California Indian tribes see the federal court ruling reaffirming the Seminole Tribe of Florida’s compact as a potential game-changer for their path to online sports betting. But is it too late to impact the 2024 election cycle?
The DC Circuit Court of Appeals ruled June 30 that the District Court erred in invalidating the first tribal compact with statewide online sports betting under the Indian Gaming Regulatory Act (IGRA).
“I think this was a really impactful decision for both the Seminoles and Indian Country,” Jacob Mejia, vice president of public and external affairs for the Pechanga Development Corp., told PlayUSA. “It affirms the rights of tribes and the state to enter into IGRA-centric compacts that not only address IGRA issues but also issues of online gaming.”
In 2021, the Seminole Tribe and Florida Gov. Ron DeSantis entered into an ambitious agreement that characterized statewide online sports bets as taking place at the server’s location on Indian lands. Previously, all tribes to offer statewide online sports betting did so through commercial agreements with a state.
Now tribes in other states can follow the Seminoles’ lead to set up tribally exclusive online sports betting under IGRA.
“Let’s give it to the Seminoles, undefeated since Columbus,” Victor Rocha, owner and editor of Pechanga.net and conference chairman for the Indian Gaming Association, told PlayUSA. “When the deal first came out, I think a lot of people in the industry said, ‘Oh no, that’s too much.’ But the governor signed off on it, the secretary of interior signed off on it, and now the court has signed off on it. Now the big question going forward as it relates to us in California is does it give the template for California tribes to do that hub-and-spoke model?”
How Seminole decision impacts California tribes
All compacts made between a tribe and state under the federal Indian Gaming Regulatory Act go to the US Department of Interior for approval. The Seminole compact tested if Interior would approve a compact with statewide online gaming. The department gave the compact tacit approval by allowing it to proceed without taking action.
Parimutuel operator West Flagler Associates sued US Interior Secretary Deb Haaland claiming the compact violated IGRA and the secretary violated the Administrative Procedure Act by allowing it to take effect.
The Circuit Court determined that the compact did authorize gaming on Indian lands. And IGRA didn’t require every aspect of the gaming take place on tribal lands.
Tribal gaming attorney Scott Crowell argued in an amicus brief he co-authored on behalf of the Indian Gaming Association and the California Nations Indian Gaming Association (CNIGA) that interior already had approved many compacts where elements of the gaming took place off tribal lands.
Crowell told PlayUSA:
“If any gaming occurs on Indian lands, IGRA applies. But aspects that occur off Indian lands still need to be lawful under the state’s law. We had pointed out in briefs that dozens of states allow tribes to offer off-track betting where the primary aspect of the gaming takes place off Indian lands.”
West Flagler could file for a rehearing or petition the US Supreme Court to consider the case. But either route is rare, meaning California tribes could see the Circuit Court decision as a green light to move forward.
“Assuming the decision stands, I think it does mark a path for tribes and states to compact on internet gaming,” Derril B. Jordan, an Indian law attorney who used to work for the Department of Interior, told PlayUSA. “I think that’s an equally accessible model across the country. It just depends on the willingness of the state to negotiate with tribes on that basis.”
Mejia said there was still much to unpack regarding the immediate impact in California.
“The decision helps provide clarity as far as what is permissible in this emerging digital space. But California hasn’t engaged in the same level of authorizations as Florida did with the Seminoles. In California, you have to amend the constitution to allow for sports betting. That means going in front of voters. And we don’t yet know if that is politically viable and what it would look like.”
CA tribes have been waiting on Seminole ruling
Commercial sportsbook operators put an online sportsbook initiative in front of voters last year. Facing staunch opposition from tribes, Prop 27 went down in flames.
Knowing the biggest online sports betting companies will continue coming for California, tribes spoke about working to develop a tribal model for online sports betting. But tribal representatives report little progress in those discussions since the election.
James Siva, chairman of CNIGA, told PlayUSA that waiting on the Seminole ruling played a factor in the slowdown.
