Tuesday, May 5, 2015

The Texas Legislature Takes a “Texas Two Step” Approach to Indian Gaming

By Dennis J. Whittlesey

With new legislation introduced in Texas, it is an appropriate time to examine whether the Texas State Legislature is trying to do something for Indian Gaming or to Indian Gaming. The only certainty is that something is likely to happen! And, like the Texas Two Step, the legislative casino dance changes at the whim of the “leader” – which in this case is the Texas Legislature.

The overriding question is: What is happening here, and why?

For starters, it is important to understand two things: (1) the state’s three federally recognized Indian tribes do not share equal legal status and (2) the Legislature ostensibly has proposed to level the playing field so that all three enjoy an equal gaming opportunity. The three tribes are (1) the Texas Band of Kickapoo Indians in Eagle Pass, which is 143 miles southwest of San Antonio on the Rio Grande River and far from the Gulf Coast, (2) the Ysleta del Sur Pueblo Tribe – also known as the Texas Tigua Tribe, located near El Paso and far from the Gulf Coast, and (3) the Alabama-Coushatta Tribe of Livingston, 74 miles north of Houston and 76 miles northwest of Beaumont, and clearly much closer to the Gulf Coast and the hundreds of thousands of tourists annually traveling to the Gulf. Each of these tribes was recognized by a special Act of Congress.

Kickapoo was recognized by Congress through the Act of January 8, 1983, a federal law which imposed no restrictions on the Tribe’s right to conduct gaming. The Alabama-Coushatta and Texas Tigua Tribes were recognized through the Act of August 18, 1987, which restricted any tribal gaming to gaming activities that are lawful under Texas state law. The distinction between Kickapoo gaming opportunity and that available to the Alabama-Coushatta and Tigua becomes important under both the Texas state laws and, in turn, the federal Indian Gaming Regulatory Act of 1988.

It should be noted that the Alabama-Coushatta opened a casino in 2001 on its Livingston reservation that produced monthly revenues of an estimated $1 million for nine months. A federal court shut it down, and the facility has never reopened. Similarly, the Tigua Tribe operated a casino for a while, but it too was closed by court order. Since then, the Tigua gaming operation has been limited to a “sweepstakes” that the Tribe claims is legal under state law. In the meantime, the Kickapoo Tribe has been operating a Class II gaming facility on its reservation, but the State has refused to negotiate a Class III gaming compact.

The two “have not” tribes are the subject of state legislation that would remedy the situation. This would be accomplished by a bill introduced on March 12 by state representatives for districts in Houston and El Paso purporting to put all three Texas tribes on an equal footing. Indeed, the legislation has been touted in the press as “recognizing the gaming rights of all tribes in Texas.” It would do this by removing the restrictions of the 1987 federal law by extending the same rights to the two tribes recognized by that legislation to the level of rights enjoyed by the Kickapoo under the 1983 federal law. The bill sponsors’ stated intent is to amend the Texas Constitution to allow the Alabama-Coushatta and Tigua to engage in gaming on their tribal lands, and thus putting them on the same footing as the Kickapoo.

Within 24 hours of the introduction of the March 12 legislation, State Representative Joe Deshotel of Beaumont proposed to severely mitigate the pro-tribal benefits from the day-old legislation. The Beaumont politician introduced legislation proposing to authorize nine non-tribal “Las Vegas style” casinos to be located in counties on the Texas Gulf Coast. (As the reader will recognize, the sponsor’s hometown just happens to be in one of the counties that just happens to be on the Gulf Coast.)

The ostensible purpose of the new bill is far from the costs incurred by property owners in those designated counties during violent storms, such as hurricanes. However, its actual effect would be devastating to an Alabama-Coushatta gaming facility located far from the tourism mecca of the Gulf Coast. It is true that the Tigua and Kickapoo would benefit, but they almost certainly would lose destination casino traffic in light of the competing opportunity on the Gulf Coast.

