Kurt Luger, executive director of the Great Plains Indian Gaming Association in Bismarck, North Dakota, believes he knows what it takes for American Indian governments in the rural United States to succeed with internet poker.
“We need a coalition,” says Luger, with enough tribes to generate the player liquidity for a profitable online poker venture.
“I’d like to see (an internet) server on Shakopee,” he says of the prosperous Shakopee Mdewakanton Sioux Community in Prior Lake, Minnesota, near Minneapolis, an operation that would link smaller, remote tribes in the Midwest, Great Plains and throughout the United States.
“That’s what I would like to see happen, if I had my druthers.”
Outside California—potentially the country’s most lucrative online poker market with 38 million people—many of the 255 tribes in the lower 48 states believe interstate alliances are crucial to efforts to leverage entry into online gambling.
California is the anomaly, with tribes and card rooms seeking legislation to legalize intrastate internet poker.
Tribal networks linking reservations in the more rural states are particularly logical in the absence of federal legislation and with the growing number of states legalizing internet gambling, creating competition for the 425 Indian casinos in 28 states. Ten states may legalize online wagering this year, said Gambling Compliance.com, joining Nevada, New Jersey and Delaware.
Meanwhile, a handful of smaller tribes are considering launching real-money websites to offer poker and Class II bingo under the Indian Gaming Regulatory Act. Some plan to press the legal envelope and accept wagers beyond reservation borders, a strategy many Indian law experts believe will be found to violate federal law.
But defining a nationwide internet trend in Indian Country is extremely difficult. “Tribes are all over the spectrum on iGaming,” says online consultant Ehren Richardson.
With the likelihood Congress will not move on internet wagering, a growing number of indigenous leaders no longer see the urgency to seek entry into the market.
“There is not the pressure to get it done today as there was a few years ago,” says Chuck Bunnell, CEO of the Mohegan Tribe of Connecticut.
And, perhaps most significant, larger tribes are becoming skeptical that the resources needed to launch a gambling website will justify the returns. The skepticism is supported by dismal revenue reports out of Nevada and New Jersey, where Governor Chris Christie’s expectations of $180 million a year have been lowered to $34 million.
“Some of the bigger tribes have really, really looked at the internet,” says a prominent Washington lobbyist, “particularly a few years ago, when there was the sense, ‘It’s going to happen. It’s going to happen. It’s going to happen.’
“But there’s now a sense nothing is going to happen. And the bigger tribes aren’t willing to put a lot of money out because they don’t see the returns.”
“I’ve seen that all along,” says Jeffrey Nelson, attorney for the Tribal Internet Gaming Alliance (TIGA) a coalition of two Wisconsin tribes (Lac du Flambeau Band of Lake Superior Chippewa Indians and Bad River Band of Indians) seeking to link reservations in a network offering Class II bingo.
“TIGA was born from small to mid-sized tribes. We don’t have any large tribes. I would love to have a wealthy tribe join us.”
Nelson doesn’t believe there is any significant trend other than “bigger tribes are just being cautious because they have a lot to lose.”
“As soon as California opens up, tribes are going to be singing a different song,” Nelson says. “If California opens up or if TIGA gets off the ground, there’s going to be a change.
“When that happens, I don’t know. I’m done predicting when it’s going to happen because I’ve never been right.”
One tribal official noted a gambling website platform could run from $60 million to $70 million, with annual marketing expenses well into eight figures. It’s a difficult bit of math for small tribes in rural markets outside California.
“It’s hard to build liquidity in states that aren’t very populous,” Bunnell says. “You have to accumulate a lot of states to generate the liquidity necessary to make (online poker) profitable. It’s difficult.”
Connecticut, home to both the Mohegan Tribe and Mashantucket Pequots, operators of Foxwoods Casino Resort, is expected to facilitate both tribes in enabling legislation under discussion by lawmakers.
Complex Legal, Jurisdictional Issues
The congressional landscape has changed dramatically since 2012, when Senate Majority Leader Harry Reid of Nevada failed in his effort to deliver federal internet poker legislation to his commercial gambling industry constituents.
There remains little appetite on Capitol Hill to expand gambling. Casino mogul Sheldon Adelson is pressing for abolition and, while several federal lawmakers continue to work to legalize online poker, Senator Lindsey Graham introduced legislation to ban it.
