When online sports betting goes live in Arizona, it might not look the way some stakeholders thought it would. While tribal interests believe they’ll be able to offer digital wagering in their casinos and on their reservations, the latest compact amendment doesn’t clearly allow for mobile wagering on a reservation outside of a casino building, and state regulators say they will geofence tribal lands, meaning that digital platforms from outside of a reservation will not be available within the boundaries of a reservation.
Up to 350,000 Native Americans live on reservations in Arizona, including more than 150,000 in the Phoenix metro area. In a state with a population of about 7 million, those tribal residents represent 5% of the population.
As a tribal source not in Arizona put it, “I think they are missing a huge opportunity.”
And one sports betting industry executive told Sports Handle, “Any sort of prohibitive areas to reach customers is not ideal, of course. To access of-age players is what you want. You work around it, if that’s what the state law is.
“I think yes, this geogencing and not being able to create a holistic gaming experience for your customers, that would cause concern. If you’ve got a brand, you want to brand retail and mobile. A guy is playing poker, and he wants to bet and now he has to get up [to go to the sportsbook], that’s not easy.”
While the new compact dictates what can or cannot happen on tribal land, the Arizona Department of Gaming interprets the state’s new law to mean “mobile wagering on tribal reservations will not be permitted at all, even with the designated operator the Tribe partners with,” an ADG spokesman told Sports Handle in early July.
From the ADG’s perspective, that means that WynnBET‘s deal with the San Carlos Apache will allow it to offer online betting in the state of Arizona, but not on the reservation, which is sovereign, and also governed by federal law. In addition, Bally’s, Caesars, DraftKings, FanDuel, and Penn National Gaming, all of which have commercial agreements in the state, won’t be able to reach bettors in Indian Country.
Lawmakers left ADG with lots to sort
How is it that a bettor may not able to wager on tribal lands? It’s a tangled web of the tribal-state compact amendment, the Indian Gaming Regulatory Act, the new sports betting statute, and proposed regulations. The first three are legally binding documents — with different interests, perspectives, and interpretations, to be sure. The ADG on Wednesday released its final rules with plans to approve them Friday.
The question of where digital platforms will be allowed to be live is just one of many messy items lawmakers left the ADG to sort through, including how to allocate 10 tribal event wagering licenses in a state with well over 10 gaming tribes and how to set licensing fees.
IGRA was enacted by Congress in 1988, before the proliferation of the internet and certainly before we all carried tiny computers — or mobile sportsbooks, as the case may be — around in our hands. As such, IGRA does not address digital gaming, which did not exist at the time it was passed. To that end, tribes around the nation have been trying to figure out how and where they can offer digital sports betting without violating IGRA.
In Michigan, the tribes essentially “opted out” of IGRA and agreed to be regulated and taxed by the state. Michigan’s 12 tribes are the only ones so far in the U.S. to go down this road. All other tribes in legal jurisdictions either have a revenue-sharing deal with their state or don’t pay the state at all.
Tribes in Michigan made that decision because they believed that a change to IGRA was needed in order for them to offer mobile wagering outside of a reservation. Bryan Newland, then the Bay Mills (Mich.) Indian Community tribal chairman, was a leader in making the deal. He has since been named the principal deputy assistant secretary at the Bureau of Indian Affairs and was the person who signed off on the Arizona compacts.
Big launch day for iGaming and online #sportsbetting in Michigan. A major $1bn+ market, but also a pivotal moment in US gaming as tribes participate in state-regulated online gambling under new regulatory model. @tbattdc reports for @GamblingComp https://t.co/WjKxACYZC8
— James Kilsby (@JKilsbyDC) January 22, 2021
In his Arizona compact amendment approval letter, Newland wrote, “I also note that the State made a valuable concession to the Tribes by adopting the 2021 Gaming Act provisions to ensure an opportunity to participate in the commercial gaming market outside of Indian Lands. This interconnected arrangement, where the Tribes negotiated for the right to participate in off-reservation mobile sports betting with competition limited by the State is directly related to on-reservation gaming in the 2021 Compact, and, therefore, permissible under IGRA.”
But the hitch in Arizona is not whether or not tribes will be able to offer mobile wagering off reservation. It is clear that they will be able to, meaning Caesars (Ak-Chin Indiana Community), Kindred (Quechan Tribe), and PointsBet (Yavapai-Apache Nation) who have tribal partners will be able to offer digital wagering off reservation. The question is if they will be able to offer it on reservation, outside of a casino.
The document that the state of Arizona and the tribes agreed to earlier this year is an amendment, rather than a new compact. It’s possible that language from the original 2003 compact — which also did not contemplate digital wagering — may need to be cleaned up in order for digital wagering to be legal on tribal land outside of physical casinos.
The compact amendment details that on-reservation Class III gaming be limited to the facilities in which gaming takes place. Because the pact specifies “facilities,” that could mean that it is not currently legal for a tribe to offer digital wagering outside of a casino on tribal lands.
According to the text of the compact (Section 3, page 16):
The Tribe may operate Class III Gaming only in the number of Gaming Facilities specified in
Gaming Facilities Annex for the Tribe
There is a provision in the compact amendment, however, for clarification to be added through the appendices.
Law crystal clear — no mobile on reservation
While the compact amendment allows for mobile wagering inside casino facilities, the new law clearly does not allow for digital wagering anywhere on reservations. From Section 5-1303-D of the Arizona statute:
AN EVENT WAGERING OPERATOR MAY NOT ACCEPT ANY WAGER IF THE INDIVIDUAL WHO PLACES THE WAGER IS PHYSICALLY PRESENT ON INDIAN LANDS WHEN THE WAGER IS INITIATED
The ADG, in turn, interpreted this sentence to mean no mobile wagering on tribal lands anywhere, any time.