The March 12 legislation looks great on paper. However, it looks much less so in light of the March 13 legislation. Moreover, current activity in the Legislature is even more troubling for tribal gaming. What initially seemed to be a fairly simple resolution is more complicated by recent statements by Texas legislators from Laredo, Houston, and Eagle Pass, as well as statements from anti-gaming lobbyists claiming a “clear majority” of lawmakers opposed to any expansion of gaming “even when times are hard.”

To read the complete article in the latest edition of Gaming Legal News, please click here.

Tuesday, April 28, 2015

Have the Odds of Casino Gaming in Tennessee Just Been Raised?

Tennessee has long been known for its strong tourist attraction. With Beale Street and Graceland in Memphis, the music industry and dynamic attractions of Nashville, the Aquarium in Chattanooga and beautiful Smoky Mountains in East Tennessee, the state continues to draw numerous tourists from all over the country, and beyond.

Gaming is not legalized in Tennessee. Tennesseans do, however, have easy access to gaming outside the state. Tennessee has eight contiguous states (Kentucky, Virginia, North Carolina, Georgia, Alabama, Mississippi, Arkansas and Missouri). Three of those states have legalized gaming (North Carolina, Mississippi and Missouri).

The statistics show that Tennesseans have been streaming across its borders to its sister states to take advantage of the gaming these states offer. This fact, along with the millions of dollars following Tennessee residents gaming in other states, has not gone unnoticed by the Tennessee legislature.

Perhaps mindful of this, State Representative Jason Powell submitted a bill to the Tennessee legislature last month. The bill proposes that Tennessee allow casino gaming.

There has long been opposition in the legislature to gaming in Tennessee. But for the first time in decades, a bill proposing gaming in Tennessee received a second in the subcommittee where it was introduced, and a discussion of the issues relative to gaming took place on the Tennessee Capitol Hill.

Dickinson Wright Partner Stuart Scott was asked by Representative Powell to address the legislature. Mr. Scott did so and was able to highlight for the legislature facts and statistics concerning gaming, Tennesseans and revenue.

For example, Tunica, Mississippi, has gaming. It is located in the northwest quadrant of the state. Between 2007 and the third quarter of 2012, Tennesseans made up over 30% of the gaming patrons there. During this same period of time, the data demonstrates that Tennessee residents outpaced residents of the host state by more than 50% at these Mississippi gaming sites. In fact, Tennesseans outpaced patrons from every other state during this time.

Tennesseans are consistently willing to cross state borders to find casino gaming – and take their tax dollars with them. Tennesseans are gaming; they are simply doing so in other states, and taking millions of dollars with them which could be used to benefit the state of Tennessee.

Ohio provides a prime example of the enormous financial benefits Tennesseans stand to gain from legalized gaming. Ohio opened four casinos between 2012 and 2013. In 2014 alone, Ohio brought in $268,000,000 in gaming revenue for its state.

In order to permit casino gaming, Mr. Scott explained to the legislative committee, there must be an amendment to the Tennessee constitution. While the process is lengthy, it permits time for input by all involved and likewise allows for a carefully crafted amendment that permits limited, intelligent gaming in precisely the areas desired.

Some members of the legislative committee considering the bill were also unaware of the control the State may exercise over gaming. There has been concern that permitting casino gaming in Tennessee would have the same effect as authorizing the lottery did. Of course, once the lottery was authorized within the state, lottery ticket purchases were permitted ubiquitously.

Unlike the lottery, casino gaming can be controlled both in terms of location and concerning the number of casinos allowed. Mr. Scott explained that Ohio, for example, only permitted four casinos. These four casinos, one in each of Ohio’s largest cities, brought in just under $64,000,000 in gaming tax revenue in the fourth quarter of 2014 alone. Ohio has already received in excess of one billion dollars in gaming revenue since the fourth casino was completed in 2013.

