Not a Sure Thing

Tribal participation in sports betting is complicated and uncertain

Robert Martin, chairman of the Morongo Band of Mission Indians, views the looming political war over sports betting in California with a sense of dread, largely because it comes on the heels of a failed, decade-long battle to get online poker legalized in the Golden State.

The protracted political war over online poker cost Morongo “just shy of $5 million,” Martin says. And the chairman is not keen on the notion of spending anywhere near that much to help finance the legislative effort and public referendum needed to legalize sports betting in California.

“It’s going to require a constitutional amendment and a bill,” Martin says. “After all the time and money we spent on internet poker, I’m not willing to risk taking a stab at that.

“I have to look after the interests of my tribal members,” Martin says. Unlike commercial casinos, gambling in Indian Country generates government revenue to benefit tribal citizens.

 

Tribal Sovereignty vs. States’ Rights

The fact nearly 500 American Indian casinos in 28 states are essentially government enterprises has been ignored or given lip service in the media debate following the May U.S. Supreme Court decision declaring a federal prohibition on sports betting to be unconstitutional.

But that is precisely why many, if not most, of the approximately 245 tribes operating casinos—including 62 California tribes—remain at least cautious about the risky, expensive and marginal business of sports betting.

“I haven’t seen any enthusiasm for it at all,” says Steve Stallings, chairman of the California Nations Indian Gaming Association (CNIGA) and a member of the tribal council for the Rincon Band of Luiseño Indians.

The Indian Gaming Regulatory Act (IGRA) allows tribes to operate and regulate their casinos free from taxation and with minimal state oversight.

But state laws and tribal-state regulatory agreements, or compacts, required under IGRA limit what tribes can offer in their casinos. Tribes can only offer forms of gambling otherwise legal in the states in which they are located.

Sports wagering also will require tribes in California and elsewhere to negotiate new or amended compacts, an often lengthy process often fraught with politics and state demands for a cut of tribal revenues. Several tribes pay exclusivity fees to operate casino-style gambling.

Finally, a legal cloud remains over the ability of tribes under IGRA to accept sports and internet bets from off Indian lands.

Some tribes may pursue sports betting as a commercial venture, taxed and regulated by states, instead of gambling under IGRA, enabling them to move into an era of mobile, online wagering.

 

Finance, Legal Obstacles

Only a few tribal casinos in Arizona, Oklahoma and other states seeking sports betting have the resources to build and operate sports books, a time-consuming, labor-intensive and costly endeavor that on average generates a roughly 4 percent to 6 percent profit margin.

John Repa of Hospitality and Gaming Solutions says about eight California casinos would run a book if they had the opportunity. Others may consider adding betting windows to a sports bar or installing a kiosk. Many will do nothing at all.

Meanwhile, tribes in California and many other states—particularly in the Midwest and Great Plains—face potential competition from commercial casinos, lotteries, cardrooms and parimutuel racing interests, all clamoring to get into the sports betting business.

A widely circulated Associated Press report states that “hundreds” of tribes welcome the “opportunity” to engage in sports betting.

That prediction appears to be a bit of a stretch.

“Most tribes see sports betting as a threat to cut into profits in an already-competitive industry,” says a tribal Capitol Hill lobbyist who requested anonymity. “Then you have a very small handful of tribes that see it as an added amenity.”

Meanwhile, elected officials in states where tribal casinos dominate the landscape may have to overcome tribal political clout and maneuver a minefield of Indian law to reap the tax benefits of sports betting.

And the public demand to bet their favorite teams may not be satisfied anytime soon.

“The debate literally raging within the casino industry over sports betting is generally missing an in-depth analysis of business model and viability,” says consultant Joe Valandra, a Sicangu Lakota and former chief of staff for the National Indian Gaming Commission (NIGC).

“This is most glaring when Indian gaming is included in the mix. There is no clear path for tribes yet,” Valandra says, and indigenous communities “are likely to be cast as the spoiler in states where they have a political voice.”

The National Indian Gaming Association (NIGA)—a lobby and trade group representing some 184 casino tribes—adopted a resolution this spring supporting repeal of the Professional and Amateur Sports Protection Act (PASPA).

But the NIGA resolution demands any federal and/or state legislation acknowledge tribal sovereignty, tax exemptions and tribal-state exclusivity agreements while granting tribes parity in online wagering, conditions intended to protect tribal government revenues.

NIGA Chairman Ernie Stevens, in a prepared statement, said tribes are “encouraged” by PASPA’s repeal. But he added a few words of caution.

“Indian Country has diverse economies that will be impacted by the federal or state legalization of sports betting,” Stevens says. “As a significant stakeholder, our gaming tribes look forward to being at the table in establishing the critical regulatory framework that will minimize the negative impacts of sports betting on tribal casinos.”

