One Size Does NOT Fit All

Sports betting taking slow strides with mid-side, small tribal casinos

The Spirit Lake Tribe, owners of a modest, 49,000-square-foot casino and 124-room hotel near Devil’s Lake in northeast North Dakota, hopes to soon offer customers the opportunity to wager on college and professional sports.

Tribal-state compacts permit North Dakota’s seven American Indian casinos to operate sports betting. And Spirit Lake will hold a tribal referendum this spring on a measure to allow alcohol at the casino. If it passes, the tribe will build a sports bar.

“I don’t think it will be a full-blown sports book operation,” Slot Director Jason Thompson says. “I don’t think we have the capability to do that. But there are a lot of gamblers that will want to place bets on sporting events. It will be a good source of revenue.”

Some 225 miles south in Hankinson, the Sisseton-Wahpeton Oyate of the Lake Traverse Reservation are opposed to sports betting at their 95,000-square-foot Dakota Magic casino and 111-room hotel.

“It’s been discussed,” Marketing Director Rojelio Rubio says. “But there is currently no interest in it right now. There are a lot of risks and not a whole lot of profit margin.”

The difference of opinion on sports betting between Spirit Lake and Dakota Magic is indicative of the split among the nearly 500 casinos in 29 states that make up the $32.4 billion American Indian government casino industry.

“It’s a good illustration of what is going on nationally,” attorney Greg Gemignani, a lecturer at the International Center for Gaming Regulation at the University of Nevada, Las Vegas, says of the North Dakota tribes. “Each tribe has a different take on sports betting, or at least a slightly different spin. I don’t know that they have a common desire to enter into it.

“A lot of tribes don’t want it, period,” Gemignani says. “Not only don’t they want it, they don’t want the lottery or commercial gaming in the area to have it, either.”

Many Indian tribes bought into a nationwide campaign by the American Gaming Association, the commercial casino lobby, to encourage the U.S. Supreme Court to strike down a federal prohibition against sports wagering. Justices voted in May to nullify the Professional and Amateur Sports Protection Act (PASPA), opening sports betting legislation to the various states.

But the high risks and lack of profitability in sports betting—combined with the legal and regulatory challenges for tribes operating casinos under federal law—soon diminished their enthusiasm.

Although tribes represent the largest segment of the nation’s approximately $100 billion legal gambling industry, it appears indigenous governments in only a few of the 29 states with significant Indian casino markets will seek to operate sports betting anytime soon.

 

A Divide Among Big, Small Players

Of the 242 tribes with casinos, only 18 percent generate a whopping 74.3 percent of the $32.4 billion won by tribal casinos nationwide, according to the National Indian Gaming Commission (NIGC).

These approximately 90 lucrative casinos in largely urban areas stand to gain the most from sports betting, a risky endeavor requiring a hefty investment while generating a meager profit of 3-5 percent.

The upscale resorts can afford elaborate sports books with high-definition screens flashing sporting events to a younger, more lucrative customer willing to spend large on food, drinks and entertainment, not to mention other games of chance.

“Providing dedicated room and space for a stand-alone sports book is really going to be left to the larger guys,” says John Repa, president of Hospitality and Gaming Solutions, or perhaps 40 to 80 of the casinos nationwide. Others may incorporate betting windows into bars and restaurants or install kiosks.

But most tribes operate marginal, small to medium-sized facilities on rural, often economically deprived reservations in the Great Plains, West and Midwest—casinos intended to create jobs for struggling communities, not revenue to fill the pockets of corporate shareholders.

“There’s a broad spectrum in Indian Country covering two extremes: tribal nations that would not benefit at all and, on the other end, tribal nations that would significantly benefit,” NIGC Chairman Jonodev Osceola Chaudhuri told the Associated Press.

Of 494 tribal operations nationwide, 351 of them—or 71 percent—generated just 14.1 percent of the $32.4 billion in casino revenues in 2017, according to NIGC statistics.

Reservation casinos with 200 to 500 slot machines, a handful of table games, a few hotel rooms and a fast food restaurant may not be inclined to add sports betting to the mix.

As an increasing number of states with tribal casinos begin to move on legislation to enable wagering on sports, many tribes are not getting on board.

“The mid-range tribes are starting to pick up the pace in terms of looking at sports betting and getting ready to move on it,” says Deborah Skenandore-Thundercloud, chief of staff for the National Indian Gaming Association (NIGA). “But I see the trend moving much slower with the smaller tribes.”

“It’s moving very slow because of capital constraints and budget constraints,” Repa says. “The return on a sports book isn’t good. The margins are thin.”

William Hill Race & Sports Book, which operates in more than 100 Nevada casinos, bars and convenient stories, is seeking tribal partnerships for its operational expertise, risk management and trading data.

