Indian Country in a quandary over sports betting

Victor Rocha, consultant and owner of the American Indian news service Pechanga.net, was asked at the October G2E conference and trade show in Las Vegas if tribes view the potential legalization of sports betting as an opportunity, a challenge or a threat.

“All of the above,” said Rocha, a citizen of the Pechanga Band of Luiseño Indians of Southern California.

“That’s a really good question,” said Shannon Keller O’Loughlin, Oklahoma Choctaw and former chief of staff of the National Indian Gaming Commission.

“I think for the most part it is considered more opportunity than threat, but guardedly so,” added James Klas of KlasRobinson, a hospitality consulting company with tribal clients.

While the commercial casino industry’s American Gaming Association is lobbying full-throttle to repeal a federal ban on sports betting outside Nevada (and on a limited basis, Montana, Oregon and Delaware), the nation’s 248 tribes with casinos are in a bit of a quandary over the issue.

“We need to determine on what side of the argument we’re going to fall,” says O’Loughlin, executive director of the Association on American Indian Affairs. “I don’t think we have enough information. We haven’t done our homework.”

The AGA is seeking repeal of the Professional and Amateur Sports Protection Act (PASPA). The U.S. Supreme Court will hear arguments on the constitutionality of PASPA this December, and more than a dozen states have enacted or proposed legislation in the event the act is whipped off the books.

Momentum is building for the AGA and a coalition of industry, state and law enforcement officials formed by the association to lobby the issue. A recent Washington Post poll showed 55 percent of the public favors legalized sports betting.

 

Legalize It, Tax It!

The nearly $30 billion commercial casino business is chomping at the bit, hoping for a chunk of the $150 billion believed to be wagered illegally on sports in the United States every year.

“It’s a unique opportunity for the industry,” Sara Slane, AGA senior vice president of public affairs, told attendees at a recent gambling seminar.

Perhaps.

But the slightly larger $31.2 billion tribal government casino industry—which consists of 484 facilities run by 248 tribes in 28 states—is not in complete agreement with Slane’s assessment.

Many tribal leaders fear any new state or federally sanctioned gambling—whether it is sports betting, internet gambling or daily fantasy sports—will create competition for Indian casinos.

Unlike commercial gambling operations, tribal casinos generate revenue to help provide housing, health care, education and other government services to some 2.9 million indigenous Americans.

Tribes are trying to get out in front of both the expansion of gambling fueled by the need for state revenues and the rapid evolution of technology challenging a tribal casino industry subject to a myriad of complex federal, state and tribal regulations.

“Indian Country should be afforded the same opportunity” as commercial casinos in operating sports betting, says Stephanie Bryan, tribal chairwoman and CEO of the Poarch Band of Creek Indians in Alabama.

“But it’s very, very important to protect the integrity of Indian gaming,” she says of the brick-and-mortar operations that often fund the bulk of tribal governments. “We should be involved and be at the forefront of this issue.”

A well-intended but clumsy effort by the AGA to form an alliance with tribes on the issue is finally beginning to work itself out. (See page 36.)

But unlike the AGA, the National Indian Gaming Association (NIGA), the lobby and trade group for the tribal casino industry, is not advocating repeal of PASPA.

Instead, NIGA is calling for any congressional or state legislation arising out of PASPA’s repeal to acknowledge the status of tribes as sovereign governments and honor tribal-state regulatory agreements, or compacts.

The compacts and state laws often give tribes statewide or regional exclusivity to operate casino gambling in exchange for a share of the revenue.

“Of chief concern to NIGA is to ensure that tribal interests are protected, particularly avoidance of any negative impacts on existing compacts and exclusivity clauses,” NIGA Chairman Ernie Stevens says. “As one of the key stakeholders in these discussions, we want to ensure that, if legalized, our members have the opportunity to offer this activity as part of their overall entertainment package, and as an additional source of revenue for tribal government gaming to promote tribal economic development, tribal self-sufficiency and strong tribal government.”

