Why Tribal Gaming Will Oppose King Online Gambling Bill

June 9, 2013
Why Tribal Gaming Will Oppose King Online Gambling Bill

A bill that expands gambling in the United States requires the support of groups that will operate the proposed system.  The bill sponsored by Representative Peter King (R-NY) that would regulate online gambling in the United States will be missing this key element.  Tribal gaming interests are certain to oppose this bill across the board for a number of reasons.

The Indian Gaming Regulatory Act (IGRA) was enacted by the federal government in 1988.  It settled the long standing issue of reservation casinos.  It gave states the right to enter into gaming compacts with tribes.  Reservations were given the ability to mirror existing gaming laws within a state tax free or agree upon terms that would give Native American tribes exclusivity to certain class III gaming.

Rep. King’s bill takes away some of these rights by removing the Internet as a potential platform for gambling as it pertains to the IGRA.  Tribal lobbyists are certain to see this as an issue.

Unique Gaming Compacts

About 30 states have casinos located on reservations.  Most of these casinos have some sort of exclusivity agreement on at least some forms of class III gaming.  Arizona, Connecticut, North Carolina, Oklahoma, Wisconsin and Wyoming are examples of states where tribal gaming has a monopoly on class III gaming through compacts with the state.  Some of these reservation casinos pay high tax rates in exchange for these rights.

California, Florida, Minnesota, North Dakota, Oregon, and Washington are examples of states that have a different agreement with tribal casinos.  These states allow expanded gambling on reservations that would otherwise be illegal on state land.  This expansion typically includes the addition of slot machines or games of chance, where commercial casinos might only be allowed to offer poker and certain other card games in these states.  There are often tax agreements negotiated on these compacts as well.

IGRA Rights Not Applied to Internet

Tribal lobbyists are certain to object to the idea that their protected rights under brick and mortar compacts would be trumped by a federal law that would dilute protections provided by the IGRA.  The new federal bill makes it clear that states could license games over the internet that would otherwise not be allowed under existing gambling laws and may be currently exclusive to tribes.

Not Enough Time to Renegotiate Compacts

A state could also opt out of online gambling altogether under this bill, even if there is a gaming compact in place that covers brick and mortar operations.  A governor would have 120 days to opt out after this bill passes, otherwise they will join federal online gambling by default.  That is hardly enough time to negotiate a new gaming compact as it would be likely that one or both sides would want to discuss this new expansion of gambling.  This could cause one of two situations, either tribes would then be allowed to operate online gambling and potentially pay no taxes, or the governor could opt out if a new compact was not reached.

It is clear that reversing a governor’s opt out would be difficult.  That is evidenced by the fact only three states have approved online gambling at this point.  If the governor failed to opt out then tribes might take actions to launch online gambling, only to have the legislature later take that those rights away.

Tribes Allowed to Opt in Even if State Does Not

The bill does give tribes the right to opt in even if their state governor opts out.  This term will be of little help as all action must take place on reservations in this scenario, many of which are sparsely populated and have little economic activity outside of casinos.

Potential for Litigation

The IGRA has been the subject of a number of lawsuits over the years.  Placing language that attacks the rights of Native American gaming could once again place the issue in court.  That could potentially delay enactment of the law.

Tribal gaming rights create a difficult situation.  The lobbying groups are powerful and will defend their rights to the end.  Any online gambling bill must address these rights and include a compromise with tribal gaming interests or else it is destined for opposition or a legal challenge.

Tribal Gaming Just One of Many Reasons Bill is Doomed

There are a number of other issues with this bill, but when it has the opposition of a large section of the gaming lobby, then it seems sure to fail.

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