Tribes eye online gaming amid pandemic struggles

Joe Valandra, former chief of staff of the National Indian Gaming Commission, speaking at the 2014 Global Gaming Expo in Las Vegas during a reception launching the Great Luck brand and bingo product. (Photo courtesy Joe Valandra)

Rob Capriccioso

'COVID-19 definitely has the potential for tribes to push for legal changes at the federal level'

Rob Capriccioso
Special to Indian Country Today

In the midst of a debilitating global pandemic, there is no shortage of concerns for tribes involving their gaming operations.

Can employees be protected and paid? Will closures be necessary again? What is the best response to an alarming uptick in new cases during the first wave, and what happens if there is a second wave? Will the federal government properly live up to its treaty and trust obligations in this uncertain time if there continue to be major shortfalls in tribal operating funds?

Making their gaming facilities safe is one of the biggest on-the-ground challenges for tribes in their quests to be resilient. Social distancing isn’t easy at a poker table; serving drinks to customers wearing masks presents a plethora of challenges; and tribal casino HVAC systems are no better at filtering COVID-19 than any other regular air conditioning and heating system.

Some tribes and their gaming advocates say resiliency requires new tactics, relying on paths that some wealthier, established casino tribes have generally been hesitant to go down and have even lobbied against, including online gaming.

Competition, brand dilution and the possibility of reduced business at their already successful brick and mortar facilities have been common concerns from large gaming tribes. Plus, there has been worry from organizations like the National Indian Gaming Association that encouraging Congress to open up the Indian Gaming Regulatory Act to support Indigenous internet gaming could be dangerous as federal policymakers could use the opportunity to limit tribal sovereignty.

“There’s still a reluctance to fully support online gaming,” says Joe Valandra, former chief of staff of the National Indian Gaming Commission and current director of the Native American Contractors Association. “Having said that, there is a big recognition that online everything is here now, and, especially in light of current events, likely here to stay. Right now it’s the pandemic, but people have been more and more comfortable doing more things online all along, so it only makes sense for tribal enterprises to tap into that potential.”

Valandra has had major experience in the difficulties of this arena having unsuccessfully tried to launch a tribal online bingo and poker endeavor called Great Luck in southern California in the mid-2010s. The operation ended up being immediately sued by the state and by the federal government for violation of the Unlawful Internet Gambling Enforcement Act of 2006, which prohibits internet gaming across jurisdictions where gaming is illegal. 

California lost its suit, but the federal government won. As a result, the Iipay Nation of Santa Ysabel was prohibited from operating its Desert Rose Casino, a server-based computerized bingo game.

Explaining the case better and networking with concerned parties, including federal policymakers and other tribes, could have helped the case, Valandra now assesses. “We weren’t completely understood, and we were launching what seemed like a rogue effort, trying to change the world. We certainly were trying to change the world, but we weren’t trying to be rogue.”

In the years since the battle of the Desert Rose, the California Legislature has been in ongoing discussions about whether to legalize internet gaming within the state. But tribes there have been resistant to the idea, helping to kill a recent proposal surrounding it.

Indian gaming experts predict COVID-19 will inevitably cause some of the concerns to alleviate, or at least evolve, on the tribal, state and federal fronts, and the Indian Gaming Regulatory Act might never have to be touched. Instead, what will become most important are ways for tribes to work within or influence the boundaries of the Unlawful Internet Gambling Enforcement Act and the federal Wire Act of 1961, which prohibits the transfer of money for use in illegal gaming. The Wire Act is facing litigation from the state of New Hampshire involving its validity, and the U.S. Justice Department has wavered in its interpretation of it in recent years.

“In the new COVID landscape, which I think we’re going to be living in for quite some time, we need to look for ways to intelligently improve the regulatory and statutory framework of Indian gaming and see what can be done to further promote the objectives of IGRA and other statutes,” says Jonodev Chaudhuri, former chairman of the National Indian Gaming Commission and now an Indian affairs lawyer with Quarles & Brady.

Jonodev Chaudhuri, former chairman of the National Indian Gaming Commission, testifies before the Senate Committee on Indian Affairs in October 2017. (Senate Committee on Indian Affairs)
Jonodev Chaudhuri, former chairman of the National Indian Gaming Commission, testifies before the Senate Committee on Indian Affairs in October 2017. (Senate Committee on Indian Affairs)

Where the chips will fall on the nationwide level in terms of regulation, no one knows yet, but tribes are certainly mobilizing on the online gaming front.

To date, the Mississippi Band of Choctaw Indians has been a tribal leader in the sports betting arena and has been in talks with state officials to expand to internet gaming. Sports betting and how to do it both physically and online is something many Washington state tribes are considering since Democratic Gov. Jay Inslee signed a bill in March allowing non-mobile sports wagering inside tribal casinos. New York and Louisiana tribes are also counting on online sports betting becoming a reality sooner than later. Other tribes, like the Mashantucket Pequot Tribal Nation, have experimented in internet gaming sans wagering.

