When Arizona lawmakers first pitched a bill to legalize sports betting in February 2021, they allowed for 20 digital and retail event wagering licenses in an effort to create “parity” between the state’s professional sports teams and gaming tribes. The legislation, which became law April 15, 2021, allows for 10 licenses each for professional sports teams and tribes — but a key issue is that there are fewer than 10 qualified professional sports teams in the state and more than 10 gaming tribes.
That “parity” has been at issue since the bill was introduced, and came up once again Tuesday during an Arizona Department of Gaming public comment session on permanent rules. The ADG must file its final rules with the secretary of state’s office by Friday.
The regulator has no control over the number of licenses allowed — that’s determined by statute. But the ADG was left to determine how to divvy up those licenses, and it has had to deal with frustrated tribes that were left out of licensing. On Tuesday, the phrases “responsible party” and “management services provider” became hot-button issues, as tribes with licenses asked the ADG to clarify the rules so they do not risk losing their licenses and tribes without licenses continue to seek a way in.
Who is responsible for a license?
Both licensed gaming tribes and professional sports teams are working with operators or suppliers to offer sports wagering. As examples, the Navajo Nation is partnered with Hard Rock Sportsbook, the Fort Mojave Indian Tribe is partnered with SuperBook Sports, the NBA Suns are partnered with FanDuel, and the MLB Diamondbacks are partnered with Caesars Sportsbook. In the current draft of the rules, Section R19-4-105J reads, “The Department may revoke a license if the responsible party fails to continue operations.”
That one line elicited at least half a dozen comments, including Navajo Nation attorney Stephen Hart asking, “We have a management services provider. … What if something happens with them and we get our license revoked?”
His concern was echoed by other tribal representatives, who wondered if they could change management services providers (MSP) without risking penalty, or what comes next if the relationship between a tribe and its MSP gets broken.
PointsBet's partner in Arizona did not receive sports betting license… so back to the drawing board it seems.
— Alfonso Straffon 🇨🇷🇺🇸🇲🇽 (@astraffon) August 30, 2021
If that “relationship no longer exists,” said Lisa Estensen, an attorney with the Yavaapi Apache Tribe, “then what happens? There are six to 10 tribes with no license.” She went on to say that if a tribe loses its license over an MSP relationship, that license should be open to all qualified tribes for bidding.
Estensen’s tribe and its wagering partner PointsBet were at the center of a storm last summer when the ADG issued the Yavaapi Apache Nation a license and then rescinded it with no other explanation than “clerical error” days later.
Whatever side a tribal nation is on, clarity on exactly who is responsible for the license, how it could be lost, and how a license would be reallocated is needed. But that’s unlikely to happen this week, as the ADG said Tuesday it plans to file the draft rules with the secretary of state and handle bigger issues like this one in regular regulatory review going forward.
Status of overpayments also unclear
Many of the changes to the rules were technical, grammatical, or provided needed clarity. But there are other key issues that will require attention in the future:
- The ADG removed language surrounding the location of a licensee, leaving the Phoenix Coyotes, who are moving into a temporary arena at Arizona State University, confused. The team launched its SaharaBets platform in January. By law, the professional sports team licenses are tied to a venue (FanDuel-Footprint Center, Caesars-Chase Field, as examples), so moving could upend the Coyotes’ ability to have a platform. The Coyotes’ Andrew Diss asked that language surrounding the location be brought back, while the ADG said the language was removed after multiple stakeholders asked for that.
- Hart also asked for clarification on the phrase “fails to continue operation” in Section R19-4-105C. He said the Navajo Nation reads that to mean the “cessation” of operations, but suggested that the wording is not clear enough. He asked if suspending operations due to a technical update could fall into the category of “failing to continue operations.”
- Another discussion point surrounded R19-4-112C, which deals with privilege fees and how overpayment of fees will be handled. FanDuel’s Andrew Winchell suggested that the rule is too vague, doesn’t explain how an overpayment would be carried over, and isn’t clear about whether an overpayment would be credited or if an operator would be “out of luck.” ADG Director Ted Voigt said the challenge in handling overpayments is a result of monthly, rather than daily, reporting. Casinos in many states traditionally report income and pay taxes daily, while sports betting operators are often on a monthly schedule.
- The ADG updated Section R19-4-113C to reflect that it will require licensees to “notify the Department no less than 180 days prior to ceasing operations and shall provide a written plan to settle any outstanding liabilities and/or refund player account funds.” The regulator said it came up with the 180 days after getting input, but at least one stakeholder thought the timeframe was too long and the language too vague.