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The Southern Ute Indian Tribe has filed a federal lawsuit seeking to force the state of Colorado to allow it to offer statewide online sports betting.
However, because of the unique circumstances of tribal compacts in Colorado, a respected tribal attorney doesn’t expect this to start a wave of tribes suing states for online gaming access.
“I don’t think that it evolves in a way that impacts other tribes,” Scott Crowell told PlayUSA. “Because of the unique nature of tribal agreements in Colorado, we’re likely to get a decision out of this case that does not have a national impact.”
More tribes are expected to seek online gaming in the coming years as a result of federal decisions upholding the Seminole Tribe’s compact with the state of Florida to offer online sports betting.
Why Colorado tribe filed online sports betting lawsuit
The Southern Ute filed the lawsuit on July 9 in U.S. District Court, District of Colorado, naming Colorado Gov. Jared Polis and Colorado Division of Gaming Director Christopher Schroder as defendants.
The tribe wants a declaration that it is entitled to offer statewide online sports betting under its existing compact and to prevent the Colorado Division of Gaming from interfering with vendors looking to do business with the tribe.
Southern Ute Indian Tribe Chairman Melvin Baker provided reasons behind the lawsuit to Colorado legislators at an American Indian Affairs Interim Study Committee hearing the day before the filing.
The tribe’s 1995 compact states that it can engage in “any gaming activity like that which is authorized elsewhere in Colorado so long as the Tribe’s gaming activity mirrors Colorado bet amounts.”
However, in 2019, the Colorado legislature put Prop DD to legalize sports betting on the ballot and voters approved. Southern Ute partnered with USBookmaking to create the Sky Ute Sportsbook app.
Right before sports betting became legal on May 1, 2020, the Colorado Division of Gaming let the Southern Ute and Ute Mountain tribes know it expected them to submit for licensing, state regulation and a 10% tax to offer online sports betting.
“Under federal law and our 30-year-old agreement with the state, the tribe is allowed to engage in statewide sports betting,” Baker told the committee. “But we are not. Through actions taken by the state, we have been prohibited in successfully engaging in this new economic opportunity. This is unfair and breaches our existing agreement, federal law and the trust we have developed with the state.”
Colorado online casino isn’t legal in the state.
How Southern Ute situation differs from other states
The Colorado situation really is a disagreement between the state and tribes on the implementation of a 30-year-old compact clause that doesn’t exist with tribal agreements in other states.
The Colorado Division of Gaming didn’t attempt to infringe on tribal sovereignty by stopping the tribes from operating online sports betting apps.
Instead, the regulators influenced what they can control by pressuring commercial vendors not to partner with the tribes. The Southern Ute ignored the division and launched the Sky Ute Sportsbook in June 2020. The app shut down in July 2023 for commercial reasons and the tribe has been unable to secure another partner.
According to the Southern Ute complaint:
“The State’s disregard for the binding Gaming Compact is motivated by money. Sports betting regulated by Colorado is subject to a 10% tax, whereas no such tax could ever apply to Tribal gaming under federal law. Therefore, the State sought to freeze the Tribe out of internet sports betting.”
Ute Mountain partnered with IGT for its online sportsbook. However, as the lottery partner for Colorado, IGT wouldn’t move forward without state approval.
This doesn’t test whether a state must negotiate compacts in good faith for tribes to offer sports betting under IGRA if the activity is legal in the state. The Southern Ute tribe doesn’t want to open up compact negotiations. The tribe has a favorable setup with the current compact, which doesn’t require any revenue share with the state.
“For various political reasons, they are not looking to resolve the issue by renegotiating their compact,” Crowell said. “They believe their compact has a grandfather clause that if the state authorizes any form of gaming, they are able to offer the same game. So when the voters of Colorado approved statewide mobile sports betting, it had the effect of approving it for the tribe as well.”
Will server location become part of ruling?
In the filing, the Southern Ute uses the Supreme Court denial of West Flagler’s petition to review the DC Circuit ruling to support its position that tribes can offer statewide online gaming under the Indian Gaming Regulatory Act (IGRA).
The complaint takes a page from the Seminole compact in stating that the Sky Ute Sportsbook would take on-reservation bets from people located across the state based on the location of the server.
That could lead to the Colorado District Court ruling by Magistrate Judge N. Reid Neureiter commenting on whether the bet occurs on servers located on Indian lands.
However, the higher DC Circuit court already overturned a District Court ruling based on the server location, saying it didn’t make a difference. So another District Court ruling would have little impact.
“The DC Circuit said it’s not a question of where the server is located or the wager occurs,” Crowell said. “It’s a question of whether the patron’s wager is lawful as a matter of state law. Deeming a bet to take place at the server can make for stronger language. I don’t think not having it is fatal to Southern Ute’s case but it will certainly be looked at.”
On July 25, Neureiter granted the defendants’ motion for an extension to file a response to the complaint. The response from Polis and Schroder is due Sept. 3.