“When the Seminole compact originally came out with their hub-and-spoke model for online sports betting with the location of the servers on tribal land, I think that model had a major appeal to a vast majority of California tribes. And then when that compact was struck down by the original court decision, it really forced a shift of approach in California. That’s why I think you saw most tribes didn’t try to push something online in the last election cycle.”
Decision revives hub-and-spoke model for CA tribes
The Seminole compact presented a unique statewide online sports betting model centered around the tribe. As the hub, the Seminoles operate a wagering platform on Indian lands. But the tribe would allow three parimutuel operators (spokes) to access their platform with their own brands.
After sportsbook operators filed what became Prop 27, four California tribes led by the San Manuel Band of Mission Indians filed a tribal response with their spin on the hub-and-spoke model.
Tribes with online sportsbooks served as a hub for other tribes offering account registration and marketing services.
In the next month after filing, the District Court decision came down invalidating the Seminole compact. The tribes scrambled to amend their initiative to reflect the change. The watered-down initiative didn’t qualify for the ballot.
But with the Circuit Court decision, the original model could be a starting point to revive tribal discussions on online sports betting in California. Siva said it could be the key to finding equity among the 110 federally recognized California tribes in the online space.
“We’ve been trying to find a model in California that works for online sports betting, taking into account the needs for all California tribes. I think that hub-and-spoke model is the best way to find a solution between some of the larger gaming tribes in a more urban setting and the smaller gaming tribes in more rural settings.”
CA tribes still might wait for 2026 for initiative push
The Seminole decision comes at an interesting time in California. To get the maximum 180 days to collect signatures for an initiative to make the 2024 general election ballot, petitioners must file in the next month.
“In California specifically, I think the timing is such that it’s not going to impact the 2024 election cycle,” Crowell said. “All indications are there won’t be any measures on the ’24 ballot.”
However, if they are willing to pay top dollar to signature collectors, petitioners could theoretically wait several months and still qualify.
And fewer signatures are required for 2024. The 874,641 signatures required for a constitutional amendment to make the 2024 ballot are about 100,000 fewer than last election cycle.
Siva thinks tribes might still be able to apply this decision to an initiative proposal for 2024. And he expects the decision will spark discussion among California tribes.
“I think this really starts us talking in California about what this looks like for online sports betting, probably sooner rather than later. I don’t know if we have time left for ’24. But I definitely wouldn’t say we’re out of time because tribes are very much used to making things happen quickly.”
Dan Little, chief intergovernmental affairs officer for San Manuel, previously told PlayUSA that he didn’t think any sports betting initiatives get filed in California for 2024. Following the Seminole decision, he said it doesn’t change that California voters still don’t support sports wagering.
“One thing about last year is it really seemed to sour the appetite for sports wagering in California. Our polling continues to show there’s just not support for online sports wagering or any sports wagering in California right now. So I don’t think it changes anything for ’24.”
Impact in states where tribes entered commercial deal
In California, Minnesota, Washington and North Dakota, Crowell said there likely will be efforts to pursue compacts for tribal exclusivity of online sports betting under IGRA due to the Seminole decision.
But he doesn’t expect the decision to lead to changes in states that made commercial deals for tribes to offer online sports betting. Michigan and Arizona are key states where tribes operate commercial online sports betting alongside other entities.
This is because IGRA requires that 60% of net revenue under a compact is income to the tribe. So Crowell sees compacts with online gaming under IGRA only working in states with tribal exclusivity.
“If DraftKings is in a state looking at both tribal and nontribal models, they’re not going to have the incentive to contract with the tribe when doing so under IGRA obligates them to give 60% to the tribe. So it’s difficult to say how states react and respond to this model. In states where commercial sports betting is already established, the economics are going to be different.”
Working with tribes under the revenue-sharing parameters of IGRA could require a business-to-business model. Some companies with sportsbook operations such as Caesars have expressed interest in working with California tribes in that way. Little said he hopes the Seminole decision gets operators such as FanDuel and DraftKings to consider this relationship with California tribes.
“I would hope this decision would compel some commercial operators to investigate the business-to-business model. … Hopefully some of these strictly online companies revisit the business model and see if they could be technology providers to the tribes.”