Daniel Shapiro, vice president of business and strategy for William Hill US, says any size of tribal operation—from a gambling resort to a small and medium-sized casino to a kiosk—can avail them to a betting operation.

“We’ve been talking to lots of tribes, ranging from very small to very large ones,” Shapiro says. “We’ll have a conversation with anybody, quite frankly. If you look at our Nevada operations, we operate in large casinos on the Strip and we operate in small ones in rural Nevada.

“There are different ways of structuring an agreement. Certainly we’re willing to provide the technology and/or risk management. Kiosks are another way to offer sports betting to a smaller property. Any tribe should be able to operate.”

Meanwhile, California, Arizona, Oklahoma, Minnesota and other states with large tribal casino industries taking up sports betting legislation in the new year aren’t impressed with the bottom line.

“States in the beginning really thought this was going to be a big windfall,” Repa says. “Now the reality has begun to sink in. They’ve been educated enough that they know it’s not what they thought it was going to be, initially.”

“Everything I’ve seen so far suggests that this would not be what one would consider to be a pot of gold,” Ohio state Senator John Eklund, a Republican who introduced legislation to legalize sports betting in his state, told the Associated Press.

 

Risks With Compacts, Competition

Unlike commercial casinos, expanded gambling for tribes operating under the Indian Gaming Regulatory Act (IGRA) presents as many challenges as opportunities.

IGRA requires indigenous governments seeking to operate casinos to enter into tribal-state regulatory agreements, or compacts, many of which require tribes to share their gambling revenues with the state.

Compacts vary from state to state. Some clearly define games permitted under the compacts and do not specifically reference sports betting. Others broadly refer to casino games, including sports betting as Class III gambling under IGRA.

To operate sports books, tribes in many states need to negotiate new or amended compacts, leaving them vulnerable to paying greater revenue shares to the state. This is particularly problematic with the slim margins involved in operating a book.

Meanwhile, in states where tribes have exclusive rights to operate casinos, legal sports betting can create competition for the gambling dollar from the lottery, racetracks and other potential vendors such as taverns, card rooms and charities.

In addition, IGRA limits tribes to gambling on Indian land, creating a potential legal problem with mobile and account wagering. Online and account wagering dramatically increase profits from sports betting.

For a rural tribe in a state with no professional sports teams, wagering on sports may not make economic sense if it is limited to Indian lands, particularly when one figures in risks, upfront capital costs, compact revenue sharing and an operating agreement.

“If the state law is such that tribes are not going to be able to take wagers from off tribal lands, what’s the point of having any expanded gaming at all, sports or otherwise?” Gemignani asks.

 

Roadblocks to Tribal Sports Betting

Legislatures in Nevada, New Jersey, Delaware, West Virginia, Mississippi, Pennsylvania and Rhode Island already have legalized sports betting. Other states—including Kentucky, Missouri, Ohio, Tennessee and Virginia—will consider sports betting bills early this year.

Sports betting legislation in several states with significant tribal markets is expected to be approved through legislation or ballot initiatives, including New York, New Mexico, Connecticut, Oklahoma, North and South Dakota and Arizona.

But much of the tribal casino industry will not be participants in sports betting, at least not for a few years.

In California, 63 licensed casinos generate more than $9 billion a year, roughly 30 percent of the tribal revenues nationwide. But politically powerful tribal casinos, card rooms and racetracks have struggled for a decade over competition issues in efforts to legalize online poker.

Sports betting in the Golden State would require a voter-approved constitutional amendment. A draft ballot initiative would grant licenses to tribal casinos, card rooms and racetracks. It would also allow banked table games in the card rooms, encroaching on tribal exclusivity.

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

Eleven Minnesota casinos tribes oppose any expansion of legal gambling in the state, including sports betting. The largest of 11 Wisconsin tribes operating about 25 casinos have also expressed an unwillingness to renegotiate tribal-state compacts.

A dozen Michigan Indian tribes agreed to carefully craft online wagering legislation for commercial and Indian casinos in the state. But the bill was vetoed by the governor.

Several of the 14 pueblos and tribes in New Mexico have stated they define compacts as including sports betting, a decision not opposed by the state attorney general. Santa Ana has launched a sports betting operation.

 

North Dakota

Legislation is being floated in North Dakota to add sports wagering to the limited-stakes blackjack and pull tabs already allowed by some 50 charities and nonprofits in many of the bars, restaurants and hotels. State legislators also may pursue a constitutional amendment, which would require a ballot measure.

Wagering on sports is already permitted on tribal lands in North Dakota with the repeal of PASPA. But it’s not clear how many of the seven mainly small tribal casinos will pursue sports betting, particularly if tribal-state compacts limit mobile gambling to tribal lands.

“That’s how the compact reads, within tribal boundaries,” says Collette Brown, director of Spirit Lake’s gaming commission. “But we have customers asking if we will be doing it,” she says, and the tribe is in discussions with William Hill US to operate the wagering in connection with a sports bar.

