Push to legalize sports betting will have to cater to tribes in some states
Legal Sports Report

Implementation Of Sports Betting Would Be ‘Tricky’ In Indian Country, If Federal Ban Lifted

Tribes and sports betting tricky implementation
The Mohegan and Mashantucket Pequot tribes, who share Connecticut’s American Indian casino market, operating gambling resorts in Uncasville and Mashantucket, anxiously anticipate adding legalized sports betting to their host of wagering options.

But the tribes say they are not yet certain they would be operating sports betting as a tribal government enterprise under the Indian Gaming Regulatory Act (IGRA) – as they do their casinos – or as a commercial venture, taxed and regulated by the state.

“We have not begun those discussions in detail but are looking forward to being a lead state,” Chuck Bunnell, Mohegan’s chief of staff, said in an email.

“It is premature to speculate on how any such legislation might impact on our rights under IGRA, much less on the provisions” of tribal-state regulatory agreements, or compacts, with the state of Connecticut, said Lori Potter, spokeswoman for Pequot’s Foxwoods resort.

Talks will intensify if the US Supreme Court deliberating a New Jersey lawsuit tosses out the Professional and Amateur Sports Protection Act (PASPA). Connecticut is one of a variety of states that have introduced legislation to legalize sports betting if PASPA is wiped off the books.

Where do tribes come down on sports betting?

The commercial and tribal government segments of the US casino industry are anticipating the high court’s decision. The matter will likely be argued this fall and ruled on next year.

But while the commercial casino industry may be eager in its anticipation, tribal government casino operators are a bit apprehensive, with good reason.

Tribal governments and commercial casino companies each operate about 460 to 480 casinos generating about $30 billion a year and employing some 330,000 workers.

But while commercial casinos are prepared to run with sports betting, expanding the scope of legal gambling will be problematic for 244 tribes in 29 states operating under federal law (IGRA) and tribal-state compacts limiting the scope and regulation of gambling on Indian lands.

Many of those compacts provide tribes statewide or regional exclusivity. Tribes in at least ten states pay a share of casino revenues in exchange for the exclusivity.

But few compacts cover sports betting, which means the agreements will have to be amended if PASPA prohibitions are lifted and tribes want to offer that form of wagering.

Either that, or new compacts will have to be negotiated, a potentially difficult task where tribal-state relations are strained. Compact negotiations have been prolonged or at least mildly contentious in California, Oklahoma, New Mexico, Michigan and elsewhere.

Tribes at a disadvantage?

Tribes go into any negotiations with states at a strategic disadvantage because they are prohibited by the 11th Amendment and Seminole Tribe of Florida v Florida (1996) from filing a lawsuit in the event of bad faith negotiations. California is one of the rare states that have waived their 11th Amendment protections.

The last option for tribes is to operate sports betting as a commercial venture under state jurisdiction, an erosion of their governmental sovereignty.

“We’re aware of individual tribes that want to have sports betting, which is great,” said a tribal official who requested anonymity.

“But the implementation part is tricky. It comes down to state-by-state and regional concerns and what the compact says.”

“It doesn’t necessarily mean tribes are opposed to sports betting,” said Valerie Spicer, founding partner of the Trilogy Group, a tribal government consulting firm. “They are concerned about the impact it may have on their current agreements.”

“We will be discussing these issues in depth at our mid-year meeting,” Ernie Stevens, chairman of the National Indian Gaming Association (NIGA), said of the group’s gathering Sept. 19-20 at the Renaissance Hotel in Phoenix.

Lobby presses for states’ rights

The American Sports Betting Coalition (ASBC), a group of gambling industry and state officials, law enforcement officers and business leaders, is advocating for the repeal of PASPA to “give states the ability to decide the question of legalization,” according to the group’s website.

The coalition was formed by the American Gaming Association (AGA) which primarily serves as the commercial gambling industry’s trade association and lobby, although it has as members seven of the 244 casino tribes.

The ASBC seeks to:

  • Defer to states regarding the desirability of regulating sports betting as all forms of casino wagering.
  • Ensure the integrity of sports betting and sports through state licensing and regulation.
  • Make all sports betting businesses transparent to law enforcement.
  • Ensure a tax regime does not undermine regulated sports betting operations’ ability to compete against illegal offshore operators.

The ASBC goals might rub tribal leaders the wrong way, particularly since IGRA was intended to give sovereign tribal governments – not the states – primacy in the regulation of gambling on Indian lands.

Tribes have different priorities

Thirty-three mostly urban Indian casinos generated half the revenue won by tribes nationwide in 2016, according to the National Indian Gaming Commission, which audits tribal casinos. Eighty-four facilities generated 72.9 percent of the win, or $22.7 billion, leaving nearly 400 operations to divvy up the remaining $7.3 billion.

A handful of those lucrative casino operating tribes are actively lobbying the sport wagering issue, including seven tribes who are members of AGA.

But a majority of tribes operate marginal, rural gambling operations that provide desperately needed jobs and meager subsidies to help fund programs for indigenous citizens. They view state intrusion, including the need to amend compacts, as a potential threat to their stream of government revenue. Betting on sports is not high on the list of priorities.

“There hasn’t been an appetite for expanded gambling that I’m aware of,” Ron Allen, chairman of the Washington Indian Gaming Association, said of state officials and leaders of WIGA’s 25 tribes, with the possible exception of three of the largest and more prosperous casino operators.

