The Odds Are Good: States Considering Sports Betting Agreements with Native American Tribes May See Increases in Gaming Revenue

By Rachael Marvin*

The multi-faceted controversial topic of sports betting has recently made headlines for the Supreme Court’s movement towards legalization and the resultant new business developments in various states.[1] The legalization of sports betting is a major opportunity for both businesses and states to significantly increase gaming revenues.[2] Legislators are considering the impacts of agreements with native tribes that would host sports betting on their reservations.[3] Several states, such as Arizona, Connecticut, and Michigan, have already begun negotiating with Native American tribes.[4] States vary in their approaches to sports betting regulation; states like Connecticut are working out the legality of sports betting under existing gaming compacts, where tribes operate a majority of casinos and provide a percentage of revenues to the state, while other states are still negotiating gaming compacts and whether to share profits with tribes.[5]

To summarize, in states with gaming compacts, individuals interested in the sports betting market will have to examine Native American “exclusivity rights” under existing gaming compacts, while states without compacts will still likely grapple with issues of legitimate revenue interests from tribes.[6] There are both legal and equitable issues at stake, and resolution is vital to providing valuable revenue opportunities for both Native tribes and states.[7] Ultimately, roughly 475 tribal casinos already operate a majority of gaming opportunities, and thus deserve a seat at the table.[8] Therefore, the significant presence of gaming on tribal reservations highlights the importance of including tribes in discussions of legalizing sports betting.[9]

Including tribes in sports betting negotiations is necessary because of the substantial amount of money states receive from Native American gaming interests.[10] In Arizona, legislators are working hard to legalize sports betting to maximize the state’s general fund and support its citizens.[11] In California, 34 tribes want to particularize the language of sports betting legislation to better understand whether sports betting could occur in physical wager books or online.[12] Michigan, Connecticut, and Arizona have yet to legalize sports betting because the legislature must consider tribal compacts that tribes argue allow Native American casinos to monopolize the sports-betting arrangements.[13]

The financial gain at stake in finalizing these compacts is sizeable for both tribes and states. In Arizona, for example, signing agreements with Native American tribes is highly important, because more than two-dozen Native American casinos pay over $80 million to the state.[14] Similarly, tribes maintain the position that gaming revenue is another way to “deliver services to tribal members.”[15] Ultimately, both states and tribes stand to benefit from finalizing these negotiations. 

The U.S. Supreme Court’s Landmark Decision

In early 2018, the Supreme Court struck down a 1992 law that banned sports betting in most states, with the exception of Nevada, where sports betting is legalized.[16] The Supreme Court essentially overturned the 1992 Professional and Amateur Sports Protection Act (“PASPA”), which initially sought to “protect the integrity of sports,” by making all sports betting illegal at the federal level.[17] The Supreme Court’s decision in Murphy v. National College Athletic Association was a landmark ruling for sports betting because the Supreme Court overruled the previous 1992 federal law, which banned sports betting altogether.[18]

The 2002 Native American Gaming Compact Renegotiations 

In late 2016, Arizona’s Governor Ducey and nine tribal leaders began renegotiations to amend the state’s 2002 Native American Gaming Compact.[19] The gaming compact is the exclusive authority on gaming laws in Arizona.[20] Arizona’s Salt-River Pima Maricopa Indian Community President, Ivan Makil, stated that the gaming compact provided a tremendous economic opportunity to both the state and Arizona’s native tribes.[21] Ivan Makil’s statements further exemplify the potential for both entities to see financial gains from these negotiations.[22]

In Arizona, many individuals believe that revenue from sports betting would increase funding for schools and other important state needs.[23] In Nevada, sports betting revenue produced roughly $14 million in tax receipts, and Nevada’s tribal gaming revenues provides more than $150 million to the state’s general fund.[24]

