Opinion: Tribal Gaming Issues Loom Over Mobile NY Sports Betting Deal

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NY sports betting

Editor’s note: Legal Sports Report consulted with multiple gaming industry and legal experts to produce this editorial article about NY sports betting.

If pressure makes diamonds, maybe the Governor of New York and the Legislature should put the sports betting deal back because it is far from pretty.

The “deal,” is an apparent compromise from two less-than-ideal (but for different reasons) proposals. The deal announced as part of Andrew Cuomo’s massive budget does not appear to be the best option for a competitive environment for consumers, nor does it look like the best way to maximize revenue for the state. (Seriously, just auction one or two licenses off if you want to maximize revenue.)

Instead, there is now a mobile betting outline (perhaps ad-libbed from New Hampshire) that appears to raise more questions than it provides answers at the moment.

While it will be months before the details of mobile betting in New York shake out, there remain a few overarching questions for those tasked with polishing this law. Most prominent among the issues appears to be the seeming absence of tribal gaming interests in crafting this proposal.

Time not doing this law any favors

As many are still trying to gather just who is well-positioned, and frankly, what the authors of the law were even referencing with parts of the law, there appears growing consensus around one aspect of the bill: the absence of full consideration of tribal gaming interests in the state.

The Oneida Nation promptly warned the state that the plan threatened to undermine their settlement agreement signed with the state in 2013. While Cuomo promised to resolve the issue, the details of how Cuomo plans to do so are not exactly clear.

The 2013 Oneida Nation settlement

The 2013 settlement between the State of New York and the Oneida Nation was one of the most recent additions to a series of compacts between the tribal government and the state. The first agreement was entered into by current Cuomo’s father, Mario Cuomo, and the Oneida Nation in 1993.

The most recent agreement between the Oneida Nation and the State sees the state receive 25% of slot revenue from the Tribe’s casinos located in Oneida and Madison counties. In exchange, New York awarded the Oneida Nation exclusive gaming rights to 10 counties in the central part of the state:

While they are not population centers, these counties run straight through the center of the state. Failure to reach an agreement on NY sports betting could see the state forced to geofence those counties. That appears to be the plan as of now.

Other states have geofenced tribal lands; as sovereign nations, states cannot regulate the activities on the land. The situation in New York could mean not only geofencing tribal lands but also surrounding counties.

A breach of the settlement with the Oneida Nation could cost the state as much as $70 million annually, in addition to other remedies available under the Indian Gaming Regulatory Act (IGRA) that a court could award should New York be found in violation of the settlement.

Other compacts in question

The State of New York also has gaming compacts with the Seneca Nation, who have some exclusive rights west of State Route 14, an area that includes Buffalo and Niagara Falls. As part of their agreement with the state, the Seneca Nation was told that the governor would not support commercial gaming expansion legislation in the area back in 2012

The deal with the Seneca Nation, which recognized the continued operation of video lottery terminals (VLT) in the region, also came with an agreement that the “State will enforce the Western New York exclusivity zone for casino gaming, and a new dispute resolution process will be put in place to deal amicably with future disagreements.” The impact of this agreement on NY sports betting remains unclear.

More “casino gaming” exclusivity?

The Saint Regis Mohawk Tribe has an additional agreement with the state which grants exclusivity from “casino gaming siting legislation” in an eight-county region:

What about casino gaming?

One question for the agreements between the Seneca Nation and the Saint Regis Mohawk Tribe with New York is whether sports betting expansion is permissible under their exclusivity agreements.

There remains something of an unresolved question as to whether sports betting generally is casino gaming. In addition, there are questions over whether the agreements with the Seneca Nation and Saint Regis Mohawk Tribe are implicated in mobile betting expansion.

If mobile betting does violate these agreements and the governor cannot reach a separate agreement with the tribes, the tribes might be entitled to suspend their revenue-sharing payments to the state. The value of the withdrawal of revenue-sharing payments to the state is likely in the ballpark of realistic estimates of the potential revenue sports betting in New York could generate.

Lots of questions still linger for NY sports betting

In addition to what impact the existing tribal gaming compacts could have for NY sports betting, there remain questions over the location of where a bet is placed. Indeed, many of the theories for governing the scope of the compacts and where a bet is placed remain largely untested by the courts.

What seems like a simple question, is actually not quite so clear.

While New York obtained a quintet of legal opinions on the issue of where a bet is placed, there appears to be a possible split between state and federal law. This issue could eventually see itself resolved in the court system.

What about a DFS-type lawsuit?

As some might remember, the state’s efforts to legalize daily fantasy sports in New York were thwarted in state courts. While the issues are not totally analogous, the suit brought by private parties questioning the constitutionality of the action might provide a framework for others seeking to stop mobile NY sports betting expansion.

While New York legislators have sought opinions on the legality of approving mobile NY sports betting without a constitutional amendment, that does not stop an interested group from filing a lawsuit in an attempt to stop the rollout and to task a court with reviewing the constitutionality of the state’s actions.

NY sports betting resolution for all parties?

Nobody wants litigation over this new law. The best-case scenario is that the governor and the impacted tribes come to an agreement.

The tribes hold many of the cards. Even though the New York City population center is seemingly unaffected by exclusivity zones, it is unlikely bettors on the other side of the state will be thrilled if they cannot wager on their phones because the governor could not reach an agreement with the tribes.

New York’s tribes are in a powerful position. The revenue from sports betting is unknown, but most experts seem to agree that Cuomo is dreaming about sports betting generating $500 million annually.

The revenue tribes give back to the state is real, so it would seem foolish for the state not to look to make a deal to avoid threatening existing revenue.