Several of the legislators were unaware of the fact that the State retains total control over how gaming revenue is spent. In its current form, Representative Powell’s bill will divide gaming revenue between K-12 education and gaming addiction programs. The state entities benefiting from gaming revenue, however, may be supplemented. For example, city and county funds, property tax abatement, infrastructure work and law enforcement support may be considered, among a host of other positive ways to distribute casino gaming proceeds among state agencies, which will benefit all Tennesseans.

Following Mr. Scott’s presentation, the committee broke with what has become a long-standing tradition. Instead of killing the bill promptly, the bill was sent for a fiscal study, which is to take place in the summer of 2015. This is the first time in decades a bill of this nature regarding casino gaming has been allowed to proceed out of a subcommittee, Representative Powell confirms. A discussion of issues relative to casino gaming in Tennessee may begin later this year during the next legislative session.

Tuesday, April 21, 2015

USVI Casino Control Commission Hosts IMGL Gaming Law Conference

The United States Virgin Islands Casino Control Commission hosted the International Masters of Gaming Law Annual Spring Conference on St. Thomas on March 29-31. The conference started off with a welcome from USVI Casino Control Commission Chairwoman Violet Anne Golden and a keynote address by USVI Governor Kenneth E. Mapp. Governor Mapp advised the conference audience that it is time for the USVI to expand its gaming operations beyond the current casino on St. Croix and explore initiation of Internet gaming in the USVI. Governor Mapp emphasized that he supports the USVI gaming industry and its expansion as an element of the USVI economy. In this regard, the USVI Attorney General issued an opinion in 2013 concluding that the USVI’s previously enacted gambling law, which allows Internet-based gambling, does not conflict with federal rules. However, it is recognized that the previously adopted legislation requires tweaking in light of legal and regulatory developments regarding Internet gaming since the original enactment of the USVI gaming legislation in 2001. The USVI is also investigating the possibility of opening the USVI to sports betting.

The International Masters of Gaming Law Conference featured speakers from around the world discussing online and offshore gaming, fantasy sports, legalized sports wagering, global gaming reforms, lottery expansion efforts, compliance issues, FinCEN’s AML protocols for casinos, and the increasing expansion of Internet gaming on a worldwide basis.

In addition to several IMGL master classes set for the iGaming Compliance Conference in Amsterdam (June 25) and G2E in Las Vegas (September 28), the IMGL will host its Annual Fall Conference this year in Lima, Peru, on October 14-16 in conjunction with the International Association of Gaming Regulators.

USVI Casino Control Commission Chairwoman Calls for Regional Gambling Cooperation

At the International Masters of Gaming Law Conference held on St. Thomas, USVI, in March, USVI Casino Commission Chairwoman Violet Anne Golden called for regional dialogue and cooperation amongst the Caribbean countries permitting gambling on their islands. Noting that amongst the Caribbean islands there are both regulated and unregulated gambling activities, Ms. Golden declared that it is in the best collective interests of the Caribbean countries to establish a regional gaming regulatory association focused on standardizing gaming regulations in the Caribbean. In particular, establishing some uniformity of the regulatory environment could encourage investment in new gaming facilities operating in line with the standards required and expected by the major United States and world casino operators and gaming equipment suppliers. The expansion of legal, well-regulated gaming on the Caribbean islands will bring with it expanded economic development, increased employment opportunities for the island populations, and increased revenues for government functions, all of which are of critical importance to the Caribbean nations. A precursor to such a cooperative Caribbean regulatory association may well be establishing an annual regional conference supported by a number of Caribbean nations focusing on Caribbean gaming and regulatory issues that encourages an open dialogue between Caribbean gaming regulators and Caribbean gaming operators and gaming equipment suppliers.

