Tribes Split On Whether To Embrace Sports Betting: No ‘One-Size-Fits-All’ Answer

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Tribes sports betting

The American Indian segment of the legal gambling industry is sharply split over the potential legalization of sports betting, a nationwide expansion of wagering that could markedly impact the legal and regulatory paradigm of the $31.2 billion tribal government casino business.

Several lucrative casino tribes and those seeking to expand their gambling enterprises beyond Indian trust lands are embracing the prospects of legal sports gambling. They reportedly include most or all of seven tribes that are members of the American Gaming Association (AGA), the commercial gambling industry trade group and lobby.

But most of the 244 tribes operating 480 gambling facilities in 29 states are opposed to or at least cautious of the impact sports betting will have on tribal-state regulatory agreements, or compacts, required under the Indian Gaming Regulatory Act (IGRA) for tribes offering casino-style gambling.

The baseline for tribes and sports betting

Many compacts grant tribes statewide or regional exclusivity to operate casinos, which generate revenue to fund services to their citizens. Tribes in at least ten states pay a share of their gambling revenue for the compact exclusivity provisions.

The compacts also greatly influence political relations between the equally sovereign tribal and state governments. Those relations involve land/trust, jurisdiction and other issues more important to tribes than gambling.

Allowing tribes to offer sports betting under IGRA would require tribes and states to amend the compacts or draft new agreements. Current compacts do not address sports gambling.

Tribes would otherwise need to operate sports wagering as a commercial enterprise outside IGRA, subjecting themselves to state taxes and regulations that would erode their sovereignty.

The US Supreme Court is reviewing a New Jersey lawsuit attempting to appeal the Professional and Amateur Sports Protection Act (PASPA), a pending ruling that has prompted more than ten states to introduce legislation allowing for sports betting in the event the federal prohibition is lifted.

Not everyone on the same page

A number of tribal leaders expressed concern at the decision in July by the National Indian Gaming Association (NIGA), the tribal casino trade organization and lobby, to join an AGA coalition to repeal the federal ban on sports wagering.

NIGA Chairman Ernie Stevens issued a statement Friday clarifying that the association was joining the American Sports Betting Coalition (ASBC) to monitor the group, not to actively work for repeal of PASPA.

“Of chief concern to NIGA is to ensure that tribal interests are protected, particularly avoidance of any negative impacts on existing compacts and exclusivity clauses,” Stevens said.

AGA President Geoff Freeman said NIGA’s involvement in the coalition will nevertheless help repeal the sports betting ban.

“Tribal engagement will help to move the needle forward and as the industry further unites, we will be able to end the failing ban on sports betting and allow our industry to grow,” Freeman said.

But AGA spokesman Steve Doty said the group will attempt to ensure sports wagering does not hurt the legal and regulatory status of tribal casinos.

“We want to work with the tribes, Ernie Stevens and NIGA to find a solution that works for everybody,” Doty said.

Sports betting welcomed by some tribes

According to 2016 revenue figures from the National Indian Gaming Commission, which audits tribal casinos, 84 of 484 tribal casinos generate 72.9 percent of the nationwide gambling win.

Lucrative gambling tribes such as the Mohegan and Mashantucket Pequots of Connecticut, Seminole Tribe of Florida, Poarch Band of Creek Indians of Alabama and Cherokee Nation of Oklahoma – all members of AGA – reportedly embrace the prospects of legal sports betting.

Other AGA tribes are the Morongo Band of Mission Indians in California and Nottawaseppi Huron Band of the Potawatomi in Michigan.

Many of those tribes are seeking to expand their gambling portfolios behind reservation borders, acquiring commercial and tribal casinos in the US, the Caribbean and overseas.

Other lucrative tribes supporting sports betting are the Gila River and Salt River Pima-Maricopa Indian communities in Arizona. Sources say the Chickasaw and Choctaw nations in Oklahoma are also seeking sports wagering.

The California Nations Indian Gaming Association, a group of 31 casino and non-casino tribes, is opposed to expansion of legal gambling.

Meanwhile, the smaller, rural casinos making up the bulk of the Indian gambling industry are not enthusiastic about sports betting competing with their more marginal businesses.

“The tribes embracing (sports betting) are very high-profile, very progressive, very politically astute,” said Valerie Spicer, partner in the Triology Group, a tribal government relations firm.

“Of course, there are a number of tribes that fit that profile” that are not pursing sports betting, Spicer said, many electing to diversify their government economies beyond gambling, hospitality and tourism.

Officials with the Oklahoma, Washington and Minnesota tribal gambling associations said they believe their members should be allowed to make decisions on their own.

Ernie Stebbins, executive director of the Washington Indian Gaming Association, a group of 25 tribes, said his members will likely discuss the complicated legal and compact issues over the next several months.

