The outbreak of the Coronavirus has had a major impact on the gaming industry. With this in mind, GGB is committed to keeping its readers informed as the world faces this growing pandemic. GGB will provide updated news and analysis on our weekly news site, GGBNews.com.

Second Thoughts

Tribal views on internet gambling continue to evolve as online legislation looms

Second Thoughts

Just days after his election as chairman of the California Nations Indian Gaming Association in January 2010, Danny Tucker, chairman of the Sycuan Band of the Kumeyaay Nation near San Diego, expressed his concerns about internet gambling.

“The recent drive by members of Congress to legalize internet casino gambling nationwide represents the greatest threat to Indian gaming in the last 20 years,” Tucker said.

Testifying before a November 2011 hearing by the Senate Committee on Indian Affairs, Glen Gobin, vice chairman of the Tulalip Tribes of Washington state, said his community viewed internet gambling as “a direct threat to the economic growth in Indian Country.”

Tucker and Gobin were not alone in their opinions. Most of approximately 240 American Indian tribes operating casinos were angered in late 2009 when Congress began considering legislation to legalize, tax and regulate internet gambling. Tribes were convinced cyberspace gambling—even if restricted to player-banked poker games—would seriously impact visitation to what are now 460 casinos scattered throughout largely rural reservations in 28 states.

Indigenous leaders, lawyers and lobbyists also feared federal legislation would erode Indian self-governance and interfere with tribal-state compacts defining the roles of tribal and state casino regulatory agencies. Many compacts give tribes exclusivity to operate casinos in exchange for a state share of gambling revenue.

The fears remain. But the American Indian casino industry’s position on internet gambling has undergone a major transformation. And tribal thoughts on cyberspace wagering continue to evolve. When representatives of 260 tribes attending a July National Indian Gaming Association summit in Washington, D.C. were asked if they viewed online wagering as an opportunity, most in the audience raised their hands.

Only a few hands were raised when attendees were asked who viewed internet gambling as a threat.

Tucker’s CNIGA organization recently endorsed a legislative proposal to legalize statewide online poker. And when Gobin made a second appearance before the Indian Affairs committee in July, he spoke in support of federal internet legislation. A December 2011 Department of Justice opinion limiting Wire Act prohibitions to sports betting would allow state lotteries to engage in online wagering, he said, creating potential competition for tribal and commercial casinos.

Contrary to the fears expressed by Indian leaders more than two years ago, many tribes now believe they can reap additional profits and marketing opportunities from internet commerce, even if they are forced to compete with a popularly branded Nevada casino industry that has moved far more rapidly in embracing internet technology and regulations.

“Tribes began to research the issues, and in doing so learned what their opportunities are,” says Jana McKeag, principal of Lowry Strategies, an Alexandria,

Virginia, governmental relations firm. “Tribes are now aware the internet dominates our social and business world. They realize they can’t hide from it and that it might actually be helpful as a marketing tool.”

But the 365 indigenous governments in the lower 48 states remain widely divided on whether online wagering should be legalized, and how enacting federal and state legislation should be crafted. The still-evolving evolution of tribal thought on internet wagering comes as Congress and several states are moving to enact legislation, ushering in an online gambling industry that generates more than $30 billion in annual revenues worldwide.

And the lack of lineal thought on online legislation may be putting the $27.2 billion Indian gambling industry at a political disadvantage with the more unified commercial casino industry and state lotteries. “As latecomers to the debate, the tribes are at a disadvantage” in negotiating inclusion of tribal concerns in proposed legislation, reported the Las Vegas Sun newspaper.

While many tribes remain opposed to expansion of commercial and lottery gambling, others are split over whether indigenous governments would benefit more from a federal regulatory scheme or state legislation. There are concerns over the impact enacting legislation would have on tribal sovereignty and self-governance, tribal tax exemptions, and the ability of tribes to largely self-regulate land casinos under the Indian Gaming Regulatory Act of 1988.

