Seminole Compact Challenge Forces Changes To California Sports-Betting Initiative

December 20, 2021
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A federal judge’s decision to void a gaming compact between the Seminole Tribe and the state of Florida over a provision allowing state-wide mobile sports betting with servers based on tribal lands has prompted a coalition of four California tribes to revise their ballot proposal for online sports wagering.

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A federal judge’s decision to void a gaming compact between the Seminole Tribe and the state of Florida over a provision allowing state-wide mobile sports betting with servers based on tribal lands has prompted a coalition of four California tribes to revise their ballot proposal for online sports wagering.

The four tribes met a December 13 deadline to file an amended version of their sports-betting ballot initiative with the California attorney general’s office, adding language to ensure that tribes could still offer state-wide mobile sports wagering even if federal courts continue to find that to be impermissible under the Indian Gaming Regulatory Act (IGRA) of 1988.

The 44-page amended version of the Age-Verified Tribal Online and In-Person Sports Wagering Regulatory Act would still authorize California tribes to amend the gaming compacts and offer mobile wagering throughout the state via servers on tribal lands.

But it also would enshrine the rights of tribes to offer online sports betting in state law, granting tribes the option to operate mobile wagering subject to state regulation, “entirely off of Indian lands and not subject to the Indian Gaming Regulatory Act.”

Those rights would remain in place “to the greatest extent possible under the laws of the state of California,” even if ultimately deemed to be dependent or subject to IGRA of federal laws.

California tribes had originally supported operating state-wide mobile wagering exclusively under IGRA trying to operate with servers located on tribal lands.

But whether that model is legally possible has become more uncertain since a three-judge panel in Washington, D.C. ruled 2-1 earlier this month to reject the Seminole Tribe’s appeal against a lower court ruling to vacate its own compact with the state of the Florida that pioneered such a framework.

The federal appeals court has yet to rule on the merits of the 2021 Seminole compact and “there are arguments to be made that the district court's decision is wrong,” said Kathryn Rand, co-director of the Institute for the Study of Tribal Gaming Law and Policy at the University of North Dakota School of Law.

Authorizing online sports betting by tribes subject to state law is one alternative way to proceed.

“But even if California tribes can remedy the legal issues the Seminole compact raised, it is worth noting that compacts are more likely to be challenged and litigated after the district court’s decision in the Seminole compact case, which can have the effect of slowing down both the authorization and the operationalization of tribal mobile wagering outside of Indian lands,” said Rand.

The revised proposal was submitted by the coalition of the San Manuel Band of Mission Indians, Rincon Band of Luiseno Indians, Federated Indians of Graton Rancheria and Federated Indians of the Wilton Rancheria.

In addition to the four tribes’ measure, DraftKings, FanDuel, BetMGM and four other commercial sportsbook brands have filed an alternative proposal to legalize mobile sports betting that would require operators to partner with a California tribe and serve as their designee in offering state-wide mobile wagering under state regulation.

A separate cardroom-backed measure envisions a broad sports-betting market involving California tribes, cardrooms, sports teams and other entities, with accompanying provision to expand the range of card games permitted in cardroom venues.

All three are seeking to make the November 8, 2022 ballot, alongside a fourth, and already qualified, measure proposed by a broader coalition of Indian tribes to authorize strictly retail sports wagering on tribal lands and at state-licensed racetracks.

Besides retail sports betting, that initiative would allow tribes to offer additional casino games such as roulette and craps and enable private citizens to launch civil enforcement actions against illegal gambling violations not being pursued by the state attorney general.

The coalition of California gaming tribes is opposed to both sports-betting measures filed by the leading commercial operators and cardrooms but has not yet confirmed its position on the measure proposed by San Manuel and three other tribes.

“Tribal leaders are reviewing the extensive amendments that were submitted and decline to provide further comment at this point,” Jacob Mejia, a spokesman for the retail-wagering initiative already on the 2022 ballot, told VIXIO GamblingCompliance.

The amended version of the Age-Verified Tribal Online and In-Person Sports Wagering Regulatory Act also would entitle California tribes to amend their gaming compacts to include craps, roulette and retail sports betting at their casinos.

As amended, it would not conflict with the retail-only measure, meaning both could take effect if approved by state voters.

To gain support from other tribes in the state, the revised version increases the revenue share from 10 percent to 15 percent that tribes pay into a Tribal Sports Wagering Revenue Sharing Trust Fund to share with other tribes.

Tribes would also pay 10 percent of adjusted gross revenue to the state to help pay for homeless and mental illness programs.

Through state law, the revised initiative would create an association of tribal and state gaming regulators to oversee tribal online sports betting, to include members from the state's Bureau of Gambling Control and the California Gambling Control Commission (CGCC). The CGCC would adopt mobile wagering rules for state-regulated online betting, but these would be subject to approval by the association.

According to the initiative, $50m would be transferred from California’s Indian Gaming Special Distribution Fund to the gaming regulators to help cover implementation costs. But the fund would be reimbursed over a ten-year period.

“We’re aware of the proposal and are reviewing it at this time,” CGCC spokesman Fred Castano told VIXIO GamblingCompliance.

The proposal would limit deductions of promotional wagers to 15 percent of all bets less the monies paid out as winnings, while limiting sports betting to those 21 years old and banning marketing and advertising to minors.

In another nod to the restrictions established by IGRA, the revised proposal would limit under California law the amount of revenue that online sportsbook providers partnering with California tribes could receive if a tribe offers mobile wagering subject to state regulation.

Mirroring IGRA restrictions on so-called management contracts, management service providers partnering with tribes to provide mobile wagering could receive no more than 40 percent of net revenues, with partnership agreements limited to seven years.

As per the original version, tribes would be restricted to using their established casino brands for online betting. Players would have to register accounts in person either at an established tribal casino, or if under state law, at approved locations within ten miles of tribal lands.

Now that the revised initiative has been submitted, the California attorney general is expected to issue a title and summary for the petition by January 11. The coalition will then have until early June to collect the nearly 988,000 voter signatures required to qualify for the November ballot. California’s legislative analyst will also issue a fiscal impact report early next month.

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