An Iowa District Court judge has denied a lawsuit challenging the wording of a 2021 Linn County gambling referendum and the subsequent issuance of a casino gaming license to Linn County, removing a key potential obstacle to the ongoing construction of the Cedar Crossing casino in Cedar Rapids.
The ruling from Eighth Judicial District Court Judge Michael Schilling was issued June 18 and filed in Washington County District Court June 19.
The lawsuit was filed in Washington County District Court Feb. 6 – the same day the Iowa Racing and Gaming Commission (IRGC) voted 4-1 to issue the state’s 20th gaming license to the Cedar Rapids Development Group and the Linn County Gaming Association for a new $275 million Cedar Crossing casino on the city’s northwest side.
The suit, filed by the Riverside Casino and Golf Resort and the Washington County Riverboat Foundation against the IRGC, the Linn County Gaming Association and the Cedar Rapids Development Group, claimed that the 2021 referendum, which was approved by voters and permanently authorized casino gaming in Linn County, was improperly worded because it indicated that the “operation of gambling games with no wager or loss limits may continue” in Linn County, even though there was no casino operating in the county at that time.
As a result, the lawsuit claimed, the ballot measure should be considered invalid, and therefore the Iowa Racing and Gaming Commission (IRGC) lacked the statutory authority to issue a gaming license to Linn County.
Linn County voters first approved a casino referendum in 2013, but the subsequent referendum vote in 2021, which authorized casino gaming in Linn County in perpituity, was the point at issue in the most recent lawsuit.
In his ruling, Mr. Schilling fully rejected the lawsuit’s claims.
“The court concludes that the decision to grant a gambling game license for a Linn County casino on February 6, 2025, cannot be fairly characterized as an erroneous interpretation of law,” Mr. Schilling said.
In a separate response to the lawsuit’s challenge of the 2021 Linn County ballot language, Mr. Schilling wrote that “the court concludes that Petitioners challenges to the words of Public Measure G, including, but not limited to, ‘without wager or loss limits’ and ‘may continue’ fall into the category of minor defects in the form of the ballot, and do not rise to the level of a ‘fatal defect of substance’ or go to the ‘heart and soul’ of the election.”
Mr. Schilling’s ruling also rejects the lawsuit’s claim “that the IRGC failed to follow agency precedent when assessing the weight to be given to the negative economic impact (cannibalization) Riverside and the WCRF would suffer from a competing casino in Cedar Rapids.”
In January, the IRGC declined to consider a petition for declaratory relief filed by the Riverside Casino and Washington County Riverboat Foundation, challenging the commission’s authority to issue a license.
“The court … concludes that the record does not support the conclusion that the decision not to answer the Petition was unreasonable, arbitrary, capricious, or an abuse of discretion, or a decision exercised on grounds clearly untenable, or exercised to an extent clearly unreasonable, or made without regard to the law or facts of the case,” Mr. Schilling wrote in his ruling. “The court concludes that Petitioners have not shown … that the manner in which the IRGC weighed the effect of cannibalization on Riverside and WCRF was an error of law, or unreasonable, arbitrary, capricious, or an abuse of discretion, or exercised to an extent clearly unreasonable, or made without regard to the law or facts of the case.”
Leaders respond to ruling
Attorney Mark Weinhardt, who represented the Riverside Casino and the Washington County Development Group, said the ruling acknowledged some claims made by his clients in their lawsuit.
“The district court’s ruling recognizes that much of what our clients have argued is correct,” Mr. Weinhardt said in a written statement. “The court agrees that Riverside Casino and its non-profit partner had a right to challenge this license in court. It agrees that the Cedar Rapids casino will cost our clients many millions of dollars. The court does not dispute that the 2021 Linn County ballot was defective. We and our clients are studying the court’s opinion and our options from here.”
Mr. Weinhardt did not specifically indicate whether the plaintiffs in the case plan to appeal the ruling.
Cedar Rapids mayor Tiffany O’Donnell, a staunch supporter of the efforts to bring a casino to Cedar Rapids, responded enthusiastically when asked to react to the ruling.
“I couldn’t be more thrilled,” Ms. O’Donnell said. “It really affirms what voters here already knew. We spoke loud and clear at the ballot box, and now the judge has made it official, so we are continuing to move on.”
The ruling came six full weeks after the hearing.
“I think we all wished that it would’ve been sooner,” Ms. O’Donnell said, “and at the same time, we really appreciate the judge’s efforts. If anything, it just reinforces our position. Knowing that he took this kind of time makes me feel even stronger in our position.”
