State officials from California to Connecticut spent last week maneuvering for control of the tens of billions of dollars in projected revenue from sports betting, and joining them was another group of powerful, and familiar, gambling operators aiming to claim their piece of the action: American Indian tribes.
For three decades, federal legislation has allowed the tribes to operate casinos dominated by slot machines and blackjack tables. Now, after a groundbreaking Supreme Court decision cleared the way for states to allow betting on sports, industry experts say what may become a yearslong fight over control of sports betting will hinge on the fine print of a series of gambling agreements between state governments and Indian tribes.
In Connecticut, for example, where two federally recognized tribes, the Mashantucket Pequot Tribe and the Mohegan Tribe, operate the hugely successful Foxwoods Resort Casino and the Mohegan Sun, leaders of the organizations have insisted they alone have the legal authority to offer sports betting, according to their compacts with the state. They say the state may incur a steep penalty if it violates those agreements.
Under the compacts the tribes and state officials signed in the 1990s, as long as the state does not authorize any other slot machines or commercial casinos, the tribes must give 25 percent of their slot machine revenue to the state. In the 2017 fiscal year, this resulted in a $270 million payment to Connecticut.
Helga Woods, attorney general of the Mohegan Tribe, has already written to legislators to point out that if the state authorizes another group to offer what she referred to as “video facsimile gaming,” that would violate the exclusivity provisions of the compact. If that happens, “our obligations to make the slot contributions cease,” Woods wrote.
State officials disagree. Proposed legislation would allow the two tribes, the Connecticut Lottery Corp., and Sportech, which operates off-track betting parlors in the state, to offer sports betting.
Rodney Butler, chairman of the Mashantucket Pequot Tribal Council, said he had met with state legislators and representatives of Gov. Dannel P. Malloy to begin negotiations.
“We have said, ‘We want to work with you,’” Butler said. “Let’s work out an arrangement.”
With billions of dollars at stake, such discussions are likely to represent some of the sharpest negotiations between the tribes and government officials since 1988, when Congress passed the Indian Gaming Regulatory Act. That legislation allowed federally recognized Indian tribes to offer casino-style games like slot machines, blackjack and roulette on tribal land. There are now 238 tribes in 28 states offering some form of gaming, according to the National Indian Gaming Commission.
In the 2016 fiscal year, those operations generated more than $31 billion in revenue. Over roughly the same period, taxable gaming revenue in Nevada, home to the gambling destinations Las Vegas and Reno, where private companies rather than Indian tribes control most of the business, accounted for $10.6 billion.
Betting on sports represents a small fraction of that amount, though industry experts say the court ruling will most likely allow that to increase significantly. In Britain, where the sports market is far less diverse and where the population is about one-sixth as large as that of the United States, gamblers wagered some $20 billion for the year ending in March 2017.
Analysts estimate that gamblers in the United States wager as much as $150 billion each year illegally through bookies and offshore accounts, as well as through less formal wagers, such as office pools around the men’s NCAA basketball tournament. With so much on the table for the Indian tribes, the days since Monday’s Supreme Court ruling have been filled with jockeying and strategic planning, especially in the states where Indian casinos have exerted powerful influence over local economies, such as California and Mississippi, in addition to Connecticut.
In California, dozens of Indian-owned casinos generate close to $8 billion in annual revenue, the most of any state, giving the tribes enormous influence over the gambling industry. Before the Supreme Court decision, Assemblyman Adam Gray introduced a bill to amend the California Constitution, which gives Indian tribes exclusive rights to operate slot machines and other casino-style games. The tribes say those rights include sports betting.
Since legalizing sports betting in California will require amending the state constitution, lawmakers, lobbyists and tribal leaders are now girding for a drawn-out, perhaps yearslong fight before anyone in the state makes a legal bet on a sporting event.
The tribal leaders base their claims to exclusivity on language in the state constitution that gives them the rights to games that involve “banking” — meaning the house creates the market for the bet.
In a statement this week, Steve Stallings, chairman of the California Nations Indian Gaming Association, formally requested a role in all negotiations over the future of sports betting.
