To Renegotiate Or Not To Renegotiate? That Is the Question California Gaming Tribes May Face

September 7, 2022
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California tribes appear to be split on whether they should renegotiate their gaming compacts with Democratic Governor Gavin Newsom if voters approve online sports betting on November 8.

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California tribes appear to be split on whether they should renegotiate gaming compacts with Democratic Governor Gavin Newsom if voters approve online sports betting on November 8.

If Proposition 27 passes on Election Day — and polling so far suggests that outcome is unlikely — online wagers will become legal and tribal control of the gaming market in the nation’s most populous state will diminish.

Or will it?

DraftKings, FanDuel and other commercial sports betting operators may not be the only ones taking wagers in California if Prop. 27 becomes law.

“Tribes may also be in a position to add online to their scope of gaming as well,” said Deron Marquez, an adjunct professor and co-founder of the Tribal Administration Certificate Program at Claremont Graduate University in California.

“Corporations seeking to gain a foothold in California may be the catalyst needed to expand tribal government gaming operations, at least in theory,” Marquez said.

Marquez emphasized he was not speaking for the San Manuel Band of Mission Indians, which he served as chairman from 1999 to 2006.

San Manuel continues to work with two other prominent California tribes to gather signatures to qualify its own online sports betting ballot proposition for the 2024 ballot that would grant tribes greater control of the online market versus under Prop. 27.

Of the $39bn produced by the Indian gaming industry in 2021, more than 25 percent came from tribes in California.

Tribal gaming officials in California tend to bristle when the term “monopoly” is used to describe their control of the gaming industry in the Golden State.

They prefer “exclusivity”, which is guaranteed in the gaming compacts they negotiated with California’s governors.

Those compacts must comply with the Indian Gaming Regulatory Act (IGRA), which Congress approved in 1988 to control the expansion of tribal casinos.

As with many intentions of Congress, the opposite result occurred and there are now more than 500 Indian casinos in the United States.

Little Fawn Boland, an Indian gaming attorney in Mill Valley, a town 14 miles north of San Francisco, said online gaming is “outside of the IGRA rubric.”

“That being said, there might be support for an IGRA-style regulatory scheme (for online wagering in California),” Boland said.

In any case, amending existing California gaming compacts would be difficult, according to Boland.

“Hopefully, the voters see through the Prop. 27 illusion and vote it down, so we don’t need to face any of these tough scenarios for California tribes,” she said.

California tribes are laser focused on defeating Prop. 27 and other considerations are mere afterthoughts.

Even the tribal alternative of Proposition 26, which would limit sports betting to in-person bets at Indian casinos and state-licensed racetracks, does not appear to be a top priority at this point in the campaign.

Both propositions appear headed for defeat on November 8, based on current polling, but if Prop. 27 passes, California tribes may seek to renegotiate their gaming compacts.

“If there is a change in exclusivity — or if you want to call it the monopoly — well, then the tribes would say, ‘OK, then we get a right to go back and have different percentages (of gaming revenue),’” said Ian Imrich, a gaming attorney in Los Angeles.

But a California tribal gaming executive, who requested anonymity, cast doubt on renegotiation as a viable option.

“The compacts apply to our current operations at brick and mortar casinos. They do not apply to online activity,” the executive said.

Whatever happens after the November election, California gaming tribes will not go away, and neither will the commercial sports-betting consortium including BetMGM and Fanatics.

“California is a diverse market for gaming — with tribal casinos, cardrooms which operate across the state and several prominent horse tracks,” said Jennifer Carleton, chief legal officer of Sightline Payments and a distinguished fellow at the Boyd School of Law Nations Gaming and Governance in Las Vegas.

“California’s tribes are no strangers to commercial competition regardless of how the ballot measures play out in November,” Carleton said.

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