Revising Federal Regs Could Create Big Change In Indian Gaming

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Within a massive packet of proposed updates to federal regulation of Class III tribal-state gaming compacts lie several sentences that could dramatically change the face of digital gaming across the U.S.

Most immediately, if the proposed rules are adopted, they potentially could negate a lawsuit brought against the U.S. Department of the Interior by two Florida parimutuels and allow Florida’s Seminole Tribe to offer statewide digital sports betting and iCasino. In addition, the proposed rules could allow for tribes to purchase land, put it in trust, build a casino, and then provide the same types of online gaming, all without being taxed by the state on those lands.

All eyes in tribal gaming are on what could prove to be the biggest shift in gambling since the federal Professional and Amateur Sports Protection Act was overturned in 2018 and states began offering retail and digital betting.

When the Supreme Court rejected PASPA, it made legalization of sports betting and iCasinos a states’ rights issue. Should the new proposals from the U.S. Bureau of Indian Affairs (BIA) become regulations, they, in turn, would essentially turn sports betting and iCasino adoption into tribes’ rights issues. The process of getting to market would be more streamlined, and it likely could clarify tribes’ ability to offer statewide mobile wagering.

The proposed rules also include many minor changes that would further assist in the implementation of the Indian Gaming Regulatory Act (IGRA). In fact, stakeholders say, the original intent of the update to the rules was to handle mostly non-substantive changes brought on by the evolution of gaming and technology. But the proposed update also appears to include at least three major changes:

  • Tribes could offer digital sports betting and iCasino throughout the state within which they are located, as long as such games are included within the tribal-state compact, and in some cases without a commercial license.
  • States that do have any form of legal Class III gambling likely would have to negotiate each Class III game with tribes, including digital gaming, which is not currently directly addressed in IGRA. Some court decisions have suggested that if a state permits any form of Class III gaming within the state, then “all” forms of Class III gaming may be negotiated through compacting, which in today’s landscape could potentially include digital.
  • Tribes would be permitted to purchase new land (in fee), but would need to go through a formal process before the land is judged to be “held in trust” and available to gamble on under IGRA.

“I see this as fixing the whole thing,” one attorney, who specializes in tribal gaming law but wished to remain anonymous, told Sports Handle in reference to the current Seminole-related litigation.

“IGRA only governs on tribal lands, so this appears to be intended to fix that lawsuit. The Seminoles and others likely brought a lot of resources to seek these changes. … If these changes go through, it likely would permit them to offer wagering off reservation under the compact they negotiated with the state of Florida.

“Tribes could possibly offer mobile gambling throughout the state without a commercial license. They’d still need a compact. … These proposed rule changes could be challenged procedurally and for substantive grounds. There have been many efforts over the years to try and amend IGRA, but those efforts have not succeeded.”

Public comment period just ended

At least 16 entities from casino associations to tribes offered comment on the proposed updates before a public comment period closed last Wednesday. Now the BIA and the U.S. Department of the Interior (DOI), which is tasked with reviewing tribal-state compacts, must review comments and determine if they will incorporate any into the proposal.

Among those who offered comments are the Seminole Tribe, which submitted 12 pages of comments in general support of the BIA’s proposed changes. The Seminoles wrote that “compact provisions allocated jurisdiction are permissible under IGRA when the parties are allocating jurisdiction over activities directly related to gaming activities on Indian lands.”

The tribe added its belief that remote wagering “is also clearly authorized by IGRA and is fully consistent with IGRA’s provisions allowing states and tribes to negotiate over the allocation of jurisdiction.” While the tribe believes that compacting involving remote wagering is already acceptable, it stated that the updated regulations could clarify that.

It could be months before the new regulations are formalized. There could be an additional public comment period on any proposed revisions, and once set, the rules must be published in the Federal Register for 30 days before they become active. There’s also a possibility of litigation from the commercial sector if any or all of the above three changes are incorporated in the final document.

How Indian gaming is governed

Among the non-substantive proposed changes, the BIA would:

  • Add and define the phrase “gaming spaces,” which would be different from previously defined “gaming facilities.”
  • Protect tribes from a state demanding a “tax, fee, charge, or other assessment” for offering wagering.
  • Clarify the difference between a “compact” and an “amendment” and the process of submitting agreements to the DOI secretary for determination.
  • Allow tribes to submit compacts electronically in addition to hard-copy submissions that have traditionally been mailed or delivered.
  • Clarify language around whether the DOI secretary must actively disapprove a compact in order for it to fail, as well as reiterate that a compact that is “deemed approved” with no signature is only approved if it is “consistent” with IGRA.