Tribes in Michigan, too, have been eagerly looking to sports betting, especially its online angle, as well as to internet gaming within the state’s boundaries as a source of new and sustained revenue. As a result of the state’s Lawful Internet Gaming Act and its Lawful Sports Betting Act, both signed into law by Democratic Gov. Gretchen Whitmer in December, tribes in the state are eligible to pursue both types of endeavors without fear of violating the federal the Unlawful Internet Gambling Enforcement Act or the Wire Act, and without having to have the Indian Gaming Regulatory Act toyed with by Congress.

In early June, the Bay Mills Indian Community became one of the first tribes in Michigan to announce its plans, announcing in a news release that it had partnered with DraftKings Inc., a leading fantasy and sports betting vendor, to offer betting via mobile and online sportsbook platforms, as well to allow state residents to place sports bets in person at the Bay Mills Resort & Casino in the Upper Peninsula of Michigan.

“It was a very complicated process, and hats off to our legal team for getting it done,” says Bryan Newland, chairman of the Bay Mills tribe. He says that on-reservation sports betting was the “easiest part of the deal to get done,” referring to the tribe’s work with the state during its lawmaking process, while the hardest part was figuring out tax revenue issues related to entities involved in the Michigan laws, including the state, the tribes, and the three commercial casinos in Detroit.

“The state was worried about its own online lottery revenues and losing money for education, so it had to hit a certain number, and everyone recognized that,” Newland says. “For the 12 tribes in Michigan, it was important for us to show that we are not simply commercial operators, like a privately owned casino where the revenues go to shareholders.

“Our revenues, even though we would be operating under a state license, were going to be used to fund tribal governmental activities. We didn’t want to be in the position where tribal people would be the last people to benefit from this arrangement. That took some work in drafting the law, but thankfully for us, legislators from both parties recognized that, and they got it done.”

Michigan tribes are now eligible to get licensed through the state to offer mobile gaming, mobile slot machines, mobile blackjack, and more. Bay Mills’ licenses and regulations are in the process of being fulfilled, and Newland expects the gaming to be operational by late fall or early winter. To not violate the Unlawful Internet Gambling Enforcement Act, the online gaming under agreements with tribes must not cross the Michigan jurisdiction of legality. Wire Act issues will also not be a problem, since the gaming activities are geofenced within the state.

National Indian gaming experts have been cautiously watching this Michigan tribal gaming experiment, and Newland says he has sensed some “reluctance and concern to have tribally owned gaming operations licensed and regulated directly by states.” For the past 32 years, Bay Mills has been operating land-based gaming within its own sovereign rights, only limited by the Indian Gaming Regulatory Act, so state regulation for online tribal gaming admittedly adds a new wrinkle.

But Newland says Michigan tribes could not ignore the obvious economic benefits as their own brick and mortar revenues continued to shrink, yet at the outset of the new lawmaking process they were indeed concerned about the new state involvement; still, that the Indian Gaming Regulatory Act did not have to be opened on the federal level was a major benefit, he says.

“Whether what Michigan tribes have negotiated will be a good thing for tribes overall remains to be seen,” Chaudhuri says. “I am encouraged, though, by the dialogues between tribal officials and the state government there asking how we do this in a way that respects tribal sovereignty. But we have to see how a lot of this plays out to see if tribes really benefit.”

Valandra says the new Michigan tribal gaming effort is a "big step in this process."

“They understand that this has to be an online model. For smaller tribes to partner with major players in this field, online makes the most sense.”

The more sports books that open inside any land-based casinos, certainly tribal casinos, the "better primed everybody will be  policymakers and the public alike —for the move to online and mobile,” adds Steven Light, co-director of the Institute for the Study of Tribal Gaming Law and Policy at the University of North Dakota. “That will place pressure on more states to negotiate compacts and revenue sharing agreements.”

Gaming experts, meanwhile, continue to watch Congress for signals on whether any federal changes will occur as a result of the coronavirus.

“COVID-19 definitely has the potential for tribes to push for legal changes at the federal level that not only would make online gaming legally more feasible for tribes right now, but also could lay a legal foundation for expansion of mobile wagering and other mobile platforms for the future of tribal gaming,” says Kathryn Rand, who co-directs the Institute with Light.

Chaudari believes many tribal advocates would support improvements to the Wire Act and the Unlawful Internet Gambling Enforcement Act that further promote the goals of the Indian Gaming Regulatory Act. 

He added he hopes the pandemic is helping policymakers understand just how important Indian gaming has been in aiding not only tribal communities but all communities near Indian casinos in terms of economic and social development. He says there are regular discussions in Congress about potentially legalizing online gaming across state lines.

From his perspective, Newland says he and his community are excited that they took action on this issue now instead of waiting for federal changes.

“With a pandemic in place and people reluctant to travel and the risks associated with gathering a lot of people in a confined space, we’re really looking at all that’s on the horizon,” Newland says. “And we will be in a place to deal with those concerns that a lot of other tribes won’t be.”

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Rob Capriccioso, a citizen of the Sault Tribe of Chippewa Indians, is a journalist based in the Washington, D.C., metro area.

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