 

A Survey of Tribal States

The 17 Arizona tribes operating 23 casinos are planning to include sports betting as part of negotiations on tribal-state compacts set to expire in 2022. Navajo Nation and the Gila River and Salt River Pima Indian communities have openly expressed a desire to get into the business.

Sports betting will also be a topic in upcoming compact talks between Oklahoma officials and 31 tribes operating about 130 gambling operations ranging from traffic plazas to resorts. The Cherokee and Chickasaw nations both say they want to offer sports books.

Talks between tribes and Arizona Governor Doug Ducey might be a bit dicey. Ducey wants to extend licenses to 55 off-track betting operations, encroaching on what tribes believe is their exclusive right in the compacts to casino-style gambling.

“I think the tribes are very interested in exclusivity,” says tribal attorney Stephen Hart of Lewis Roca Rothgerber Christie. “I think tribes would be willing to sit down and negotiate something with the governor’s office. But I would be very surprised if it involved commercial gaming.”

Exclusivity will also be an issue in Oklahoma, where, like Arizona and several other states, gambling policy is largely dictated by the tribes.

“I believe the tribes are justified in seeking exclusivity under the compact,” says attorney Jennifer Lamirand of Crowe & Dunlevy, a member of the Citizen Potawatomi Nation. “It’s yet to be seen if the state will agree or come up with a different alternative.”

As is the case in Arizona and elsewhere, only a few Oklahoma tribes will delve into the business.

“Not all the operations are going to have a need or the taste for sports betting or the ability to get it up and running,” says Lamirand, an associate justice on the Potawatomi Nation’s Supreme Court. “I believe there will be a handful of tribes that actually pursue it.

“Most tribes recognize it is a pretty extensive and expensive endeavor to get off the ground.”

The Mohegan and Pequot tribes of Connecticut are seeking exclusivity to operate sports betting, and the Seminole Tribe of Florida and Poarch Band of Creek Indians in Alabama operate largely free of competition. The Oneida and Seneca nations of New York also want to operate books.

Efforts to legalize online wagering and sports betting in Michigan—with three commercial casinos in Detroit and a dozen tribes operating 23 gambling operations elsewhere—have proven problematic.

Michigan tribes over the years have seen their promised regional exclusivity eroded. They do not look kindly at gambling proposals calling for increased revenue sharing with the state.

Many Michigan tribes are in the throes of protracted compact negotiations. And it is not clear how tribes will adapt to online provisions in pending state legislation.

Jim Wise, vice president of marketing for the FireKeepers Casino Hotel, owned and operated by the Nottawaseppi Huron Band of Potawatomi, says the tribe is monitoring legislative activity but has not decided whether to add sports wagering to the mix of amenities.

“We expect there will be a lot of discussion about this topic in the coming weeks and months, but until there is something more to react to, it’s probably premature to speculate,” Wise told the Detroit News.

The Oneida and Ho-Chunk tribes of Wisconsin are not sure the economics of sports wagering warrant opening up compacts for negotiations.

“The Supreme Court decision just came down, and we’re trying to wrap our minds around it,” Oneida spokesman Phil Wisneski told USA Today. “Leadership has been talking about it, trying to figure out the potential impacts.”

There also doesn’t seem much taste for sports betting in Washington, where two dozen tribes operate casinos in a state more concerned with limiting than expanding gambling.

“I don’t get myself too worked up over it,” says Ron Allen, chairman of both the Jamestown S’Klallam Tribe and Washington Indian Gaming Association. “The margins are small,” he notes, and the business can be risky.

“I refer to it as a gambling entertainment amenity that adds to the mix,” Allen says.

While some interest in sports betting can be found in Arizona,

Oklahoma and on the East Coast, the pushback comes from California and the nearly 70 rural, mostly marginal casino tribes in the Great Plains and Midwest.

“It’s location, location, location,” says attorney Phil Hogen, former NIGC chairman, and an Oglala Lakota from the impoverished Pine Ridge, South Dakota reservation. “If you’re in a metropolitan area with a lot of traffic coming your way, it’s an opportunity.

“But I don’t see a lot of people driving to Pine Ridge to do sports betting.”

“Our little casino, maybe in a good year, nets $1 million,” says Valandra, a citizen of the Rosebud Sioux Reservation on the North and South Dakota border. “The chief advantage of the casino is it provides 230 jobs.

“That’s true for almost every tribal casino in North Dakota, South Dakota and Montana. They provide jobs. Tribes are very fearful of making changes that might impact those jobs.”