Negotiations May Eventually Pay-Off for Both Tribes and States

While Native American tribes have previously negotiated in favor of increasing gambling on reservations, they are now presented with a new negotiating challenge by sports betting opportunities.[25] For example, gaming compacts in Connecticut allow Native American tribes exclusively in operating casinos and slot machines, as long as they pay a quarter of their slot machine revenue to the state.[26] The projected revenue from legalizing sports betting is in the billions; therefore, both tribes and states have significant financial stakes in the legalization of sports betting.[27] In Connecticut, two tribes operate highly successful casinos, which would significantly profit from sports betting agreements.[28] Under a gaming compact, tribes in Connecticut “give 25 percent of their slot machine revenue to the states” for complete gaming power, and tribes argue that sports betting falls into this category.[29] Therefore, it is in both the states’ and the Native American tribes’ best interests to negotiate sports betting agreements; specifically, tribes could increase gaming profits through sports betting, which in turn provides significant revenue opportunities for states.

* Staff Writer, Jeffrey S. Moorad Sports Law Journal, J.D. Candidate, May 2020, Villanova University Charles Widger School of Law.

[1] See Polina Marinova, FanDuel is About to Launch Its Sports Betting App, Fortune (Sept. 6, 2018), http://fortune.com/2018/09/06/fanduel-sports-betting-app/ (noting that Supreme Court has ruled in favor of legalizing sports betting, and as  result, businesses like FanDuel are developing products geared at introducing sports betting into the marketplace).

[2] See id. (examining new business ventures, such as FanDuel, which are developing new, innovative products alongside regulators to create business worth almost $1 billion dollars). 

[3] See Jill R. Dorson, Arizona Must Consider Tribes When Crafting Sports Betting Law, SportsHandle (Aug. 28, 2018, 4:35 PM), https://sportshandle.com/arizona-must-consider-tribes-when-crafting-sports-betting-law/ (analyzing complex issues that arise between sports betting and tribal gaming interests, such as a monopoly on sports betting revenues under gaming compacts); see also Kevin Draper, infra note 24 (discussing how Connecticut tribes argue that gaming compacts may allow tribes to solely regulate sports betting).

[4] See id. (noting that states have had difficulty moving forward with sports betting legislation because of conflicts with tribes). 

[5] See Felecia Fonseca, Sports Betting Ruling Has Ripples for U.S. Tribes With Casinos, Star Tribune (May 16, 2018, 10:10 AM), http://www.startribune.com/tribes-welcome-opportunity-to-add-sports-book-to-casinos/482762831/ (recognizing majority of tribal casinos have monopoly on blackjack, table games, and slot machines at casinos, and many tribes recognize that sports betting may fall into this category under gaming compacts); see also Martin Owens, The Mouthpiece: Can Indian Tribes Offer Sports Betting?, CalvinAyre (July 4, 2018), https://calvinayre.com/2018/07/04/business/mouthpiece-can-indian-tribes-offer-sports-betting/ (discussing how certain states will have to “respect tribal sovereignty” in efforts to legalize sports betting); see also Nick Sortal, Sports Gambling? Probably Not Soon, If Your State Has Tribal Gaming, CDC Gaming Reports (May 30, 2018, 12:01 AM), https://www.cdcgamingreports.com/commentaries/sports-gambling-probably-not-soon-if-your-state-has-tribal-gaming/ (recognizing that many sports betting discussions focus on whether sports betting implied under existing gaming compacts, the potential for monopoly infringement, and revenue taxation issues).

[6] See Owens, supra note 5 (discussing practical function of compacts).

[7] See Fonseca, supra note 5 (reasoning that legal interests at stake involve disagreements on whether tribes with monopolies on slot machines, blackjacks, and other table games would similarly have a monopoly on sports betting, whereas equitable interests require examination of revenue allotment and determination of where sports betting profits are dispersed); see also Owens, supra note 5 (discussing legal versus equitable interests where legal issues also pertain to internet-based sports betting and whether Native tribes have legal jurisdiction for online betting).

