Nearly from the start, Florida’s sports betting legalization and launch have been mired in challenges — opponents brought three lawsuits and one ballot initiative proposal within four months of the state legislature approving sports betting by the Seminole Tribe. No state that has legalized sports betting since the May 2018 fall of the Professional Amateur Sports Protection Act has come under such fire.
To date, one of those lawsuits, brought by West Flagler Associates (Magic City Casino) and Bonita-Fort Meyers Corp. (Bonita Springs Poker Room) and filed in a U.S. District Court in Northern Florida, has been dismissed. And most stakeholders say a suit brought by a pair of Florida businessmen in the U.S. District Court in the District of Columbia — considered the second most powerful in the nation for its physical location and proximity to the Supreme Court — doesn’t have legs.
But a second lawsuit filed in in the District of Columbia by Magic City and the Bonita Springs Poker Room, as well as a potential ballot referendum funded by sports betting giants DraftKings and FanDuel, are still in play.
In Florida, per sources, #DraftKings and #FanDuel behind a forthcoming ballot initiative to allow for commercial statewide online wagering.https://t.co/0eHduQWx18
— Sports Handle (@sports_handle) June 23, 2021
Two attorneys — one specializing in gaming law and another in sports betting law — say the lawsuit, set for a 10 a.m. Friday hearing in federal Judge Dabney Freidrich’s D.C. courtroom, might be the best of the bunch, but that it still lacks punch.
“It’s a better lawsuit,” said Bob Jarvis, a professor specializing in gaming law at Nova Southeastern University’s Shepard Broad College of Law. “But it’s still dead on arrival.”
A little background
The Seminoles, who own the Hard Rock brand, went live with digital wagering in Florida on Monday. The launch doesn’t change the core arguments in the lawsuit that will be heard on Friday, but it happened without warning and two weeks earlier than many projected.
The plaintiffs, Magic City Casino and the Bonita Springs Poker Room, asked for an injunction before Nov. 15, “which is the date that Plaintiffs contend that the relevant provisions of the tribal state compact at issue in this case are scheduled to be implemented.” The Seminoles say, however, they never targeted a specific start date.
By way of background, Florida’s Seminole Tribe has offered gaming since 1979, when it opened its first high-stakes bingo hall, and has offered casino gaming since Congress’ 1988 passage of the Indian Gaming Regulatory Act. The tribe has long had exclusivity for most forms of legal gambling in Florida, and in April 2021 retained that when negotiating its new compact with the state of Florida.
The new pact allows the tribe to add sports betting and several types of table games to its offerings. While there seems to be no question that it’s legal under IGRA for the tribe to offer retail sports betting at its seven brick-and-mortar locations on tribal land, challenges have come because the pact also allows for statewide mobile wagering throughout Florida.
There are several other states where tribes can offer digital betting off-reservation, but each situation is different. The first state in which tribes offered digital wagering off-reservation was Michigan on Jan. 22, 2021, but tribes there did not compact with the state and agreed to have sports wagering activity regulated and taxed by the state. In both Arizona and Connecticut, tribes did compact, and they can offer statewide mobile betting through their operators.
But none of those states has a constitutional amendment like Florida’s Amendment 3 requiring that any proposed expansion of gaming — though sports betting isn’t specifically mentioned — go to the voters. The tribes in those other states also gave up significantly more exclusivity than the Seminoles did. In Connecticut, the lottery is allowed to offer a digital platform and can operate up to 15 retail locations, while in Arizona, the tribes agreed to 10 licenses each for tribes and professional sports franchises.
Connecticut’s tribes agreed to be regulated by the state and pay an 18% tax on digital gross gaming revenue and 13.75% on retail gross gaming revenue. Arizona’s tribes pay the state to cover regulatory fees for off-reservation mobile wagering, and their operators pay a 13% tax on gross gaming revenue to the state.
In Florida, the Seminoles do have a revenue share with the state, but not an outright tax, and the sports wagering will not be regulated by the state.
But the biggest difference may be that any and all sports betting in Florida will exist exclusively through the Seminoles. Parimutuels that partner with the tribe for sports betting must run their bets through the Seminole server and pay the tribe 40% of gross gaming revenue.
