Parimutuels Lay Out Issues With Florida-Seminole Compact

Pleading with the U.S. Supreme Court (SCOTUS) to not “allow the unlawful approach taken by Florida to become a model” for the future of tribal sports betting nationwide, attorneys for West Flagler and Associates Thursday afternoon filed their writ of certiorari, asking SCOTUS to hear its case against the U.S. Dept. of the Interior.

The briefing deadline was Thursday, and lawyers for the Florida parimutuels filed a 45-plus-page document and an appendix in the latest round of legal wrangling around the legality — or not — of online sports betting in Florida. Since Nov. 7, 2023, when the Seminole Tribe launched its Hard Rock Bet digital platform, commercial operators — in addition to the parimutuels — have been relegated to the sidelines as sports betting takes place in the third biggest state in the U.S.

Hard Rock CEO Jim Allen in December said he believed that Florida sports betting handle could rival that of New York. The differences? Florida has a single operator that will pay the state 13.75% in wagering revenue share, and New York has nine betting apps paying a 51% tax rate. It’s not clear how much money is being wagered in the state because the Seminole Tribe has not released any revenue reports since launch.

SCOTUS will now consider the request and decide whether or not the hear the case. There is no timeline on which this decision will follow. Should the court decline to hear the case, WFA will have exhausted all federal legal options, but a case in Florida State Supreme Court is still in process.

Three key questions for federal court

The Seminoles’ Nov. 7, 2023 launch was the tribes’ second in two years — in November and December 2021, the Hard Rock platform for live for 34 days before it shuttered following multiple court orders. The launch was also the second by the Seminoles while a court case on the legality of its 2021 compact with the state of Florida was still pending.

In its writ of certiorari, West Flagler and Associates (WFA) seeks the answers to three questions:

1. Does the Indian Gaming Regulatory Act allow for the approval of a compact that gives the Seminoles a monopoly and the ability to offer online sports betting in and out of Indian Country?
2. Does the 2021 compact violate the Unlawful Internet Gambling Enforcement Act?
3. Did U.S. Dept. of the Interior Secretary Deb Haaland “violate the equal protection principles” by approving a compact that gives the Seminoles a monopoly in a state where anyone else offering online sports betting would be considered a felon?

Attorney Hamish Hume and his team, representing WFA, are clear in stating that they believe that the approval of the 2021 compact between the state of Florida and Seminole Tribe — which was approved during a special legislative session — is an “abuse” of power and uses a “backdoor” to legalize an activity banned by the state constitution. They wrote that the parimutuels will “suffer competitive injury” from the current decision by the U.S. District Court of Appeals for the District of Columbia. The case was first filed in U.S. District Court, where Judge Dabney Friedrich found in favor of the parimutuels. But a federal appeals court with a three-judge panel overturned that decision. In that ruling, WFA lawyers write, the appellate court strayed from past precedent and is allowing the Seminoles to “have their cake and eat it too.”

Further, when WFA initially appealed the appellate decision to the U.S. Supreme Court and asked for a stay to keep the Seminoles offline, Justice Brett Kavanaugh wrote that the compact “would likely violate the Indian Gaming Regulatory Act” and that the state law allowing a Seminole monopoly “likely raises serious equal protection issues.”

Voters, commercial operators cut out

In 2018, Florida voters overwhelmingly approved Amendment 3, which requires any expansion of gaming to go to the voters. The 2021 compact expands gaming to include not just retail and digital sports betting, but also allows the addition of ball and dice games at Seminole casinos.

However, the addition of retail games, which will most certainly be lucrative for the tribe, aren’t key issues. It is widely accepted that what IGRA does govern is gaming on tribal lands. In-person sports betting, craps, roulette, and other new games are taking place exclusively on tribal land. It is the allowance of online sports betting from Miami to Jacksonville and Vero Beach to Tampa that is at issue.

When lawmakers, and then Gov. Ron DeSantis, approved the compact, they handed digital sports betting to the Seminoles. The state’s other tribe, the Miccosukees, has not compacted with the state for Class III gaming, and therefore was not part of the agreement. But the state’s parimutuels were also, if not left out, left to negotiate with a monopoly. Under the terms of the 2021 compact, parimutuels can offer sports betting, but must pay the Seminoles 60% of revenue, a figure that is higher than even the highest tax rate among states that allow legal commercial sports betting.

