Department of the Interior Announces Finalization of New Compact Approval Rules

After over a year of deliberation, the US Department of the Interior (DOI) is moving ahead with a modified version of the new compacting rules proposed by the Bureau of Indian Affairs (BIA). The final rules will open up some new possibilities for tribal gaming. However, they also include significant changes from the draft version that will mitigate the potential impact.

On Feb. 20, the DOI announced that it will be publishing the final rules in the Federal Register in “the coming days.” That publication will start a 30-day clock countdown, after which the rules will come into effect. These rules govern the way states and tribes negotiate gaming.

Secretary of the Interior Deb Haaland said:

These regulations are part of the Biden-Harris administration’s commitment to ensuring that Tribes have the resources they need to exercise their Tribal sovereignty and support their communities. Not only does Indian Gaming support Tribal economies, the funding it generates helps to support the vital services that Tribal Nations provide to their citizens—from language preservation to healthcare. By updating these regulations, we will provide certainty and clarity to Tribes for an industry that remains one of the most significant sources of economic development in Indian Country.

The BIA’s proposed rules were popular with many tribes and controversial among commercial gaming interests for two main reasons:

  • They endorsed the Florida model of online gambling, in which a bet can be considered to take place wherever the receiving servers are.
  • They asserted that a state that regulates any form of Class III gaming must negotiate any and all such gaming that tribes might wish to offer.

Together, those features had the potential to turn the US gambling landscape on its head. However, only the first made it into the final draft, with some changes.

‘Class III Gaming’ Doesn’t Mean All Class III Gaming

The DOI’s announcement included a 122-page document detailing the feedback it considered and changes it made to the BIA’s draft rules. Of all those changes, perhaps the one with the greatest impact is that it declined to adopt the proposed paragraph 293.27.

That addition to the rules read as follows:

May a compact or amendment permit a Tribe to engage in any form of class III gaming activity? Yes. If the State allows any form of class III gaming, then the State is regulating all forms of class III gaming. A State’s refusal to negotiate in a compact over all forms of class III gaming, not prohibited in the State, is considered evidence of a violation of IGRA.

Class III gaming is the catch-all category. It includes everything that isn’t Class I (traditional tribal gambling for cultural purposes) or Class II (bingo, pull-tabs, etc.).

Among other things, Class III includes all casino games, sports betting, and the online versions of those.

Had that rule made it in, it would have massively expanded tribes’ ability to compel negotiations. A state could not permit any form of such gaming—retail sports betting or small-scale slots parlors, say—without opening the door for tribes to negotiate anything they like, up to and including online casinos.

The DOI points out that some objections came from parties that misconstrued the rule. Even if it had been adopted, states could explicitly outlaw particular forms of gambling to avoid such negotiations. However, it would have reversed the default presumption. Instead of being off the table until expressly permitted, novel forms of gambling would have been up for negotiation unless expressly outlawed.

That point is now moot, however. The existing system will remain in place. Tribes can only compel the state to negotiate for specific forms of gambling it already regulates.

Changes to the Controversial Bet Location Rule

The new section about bet location did make it into the final rules. However, the DOI made two small but meaningful tweaks to the language.

The original draft stated that a compact could address online wagers originating outside of tribal lands, with three provisions:

(a) State law and/or the compact or amendment deem the gaming to take place, for the purposes of State and Tribal law, on the Tribe’s Indian lands where the server accepting the wagers is located;

(b) The Tribe regulates the gaming; and

(c) The player initiating the wager is not located on another Tribe’s Indian lands.

The final version changes point (a) by replacing “and/or” with “and.”

This means that a compact can’t unilaterally assert that a bet takes place where the servers are. A separate state law would be required to affirm that interpretation.

That’s important because it means that a Governor couldn’t bypass their legislature entirely to authorize iGaming by way of a compact. However, Florida’s strategy to avoid a Constitutional referendum through a compact plus “implementing bill” could still work, provided it holds up in state court.

The new rules could, therefore, be the final nail in West Flagler Associates’ hopes of a successful federal appeal in their challenge to Florida sports betting.

The other change is to provision (c). This one is in tribes’ favor, adding “unless that Tribe has lawfully consented” to the end.

That change means that tribes can now voluntarily opt into online gambling offered by other tribes or strike mutual agreements to share their players.

A Modest Impact

So, what do we make of the changes? What do they mean for the future of online gambling in the US?

Taken together, the changes should make it a little bit easier for states and tribes to work together to authorize tribal iGaming. That’s particularly true in states like Florida, where authorizing a new form of gambling statewide would typically require a constitutional amendment and, therefore, a referendum. There are many states in that position.

However, the DOI’s changes avert the chaos and legal challenges the BIA was potentially flirting with. Tribes won’t unilaterally be able to push for iGaming in states that don’t want it or aren’t ready to move forward with the idea.

If anything, the new rules will make federal challenges less likely in the future. They formalize what was already the position of the DOI, the DC Circuit Court of Appeals, and seemingly the Supreme Court: That the issue of where a bet takes place is one for states—and their courts—to decide.

Update (Feb. 28., 2024): Chairman James Siva of the California Nations Indian Gaming Association told PlayUSA that California tribes are “happy-ish” with the outcome. However, tribal gaming attorney Scott Crowell lamented that the rules don’t treat mobile wagering as a separate type of gaming for purposes of compelled negotiations. This hurts tribes in states like Indiana, Iowa, and Oregon, where they may be limited to retail sports betting while having to compete against online apps from commercial operators. A similar situation with tribal retail casinos vs. commercial iGaming could also occur, though it hasn’t come up yet in any state.

About the Author

Alex Weldon

Alex Weldon

Alex Weldon is an online gambling industry analyst with nearly ten years of experience. He currently serves as Casino News Managing Editor for Bonus.com, part of the Catena Media Network. Other gambling news sites he has contributed to include PlayUSA and Online Poker Report, and his writing has been cited in The Atlantic.
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