Igaming Focus: New trails for Indian gaming? Online considerations for the post-pandemic world.

“Sovereignty is not given. It is taken.”
– Mustafa Kemal Ataturk.

Nobody thought it would get this big. In 1988, the Reagan administration backed congressional efforts to allow Indian tribes, nations, and bands to license gambling operations on their Federally designated lands. The aim was not to liberate gambling so much as it was to bolster the status of tribal governments, giving them access to assets, which would be a steppingstone to eventual self-sufficiency. To be sure, the Indian Gaming Regulatory Act allowed substantial progress to be made in that direction. But it also let in other things, developments that nobody was really prepared for.

Today, Indian gambling is a $30 billion a year business. Twenty-nine US states have agreements of one sort or another with 240 Federally recognized Indian tribes, fielding a grand total of 460 operating Indian casinos. Of course, “operating” is a term that is now open to various definitions. Tribal gaming shut down along with most of the US economy in March, when the pandemic was first declared.

But when attempts to re-open state economies led to local spikes in infection rates, a number of states decided to reinstate the shutdowns. This time, however, many Indian operations that had reopened did not follow suit. Most of California’s tribal casinos did not close when Gov. Newsom decreed California’s economy should be re-shuttered in August on a county-by-county basis. There were sound monetary reasons behind these refusals to close. In many, if not most instances, the tribal casino was the biggest, if not the only economic driver for the whole tribe. Why should that help the Indians, when it didn’t help other, nontribal establishments?

Sovereignty, Kind Of

Because the Indians have a legal argument. It is called the doctrine of tribal sovereignty, and it has been quietly causing ulcers in official circles for years now.

When the country was founded, the Constitution gave Congress plenary power over dealings with the Indian tribes. At the time, most tribes were located outside the borders of the USA- that is, sovereign de facto. Sovereignty de jure was another story. A very tangled, confusing, and contradictory story. As the years passed, the status of the tribes became less that of coequal nations with the US government, and more that of wards of the US government – “domestic dependent nations” as Justice John Marshall put it. Under the Indian Reorganization Act of 1934, over 600 nations, tribes, bands, missions, family units, and even incorporated townships rate the status of “federally recognized tribes”, which means they have at least a measure of legal control over their lands and what happens there.

Did that include gambling? In the landmark case of California v. Cabazon Band of Mission Indians (480 US 202, 107 S. Ct 1083 (1987)), the Supreme Court explained where the boundaries are. If a state has a completely anti-gambling stance, such as Utah or Hawaii, then that state is within its rights to forbid any Native American communities within, also, from opening gambling operations. But where a state itself licenses gambling outside the reservations, then it cannot forbid the Native Americans therein from opening the same type of gaming operations also.

But the doctrine of “Indian sovereignty” is not a favored one in US judicial circles. A separate set of rules for one group, but not another, does seem to fly in the face of the creed of “equal justice under law.” Indeed, recent court decisions allowing “Indian sovereignty” to continue seem much more based in the juridical desire to avoid the appearance of arbitrary rulemaking, than any affection for the underlying rule. To build the future of a gaming industry on the doctrine of Indian sovereignty, therefore, would seem to be building on sand, rather than rock.

The New Frontier

And the Indian Gaming Regulatory Act has a definite frontier. It is concentrated on, in fact written for, land-based, brick and mortar gaming establishments. Land-based only would seem to be where safety lies. But thanks to the international economic convulsions of the coronavirus pandemic, safety is safe no more. For if the pandemic has had one central theme, it is dispersal, rather than concentration of the customers, the better to avoid mass contagion. Restaurants, movie theaters, every sort of personal service and entertainment, must now figure out a way to tap the customer base via the Internet and social media, or risk going under. But for tribal gaming, going online generates a new set of problems- in fact, several sets of new problems.

First, there is the thrice- vexed question of jurisdiction. Can an individual state of the United States open up Internet gaming and take all comers from all over the world? What would happen in case another nation, the Republic of X, complained that the online gaming from the (imaginary) U.S. state of Zenith was crooked, or out of line, or accessing the residents of X without permission of its government? To seek a judgment in some foreign court, against the gaming authorities of Zenith, without first going through the US Federal government, would be perceived, correctly, as a diminution of United States sovereignty. What about a judgment in the state courts of Zenith against residents of another state? It is for this reason that US states which seek to license online gaming make it clear that licensees will only take bets from bona fide residents of those states- often enough, only while the residents in question are physically located within their home state.

Second, there is the related question of reciprocity. Can gaming establishments home-based in Zenith reach out to the residents of X, if Zenith denies X- based establishments access to its own residents? It was precisely that question which led to the World Trade Organization decision against the United States, when its market access policies were challenged by Antigua. In and of itself, that particular ruling is no threat to the USA. The smaller, ephemeral nations of the Caribbean and such places are much too dependent on the goodwill of the American government to fear direct action from that quarter. All the same, it is a bad precedent to set; as the old story tells us. Anyone wanting to play the troll should remember that the little Billy Goats tend to have bigger brothers, sooner or later.

Pioneers?

For Indian gaming, as with most sectors of the leisure and recreation industries, the economic shock of the pandemic will hurt the little guys most. Smaller operations that have no large sponsors or backers may find themselves forced to curtail their operations, and in many instances they will wind up closing altogether. And this would seem to be inevitable. Gambling, after all, is a luxury, economically speaking. Access to a casino may be nice to have, but nobody absolutely needs it- except the proprietors.

But now, there just might be a way out. Many other entertainment and service venues have managed to survive by adopting an online business model. In fact, a network of online Indian gaming, even one that crosses state lines, has been supported by legislators at various levels, over the years, even by those who otherwise wished to ban online gaming altogether.

And when we look at it, it is not so radical a change as it might seem at first. After all, horse racing in the USA is state supervised, and today the states which allow horse betting also license Internet websites and networks to take bets on horse races all over the country. In fact, depending on the service you subscribe to, it may be quite possible for you, a resident of the USA, to bet on races overseas- in Europe, Asia, and even Australia.

Could the various US tribes and nations put aside rivalries and open their own in-state markets for the sake of accessing a global market? This is becoming a very important question as state after state licenses sports betting in the wake of USAA v Murphy, the 2008 Supreme Court decision that allowed state gaming authorities to license sports betting. Because that list of authorities very definitely includes the tribal gaming authorities operating under IGRA.

Could the tribes join with each other, and with state authorities pull together in a pioneering effort to master a radically changed market? As the post pandemic economy forces new choices on us all, such cooperation may be more likely than we would think at first. Remember that the First Americans began as pioneers. It’s just been a while, is all.

Mr. Owens is a California attorney based in Sacramento, specializing in Internet and interactive gaming law since 1998. Co-author of INTERNET GAMING LAW with Professor Nelson Rose, (Mary Ann Liebert Publishers 2005) ; Editorial board, Gaming Law Review 2005-2019; frequent contributor to other trade publications. Comments/inquiries welcome at mowens@trade-attorney.com.