Federal judge throws out Florida sports betting compact with Seminole Tribe

Ruling halts sports betting and gaming expansion indefinitely.
Two pari-mutuels filed the first federal lawsuit against the state's gambling deal with the Seminole Tribe of Florida, which owns the Guitar Hotel near Hollywood. A judge late Monday ruled that the deal violates federal Indian gaming law.
Two pari-mutuels filed the first federal lawsuit against the state's gambling deal with the Seminole Tribe of Florida, which owns the Guitar Hotel near Hollywood. A judge late Monday ruled that the deal violates federal Indian gaming law. [ MIKE STOCKER | South Florida Sun Sentinel ]
Published Nov. 23, 2021|Updated Nov. 23, 2021

In a stunning rejection of Florida’s attempt to give the Seminole Tribe a monopoly on sports betting, a federal district court judge in the District of Columbia ruled late Monday that the compact violates federal Indian gaming law and invalidated the entire agreement, halting all sports betting and gaming expansion in Florida indefinitely.

The ruling by Judge Dabney L. Friedrich puts a halt on the sports betting quietly launched by the Seminole Tribe on Nov. 1. But in a double hit, it also blocks the tribe’s Hard Rock casinos in Broward and Hillsborough counties from becoming full Las Vegas-style casinos.

Under the 30-year gaming compact signed by Gov. Ron DeSantis, and approved by the Florida Legislature and the Secretary of the U.S. Department of the Interior, the Seminoles agreed to pay the state at least $2.5 billion over the first five years in exchange for having control over sports betting in the state and being allowed to add roulette and craps to the tribe’s casino operations.

Friedrich concluded that the compact violates the federal Indian Gaming Regulatory Act, which requires that any state-sanctioned gambling must occur on tribal land. Florida’s attempt to claim that sports betting was occurring on Indian lands by having all bets going through a server on tribal property was a “fiction,” she said.

“Although the Compact ‘deem[s]’ all sports betting to occur at the location of the Tribe’s ‘sports book[s]’ and supporting servers... this Court cannot accept that fiction,’’ Friedrich wrote. “When a federal statute authorizes an activity only at specific locations, parties may not evade that limitation by ‘deeming’ their activity to occur where it, as a factual matter, does not.”

Friedrich ordered the state “to reinstate the Tribe’s prior gaming compact, which took effect in 2010″ and suggested that the governor and Tribe “may agree to a new compact, with the Secretary’s approval, that allows online gaming solely on Indian lands. Alternatively, Florida citizens may authorize across their State through a citizens’ initiative.”

The decision is a victory for the owners of Magic City Casino and Bonita Springs Poker Room and a group of plaintiffs that includes No Casinos and Miami businessmen Armando Codina and Norman Braman. They each filed separate lawsuits against U.S. Secretary of the Interior Deb Haaland alleging that the federal government improperly approved the gaming compact.

Codina and Braman have fought to block gaming expansion for decades and helped finance the successful 2018 constitutional amendment that requires that any expansion of gambling be approved by voters in a statewide referendum.

“I think this is a big victory. I couldn’t ask for more,’’ said Codina, the real estate developer and devoted gambling opponent. He said he will continue to fight if the state and tribe file an appeal.

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The state and Seminole Tribe are expected to appeal the decision and request an immediate stay of the order, said Daniel Wallach, a gambling expert and Hallandale Beach-based lawyer. But, he said, he does not expect a subsequent decision to prevail.

Another amendment is an option

The other option is for the Florida Legislature to either put an amendment on the November 2022 ballot to enable statewide sports betting, or conceive of some other statutory regime that does not violate Indian Gaming Regulatory Act, he said.

Sport betting giants Fan Duel and Draft Kings have already launched a petition drive to get sports betting approved by voters next year.

In a statement on Tuesday, Seminole Tribe spokesman Gary Bitner said the tribe “is reviewing the judge’s opinion and carefully considering its next steps.”

At a news conference Tuesday morning, the governor said he had not seen the ruling on the compact but said “I would imagine this is going to be appealed.”

His comments indicated he was not aware that the entire compact had been invalidated, including the casino portion as well as the so-called hub-and-spoke model for sports betting. The compact required that all online sports bets go through the tribe’s servers from players located outside of tribal lands, an arrangement that the court said violates federal gaming law.

