A pair of Colorado tribes are suing the state over the right to offer digital sports betting off reservation. The Southern Utes and Ute Mountain Utes argue that the West Flagler decision in Florida makes it so they have the right to offer statewide mobile betting under federal law. But does it?
The Southern Utes filed their lawsuit in July, about a week after the US Supreme Court declined to hear West Flagler vs Haaland. That case, decided in the US Circuit Court of Appeals for the District of Columbia Circuit, made it legal for the Florida Seminoles to offer statewide mobile betting.
The Ute Mountain Utes joined the Colorado lawsuit in September. The case is filed in the US District Court for the District of Colorado. And on Wednesday (16 October) the governor, Jared Polis, filed a motion to have the lawsuit dismissed.
It’s clear from the text of the complaint that the relationship between the tribes and the state has become strained. For a tribe to to offer digital wagering throughout a state, it must compact with a state for that right. Or in cases like Arizona and Michigan, tribes must agree to be regulated by the state and pay taxes for off-reservation bets.
What’s in a compact matters
The model used by the Seminoles is known as hub-and-spoke. A server on tribal land is considered the “hub” and consumers gambling on their mobile devices are considered “spokes.” The Seminoles’ compact with the state of Florida explicitly allows bets to be considered placed where they are received.
“States and tribes are allowed to negotiate compacting solutions to off-reservation gaming,” former National Indian Gaming Commission chair Jonodev O Chaudhuri said during a panel last week at the Global Gaming Expo (G2E). “That doesn’t automatically legalise all off-reservation gaming or all hub-and-spoke models.”
Neither Ute tribe’s compacts with Colorado exclude such language. The Southern Ute compact specifies that the tribe can offer any kind of gambling approved by the state. In defining what kind of wagering the tribe could offer, the compact reads: “Class III games that are explicitly authorised by the state include slot machines, the card game of blackjack, off-track betting, keno and lottery, as well as any and all Class III games that, subsequent to the effective date of this compact are explicitly authorised by the laws of the state.”
“Potentially magic language” missing
Colorado voters legalised retail and digital sports betting in November 2019. Platforms went live in May 2020.
In essence, the tribe is within its rights to offer in-person sports betting at its casino. But whether or not it has the right to offer statewide mobile betting isn’t clear. The Indian Gaming Regulatory Act, written in 1988, and the 1995 Southern Ute-Colorado compact do not directly contemplate digital gaming.
“The Colorado compacts do not have that potentially magic language that deems” that a bet taken anywhere in the state is considered to be on Indian lands if it flows through a tribal server, a tribal lawyer who asked for anonymity told iGB. “Whether or not you need that language is not clear and this lawsuit may” clarify that.
BIA regs have a say, too
In February, the US Department of the Interior’s Bureau of Indian Affairs (BIA) released draft final rules that codify existing practices in Indian Country. The BIA specifically addresses digital wagering off tribal land. And it ultimately interprets IGRA to mean that tribes can take bets from anywhere in a state, if the bets run through tribal servers. But those are federal laws and regulations.
Indian gaming has been one of the largest drivers of economic development in Indian country in my lifetime. We’ve published new regulations to uphold the Indian Gaming Regulatory Act and provide clarity on how this industry is regulated.https://t.co/rb7oW5SGbj via @interior
— Bryan Newland (@AsstSecNewland) February 21, 2024
The draft final regulations “say that compacts like the one reached between the Seminole tribe and Florida are lawful under IGRA, but still need to be lawful in the state,” one lawyer who specialises in tribal gaming law and who spoke on background told Sports Handle in February. “But if state law doesn’t allow [gaming], then it is not legal.”
States do have the right to make a “public policy decision to give a tribe exclusivity in a state”, another lawyer familiar with the draft final regulations, who wished not to be named, told Sports Handle.
For the Southern Utes and Ute Mountain Utes, this is the rub. It seems clear that the federal government has given its blessing to any federally recognised tribe to offer digital gambling off reservation as long as bets flow through a tribal server. But the Colorado tribes may need state approval to agree to the same. To get it, they potentially have to re-open their compacts.
Specific language may not be needed
The tribal lawyer who asked for anonymity said he isn’t so sure that the “bets deemed to be placed where received” language is necessary for tribes to offer off-reservation mobile betting. When IGRA, the BIA regulatory update and West Flagler are taken together, things get murky.
“In Part 293, (the BIA) was careful to use the word ‘may’,” he told iGB. “But the DC Circuit seemed to only be concerned that the person making the wager on state lands is complying with state law. I think the right reading of the DC Circuit is that you don’t need that language. But you do need state law to make the wager lawful. But you don’t need to go so far as deeming the wager as placed at the site of the server.”