The 11 tribes in Minnesota have a compact in perpetuity with no revenue share with the state, an agreement they are not likely to amend in exchange for the opportunity to offer sports betting, says John McCarthy, executive director of the Minnesota Indian Gaming Association (MIGA).

“The Shakopee Mdewakanton Sioux Community seemed neutral,” a sports wagering consultant says of a recent meeting with Minnesota tribes. “All the others seem opposed.”

A MIGA press release stated tribes would give sports betting serious thought, adding the association “has long opposed the expansion of gambling.”

A public appetite for sports wagering could alter the politics in many states.

“The citizens in many of these states are going to want an opportunity to bet on sports,” says Norm DesRosiers, a regulatory consultant and former NIGC commissioner. “I don’t think they’re going to sit by and let the Indians stop it.

“If the tribes see a state legislature is going to offer it to whatever outlets choose to operate sports betting, they’re going to be faced with getting on board or not.”

 

Fear, Loathing in The Golden State

California is the nation’s most lucrative gambling market, with 61 tribes operating 63 licensed casinos, according to the California Gambling Control Commission website. The Lytton Band of Pomo Indians operates a Class II facility not subject to state regulation.

California tribes generate $8 billion, about a fourth of the $31.2 billion annually won by tribes nationwide.

“We view sports betting as a potential amenity that would complement our numerous offerings,” says Chairman Mark Macarro of the Pechanga Band of Luiseño Indians, operators of arguably the state’s largest and most lucrative casino resort in rural Temecula.

“We look forward to engaging in a conversation with fellow tribal leaders, policymakers and industry stakeholders to see if there is a path forward for sports betting in California.”

As is the case in Minnesota, Macarro consistently cites the state’s policy of limited gambling during the decade-long debate over online poker. He and his tribal colleagues will likely work to maintain that policy, if not seek sports wagering exclusivity for tribes.

“California voters have, on numerous occasions, confirmed the exclusive right of California tribal governments to operate casino-style games,” says CNIGA’s Stallings. “Legalization of sports betting should not become a back-door way to infringe upon that exclusivity.”

Unfortunately for the tribes, their constitutionally guaranteed casino exclusivity is limited to slot machines, lotteries and banked table games. It does not include sports betting.

A proposed constitutional amendment by state Assemblyman Adam Gray does not specify licensees, but the list is expected to include tribes, parimutuel racetracks and card rooms.

“The gaming industry needs to come together to ensure this opportunity is available for everyone in the state,” Kyle Kirkland, president of the California Gaming Association, a card-room lobby, said in an opinion piece in the Sacramento Bee.

“Our constitution grants tribes the exclusive right to banked card games, but does not provide anyone the right to conduct sports wagering.”

“It is a casino-style game,” Stalling replies. “It is house-banked. The tribes will probably argue this is an activity that is exclusive to the tribes.

“If you’re going to legalize it you’re going to have to start by talking with us.”

The lobby war between tribes, card rooms, racetracks and fantasy sports interests leading up to a possible 2020 referendum will likely be hard fought. Tribes and card rooms are already engaged in a vicious political and regulatory row over banked table games in the state’s 88 card rooms.

Tribes contend the games violate their exclusivity. The card rooms claim the games are necessary to preserve an industry that employs more than 20,000 people and provides critical tax revenue to several municipalities.

 

City Books, Tribal Distrust

Sports books and banked table games, in addition to restaurants and hotel rooms, would in the view of tribes constitute urban casinos, creating unfair competition to the rural tribal operations.

It also would jeopardize the revenue stream that funds tribal governments.

When racetrack and card-room interests in 2004 attempted to get voter approval of urban casinos, tribes spent $33 million to defeat the effort by a vote of 76 percent to 24 percent.

California tribes in the months ahead will debate what sports betting will look like in the Golden State—whether exclusivity should remain with tribes or shared with other vendors, particularly the racetracks or card rooms.

They also will debate the issue of online and mobile wagering, whether it’s time to move away from IGRA and begin pursuing commercial gambling opportunities.

At some point a ballot initiative may surface and tribes will be faced with the sustainability of their governments for decades to come.

Then they will flex their political clout.

“If we saw a referendum as a threat to our exclusivity and operations, I truly believe the tribes, with the right messaging, could defeat it,” Stallings says.

Indian advocates say it is foolish to suggest tribes stop short of doing all they can to preserve and protect IGRA and the flow of revenue from their casinos, which provides housing, health care, education and other services to their citizens.

“It’s really hard to understand what we’re fighting for, why it’s so important,” says Steve Bodmer, general counsel for the Pechanga Band.

“There’s no substantial tax base for many tribes in Indian Country,” Bodmer says. Unlike commercial casinos, he says, gambling revenue “is not going to help a CEO buy a yacht. It’s going to take care of tribal members.”

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.