Legal sports betting is coming to Florida. But when, and exactly in what form, is still being hotly debated and litigated, even after a deal was struck that could have already allowed wagering to begin in the Sunshine State.
Florida Gov. Ron DeSantis announced in April a new gaming compact with the state's Seminole Tribe, sports betting included, saying the deal “establishes the framework to generate billions in new revenue and untold waves of positive economic impact.”
After the compact was ratified by the legislature in May, the U.S. Department of the Interior said in August that it had taken no action to approve or reject the compact. This meant that it was “deemed approved” to the extent that it complied with federal law.
The 30-year agreement provides the Seminole — who own and operate casinos and online sports betting using the Hard Rock brand — with exclusive rights for various gambling activities in Florida. In return, the tribe will make payments to the state (which it had stopped doing over an earlier gambling-related spat), including at least $2.5 billion over the first five years of the compact.
One such activity that the compact allows the tribe to offer is both in-person and online sports betting. While the Seminole are expected to partner with pari-mutuels, such as race tracks, for the consumer-facing, front-end of the business, all sports gambling must ultimately flow through the tribe in Florida. (The tribe also gets to keep up to 40 percent of the profit from such arrangements with the pari-mutuels.)
Sports betting must be "exclusively by and through" sportsbooks that are operated by the Seminole or its approved management contractor, the gaming compact says. Wagering would be allowed on professional and college sports events by those 21 and older.
Moreover, all of that sports betting is to be "deemed" exclusively done by the tribe even when the wagers are placed by someone in the state, but not on the tribe's lands, using their phone or computer.
“The Tribe and State refer to this arrangement as a ‘hub and spoke’ model, where the Tribe's servers are the hub, and the spokes are the mobile devices and contracted Qualified Pari-mutuel Permitholders facilities where the wagers originate,” the Department of the Interior’s approval letter said.
The gaming agreement between the state and the Seminole was also tweaked so the tribe could not start sports betting in Florida until at least Oct. 15, 2021, which was this past Friday.
When legal sports betting launches in Florida, it will be the most populous state to date with legal wagering. So why hasn’t it happened yet?
Tell it to the judge
For one thing, the gaming compact and its provisions around sports betting were expected to attract legal challenges.
“We're going to be in court, we're going to lose, and we are going to see this on the ballot,” Democratic Rep. Michael Grieco predicted during a May debate on the compact's implementation legislation.
Those expected legal challenges have arrived, with lawsuits filed that could block sports betting from launching in the way proposed and approved by Florida’s governor and Seminole Tribe.
There have been at least three lawsuits so far in connection with Florida's sports-betting plans. All three were lodged in federal court, with two based in Washington, D.C., and one in the state.
Two of the lawsuits, one in Florida and one in D.C., have been filed by the owners of the Magic City Casino in Miami and the Bonita Springs Poker Room. The other was submitted by a group that includes No Casinos, which opposes the further growth of the gambling industry in Florida.
They all have one thing in common, though: they don't want sports betting in Florida to go ahead as currently planned.
(Update: One of the Magic City-Bonita Springs lawsuits was dismissed on Monday by a federal judge in Florida, according to the South Florida Sun Sentinel.)
Statement from #NoCasinos President John Sowinski regarding "deemed approved" compact... pic.twitter.com/RSkZ75vpmZ
— No Casinos (@NoCasinos) August 6, 2021
A hearing is set for November 5 in the Magic City-Bonita Springs lawsuit in Washington — although arguments relating to the No Casinos case could be heard — which challenges the legality of the Department of the Interior’s approval of the DeSantis-Seminole gaming compact.
“Certainly there are legal challenges out there, and certain individuals and organizations who are trying to file some immediate injunctive relief,” Hard Rock International Chairman Jim Allen recently told CNBC.
Court documents suggest that the earliest the Seminole would launch online sports betting would be November 15. Allen told CNBC that they would launch sports betting at some point in the next two months, even with the legal challenges looming.
“We're hopeful we prevail there,” said Allen, who is also the chief executive of Seminole Gaming. “But keep in mind, we're actually not the target. It's actually the state of Florida and the United States Department of [the] Interior. And certainly, the legal process has to work through that.”
There has already been a considerable amount of paperwork filed in connection with the lawsuits. However, there are basically two principal grounds on which the online sports betting provisions of the Seminole-Florida gaming compact are being challenged, according to Daniel Wallach, a prominent gaming and sports-betting law attorney.
