In column A, we have the four most active states for Indian gaming: California, Oklahoma, Florida and Washington.
In column B are four states with little or no Indian gaming: New Jersey, Mississippi, West Virginia, and Delaware.
Guess which column of states is closer to sports betting? Yes, the states in column B.
In this new era, created by the U.S. Supreme Court’s ruling on May 14 that clears the way for sports betting, one thing is clear: the launch date for states with tribal gaming is going to be much later than those without. The reason is simple: With at least one additional party involved (more if there are multiple tribes), the negotiations become exponentially more difficult.
Every state where there is Indian gaming has negotiated agreements with its own Indian tribes. In many cases those compacts have been in place for lots of years before sports betting was even a glimmer in a gambler’s eye. (Okay, legal sports betting.) Working out issues like geographic exclusivity, fair tax rates, and what kind of games could be offered has proven to be difficult enough. Now there’s the wild card of a new form of gaming activity that has barely been discussed, if at all. The starting point for disagreements will be whether sports betting was implied in an existing compact, with tribes also aiming to cement their position as sovereign nations.
Clearly, sports betting is a form of gambling expansion, and – let’s use my state of Florida as an example – any state approval of such activity has to be viewed as an infringement onto whatever monopoly the Seminole Tribe of Florida has on parts of my state. With infringement, that $300 million a year the Seminoles annually pay to the state would legally have to be reduced.
Unless … the Seminoles themselves get sports gambling exclusivity, which would make their payments to the state go up, and provide a backstop of sorts against the proliferation of gambling here in the Sunshine State. Such exclusivity would also cause a lot of howling from the South Florida racetrack casinos, and from others not in the deal. Howling that could mean a lot fewer campaign contributions.
California, by far the leading state for Indian gaming revenues, faces an even thornier challenge, as part of a tug-of-war between tribal casinos, card clubs, and racetracks. The state’s 63 tribes collected $7.9 billion in gaming revenues in 2015, according to a report by Alan Meister, a gambling industry expert with the consulting firm Nathan Associates. That’s a lot of money at risk.
Last year, State Assemblyman Adam Gray introduced an amendment to the state constitution that would allow sports wagering should the nationwide prohibition be lifted. The bill requires a two-thirds vote in the state legislature to be placed on the ballot. It then would need the support of the majority of voters for passage. After that would come the tough part of deciding, among other things, who will actually offer sports wagering.
There is tribal-related action in a number of other states. Among them:
- In Arizona, Governor Doug Ducey sees the sports betting question as a way to modernize tribal gambling compacts, most of which are up for renewal in 2022. (Arizona tribes, as a group, negotiated standard tax rates, and there is no commercial casino competition.)
- Tribes in Oklahoma have been trying to get sports betting approved through the state legislature in the last two sessions but have been unsuccessful.
- In Connecticut, the Mohegan Tribe said it’s looking forward to working with the state to legalize and regulate sports betting. “We have long felt that Mohegan Gaming & Entertainment was in a great position to offer this type of gaming at our properties,” spokeswoman Jennifer Harris Ballester wrote in a statement.
Ernie Stevens Jr., chairman of the National Indian Gaming Association, said the group has been preparing tribal governments for sports betting with listening sessions outlining internal regulations and negotiations of state gambling compacts. Location and competition would be major factors in tribes’ decisions to add sports betting, he said.
“I don’t believe this is going to take the place of our slot machines, but it’s another amenity we can enjoy and people can have fun with,” he told The Associated Press. “And we want to be able to move forward with the overall industry.”
Donald R. Pongrace, a co-leader in the Akin Gump law firm’s public law and policy practice, said once a launch is approved, implementation is going to be a challenge because the margins are so low. Most books make about 5 percent on the action, after taxes.
“It’s not much ado about nothing but it’s a very carefully calibrated equation,” Pongrace said, adding that the number of ways a plan can be divided and shifted are almost innumerable.
It would be a challenge to run – or subcontract – a sports book that paid a large cut to a state. Pongrace fears that legislators may view sports betting as a way to bolster coffers, despite the fact that casinos often view sports books as an amenity to attract other forms of gambling and types of spending (food and entertainment, for example), rather than as a straight money-maker.
He points to Nevada’s 6.75 percent tax on sports betting as a standard that other states will be hard-pressed to match. That means that other states’ books may not be as good as those in Las Vegas.
“Ultimately, though, someone will find a way to do this,” Pongrace said.
