Gambling deal to face federal scrutiny

May 27, 2021

Dara Kam, News Service Florida

TALLAHASSEE --- While Florida lawmakers signed off last week on a far-reaching gambling pact with the Seminole Tribe that includes sports betting, Las Vegas-style casinos, craps and roulette, the deal now will face scrutiny from the U.S. Department of the Interior.

The Department of the Interior oversees tribal-state gambling “compacts,” such as the one that Gov. Ron DeSantis and Seminole Tribe of Florida Chairman Marcellus Osceola Jr. signed April 23 and sent to lawmakers for approval. Once the compact is submitted, the Department of the Interior has 45 days to approve the plan, reject it or allow it to go into effect without the federal agency’s action.

The Biden administration’s role in examining the compact with the Seminoles is somewhat limited, according to experts.

Federal officials will “look at the compact and see if there are any provisions in there that are problematic,” said George Skibine, whose lengthy career with the Department of the Interior included a stint as director of the Office of Indian Gaming. Florida House Speaker Chris Sprowls, R-Palm Harbor, hired Skibine to advise the House about the compact.

Since taking office in January, Biden tapped former U.S. Rep. Deb Haaland, a New Mexico Democrat and member of the Pueblo of Laguna tribe, as secretary of the department. The U.S. Senate confirmed the appointment of Haaland, the first Native American to serve in a Cabinet post, in March. 

The federal Indian Gaming Regulatory Act, or IGRA, gives Haaland only a handful of reasons to reject a compact.

The law allows tribes to conduct any types of gambling that are permitted anywhere else in the state. States can enter into revenue-sharing agreements with tribes in exchange for offering them “exclusivity” for certain types of gambling activities or certain geographic areas.

Under the 30-year compact signed by DeSantis and Osceola, the Seminoles agreed to pay Florida about $20 billion, including $2.5 billion over the first five years of the agreement. The amount dips by $50 million a year if the sports-betting provision doesn’t go into effect, essentially guaranteeing the state an annual minimum payment of $450 million.

The agreement also puts the Seminoles in control of sports betting. The tribe would serve as the hub for sports betting, with pari-mutuel operators contracting with it. The plan would allow Floridians and visitors anywhere in the state to place sports bets using apps on cell phones, but the Seminoles would host the sports-betting activity through computer servers located on tribal lands.

The sports-betting provision could prove to be a major test of the federal law, which was enacted before online gambling activities began. 

The Indian Gaming Regulatory Act requires that covered gaming activities occur on “Indian lands,” Skibine noted. The Florida compact could force federal regulators to decide for the first time whether sports bets made on mobile phones or other devices off of tribal lands comply with the 1988 law. 

“So the issue that is raised now that there is online gaming, that there wasn’t back in the ‘80s when the act was passed, is whether a bettor can essentially use a computer to place a bet on the reservation, when the bettor is located off the reservation. So that question is going to be one of the key questions, I think, that they will look at,” Skibine said.

The deal with the Seminoles may turn out to be a national test case for other tribal compacts, he said.

“It could very well be. I think that the department will have to look at that provision of the compact that says that the entire gaming activity is essentially deemed to occur where the servers are located. They will have to take a look at this issue,” he added.

But Jim Allen, CEO of Seminole Gaming and chairman of Hard Rock International, said the tribe believes the sports betting arrangement is on solid ground.

“It’s our feeling, and we certainly have talked to the Department of the Interior, as long as the servers are on sovereign land, we are within the boundaries of the law. I certainly recognize that there are many companies that are trying to derail this,” Allen told The News Service of Florida in a phone interview this month.

The Department of the Interior on Monday approved an Arizona compact that allows sports betting, but the details differ from the Florida plan. A New Mexico compact with a sports betting provision is awaiting federal approval.

Before the Florida compact makes it to the Biden administration, the Seminoles’ tribal council must approve the agreement. A vote on the issue is expected soon.

The sports-betting arrangement with the Seminoles is aimed at complying with a 2018 constitutional amendment that requires statewide voter approval of gambling expansions in Florida. Under what is known as Amendment 3, expansions of gambling must be placed on the statewide ballot through the citizens’ initiative process.

Allen and other proponents of the Florida compact contend that, because sports-betting wagers will be transacted through the tribe’s servers, a statewide vote is unnecessary. Skeptics argue that the legalization of sports betting requires approval by voters and have pledged to challenge the deal in court.

The compact also allows the tribe to add craps and roulette to its casino operations, which already include slot machines and house-banked card games, such as blackjack. The agreement also allows the Seminoles to add three facilities to their Hollywood Hard Rock casino operations, and allows non-tribal casinos to be opened in other parts of the state, with certain caveats.

After the Florida compact is submitted to the Department of the Interior, agency officials will send a letter to DeSantis and Osceola asking them to respond to a list of questions, Skibine told the News Service.

“In general, the key question that the department has looked at is whether, if there are revenue-sharing provisions in the compact, whether these revenue-sharing provisions are a tax, which would be unlawful, or whether the payments are exchanged for a valuable consideration that the tribe obtains,” he said.

The Seminoles first entered into a compact with then-Gov. Charlie Crist in 2007. But Republican legislators challenged the deal in court, arguing that it required ratification by lawmakers. The Florida Supreme Court sided with the Legislature, resulting in a revised compact that allowed the Seminoles to operate slot machines, which were already permitted at pari-mutuel facilities in Miami-Dade and Broward counties, and gave the tribe “exclusive” rights to conduct banked card games such as blackjack and baccarat. 

But the Seminoles in 2019 halted payments to the state of more than $350 million a year because of a drawn-out dispute over controversial “designated player” card games offered at many pari-mutuels throughout Florida. The tribe ceased the annual payments after a series of court rulings.

The agreement drawn up by DeSantis and Osceola would not completely negate the tribe’s revenue-sharing agreement with the state if portions of the compact are breached, a feature that advocates say makes the deal a sure win for the state.

Addressing lawmakers on May 17, Allen acknowledged that the sports betting provision in the compact is likely to face legal challenges.

“Very candidly, it does not matter,” he argued, “because the state of Florida is not taking a risk.”