G2E: Internet Gaming Is Inevitable, but Many Questions Remain

Gale Courey Toensing
10/9/12

Internet gaming was the hot topic at the Global Gaming Expo again this year, but how and when it will be regulated is still anybody’s guess.

The Great Debate: Online Gaming in Indian Country” was the first presentation in the Indian track at the biggest commercial and Indian gaming expo in the world—G2E—which took place October 1-4 at the Sands Expo in Las Vegas.

Jana McKeag

The panel discussion was moderated by Jana McKeag (Cherokee Nation), president of Lowry Strategies a bi-partisan government affairs firm specializing in tribal issues and gaming issues and a member of the G2E advisory board. McKeag is a former commissioner at the National Indian Gaming Commission and has worked on tribal issues for more than 30 years.

At last year’s G2E, questions revolved around whether Internet gaming would impact brick and mortar casinos, whether the nations should support or oppose legislation or if they should favor state or federal legislation. “It’s kind of remarkable how a discussion can change in one year’s time,” McKeag said. “After December 23, 2011, we have the now-infamous Department of Justice opinion which basically allows (state) lotteries free range to conduct Internet gaming.” States are now considering running virtual slots online; they are planning state-to-state Internet gaming; and unregulated Internet cafes have proliferated, McKeag said. “So the discussion has not turned to not ‘if’ but ‘when,’” she said.

Leslie Lohse

First up was the Honorable Leslie Lohse, the chairwoman of the California Tribal Business Alliance (CBTA) Board of Directors and the Paskenta Band of Nimlaki Indians' tribal council treasurer. “We don’t have clarity in the legislation as to how it’s going to play out. Through our brick and mortar casinos and the Indian Gaming Regulatory Act we’re been able to establish a revenue stream that helps provide opportunities for our kids, the ability to bring better homes to our lands and just a number of [other] things we use our tax dollars for. And gaming has been our biggest provider of dollars for our people and that’s why we look at online gaming as a possible threat.”

Lohse said that CBTA, which includes the Lytton Rancheria of California and the Pala Band of Luiseño Indians in addition to Paskenta, has been has been educating legislators regarding Indian gaming and the tribal-state compacts and closely monitoring proposed legislation in the state. “CBTA is very diligent. We have to watch where this trail leads us,” she said. CBTA has opposed legislation put forward by the California Online Poker Association because “it created a monopoly for a small group of select tribes. We voiced our concern and it was put aside.” Other proposals have also fallen short by preventing California tribes from becoming licensed or infringing on tribal sovereignty, Lohse said. She warned that tribes across the country need to maintain solidarity concerning online gaming, “Tribes across the country need to make sure (the states) respect the consultation process in place on the federal side. We’re in this all together. The economy, the lack of jobs touches us all. . . We need to look at this as a whole. The tribes are not saying no, but we’re saying let’s look at this because we all know once something is passed, there’s no do-over,” Lohse said.


Valerie Spicer (Mescalero Apache), the executive director of the Arizona Indian Gaming Association (AIGA), focused her attention on that state’s tribal-state compacts. Referring to a proposal by Arizona Sens. Harry Reid, Democrat, and Jon Kyl, Republican (D-Arizona) called the Internet Gambling Prohibition, Poker Consumer Protection and Strengthening UIGEA Act of 2012 Spicer said, “We can’t say we had a lot of influence on what’s been transpiring in that bill.”

Arizona has tribes in a variety of situations—urban tribes in Phoenix and Tucson, tribes in remote rural areas, tribes that don’t conduct gaming but share in transfer revenues and some that aren’t involved in gaming at all, Spicer said.  The tribal-state compact says Internet gaming is prohibited unless the state or persons authorized by the state are allowed to conduct Internet gaming. And Arizona law provides that any new form of gaming that was not introduced at the time the compacts were signed invokes a “poison pill,” Spicer said. “In our state that means a great deal. We have a beneficial fund we pay into that helps education, trauma care, wild life, tourism. If the poison pill is invoked, basically the fund goes away. The limits or caps (on the number of slot machines) are eliminated, which is contrary to what the people in the state voted for – limited and regulated gaming, and that’s what we protect today,” Spicer said.