IMGL Past President Robert Stocker echoed Chairwoman Golden’s call for regional cooperation during the “Changes in Offshore Gaming Regimes” panel at the IMGL Conference, noting that the Caribbean countries permitting gaming operations need to get their houses in good order in anticipation of the eventual opening of Cuba to the United States general tourist trade. Stocker noted that it is only a matter of time before Cuba and the Cayman Islands, as well as the Atlantic island of Bermuda (which is in the preliminary stages of establishing casinos on the island), open their doors to casinos. These are other tourist-oriented jurisdictions seeking to lure tourist dollars to their islands. While in some cases such gaming expansion will in all likelihood be many years away from reality, the sooner the Caribbean islands that currently allow gaming get themselves into solid regulatory status in compliance with the United States and international regulatory trends, the greater the likelihood of their being able to withstand increased competition from the opening of legal gaming in other competing tourist destinations.

Tuesday, April 14, 2015

North Fork Tribe Sues State for Compact in Latest Chapter of Gaming Saga

By Patrick Sullivan

By the summer of 2014, it appeared that the North Fork Rancheria of Mono Indians of California had finally made it over the last hurdle to begin construction of a Class III casino with 2,000 slot machines and 40 gaming tables in Madera County, California. But a successful anti-gaming ballot initiative reversed the Tribe’s Class III gaming compact in November, and the Tribe is now suing to regain its lost ground.

The Tribe had pursued its goal for more than 10 years, executing a memorandum of understanding with Madera County in 2004. In 2011, the Tribe won a “two-part” gaming eligibility determination for its newly acquired off-reservation casino site under the Indian Gaming Regulatory Act (“IGRA”). The determination was based on conclusions by the Secretary of the Interior that a gaming facility was in the best interests of the Tribe and not detrimental to the surrounding area, with the concurrence of the governor.

The Tribe negotiated a gaming compact with Governor Jerry Brown which was signed by the governor in August 2012. In February 2013, the Tribe successfully placed a 305-acre parcel in trust status for the project, 36 miles from its Rancheria. On October 22, 2013, the Secretary of the Interior published notice that the compact was federally approved. California requires that Class III gaming compacts be legislatively ratified, and on June 27, 2014, the legislature ratified the Tribe’s compact. Governor Brown signed the compact ratification bill on July 3.

The Tribe received a devastating blow when, immediately after the legislative ratification, Stand Up for California!, a gaming watchdog group opposed to what it calls “reservation shopping” by California Indian tribes, began the process of gathering signatures to refer the North Fork compact, along with a second off-reservation gaming compact, to the voters. The group successfully placed the referendum on the November 2014 general election ballot and commenced an $18.5 million campaign to defeat the compacts, reportedly outspending supporters of the project by 45-1. Almost all of the opposition funding came from other Indian gaming tribes and their investors. The Picayune Rancheria of Chukchansi Indians claimed the North Fork project would reduce revenues at their own casino by as much as a third (the Chukchansi casino is currently closed due to a tribal leadership dispute).

Stand Up! had previously sued the State, the governor and other officials in California state court seeking to prevent the governor from even executing the North Fork compact. After Stand Up! began the referendum process, the Tribe intervened in that litigation and filed a counterclaim challenging the validity of the referendum. The Tribe claimed that (1) the ratification could not be undone by referendum under California law, and (2) IGRA’s requirement that states negotiate compacts “in good faith” preempted such a referendum to the electorate. On June 26, the state court allowed the referendum to proceed, ruling that the compact ratification was subject to referendum under California law as a “legislative act” and not an exempt “administrative act.” The Court further held that California’s referendum process could be read in harmony with IGRA and was not preempted by the federal law.

In January 2015, the Tribe requested that the State reopen compact negotiations. In a January 16, 2015, letter to the Tribe’s attorney, Joginder Dhillon, Senior Advisor for Tribal Negotiations to Governor Brown, wrote: “Given that the people have spoken, entering into negotiations for a new compact for gaming on the Madera parcel would be futile.”

Dhillon’s letter was exactly what the Tribe needed to demonstrate that the State had refused to negotiate. On March 17, the Tribe filed a federal lawsuit against the State of California in federal district court alleging that the referendum overturning the compact ratification and the renewed refusal to enter new negotiations violated IGRA. The Tribe asked the court for a declaration that the State had failed to negotiate a Class III gaming compact “in good faith” in violation of IGRA and for an order requiring the State to resume negotiations.

