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Virtual Indian Country

Sports move regulatory debate to online, mobile

Virtual Indian Country

Much of the American Indian casino industry is at least temporarily opting out of sports betting, discouraged at the anticipated low profit margins and rebuffed by federal and state regulatory and legislative hurdles required to take wagers on college and professional sports.

But the debate surrounding sports betting is accelerating efforts to advance tribal government casinos from traditional gambling to internet and mobile technology, a transition believed necessary to generate interest from a younger generation of customers.

“This certainly ramps up the conversation of what comes next in the evolution of gaming in Indian Country,” says Billy David, an Oregon Klamath and spokesman for the Tribal Alliance, a consortium of some 40 tribal regulatory commissions.

“This is a defining time for tribal gaming. How do we properly move forward?”

Not more than a few of 240 tribes operating government casinos in 29 states are expressing interest in operating sports books, a costly, risky endeavor that generates a marginal profit.

“No, not at this point in time,” says Debbie Thundercloud, chief of staff for the National Indian Gaming Association (NIGA), the industry trade and lobby group.

Sports wagering’s impact on Indian gambling nationwide, which saw a 3.9 percent growth in 2017 to $32.4 billion, will be minimal, she says.

“I don’t believe it will have a significant impact, economically, on tribal gaming,” says Thundercloud, a Wisconsin Oneida. “The margins are so small.”

“The reality is there’s not a lot of money in sports betting, from the operator’s perspective,” agrees a tribal gambling industry official who requested anonymity. “It’s just not there.”


National Campaign

A nationwide initiative to repeal the Professional and Amateur Sports Protection Act (PASPA) by the American Gaming Association (AGA)—a lobby and trade group largely for commercial casinos—generated moderate support from tribes operating 500 casinos in 29 states.

Tribes saw a need to partner with AGA, despite being aware the legal and regulatory constraints of federal law and tribal-state regulatory agreements would make it difficult for tribes to embrace sports betting as an expansion of tribal casinos.

“We saw a need to engage in this emerging industry,” NIGA Chairman Ernie Stevens told the group’s annual conference. “There is no one size fits all and policymakers need to hear from the Indian gaming industry.

“The unlawful (sports betting) market continues to thrive, 20 states are considering sports betting bills and the train is moving quickly,” Stevens said.

But the economics of sports betting and the regulatory and legal obstacles for the tribes have, indeed, been problematic.

“I’m not faulting AGA on picking up on sports betting. It’s a big issue,” says an industry official who requested anonymity.

“But this has been their issue,” the official says of AGA and commercial casinos. “The reality is it doesn’t have much effect on the tribes.”

Sports betting legislation has been introduced in 19 states, most with commercial casinos. The bills have found most success in states with few or no Indian tribes.

But the momentum created by the movement to legalize sports betting—accelerated by the May U.S. Supreme Court decision declaring PASPA to be unconstitutional—is pressuring tribal leaders, regulators and casino operators to make preparations for online and mobile wagering.

“The sports betting debate is definitely triggering more discussion about the internet,” Thundercloud says.

“You have to concede that’s a transition that is going to happen, eventually,” agrees Chris Stearns, a Navajo and chairman of the Washington State Gaming Commission. “It’s the wave of the future.”

The Tribal Alliance has drafted minimal internal operating controls (MICs) and technical standards—largely focused on skill-based gaming—to assist tribes in making the eventual transition from traditional gambling to mobile and internet play.

That transition will likely include wagering on sports and other games on—and eventually off—the casino property.


Indians Online

Seven categories of iGaming the alliance is working on, suggested by NIGA leadership, include social and real-money platforms and sports wagering. A dozen tribes already operate social gambling websites. A few tribes operate real-money sites as commercial ventures.

“That’s how the birth of the Tribal Alliance came about,” David says. “We’ve got to be prepared to regulate. If we, as regulators, aren’t ready, we’re going to be stifling the industry’s growth.

“We’re relying on experts in the tribal realm to come forward and provide their expertise,” David says, particularly in the case of smaller, rural tribal casinos on impoverished reservations lacking the resources and technology to cope with the onset of iGaming.

The National Tribal Gaming Commissioners/Regulators (NTGCR), a larger coalition of tribal gambling regulators, is also exploring the impact sports and internet wagering will have on the indigenous casino industry.

“This is going to force all of us—NIGA, NCTCR, our tribal leadership—to put together some positions and talk about what this means to tribes,” says Jamie Hummingbird, NCTCR chairman and director of the Cherokee Nation Gaming Commission. “We’re still in that regrouping phase. We’re still trying to figure out how this is all going to work.”

