Florida fight with Seminoles highlights concerns with the Indian Gaming Regulatory Act

In most of Florida only the Seminole Indians offer gambling and fighting between the tribe and state legislators came to a head last week when the Florida Supreme Court agreed to a constitutional amendment that would permit counties to offer any form of casino gambling.

In 1988, the federal government passed the Indian Gaming Regulatory Act (IGRA). The act provided a legal federal framework for native groups to operate gambling on their reserves. The act is meant to help the tribes generate revenue and spur economic development on their lands while also affirming their sovereign rights. The IGRA also created a new entity called the National Indian Gaming Commission (a part of the Department of the Interior) which is the arm that regulates Indian gaming and indicates rules the tribes must follow to be in compliance with the law. Failure to live up to the rules set out by the Commission would put the native groups in violation of federal law. The IGRA breaks down gambling into 3 groups and each group has different rules.

Class 1 is cultural gambling that is used by tribes in ceremonies or celebrations and often includes competitions and social gambling. This type of gambling has been used by tribes for generations and the government doesn't want to interfere with that culture. Consequently Class 1 gambling has no restrictions.

Class 2 gambling are games of pure chance like bingo and non-banked card games where players wager against each other rather than against the house (gambling establishment). The IGRA permits all Class 2 gambling to be offered by tribes if type of gambling is legal in the state and the tribes agree to any rules set out by the Gaming Commission relating to that type of wagering.

Class 3 gambling is everything else and includes slots, banked card games such as blackjack and baccarat, craps, roulette and possibly poker. There has been some discussion as to whether poker is class 2 or class 3 since poker involves both players wagering against each other as well as the house taking a rake but it seems most states have agreed it is Class 2. For tribes to operate class 3 gambling three conditions must be met:

1 - The type of gambling proposed must be legal per state laws
2 - The tribe and state have agreed to a compact that is approved by the regulators
3 - The tribe creates a gaming ordinance that is approved by the National Indian Gaming Commission

Florida gambling Seminole IndiansSince the IGRA was enacted most states have permitted Indian run casinos and bingo halls with the largest being in California, Oklahoma and Florida. California gambling is run by several tribes, but in Florida only the Seminole Indians offer gambling. And the Seminole tribes have operated bingo halls and some form of casinos on their reserves for almost 40 years. The first Seminole casino, - the Brighton opened in 1980. Since the IGRA, however, the Seminoles expanded their casinos in Florida to seven, with two casinos in Hollywood and one each in Tampa, Coconut Creek, Hendry and Immokalee. The legality of the casinos and the ability to offer Class 3 gaming were never really tested, so Governor Charlie Crist made it his mission to create a compact with the Seminole tribe that would pave the way to allowing the Seminole tribe to operate their casinos with a full array of gambling options and one where both the tribe and state would benefit.

So, in 2010 a compact was reached between the state and the Seminoles that gave the tribe exclusive rights to offer slot machines outside of South Florida for 20 years and allowed them the exclusive right to offer banked card games at 5 of their seven casinos for five years. Banked card games are defined as games where the casino is the bank and plays against other players at the table, examples being blackjack, baccarat, let it ride and Caribbean Stud. In exchange for that right, the Seminoles agreed to a revenue sharing plan and the state earned almost $1.7 billion from the revenue sharing. South Florida was excluded from the exclusive deal for slots since Dade and Broward counties voted in a referendum in 2004 to allow slot machines. These were deemed necessary to save the pari-mutuel industry in South Florida (primarily Miami) by providing revenue to struggling horse, greyhound and jail alai facilities. The Florida House was on board with the compact from the beginning although there was some resistance from the Senate.

Things ran fairly smoothly until July 2015 when the 5-year agreement to offer banked cards games ran out and the two parties had until October 2015 to write up a new compact. In December of 2015 a deal was finally reached between Governor Rick Scott and the tribe that would allow the Seminoles the right to continue offering banked games at their casinos for a guaranteed $3 billion in revenue and the tribe would also be allowed to add roulette and craps at their casinos. The House approved the deal almost immediately, but the Senate balked, wanting the deal thrown out because they wanted to expand gambling in the state. Many Senators were told by counties outside of South Florida that their pari-mutuel operators wanted to offer slot machines and banked card games and they also wanted the go ahead to create two new resort casinos in Dade and Broward counties by Malaysia based Genting that would include a full array of games, including slots and banked card games. As a result, the new compact never got to a vote and was never ratified.

After mounting pressure by the legislators to shut down the card tables at their casinos, the Seminoles decided to take the state to court, arguing that they should be allowed to continue the exclusive right to offer banked card games because the state broke the compact by allowing designated player games at pari-mutuel facilities outside of South Florida and for allowing video terminals that simulated blackjack games at the racinos in Dade and Broward county. Unlike banked card games, where the facility operator is the bank, the designated player games allow a player at the table to be the designated bank. The state okayed these types of games in 2013, but the tribes argued that they were just a façade and were really banked card games in disguise. Regulators observed these games and affirmed the tribe was correct. The designated players were never involved in the games but rather just had the chips in front of them. The dealer (who apparently isn't the bank) payed out the winnings and took the losing bets and the designated player was effectively just there to make it appear that the pari-mutuel facility was not acting as the bank. The observers also suggested that there was no single designated player and that people came and went at will with no interest in the games being played. This is completely different than pai-gow poker where every other turn a player can be the bank instead of the house, but in that instance the player is highly involved in the game, even setting the hand to play against the other players. As for the simulated blackjack machines, the state contends that this is just a slot machine disguised as blackjack, since the cards are dealt by a random number generator and the percentage payout is pre-set. The judge has not ruled on that, but the state has a good argument there.

In November of 2016, federal justice Robert Hinkle, who was hearing the case relating to designated player games, sided with the Seminoles and concluded that the designated player games were clearly a violation of the compact since it was just a workaround to allow pari-mutuel companies to offer these card games. Consequently, the judge also ruled that the Seminoles can keep the blackjack tables and other banked card games at their casinos along with the slot machines until 2030 when the compact runs out.

That decision gave the Seminoles a hand up in the dispute, but it didn't resolve the underlying issue as to whether they would continue to get exclusive rights to banked games and whether slots could be offered in the rest of Florida. That question was finally answered last week when the Florida Supreme Court agreed to a constitutional amendment that would permit counties to offer any form of casino gambling, provided residents voted for it via a referendum. Currently four counties have voted to offer slot machines.

To date the Seminoles have not responded to that ruling, although they are likely not to be happy. No doubt they fear competition from new casinos and slot parlors and the House is clearly unhappy since they wanted everything to be kept as is and are already trying to figure out how to spend the $3 billion they were to receive from the Seminoles over the next 7 years. It's unlikely the Senate will be happy either since they want the Seminole casinos to shut down or in the very least they want increased competition and a better revenue deal for the casinos the Seminoles operate. As such look for all parties to continue to work at a new compact that will provide enough incentive for all sides to make everyone satisfied.

Florida however, is not the only state that has had infighting between the tribes and state legislators and there has been a lot of lawsuits and upset regarding the provisions listed under the IGRA. In fact, even in Canada there has been some contention between provinces and native groups over gambling. While there is no IGRA in Canada there is similar legislation and questions as to First Nations rights. My next article will look more deeply into the issues, quarrels and possible solutions surrounding Native gaming rights and the states/provinces in North America.

Read insights from Hartley Henderson every week here at OSGA and check out Hartley's RUMOR MILL!

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