In testimony in October before the Senate Committee on Indian Affairs, Stevens asked the group to explore the potential impact on tribes of all new forms of wagering—be it sports betting, fantasy sports or internet wagering.

“These activities pose both potential expansion opportunities and challenges to existing tribal gaming operations and tribal-state compact agreements,” he said.

NIGA also is putting together a working group to study the opportunity and challenges of sports betting in Indian Country.

It won’t be an easy task.

 

Myriad Legal Issues

Unlike commercial casinos largely taxed and regulated by the states, the scope of tribal government gambling is defined by the Indian Gambling Regulatory Act (IGRA) of 1988.

IGRA restricts Indian casinos to trust lands and requires tribes operating Las Vegas-style casinos to enter into tribal-state compacts defining the scope and regulation of their operations.

The compacts and legal and regulatory structures under which tribes operate vary dramatically from one state to the next.

IGRA also limits tribes to types of gambling otherwise legal in the state in which they are located. If Congress defers to the states, tribes may only be able to offer sports wagering if states legalize the activity.

Because sports wagering is generally regarded as a Class III game under IGRA, tribes would have to negotiate new or amended tribal-state compacts, an often contentious, highly political process that may result in additional revenue-sharing payments to the state.

Tribes under IGRA have primacy to regulate gambling. The act prohibits taxation of tribal government gambling revenues.

But tribes may be forced to operate sports betting as a commercial venture, taxed and regulated by the states.

In addition, IGRA and federal law remain cloudy on the ability of tribal casinos to take wagers from off trust lands.

And tribes in many states face potential competition with internet, sports betting and other forms of gambling from commercial casinos, card rooms and the lottery.

 

Some Tribes Have Advantages

About 16.6 percent of the tribal casinos—many in or near metropolitan areas—generate 71.5 percent of the gambling revenues nationwide, according to senior economist Alan Meister of Nathan Associates.

It is the more lucrative tribes that will likely pursue sports betting. They include at least seven tribal casino enterprises and two tribal governments that are members of AGA.

Some of the AGA tribes—Seminole Hard Rock Gaming of Florida, Mohegan Tribal Gaming Authority of Connecticut, Wind Creek Hospitality of Alabama and the Chickasaw Nation of Oklahoma—own and manage commercial ventures.

Other tribal casinos—largely rural, marginal operations providing jobs and a moderate flow of government revenues—are not likely to have the human and financial resources to pursue sports betting.

The Seminole Tribe of Florida, Poarch Band of Creek Indians in Alabama and other tribes operate relatively free of competition.

California has 110 of the 367 tribes in the lower 48 states, 62 of which operate casinos that compete primarily with card rooms. The state generates $8.4 billion a year, or nearly a fourth of the tribal revenues nationwide.

Oklahoma has 38 tribes operating 130 facilities ranging from travel plazas to gambling resorts. There are several tribes with casinos in Arizona, New Mexico, Minnesota, Wisconsin and Washington state.

The Mississippi Band of Choctaw Indians and tribes in Michigan, Iowa and elsewhere compete with commercial casinos.

 

A Marginal Industry

Sports books are a low-profit (4 percent to 6 percent margins) segment of the casino industry. It is a labor-intensive, high-risk business that requires a large capital investment. It also requires a unique skill set not easily found outside Nevada.

“I don’t think the message is being conveyed properly of the risks and the lack of extreme profitability in sports books,” says Art Manteris, vice president of race and sports operations for Station Casinos.

“Some of the Strip properties I was involved in, people are shocked when I tell them that sports book revenue is something like 1 percent to 1.5 percent of overall casino revenue,” Manteris says.

“We’re not talking about a massive influx of new revenues in the sports book business.”

The profits rise with account wagering and online betting. But the value of a stand-alone sports book or incorporating the activity in a sports bar packed with big-screen televisions is its ability to bring a newer and younger customer profile to the casino.

