A federal court in Oklahoma has sided with Gov. J. Kevin Stitt, ruling that recent changes to the state’s gambling laws don’t violate its tribal gaming compacts. In his official capacity as Governor, Stitt was the defendant in a suit brought by the Wichita and Affiliated Tribes over two separate changes dating back to 2017 and 2018. The latter has some bearing on the possibility of an online lottery in the state.
Oklahoma tribes have exclusivity over most Class III gaming in the state. As of 2020, that includes sports betting. In return for that exclusivity, the tribes pass on a portion of their revenue to the state government. However, any expansion of non-tribal gaming in the state risks violating the compact, which would end the tribes’ obligation to share revenue.
In 2017, Oklahoma passed a bill repealing the limited hours of operation for commercial gaming at racetracks. The following year, a separate bill allowed the state lottery to introduce promotions and products with “second-chance drawings” through an internet website or online app. In their suit, the Wichita argued that each of these violated the compacts’ provision that the state must not permit additional electronic gaming.
Last week, Chief District Judge Timothy G. DeGiusti issued a summary judgment in favor of Gov. Stitt. Summary rulings are possible when there’s no disagreement between the parties over the facts of the case, only in how to interpret the law.
Gov. Stitt’s relationship with the state’s tribes has been frosty throughout his tenure. That bodes poorly for the prospects of online casino gaming in the state since such expansion would have to be done in partnership with the tribes. However, Judge DeGiusti’s decision does make it likely that an iLottery is possible, should the state want one.
Lottery Products are Not Class III Games
Seven states (plus D.C.) offer instant online lottery games, and many more sell draw tickets through the internet. Oklahoma is not among these.
However, a 2018 bill did make it possible for the state lottery to offer retail tickets that grant access to online games. Such tickets would provide a direct chance of winning a prize but also include a code to play an online game with an additional opportunity to win.
The Wichita claimed that such products are an “additional form of electronic gaming” and would violate the compacts.
However, Judge DeGiusti ruled that the tribe was taking the phrase out of context and ignoring its intent within the scope of the compact. He says that because of the context in which it first appears, “electronic gaming ” should be understood to mean “electronic Class III gaming.”
The court decision explains:
The phrase “any additional electronic gaming” appears in a provision regarding substantial exclusivity in Class III gaming authorized by the Compact. The Court rejects the Tribe’s effort to untether “any additional electronic gaming” from the context in which the phrase appears.
Could Oklahoma Authorize Instant Online Lottery Games?
Lottery products are explicitly not part of Class III gaming. Hence, Judge DeGiusti is saying that any new lottery products, electronic or not, are allowable under the compact. He also points to the precedent of “on-line” tickets, which in the context of state lotteries refers to draw tickets sold through electronic terminals at retailers.
The court’s reasoning opens the door to other exciting possibilities.
The e-Instants available in some other states are the online equivalent of video lottery terminals. They can bear a passing resemblance to slots but use the same mathematics as scratch tickets to award prizes. That makes them lottery games.
States passing a law to legalize such games have typically only needed to add the words “including the sale of tickets over the internet” to the existing language. In some cases, the state lottery was able to do this via a rule change without needing any help from the legislature.
Oklahoma’s 2018 bill only authorized online promotions and second chance drawings. The state would therefore need a separate bill to permit online games sold directly through the internet. However, Judge DeGiusti’s ruling establishes a precedent that would likely make such a law safe from challenge by the tribes.
Longer Hours are Not Additional Forms of Gaming
The other portion of the complaint is more straightforward and has no impact on future online gambling.
Oklahoma’s two racetracks are an exception to the tribes’ exclusivity over casino gaming. Per the terms of the compacts, each facility has the right to operate electronic casino-style games. Until 2017, state law restricted those games’ operation time to no more than 106 hours per week and 18 hours per day.
The Wichita argued that repealing that restriction constituted an expansion of electronic gaming in the state. Judge DeGiusti disagreed.
The relevant portion of the compact reads:
So long as the state does not change its laws after the effective date of this Compact to permit the operation of any additional form of gaming by any such organization licensee, or change its laws to permit any additional electronic or machine gaming within Oklahoma, the tribe agrees to pay the following fees…
By Judge DiGiusti’s reading, the key words in that section are “form of.” The electronic games in question are already allowed under the compact. According to DiGiusti, making them available to players for a longer period does not constitute a new “form of” gaming.