In May, Florida became the largest U.S. state by population to legalize digital sports wagering when the House of Representatives in a special session ratified the compact by an overwhelming 97-17 margin. The compact calls for the Seminoles to disburse $2.5 billion in payments to the state over the first five years of the accord. At the time of passage, several legislative leaders openly conceded that the process would be fraught with a litany of legal challenges.
One of the arguments against the legality of the new compact is that it violates Amendment 3, which requires that any gaming expansion be decided by voters. The amendment was passed in November 2018 — just six months after PASPA fell. Given the timeline for amendments in Florida, the language for Amendment 3 was already set before PASPA went down.
“Who drafted Amendment 3?” asked Jarvis, the NSU professor. “The Seminoles. They wouldn’t do anything to hurt themselves. They are very smart, and Jim Allen (the Seminoles’ gaming executive) is a tremendous leader.”
Florida Gambling Amendment 3 Does Not Cover Sports Betting..
Will sports wagering be allowed at Florida racetracks?#hightakeout #horseracing https://t.co/6exJMm9rqe pic.twitter.com/WNe9QVCxza
— jack white (@HorseRacingCOO) November 20, 2018
Jarvis points out that the phrase “sports betting” does not appear anywhere in Amendment 3, and that the amendment only gives voters the “exclusive right to authorize casino gambling in the state of Florida.” Those games are then defined as “any of the types of games typically found in casinos,” which at the time, did not include sports betting.
“Amendment 3 went to the Florida Supreme Court [for ballot approval] in 2016, so to think that any voter in November 2018 thought, ‘Hmm, since PASPA is now dead, that means that Amendment 3 now includes sports betting’ is sheer folly.”
Where Amendment 3 does address tribal gaming, it only addresses the ability of the state and the tribe to compact and to acknowledge existing gaming on tribal lands:
In addition, nothing herein shall be construed to limit the ability of the state or Native American tribes to negotiate gaming compacts pursuant to the Federal Indian Gaming Regulatory Act for the conduct of casino gambling on tribal lands, or to affect any existing gambling on tribal lands pursuant to compacts executed by the state and Native American tribes pursuant to IGRA.
“This is all getting done on past technicalities,” said gaming consultant and partner at Global Market Advisors, Brendan Bussmann. “Clearly three years ago, the Seminoles believed the best way to get gaming expanded was through the people, and now that no longer matters, and that’s not right. My angst over it is that, barring off that timeline, the Seminoles should have gone to get the compact updated (in 2018) with sports betting included. There was a window in good faith to go negotiate the compact and add that in.”
Standing and who to sue
In all of the court cases relating to the Florida compact and law, the question of standing — i.e. does the plaintiff have sufficient connection to the case and an injury that’s redressable — is of paramount importance. In the U.S. District Court for Northern Florida, the Magic City and Bonita Springs Poker Room case was thrown out due to lack of standing. The judge in that case wrote that the pair “lack standing to sue the Governor or the Secretary because their actions are not fairly traceable to any alleged harm.”
In his decision, Judge Allen Winsor also seemed to imply that the parimutuels had sued the wrong people. The lawsuit was brought against Florida Gov. Ron DeSantis and Florida Department of Business and Professional Regulation Secretary Julie Brown. Winsor wrote that neither of them would have the power to stop the Seminoles from going live with gaming.
Essentially, Winsor wrote that DeSantis and Brown were only doing their jobs.
“For a judge to intervene in decisions by a sovereign state, a sovereign nation, even, would be a big deal,” said a sports betting attorney, who wished to remain anonymous. “For a federal judge to step in and disrupt the process between the governor and the tribe, that would be noteworthy.”
Freidrich, the D.C. District Court judge, could also make a similar finding about the plaintiffs’ standing. The case before her is against DeSantis and U.S. Department of the Interior Secretary Deb Haaland, the first Native American to hold the post.
“The Seminoles are an active participant in this conversation, and need to be enjoined in the case,” Bussmann said. “They are going after DOI and the state because they are the ones who entered into negotiations, so technically they are a party to the situation, but why aren’t the Seminoles enjoined?”
The sports law professor interviewed by Sports Handle agrees, and said that while no one seems to have “any qualms” about suing sitting governors over sports betting, “the optics of them suing a federally recognized tribe must be stopping them from filing a lawsuit against the tribe. Perhaps it happens down the road, perhaps it doesn’t.
“The underlying argument of standing is very similar, and it could be decided in exactly the same way” as the U.S. District Court case in Florida, he said.
