In what seemed very much like a predetermined outcome, the Florida House of Representatives on Wednesday ratified the new gaming compact between the state and the Seminole Indian Tribe, 97-17. The approval came after an hour of debate and attempts at multiple amendments, making Florida the biggest state by population to legalize sports wagering since the fall of the Professional and Amateur Sports Protection Act on May 14, 2018.
The compact all but creates a monopoly for the Seminole Indian Tribe, which is already the driver of gaming in Florida. Any and all sports bets — even if made on mobile devices or via parimutuel partners — must “go through servers” placed on tribal lands, and the tribe gets a cut.
All involved, including those who voted in favor of the compact, believe it is subject to legal challenges, and that there is a possibility that the U.S. Department of the Interior will not approve it. The legislature did not write — and therefore cannot amend — the compact, which was agreed upon between Gov. Ron DeSantis and the tribe in April.
“It doesn’t take a master’s degree to know that there will be litigation,” said Rep. Sam Garrison during discussion.
Said Speaker of the House Chris Sprowls: “I don’t think there’s any chance of doing a gaming deal to the size and scope that was negotiated by Gov. DeSantis without a legal challenge. You are navigating the icebergs of legal hurdles as you do this.”
This isn’t a pretty deal
When the state of New York legalized mobile sports betting via the state budget on April 21, it was the biggest state to that point to do so. While stakeholders had been enthusiastic about potential legalization in two of the biggest markets in the U.S., the new laws in both states severely limit the amount of competition and, in turn, the options available to bettors.
Florida ranked third in the U.S. in population, according to the 2020 Census, with 21.5 million residents. The figure is about 1.3 million higher than New York.
“If anyone wanted to take the New York bill and make it worse, Florida did that,” consultant Brendan Bussmann, a partner with Global Market Advisors, told Sports Handle in early May. “Florida did the New York deal and put it in the blender and said how can we scramble this even more?”
Florida, with federal approval, will become the 28th state – plus DC – to legalize sports betting. There’s the potential for a massive payoff. Here’s the revenues for the Top 10 states that have made sports betting legal since the repeal of the P.A.S.P. Act in 2018. pic.twitter.com/D1jl9ClbZ1
— Ryan Bass (@Ry_Bass) May 19, 2021
“I think the Seminole Tribe controls gaming, and operators like us need to come to terms with them,” echoed Yaniv Sherman, SVP Head of US at 888 Holdings. “They’ve sort of been given the pole position, if not a monopoly in Florida.”
State gets paid even if compact violated
Lawmakers say the key issue that could draw legal challenge is statewide mobile sports betting. The Seminoles currently operate seven land-based casinos, and the original version of the compact would have allowed for iGaming, but DeSantis and Seminole Chairman Marcellus Osceola Jr. amended the compact on Monday to remove that provision, which was a sticking point for many lawmakers.
“Today, all the people of Florida are winners, thanks to legislative approval of the Gaming Compact between the State of Florida and the Seminole Tribe of Florida,” Osceola said in a statement. “It is a historic and mutually-beneficial partnership between the State and Seminole Tribe that will positively impact all Floridians for decades to come.”
The only remaining digital piece in the compact is sports betting, and one side of the argument is that if bets go through servers on Seminole lands, they are technically made on tribal lands. But opponents say mobile/online betting constitutes an expansion of gaming and is a flagrant violation of Amendment 3, which requires voter approval for any gaming expansion. Amendment 3 was overwhelmingly passed by voter referendum in November 2018.
“We’re saying if you are standing on this floor, you will be able to make bets even if the box or whatever they call it is on the tribal lands,” argued Rep. Michael Grieco. “You can’t do that now. We know this will be litigated.”
“The question is, then, how rich is this deal? We are selling ourselves short for this deal, a deal that has a high realistic possibility of falling apart.”
The compact itself makes provisions for just the kind of legal action lawmakers are expecting. There is a severability clause, which essentially says that should digital wagering be deemed unlawful and the Seminoles can’t offer it, then they will pay the state 10% less annually. The compact calls for $2.5 billion in payments to the state of Florida over the first five years of the compact.
If at any time the Tribe is not legally permitted to offer Sports Betting as described in this Compact, including to Patrons physically located in the State but not on Indian Lands, or the Tribe loses the exclusive right to offer Sports Betting as provided in Part XII, Section A.3(a) or B.1, then the Tribe’s obligation to pay the full Guaranteed Minimum Compact Term Payment and the other minimum payments set for in this Section shall be reduced by ten (10) percent.
Did lawmakers come to ‘spin their wheels?’
Given the likelihood that the compact as written would trigger legal action, some lawmakers said they hardly saw the point in approving it.
“What happens if the whole thing is invalidated?” Grieco asked. “We have come here to spin wheels for no reason whatsoever. I think it’s important to think about what you’re doing.”