To give some context, IGRA is the federal law and framework that govern tribal gaming. The view from Indian Country is that IGRA protects tribal sovereignty, while the view from outside Indian Country is that IGRA keeps Indian gaming on tribal lands. The nuanced difference in those views has to do with whether IGRA protects tribes or whether it limits them.

The DOI serves as the federal arbiter of IGRA, while the National Indian Gaming Commission (NIGC) and Bureau of Indian Affairs act as regulators. The NIGC is most often the enforcer when it comes to IGRA and Indian gaming, while the BIA deals more with land issues and compacting.

The NIGC and BIA jointly administer IGRA, but not as equal partners. As gaming has evolved over the years, IGRA has remained static, but many bulletins around how to implement IGRA have come from the NIGC. The proposed changes were initially an attempt to codify the group of bulletins that have grown in volume and scope over the years.

IGRA became law in 1988, well before the personalized computer age, and some say it thus leaves much open to interpretation. The law was written in response to the 1987 Supreme Court decision that allowed the Cabazon Band of Mission Indians and Morongo Band of Mission Indians to offer bingo in California. It was passed by Congress in relatively short time — the SCOTUS decision came on Feb. 25, 1987, and IGRA was published on Oct. 17, 1988 — and some say it was designed to stop Indian gaming where it lay in 1988.

“Let’s just assume that if [the proposed new regulations] were to pass and clear all judicial hurdles, it means tribes won’t need to apply for state licenses to conduct mobile gambling in states where it’s legal,” James Lewis, an associate at Duane Morris LLP, told Sports Handle. “Right now, under IGRA, tribes are disadvantaged by state regulation of mobile gambling, because the gambling must occur … completely on Indian lands or it’s subject to state law vs. on state lands.”

IGRA attempts “to control the expansion of Indian gaming,” Lewis continued. “By its own provisions, there’s an argument that IGRA was intended to freeze gaming as it was in 1988.”

Gambling has evolved

Since 1988, technology has changed gambling, both for commercial companies and tribes. While tribal casinos have popped up across the U.S. over the last 30 years, the overturning of PASPA and the proliferation of smartphones have combined to create a tidal wave of new possibilities.

IGRA, many stakeholders argue, is not equipped to manage that evolution. Over time, there have been failed attempts to change the law. Its architects could not have foreseen the advent of internet gaming, and as such, IGRA does not directly contemplate it. Rather, IGRA seeks to govern tribal gaming on tribal lands, or what is referred to as “in-person” gambling at brick-and-mortar locations.

In drafting its proposed changes, the BIA consulted with tribes. It wasn’t until after the agency sent out a “Dear Tribal Leader” letter that it included sections related to digital gaming in its proposed updates, including what the BIA refers to as “consultation questions.”

One of those questions was, “Should the draft revisions include provisions that facilitate Statewide remote wagering or internet gaming?” It elicited a range of answers from those supporting it to those offering language for inclusion to those saying the “issue was not ripe for inclusion.”

According to the posting in the Federal Register, “the overwhelming majority of commenters agreed that the Department should include provisions relating to i-gaming.” While the entry does not identify who the respondents were, one in support wrote that such a regulation is needed to effectively allow the tribes to compete in the digital age. Another wrote that the “State law model of i-gaming is not a substitute for i-gaming under IGRA and Tribes should be able to engage in internet gaming under IGRA.”

Ultimately, the BIA decided on two proposed regulations around Class III gaming and one around trust land, all of which would give the Florida Seminoles the sports betting monopoly they were seeking when they compacted with the state in 2021. The terms of that compact seemed to stretch the bounds of IGRA by allowing that a wager placed electronically anywhere in the state would be deemed to be have been placed on Seminole land, so long as the wager transmission flowed through a server located on Seminole land.

Such a situation does not exist anywhere else in the U.S. In fact, in the states in which tribes do offer statewide digital wagering, the opposite is true — the servers are located on state land, off reservations.

In both Arizona and Connecticut, at the start of digital gaming people located on reservations didn’t even have access to mobile betting, because in order to calculate taxes for bets made off tribal lands, the tribes’ commercial betting partners located their servers off reservation. Bets made on reservations located in Arizona are not taxed by the state.

