Business Matters

Alliances vary in their approach to online wagering

The three tribal founders of Tribal Internet Gaming Alliance (TIGA)—the Red Cliff, St. Croix and Lac du Flambeau bands of Lake Superior Chippewa Indians of Wisconsin—hope to launch a free-play, internet bingo website that would eventually expand into for-pay poker.

TIGA looks to enlist into its network other tribes, and even states where internet wagering is legal. But it will not attempt to solicit wagers from off the reservations or from states that are not part of the network.

TIGA attorney Jeffrey Nelson says he is not concerned with critics who contend the network will not likely generate a significant profit if wagers are limited to tribal lands.

“Whether the business model makes money at the outset is rather secondary,” he says. “The primary purpose will be to gain experience and bring more patrons to the land-based casinos.

“We hope to eventually create a large coalition that will be a model of intertribal cooperation and economic success. It would be a model that other tribal groups can use not only for internet gambling, but as an example of how tribes can work together and use their sovereignty to diversify and become economic powerhouses.”

The Intertribal Online Gaming Alliance (ITOGA), a group of six California, Oklahoma and Michigan tribes, is planning to launch an online for-pay bingo and Class II slot machine website that will accept off-reservation wagers.

ITOGA CEO Jeff Voyles says the group hopes to sign up 10 tribes before launching the website this summer. Member tribes anticipate a legal challenge.

“The case on whether federally recognized Indian tribes can operate Class II gaming over the internet has never been decided,” says ITOGA attorney Robert Rosette. “The legal and policy argument to demonstrate why it should be allowed has never been made.”

By using internet servers on Indian reservations and crafting wagers as loan transactions through tribal-owned payday lending operations, Rosette says tribes can make a legal case that wagers constitute “proxy play” originating and culminating on Indian lands.

Rosette says the process also enables tribes to work within safe harbor provisions of the

2006 Unlawful Internet Gambling Enforcement Act (UIGEA), which limit online gambling transactions.

“We have the requisite legal framework to design games that comply with IGRA and do not violate any applicable federal or state law,” Rosette says.

The two groups are generating controversy.

Tribal involvement in payday lending, while a legal enterprise, is getting pushback from financial regulators.

Industry observers also caution ITOGA about mixing gambling and payday lending, short-term loans at high interest.

Voyles says payday loans enable the tribes to avoid UIGEA prohibitions against the use of credit cards for gambling.

“It allows (players) to access money to play, because obviously we’re not going to use MasterCard,” Voyles says. “It’s legitimately a separate business.

“If you take that loan out—$500 or $200 or whatever it is—you can use that loan for whatever you want. We’re not telling you to gamble with it. You can fix the air conditioner if you want. But you can gamble with it, if you like.”

TIGA’s business model is far more conservative, but a founding member of the group, Kevin D. Maulson, has a 2008 securities fraud conviction in the operation of AmeriCash Inc., a supplier of ATMs to tribal casinos.

Maulson says he will not remain with the group when a website is launched.

“When it comes time to move forward on this (TIGA), that’s when I back away,” Maulson told GamblingCompliance.com. “I won’t do anything to jeopardize the hard work tribal leaders have done.”

Dave Palermo is an award-winning metropolitan newspaper reporter. He has written about American Indian governments for more than 20 years, working as an advocate for several tribes and tribal associations. He also has co-authored books on gambling and gambling law. He can be reached at dgpalermo1@gmail.com.

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