Many tribes are only reluctantly becoming engaged in the political process, convinced it’s futile to try to stymie the evolution of cyberspace gambling. “I would not say tribes are embracing the onset of internet wagering,” an Indian lobbyist who requested anonymity told GamblingCompliance.com. “Tribes see it as an eventuality. They are being pragmatic.”

Regardless of their motivation, many larger tribes are devoting time, money and resources to set up the technological, regulatory and legal infrastructure needed to engage in internet wagering should Congress enact a federal scheme.

“A good majority of the larger tribes have been investigating and tracking (internet wagering) for some time, and I would say most of them are putting game plans in place” in the eventuality online wagering is legalized, says Ehren Richardson, a consultant for NIGA and individual tribes.

“Internet gaming is a reality in today’s digital world,” says Bruce Bozsum, chairman of the Mohegan Tribe of Connecticut, which operates a government casino and Pocono Downs racetrack and casino in Pennsylvania. “Our tribe is doing everything in our power to prepare for it, and to look out for the best interests of tribal governments and the commerce our tribal nations depend upon.

“We have invested a great deal of time to develop regulations for internet gaming should they be necessary. These regulations… meet or exceed the toughest regulations found anywhere in the world, including the new standards recently established in Nevada.”

Mohegan, Mississippi Choctaw and Great Plains Indian Gaming Association are looking at interstate coalitions as a means of pooling player liquidity in the event of federal legislation.

Meanwhile, many of the 61 casino tribes in California have aligned with card clubs in pressing for intrastate legislation, aware the state is one of the few with the population and player liquidity to sustain a profitable online poker site.

Delayed Response

Native America for several years after passage of the Unlawful Internet Gambling Enforcement Act of 2006 remained ambivalent about the internet and skeptical Congress would attempt to tax and regulate online gambling.

“Interest was minimal at best,” says Richardson, who as a NIGA consultant held several sparsely attended meetings on the internet.

Tribes remained low on the internet learning curve. When Congress in 2009 moved to legalize online poker, tribes feared the move would cannibalize casino revenue. They were not aware online poker players rarely patronize casinos or that the player-banked game generates less than 3 percent of a casino’s revenue.

Tribes also were slow to react to the onslaught of congressional efforts to legalize online gambling that began in 2009. With its 184 member tribes widely diverse on the issue, NIGA and Chairman Ernie Stevens took a cautious position in the congressional internet debate.

Eastern and Great Plains tribes remained hopeful of establishing interstate coalitions under a federal scheme. Some large, lucrative California tribes threatened to leave the organization if NIGA was proactive on federal legislation. Others opposed federal or state legalization.

“Much to Ernie’s credit, he doesn’t get ahead of his membership,” says Elizabeth Homer, tribal attorney and former vice chair of the National Indian Gaming Commission.

“Reaching consensus in Indian country is not easy,” says John Tahsuda, principal in Navigators Global, a government relations firm, and a former NIGA counsel. “I know; I’ve been there.”

NIGA in a July statement said it began monitoring the internet in 2001, and in 2010 formed an internet committee that has since met “a dozen” times. NIGA also solicited at least two studies on the internet, one weighing its potential impact on casinos.

There was no urgency to get out front on the issue, Homer says, until the December 2011 Department of Justice opinion on the Wire Act. “Until the Justice Department opinion… there was basically a prohibition on the use of the internet for gaming purposes,” he says.

Tribes failed to reach consensus on an internet position at NIGA’s annual meeting in April 2010 in San Diego, saying they needed more time to study the issue. Tribes shelved a resolution opposing a House bill by Rep. Barney Frank, D-Massachusetts, to legalize internet poker and place it in the regulatory hands of the Department of the Treasury.

The delay in reaching consensus, wrote Tony Batt of GamblingCompliance.com, meant it was “unlikely” NIGA would “play a significant role in the debate in Congress on internet gambling” at least until a later meeting in October in Prior Lake, Minnesota.

Anxieties increased when the American Gaming Association, the lobby for the commercial industry, unexpectedly lifted its opposition to internet gambling. Senate Majority Leader Harry Reid, D-Nevada, began to push for enacting legislation giving preference to the state’s commercial casino industry.

