D.C. Circuit Court Revives Seminole Tribe’s Sports Betting in Florida

July 7, 2023 | mobile sports betting

BROWNSTEIN CLIENT ALERT

Washington, DC (JULY 5, 2023) — On June 30, 2023, the U.S. Court of Appeals for the District of Columbia Circuit reversed the district court’s ruling in West Flagler Associates, Ltd. v. Haaland. This will allow, at least for the present, the Seminole Tribe of Florida to accept online/mobile sports bets from patrons located throughout the State of Florida. At the same time, the decision leaves incomplete a puzzle of applicable state and federal laws even as it allows the tribe to move forward with its statewide operation.

The plaintiff-appellee in this case, a Florida bricks-and-mortar casino and parimutuel wagering operator, had challenged the tribal-state gaming compact entered into between the Seminole Tribe and the State of Florida pursuant to the Indian Gaming Regulatory Act (“IGRA”). In addition to authorizing the Seminole Tribe to operate certain games on its Indian lands, the compact also provided for online/mobile sports betting by players located anywhere within Florida and that such bets would be “deemed” to take place on Indian lands, where the tribe’s servers were to be located.¹ As required by IGRA, the compact was submitted to the Secretary of the Interior (the “Interior Secretary”) to approve, disapprove or take no action on it within the 45-day period prescribed by IGRA.

The Interior Secretary did not take action to approve or disapprove the compact within the 45-day period. It was therefore deemed approved as a matter of law pursuant to IGRA but only to the extent it is consistent with IGRA and other federal laws. After the deemed approval, the Office of the Assistant Secretary for Indian Affairs issued a letter, describing some of its analysis of the compact, generally approving of the statewide online/mobile sports betting approach as a cooperative division of state and tribal jurisdiction over the regulation of gaming.

Thereafter, the Seminole Tribe, under its “Hard Rock” brand, began operating online/mobile sports betting in Florida for just over a month until the U.S. District Court for the District of Columbia forced the operation to close. The lower court held that the compact’s language deeming bets sent from outside of Indian lands to occur on Indian lands violated IGRA by authorizing gambling outside of Indian lands, and therefore the Interior Secretary was obligated to disapprove it.

On appeal, the D.C. Circuit Court reversed the district court’s decision, holding that, although IGRA cannot be used to authorize gambling outside of Indian lands, this compact did not do so. Instead, the court found that IGRA permits the inclusion of provisions related to the allocation of criminal and civil jurisdiction between the state and Indian tribes and other subjects directly related to the operation of gaming activities, even if such topics cover activity outside of Indian lands, and that this compact did just that.

The appeals court determined that the compact “addressed” online/mobile sports betting off of Indian lands, but it did not “authorize it” under IGRA. The court further held that “[w]hether it is otherwise lawful for a patron to place bets from non-tribal lands within Florida may be a question for that State’s courts, but it is not the subject of this litigation and not for us to decide.” The court concluded that the district court erred by “reading into the compact a legal effect it does not (and cannot) have, namely, independently authorizing betting by patrons located outside of the Tribe’s lands.” In its decision, the court relied on the U.S. Supreme Court opinion in Michigan v. Bay Mills Indian Community, 572 U.S. 782, 795 (2014), which stated, “Everything—literally everything—in IGRA affords tools (for either state or federal officials) to regulate gaming on Indian lands, and nowhere else.” Although the D.C. Circuit acknowledged that language in the compact appeared to authorize gaming outside Indian lands, it interpreted that language as “simply allocate[ing] jurisdiction between Florida and the Tribe, as permitted by [IGRA].”

Although many have interpreted this decision as opening a floodgate for tribes to offer statewide online/mobile betting through IGRA, the court’s decision does not allow compacts to “authorize” statewide online/mobile sports betting. The court stated that any activity occurring outside of Indian lands is not within IGRA’s scope and therefore cannot be governed by it. Overall, this decision is consistent with Bay Mills Indian Community in that it concludes that IGRA cannot be used to authorize or regulate gaming outside of Indian lands, even if the activity is “deemed” by a state and a tribe to occur on Indian lands.

Even though this could allow the tribe to engage in statewide gaming, the appeals court stated that such gaming will not be governed by IGRA. This leaves open several questions about how this activity will be regulated, and whether the activity will be viable under state law.

First, if the activity cannot be authorized under IGRA but the state has deemed the activity to be occurring on Indian lands for the purposes of state law, which laws will govern the activity? Will the National Indian Gaming Commission, which is the federal agency responsible for regulating gaming under IGRA, assert jurisdiction over the portions of the activity that occur on Indian lands (e.g., the receipt, settlement and other aspects of bets coming from outside of Indian lands), even though the court said that the activity cannot be authorized pursuant to IGRA? And, if the NIGC determines that it possesses jurisdiction over certain portions of the gaming activity, do IGRA’s restrictions related to sole proprietary interest, management contracts and other regulatory rules apply to statewide online/mobile sports betting?

There are also questions related to whether the tribe will be required to remit revenue-sharing payments to the state pursuant to the compact for activity supposedly not happening under IGRA. Many additional questions remain about how the state will involve itself in the regulation of activities by patrons, which, according to the court’s ruling, cannot be governed by or regulated pursuant to IGRA. In short, there is a lot to unpack as the tribe moves forward to offer statewide sports betting in Florida.

In states where sports betting has already been legalized, this decision will have little impact. States and tribes must agree to engage in lawful statewide online/mobile sports betting, and some states already have licensing processes for tribes to participate statewide. For those that do not currently have regulatory schemes in place, state law will dictate how tribes can enter the statewide market, as IGRA alone cannot be used to authorize it, based on this decision. We expect tribes to continue to discuss statewide online/mobile sports betting with state governments, just as they have before, but there will still need to be state government action (or voter-initiated ballot measures, e.g., in California) for statewide online/mobile sports betting to become legalized in a state.

There is a lot of nuance contained in this decision, which highlights the quickly changing online/mobile gaming regulatory landscape. Brownstein Hyatt Farber Schreck is a leading law firm for counsel in gaming licensing, regulatory and transactional matters. Contact one of the authors listed below or a member of the firm’s Gaming Law Group for specific questions.