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How New Federal Compact Rules Affect Future Of Tribal Online Gaming

Updated federal regulations on Indian gaming compacts could be a game changer for Indian tribes in some states while having little impact on tribes in other states.

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Matthew Kredell Avatar
5 mins read

Updated federal regulations on Indian gaming compacts could be a game changer for Indian tribes in some states, while having little impact on tribes in other states.

Regulations from the Bureau of Indian Affairs (BIA) at the US Department of Interior (DOI) were published in the federal register Feb. 21. They go into effect on March 22.

The final rules provide clarity to tribes and states on what they can include in Class III gaming compacts under the Indian Gaming Regulatory Act (IGRA).

One such clarification codifies that the BIA will approve compacts that include online gaming outside Indian lands.

Alex Weldon of Bonus.com gave an initial analysis of the final rules and how they differ from draft proposals. PlayUSA spoke with a California tribal leader and a tribal attorney about the impact of the rules on the future of tribal online gaming.

Tribes have the choice to do online gaming through compact

Interior set a precedent in 2021 by allowing the first compact to include online gaming.

The Seminole Tribe’s compact with the state of Florida featured statewide online sports betting. New regulations made official that the DOI will approve compacts with internet gaming as long as state law and the compacts deem the betting to take place on tribal lands, where the servers are located.

So long as the Seminole compact withstands one final federal legal challenge, this provides a pathway for tribes to do online sports betting and online casinos under IGRA.

Previously, tribes wanting to participate in statewide online gaming needed to enter commercial agreements in the state. Tribes have reached such agreements in Michigan, Arizona and Connecticut.

That still might be the best path to online gaming for some tribes, but now they have options. Tribal gaming attorney Scott Crowell explained:

“Whether it becomes a widespread model or not now shifts from the legality of doing online gaming under IGRA to what is more economically viable. I think tribes would prefer to do it under IGRA but not if it prices them out of the market.”

States where compacts with online gaming might make sense

Crowell predicted that tribes in California, Oklahoma, Washington, Wisconsin, Minnesota, New Mexico, North Dakota and South Dakota could take a serious look at doing online gaming through the IGRA model.

“For the handful of states where you have true tribal exclusivity or substantial exclusivity on gaming, this provides a decent model,” Crowell said. “When you maintain that exclusivity, you’re going to ensure that tribes are the primary beneficiary of the new gaming activity.”

Tribes usually get a better economic deal under IGRA, which limits management service provider contracts to 40% of net revenue.

California tribes, in particular, value an IGRA approach to control the market and not let out-of-state operators dominate the online landscape in California as they do in other states.

California Nations Indian Gaming Association Chairman James Siva told PlayUSA that the state’s tribes were pleased with the final rules.

“I think overall, we’re happy-ish. I’m pleased to see that they followed a similar model as the Seminole’s put out. I think that’s a model that has a lot of potential, specifically here in California. Just looking at the vast number of tribes, the massive size of the state, that’s a model we’ve thought could be a solution here in California since the Seminole first negotiated their compact. So its inclusion in the regulations is a good thing.”

Crowell said it also helped California tribes that they could go directly to voters through the initiative process to get the state law approvals needed for online gaming. Tribes in other states need to go through the legislature.

“For tribes in California, I think it provides a clear road map for what an initiative might look like in ’26 or ’28,” Crowell said. “Outside of California, where tribes have to negotiate with the state, it clarifies the path for what a willing tribe and a willing state can do.”

States where online gaming under IGRA isn’t feasible

The 40% limitation for management service providers under IGRA can be a double-edged sword.

Tribes wanting to get into online gaming must either create their own platforms from scratch or partner with companies that can provide the technology.

In states that have competitive commercial online gaming, tribes won’t be able to get a partner for 40% of the revenue. All the operators will go with commercial partners.

“Even though tribes have the right to operate statewide online gaming under IGRA, they may get priced out of market to partner under IGRA model with one of the major players,” Crowell said.

North Carolina, Massachusetts and Arizona are states where tribes couldn’t compete with commercial interests for online partners under IGRA limitations.

Tribal benefits left out of final rules

In the final rules, the Interior declined to include language requiring a state that legalizes commercial statewide online sports betting or online casinos to negotiate with tribes to offer the same form of online gaming through a compact.

Crowell said that affects many tribes in states with online sports betting, such as Indiana, Iowa and Oregon.

“One of my disappointments with the rule is that, in states where mobile wagering has already been approved for nontribal interests, it doesn’t clarify what obligations the state has to negotiate with those tribes to allow them to compete. So it leaves unanswered questions for what tribes in the vast majority of states need to do in order to get through the finish line.”

In Oregon, there are nine tribes and only one online sportsbook app operated by DraftKings for the Oregon Lottery. DraftKings gets 49% of the revenue, so the market is ripe for tribes to compete under IGRA.

However, the governor has refused to negotiate with tribes for statewide online sports betting. One reason is that DraftKing’s contract lowers its tax rate to 15% if the state contracts with a single tribe to offer online sports wagering.

Another provision left out of the final rules could have compelled states that authorize any form of Class III gaming to allow all forms of Class III gaming.

Crowell said he felt that language wouldn’t have passed legal muster anyway. It could have allowed a tribe to say the state offers horse racing, so the tribe wants to offer slot machines. He also pointed out the draft language did not ask “Must a compact or amendment permit a tribe to engage in any form of Class III gaming activity?” The question started with “May.”

“The bottom line is the removal of that language doesn’t really change the landscape at all,” Crowell said. “It still leaves it up to the tribes and state to battle it out in terms of what constitutes a game they must include in a compact, but there’s no restriction on what a state may include in a compact.”

Matthew Kredell Avatar
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Matthew Kredell serves as senior lead writer of legislative affairs involving online gambling at PlayUSA. He began covering efforts to legalize and regulate online gambling in 2007 and has interviewed more than 300 state lawmakers around the country.

View all posts by Matthew Kredell

Matthew Kredell serves as senior lead writer of legislative affairs involving online gambling at PlayUSA. He began covering efforts to legalize and regulate online gambling in 2007 and has interviewed more than 300 state lawmakers around the country.

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