Ms. O’Donnell referred to the challenges to Linn County’s efforts to obtain a gaming license, from legislative moratoriums to resistance from other Iowa casinos, as “speed bumps.”
“It’s real validation for our voters,” she said. “And I think, too, you can’t underestimate the validation of the Iowa Racing and Gaming Commission. They made a pretty strong ruling, and to have that in jeopardy, I feel like this is validation for them too.”
Ms. O’Donnell also acknowledged that Washington County gaming interests were justified in expressing their concerns.
“I think the citizens of Washington County have every right to voice their opinion, and (Riverside Casino CEO) Dan Kehl certainly continues to fight on their behalf,” she said. “I would also suggest that maybe Mr. Kehl will increase his percentage in contributions to the county. Now that Washington County voters understand what Linn County voters are going to get put back in, 8% (to nonprofits), I’m hopeful that Mr. Kehl will step forward and support their community in the same way.”
The casino project is also a victory for Cedar Rapids development and employment, particularly on the west side, Ms. O’Donnell said.
“It’s an incredible facility that’s going to go into a part of our community that deserves to be revitalized,” she said. “It’s also jobs, not just to build this facility, but to sustain it. You can’t underestimate the power in that for our community, the tourism dollars, the economic development that’s already happening around it because it exists. The ripple effects will be felt for decades. It really is a linchpin for that neighborhood.
“I supported this because it was the will of the Linn County voters,” she added. “This community continues to fight for itself. Today is a huge victory for our not just our community today, but our community tomorrow. The future is bright.”
Arguments presented at hearing
Attorneys on both sides of the lawsuit presented starkly contrasting views on Linn County voters’ 2021 approval of the casino gambling referendum during a judicial review hearing May 7 at the Henry County Courthouse in Mount Pleasant, which drew dozens of attorneys and observers.
“This case is about requiring a government agency to follow the law,” Mr. Weinhardt said at the May 7 hearing. “The commands and constraints relevant to this case, particularly the ones having to do with electoral approval of the licensing process, are not confusing. They’re not obscure, and they have not been complied with in this case.”
“Judicial review exists to correct that error,” he added, “and we’re asking this court to review and reverse the decision of the Racing and Gaming Commission that it took on Feb. 6 to grant a license for the casino in Linn County.”
During his arguments, Mr. Weinhardt referenced various legal precedents, stating that the plaintiffs had legal standing to pursue the case because when “a business competitor is damaged by an act of a regulatory agency that directly affects and helps another business competitor, that business competitor who is disadvantaged has standing, even if the injury is probable [and] has not already happened.”
Because the 2021 ballot language was “misleading,” Mr. Weinhardt said, “given that there was less than a 10% margin in this election, only one out of 20 voters would have to have been misled to change the outcome of the election. We don’t need to win that the outcome of the election was erroneous. We only need to demonstrate that the ballot didn’t comply with the statute.”
Mr. Weinhardt also argued that as a result of the faulty ballot language, the IRGC did not have the legal discretion to interpret the voters’ will.
“The Racing and Gaming Commission is proud of the discretion that it has to make decisions essentially unreviewable,” he said. “This is not one of those times when it has such discretion. This is rather surely a question of law.”
He said that even though Linn County wasn’t legally required to hold the second election specifically in 2021 in order to receive a license, “Linn County did, and they made a mistake. They botched the election, and so they can’t now, based on these thin statutory arguments, pretend that the election didn’t happen. The election did happen, and it happened in a misleading way.”
A trio of attorneys spoke for the three defendants in the case.
Jeff Peterzalek, representing the IRGC, asserted that the commission has complete authority over casino gaming in Iowa.
“The Iowa Racing and Gaming Commission is a legislatively created, executive branch appointed body that has exclusive jurisdiction over gambling in the state of Iowa,” he said. “They’re the ones that control all aspects of this highly-regulated, highly-complex industry.”
He noted that since the Linn County application process began, the IRGC has hundreds of pages of documentation from commissioners and comments from the public, as well as dozens of briefings on the merits of the legal arguments.
“Those are two things that have changed,” he said, “but what hasn’t changed is unprecedented demand from the Washington County petitioners that you disenfranchise 44,311 Linn County voters, over 24,000 of whom voted in favor of continuing approved gambling in Linn County, Iowa.”
