United States: Supreme Court To Decide Future Of Sports Betting: Implications For Tribal Casinos

 The Supreme Court's forthcoming decision in Christie v. National Collegiate Athletic Association (Nos. 16-476, 16-477) will have profound implications for sports betting in the United States and will potentially open the door to such betting in tribal casinos across the country. The case presents New Jersey's challenge to the constitutionality of the Professional and Amateur Sports Protection Act ("PASPA"), a federal law enacted in 1992 to prohibit states and tribes from sponsoring or authorizing any form of sports wagering, while grandfathering the handful of states that allowed such gaming at the time of PASPA's enactment. Several news outlets and legal commentators have noted that the Court appeared skeptical of PASPA's constitutionality at the December 4, 2017, oral argument, and many states have taken steps in anticipation that the Court will hold PASPA unconstitutional.1 Since the oral argument, online betting markets on the decision have given New Jersey more than an 80 percent chance of prevailing.2 This alert analyzes the implications for tribal casinos if the Court strikes down PASPA.

At the outset, it is important to note that the Court's ruling would simply restore to states and tribes the authority that PASPA had taken away from them, but would not actually authorize sports betting anywhere in the country. Any tribal sports-betting operation would be governed by the Indian Gaming Regulatory Act ("IGRA"), the 1988 federal law that governs tribal gaming. As discussed below, however, there are a number of important issues that remain unsettled under IGRA—and a renewed interest in sports betting could engender litigation to resolve them.

Generally speaking, IGRA allows a tribe to conduct commercial gaming operations if "such gaming" is permitted in its home state and the tribe meets other federal requirements that vary based on whether the gaming constitutes class II or class III gaming under IGRA.3 But when a state permits only certain kinds of gaming, courts have not uniformly agreed on how broadly a tribe may engage in other, related gaming. Although IGRA clearly authorizes the tribe to engage in the same forms of the same games permitted under state law, it is less clear whether the tribe may also conduct other forms of the same games or even other kinds of games within the same IGRA class.

Accordingly, a threshold question is whether particular forms of sports betting would qualify as class II or class III gaming under IGRA. While most traditional sports betting would likely be treated as class III gaming, other forms could potentially be considered class II, and the classification of gaming is still a developing area of law. If the state does not permit any gaming of that class, tribes will not be permitted to conduct it. If the state permits only limited kinds of gaming within that class, then tribes will clearly be permitted to conduct at least the specific forms of gaming (including sports gaming) that their home states authorize. In addition, tribes have arguments that they should be entitled to conduct any form of sports betting in states that allow other forms of class III gaming—though this too is still a developing area of law and likely to be the subject of future litigation, particularly if states attempt to limit the forms of sports betting they authorize.

In states where IGRA permits tribes to conduct sports gaming, tribes will also have to satisfy other federal requirements for class II or class III gaming. The difference is important: IGRA subjects class II gaming only to federal oversight, not state regulation, but generally permits class III gaming only pursuant to gaming compacts negotiated between tribes and their home states. Although states vary in how they negotiate and execute gaming compacts with tribes, all states are subject to IGRA's requirement that they conduct such negotiations "in good faith"—a mandate that tribes have successfully enforced against some recalcitrant states in federal court to obtain alternative terms issued by the Secretary of the Interior that permit class III gaming operations.

Finally, states and tribes that have negotiated provisions in existing compacts granting tribes exclusive gaming rights in defined areas will need to ensure that newly authorized sports wagering does not run afoul of those exclusivity provisions.

I. Professional and Amateur Sports Protection Act in Christie

The key provision of PASPA before the Supreme Court is 28 U.S.C. § 3702, which provides:

It shall be unlawful for—

(1) a governmental entity to sponsor, operate, advertise, promote, license, or authorize by law or compact, or

(2) a person to sponsor, operate, advertise, or promote, pursuant to the law or compact of a governmental entity,

a lottery, sweepstakes, or other betting, gambling, or wagering scheme based ... on one or more competitive games in which amateur or professional athletes participate, or are intended to participate, or on one or more performances of such athletes in such games.4

PASPA defines "governmental entity" to include states and their political subdivisions, as well as Indian tribes.5

In Christie, New Jersey has primarily challenged Section 3702(1), but has argued that Section 3702(2) is also unconstitutional because, in prohibiting individuals from sponsoring or operating sports wagering "pursuant to" state law, it is textually tethered to Section 3702(1).6 Defenders of PASPA—including the major sports leagues and the United States—have argued that, even if Section 3702(1) is held unconstitutional, Section 3702(2) should survive, which could effectively prohibit sports betting outside of the three grandfathered states.7

It remains to be seen how the Supreme Court will approach Section 3702(2) if it invalidates Section 3702(1). If Section 3702(2) survives, it may have the same effect as PASPA does now by prohibiting individuals from operating sports wagering "pursuant to" any law a state might pass if Section 3702(1) were invalidated. However, it is certainly possible that if the Court finds any portion of Section 3702 unconstitutional, it will invalidate both Sections 3702(1) and (2), thereby allowing states to authorize sports betting and individuals to participate. The remainder of this alert proceeds on the assumption that the Court invalidates the entirety of Section 3702.

