Gambling on compacts

05 April 2022 SportBusiness Publication
Author(s): Samuel J. Fishman

This article originally appeared in SportBusiness, and is republished here with permission.

The United States Supreme Court’s 2018 decision Murphy v. NCAA struck down the Professional and Amateur Sports Protection Act (PASPA), thereby permitting states to legalize sports gambling and ushering in an historic wave of new domestic commercial activity in the space.

In the years since, a flurry of states have legalized sports gambling. In some states, the process requires only the passage of legislation. In others, where the state constitution includes restrictions on gambling, it may require the more complicated effort of amending the constitution.

Where it might be difficult to pass such legislation or effect a constitutional amendment, states have turned to another legal avenue to implement legalized sports betting: the Indian Gaming Regulatory Act of 1988 (IGRA).

The IGRA regulates gaming on Native American lands. Under the IGRA, there are three classes of games, and each class has a different regulatory scheme. Class I gaming largely includes traditional and ceremonial games and are largely unregulated. Class II includes bingo and non-banked card games like poker. Class III includes all other forms of gaming—including sports gambling. A tribe may only offer Class III games in a state if it has entered into a compact with the state.

As Class III games like sports betting have become more popular, some states have amended their gaming compacts to give licenses to Indian tribes to conduct sports gambling on tribal lands, despite the fact that sports gambling is not permitted by state law.

In 2021, Florida amended its compact with the Seminole Tribe to allow the tribe to operate online sports betting though computer servers situated on tribal land. This approach has also been implemented in Washington, Wisconsin, and North Carolina—each of which amended compacts with various tribes to authorize in-person sports gambling at tribal casinos. Statewide sports gambling is not otherwise legal in any of these states.

In the meantime, in other states, like New Mexico and North Dakota, which have not similarly amended tribal compacts or otherwise legalized sports gambling, Native American tribes have interpreted their existing gaming compacts as permitting sports gambling and have since started operations.

These efforts to implement sports betting through existing or amended tribal-state compacts have unsurprisingly engendered litigation. Recently, in an action brought by the owners of Magic City Casino and Bonita Springs Poker Room, a federal district court in Washington, District of Columbia, invalidated the amendment to the Florida/Seminole compact. The Court stated that the IGRA authorizes gaming only on Indian lands, and as a consequence, the amended compact impermissibly allowed patrons to place mobile sports wagers from locations throughout Florida and outside tribal lands.

The fact that the sportsbook and servers were located on tribal land were not sufficient to save the amended compact under the IGRA. The Seminole tribe has since suspended sports gambling operations, and the case is on appeal.

Washington state’s amended tribal compacts are now also the target in another action filed in District of Columbia  federal court. There, Maverick Gaming LLC has challenged the state’s amended compacts allowing for in-person sports betting on tribal lands. Maverick contends that the amended compacts create an impermissible tribal monopoly over sports betting in violation of the IGRA which allows for tribal Class III gaming only in states that permit the same gaming activity by non-tribal entities. Maverick also contends that the amended compacts violate the US Constitution’s guarantee of equal protection of the laws by establishing a race-based preference for Indian tribal sports gambling.

Finally, Maverick seeks invalidation of the IGRA itself under the anti-commandeering clause of the Tenth Amendment, arguing that it impermissibly mandates that states negotiate with Indian tribes requesting a Class III gaming compact.

If Maverick’s challenge to the very validity of the IGRA is successful, it would likely nullify numerous tribal-state gaming compacts. This state sovereignty argument against the IGRA, however, has previously been pursued unsuccessfully in federal courts in Oklahoma (10th Circuit), South Dakota (8th Circuit), and California (9th Circuit).

Still, the Maverick case bears watching, especially in states that have allowed sports gambling only through tribal compacts.

The remaining states with compacts permitting sports gambling exclusively through tribal operators may well face challenges similar to those raised by Maverick.

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