Tribes viewed wagering in cyberspace as a threat to their land-based casinos, the first viable funding source for indigenous governments since European settlement of North America.
Unlike commercial casinos filling the pockets of shareholders and business partners, the $30 billion tribal government casino industry is intended to supplement poorly funded health care, education and other social services for largely impoverished Indian communities.
“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,” Chairman Danny Tucker of the Sycuan Band of the Kumeyaay Nation said in assuming leadership in 2010 of the California Nations Indian Gaming Association.
Internet gambling “is a direct threat to the economic growth in Indian Country,” Glen Gobin, vice chairman of the Tulalip Tribes of Washington state, told a November 2011 hearing by the Senate Committee on Indian Affairs.
“We do not support legislation that legalizes internet gambling,” he said.
Tribal attitudes toward iGaming are changing, albeit at a slow pace. Indigenous governments have not been nearly as quick in embracing online technologies as commercial casino companies and slot machine manufacturers.
Predictions that real-money online gambling would sweep the country have thus far failed to materialize, its growth limited to Nevada, New Jersey and Delaware.
But tribes are finally entering the booming social gaming sector of the legal gambling industry, and at least exploring rapidly emerging technologies such as daily fantasy sports, eSports and skill-based games.
Because they largely operate single, small-market casinos, tribes have not matched the multimillion-dollar investment of commercial operators MGM, Churchill Downs and Caesars Entertainment, which last summer sold its interactive online games unit, Playtika, to a Chinese group for $4.4 billion.
The nation’s major slot manufacturers such as International Game Technology (IGT), Scientific Games and Aristocrat have emerged as leaders in providing online social gaming content.
Meanwhile, in Indian Country, a handful of tribes in Connecticut, Oklahoma, California and elsewhere are now offering free play on their casino websites and launching social gaming platforms, most in partnership with online software companies.
They are tapping into what SuperData Research says is a $1.7 billion North American social gambling industry. The worldwide market may reach $4.4 billion in the coming year.
Once thought of as a segue to real-money online gambling, tribes are grasping the notion that internet platforms selling time on casino games without offering prizes can, indeed, be profitable, without the regulatory and legislative hurdles.
“Originally, the idea was to develop a social gaming website and transpose into real-money gaming,” says Ken Perez, former casino regulator and councilman for the Pechanga Band of Luiseño Indians in California. “But social gaming and social media is not the wave of the future. It’s here.
“It would be narrow-minded to look at social gaming as a pathway to real-money gaming,” Perez says. “It’s a huge market unto itself.”
Tribes are also buying into the concept that online digital marketing to social gamers—when integrated into a casino loyalty program and customer database—can be more effective in getting people through the door than the traditional direct (snail) mail and even email methods.
“The idea, in its purist form, is for free play, social gaming and a tribe’s marketing program for its land-based casino to work together to increase the revenue pie,” says Knute Knudson, IGT vice president of business development and tribal relations.
“The more progressive and wealthier casino operations are going to work toward that goal.”
Social games “fit into the portfolio of a casino operation,” Knudson says, “even though it’s not truly gaming, even though there is no prize.”
In a related development, the Iipay Nation of Santa Ysabel in California is planning to argue to the 9th Circuit Court of Appeals for permission to offer real-money online bingo. Santa Ysabel believes it has the legal right under the landmark Indian Gaming Regulatory Act (IGRA) of 1988 to offer online Class II games such as bingo and poker outside of state regulations and taxation. Courts thus far have refused to allow this kind of wager.
And the Iowa Tribe of Oklahoma says it will soon launch a real-money version of its social gambling platform, PokerTribe.com, targeting foreign and out-of-state gamblers.
Tribal Landscape Is Problematic
The legal and political landscape for Indian gambling has made it difficult for the approximately 243 casino tribes in the lower 48 states to develop a cohesive approach to the rapidly evolving online gambling industry.
“There hasn’t been a lot of strategic thinking about how we can get into it as a group, as an industry,” says Joe Valandra, CEO of Great Luck LLC, partner with Santa Ysabel in an online bingo enterprise.
“The news—if there is news—is that tribes continue to wait,” Valandra says, particularly when it comes to stretching the legal and regulatory envelope surrounding real-money gambling.
