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There has recently been a lot of talk about a Ninth Circuit Court of Appeals case and what it might mean for online sports betting. The case has attracted so much attention, in fact, that Congressman Anthony Brindisi (D-NY) introduced a new federal sports betting bill.
The bill purports to “remove Federal barriers regarding the offering of mobile sports wagers on Indian lands when the applicable State and Indian Tribe have reached an agreement.”
It provides that for purposes of federal law, a bet would be deemed to originate place at the location of the server or computer used to accept the bet rather than the location of the bettor.
Advocates for expanded mobile wagering suggest that such language is already the law in several jurisdictions, with case law relying heavily on horse racing. At least at the federal level, however, this is unclear. And there certainly remains debate at the state level, as well.
Indeed, Jay Cohen argued something similar in his criminal appeal:
Cohen argues that under WSE’s account-wagering system, the transmissions between WSE and its customers contained only information that enabled WSE itself to place bets entirely from customer accounts located in Antigua.
This was, however, rejected by the Second Circuit. It found that bets transmitted from users in New York (where betting was illegal) to Antigua did not trigger the Wire Act safe harbor as the bettors were in New York.
A related argument was raised in 2014 Sports Off Shore Wire Act case, with the First Circuit also rejecting the defendants’ arguments regarding the safe harbor provision.
So what did this recent case say that made a Congressman take action now?
The case was brought by the state of California which asked the Ninth Circuit to determine:
Does the Indian Gaming Regulatory Act, 25 U.S.C. § 2701, et seq., permit an Indian tribe to offer online gaming to patrons located off Indian lands in jurisdictions where gambling is illegal?
The background as described by the court is as follows:
The Iipay Nation of Santa Ysabel is a federally recognized tribe which operated a casino on tribal lands. The casino ultimately failed commercially and ceased offering gaming activities.
Seeking to generate revenue the tribe launched Desert Rose Bingo, which allowed patrons to play bingo over the internet via a server located in the old casino.
The online user would submit a form which detailed how many games they wanted to play and how many cards they wanted for each game. There was a designated agent at the casino who was a passive observer, but the software would execute all the gameplay. The last human action was the submission of the form.
Just 15 days after launching the website, California sued the tribe. The federal government joined the state in seeking an order prohibiting the Iipay from operating the site, an order which the District Court granted.
The state’s first claim was that the game was being conducted in violation of the tribal gaming compact. That argument was rejected, however, with the court finding that bingo games were class II gaming and not subject to the compact.
The government then argued that the games violated the UIGEA. The tribe argued that they did not violate the statute because they were conducted on tribal land.
The Ninth Circuit held that “the UIGEA does create a system in which a ‘bet or wager’ must be legal both where it is ‘initiated’ and where it is ‘received.’”
The court rejected “Iipay’s argument that the patron’s decision to submit a requested wager of a particular monetary denomination is merely a pre-gaming communication with the patron’s designated proxy.”
The court found that what “Iipay’s arguments fail to acknowledge is that the UIGEA does not have to make DRB [Desert Rose Bingo] the game illegal in order to make Iipay’s operation of that game—specifically, its decision to accept wagers and financial payments over the internet from patrons located in California—illegal.”
The Ninth Circuit also rejected the tribe’s arguments that having the servers located on tribal land and having a designated agent satisfied UIGEA.
This case is a significant tribal gaming decision as it illustrates some of the challenges facing the operation of mobile betting on tribal lands.
Despite being a relatively recent federal statute, the Indian Gaming Regulatory Act (IGRA) did not contemplate online gambling. That leaves the activity, in many ways, a legal unknown.
This case almost certainly raises more questions than answers.
First it is a case governing Class II gaming, which could be significant if tribes and states instead enter into compacts regarding Class III mobile gaming. IGRA permits tribes to conduct Class II games (provided they are legal under state law) without a compact, unlike Class III games.
The case makes no mention of sports betting, which is a class III game. The absence of a mention makes congressman Brindisi’s introduction of a bill limited to sports — as opposed to online gaming more broadly — somewhat puzzling.
The case may also be influential to other courts grappling with determining the location of a bet. Does the bet take place where a server is located or where the bettor is physically located?
The federal bill is not without its criticisms beyond being limited to sports betting, as Tony Batt recently highlighted for Gambling Compliance ($). As Batt noted, the bill would require opening up compacts to offer sports betting — something most tribes would be reluctant to do.