“We structured the compact so that the compact is preserved for the casinos and the other stuff,’’ DeSantis said. “So we’re going to still be getting revenue, obviously we’ll get less revenue from sports betting if they’re not able to do hub and spoke.”

The governor admitted that the hub-and-spoke set-up was “an unsettled legal issue” but he also downplayed his role in shaping the agreement.

“I can only negotiate with the tribes. I cannot do any gambling outside of that per the amendment that passed in 2018,” he said.

A legal victory for pari-mutuel competitors

For West Flagler Associates, the Bonita-Fort Myers Corporation and the Havenick family that own Magic City Casino and Bonita Springs Poker Room, the judge’s decision to invalidate the entire compact also meant the cancellation of a provision which gave pari-mutuels the opportunity to partner with the Seminole Tribe to operate online sports betting.

In late October, the tribe announced it had reached agreements with the several pari-mutuels to place sports-betting kiosks in their facilities and receive up to 40 percent of the revenue that the kiosks generate. The agreements were reached with Palm Beach Kennel Club, Hialeah Park Casino, Ocala Gainesville Poker and Ocala Breeders’ Sales Co., Tampa Bay Downs, and TGT Poker & Racebook in Tampa.

West Flagler argued that despite the revenue-sharing option, any such agreement would require substantial upfront investments and substantially undercut their existing gambling operation.

“Last night’s ruling was a victory for family-owned businesses like ours who pay their fair share in taxes and believe the free market should guide the business operations of gaming venues,’’ said Christian Ulvert, Magic City Casino spokesperson, who also commended their legal team at the Boise Schiller law firm.

“The judge clearly understood the blatant violation of IGRA as her ruling demonstrates. We look forward to working with the governor, Legislature, and the citizens of Florida to pave a path forward that ensures a fair gaming marketplace exists in Florida.”

The compact relied on the hub and spoke model for sports betting in an attempt to get around the limitations of the Florida Constitution, which requires voter approval for expanded gambling outside of a tribal compact.

The governor and tribe argued that by allowing online sports betting to be controlled by the Seminole Tribe, with all bets going through a server on tribal property, they were not expanding gaming throughout the state.

But Friedrich didn’t buy that argument. She concluded that the Florida Constitution “provides that the State may expand sports betting only through a citizen’s initiative or an IGRA gaming compact....And because no citizens’ initiative has approved online sports betting, such betting can be lawful in Florida only if it is authorized by a gaming compact.’’

The conclusion, she said, is “the appropriate remedy Is to vacate the compact.”

Friedrich also sent a warning about future compacts. “What the Secretary may not do, however, is approve future compacts that authorize conduct outside IGRA’s scope,’’ she wrote.

John Sowinski, executive director of No Casinos, the anti-gambling non-profit that which backed the constitutional amendment approved by voters, said he was not surprised.

“This ruling says what should’ve been obvious to everyone from the beginning — that Florida’s Constitution gives only Florida voters, not politicians in Tallahassee and Washington, the power to expand gambling in our state,’’ he said.

Wallach said he was also not surprised by the ruling.

“The avalanche of legal authority was on the side of invalidating online sports betting,’’ he said. “She recognized the obvious — that a customer located in Jacksonville or Key West or Pensacola is not on Indian land when they initiate the wager.”

Severability clause didn’t stick

Unlike tribes in other states, including Connecticut, Arizona and Michigan, which operate sports betting limited to tribal land, the Seminole Tribe argued that it could operate online sports betting operations throughout the state.

“Each of those three states understood the jurisdictional limitations of IGRA,’’ Wallach said. “But the state of Florida and the Seminole Tribe were operating in a state of delusion.”

Although the tribe and the governor contemplated that the sports betting component could be thrown out and included a severability clause to allow the remaining portion of the compact to operate, the Department of the Interior omitted that in its argument before the court, forfeiting that option, Wallach said.

Because the Seminole Tribe did not intervene on the merits of the case, it also forfeited the opportunity to emphasize the severability and preserve in-person sports betting on Indian lands,’’ he said.

There was no immediate information available as to what happens to the sports wagers accepted by the tribe through its mobile app in the three weeks it was operating.