In giving the Seminoles a monopoly on running digital sports betting, the compact also effectively cuts out commercial operators like BetMGM, Caesars Sportsbook, DraftKings, Fanatics Sportsbook, and FanDuel. For those companies to gain entry into the state, they could potentially partner with a parimutuel, pay an exorbitant fee to the Seminoles, and possibly be required to put their technology onto a tribal server, because any digital bet within the state of Florida must flow through a tribal server, per the compact.

Florida decision could set precedent

The question of the legality of the compact, according to the latest petition, isn’t just about the state of Florida.

“This question is exceptionally important not just for the people of Florida, but for the nationwide precedent it will set for other state-tribal compacts if the Court of Appeals’ affirmative answer is left undisturbed — as an end-run not just around state-law prohibitions on gaming off tribal lands, but also around Congress’ limitation of IGRA’s federal imprimatur to gambling on tribal lands. Michigan v. Bay Mills Indian Cmty., 572 U.S. 782, 795 (2014) (“Everything—literally everything—in IGRA affords tools (for either state or federal officials) to regulate gaming on Indian lands, and nowhere else.”),” WFA lawyers wrote.

WFA is also pursuing a legal remedy in Florida’s State Supreme Court. When WFA asked for an extension in filing its writ of certiorari with SCOTUS, the hope was to have some clarity from the state court, but it has not yet ruled. WFA wrote in its petition that because a state court decision could “moot” federal proceedings, it would agree to extend to 30 days after a state-court decision any opposition.

But compelled to move forward by the SCOTUS timeline, Hume and his team argue that only SCOTUS can answer the federal questions raised by by the petition and stop the Seminoles from continuing to offer online sports betting.

In 2021, the Seminoles and the state of Florida created the current compact. At that time, lawmakers had their doubts about its validity, and it came under legal fire almost immediately. Of note is that DOI Secretary Haaland did not actively approve the compact. Rather, she allowed a 45-day period to pass at the end of which the compact became “deemed approved.” Such a road also exists for politicians — governors and the U.S. president — to allow a bill to become law without signature. This tactic presumably means the person or entity that could sign does not either enthusiastically support or oppose a proposal.

Clarity, please

In its petition, WFA attorneys argue that because IGRA was enacted in 1988, before the advent of the internet, that it does not contemplate online gaming. They further argue that the compact violates UIGEA, which defines unlawful internet gaming as “occur(ring) when someone places, receives, or transmits a ‘bet or wager’ using the internet that ‘is unlawful under any applicable Federal or State law in the State or Tribal lands in which the bet or wager is initiated, received, or otherwise made.’”

Finally, the petitioners argue that the compact violates state law, which requires that an expansion of gaming go to the voters, unless that expansion is limited to gambling on tribal lands.

In recapping the path the 2021 compact has taken, Hume wrote that in a DOI letter explaining why the agency would allow the compact to become deemed approved, the DOI barely addressed the idea that wagers would happen outside of Indian Country and instead “accepted” the “jurisdictional agreement” to allow this between the state and the tribe. The letter did not address UIGEA.

Hume and his team also wrote that the appellate court decision is in conflict with several of its own previous decisions — particularly Michigan v Bay Mills —  with regard to IGRA applying strictly to gaming on Indian lands, and calls “absurd” the appellate court’s use of the “interpretive principle,” writing that there is nothing ambiguous in the compact. In addition, the parimutuels say that the appellate court used an unusually broad interpretation around allowing wagering outside tribal lands, which is in conflict with other appellate and SCOTUS opinions on Indian gaming.

Finally, WFA seeks clarity on U.S. Code, Title 25, Section 2710 (d)(1)(B), which reads:

Class III gaming activities should be lawful on Indian lands only if such activities are located in a state that permits such gaming for any purpose by any person, organization or entity.

In the current landscape, Florida is not one of those states, as it does not allow Class III gaming for any commercial entity anywhere in the state.