CA tribes to sweepstakes operators: “We don’t negotiate with terrorists”

Rocha, conference chair for the Indian Gaming Association (IGA), was joined by fellow host and IGA executive director Jason Giles. This week’s guest was Jonodev Chaudhuri, principal at Chaudhuri Law and former chair of the National Indian Gaming Commission (NIGC).

The theme of the episode was regulation and enforcement. More specifically, Rocha and Giles sought to know what tools the NIGC – and state and federal governments – can use to fight the proliferation of sweepstakes sites.

“You see the entire industry is reacting to this,” Rocha said. He noted that among California tribes in particular, “you’re starting to see the outrage” that typically follows attempts to encroach on tribal exclusivity.

He later asserted that there is no room for collaboration between tribes and sweepstakes. “This is not a dialogue, this is not a discussion – we don’t negotiate with terrorists,” he said.

Chaudhuri: NIGC has to be “reactive”

Chaudhuri, who served as NIGC chair from 2013 to 2019, explored the nuances of tribal gaming regulation. He explained the history of the Indian Gaming Regulatory Act (IGRA), the 1988 federal legislation that established the framework for Indian gaming in the US. IGRA also established the NIGC, one of the federal agencies involved with tribal gaming.

In the context of enforcement, Chaudhuri acknowledged that the commission is somewhat limited in its abilities. Tribes themselves are the primary regulators and the NIGC supplements those efforts and acts as a liaison to the government. In some cases, states also play a small role in regulation. The commission is also largely confined to the guidance of IGRA. Because of this, it is hard to get out in front of new developments.

“In many ways the NIGC has to be somewhat reactive,” Chaudhuri said.

But he did note throughout the discussion that IGRA has explicit stipulations that tribes must be the primary beneficiary and have sole proprietary interests in gaming operations. It also has clear guidelines about protecting Indian lands.

“If there is gaming occurring on tribal lands that isn’t run by the tribe, that is a violation of IGRA,” he said. “How that applies to sweepstakes is a conversation about what is actually going on.”

Enforcement options vary for California tribes

If an entity is determined to be operating illegally on tribal lands, Chaudhuri said enforcement options are available. They are applicable to any entity, be it tribal or, in the case of sweepstakes, commercial.

He mentioned fines and closure orders as simple examples. “I did letters like that when I was [at the NIGC],” he said. The NIGC also has the ability to review games at the request of tribes and rule if they are Class II or III. But those reviews are much more difficult when the supplier of the game is not involved and that would appear to be the case with sweepstakes.

Given that tribes are the primary regulators, they too can take similar enforcement steps. Rocha and Giles asked if, theoretically, all of the state’s gaming tribes could take such action collectively against sweepstakes operators.

Chaudhuri didn’t go so far as to endorse that but said it is technically possible. But he stipulated again that this applies to tribal lands and noted that there “is not one uniform compact” in California. Each tribe has its own compact with the state.

Compacts play a big role in this discussion

The role of compacts in this debate was mentioned several times. Chaudhuri pointed out that “a lot of compacts will have provisions in the revenue-sharing portions” of the agreements that render them void should any unlawful expansion or breach of exclusivity take place.

Indian Country, in general, does not pay taxes to a state for gaming that takes place on its land. But in some cases, tribes agree to revenue-sharing agreements with states. As an example, in Florida, the Seminole tribe pays the state hundreds of millions per year as part of its agreement with the state. But the tribe withheld those payments beginning in 2019 when it claimed the state was allowing commercial card rooms to encroach on its exclusivity.

Because states often do benefit from revenue sharing, they also have an interest in stopping sweepstakes to ensure that their revenue cut is not nullified. But getting state and federal officials to acknowledge that importance is a challenge, even for the NIGC.

“It’s a never-ending education challenge,” Chaudhuri said. He explained that the NIGC is constantly working with other officials and agencies to recognise the importance of Native issues. This hurdle applies not only to sweepstakes but also to skill games, card rooms and other forms of gambling that could be seen as an encroachment of exclusivity.

“This is getting worse by the week”

In closing, Giles and Rocha again stressed the importance of the issue as it relates to California tribes.

“This is getting worse by the week,” Giles lamented, specifically referencing the recent launch of the Legendz social casino and sportsbook in 43 states, including California. Rocha agreed and used the analogy of a company building a dam upstream from a reservation. The consequences might not be immediately noticeable, he said, but future infrastructure will undoubtedly be affected.

For future episodes, Rocha mentioned the need to talk to tribes in Connecticut and other states that appear to be taking a more head-on approach to these sites.

“The industry is behind us but we have to lead,” he concluded. “That’s not an unfamiliar position for us.”