The State has yet to file an answer, but California’s waiver of its Eleventh Amendment immunity to the Tribe’s bad-faith suit means that the Tribe will likely prevail and win the right to conduct Class III gaming at the site. In the meantime, nothing prevents the Tribe from conducting Class II gaming on the site, as Class II gaming does not require a compact.

To read the complete article, please click here.

Tuesday, April 7, 2015

Internet Gaming Launches in Ontario – Alberta Next?

By Michael D. Lipton, Q.C., Kevin J. Weber, and Jack I.Tadman

Pursuant to the Canadian Criminal Code, only provincial governments may conduct and manage Internet gaming. Eight provinces currently conduct and manage Internet gaming, the most recent of which, Ontario, launched its Internet gaming website on January 8, 2015.

The two Canadian provinces not currently offering Internet gaming are Alberta and Saskatchewan. Alberta, however, has recently commenced the process of finding a service provider to enable the Alberta Gaming and Liquor Commission (AGLC) to conduct and manage Internet gaming in Alberta.

Alberta is Canada’s fourth largest province in terms of population and third largest province in terms of gross domestic product. In 2012-2013, Alberta earned nearly $1.7 billion in net gaming revenue, and at 3.99%, had the highest percentage of provincial revenue derived from gaming.

In an interview with the Canadian Broadcasting Corporation, AGLC CEO Bill Robinson stated that “too much money is being left on the table when it comes to Internet gambling sites and Alberta needs to cash in,” and “we estimate that there’s well over $100 million that leaves Alberta [through unauthorized online gaming].”

On January 22, 2015, Alberta issued a request for information (RFI) for the provision of a Turnkey Internet Gaming Solution. The RFI invited qualified vendors to describe their vision and approach to the deployment of an Internet gaming solution and the delivery of related services. AGLC’s preferred solution is a turnkey offering which includes a back-end operational platform, operations management and support services, and game content and marketing from multiple providers.

A primary vendor will provide the back-end platform and operational services for “a true turnkey environment requiring minimal intervention by the AGLC for day-to-day functions.” Other providers may provide game content and support services.

Vendor qualifications include:

  • a reference base of one or more current clients, either government or private/commercial entities, to whom the vendor has legally supplied products or services in the Internet gaming sector for a minimum of one (1) year;
  • having experience in the operation of such products or services in regulated markets in either Europe or North America;
  • prior to contract execution, being found suitable by the AGLC Due Diligence Unit and holding a gaming registration in Alberta; and
  • a demonstrated operation of such products of services for real-money wagering.

In addition to issuing the RFI, the AGLC also released answers to questions asked by potential respondents. One such question led AGLC to answer that it will not be prohibiting the primary vendors from integrating/delivering games from non-primary vendors if those games are currently being offered to Alberta residents via offshore operators. This response indicates that the AGLC may have a tolerant attitude towards offshore operators who offer games to Alberta residents.

The RFI closed on February 26, 2015.

Tuesday, March 31, 2015

Is Gaming in the Cards for the Volunteer State?

By W. Stuart Scott

Dickinson Wright has learned that Tennessee House Representative Jason Powell has submitted a proposed constitutional amendment that could permit casino gaming in Tennessee. This is designed to amend Article 9, Section 5 of the Tennessee Constitution regarding casinos. It proposes that the Tennessee Constitution be amended to permit gaming in a fashion similar to the previous amendment that allowed for a lottery in Tennessee.

Tennesseans are taking advantage of the relatively easy access they have to legalized gaming in surrounding states. The fact that multiple millions of Tennessean’s dollars are streaming across its borders to other states in gaming revenues has not gone unnoticed by the legislature. For example, in the third quarter of 2012 alone, the Mississippi Gaming Commission confirms that over 30% of its gaming revenues in its Northern River Region, which includes Tunica, came from Tennessee residents.