When the Justice Department opinion was released last year giving the state lottery the ability to engage in Internet gaming the “poison pill” issue was immediately raised, Spicer said, and for tribes, it presented a dichotomy:  “Do we look (at the fact) that Internet gaming wasn’t allowed at the time of the compact or do we look at it as, ‘If the state is allowed to do that then we’re allowed to do that’?” Spicer said.

There would have to be a change in the state statute for the state lottery to conduct Internet gaming and “from what we know the state legislature is not keep to do that. So we think, ‘Okay, let’s keep an eye on it.’ But at any given moment that may change,” Spicer said.

But no one really knows what the proposals are. “There’s a great debate among attorneys within the state. They say it really just depends. . . We have to wait and see the language. When you aren’t given access to the language and (you have) no ability to participate in the process, where do you go?” Spicer said there are a number of threats to tribal gaming – including threats to exclusivity an threats by racinos and  commercial gaming, in addition to Internet gaming. She told a story that well illustrates the concerns tribal concerns. At a meeting with non-gaming tribes and the governor, a tribal chairwoman told the governor that her tribe was happy to receive funds through the state’s transfer agreement in which gaming tribes share some of their revenues with non-gaming tribes. The chairwoman said the money is used to buy winter coats for the tribal children, wood for the elders to heat their homes, and furniture for families who need it. “And I thought, wow, those are very simple basic needs and they’re important essential needs and when we look not only at Internet gaming but potential expansion that upsets the apple cart and infringes on the compact those are the kinds of things we need to protect,” Spicer said.

John Tahsuda

John Tahsuda (Kiowa), the last person on the panel, is vice president of Navigators Global, a firm that provides advocacy and counsel on a range of tribal policy issues, including gaming, tax initiatives, tobacco sales, land-into-trust issues, health care, economic development, energy policy, federal recognition and self-governance.

Tahsuda focused on federal legislation and the politics surrounding the issue of Internet gaming. “There is no legislation, of course. There are draft ideas put out. The authors of these ideas have been reluctant to put out language in an actual legislative form,” he said. “I’d do the same thing because it’s so easy to get bogged down in something as complicated as this, complicated politically and technically.”

Like the other panelists, Tahsuda also noted that the Justice Department opinions created a “180 degree” change concerning Internet gaming. “It opened a lot of eyes,” he said. He said the issue has two sides – the business/revenue side and the law enforcement side. The business side wants to protect consumers against “bad actors internationally” and the law enforcement side wants to make it easy to track criminal activity.

The Reid-Kyl proposal “takes a swipe at the lotteries” and essentially wants to roll back the Justice Department opinion, including putting a lock on interstate gaming, Tahsuda said. Lotteries would have a draw only once a day, and players would not be able to  play instant lottery since that would be like slots, Tahsuda said. As for Internet cafes “both Reid and Kyl take a hard swipe at those and would prevent them from operating,” Tahsuda said. As for poker, “I think the two senators think they can put parameters around what the actual game of poker is and what could actually be authorized to play,” he said.

A lot of the proposals for federal legislation require an opt in which makes it difficult for tribes, because if a state doesn’t opt in, a tribe can’t opt in, Tahsuda said. He talked about the debate over which federal agency would regulate online gaming. Both Sen. Daniel Akaka’s bill and the Reid-Kyl proposal tap the Department of Commerce for the oversight position, “which is interesting in that Commerce doesn’t do much regulation, in fact it doesn’t do much of anything” other than give out grants, Tahsuda said. Most tribal leaders would like the National Indian Gaming Commission to regulate online gaming.

Another issue tribes feel strongly about is protecting the current provision whereby tribes can both operate and regulate their gaming activities. “Reid and Kyl don’t agree—they would flat out prevent tribes from regulating and operating,” Tahsuda said.

As for the politics, Tahsuda said there’s a possibility that an Internet gaming law could be passed during the lame duck session after the elections, but most people are tired after the election and just want to go home. If that happens, Reid may have to start all over at square one, building a new bill when the new legislature is seated next year.

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