But tribal leaders contemplating entry into online commerce should not be swayed by lobbyists and consultants warning of pending legislation, says Valerie Spicer, executive director of the Arizona Indian Gaming Association.
They should instead base their decisions on good business sense.
“Tribes should not look at the internet any differently than any other business diversification or investment,” Spicer says. “At the end of the day that’s what it is, a business decision.
“A lot of basic business rules regarding return on investments and the like are being ignored because of the chatter that, ‘If you don’t do this you’ll be left behind.’ Or, ‘There’s billions of dollars to be made.’
“I don’t feel much of that is accurate, certainly not in the case of every single tribe in every single jurisdiction.”
The jurisdictional issues from state to state are, indeed, complicated. Tribes are not only subject to state prohibitions, but tribal-state regulatory agreements, or compacts, many of which limit online wagering. The compacts are required under IGRA for tribes operating Class III, casino-style gambling.
Tribes in California are working with card rooms in pursuing intrastate poker as a commercial venture outside the compacts, taxed and regulated by the state.
Indian communities in other parts of the country are exploring the option of offering online bingo and other Class II games under IGRA, regulated by tribes with oversight by the National Indian Gaming Commission, the regulatory agency for tribal casinos.
Still others—notably Santa Ysabel and the Aturas Tribe in California—appear willing to push the legal envelope, proposing to launch gambling websites that would take wagers from off the reservation.
Indian law experts believe federal law and NIGC regulations prohibit off-reservation wagers. But there are those who suggest that with servers on tribal lands and through the use of a system of “proxy play,” a legal argument can be made that wagers begin and end on Indian lands.
“Tribes are in control of their own destiny. They’re not dependent upon the state passing a law or the feds passing a law,” says Joe Valandra, CEO of Great Luck LLC, partners with Alturas and Desert Rose Bingo in what they hope will be a real-money online bingo operation.
“If our legal principle is established—that tribes regulate Class II gaming and that proxy play takes place on Indian lands—the sky’s the limit.”
Desert Rose has a small army of attorneys ready to take on state or federal legal challenges, but the launch of the site has been long delayed by the lack of a firm to process wagers.
“Once there’s some legal certainty to the question of off-reservation wagers, more tribes will jump in,” says Great Luck attorney Kevin Quigley.
“If the courts hold that the gambling is, indeed, Class II with technological aids, which is permissible under IGRA, that’s the end of the story,” adds Norm DesRosiers, a regulatory consultant and former NIGC commissioner. “That will open the flood gates for tribes.”
But many doubt federal judges will allow persons in one state to gamble on a tribal website in another state.
“If the notion succeeds legally that you can specify that the gambling is taking place on Indian land, either through proxy or some other means, it will throw the door open for tribes to get into the business,” says John Tahsuda, partner in Navigators Global, a tribal consulting firm.
“But the courts have not been receptive to someone in a state that did not authorize gaming to reach out through technology to some other jurisdiction and make the wager.
“I find it hard to believe that a federal court would make the states powerless to protect their consumers, people who are physically within their jurisdiction.”
Tribes seeking to press the proxy battle face both legal and political challenges from states opposed to any expansion of legal gambling. Politicians can easily and quickly press for anti-internet legislation. And regulators can threaten to pull the charters of financial institutions willing to process online wagers.
“Anybody can say they have an interesting technology solution that will enable them to get around the legal system that they’re going to do whatever they want to do,” warns a regulatory consultant who requested anonymity.
“But the state has tremendous power. There is a panoply of action a state could take, not the least of which is criminal prosecution.”
Coalitions May Be The Key
Should the courts limit wagers to Indian lands, tribes in the “Land of 10,000 Lakes” would likely benefit from an interstate internet coalition of indigenous communities, pooling player liquidity from throughout the region.
Sources say the strategy would be similar to the concept voiced by Luger, a network of tribes linked to a common server, perhaps on Shakopee, one of the nation’s most prosperous Indian communities. Shakopee has a reputation of charitable giving, particularly to other Indian tribes.
“Shakopee would do it if they saw it as a way to help the smaller tribes,” says consultant Richardson. “Will they make money? Probably not. It’s a lot of investment and little return.
“People are still talking about it. It’s the pot at the end of the rainbow.”
“Shakopee can move the needle,” says the Capitol Hill lobbyist.
Shakopee tribal leaders and attorney Willie Hardacker declined requests to discuss internet gambling.
