The gaming industry is waiting nervously to see if the Bureau of Indian Affairs (BIA) goes through with proposed changes to the rules governing tribal-state compacts under the Indian Gaming Regulatory Act (IGRA). The public comment period for the rules closed on March 1, 2023. Since then, the BIA has remained silent on its plans as stakeholders brace for legal drama.
The changes, like IGRA itself, are complicated. That said, two particular points have received the most attention because they aim to produce a radical shift in US online gambling. The proposed rules state that:
- Online gambling should be considered to take place on tribal land if that’s where the servers are located, and
- A state that regulates any form of casino gambling must be willing to negotiate all forms of gambling with tribes.
Taken together, these would allow tribes in many states to launch online casinos without the need for legislation.
Naturally, most public comments by tribes have favored the proposal. Conversely, lawmakers and the commercial gaming industry find the prospect alarming.
Opponents of the changes would be unlikely to let such rules come into effect without a fight. Though stopping short of suggesting it would be the one to initiate such a fight, the iDevelopment & Economic Association (iDEA) warned that the rules “would overstep BIA’s statutory authority in several ways.”
John Holden, an expert on gaming law who has previously written for Bonus about the proposed changes, said he sees the contentious portions as “legally suspect under the Administrative Procedure Act.” In his opinion, a challenge is inevitable:
The APA is under pretty intense scrutiny from certain judges so I would expect anything that could be challenged will be. Gaming expansion is an easy target.
What All the Fuss is About
Federally-recognized indigenous tribes are sovereign entities. They aren’t subject to state laws but interact with state governments in ways established by federal laws like the IGRA.
One key feature of the IGRA is the requirement for state governments to negotiate in good faith with tribes who want to offer any type of gambling that exists elsewhere in the state. For instance, if the state allows charity bingo, it must negotiate with any tribes who want to open their own bingo halls.
The IGRA defines three classes of gambling:
- Class I: Traditional and social games with prizes of minimal value
- Class II: Bingo and “non-banked” card games like poker
- Class III: A catch-all for other forms of gambling, including slots, casino games, sports betting and iGaming
The BIA’s new rules seek to make the requirement to negotiate a categorical one. So, if a state allows any type of casino game, like blackjack, tribes could force the Governor to the table to negotiate any kind of Class III gaming, including online gambling.
Gambling under the IGRA is only allowed on tribal lands because they are a sovereign jurisdiction. State law applies outside those lands, so any new gambling requires legislation, not a compact.
However, the BIA is also taking a stand in favor of groups like the Seminole Tribe of Florida. Florida’s constitution prohibits gambling. The Seminoles and the Governor’s office attempted to work around the need for a sports betting referendum. They asserted in the compact that a bet received by servers on tribal lands is considered to occur there, regardless of where it originated.
That notion is the subject of ongoing litigation in federal courts. Yet the BIA is effectively saying that it intends to approve other such compacts in the meantime.
Rules to Facilitate Retail Expansion Have Received Less Attention
The aspects of the rules changes relating to online gambling expansion have received the most attention. However, Holden points out that other proposed changes would have a similar impact on retail gaming:
The proposal would make it easier to take land into trust, which means we could see tribal casinos in more major cities. Those changes are likely to be a target for anyone who opposes gaming expansion.
Placing land into trust with the Department of the Interior is how tribes establish their sovereign territory. The proposed changes would remove some of the hurdles involved in doing so. Benefits to tribes, such as land use and tax exemptions – and the right to conduct gaming under the IGRA – exist only on trust lands.
In other words, if the changes went unchallenged, it would become easier for tribes to buy up land and place it into trust, thereby making it possible to build tribal casinos in new locations.
The BIA May Be in a Catch-22
Many of the changes the BIA is proposing, including these controversial ones, seem aimed at making it easier for tribes to expand their gaming activities. Reading between the lines, however, there’s also a sense of frustration. The BIA appears to feel it’s in a sort of Catch-22 regarding the legal ambiguity around online betting.
When the BIA receives a compact, it has 45 days to approve or reject it. The IGRA stipulates that it can only reject compacts on legal grounds.
If the BIA fails to act within 45 days, the compact takes effect by default. However, the District of Columbia Circuit Court of Appeals ruled in Amador County v. Salazar that the BIA has an obligation to reject illegal compacts and must not leave the question to the courts.
That puts the BIA in a bind when it cannot determine the legality of a compact. It cannot reject a legal one nor approve an illegal one, even through inaction. It raises this point in explaining its proposed changes:
The Department notes that one Circuit has held that the Secretary must disapprove a compact if it violates any of the three limitations in IGRA and may not approve the compact by operation of law. The Department, however, strongly disagrees with the court’s holding, finding that it conflicts with and negates a specific provision of IGRA.
It comes back to the point later when explaining its stance on the online wagers issue:
The Department notes the ultimate legality of gaming activity outside Indian lands remains a question of State law, notwithstanding that a compact discusses the activity. However, Congress in enacting IGRA did not contemplate the Department would address or resolve complex issues of State law during the 45-day review period.
Forcing the Issue
It appears, then, that the BIA’s goal is to force the judicial and legislative branches to make up their minds. Its stance is obviously popular with tribes, who want to expand gambling as quickly as possible. However, by its own admission, the BIA knows its opinions don’t carry the force of law.
It may well expect a challenge. Whatever resolution comes of it would provide clarity and free the BIA from making such determinations itself in a limited timeframe. At the same time, such a decision would set the tone for US online gambling for decades to come.
Already, we see hints of what such a challenge might look like. For starters, there is the question of the limits of the BIA’s authority, as indicated by iDEA. Another public comment, without a name attached, pointed out a possible contradiction in the BIA’s stance.
While asserting that tribes can accept bets originating on state land, the BIA added an asterisk that the same does not apply on other tribes’ land. The anonymous commenter argues that this conflicts with the claim that only the location of the servers matters, and not where the bet originates:
If the legal theory is that the situs of the bet is where the bet is accepted, then the physical location of the player (within the State) is irrelevant. To the contrary, however, this proposed limitation suggests that the location of the player is indeed a material factor to the legality of the wager, which undermines the entire legal premise upon which tribal-mobile wagering is built.