#Seminoles' Hard Rock Sportsbook brand goes live two weeks before it indicated it would in court filings, but after legally allowed.
On the big development in Florida today:https://t.co/p38ItTthln
— Sports Handle (@sports_handle) November 1, 2021
Jarvis makes the point that both DeSantis and the DOI are tasked with working with the tribes. As governor, DeSantis must negotiate with them, and the DOI must consider compacts. Fundamentally, IGRA suggests that a state’s tribe, the governor, and the DOI are those most knowledgeable and best suited to negotiate what’s best for a tribe in a state, so suing them is for naught.
“It’s important to keep going back to 1988 and what Congress did with IGRA,” Jarvis said. “States and tribes should play nice together and find a good pathway to move forward together, so to think that a judge is going to second guess all of that is crazy.”
The setup the Seminoles negotiated is called a “hub-and-spoke” model. Under this, the Seminoles are the hub and the parimutuels are the spokes. This model isn’t new, but it is controversial, or as the sports betting attorney called it, “thorny.”
IGRA says “you’re only supposed to take bets if you’re an Indian tribe, and then you can only take bets that are on Indian lands,” Jarvis said. “When a court faces a situation involving a decision legislators made when they couldn’t have foreseen the future … it is supposed to ask itself how the legislators would have voted had they been able to see the future. In the case of IGRA, the answer is, IGRA was designed to pull the tribes out of poverty. Congress, if it had foreseen the advent of the internet, would have explicitly authorized the hub-and-spoke model.”
How will things play out?
So how could things play out Friday? Both professors believe that no single federal judge will decide in favor of the plaintiffs. But that doesn’t mean all is lost for Magic City and Bonita Springs Poker Room. Should the case get dismissed, the parimutuels could then appeal to an appellate court, which has a three-judge panel. And if an appellate court dismisses, then the parimutuels could appeal to the U.S. Supreme Court, though it accepts just a small fraction of appeals filed.
If Freidrich does not find in favor of the plaintiffs Friday, then any hope for an injunction or stop, now that the Seminoles have gone live, will be lost in the short term. Appellate courts have a much longer runway — six to 12 months for most cases — and the case must get through that court before having a chance at the Supreme Court, if that is the direction the parimutuels decide to go.
“It’s hard to close Pandora’s box once it’s open,” Bussmann said. “Now that it’s live, it’s hard to take away something when it’s already legal.”
Until Monday, the parimutuels could not show “irreparable harm” in a business sense because the tribe had not launched sports betting. Magic City and the Bonita Springs Poker Room claimed in both lawsuits that allowing the tribes to offer wagering as laid out in the compact would cause financial duress and potentially force them to close their doors. But without live wagering, they could not prove that.
“We’re living in the Seminoles’ world,” Jarvis said. “That’s the deal that was struck. And everyone else will get the crumbs. The Seminoles have been working toward this kind of deal since the 1990s.”
Should the mobile sports betting provision be struck down in court, the compact contains a severability clause that relieves the tribe of paying the “full guaranteed minimum compact term payment,” or an annual sum of $50 million. Under that scenario, the remainder of the compact would remain in effect minus the section on mobile sports wagering. Florida House Speaker Chris Sprowls contemplated the possibility in May when he told reporters that Floridians would receive the “benefit of the bargain,” of continued revenue-sharing payments from the tribe, but would lose $50 million a year from mobile sports betting.
The initiative proposal
While the courts sort out how to move forward, another challenge to Seminole gaming continues to brew. A band of operators, led by DraftKings and FanDuel, announced in June it was moving forward with a ballot referendum that would open up digital wagering to commercial operators and would not require bets to be run through the Seminole server. The proposal would allow the Seminoles to continue to operate, but would create a more open, competitive marketplace by opening the door for certain stand-alone digital platforms.
In Florida, a proposed ballot initiative needs 891,589 verified signatures to get on the ballot, and those signatures must be turned in by the beginning of January. According to Florida Education Champions, the political committee running the campaign, it had collected more than 350,000 signatures as of Monday. Not all have been verified — the Department of Elections website shows 66,769 verified — but the 350,000 signatures are nearly 120,000 more than the committee had collected by late September.
The group continues to go door-to-door, use direct mail, run digital ads, and solicit signatures at sporting events across the state. DraftKings and FanDuel staked the campaign with $20 million.