Should the district court rule in favour of the tribes in the Colorado lawsuit, the case could have more far-reaching applicability than many believe West Flagler has.
Colorado governor files motion to dismiss
Earlier this week, the Polis administration filed a motion to dismiss the Colorado lawsuit with prejudice. Lawyers wrote that Polis and other state officials have immunity from lawsuits brought by tribes, so the court “lacks subject matter jurisdiction”. The administration also argues that “the tribes have failed to state a claim under IGRA or the compacts”. The state writes that it has made an “ongoing effort” to engage the tribes in “meaningful dialogue”.
Further, the attorney-general argues that “Here, the tribes seek authority to accept sports betting wagers placed outside their reservations without state regulation and thus the compacts do not plausibly provide relief.”
In the original complaint, the Southern Utes write that “at no time while the legislation was pending or at any time until shortly before internet sports betting became legal” did the state contact the tribes to discuss their involvement. As such, both tribes believed that they had the right to open retail sportsbooks and offer statewide digital betting.
Southern Utes launched, then shuttered
The Southern Utes launched their digital Sky Ute Sportsbook in June 2020 in partnership with a tribal-owned technology partner, US Bookmaking. That company has since been acquired by Elys Technology.
Thus began a lengthy and contentious back-and-forth between the state and the Southern Utes over the veracity of the platform. The state, through the Colorado Department of Gaming, sent correspondence to both the Southern Utes and their technology partner that resulted in the tribe shuttering its platform in July 2023.
Sky Ute SportsBook launched in Colorado on Tuesday, the first statewide tribal sports betting app in the nation. @brettsmiley on the novelty of the addition, plus a look at the growing Colorado market: https://t.co/BRwxQNX9Bj pic.twitter.com/FncDD8R1AG
— US Bets (@US_Bets) June 9, 2020
At issue for the state is tax dollars. Colorado’s commercial sportsbooks are taxed at 10% of gross gaming revenue. In general, tribes do not have to pay state taxes. But tribes in Arizona, Connecticut and Michigan agreed to be regulated and taxed by their states for off-reservation digital gambling. The Seminoles do not pay a tax, per se, but did agree to make payments to the state totalling $2.5bn over five years. The fees are in exchange for the right to have a monopoly and offer statewide mobile sports betting.
The Southern Utes and Ute Mountain Utes don’t want to pay taxes to the state for digital gaming. Like any other federally recoginised tribe, they do not pay taxes for on-reservation gaming.
The Southern Utes referred to the ask as “baseless requirements” by the state. According to a 2015 news story, the Ute tribes and Alaskan Natives of Colorado had contributed $1.5bn to the state economy. According to the Southern Utes homepage, the tribe generates “millions of dollars each year for La Plata and Archuleta Counties”. Both Ute tribes make contributions to local communities and the state. They also employ non-tribal members.
Indian Country will be watching
Should the Colorado lawsuit survive Polis’ motion to dismiss, it will be closely watched throughout Indian Country. Key tribal gaming states, including California, Minnesota and Oklahoma, have yet to legalise. And every new court decision or rules interpretation creates more nuance to consider during the process.
In compact negotiations, a key phrase is that both parties must be “willing” in order to reach an agreement. Tribes can seek legal remedies if state governments are “unwilling”.
In Oklahoma, legal wagering is likely on hold until Governor Kevin Stitt is out of office. Tribes there say he does not respect their sovereignty. He is currently the author of a gambling proposal that would give the tribes the right to offer on-reservation, in-person sports betting, but would preclude them from participating in digital betting. Across the US, about 90% of wagering revenue is derived online.
Stitt is a clear example of an “unwilling” governor. Polis has not been as publicly disrespectful. His administration is an example of more of a grey area when it comes to the willingness to negotiate.
Case could “create a precedent”
Conversely, in Florida, the state and Governor Ron DeSantis were more than “willing” when they agreed to the Seminole compact. In fact, DeSantis called a special legislative session in May 2021 expressly to have the legislature approve the compact.
Florida legislature approves Seminole Tribe gaming compacthttps://t.co/H9f1y2D4wH pic.twitter.com/oiaHnWz3T5
— Gaming Intelligence (@GamingIntell) May 20, 2021
“West Flager provides a great example of willing,” the lawyer who requested anonymity told iGB. “But what do you do when (the state) negotiates in bad faith? I think IGRA obligates the state to compact for some kind of gaming.
“But whether you can compel through IGRA or (BIA) Part 293 to allocate its jurisdiction to include the ‘deeming’ language, I think that’s a much tougher call. If you have to have that language in the compact, then the state has more leverage. If you don’t, then it will create a precedent that all tribes that are confronted with unwilling states can use.”