One is that the use of a compact to authorize online sports betting violates the federal law known as the Indian Gaming Regulatory Act (IGRA), said Wallach, who is also the founder of Florida-based Wallach Legal LLC.
It is IGRA that governs the conduct of gambling on tribal lands, Wallach explained. And the law is also used by states and tribes to enter into agreements for so-called Class III gambling, such as casino-style games and sports betting.
“The opponents to the compact are arguing that the state of Florida and the U.S. Department of the Interior exceeded their powers by approving internet-based sports wagering which definitionally is initiated and commenced, from the gamblers’ perspective, when he is outside of the Indian reservation,” Wallach said in an interview with Covers.
The other main argument that Wallach highlighted is the allegation that the compact and its online sports betting-related provisions violate the Florida constitution, which was amended in 2018 to require voters to approve new “casino gambling” in the state.
There is a carve-out for the state and the Seminole Tribe to negotiate compacts under IGRA for conducting casino gambling on tribal lands. However, what is at issue in the lawsuits is whether online sports betting is actually happening on those lands if it only passes through some tribal servers.
“The other argument that's raised in all three of the lawsuits to varying degrees is that the internet-based aspect of the sports betting brings the gambling activity off of Indian land, and as a result, it runs afoul of the Florida constitution’s prohibition against non-voter approved casino gambling,” Wallach said.
The November 5 hearing will deal at least with the request by the owners of Magic City and Bonita Springs for a summary judgment on their attempt to have the "deemed approval" of the compact and its sports betting-related provisions. Or, in order to protect them from "suffering irreparable harm," the plaintiffs are asking for an emergency injunction to stop online sports betting from launching in Florida as the Seminole and DeSantis envisioned.
For their part, the federal defendants in the case disagree, and have asked the court to deny the motion and dismiss the lawsuit entirely.
We're just getting started
Whatever happens next almost certainly won’t be the end of the legal saga.
The judge hearing the oral arguments on November 5 should decide on the motion within 10 days, Wallach noted, which would be before the plaintiffs expect online sports betting to launch on November 15. Whoever loses is then likely to appeal the decision right away.
“And then potentially, because I think this is an issue of importance to tribes nationwide, this has the potential for being reviewed by the U.S. Supreme Court, because of the multi-state importance of this issue,” Wallach added.
There are other states that have recently legalized sports betting that could take an interest in the ruling, such as Connecticut, which worked with the Mohegan and Mashantucket Pequot tribes on those efforts.
However, Connecticut is enacting online sports betting using a blend of both federally approved gaming compacts and state-level legislation and oversight. Under that framework, the tribes’ online wagering efforts are regulated by the Department of Consumer Protection.
“So the compacts were exclusively used for retail and ... online sports betting was authorized entirely outside of the compacting process,” Wallach said. “Florida didn’t get that memo.”
A second opinion
But the opposition to the DeSantis-Seminole sports-betting model doesn’t end in the courts, as there is also a political effort afoot to establish an alternative. That campaign is being supported and financed by DraftKings Inc. and FanDuel Group, and aims to ask voters whether to add a new section to the state constitution for sports and event betting.
The constitutional amendment being pushed by the sportsbook-backed Florida Education Champions would still allow sports betting to be conducted by the Seminole. However, it would also authorize it at professional sports venues, pari-mutuel facilities “and statewide via online sports betting platforms by entities authorized to conduct online sports betting.”
DraftKings and FanDuel contributed $10 million each to the political committee in June, and Florida Education Champions had spent nearly $10 million as of the end of September, according to campaign finance records.
“It is our shared goal to have a safe, legal, regulated and competitive market for online sports betting in the Sunshine State,” DraftKings CEO Jason Robins said in August. “And Floridians deserve a market-leading and technologically advanced product offering.”
Bettors would still have to be 21 years of age or older and the funds raised by this model of sports betting would get paid into the state’s Educational Enhancement Trust Fund. The initiative requires 891,589 signatures from Floridians to make it onto the November 2022 election ballot, and would then need to be approved by 60 percent of voters to pass.
The success of the ballot initiative remains to be seen. What’s more, the Seminole plan to push back themselves against the effort.
“Obviously, we're going to protect our home turf,” Hard Rock’s Allen told CNBC. “We certainly think that once all the court cases are decided, then we'll have a better barometer, if you will, as to how to deal with referendums from potentially our competitors, or in some cases potentially partnerships, or potentially doing it on our own.”