“It will take a number of meetings to get my board members up to speed,” he said.

A difference of opinion within the industry

Tribal leaders, their gambling regulators and Indian casino operators may differ on how to respond to the potential for legal sports betting.

Elected tribal leaders may be particularly cautious of any threat to what has become the most valuable tool for Indian self-determination since European settlement of North America.

Gambling for many tribes is the primary source of funding for government programs. Tribal leaders will oppose potential competition from state-sponsored gambling and legal and political threats to the casino revenue stream.

Tribal leaders are also apt to push back against any statewide expansion of gambling requiring tribes to subject themselves to state regulations and taxation. IGRA permits tribes to be the primary regulators of gambling on Indian lands.

Tribal casino operators may also weigh in on the issue. While it is not a major revenue generator on the casino floor, sports betting – along with daily fantasy sports and internet gambling – are considered tools tribes will eventually need to remain competitive.

Account wagering – allowing customers to bet by telephone or online – will be key to any sports betting operation.

Tribes operating as commercial ventures will be able to offer the service. Those operating under IGRA will need to confront the legal uncertainty of taking wagers from off the reservation.

“A lot is going to depend on the nature of the beast, if it is going to be a compacted game under IGRA or a commercial enterprise, taxed by the state,” said Norm DesRosier, regulatory consultant and former NIGC commissioner.

To compact, or not to compact …

“It could be preferable for tribes to operate under state licensure and leave the compacts alone,” said Joe Valandra, a tribal consultant and former NIGC chief of staff.

The Mohegan and Mashantucket Pequot tribes of Connecticut, who have a statewide monopoly on legal gambling, support ongoing legislative efforts to legalize sports betting. But talks haven’t progressed on whether they would pursue sports wagering under IGRA as an amendment to their tribal-state compacts, or as commercial enterprise taxed and regulated by the state.

“While the Mashantucket Pequot Tribal Nation fully supports the effort to decriminalize and regulate sports betting, it is premature to speculate on how any such legislation might impact on our rights under (IGRA) much less on the provisions in our (compacts),” said Lori Potter, spokeswoman for Foxwoods Resort Casino.

Compact language varies dramatically among the states with Indian casinos. Tribes also operate in diverse regulatory and political environments. Many are involved in renegotiating compacts. Others, such as Minnesota’s 11 tribes, have favorable compacts terms that would discourage them from willingly opening up the agreements to amendments.

“Each state has different rules,” said Sheila Morago, executive director of the Oklahoma Indian Gaming Association. “Each state has very unique tribal compacts. Everybody has different provisions on defining exclusivity. There is not one-size-fits-all.”

Golden State debate particularly complex

California, with nearly 40 million residents, is regarded as potentially the most lucrative sports betting market in the country. It is also the nation’s largest and most diverse gambling industry, with tribal casinos, card rooms, pari-mutuel racing and charitable gambling generating roughly $11 billion a year in gross revenues.

Seventy-five California tribes have compacts that – in accordance with a 2000 constitutional amendment (Proposition 1A) approved by 63 percent of the voters – give them exclusivity to operate casino gambling, defined in the agreements as slot machines and banked and percentage table games.

Assemblyman Adam Gray in July introduced a constitutional amendment to authorize sports wagering. The amendment – which would require two-thirds vote of the state legislature and a public referendum – would take effect if federal law changes to allow sports gambling. Betting in the legislation would be operated not only by tribes, but card rooms and the racing industry.

The exclusivity wording of compacts and Proposition 1A do not include sports betting. But attorneys contend tribes could argue any expansion of gambling is a breach of exclusivity and pursue legal action.

“Some tribes will perhaps stop making revenue sharing payments to the state,” said a tribal attorney who requested anonymity.

California in settling its compact dispute with the tribes waived its 11th Amendment protections against tribal lawsuits alleging bad faith compact negotiations.

Federal law states revenue sharing without a substantial benefit to the tribes is an illegal tax in violation of IGRA, a position upheld by the Ninth Circuit Court of Appeals in Rincon v Schwarzenegger (2010). The state has cited tribal casino exclusivity in justifying revenue sharing in compacts approved by Gov. Jerry Brown and former Gov. Arnold Schwarzenegger.

All but one of those nearly 20 compacts with California’s more lucrative tribes were “deemed” approved by a US Department of Interior not enamored with the mandated revenue sharing provisions of the agreements.

This could all lead to a legal nightmare for the state and both tribes seeking to operate sports wagering as well as those hoping to walk away from revenue sharing agreements.

Roughly half of about 60 tribes that agreed to compacts in 1999 are in negotiations to have the agreements renewed. Sports betting will change the landscape on those talks and perhaps open up amendments to deals signed with Brown and Schwarzenegger.