 

Challenge in the Golden State

Oklahoma tribes are prepared to negotiate new compacts with a cash-starved state government, seeking both sports wagering and dice and roulette games. But California tribes are casting a wary eye on proposed legislation calling for a constitutional amendment that, if approved by the voters, would for all intents and purposes strip Indian casinos of their casino exclusivity.

The tribes’ constitutional exclusivity in the Golden State currently doesn’t extend to sports betting, but is technically limited to the operation of slot machines, a lottery and banked and percentage card games.

But California tribes contend permitting sports betting for all but indigenous communities (read: card rooms, parimutuel racetracks and the state lottery) constitutes an expansion of legal gambling in violation of tribal exclusivity and public policy for limited gambling.

“We’re opposing the expansion of gambling,” says Steve Stallings, chairman of the California Nations Indian Gaming Association (CNIGA), a group of 31 casino and non-gambling tribes.

If future policy discussions do lead to sports betting, he says, there should be assurances wagers will be made at brick-and-mortar facilities.

“We would not want it to go on the internet,” says Stalling, a councilman with the Rincon Band of Luiseño Indians. “We would not want sports betting to go to facilities throughout the state.

“We would want it to go to those entities already licensed to operate gambling, which would be the tribes, the card rooms and, potentially, the racetracks.”

 

‘Not a Matter of If, but When’

Pechanga Chairman Mark Macarro warns of the ebb and flow of industry trends: the naysayers who discouraged cashless machines; the prognosticators who wrongfully predicted the growth of online poker and internet gambling; the baseless forecasts of potential revenue and taxes.

Experience taught Macarro to view sports betting with caution and a healthy skepticism that there are billions of dollars to be gained through an industry niche that generates so little profit.

“We need some new studies,” he says. “We need something quantifiable.”

Macarro remains keenly aware, however, that the industry is in evolution. A new and younger gambler is reaching for a mobile device—not to play slots, but games of skill, excitement and, yes, sports.

“These shifts happen,” Macarro says of industry evolutions and marketing trends. “If you were ready for it, you could take advantage of it. If you weren’t ready for it, you were behind the curve.

“We need to be ready for the shift when it happens. We need to be at the table.”

Brian Cladoosby, chairman of both the Swinomish Indian Tribal Community and National Congress of American Indians, agrees with Macarro that it is important to remain alert to protect the viability of a gambling industry that has meant so much to Native America.

“It isn’t a matter of if, but when,” Cladoosby said of sports wagering. “Tribes need to get ahead of the ball. Be ready. Be prepared.”


NIGA, AGA Work Together, but Harbor Differences

More than a decade ago, while attending a social gathering of the International Masters of Gaming Law in Las Vegas, commercial gambling lobbyist Frank Fahrenkopf was asked if he would welcome an alliance with American Indian tribes operating casinos.

“Yes, we would,” replied the then-president and CEO of the American Gaming Association.

But when asked what role the AGA would play in tribal government issues, Fahrenkopf shrugged and shook his head.

“We’re not interested in that,” he said.

An alliance of the commercial and tribal casino segments of the legal gambling industry is, at long last, becoming a reality, spirited along by the potential legalization of sports wagering.

Nine tribes have joined AGA, seven through their casino business enterprises and two as governments.

Most tribes welcome the unity. The AGA’s gambling expertise and resources exceed the National Indian Gaming Association, a trade group and lobby made up of 184 indigenous communities.

Where NIGA is concerned with matters of sovereignty and advancing tribal self-governance through gambling, AGA is focused on industry issues.

“Where we can find common ground—where we can advance and protect the industry—we should take advantage of the opportunity,” says Steve Stallings, chairman of the California Nations Indian Gaming Association (CNIGA), which represents 31 tribes.

“There was an established gaming industry prior to tribes getting into it,” says Stalling, a member of the Rincon Band of Luiseño Indians. “I don’t think you’ll find tribes not recognizing or appreciating what AGA does for its members.

