Seminole tribe to defend new FL gambling compact at federal level: We ‘have our work cut out for us’

The Hall of Tribal Nations. Credit: U.S. Bureau of Indian Affairs, Facebook

Gov. Ron DeSantis and the Seminole Tribe of Florida are celebrating their success last week in advancing a 30-year agreement on gambling worth at least $2.5 billion to Florida over the next five years and much more over the next three decades.

But did they succeed in crafting an agreement that will survive legal challenges at the state and federal levels?

Don’t bet on it.

The uncertainty explains why the agreement, called a compact, includes a severability clause that keeps the main part of the deal intact even if state or federal authorities strike down provisions that in effect authorize sports betting statewide.

Attorneys for the state and for the tribe fully expect lawsuits: one questioning whether the compact violates Florida’s constitutional Amendment 3, banning expansion of gambling without voter approval; and at least one questioning whether federal Indian gambling laws permit statewide online sports betting.

Jim Allen, CEO of Seminole Gaming and chairman of Hardrock International, testifies to the Senate Appropriations Committee. Credit: The Florida Channel

Jim Allen, CEO of Seminole Gaming and chairman of Hardrock International, and Joe Webster, an attorney representing the tribe, testified before legislative committees that the tribe contributed $22 million to the campaign to pass Amendment 3 in 2018 expecting it would not later pose a barrier to expansion of sports betting.

“I assure you, those conversations were had with Mr. [John] Sowinski before we ever wrote a check for $22 million,” Allen said. “We may be naïve but we’re not crazy.”

John Sowinski, president of No Casinos and the driving force behind passage of Amendment 3, did not recall the conversations that way.

While sports betting in fact is not listed among the kinds of gambling “typically found in casinos” that the amendment specifically bans, Sowinski said, Florida voters clearly intended to “lock the door and hold the key” against all expanded gambling off tribal lands.

“It does not comport with our understanding of IGRA or [the understanding of] any attorney we’ve spoken with, and we’ve spoken with a lot of them across the country,” Sowinski told lawmakers.

Debate about how the gambling compact does or does not violate Amendment 3 will surely wind up in state court.

But IGRA — the Indian Gaming Regulatory Act, to which Sowinski referred, enforced by the U.S. Department of Interior — poses a much higher bar. The compact is meaningless until Interior approves it, and the job of winning approval falls largely to the tribe.

“Mr. Webster and I have our work cut out for us,” Allen told state lawmakers.

The needle to be threaded involves desires in many states to extend sports betting, with many tribes in support. Still, the federal law reserves certain gambling exclusively for the tribes and to their benefit.

Allen and Webster told lawmakers the Seminole tribe is “receptive to navigating the process” by serving as a “hub” for online sports betting throughout the state but that nothing is certain about how the Department of Interior will view the compact.

“If you look at the actual scope, it is extremely unique because, frankly, there’s not in many areas a lot of exclusivity” for the tribe under the deal, Allen said.

That’s because pari-mutuel facilities would be allowed to host sports betting in cooperation with the tribe. That non-exclusive partnership would give pari-mutuels 60 percent of the take, a provision that presents another federal hurdle to overcome, Allen said.

Seminole Hardrock Hotel & Casino, Hollywood, FL. Credit: Getty Images/Joe Raedle

“Actually, IGRA reads today that 60 percent of gross gaming dollars is supposed to go the tribe, so we are on the absolute flip side of that. But because of … the overall relationship of the ‘hub’ being with the tribe, we think we’re going to exceed the 60 percent. Therefore we think we can, hopefully, stay within compliance, so it will be our goal that we’re somewhere around 60 percent so we can get through IGRA,” Allen said.

“When we look at the overall state, we are going to testify to the Department of Interior that we do believe there is enough exclusivity to justify the revenue share payments from the tribe to the state to make sure we have not crossed the line into a taxation situation,” he said.

It is illegal to outright tax the tribe’s revenue.

The Interior Department, the Bureau of Indian Affairs, and the National Indian Gaming Commission declined to be interviewed or to issue any statement about the proposed compact, despite numerous requests made by phone and email over the past two weeks.

Upon Florida submitting the compact for review, Interior will have 45 days to issue a ruling on it.