“We’re not talking simply about sports betting, we’re talking about internet gaming,” says Joe Valandra, a Rosebud Sioux and former chief of staff for the National Indian Gaming Commission (NIGC). “We’re talking about mobile gaming, which is vital for any big-time success of sports betting.

“If you can’t do mobile even inside your property, you’re really limiting any opportunity to make money. I’m not sure everybody sees it that way, or they don’t want to talk about it.”

Meanwhile, state and tribal governments are wrestling with the legal and regulatory minefield as states move to enact legislation to legalize betting on college and professional sports.


Sports Betting Legislation can be Problematic

Tribal casinos dominate the gambling industries in several states, notably California, New York, Oklahoma, Arizona, New Mexico, Connecticut, Washington, Minnesota, Michigan, Wisconsin, Oregon, Alabama and Florida.

Enacting sports betting legislation in states with commercial casinos, racetracks, card rooms, lotteries and other forms of gambling taxed and regulated by the states is relatively simple. But crafting legislation in states with tribal government gambling can be complicated.

Tribes operate casinos under the Indian Gaming Regulatory Act (IGRA), which limits types of games tribes can operate on Indian lands. Permissible games are defined by tribal-state regulatory agreements, or compacts, required under IGRA. Compact terms vary dramatically from one state to another.

Compacts in many states provide tribes with casino exclusivity in exchange for giving the state a share of gambling revenues. To operate sports books, tribes and states need to negotiate amendments to the compacts, an often politically problematic process.

States seeking to extend sports betting to lotteries and commercial vendors risk violating exclusivity provisions in the tribal-state compacts and losing their share of tribal casino revenues.

And states seeking tax revenues from sports gambling are confronted with federal law that generally prohibits taxation of tribal government gambling revenues.

Adding to the confusion is the fact IGRA limits gambling to Indian trust lands. There remains legal uncertainty over the ability of tribes to accept wagers from outside reservation boundaries. Sports betting bills in several states include mobile and internet provisions.

The Wire Act and Unlawful Internet Gaming Enforcement Act (UIGEA) prohibit the transmission of wagers across state lines. But tribes are exempt from UIGEA. If compacted sports betting is declared legal on tribal reservations in several states, they can share markets.

Many tribes are contemplating operating sports betting as a commercial venture, taxed and regulated by the states, rather than gambling under IGRA and federal Indian law.

Sports betting bills in New York, Louisiana, Michigan, Oklahoma, Connecticut and elsewhere were blocked at the 11th hour over the legal complexities involved with tribal gambling.

Some trade industry writers blame tribes for the inability to get legislation through state houses. But in most cases it was the fault of legislators uninformed about IGRA and federal Indian law.

“It’s the ignorance of those who sit in state legislatures,” Thundercloud says. “They just don’t understand the compacts they’ve entered into with tribes and the terms and conditions of those compacts.”

“Legislators don’t talk to tribes until the very end,” Valandra says. “Tribes do have leverage because in many of the states tribes are making payments pursuant to the compacts. When states realize what they have to lose, things get put on hold.

“If the drafters of legislation were aware of the need to comply with federal law… things might go smoother. That’s how it works. Tribal governments, as well as state governments, have an interest to protect.”

Sports betting bills are expected to be successful in New York and Connecticut, where the Mashantucket Pequot and Mohegan tribes dominate the casino market. Both tribes also operate online gambling.

Tribes in Arizona and Oklahoma are expected to include sports betting in negotiating compacts soon to expire, although only a few of the tribes are expected to operate distinct books. Tribes are expected to demand casino exclusivity provisions over sports wagering.

Tribes in California, the Midwest and the Great Plains are pushing back on sports betting because of political, economic, legal and regulatory issues, including favorable compact terms they don’t wish to renegotiate.

But public demand for sport wagering—promoted by betting operations such as DraftKings and FanDuel—may pressure state and tribal governments to push for online and mobile gambling.

Jake Williams, general counsel for the U.S. branch of Sportradar, a European sports data and integrity company, told the Eagle-Tribune it’s important for states and companies to understand what consumers want.

“Everything in general, not just in sports betting but all sports industries, is shifting toward that real-time, instant gratification,” he said. “If you can’t have that offering, people are going to go to someone who does.”


An Industry Prepared for Sports Betting

Tribal governments have primacy for regulating Indian casinos, spending in excess of $320 million a year on commissions employing some 5,900 auditors and agents.

The industry is also subject to oversight and co-regulation by the NIGC, state offices and the federal Treasury Department.