“California voters have, on numerous occasions, confirmed the exclusive right of California tribal governments to operate casino-style games,” Stallings said. “Legalization of sports betting should not become a backdoor way to infringe upon exclusivity.”
California also allows forms of gambling in two other areas that are interwoven with the state’s history: horse racing, which was legalized in 1933; and card rooms, of which there are close to 90 across the state and which trace their heritage to poker-playing miners during the Gold Rush.
If those parties can agree on the language of sports betting legislation, the legislature will have to pass the bill with a two-thirds majority, the governor will have to sign the legislation and then voters will have to approve it in a statewide referendum. The deadline to get a bill on the ballot in November is late June. Gray, the state legislator, said that timeline is probably too short for a vote this year.
If the fight over internet poker in the state is any guide, legal sports betting in California may be years away. Several efforts in recent years to legalize betting on online poker failed, largely because none of the players in California’s gambling industry could agree on a deal, and the tribes themselves were divided.
“If you can’t solve internet poker, I don’t know how you solve something like sports betting,” Stallings said in an interview.
Gray said the language in the current constitution providing exclusivity to the tribes was left intentionally vague, “probably by a smart attorney.”
While litigation, if it comes to that, could drag on for years, Doug Elmets, a public relations adviser to several Native American tribes in California, said that if other states push ahead with sports betting, then California may have to act.
“As the fifth-largest economy in the world, California is not likely to sit by and watch potentially substantial amounts of revenue go to other states,” he said.
In Mississippi, where casinos rise from the Delta’s cotton fields and dot the Gulf Coast, regulators are hoping they can be one of those states and want a system to allow wagers on sports in place by the start of the college football season, in August. Setting aside the personal misgivings of some of Mississippi’s most powerful politicians, regulators spent months crafting new rules and introduced a 21-page proposal Thursday, just three days after the Supreme Court announced its opinion.
“We’re moving forward at a rapid rate,” said Allen Godfrey, executive director of the Mississippi Gaming Commission.
The proposal’s rules are particularly advantageous to Mississippi’s brick-and-mortar casinos: The regulations would forbid sports betting on mobile devices — except on a casino’s property — and would require gamblers to walk into one of the many casinos from Tunica Resorts to Biloxi to place bets.
That is not what the major betting companies would hope for, since so much of their business now takes place on mobile phones. Most leagues would also likely be opposed, as forcing fans who want to bet to go to a specific location also limits the number of people who can participate and, in turn, watch more live sports.
So far, the state’s tribal casinos have been silent publicly about their intentions. A spokeswoman for the Mississippi Band of Choctaw Indians referred a request for comment to the tribe-controlled Pearl River Resort, whose chief executive declined to be interviewed.
But Mississippi’s commercial casinos have long dominated public discussion about gambling in the state, and the greatest tensions appear to rest on whether it intended to allow sports betting at all.
The provision that Godfrey and other sports betting proponents believe supports their approach was part of a measure last year that permitted wagers on fantasy sports games. State leaders signed off on the measure but have insisted that they did not recognize they were creating an opening for sports betting.
Clay Chandler, a spokesman for Gov. Phil Bryant, said that the governor “recognizes the U.S. Supreme Court’s decision as the law of the land.” He did not, however, respond to questions about whether Bryant remained personally opposed to sports betting or whether he would seek a rollback of the measure that the gaming industry argues laid the groundwork for a legalization in Mississippi.
Godfrey said that continuing to prohibit sports betting was shortsighted, and that Mississippi should provide the chance for gamblers to place their bets with licensed casinos instead of with a bookie.
“This is going on illegally all across the country,” he said. “Now that option is going to be there.”
If that comes to fruition, Indian tribes that have invested billions of dollars over the past 30 years to build their businesses say they are going to do everything in their power to make sure they are a part of it.
Kevin Brown “Red Eagle,” chairman of the Mohegan Tribe in Connecticut, said that in the interest of expedience, he and his organization were at least willing to include the Connecticut Lottery Corp. and Sportech, the other two entities included in proposed sports betting legislation in the state, in negotiations.
“We don’t want to make it such a high hurdle,” he said, “that our exclusivity prevents us from being a first mover here.”