Note: With the 20th TribalNet Conference ends this week in Nashville, we take a look at one of the most important stakeholders in the sports betting conversation, and how tribal compaction may impact states’ desires for sports betting in the years to come.
The dissemination of legal sports betting in the United States dramatically accelerated over the past year. Thirteen states now offer some form of sports betting, with another half-dozen approved and awaiting launch.
Sports betting on Native American tribal lands is advancing at a cautious pace, however. Considering the prevalence of tribal games across the country, the role of tribes in the growth of American sports betting cannot be overstated.
New York, for example
At the May sports betting hearing at new York, there was a panel titled “Native American Tribes / Conditionally”.
However, those who watched the audience were likely confused as none of the speakers represented a Native American tribe. Witness Sarah Walters, who has extensive experience working at the federal level on tribal issues, even made it clear that she was testifying on behalf of Caesars.
Legal sports report met with the chairman of the committee Senator Joseph Addabbo on the lack of tribal representation.
Addabbo made it clear that the New York tribes are actively involved in the drafting of the New York bill, and that the tribes have been invited and refused to testify. Additionally, Addabbo said the tribes were present at the hearing.
The tribal impact on sports betting in many states is going to be important.
We have already witnessed Florida’s hopes to see sports betting begin and probably end with the Seminole Tribe. However, the landscape of tribal play is important to understand. It affects various states, from Oklahoma To Arizona, of California To Washington.
How big are the tribal games?
In November 2018, the American Games Association (AGA) published a report detailing the impact of tribal games across the country. The report states that in 2017, tribal gaming was a $ 32 billion market segment with operations in 28 states.
Among the states with the highest economic impact of tribal gambling is California, at nearly $ 20 billion, followed by Oklahoma, Florida, Washington and Arizona. The tribal game almost employs 650,000 people across the United States and contributes to more than $ 15 billion to states through revenue sharing agreements.
If sports betting is to take place in multiple states, it will be as a result of a major initiative, or at a minimum, supported by the tribes. Wednesday’s news from a California Tribal Supported Sports Betting Initiative is the last example.
Indian Gaming Regulation Act
The Indian Gaming Regulation Act, or IGRA, set the stage for how tribes, states, and the federal government interact when it comes to tribal games.
IGRA was catalyzed by the United States Supreme Court case, California v. Cabazon Band of Mission Indians, who said California’s efforts to control what gambling activity could take place on tribal lands through regulatory mechanisms conflicted with tribal rights.
IGRA is perhaps best known for establishing three classes of play activities:
- Class I refers to to “social games only for prizes of minimum value or traditional forms of Indian games played by individuals in connection with, or in connection with, tribal ceremonies or celebrations”.
- Iincludes bingo and card games permitted by state law, To classify II Games exclude banked card games such as baccarat, Chemin de Fer and blackjack, or electronic versions of these games and slot machines.
- Class III covers all games that are neither Class I nor Class II, possibly including sports betting.
Compaction under IGRA
While tribes have broad authority to regulate Class I and Class II games, IGRA requires that states seeking to offer Class III games must enter into negotiations with the state in which the tribe is located. The state must negotiate in good faith.
For a tribe to offer sports betting, it must satisfy several requirements:
- The activity must be authorized by an ordinance or resolution that
- (i) be adopted by the governing body of the Indian tribe having jurisdiction over such lands,
- (ii) meets the requirements of paragraph (b), and
- (iii) is approved by the President,
- (B) located in a state which permits such gambling for any purpose by any person, organization or entity, and
- (C) conducted pursuant to a Tribal-State Agreement entered into by the Indian Tribe and the State under subsection (3) which is in effect.
Let’s get together
Paragraph (3) mentioned in subsection (C) requires tribes and states to enter into negotiations for a tribal-state agreement governing gambling activities.
Once the agreement is concluded, the agreement is subject to the approval of the Secretary of the Interior and takes effect upon publication in the Federal Register.
IGRA also lists the topics it can include in a compact:
- Determine which laws will apply.
- The distribution of powers between the tribe and the state.
- Assessments made by the State concerning the costs of regulating the activity.
- Taxation by the tribe.
- Recourse in the event of breach of contract.
- Operating standards, including licenses.
- Any other subject directly related to the regulation of games.
The IGRA essentially makes pacts the primary and exclusive means for states to enter into agreements with tribes on exclusivity and revenue sharing of gaming profits.
But tribal and commercial games don’t always have the same goals, or at least face different challenges.
Sports betting could be too expensive
Sheila morago, the executive director of the Oklahoma Indian Gaming Association, explained, “The point is that unlike in business operations, tribes have legal and political issues that need to be resolved first.”
These tribal-state agreements often materialize after months or even years of negotiation. The prospect of renegotiating a pact and potentially having to cede more of the revenue to the state to offer a low-margin product, like sports betting, may not be worth it for all tribes.
Every state and tribe will need to evaluate sports betting and see if that makes sense, Morago said.
“They may be in states that require constitutional change or their covenants may be renegotiated. Thus, tribes must weigh the implications for potential income from their properties. “
The cost-benefit analysis of sports betting is somewhat unique for tribes, compared to commercial operators.
Although we have seen actions on the tribal front in New Mexico and Mississippi, other tribes – especially those enjoying a relatively quiet time around the subject of their pact – may choose to launch the sportsbook box on the road.