The current proposal adds to the constitutional language that allowed lotteries in Tennessee by allowing the Tennessee legislature to authorize casino gaming. It also directs that all state revenues derived from the proposed casino gaming, less an amount to administer gaming, will be allocated to K-12 education and gambling addiction programs.

Passage of the proposed amendment through the initial process is a gamble. Assuming the amendment makes its way out of the state government full committee, it will then be assigned to another committee. The House of Representatives Clerk’s office decides which committee it would be assigned to. Since the revenues from gaming could be multiple tens of millions of dollars, it is anticipated that the proposed amendment might be assigned to the Finance Ways and Means Committee because of its potential, significant fiscal impact on the state’s coffers. Another possibility is that the bill would proceed straight ahead to the Calendar and Rules Committee. The next step would be to send the proposed amendment to the House Floor for a vote.

Exact timing is uncertain, but it is possible the subcommittee meeting would take place on Wednesday, March 25, 2015. If the amendment receives the necessary votes there, it will then be heard in the state government full committee on March 31, 2015.

If the proposed amendment makes it through the committee system, it would then need to receive a constitutional majority in the House Floor vote. But, it does not appear the House has even authorized a fiscal effect study on possible gaming in Tennessee. There has been no official discussion on the proposed amendment yet, and the scope of potential gaming in Tennessee has not yet been addressed.

If gaming were to be legalized in Tennessee, it could be intelligently crafted in such a way to maximize revenue and control location, and the potential economic windfall to the state and its school system from the proposed amendment could be in the hundreds of millions. In a state where even passing the lottery was controversial, discussing gaming may create a storm of protest, though.

To read the complete article, please click here.

Tuesday, March 24, 2015

Nevada Regulators Green-Light Wagering on Olympic and Virtual Events

By Kate Lowenhar-Fisher, Jennifer Gaynor and Greg Gemignani

In a move designed to provide Nevada race books and sports pools with a greater variety of offerings, the Nevada Gaming Commission, on February 26, 2015, adopted amendments to its regulations to allow wagering on Olympic events as well as “virtual” events.

Wagering on Olympic events previously had been legal in Nevada but was outlawed in 2001 in response to a campaign by U.S. Senator John McCain to ban betting on all amateur sports. Since 2001, Nevada Gaming Commission Regulation 22 (Race Books and Sports Pools) has prohibited wagers on “any amateur non collegiate sport or athletic event.” The February 26 amendment revises the regulation to specifically exclude from the list of prohibited wagers bets on “Olympic sporting or athletic events sanctioned by the International Olympic Committee, subject to limitation by the chairman or the chairman’s designee in his sole and absolute discretion.” This allows broad betting on Olympic events but provides Nevada’s regulators the discretion to remove a certain contest or event from betting activity.

This is a real win for Nevada’s sports pools, for which the summer is traditionally a slow sports betting period, because baseball is the only major sport in the United States during that time. This puts Nevada’s sports pools on par with those in other international jurisdictions, such as the U.K., which already allow wagers on Olympic events.

Quickly following the decision on February 26, Nevada sports books raced to begin offering betting lines on the 2016 Summer Olympic Games in Rio de Janeiro.

The Nevada Gaming Commission further amended NGC Regulation 22 on February 26 to allow wagering on “virtual” events at Nevada sports pools.

For wagers on a virtual event to be permissible, the conditions include that an approved gaming device be used to determine the outcome(s) and display an accurate representation of the outcome(s) of the virtual event, that a live display of the virtual event is offered to all approved sports pools, and that the virtual event is pre-approved by Nevada’s gaming regulators. The technology involved in offering virtual events will be subjected to testing and approval by the Nevada Gaming Control Board.

Virtual wagering is widespread and successful in the United Kingdom and other countries. Initial offerings are likely to include mainly virtual racing and sporting events but could expand to a potentially unlimited number of virtual events.