Indigenous governments with the onset of early gambling and enactment of IGRA in 1988 relied on expertise from the commercial segment of the industry to help operate and regulate their casinos.

Tribes now have their own specialists who are expected to guide the industry through the evolution of sports betting and internet and mobile gambling.

“When you look at Indian gaming today—2018 compared to 1991 and before—it’s come a long way,” says a tribal regulatory specialist who requested anonymity. “Tribes once turned to the experience of commercial gaming people to bring expertise to Indian Country. But over the years, tribes have built their own expertise and talents. Many tribes today have the technical expertise.

“I really feel over the last two years tribes have been getting educated about this topic,” the specialist says of sports and internet gambling. “It’s been coming up more and more at the conferences. And it’s starting to dominate the conferences.

“Tribes are very cognizant of what’s coming. They’re very aware of the future. They’re very able to bring their expertise to the table and draft the documents and ordinances necessary to do the job.”

Regulating sports betting is not a complicated endeavor.

“It’s an easy business to regulate,” says Richard Schuetz, a veteran industry executive and regulator. “It’s actually cleaner than table games. You hand somebody cash and they hand you a receipt.”

“Actually I don’t think it’s going to be that difficult,” Hummingbird says. “A lot of the regulatory pieces are in place already.

“There are things you’re going to have to beef up on from the technology side,” he says, including geolocation and identity security for online and mobile gambling.

“The big thing is getting technology put in place and getting people trained in the technology.”

“It’s not all that complicated,” says Norm DesRosiers, a regulatory consultant and former member of the NIGC. “It’s all in the totalizers, the betting equipment. You get the right IT people in there with the right technology, it’s all pretty simple.

“My feeling is tribes are not going to reinvent the wheel,” DesRosiers says. “They’re probably going to look at New Jersey and Nevada models for regulating sports betting when the time comes.

“Tribes that are serious about it are going to hire experts in doing sports betting, and that could be experts from anywhere from Las Vegas to Europe. They’re going to bring in people with experience. They’re not going to do it themselves.

“How it’s going to be regulated is going to depend on how it’s legislated,” DesRosiers says, largely whether tribes will retain exclusivity and operate sports betting under IGRA. Some states may require tribes to operate commercially, taxed and regulated by states.

“All of these are unanswered questions,” he says.

NIGC has limited jurisdiction over Class III casino gambling, which most legal authorities believe includes sports betting. The federal agency has only mildly weighed in on the issue.

“As federal regulators, we have learned firsthand that there is tangible benefit to having tribes, as primary regulators, driving decisions as how gaming will operate on their own lands,” the agency said in a release.

As federal and state governments consider how to address sports betting, we anticipate tribes will be given a seat at the table to voice their positions, bring their perspectives and collective expertise and maintain regulatory and operational control over the gaming on their lands.”


States Need to Meet the Demand

“From a regulatory standpoint, we can handle whatever the legislature puts in front of us,” Stearns says.

But while there remains confidence in the tribal track record of gambling regulation, there is a concern states and the tribal and commercial industry will not keep pace with the evolution to internet and mobile sports wagering.

“When you’re able to gamble on every play, by every player, of every game—from the phone, at the arena or from home—that’s something very different from what we’ve ever had,” says Keith Whyte, executive director of the National Council on Problem Gambling.

“It’s a profoundly big and a profoundly risky expansion of gambling.”

Whyte warns that state officials have not stressed regulations and problem gambling in their rush to legalize sports and internet gambling. A regulatory failure dealing with sports betting or internet gambling could seriously damage the industry.

“The impact of technology on gaming has been profound, and it’s really been an impact on politics and policies,” Whyte says. “The greatest risk is that states, and perhaps some tribes, some operators, will screw things up and there will be a massive integrity scandal or problem gambling scandal. And all the hard-fought gains will be lost.”

Although IGRA calls for tribes to enter into regulatory compacts with states, it’s the indigenous governments that have taken the lead on policing the casino industries, providing training and guidance to state agencies.

And it’s tribal gambling—the largest segment of the nation’s legal casino industry—that will continue to lead the way as the nation evolves into sports and internet gambling.

“If this thing is going to actually work, it’s not just going to be the commercial operators,” Hummingbird says. “It’s going to be the tribes. In a lot of ways, the tribes are going to be more heavy actors than the commercial operators. That’s the way I look at it.

“We have this covered. Our policies are tried and true and have been in effect for years. We’ve got qualified people. Many are credentialed. We have former law enforcement people. We have technological people. We’ve got compliance people.

“We’ve got this down.”

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 [email protected].

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