Judge Dabney Friedrich rules that a bet takes place wherever the bettor is, not where the operator's servers are located

Federal Court Rules Florida Sports Betting Compact Invalid, Will Other States Be Affected?

Florida sports betting may soon be at an end. On Monday, a federal court vacated the new compact between the state and the Seminole Tribe, deeming it in violation of the Indian Gaming Regulatory Act (IGRA).

This isn’t a case we’ve followed all that closely at Online Poker Report. Any possibility of Florida iGaming was squashed early on in the process, and topics related solely to sports betting get covered at our sister site Legal Sports Report instead. For more back story on this case, we’d refer to you to their extensive coverage.

The verdict in West Flagler Associates vs. Haaland is an important one, however. It deals with how the IGRA intersects with online gambling generally. It could come up in hypothetical future legal battles anywhere a state authorizes online gambling by way of a compact. That includes casino and poker as well as sports betting.

For now, Hard Rock Sportsbook, the state’s only sports betting app, remains online. The Department of the Interior, which approved the compact, will likely appeal the decision, and request a stay of the court’s opinion. If that request is granted, sports betting can continue until the appeals process runs its course. Unless the decision itself is overturned, however, Florida will find itself back at square one.

The state’s governor, Ron DeSantis, also expects the ruling to face a challenge. His office released the following statement:

We are reviewing the Court’s perplexing ruling, which certainly contains appealable issues. Because neither the Seminole Tribe nor the State of Florida are parties to the case, it is unclear what if any immediate impact the ruling has in Florida. We look forward to working with the Tribe to ensure the future success of the Compact.

The bettor’s location matters

Judge Dabney Friedrich’s full opinion is complicated. However, the part that’s most likely to be an important precedent is that he rejects the compact’s assertions about how the location of a bet is determined.

Florida’s contention had been that the IGRA alone was sufficient to allow it to authorize tribal sports betting statewide. That hinged on the idea that the bettor’s location is irrelevant, because the bet happens “on tribal land” if that’s where the servers receiving and processing it are.

The reason Florida went that route is because it’s among those states with a constitutional prohibition on gambling. Any new gambling laws have to go to voters for a referendum. However, the sovereignty of tribes mean they’re not subject to state law, only federal law. Gov. DeSantis and his lawmakers were therefore hoping that with a creative interpretation of the IGRA, they could authorize online sports betting using a compact only, as an end run around their own constitutional obligations.

It shouldn’t be surprising that the federal courts objected to their logic, however. If that argument held, it could open a rather large can of worms for other areas of gambling law.

The Wire Act would keep interstate sports betting illegal either way. Earlier this year, however, the Department of Justice lost its argument that the Act applies to other forms of wagering as well. If the server’s location were the only thing that matters, states with legal online casinos might try to argue that they should be able to take out-of-state players. Depending on just how slippery the slope proved to be, it could even undermine the federal prohibition against offshore online gambling.

For these reasons and others, the federal government has a vested interest in maintaining the legal relevance of the betting party’s location.

Does this impact existing iGaming states?

There are currently two states with legal online casinos being operated by tribal gaming organizations: Michigan and Connecticut.

The Michigan online casino market is definitely in the clear. There, both tribal and commercial casinos have access to the market, and the tribes have consented to be subject to the authority of the state regulator. Everything is happening in accordance with state law and no challenge seems likely.

But what about Connecticut? There, the tribes have exclusivity over all casino gaming, including online. Could Connecticut online gambling fall victim to a similar challenge?

Fortunately, the answer is “probably not.”

Like Michigan, and unlike Florida, Connecticut passed a state law to authorize the new forms of gambling. It signed new compacts with the tribes as well, but these simply set out the terms of a commercial agreement between the state and tribes. The legality of online gambling in the state doesn’t hinge on the question of where a bet originates.

That said, there is more legal tension in Connecticut because of the tribes’ exclusivity. When the state attempted to authorize construction of a new tribal casino outside of tribal land, MGM Resorts International threatened to sue, claiming that the state had an obligation to open a competitive bidding process. The tribes said they’d stop sharing slots revenue with the state if this happened, since the deal is contingent on exclusivity. As a result, the casino plans have evaporated.

Still, it doesn’t seem likely that the Florida decision would provide MGM with the basis to challenge Connecticut’s laws. However, it’s hard to rule out legal possibilities until they’ve been tested in court. MGM’s lawyers would probably jump at any opportunity to cause trouble in Connecticut.

The IGRA route is off the table for other states

Similarly, Online Poker Report doesn’t believe that the Florida decision is likely to affect online sports betting in any other state where it’s currently legal.

However, it may very well impact some states’ future plans. Specifically, it takes one likely option off the table for any state with the following features:

  • Pre-existing gaming on tribal lands in accordance with the IGRA,
  • Some form of private sector competition to that tribal gaming, and
  • Constitutional requirements that make it difficult to pass state gambling laws

At the top of the list for such states is California. It’s simultaneously a “Holy Grail” state for online gambling, and a notorious legislative quagmire.

It’s both the most populous state and one of the wealthiest. If it were to pass a full package online gambling bill, it would double the market for online casinos and provide a significant boost for sports betting. However, it has proven impossible to come up with proposals which please all stakeholders. That includes the state’s lawmakers, tribes, card rooms and racetracks all at once. Even if these parties somehow arrived at a mutually agreeable proposal, it would need voters’ approval. Like Florida, California has a constitutional prohibition on gambling, so a referendum is mandatory.

Under those circumstances, the state might be tempted to work with the tribes alone, and try a Florida style end run. However, this verdict, if it stands, would eliminate that option.

- Alex is a journalist from Dartmouth, Nova Scotia, Canada. Now site runner for Online Poker Report, he has been writing about poker and the online gambling industry in various capacities since 2014.
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