He said that for the commission’s authority to be challenged, Linn County voters would have to have said that they didn’t want casino gambling. In fact, voters approved gambling in 2013, and that approval wasn’t challenged when Linn County casino applications were considered in 2014 and 2017.
“The purpose of the 2021 referendum, or a subsequent referendum, is really more or less of a check in,” he said. “A lot of times there might be a casino already existing, and they’re going to ask the electorate, are you still OK with gambling? Same thing here.”
The legal action in this case, Mr. Peterzalek said, would essentially overturn the will of voters in 2021.
“There isn’t any way to look at the vote of over 24,000 independent voters who voted in favor of gambling, and say those 24,000-plus yes voters are an unequivocal ‘no’ vote,” he said. “That’s the only way you can ever deprive the commission of its authority to issue a license. In this case, you have to convert 24,000-plus ‘yes’ votes into ‘no’ votes in order to deny the commission of its authority. We all know that did not happen. We all know that cannot happen.”
Attorney Sam Jones, representing the Linn County Gaming Association – the group that will oversee distribution of a portion of casino proceeds to area nonprofits – said that the case hinges on a claim that voters were confused by the ballot language, and that the IRGC’s decision was “capricious.”
He noted that all phases of Linn County’s decade-plus campaign for a casino license received extensive media attention, and as a result, voters were well-informed about the stakes.
Attorney Mark Holscher, representing the Cedar Rapids Development Group, a local investor collective providing the bulk of funding for the casino, said that the Riverside Casino is seeking to block a $270 million Cedar Rapids casino investment, as well as $6 million in proceeds to nonprofit organizations, a new STEM lab, performance spaces and more.
He noted that this case represents the first time an Iowa casino operator has challenged the issuance of a license for a competing casino, and that the IRGC is not required to issue a license to every applicant.
“The IRGC may issue a license or not issue a license,” he said. “They’re not required to because they have the authority. Having the authority to issue a license does no harm to Riverside.”
The consideration of casino gaming, by Linn voters and by the IRGC, was carefully considered, he added.
“I would submit that that deference needs to be given to the voters of the county and the IRGC,” he said. “It was a thoughtful process. Those commissioners struggled. Even commissioners who knew it might not be the best thing for their county, they struggled to do the right thing, and they did the right thing for Iowa.”
IRGC decision came after previous application denials
The February decision to issue a casino gaming license to Linn County marked a key turning point for the IRGC, which had twice rejected casino proposals for Linn County, in 2014 and 2017, after commissioners largely sided with opponents who argued the state’s gaming market was saturated and a new Linn County casino would “cannibalize,” or glean market share, from other casinos, particularly Riverside Casino.
In 2017, the IRGC rejected the proposal for a $174-million “urban casino” project by a 4-1 vote.
Weighing heavily on the minds of commission members were two market studies conducted for the state that indicated that the state’s casino market was essentially saturated, and that much of the revenue the casino would generate would come at the expense of surrounding casinos in Waterloo and Riverside.
Then-IRGC Chairman Jeff Lamberti said the “impact for me on existing facilities is simply too large, and risks destabilizing the casino market in Iowa.” He said voting for a casino in Cedar Rapids would be a significant shift in policy from past commission decisions, and he was not ready to make that change.
Perspectives on casino’s economic impact
Several studies have provided perspectives on a new Cedar Rapids casino, and its potential statewide impact.
An economic impact study by Decision Innovation Solutions, commissioned by P2E and released in January, projected a Cedar Crossing impact of $257 million during the construction phase and $183 million in the first year of operations. In total, the study projected $2.25 billion in total impact from construction through the first 10 years of casino operations.
And a study by Convergence Strategy Group, also commissioned by P2E, indicated that Cedar Crossing would generate $108 million in gaming revenue annually, $80.2 million of which would be new revenue for the state.
The study said casino construction will create the equivalent of 1,100 full-time jobs over its 18-month construction window, with over half that work going to Linn County residents. Construction would generate $303 million in additional spending in Iowa, including $102 million in wage earnings. Once operational, the casino would create 300 on-site jobs, with 224 more ancillary jobs in the community.
Projections also indicated the new casino will draw more than 1.1 million visitors to Cedar Rapids per year and generate wagers of more than $100 million annually, as well as $66 million in ancillary spending.
The casino would generate $33.5 million in total revenues to the community each year, including $23.9 million in annual gaming taxes, according to the Convergence study, which also asserted the Cedar Rapids market was dramatically underserved by the state’s current casinos.