“There hasn’t been any overall direction from a strategic, political or economic standpoint.
“Tribes seem to be waiting for something to happen—either for a state like California to act on online poker or, I don’t know what,” Valandra says. “There’s a lot of waiting while the internet gaming world is continuing to grow at phenomenal rates, depending on what segment you’re talking about: sports betting or other kinds of wagering.”
Unlike commercial casinos, tribal government operations are subject to myriad federal and state laws and regulations—primarily IGRA, which was drafted to apply to casinos on Indian trust lands. The ability of tribes to accept wagers from outside reservation boundaries remains an unresolved legal issue.
Fluctuating congressional policy on iGaming and Department of Justice interpretation of the Interstate Federal Wire Act of 1961 and Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006 also leaves a cloud over the future of online social and real-money gaming.
The National Indian Gaming Commission (NIGC) oversees the tribal casino industry. While IGRA allows tribes to operate Class II games such as bingo and poker without state oversight, those with Class III casinos equipped with Nevada-style slot machines and table games must enter into tribal-state regulatory agreements, or compacts, with state officials.
“Some tribes are into some sort of social gaming, but for many tribes it’s a very complex issue,” says Sheila Morago, executive director of the Oklahoma Indian Gaming Association. “It depends on where you’re located.
“It’s going to depend on your compacts. Some are very explicit when it comes to the internet. Some don’t even contemplate it.
“Unless iGaming becomes legal nationally, which would mean an even playing field (with commercial casinos), there is just going to be a lot of hits and misses depending on what each state wants to do.”
California tribes and card rooms have for a decade been lobbying state legislators to legalize iPoker, an effort that will continue this year. Pressure to enact an iPoker bill also is expected to emerge in Michigan and Florida.
“We’re now seeing in Michigan tribal governments having to consider the prospect of online gaming,” says CEO James Ryan of Pala Interactive, an online enterprise of the Pala Band of Mission Indians in California. “We’re also seeing in Florida tribal governments trying to understand how they can get into that marketplace.
“It ultimately comes down to state governments embracing this sector.”
Tribal Movement on the Internet is Slow
A few tribes have invested in online platforms. The Pala Band of Mission Indians in California operates both PalaCasino.com, a real-money website licensed in New Jersey, and MyPalaCasino, a social gaming free-play site.
The Mohegan Tribe of Connecticut, which owns Mohegan Sun Casino and Mohegan Sun Pocono in Pennsylvania and manages Resorts Casino Hotel in Atlantic City, operates real-money MoheganSunCasino.com and social website Play4Fun Network with Scientific Games.
Mohegan Tribal Gaming Association (MTGA) President Bobby Soper said the internet operations enable the tribe “to be a leading force within the online gaming space.
“Both platforms demonstrate MTGA’s all-encompassing dominance in the gaming industry by building a presence beyond its brick-and-mortar casinos,” Soper says.
The Mashantucket Pequots of Connecticut operate the social website
FoxwoodsOnline in partnership with Greentube Pro, which also is rolling out a free-play platform for Treasure Island Resort and Casino in Minnesota, owned by the Prairie Island Indian Community.
Fantasy Springs Casino, owned by the Cabazon Band of Mission Indians, has partnered with Scientific Games on a free-play social casino using the Play4Fun Network.
And the Pechanga Band in November launched BestBetCasino.com, a social gaming mobile app operated in partnership with Ruby Seven Studios of Reno, Nevada.
“Pechanga is committed to offering the best digital experience, just like our brick-and-mortar offerings, and this is just the first step in that long-term initiative,” tribal Chairman Mark Macarro said in a press release.
The Chickasaw Nation of Oklahoma, operators of 20 casinos throughout the state, last summer inked a deal with London-based software provider GAN to build out a social gaming platform.
“By combining traditional casino marketing with a multimillion-dollar digital marketing commitment, we believe the Chickasaw Nation will quickly secure significant market share online in the region already well-served by their land-based gaming enterprise,” GAN CEO Dermot Smurfit says.
GAN also has a partnership with the San Manuel Band of Serrano Mission Indians in California.
Casino Del Sol, an enterprise of the Pascua Yaqui Tribe of Southern Arizona, and the Campo Band of Mission Indians in California are among more than 20 tribes that offer IGT’s DoubleDown Casino, the world’s largest virtual casino.