Two South Florida parimutuels sued the DOI in federal court over its authorization of the Seminole-Florida compact. DOI Secretary Deb Haaland did not sign off on the compact but rather allowed the 45-day waiting period for action to pass, so the compact became “deemed approved.” Within months of the approval, multiple lawsuits were filed against it. The Seminoles launched nonetheless, but then were forced by court order to pull down their Hard Rock sports betting website. The case is now under review by an appellate court, which heard oral arguments in December.

Location, location, location

Bills under consideration in the Minnesota Legislature appear to be pursuing the same path that the Seminoles walked. Within both the House and Senate versions of the legislation is a section titled “wager location,” which reads, “The incidental routing of a mobile sports wager shall not determine the location or locations in which the wager is initiated, received, or otherwise made.”

Should the proposed BIA regulations become final, it appears that language would be moot. But in the current climate, it could be stretching the interpretation of IGRA.

The Seminoles also stand to benefit if the language around trust lands remains in the proposed regulations. The Miami Herald reported that the mayor of Miami Beach fears that new land-based casinos will pop up all over his city should the new regulations go into effect.

“This proposed rule represents a seismic shift in policy that will allow casinos and gambling operators to force casinos into cities, notwithstanding well-founded and long-standing objections, and regardless of how incompatible they may be with the local economy and quality of life,’’ Mayor Dan Gelber wrote in a letter to the BIA Tuesday, according to the Herald. The letter has not yet been posted in the BIA public comment section.

The Louisiana Casino Association also submitted comments opposing the idea that tribes could purchase trust land and build gambling properties on it. Executive Director Wade Duty wrote that “any rational and/or historical connection to tribal lands would be severed, allowing casino operations in locations, where because of the state’s limited regulatory powers constrained by compact, new locations would be faced with significant local impacts yet without the resources to properly address them.”

Compacting is a unique legal process, and one that tribes are often loathe to undertake. Every federally recognized tribe is its own nation, with its own set of laws and operation of schools, police, firefighters, elder care, and other services.

When tribes compact with a state for gaming, they open themselves up to negotiation on many levels. While a tribe may want to offer casino gaming, the state might want something in return — an annual payment similar to the one that the Seminoles make to the state of Florida, or for a tribe to agree to be governed by certain state laws rather than their own.

Normally on tribal lands, as one tribal lawyer put it, “state laws don’t apply unless the tribes consent.” Without the desire to have gaming, the tribes would have little reason to consider subjecting themselves to any state laws.

What’s next?

The Florida case is likely still at least a year away from a verdict. Once the appellate court issues a ruling, lawyers say it will also likely be appealed. The first step would be to ask for an en banc ruling, and following that, an appeal to the Supreme Court, which Lewis said has an interest in Indian law cases.

But regardless of how the lawsuit or the BIA proposed regulations play out, it’s unlikely that tribal wagering or iCasino will look the same in any two jurisdictions. There are more than 547 federally recognized tribes across the U.S., about half of which offer gaming, and as Lewis pointed out, each compact is unique.

In Connecticut, the Pequots and Mohegans gave up some of their gaming monopoly during compacting by consenting to have the state lottery also offer sports wagering, and they also agreed to pay taxes to the state.

In Arizona, off-reservation tribal sports betting is regulated by the state, and the tribes there, for various reasons,  agreed to a deal that allows professional sports franchises to offer statewide digital gaming as well. The tribes with compacts are permitted to offer sports betting on their tribal lands, which is regulated by the tribal gaming regulators.

But in Washington state, the tribes have been able to maintain their monopoly. They currently offer retail casino gaming and sports betting without paying taxes to the state. In most cases, tribal gaming is regulated by some combination of tribal and state agencies.

The state that could be most impacted by the regulations is California, home to approximately half of the federally recognized tribes in the country. As the Rincon Band of Luiseno Indians pointed out in a comment on the proposed rules, it spent “millions of dollars, which it would have preferred to spend on tribal programs,” to defeat a commercial sports betting proposition in November.

Tribal representatives wrote that they support the current proposed rules, as they would force states to negotiate in good faith, and also that they believe the DOI properly approved the Seminole-Florida compact. The tribe notes that in Arizona, Connecticut, and Michigan, digital gambling is taking place “not under IGRA” and that “Internet gaming is rapidly becoming the largest expansion of gaming in modern history and is quickly developing into a reality where the Tribes are on the outside looking in.”

Should the proposed rules be approved, the tribes would be on the inside looking out.


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