U.S. Commercial Operators Concerned Over New Tribal Compact Rules

February 29, 2024
New rules from the U.S. Department of the Interior recognizing the possibility of tribes offering statewide online gaming via an Indian gaming compact is concerning to commercial operators, because it limits their potential to profit from the activity, according to tribal gaming law expects.

New rules from the U.S. Department of the Interior recognizing the possibility of tribes offering statewide online gaming via an Indian gaming compact is concerning to commercial operators, because it limits their potential to profit from the activity, according to tribal gaming law expects.

The updated federal regulations published last week specify that tribal gaming compacts may allow tribes to offer online wagering involving players off-the-reservation, so long as both state law and the compact deem the gambling to take place through servers on tribal land and the tribe is also responsible for regulating the gaming activity.

The updated federal rules are consistent with the provisions in the Seminole Tribe’s 2021 gaming compact with the state of Florida, which was upheld by a federal Court of Appeals last year amid a long-running and ongoing legal challenge brought by a Florida commercial gaming operator.

Earlier this month, West Flagler Associates and Bonita-Fort Myers filed a brief asking the U.S. Supreme Court to review the U.S. Court of Appeals for the District of Columbia June 30 decision that allowed the compact to stand. That decision overturned a lower court’s ruling from November 2021 that initially struck down the Seminole compact.

The adoption of the new federal regulations is further reason to believe that the West Flagler lawsuit, which alleges that the Seminole compact is inconsistent with 1988's Indian Gaming Regulatory Act (IGRA), is unlikely to move forward, according to one prominent tribal gaming lawyer.

“I wouldn’t be overly concerned with that challenge,” Scott Crowell, an attorney with the Crowell Law Office – Tribal Advocacy Group, said Wednesday (February 28) during a webinar on the new Class III gaming compacts regulations presented by the Indian Gaming Association (IGA).

“This rule makes it clear and is consistent with the D.C. Circuit (Court of Appeals),” Crowell said.

Crowell said he expected to hear if the U.S. Supreme Court will take that case within the next couple of months.

A state-level legal challenge to the landmark Seminole compact also remains pending before the Florida Supreme Court.

But that case does not relate to IGRA and instead centers around West Flagler’s argument that the compact allowing the Seminole Tribe to operate statewide sports betting requires Florida voter approval of expanded gambling as per a 2018 state constitutional amendment.

The referendum requirement applies to types of casino games that are considered Class III under federal law, but Crowell said from the Seminole Tribe’s perspective it only relates to commercial sports betting outside of a tribal compact. 

“I think the tribe still has a better argument in that case,” he said.

“It’s a court loaded with (Republican Governor Ron) DeSantis appointees… but even if [the Florida Supreme Court] were to overturn it, the result would be that Florida and the Seminole Tribe would have to take that measure to the voters in a statewide proposition.”

Crowell said when the tribe is offering the state more than $5bn a year in revenue, “it’s difficult for me to think that they wouldn’t approve it if they have to go that route.”

“But that wouldn't change what the D.C. Circuit said, which is which is reflected in this rule,” he said.

Crowell was joined on the IGA webinar by Judith Shapiro, an attorney with Big Fire Law.

He noted that various commercial gaming industry associations had objected to the changes to federal regulations governing tribal gaming compacts after they were first proposed in 2022.

“I think the major reason that (commercial) operators are so upset with that is because of the IGRA provisions that come along with sports wagering under IGRA, where a minimum of 60 percent of the revenue must flow to the tribe in order to be consistent with IGRA,” he said, referring to provisions of the 1988 federal law that require tribes to have the sole proprietary interest in the gaming they operate and which limit commercial management partners to a maximum of 40 percent share of the revenue.

Crowell noted that major sports-betting operators have been able to agree market-access deals in various states across the country that have enabled them to retain as much as 95 percent of the revenue they generate as the 'skin' partner of a commercial casino, nothing like the 60 percent to the tribe to be consistent with IGRA.

He expressed frustration with tribes operating under the state law model, which they do in several states, such as Arizona and Michigan, leaving them vulnerable to operators who give tribes “a pittance and tell them to sit on the sidelines while they do everything.”

“I think that’s what [commercial operators] want to do and that is why they are so upset with the Seminole model and the codification of that model in the rule,” Crowell said.

Shapiro said what she found interesting in the updated federal compact regulations is the assumption that gaming takes place at the site of the server on the reservation if so deemed through a compact.

That is a model that could be applied to other forms of online gaming.

“Because once you have bought in that gaming takes place when the server is on the reservation, then it’s not just sports betting that matters,” Shapiro said. 

“Once you have sited the gaming event within the reservation for the purposes of IGRA and you are allowing people to place bets off the tribe’s reservation… what is to stop that from other mobile platforms.”

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