Chairman Mark Fox of the Three Affiliated Tribes of the Fort Berthold Reservation, owners of the 4 Bears Casino & Lodge in New Town, anticipates his tribe also will get into sports betting. The tribal operation has 600 slots, 10 tables and a 122-room motel.

Oil and gas generate the bulk of Fort Berthold tribal government revenues. But the casino accounts for 350 to 400 jobs.

“You’re going to find with most of the tribal casinos in the upper Midwest and Northern Great Plains, jobs are most important,” Fox says. “Casino revenues are not that significant. It’s the jobs.”

The lottery, charitable gambling outlets and other vendors pose significant competition for 4 Bears Casino & Lodge.

“We are always trying to be on our toes in anticipating expanded gaming in the state that will somehow diminish our own operations,” Fox says. “We are very much concerned about how (the state) will approach the issue.”

 

South Dakota

The small and mid-sized tribal casinos in neighboring South Dakota are faced with a similar situation as the state legislature considers putting legalized sports betting for 22 commercial casinos in Deadwood on the 2020 ballot.

If passed, tribes would also be allowed to bet on sports.

Many of the seven tribes operating 11 casinos are not interested in getting into the business. Most are limited to a few blackjack tables and 250 slot machines or less.

“The tribal operations are pretty small,” says one casino general manager who requested anonymity. “It’s not really a priority for us.”

“I think we’re going to let it be,” says another casino manager.

The Flandreau Santee Sioux Tribe, whose 17,000-square-foot Royal River Hotel & Casino has 500 slots and 120 rooms, supports the Deadwood initiative.

“We have been actively monitoring the legalization of wagering on sporting events,” tribal attorney Seth Pearman told South Dakota News Watch. “Sports wagering at the Royal River Casino would diversify the gaming opportunities for patrons, would positively impact their experience overall, and would keep them from leaving the area to legally place wagers.”

Chairman Troy “Scott” Weston of the Oglala Sioux Tribe warns that South Dakota and other states could use ballot initiatives on sports wagering as a means of expanding legal commercial gambling throughout the various states with tribal operations.

“Indian casinos are never going to survive,” he quips.

 

Navajo Nation

The Navajo Nation Gaming Enterprise operates four casinos on the tribe’s sprawling reservation, one casino hotel in Arizona and three stand-alone casinos in Gallup, Farmington and Shiprock, New Mexico.

The enterprise has a strategy in place to proceed with sports wagering in both New Mexico and Arizona, which is in the midst of tribal-state compact negotiations.

“We see it as a great opportunity to create promotions and events to attract new players to the property,” says NNGE CEO Brian Parrish. “Then there’s always crossover play, which is a major benefit.”

Unlike Pueblo of Santa Ana, operators of the Santa Ana Star Casino, Navajo is not moving forward with sports betting in New Mexico until state regulators have established a regulatory structure.

“The regulatory infrastructure for the state of New Mexico is just being developed,” Parrish says. “Our feeling is rather than jumping in and pushing the situation, creating ambiguity or volatility in the situation, we want to work with the state to create the regulatory infrastructure that will help the state and help the tribes. We’ll build our program into that.”

Navajo has defined areas in both the Twin Arrows resort and the smaller operations to integrate betting facilities, video screens and food and beverage ventures. A kiosk will be provided in the smaller Shiprock facility.

The investment will range depending on whether state and federal law restricts wagering on tribal lands or allows mobile and internet wagering from off the property.

“We’re in rural locations,” Parrish says of the four properties. “We anticipate having a lot of betting on local and regional teams. That makes it harder to balance the money wagered on each side of the contest and mitigate volatility in payouts. With a smaller operation like we are, that’s something to be mindful of.

“We’re going to be very competitive with the lines we offer, but we’re not going to be overly aggressive.”

Online wagering would significantly increase revenue, but the margin would remain small at 3-5 percent.

“It’s not such a big number that it will transform our business,” Parrish says. “But it will add value that we can use to create more jobs and more revenue back to the nation. The volume will go up pretty significantly.”

 

Preparing For Change

NIGA’s convention and trade show this spring in San Diego will target strategies for smaller and mid-size tribal casinos, including methods of integrating sports wagering into a facility.

The debate will include European-style betting shops, says Skenandore-Thundercloud, “ideas that would work for a smaller tribe versus setting aside a big piece of the gaming floor and dedicating it to something like that.”

Shapiro is fairly certain that in one form or another—overcoming the regulatory, compacted and legal hurdles—sports betting will be a fixture in virtually every tribal casino in the country, big or small.

“There’s been an initial sort of rush since PASPA,” Shapiro says, “but sports betting is going to be around in this country for a long time.”

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.