Last week, a gaming compact that lays the groundwork for legal sports betting in Florida was signed between Seminole Tribe Chairman Marcellus Osceola and Gov. Ron DeSantis. But a word of caution to anyone who thinks they’ll be able to lay down a wager any way other than maybe in person at a Seminole-operated casino this year: Slow your roll.
The compact between the tribe and the state is only the first step to legalizing sports betting, and it is fraught with issues that could lead to the U.S. Department of the Interior denying it or to any number of potential stakeholders taking legal action. A tribal-state compact means those two parties have agreed to what sports betting operations will look like in a state, but it does not expressly legalize it, nor does it necessarily take into consideration what other stakeholders might want or need.
In order for a state regulator to launch sports betting, a compact must be approved by the tribe(s), governor, and the Department of the Interior, and lawmakers must pass enabling legislation. For the next few months, the fate of the compact is in the hands of the Department of the Interior, which must determine if it meets the requirements of the Indian Gaming Regulatory Act. And the state legislature could make sports betting legal in Florida during a special legislative session set for the week of May 17.
The most obvious issue with the Florida compact is that it would allow for wagering off tribal lands, which industry experts say will give the Department of the Interior reason to deny it. According to IGRA, “Indian tribes have the exclusive right to regulate gaming activity on Indian lands if the gaming activity is not specifically prohibited by Federal law and is conducted within a State which does not, as a matter of criminal law and public policy, prohibit such gaming activity.”
Since the Professional and Amateur Sports Protection Act was overturned in 2018, sports betting is no longer “prohibited by the Federal government,” and should Florida lawmakers legalize sports betting during the special session (or any other time in the future), it would no longer be prohibited in the state.
The key phrase in IGRA that could keep sports betting from becoming legal in Florida is the “right to regulate gaming activity on Indian lands.” In other words, IGRA does not permit wagering outside of tribal lands, by itself, in partnership with commercial locations, or on digital platforms. So even though DeSantis and his tribal counterpart have agreed that the Seminoles can have mobile sports wagering and offer retail sports wagering through parimutuel partners, many in the industry say the Deptartment of the Interior likely won’t agree.
Is a bet where the server or bettor is?
As part of the Florida compact, the Seminole Tribe would be the “hub” for mobile sports betting in the state, and a minimum of three parimutuel facilities — racetracks, jai lai frontons, card rooms, and the like — would be “spokes,” where retail wagering could take place. Under the pact, the Seminoles would contract with the parimutuels, take 40% of gross gaming revenue (GGR), and keep the server on which the bets are recorded on tribal land.
I’m excited to announce the signing of a new compact between the State of Florida and the Seminole Tribe of Florida, which will generate the state $2.5 billion in new revenue over the next five years and $6 billion through 2030. https://t.co/6za6I0TmFz pic.twitter.com/uLV1YmsRkl
— Ron DeSantis (@GovRonDeSantis) April 23, 2021
But according to one tribal gaming expert, IGRA doesn’t recognize where a server is located, rather it identifies where the bettor is as the location where a bet is placed. Translation? If you’re standing in a jai lai fronton in South Florida placing a bet, you would not be considered to be on tribal land.
“For IGRA, the location of the server being on tribal land does not mean that the bet was placed there,” said John Holden, an assistant professor at Oklahoma State’s Spears School of Business. “I think this is kind of why we’ve seen these commercial deals in Michigan and elsewhere.”
If under IGRA the server being on tribal lands doesn’t mean the bets were placed on tribal lands, then Florida has a problem.
A prominent Florida attorney with expertise in tribal gaming issues said there’s little unhappy parties can do when it comes to the Seminoles placing brick-and-mortar sportsbooks at any one of their seven casinos. But once they attempt to get off tribal lands, it’s a different story.
“One of the things you’ll see everyone talk about is the compact has language about online to be considered where the server is,” the attorney told Sports Handle. “That’s certainly a point of contention, and there’s a fairly recent California case that is on point. Under IGRA, the governor can compact with a tribe for activities to occur on tribal land, and get effectively a fee for that. … But once you go online, the compact says otherwise. There is a memo out there that says if they are going online, it needs to become lawful in the state.”
