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  • Writer's pictureThe San Juan Daily Star

How sports betting upended the economies of Native American tribes

Johnny Lehi Jr., president of the San Juan Southern Paiutes, has had to consider how to provide for the tribe’s residents after it lost a slot machine deal worth up to $7 million yearly.

By David W. Chen, Mark Walker and Kenneth P. Vogel

For decades, gambling has been the most important source of income for hundreds of Native American tribes. Now, in many parts of the country, the rapid spread of sports betting and online wagering is threatening to crimp that economic lifeline.

In Florida, the powerful Seminole tribe forged a lucrative deal to exclusively offer sports betting in the state, only to have the deal blocked by a lawsuit from casino companies.

And in Arizona, traditional casinos and sports teams gobbled up 95% of the nascent sports-betting market, which was on display at Sunday’s Super Bowl in Glendale, where fans in attendance could bet on the game for the first time. Tribes that had relied on gambling are now scrounging for scraps; the leader of one tribe said he might have to ration food and water for its impoverished residents.

Tribal gambling took root in the early 1980s after Florida’s Seminole tribe opened a bingo hall, helping to make up for steep Ronald Reagan-era federal budget cuts to Native American tribes. In 1987, the Supreme Court ruled that tribes could conduct gambling on their own lands.

Since then, casino gambling has blossomed into a $39 billion industry for 243 federally recognized tribes in 29 states.

But in 2018, the Supreme Court struck down a federal law banning most sports betting outside Nevada. That prompted three dozen states to authorize sports wagering, including 22 states that have tribal gambling.

The field has been crowded by a combination of fast-growing online platforms such as DraftKings and FanDuel and by old-school casino companies such as Caesars Entertainment and MGM Resorts International. Companies have deployed armies of lobbyists, lavished lawmakers with gifts and campaign cash, and at times trotted out questionable data to extract favorable deals in state capitals.

Some tribes are seeing revenue evaporate as giant gambling companies enter the fray. In other situations, tribes are losing their prime position to capitalize on an expected explosion of all kinds of online gambling.

“The private sector has always wanted what the tribes have,” said W. Ron Allen, president of the Washington Indian Gaming Association and a past president of the National Congress of American Indians. “So they’re looking at ways to try to squeeze the tribes out.”

Jockeying for licenses

In 1988, Congress passed the Indian Gaming Regulatory Act and established the National Indian Gaming Commission. Tribes were required to strike deals with states — called compacts — and often had to pay a share of revenue to offer certain types of gambling on their lands.

In Arizona, gambling used to be limited to 22 tribes under a 2003 compact. A few years ago, Doug Ducey, the state’s Republican governor at the time, backed by longtime allies from the state’s professional sports teams, pushed for a new agreement that would give teams and commercial casinos the right to open sportsbooks and take mobile wagers.

The biggest tribes were also on board, in part because they could take sports bets and offer a wider menu of casino games such as baccarat, craps and roulette. They were also allowed to build more casinos, which they wanted in order to attract tourism.

Among those who helped design the legislative deal in Arizona was Jeremy Kudon, a lobbyist at the international law firm Orrick who spearheaded a national push on behalf of some of the largest sports-betting platforms and professional sports leagues. A key part of his strategy was trying to broker compromise deals.

Ducey hosted a signing ceremony in April 2021 at the Heard Museum in Phoenix, which is dedicated to American Indian art. Five months later, Arizona went live with sports betting in time for the 2021 NFL season.

The major professional sports teams were guaranteed licenses. They got a head start and spent heavily on attracting customers while partnering with top national commercial casinos.

Conversely, 16 tribes jockeyed for 10 licenses and therefore had to make proposals, to pay a nonrefundable $100,000 application fee and to vet partners before they could even begin trying to attract bettors.

“Quite frankly, we were left behind,” Charlene Jackson, a longtime lawyer for several of the tribes, said before becoming a judge in November.

To date, the five biggest sports-betting companies — FanDuel, DraftKings, BetMGM, Caesars and Penn Entertainment (Barstool) — have dominated the market in Arizona.

On Sunday in Glendale, visitors to the Super Bowl were able to place bets at a BetMGM sportsbook that opened next door to State Farm Stadium in September.

Playing both sides

The Seminole Nation has come a long way from its bingo hall.

With its distinctive Guitar Hotel at its flagship Seminole Hard Rock Hotel & Casino Hollywood outside Miami, the Seminoles are described by the federal government as a “thriving self-governing community.” Each tribal member reportedly receives annual dividend payments of $128,000.

So when the Seminoles made a play for sports betting, it seemed like the making of a crowning moment for all Native Americans.

In April 2021, they joined Gov. Ron DeSantis, a Republican, to announce a deal for a new 30-year compact giving them the exclusive right to offer online betting throughout Florida on sports and other games, among other new gambling offerings. In exchange, they would pay the state a minimum of $2.5 billion over the first five years of the compact.

The arrangement would have prevented DraftKings, FanDuel and other commercial gambling companies from launching their own sports-betting platforms in Florida. But the state Legislature and the federal government had to sign off, and a heated lobbying battle ensued.

Lobbyists for DraftKings, under the direction of Kudon, mobilized against the online gambling portions of the compact.

They claimed allowing the tribe to offer online betting throughout the state would violate the 1988 federal law governing tribal gambling, which required that betting covered under the law needed to take place on Native American land. At issue was whether that requirement could be satisfied by locating the computer servers that processed the bets on tribal land, even if the bets were being placed by people all over the state.

The position DraftKings and Kudon took in Florida — that the location of the servers was not sufficient — seemed logically inconsistent with an argument they had used to push for the legalization of online sports betting in New York. To meet a provision in the state constitution requiring gambling to occur at state-authorized casinos, Kudon’s team argued that as long as the servers accepting the bets were located at the casinos, that’s where the bets should be deemed to have taken place, regardless of the location of the bettors.

Lawmakers in Florida eventually approved a less ambitious compact, which allowed the Seminoles to exclusively offer in-person and online sports betting but not a full suite of online casino games.

The Seminoles launched online sports betting in November 2021, but the server argument resurfaced.

A pair of well-connected smaller casinos filed a lawsuit, echoing the argument DraftKings and Kudon had made in Florida. The Seminoles tried a similar rationale to the one that worked in New York — that the location of the servers trumped the location of the bettors — but they were rebuffed.

A judge dismissed the reasoning as “fiction” and nullified the compact. The Seminoles’ promising foray into online sports betting had lasted exactly three weeks. (The tribe has appealed.)

Although its current focus is on sports betting, the gambling industry sees online betting on casino games such as slots, blackjack and baccarat as a much bigger prize, because they are far more popular and profitable.

“If the tribes can’t have mobile — which will eventually mean they won’t have online casinos — then you are effectively writing an expiration date on tribal gaming,” said John Holden, a law and business professor at Oklahoma State University.

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