Murky situation

Questions about rights to conduct statewide sports betting, which would be conducted via mobile devices, is so murky that legislation pending in the U.S. House of Representatives would clarify it by specifically removing “federal barriers to offering of mobile sports wagers on Indian lands.”

The legislation is sponsored by New York Democrats Anthony Brindisi and Brian Higgins plus two Republicans, John Katko of New York and Paul Gosar of Arizona. It would define an online sports wager made anywhere in a state as having been “made at the physical location of the server or other computer equipment used to accept the wager” — in other words, servers on tribal land.

There have been no votes yet on the proposal.

There is a lot of money on the line. The American Gaming Association estimates $7 billion a year in sports bets already are being placed in Florida illegally via cellphones and other electronic devices linked to servers elsewhere. That river of money is not being tapped for the benefit of state government.

Daniel Wallach, an attorney certified by the Florida Bar as an expert on sports gambling law, has published at least four columns in Forbes magazine arguing in elaborate detail how online sports betting is not authorized off tribal land and presenting a case that the Florida law very likely will fail to meet with approval by Interior.

“There is not a single instance on record of the U.S. Department of Interior ever approving a tribal-state gaming compact that included mobile sports betting,” Wallach wrote for Forbes on May 18.

Wallach cites federal law and the outcomes of federal litigation — the Professional Amateur Sports Protection Act; Michigan v. Bay Mills Indian Community; California v. Iipay Nation of Santa Ysabel; AT&T Corp. v. Coeur d’Alene Tribe; and Iowa Tribe of Oklahoma v. State of Oklahoma — in concluding that the Florida-Seminole compact as proposed will fail.

That’s because it creates an arrangement whereby a sports bet is placed, or offered, via cellphone or other device off tribal property anywhere in the state and then received, or accepted, by internet servers physically located on tribal property.

In Florida, negotiators dubbed it a “hub-and-spoke” system, with the hub being the servers on tribal property and the spokes being the sea of devices around the state through which players lay their bets.

If Interior or a federal court rejects the offer-and-acceptance, aka hub-and-spoke, model for online sports betting statewide, that part of the Seminole compact with Florida will be severed, potentially leaving the tribe with exclusive right to offer in-person sports betting at its casinos for the entire course of the 30-year compact.

Florida’s pari-mutuel facilities — historically centered on horse and dog races and jai-alai games, although their popularity has slumped — would very much like to facilitate online sports betting through the tribe but may be barred from doing so under an adverse legal ruling.

State Rep. Randy Fine. Credit: Florida House of Representatives

State Rep. Randy Fine, a Brevard County Republican and former gambling-industry executive, spearheaded the compact in the Florida House of Representatives. He predicts Interior will approve the compact as presented by the state and the Seminole tribe.

With so much potential revenue at stake, the worst outcome for Florida, he said, would be to not try it.

“I would very surprised if they don’t approve it,” Fine said in an interview. The Seminole Hardrock Hotel and Casino in Tampa is one of the largest in the nation, perhaps the largest of all, he said, and the Seminole tribe’s support adds clout to demand for expanding sports betting beyond tribal land.

It’s a lot of clout, with the tribe conducting gambling at seven casinos: in Okeechobee, Coconut Creek, Immokalee, Clewiston, Tampa, and two sites in Hollywood.

‘The state of Florida is not taking a risk’

Speaking for the Seminole tribe, Allen and Webster told lawmakers they think they can get Interior to sign off on the deal regardless of the expanded sports betting. But, if not, that severability clause will jettison the remote sports-betting provision and keep the revenue-sharing money flowing to Florida under the remainder of the compact.

“Very candidly, it does not matter. Because the state of Florida is not taking a risk,” Allen said.

“By approving this compact, the tribe takes the risk. If in a court the tribe does not prevail with its belief that the sports betting is legal, it is still committed to pay to the state of Florida for 30 years all of its revenue share on all of its land-based casinos,” he said.

“By not voting for the compact, the state [would be] walking away from a minimum of $4 billion between now and 2030,” Allen reminded the lawmakers.

Wallach argues that the tribe’s risk is not so great either, since losing that part of the compact but gaining a 30-year-long exclusive contract on sports betting is not much of a loss.