II. Considerations Under the Indian Gaming Regulatory Act

A ruling that invalidates Section 3702 would open the door for states to authorize sports wagering. For tribes, however, lifting of the federal ban on sports wagering would be only the first step. Tribes would still need to meet the requirements of IGRA to conduct sports wagering on Indian lands.

A. Class II or Class III Gaming Classification

IGRA imposes different requirements for gaming that vary based on the three classes of gaming that IGRA defines.8 Class I gaming includes social games for minimal prizes.9 Class II gaming encompasses bingo-like games, including pull-tabs and non-banking card games, in which players bet against and settle with each other, rather than betting against and settling with the house.10 IGRA deems "all forms of gaming that are not class I gaming or class II gaming" to be class III gaming.11

Traditional sports wagering would likely qualify as class III gaming insofar as it is not a social game for minimal prizes, a bingo-like game, or an unbanked card game. Indeed, the National Indian Gaming Commission ("NIGC") has expressly defined class III gaming to include "[a]ny sports betting and parimutuel wagering."12 The NIGC's Office of General Counsel has also advised gaming operators that "sports betting ... is a Class III form of gaming."13

Whether all forms of sports wagering would be considered class III gaming, however, has not been conclusively resolved. Montana, for example, currently authorizes sports pools and sports tab games, which are non-banked games in which players bet against and settle with each other, not a traditional sportsbook.14 Such games might ultimately be deemed class III gaming because the NIGC's regulation does not expressly exempt any form of "sports betting" from its definition of class III gaming and deems parimutuel wagering class III gaming even though players bet among themselves,15 and the NIGC's Office of General Counsel has concluded that at least one form of sports betting in which "players compete against other players" constitutes class III gaming.16 But the NIGC's position has not been litigated, and the law on sports wagering is still developing.

Download >>Supreme Court to Decide Future of Sports Betting: Implications for Tribal Casinos

Footnotes

 1 See Adam Edelman, Cash-hungry states betting Supreme Court will legalize sports gambling, NBC News, Feb. 12, 2018, available at https://www.nbcnews.com/politics/politics-news/cash-hungry-states-betting-supreme-court-will-legalize-sports-gambling-n846676; Robert Barnes, N.J. argues that it can legalize sports betting, and Supreme Court seems to agree, Washington Post, Dec. 4, 2017, available at https://www.washingtonpost.com/politics/courts_law/nj-argues-that-it-can-legalize-sports-betting-and-supreme-court-seems-to-agree/2017/12/04/25410ae6-d92c-11e7-a841-2066faf731ef_story.html?utm_term=.022c7baa579e; Amy Howe, Argument analysis: Justices seem to side with state on sports betting, Scotusblog, Dec. 4, 2017, available at http://www.scotusblog.com/2017/12/argument-analysis-justices-seem-side-state-sports-betting.

2 See Ryan Rodenberg, How to Speculate—With Real Money—on the Supreme Court Sports Betting Case, Sportshandle.com, Feb. 7, 2018, available at https://sportshandle.com/supreme-court-sports-betting-speculate-real-money.

3 25 U.S.C. §§ 2710(b)(1)(A), (d)(1)(B).

4 28 U.S.C. § 3702.

5 Id. § 3701(2) (citing 25 U.S.C. § 2703(5)).

6 Pet. Br. at 20, 55-56.

7 Resp. Br. at 21, 53-59; U.S. Amicus Curiae Br. at 31-33.

8 See 25 U.S.C. §§ 2703, 2710.

9 Id. § 2703(6).

10 Id. § 2703(7).

11 Id. § 2703(8).

12 25 C.F.R. § 502.4(c).

13 Kevin K. Washburn, General Counsel, NIGC, to Joseph M. Speck, Nic-A-Bob Productions, NIGC Game Classification on WIN Sports Betting Game, p. 2 (Mar. 13, 2001), available at https://www.nigc.gov/images/uploads/game-opinions/WIN%20Sports%20Betting%20Game-Class%20III.pdf.

14 See Mont. Code § 23-5-503; see also Montana Department of Justice, Gambling Control Division, Gambling Laws, available at https://dojmt.gov/gaming/gambling-laws-administrative-rules.

15 25 C.F.R. § 502.4(c).

16 Washburn to Speck, supra, p. 2.

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