“Mobile wagering on Tribal reservations will not be permitted at all, even with the designated operator the Tribe partners with,” ADG spokesman Maxwell Hartgraves confirmed in an email. “Arizona Revised Statutes Section 5-1303(D) specifically states that.”
While the state does not regulate what happens on tribal lands, the conflicting mandates do raise the question of how digital wagering will be regulated. In Michigan, the state gaming control board oversees all digital wagering. But in Arizona, it appears that digital gaming could be regulated by tribal councils on reservation and the state off of them, or some combination.
“So, the tribes in Michigan and Arizona are offering mobile via commercial agreements with the state,” a source who studies tribal gaming wrote in an email. “They are essentially foregoing their rights under IGRA and choosing to have that aspect of their businesses regulated the same as any other operator in the state.
“Or perhaps more accurately, they are opting into state regulation of mobile wagering because it has been presumed that IGRA does not allow it. Thus, if a tribal operator wanted to compete in the mobile market they had to agree to do so outside of their compacts, and give up their rights not to be taxed as sovereigns.”
How will geofencing work?
Geofencing allows an operator or a tribe or a jurisdiction to put up a virtual barrier. For example, the state of New Jersey is geofenced to allow mobile sports wagering within the state. But if a bettor is outside of the perimeter, mobile platforms regulated by the state don’t work. Arizona has more than 20 federally recognized tribes, all of which are sovereign nations. The state proposes to geofence — put that virtual barrier — around each reservation, meaning that digital platforms that originate from outside of the geofence won’t work inside of it. The question is where a digital platform that originates inside of the fence will be allowed to operate on it.
What is Geofencing? A Guide to Virtual Barriers https://t.co/oXB5seWRR7
— GeoNewsfeed (@GeoNewsfeed) August 30, 2020
GeoComply, the company that provides geofencing for operators across the country, is currently setting boundaries for where event wagering can and cannot happen. The company analyzes a variety of geolocation data sources (GPS, Wi-Fi, Cellular, etc.) and also uses hardware (physical bluetooth beacons affixed to a building) depending on the particular market requirements. The company has dealt with many complicated U.S. jurisdictions, including Washington, D.C. (wagering is not permitted in certain exclusion zones or on federal lands, which are dotted throughout the city) and Montana, where on-site wagering is limited to locations where lottery wagering kiosks are located.
Chad Kornett, vice president of global government relations for GeoComply, said that in Arizona his company will be “nimble” and is preparing for “all potential outcomes.”
“In this case, we’re making it such that we can rapidly incorporate adjustments as clarity comes,” Kornett told Sports Handle. ”
“We believe there is an interpretation that could include the reservation [in addition to the casinos].”
The amended Arizona pact that the DOI approved allows for the state of Arizona and a Tribal Gaming Office to approve licenses and certifications. It calls for tribes to pay the state 8% in revenue sharing, or “privilege fees” as they are referred to in the draft regulations, on gross gaming revenue for in-person wagering and 10% for digital wagering. The percentages are the same for commercial operators.
— ATR (@taxreformer) July 14, 2021
It is clear that all digital platforms approved by the state will be available anywhere in Arizona, but the same may not be true in Indian Country. There are several scenarios for what could play out on reservations:
- One interpretation is that those on a reservation would have access only to that tribe’s mobile partner’s platform, and all other platforms would be unusable on tribal land.
- Another is that digital wagering will be permitted in tribal casinos, but not anywhere else on reservations.
- And a third, from the ADG’s perspective, would be that no digital wagering happens anywhere on tribal land, though it doesn’t have jurisdiction on reservations.
To get to the point of an open, competitive marketplace, there would have to be a fourth scenario, where all digital platforms available in the state would also be available on reservations, but that would likely require changes to the compact and/or the law.
Tribes in other states offer on-site digital wagering. Mississippi tribes have been offering that for several years. According to a source, tribes in Washington State believe that their new compacts — which are still under review by Newland’s office — will allow for on-site and on-reservation mobile when they go live later this year.
Law, compact created independently
In Arizona, the compact and statute were crafted at the same time, and in large part, independently of each other. Gov. Doug Ducey was the driving force behind the legislation and was also part of the tribal-state compact negotiations. But lawmakers complained during the legislative process that they were in the dark about details of the compact amendment, and tribes tried to follow along both processes when they could.
One lawmaker, Sally Ann Gonzales, a member of the Pascua Yaqui Nation, went so far as to call the legislation a “sham,” referred to those crafting it as “Ducey’s tribe,” and said it was unfair to the tribes.
Inquiries to multiple Arizona tribes for this story were not answered, so their end game is unclear.
It’s possible that tribes in Arizona, like many in other states, are hesitant to offer too many mobile options. In California, a tribal sports betting initiative that will go on the 2022 ballot restricts sports betting to in-person at tribal casinos and a handful of horse racetracks. Washington lawmakers approved in-person-only wagering at the state’s tribal casinos in 2019. In both cases, tribal leaders say they don’t want to lose foot traffic at their casinos, which employ many members of their tribes.
“This is where it helps if from the beginning, all parties are on the same page as they are crafting the legislation, compact, and the rules. Arizona has become the conundrum of the exact opposite,” Brendan Bussmann, a partner in gaming consulting firm Global Market Advisors, told Sports Handle. “Who it hurts the most is one, the tribes, and two, the consumer. … It just goes to show how the legislation from the beginning is uneven, and a poor model.
“It’s hard to fix Pandora’s box, once it’s open — just ask the District of Columbia,” he said.