And according to that report, the “cannibalization” impact on existing casinos would be much less than previous reports have indicated – a drop of about $3 million per year at the Riverside Casino by the year 2029, and the casinos in Waterloo and Dubuque would actually see higher revenues.
However, other reports raised potential concerns with a new Cedar Rapids casino.
A pair of studies commissioned by the IRGC to examine the overall Iowa gaming market – and the impact of a proposed new Cedar Rapids casino complex on that market – painted a mixed picture, extolling several virtues of the new casino proposal while warning of an overall downturn in Iowa casino proceeds in recent years and the revenue “cannibalization” of a new casino on existing casinos, particularly in Eastern Iowa.
The two studies were conducted by Marquette Advisors of Minneapolis and The Innovation Group of New Orleans and presented to the IRGC in January.
The Marquette Advisors study indicated Iowa’s casino market is mature, with 19 commercial casinos and four tribal casinos already in operation. It included profiles of each of the state’s 23 casinos and noted that Iowa is considered a “slow-growth” market in terms of population.
The study indicated that the Cedar Crossing Casino “is attractively designed and well located, such that we expect it will be successful in drawing large numbers of Iowa gamblers, especially ‘locals’ along with smaller numbers from the broader region and tourists.”
“We expect the new casino would become the dominant gaming facility with respect to the Linn County (Cedar Rapids) market and will be very competitive with respect to other nearby markets, especially Johnson County (Iowa City),” the study said.
Cedar Crossing would generate $118.1 million in gross revenue by fiscal year 2029, the study projects. However, “The level of cannibalization will be substantial for the nearby Riverside, Isle-Waterloo and Meskwaki casinos,” the report said, and estimated to reduce revenue at nearby casinos by $68 million, primarily affecting Riverside Casino (a loss of $34 million, 26% of its adjusted gaming revenue or AGR) and Isle-Waterloo (a loss of $8.8 million, or just under 10% of its AGR).
Developers of the Cedar Crossing casino in Cedar Rapids say they plan to donate 8% of the casino’s net adjusted gross revenue to nonprofit organizations – more than twice the state-mandated minimum. Supporters say about $6.3 million will be generated for nonprofits each year by the new casino.
Speakers at an October 2024 news conference say the additional revenue will provide a significant new source of revenue for their nonprofit organizations, many of which have struggled in recent years with higher demands for service and reduced revenue streams.
Casino features, projected opening date
Construction is already well under way on the $275 million Cedar Crossing Casino and Entertainment Center, which is being built on previously-vacant land between F and I avenues NW and First and Fifth streets NW. Most of that property was previously occupied by the Cooper’s Mill restaurant and Best Western Hotel before those facilities were demolished due to damages sustained in the 2008 flood, and the property was subsequently acquired by the city.
Jonathan Swain of Peninsula Pacific Entertainment, the casino’s developer, said in September 2024 that Cedar Crossing, projected to encompass 160,000 square feet and more than 1,100 on-site parking spaces, will feature three live entertainment spaces, including a 1,500-seat venue “that will host top-tier performances and events drawing visitors from across the state and beyond.”
The venue could also host sporting events, comedy shows, special events, festivals and trade shows.
“We want to draw people with entertainment, with hundreds of live performances a year,” said Mr. Swain, whose company has also developed other casinos across Iowa. “That is our experience in Sioux City, that is our experience in Dubuque. That tells us that that helps lift businesses downtown, especially hotels, bars and restaurants, bringing people to see our shows and have them stay overnight at a downtown hotel and visit businesses here. That’s what it’s all about. A high tide raises all boats.”
Mr. Swain outlined plans for three new restaurants at Cedar Crossing – Zach Johnson’s Clubhouse, developed with the PGA golfer and Cedar Rapids native, featuring steaks, chops and craft cocktails; World’s Fair, offering street foods such as Indian street tacos, Korean crispy chicken, Mediterranean wraps, crepes and churros; and the River’s Edge Smokehouse and Tap, with pub burgers, pulled pork, beef brisket and barbecued ribs.
He also introduced plans for a dedicated arts and cultural center, the first of its kind at an Iowa casino. The venue is set to feature rotating exhibits in partnership with the National Geographic Society, and would occasionally be transformed into a STEM (Science, Technology, Engineering and Mathematics) lab accessible to local students, as part of a partnership with 2020 Miss America Camille Schrier.
The new casino is slated to open its doors on New Year’s Eve 2026, developers announced at a groundbreaking ceremony Feb. 7.
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