[8] See id. supra note 5 (noting that a majority of the 475 tribes with large gaming opportunities already operate casinos with slot machines, blackjack, and other gaming options that could similarly include sports betting). 

[9] See Jill R. Dorson, supra note 3 (reasoning that sports betting legislation in several states is directly tied to Native American gaming interests). 

[10] See id. (analyzing the gaming interests at stake).

[11] See Brahm Resnik, Why Arizona Sports Gambling Won’t be Legal for Awhile, 12News (May 14, 2018, 8:25 PM) https://www.12news.com/article/news/local/arizona/why-arizona-sports-gambling-wont-be-legal-for-a-while/75-552102696 (noting while Arizona legislators have yet to sign agreement with tribes, agreement between Arizona’s government and tribes would be “win” for both government and Native American gaming interests). 

[12] See Fonseca, supra note 5 (discussing different angles of negotiating terms and strategies).

[13] See Resnik, supra note 10 (examining discussions between legislators and tribes in Arizona, which is currently resulting in standstill in legalization of sports betting in state); see alsoFonseca, supra note 5 (discussing the potential for monopolization).

[14] See id. (noting that because state of Arizona earns significant revenue from casinos on reservations, signing sports betting agreements with tribes is in state’s best financial interests).

[15] See Felecia Fonseca, supra note 7 (recognizing gaming revenue benefits to Native American tribes).

[16] See Adam Liptak and Kevin Draper, Supreme Court Rules in Favor of Sports Betting, N.Y. Times (May 14, 2018), https://www.nytimes.com/2018/05/14/us/politics/supreme-court-sports-betting-new-jersey.html (analyzing 2018 Supreme Court decisions which has resulted in significant changes to gaming laws, including opportunities for businesses and casinos to profit from legalization of sports betting). 

[17] See id. (quoting PASPA sponsor, Senator Bill Bradley of New Jersey, who fought to remove sports betting from the gambling arena aiming to preserve the “integrity” of sports). 

[18] See id. (examining Supreme Court’s ruling and effects); see also Murphy v. Nat’l Coll. Athletic Ass’n, 138 S. Ct. 1461, 1471 (2018) (reasoning that PASPA was unconstitutional because law infringed on state’s sovereignty to enact own sports-betting laws).

[19] See Brian Kramer, Governor, Tribes Sign Amended Gaming Compact, The Independent (Nov. 16, 2016), https://www.wmicentral.com/news/arizona_news/governor-tribes-sign-amended-gaming-compact/article_f88e4d16-b5b3-11e6-b26a-17960e44532a.html (explaining that Native American casinos account for more than 15,000 jobs, and therefore renegotiating compact with Native American tribes to expand gaming on tribal reservations was top priority). 

[20] See Resnik, supra note 10 (noting compact’s importance and function in governing gaming in Arizona). 

[21] See Kramer, supra note 18 (examining importance of 2002 gaming compact on Arizona’s economy). 

[22] See Resnik, supra note 10 (reasoning that sports betting agreements would be a financial “win” for both tribes and state governments). 

[23] See id. (recognizing the potential utility of sports betting profits).

[24] See id. (noting potential economic gain from examining sports betting and gaming revenues in Nevada as only state traditionally allowing sports betting and other forms of gambling). 

[25] See Kevin Draper et. al, Indian Tribes Dig In To Gain Their Share of Sports Betting, N.Y. Times (May 21, 2018), https://www.nytimes.com/2018/05/21/sports/sports-betting-indian-casinos.html (reasoning that Native American tribes see increased opportunity to gain profits from sports betting on reservations, which is major incentive for tribes to negotiate for share of profits). 

[26] See id. (analyzing conflicts arising when Native tribes argue that under these gaming compacts, tribes alone have the authority to regulate sports betting). 

[27] See id. supra note 24 (noting the increased revenue potential and negotiating challenges). 

[28] See id. (examining both the potential for increased profits and tribes’ arguments that they have the legal authority to engage in sports betting). 

[29] See id.