A set of “principles” for federal legislation was drafted by a bipartisan group of tribal lawyers and consultants and adopted by NIGA tribes at the October meeting. The principles state that internet legislation should not require amending the Indian Gaming Regulatory Act or eroding the tax exemption status of tribal governments. Nor should internet legislation infringe on tribal-state compacts.

The principles state that the NIGC should have a major regulatory role and that legislation should not delay tribes’ entry into the market, putting them at a competitive disadvantage with lotteries and commercial casinos.

Bills on the Hill

As the debate progressed, tribes began slowly, if reluctantly, warming to a federal scheme to regulate internet poker as opposed to state-by-state regulations that would permit lotteries to offer online casino-style games.

“Because tribes don’t really have a clear understanding of what is going on, the fallback is a federal scheme,” Tahsuda says. “It’s a gut-level reaction among tribes that if (internet gaming) is run by the states, we’re going to get screwed.”

Fahrenkopf echoed the concern of many tribal leaders and lobbyists, stating it was crucial to both tribal and commercial gambling that a federal scheme rather than a state-by-state approach be implemented to legalize online wagering, largely because of the threat to both industries posed by the lotteries.

“Native American gaming may be the most endangered type of gaming if there is no federal statute,” Fahrenkopf said, adding that federal legislation would enable tribes to form interstate coalitions and accept wagers from outside reservation borders.

A federal scheme would avoid a “patchwork system of state regulations,” Bozsum says, “with no guarantees that tribal sovereignty and our hard-won gains would be protected.

“Tribes should be extremely hesitant to entrust their economic futures to the tender mercies of the 50 states, many of whom are still in financial crises and looking for new sources of revenue.”

U.S. Senate Indian Affairs Committee Chairman Daniel Akaka (D-Hawaii) drafted legislation in July to legalize online poker. Proposed legislation was again formulated by Reid and Republican Senator John Kyl of Arizona. The Reid-Kyl bill will likely have two parts, the Sun wrote. One section will reinterpret the Unlawful Internet Gambling Enforcement Act to allow interstate transactions for poker. A second will redefine the Wire Act to render illegal other forms of online wagering, a move to limit expansion of online lotteries.

Tribes criticized both proposals, largely for delegating regulatory authority to the Commerce Department and slighting the NIGC and tribal regulatory agencies. “The current draft unfortunately falls short of meeting our principles,” Stevens says of Akaka’s proposal. “So we have work to do.”

Jamie Hummingbird, chairman of the National Tribal Gaming Commissioners, told the Indian Affairs committee tribal casino operators and regulators are prepared for the internet.

“By remaining at the forefront of innovation in gaming and gaming regulation, tribal gaming operations have become as sophisticated as any non-Indian gaming jurisdiction, if not more so,” he said. “It is in this tradition of innovation and regulation that tribes will enter the digital realm of internet gaming.”

Eleventh Hour

As Congress reconvenes this month after a five-week hiatus, the strategy for getting an internet bill through the House and Senate remains unclear. Many believe the political climate, upcoming elections and partisanship make it unlikely there will be any successful internet legislation.

Lobbyists agree a stand-alone internet poker bill would never get the required votes—that it would have to be attached to legislation supported by those in Congress opposed to online wagering. If a bill has components tribes oppose, Indian advocates in Congress may still vote for passage if the bill is attached to significant legislation.

“If (an internet gaming provision) is on a must-pass piece of legislation, Democrats who support the tribes may have to hold their nose” and vote for the bill, Tahsuda says. “That’s the way things go.”

Avatar
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.

    Recent Feature Articles

  • Living the Dream

    The story of Ernie Moody’s “instant” success and his prominence as a gaming investor

  • Heated Competition

    With competition fierce, New Jersey’s sports betting sites turn to marketing and promotions to lure new players

  • Kingdom In Crisis

    What is next for casinos in Cambodia?

  • Casino Credit: Calculating the Risk

    Casino credit should be simple and easy for the player, airtight and risk-free for the operator.

  • Tribal Casinos Are Smoking

    With most of society looking for non-smoking environments, how do tribal casinos respond?