“It’s not bad that our industries have a seat at the table with AGA. I think it’s fundamentally a good idea.”

“The direction (AGA) is going is a direction we appreciate being proactive,” says Robert Martin, chairman of the Morongo Band of Mission Indians, an AGA member. “Gaming is so competitive these days. If you’re not out in front, you’re left behind. That was the big distinction for my council,” he says of the decision to join the commercial gambling lobby and trade group.

 

Bumps in the Road

The alliance got off to a problematic start, largely because of the gambling industry’s misunderstanding of the complicated legal status of indigenous communities and the role of tribal government gambling on Indian lands.

  • Several of 248 tribes operating casinos rose in protest when NIGA’s executive board in August announced it was joining an AGA coalition seeking repeal of the Professional and Amateur Sports Protection Act (PASPA). NIGA officials clarified they were joining the coalition to monitor the group, not to advocate for PASPA’s repeal.
  • The American Sports Betting Coalition (ASBC) website initially advocated state’s rights, ignorant that tribes are sovereign governments. The website was heavily edited, calling for the issue of sports betting to be left to both states and tribal governments.
  • AGA President and CEO Geoff Freeman told LegalSportsReport.com that 10 tribal members of the association represented a third of the $31.2 billion won by Indian casinos nationwide. The remark angered tribes sensitive to the false perception most indigenous Americans are wealthy from gambling.
  • An AGA press release in September stated NIGA Chairman Ernie Stevens and other tribal leaders were “instrumental in the fight” to repeal PASPA. It was pulled from the group’s website at the insistence of tribal leaders.
  • Finally, tribal leaders were unnerved by an AGA newsletter announcing the group was lobbying Congress and the Department of the Interior for “greater clarity and consistency” in the application process for trust lands for casinos.

Reacquiring ancestral lands lost through European settlement—for gambling or non-casino purposes—is a serious priority for indigenous Americans.

During the Obama administration, 2,100 applications were processed for schools, housing and government infrastructure. Only about 20 involved casinos. But Interior under the Trump administration is urging regulations that would make the process more difficult.

AGA officials declined to discuss the tribal/commercial alliance or its position on newly acquired lands for gambling.

“I have no idea what the AGA is doing involved with off-reservation gaming issues,” says John McCarthy, executive director of the Minnesota Indian Gaming Association. “We will be looking into what they are up to.”

The San Manuel Band of Mission Indians, which joined the AGA through its casino enterprise, plans to weigh in on any AGA lobby effort that could impact the federal land/trust process.

San Manuel “plans to have a direct participatory role with the AGA regarding policy issues the group may address, particularly as they might impact tribal government gaming,” says Jacob Coin, the tribe’s executive director of public affairs.

“Regarding off-reservation lands, San Manuel supports the right of Indian tribes to reacquire their aboriginal lands,” he says.

 

Upside to NIGA/AGA Alliance

A synergy of the tribal and commercial casino segments of the roughly $100 billion (gross revenues) gambling business—both on trade industry matters and political issues—could be of great benefit.

It’s been 30 years since passage of the Indian Gaming Regulatory Act led to an explosion of casino gambling on tribal trust lands. Yet industry officials, trade publications and—perhaps most important—leaders on Capitol Hill remain ignorant about tribal government gambling.

AGA hired Aurene Martin, a member of the Bad River Band of Lake Superior Chippewa and president of Spirit Rock Consulting, to solicit tribal members and work with the group on indigenous issues.

“Although NIGA and AGA don’t necessarily agree on everything, I appreciate the fact Geoff Freeman is reaching out to the tribes,” NIGA’s Stevens, a Wisconsin Oneida, told LegalSportsReport.com.

“Geoff has responded to our concerns. He’s been fair. I think if we are patient and work together, NIGA and AGA can accomplish a lot of good things for both industries, on sports betting and other issues.”

Author: Dave Palermo

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.