Blowback on NIGA joining AGA coalition

NIGA got a flood of negative blowback from tribal members when it announced in July it was joining the AGA coalition. The chatter got a bit heated when trade publication headlines wrongly indicated NIGA was supporting PASPA’s repeal.

Chairman Stevens issued a “clarifying” statement that NIGA was joining the coalition to monitor the group and not to advocate for PASPA’s repeal. NIGA’s priority, he said, was to protect tribal exclusivity and other rights under IGRA and the compacts.

“We realize that legalizing any new form of gaming, at any level of government, impacts our tribal gaming industry’s economic interests,” Stevens said. “These types of gaming issues raise provincial concerns unique to each and every tribal government engaged in gaming.”

AGA declined calls and emails requesting an interview.

“Repealing PASPA simply gives states, commercial and tribal operators the opportunity to pursue sports wagering if they so choose,” AGA President and CEO Geoff Freeman said in an email.

“States would have the opportunity to choose whether the activity should be regulated within their borders – it does not necessarily mean that they are the regulator and it certainly doesn’t mean that they can violate existing exclusivity agreements.

“Any suggestion to the contrary is fear mongering.”

That may not be the coalition’s intention. But any expanded, state-sponsored gambling could encroach on what tribes are allowed to offer under the compacts, limiting their exclusivity. Negotiations on new and amended compacts to allow for sports betting could in most states result in demands for new or additional revenue sharing.

Tribes divided over implementation

Casino tribes are divided on the issue of sports betting, largely because of the legal issues involved with its implementation on Indian trust lands.

Tribal gaming association leaders and others in California, Minnesota, Oklahoma, Arizona, Michigan and Washington – which combined represent about 160 tribes — can name only a handful interested in sports betting.

Connecticut’s two tribes support sports betting. California, with 110 tribes – nearly a third of the 367 federally recognized tribes in the lower 48 states – has strong opposition, particularly from the California Nations Indian Gaming Association (CNIGA), which represents 31 tribes.

California has by far the largest tribal gambling industry in the country, with 62 tribal casinos generating $8.4 billion a year, a fourth of the win from all the Indian operations nationwide.

California Assemblyman Adam Gray has introduced legislation to amend the state constitution to legalize sports wagering in the event the Supreme Court trashes PASPA. CNIGA, which opposes expansion of gambling in the state, spoke out strongly against Gray’s bill.

“We’re opposing the expansion of gaming,” CNIGA Chairman Steve Stallings said. “We’ll have to look at our expansion of gaming will impact our brick-and-mortar casinos, whether it’s sports betting or poker or anything else.”

Tribes may want to opt in or out

The AGA coalition seeks to make sports betting a states’ rights issue. But tribes believe with a lifting of PASPA prohibitions they have the option under IGRA to pursue sports betting in states where it is not legal.

“If the state opts out, that shouldn’t preclude the tribes from opting in,” said Sheila Morago, executive director of the Oklahoma Indian Gaming Association, the second-largest Indian casino market with 33 tribes generating about $4.2 billion a year.

“We want to make sure the tribes have the opportunity to do what they want to do. That’s the important thing.”

Should a tribe wish to pursue sports wagering in the event PASPA is lifted, it can under IGRA request a state negotiate a compact. If a court determines a state fails to enter into good faith negotiations, the tribe can seek a compact through Department of Interior secretarial procedures.

“If we go to the state of Minnesota and say we don’t want to renegotiate the existing compact – we want to negotiate a new compact – I don’t think they can turn us down,” said John McCarthy, executive director of the Minnesota Indian Gaming Association.

MIGA has a tribal-state compact in perpetuity with no revenue sharing. Tribes have a cooperative policy to work with the state on gambling issues. But should tribes seek a sports betting compact, McCarthy predicts the state would “gouge the hell out of us.”

Myriad complexities with compacts

Tribes are confronted with a myriad of political, legal and regulatory complexities in negotiating tribal-state compacts.

“If a state goes ahead and legalizes sports wagering that could be a violation of exclusivity, in some states,” former chief of staff of the National Indian Gaming Commission Joe Valandra said.  “In other states, tribes could be opening the door to state regulations or new and additional revenue sharing.

“Every state is going to be slightly different,” he said. “The situation is very unclear.”

California has 75 tribal-state compacts and the constitutionally guaranteed exclusivity to operate machines and banked and percentage table games. The exclusivity does not include sports betting, which would require potentially long and complicated negotiations and the potential for further revenue sharing.

“I would think so,” Stallings said of compact renegotiations. “People like [Assemblyman] Gray don’t give that any consideration. There’s no thought being given to all these implications. There’s been no consultation with anyone in the industry.”

States would have leverage in compact talks in New Mexico, where competition is stiff, and Michigan, where tribes already compete with commercial casinos. The 33 gambling tribes in Oklahoma may have an easier time negotiating a new compact with a cash-strapped legislature.

The Connecticut tribes have no commercial competition and state officials enjoy a generous share of tribal revenues. Tribal officials hope they can reach a model agreement on sports betting.

“I am sure they don’t want to violate the compact,” Bunnell said of state officials. “That’s why discussions are so important.”

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Dave Palermo
- Dave Palermo is an award-winning metropolitan newspaper reporter. He has written about American Indian governments for more than 20 years, working as an advocate for several tribes and tribal associations. He also has co-authored books on gambling and gambling law.