Meanwhile, the Twenty-Nine Palms Band of Mission Indians in California and the Mille Lacs Band of Ojibwe in Minnesota recently launched eSports websites, the latter linking 11 states.
The Pace May Quicken
“Many brick-and-mortar operations just don’t fully appreciate what social can do for them,” Dana Takrudtong, vice president of sales and marketing for GAN, says of the hesitancy some tribal and commercial casino operators have in getting into the social gaming space.
“Most tribes are afraid that if they give the consumer a vehicle to play at home, they won’t come to the casino. Without data, social is a hard business to understand, and they’ve been reticent.
“The social casino, based on statistics, is a tool to make your customer think of you more, spend more money with you and be more brand-loyal,” she says. “We see social players spending significantly more time in the casino than players who do not play the social games.”
“The tribes are a bit behind the curve,” says attorney Tony Cabot, an internet gambling authority and author. “I’m surprised they aren’t using it more, in terms of maintaining control of their customer base.”
“The tribes have definitely not adopted social gaming as much as the commercial segment of the gambling industry,” says Gene Johnson, executive vice president of Victor-Strategies. “But you’ve seen a lot of movement in the last year and a half, two years. Things are accelerating.
“I think it’s dawning on tribes that they need to engage the customer in other ways. And waiting for real-money gaming could take forever.”
Aviram Alroy, MTGA vice president of interactive games, says the Mohegan Tribe views social gaming platforms as “a companion piece to our overall product,” which includes commercial and tribal casinos, parimutuel racing and real-money online gambling.
“It’s a doorway to real-money gaming. That’s definitely a possibility,” Alroy says of social platforms. “But even if you have real-money gaming, some people will also continue to pursue the social aspects and play for free.
“The U.K. is a great example. They have real-money gaming there, and it’s a very crowded market. But social gaming is also thriving there, perhaps not as much as in North America.”
Roughly 70 of the approximately 480 Indian casinos in 28 states generate about 75 percent of the nation’s $30 billion tribal gambling revenues. About $8 billion is generated from 60 California tribes, a dozen of which are lobbying to legalize online poker.
That is the segment of the tribal casino industry that has been greasing the skids to online gambling.
“From what I’m seeing, I think the larger and more successful casino tribes understand there’s an opportunity here,” Alroy says.
The smaller, marginal and more remote tribes “aren’t interested in it at the moment because they think this is out of reach for them,” Alroy says.
“That’s not necessarily the case,” he says. “If they dig one or two rows deeper they can find there is an opportunity for them to engage with their players.”
GAN’s Takrudtong says remote tribal operations with as few as 1,200 machines likely have the resources and can benefit from social gaming. The key is developing a strategy prior to making an investment.
Weighing Risks and Rewards
Internet social gambling—both the profit and digital marketing components—pose a challenge to both tribal and commercial casino operators, particularly those in rural areas not too unlike tribal reservations.
“It’s the same with Northern Nevada casino operators,” Cabot says. “It’s very difficult to change what you’ve always been doing for 20, 25 years. You see that a lot.”
The challenge needs to be met, however, because of the changing dynamics tied to mobile gambling and millennial disinterest in slot machines.
In an online interview with GAN, Victor Rocha, founder and editor of Pechanga.net news service, expressed frustration at what he called the “overarching complacency” tribes have toward social gaming and other emerging online technologies.
“In a certain sense, I think there is almost an emotional attachment to the brick-and-mortar space, because of the success and revenue that has been provided through them,” says Rocha, principal of the newly formed Victor-Strategies.
His tribal chairman and cousin expressed a similar sentiment at a 2014 iGaming legislative symposium in Sacramento.
“We don’t want to be here,” Pechanga Chairman Macarro told delegates. “We are talking about possibly destabilizing the one and only thing that’s ever really worked for tribal governments. It’s hard to really overemphasize how key that is.”
Internet gambling, he said, “is a greater threat than an opportunity.”
But with advancing technology and internet wagering, Macarro said, “We can’t afford not to be ready.”
“I think you’re going to see social gaming continue to grow, at a significant pace,” Ryan says.