Rep. Omari Hardy suggested that both the state and the tribe seemed to be in a rush to move forward with the compact, and that maybe the legislature should put the brakes on.
“I will not say that if we ratify this compact the sky will fall, but there are some obvious issues with how we came to this compact and how it came to this body to be considered,” Hardy said. “I don’t know why we have to rush. Given the detail and that very few of us are experts … I think it takes a little more time than a few days in a special session. I think we could spend a little more time on this. I think we could get a little bit better deal on this, and this deal feels like we came to this deal rushed. …The compact that we are going to ratify is not the compact that will take effect.”
Even Rep. Michael Grant, who is the Republican majority leader of the House and who supported ratifying the compact, was clear in saying that “it is an expansion of gaming” and that “people are going to sue.” But he also said that even without sports betting, the pact could move forward and the state of Florida would again receive payments from the Seminoles. Under the scenario, the Seminoles would pay about $50 million less to the state a year if the tribe does not receive exclusivity on sports betting.
The tribe stopped making payments to the state in 2018 after it claimed the compact was violated. The Seminoles have been withholding $350 million a year for the last three years, citing a violation of its exclusivity by parimutuel facilities in connection with certain card games. Under the new compact, the state stands to get $500 million a year from the tribe. Those payments, Grant said, would begin immediately.
“$1.5 million per day, that’s the rush,” said Grant, who also pointed out that sports betting “isn’t that big” in business terms. The new pact also grants the Seminoles the right at their retail locations to offer additional table games, such as craps and roulette, and Grant said that’s where the real money is at.
Lawmakers can’t alter compact
Lawmakers also discussed and debated the issue of portability — the compact allows for the transfer of licenses between facilities with some restrictions — as well as how many commercial operators would be able to be live in the state and the length of the compact.
Multiple amendments that sought to change the length of the compact — it’s 30 years — were found to be outside the scope of what the legislature could do. The compact was written by DeSantis and Osceola and cannot be amended by the legislature. The portability issue was debated, but also cannot be changed.
BREAKING: The Seminole Tribe’s Hard Rock Casino in Tampa will have full Las Vegas-style casinos with the addition of roulette and craps, and mobile sports betting will be allowed in Florida in a new compact approved by lawmakers. https://t.co/SMHvFptTBE
— Tampa Bay Times (@TB_Times) May 19, 2021
With regard to how many operators could be active in the state, the answer is complex. The compact allows the Seminoles to contract with a minimum of three parimutuel facilities to offer sports betting. Those parimutuels could contract with any commercial operator — DraftKings, FanDuel, PointsBet, WynnBet, you name it — but only to run the back end of a platform, which must be branded by the parimutuel. In addition, the operators would have to figure out the technology behind placing their proprietary systems onto the Seminole servers.
The compact also leaves an out for the Seminoles NOT to contract with parimutuels.
If for any reason, the Tribe does not have valid written contract with at least three (3) or more Qualified Pari-Mutuel Permitholders upon or following the commencement of the Tribe’s Sports Betting operation, the Payments due to the State pursuant to Part XI, Section C.1(j) or this Compact based on the Net Win received by the Tribe from the operation and play of Sports Betting shall (be) two percent until the Tribe has valid written contracts with at least three (d) Qualified Parimutuel Permitholders to perform marketing or similar services for the Tribe’s Sports Betting.
In essence, the Seminoles could choose not to contract with the parimutuels, thereby shutting out competitors, and pay a penalty.
But In the event that digital wagering does get severed from the compact, the seven Seminole casinos would still be permitted to offer brick-and-mortar sportsbooks on tribal lands.
The compact also contemplates what happens if the state agrees to allow commercial operators to offer sports betting independent of the tribe. Lawmakers Wednesday not only pointed out that operators could bring that decision to voters and the Seminoles are aware of that scenario. Should that happen, payments to the state from the tribe would be reduced.
“We haven’t even granted them a monopoly, that is one of the misnomers of all this,” said Rep. Randy Fine, chair of the Select Committee on Gaming. “We could end up with not a monopoly if that’s what the voters decide.”
All four gaming bills passed
In spite of the passionate discussion, the vote was decisive, as it was on two of the three other bills the House considered Wednesday. SB 4A, which creates a gaming commission, passed 108-7, and SB 6A, which deals with public records, passed 114-2. The closest vote was 73-43 on SB 8A, which deals with changing the rules to how parimutuel facilities are regulated.
🏖️ 🏈 🎉
— Hard Rock Sportsbook (@HardRockSB) May 19, 2021
Wednesday’s vote starts another process during which the Department of the Interior has 45 days from receipt to approve, deny, or take no action on the compact. If it approves or takes no action, the compact is considered approved. At that point, it must be published in the Federal Register, and it is not considered valid until that happens. According to the compact, sports betting cannot go live in Florida until Oct. 15, 2021, at the earliest.
In addition, should legal challenges occur, it’s possible that those could include an injunction that would further delay launch.