In a 2001 opinion, the National Indian Gaming Commission (NIGC) ruled that tribes in Arizona and California could not lawfully operate a sports betting slot game offered by a Las Vegas-based gaming company pursuant to IGRA. The NIGC determined that the game did not meet the parameters of a Class II gaming definition, while ruling that the “use of the Internet” is not authorized by IGRA.
Will tribe actually contract with partners?
Though many in the industry believe the Department of the Interior won’t approve the Florida compact, let’s assume for a minute that it does, and address some of the other potential problems in the compact.
The current deal clearly allows for the Seminoles to skip contracting with any parimutuels and instead pay an additional 2% in revenue share to the state. The revenue share is set at 13.75% on gross gaming revenue for tribal sports betting and 10% of GGR on the tribe’s take from parimutuel sports wagering. So if that extra 2% bumps the tribe’s payment to the state to 15.75% of GGR, that number is still well below Tennessee‘s rate of 20% and much further below Pennsylvania‘s at 36%.
In effect, is seems the tribe could decide to hold a true monopoly (though it might just be retail depending on how things play out with the compact), and at least one gaming expert thinks that’s not only a good possibility, but takes it a step further.
“If I’m the tribe, why expand?” said a source. “I don’t think they are going to have mobile.”
As written, the compact requires the Seminoles, within three months of the effective date, to “negotiate in good faith” with any interested parimutuel permit holders. However, if the Seminoles don’t have a deal with at least three parimutuel operators by the time they launch sports betting at their own casinos, then they will be required to pay the state an additional 2% in revenue share. As one source said, that 2% amounts to “pennies” and seems a small price to pay for cutting other participants out of the market entirely.
Other questions loom
Certainly, other jurisdictions have proven the popularity and revenue benefits of mobile wagering. It’s been shown everywhere from New Jersey to Colorado that most of the action and profit in sports betting comes via mobile platforms. But tribes across the country have been cautious about offering mobile wagering for fear of it reducing traffic to their brick-and-mortar casinos and costing jobs.
There are exceptions — tribes in Michigan are the only ones so far to agree to be taxed and regulated by a state in exchange for offering mobile sports betting and iGaming, and tribes in both Connecticut and Arizona found incentive to sacrifice gaming exclusivity in exchange for digital sports betting, the right to offer additional table games, and in Connecticut, the opportunity to offer iGaming.
What sports betting will look like in Florida — and when it could go live — are open questions. Beyond the key issues in the compact, there are smaller questions lurking:
- There is the matter of Amendment 3, approved in 2018 by an overwhelming 71% margin, which requires voter approval for local casino-gaming expansion. Amendment 3, some experts say, applies only to casino games, and sports betting may not technically qualify as a casino game. It’s debatable and will be debated. Disney financially backs the “No Casinos” group in Florida and the group has already promised a legal challenge.
- “Sports betting means wagering on any past or future professional or athletic event.” In a poll of stakeholders, none could determine why the word “past” was included in the compact. It’s possible that it is a nod toward the 350 historical horse racing machines that would be allowed at parimutuel facilities, but could potentially open the door for other kinds of gaming using contests that have already been decided.
- The Seminoles must set aside $250,000 per facility to benefit the Florida Council on Compulsive Gambling. If the Seminoles open sportsbooks in each of their seven casinos, that would work out to $1.75 million per year for problem gambling programs. Does the $250,000 payment extend to parimutuels? Or will there be a different number … or no money for problem gambling at all from parimutuels?
- What is the maximum number of parimutuels that the Seminole Tribe can partner with? The minimum appears to be three, but there are approximately 20 parimutuels throughout the state.
- Would parimutuel partners be allowed to then contract with other digital operators like DraftKings or FanDuel or BetMGM to offer digital wagering?
On balance, the Florida compact is only a first step, and one that is currently incomplete. The most cynical have called the pact a red herring, while those who are optimistic see it as good opener to the complex issue of legalizing sports betting in Florida.
The pact potentially sets up a situation where the Seminoles and their Hard Rock partner could have a monopoly on sports betting, which in turn means limited choices for consumers and lower tax revenue for a state. In addition, should other operators be allowed into the state, it’s not clear how they would partner — from a technological standpoint — with Hard Rock, since the compact requires all bets to go through servers located on Seminole lands.