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Major fault lines emerge over Seminole Compact ahead of May 17th special session

by | May 6, 2021


Even though Florida’s Legislature has officially scheduled a May 17th Special Session to consider ratifying the 2021 Gaming Compact, the path forward appears to be growing murkier with every passing day. As predicted, anyone with an interest in the outcome has already hired a swarm of lobbyists, public relations specialists, and enough lawyers to fill a substantial chunk of Doak Campbell Stadium. That many people, each with their own agenda, means there are some significant fault lines starting to emerge in the “process.” The outcome, despite assertions to the contrary, isn’t necessarily a fait accompli.

Governor Ron DeSantis, Senate President Wilton Simpson, House Speaker Chris Sprowls, standing shoulder-to-shoulder with the Seminole Tribe, have all made it clear they believe the Compact doesn’t violate Florida’s Constitution, while at the same time vowing to vigorously defend any constitutional challenge. But there is no shortage of legal experts and gaming lobbyists on the other side of the argument who would laugh at that claim if the outcome wasn’t so serious, both for their own bottom line and, in their view, for the future of Florida.

At stake is not only billions of dollars in potential revenue that will be paid into Florida’s budget, but also the flip side of that same coin: opponents who say perhaps even more billions in unrealized gaming revenue because, they say, the compact as it is currently written doesn’t go nearly far enough, particularly in the area of sports betting revenue.

Sports betting advocates who are not aligned with the Seminole Tribe point to New York state, which just negotiated a sports betting deal that will pay the Empire State about $500 million per year. Comparing that figure to the current language of Florida’s compact, some lawmakers are curious to learn why the sports betting component of the 2021 Compact appears to be worth only about $50 million in Florida, with a larger population.

While the overall Compact will generate guaranteed minimum payments to the state of $500 million in each of the first five years of the deal, the bulk of that payment is comprised of traditional casino revenue, not sports betting. And one section of Compact specifically authorizes the Seminole Tribe to cut their payments to the state by 10 percent (at least $50 million) if the sports betting component of the deal is invalidated either through a breach of exclusivity or by the courts:

The Tribe’s obligation to make the Guaranteed Minimum Compact Term Payment shall cease (i) if the state violates the Tribe’s exclusivity and the State fails to cure such violation within 180 days after notice of such breach by the Tribe, or (ii) if the Tribe’s authorization to conduct the Covered Games is invalidated, in whole or in part, as a result of a court decision; provided, if at any time the Tribe is not legally permitted to offer Sports Betting as described in this Compact, including to Patrons physically located in the State but not on Indian lands, or the Tribe loses the exclusive right to offer Sports Betting as provided in Part XII, Sections A.3.(a) or B.1, then the Tribe’s obligation to pay the full Guaranteed Minimum Compact Term Payment and the other minimum payments set forth in this Section shall be reduced by ten (10) percent. 

SOURCE: 2021 Florida Gaming Compact, Part XI.C.4.(e) [bottom of page 52]

Opponents of the deal have seized on that language, insisting it amounts to a measly $50 million price tag on sports betting in Florida, which is far too low, they say. They argue the Seminole Tribe is getting away with vastly underpaying for a near monopoly on the state’s sports betting market compared to the eye-popping $500 million sports betting market projected in New York. Even significantly smaller states, like Pennsylvania ($110 million), New Jersey (97.8 million), Illinois ($95 million) and Michigan ($61.7 million) are paying more than the Tribe’s guaranteed minimum in Florida. In the same study that produced those numbers, Florida was projected to generate $114.4 million under the same assumptions, or $64.4 million more than the minimum payment the Compact calls for.

The Tribe dismisses those numbers as woefully overstated, pointing out that the first year tax revenues generated by those states were far below initial projections in the previous study.

“With regard to the value of sports betting to the state, it is essential that you look at actual first full year numbers,” said Gary Bitner, spokesman for the Seminole Tribe in an email to The Capitolist. “For Pennsylvania, that number is $30.3 million. For New Jersey, the first full year was $39.6 million.  Also, projections like you are hearing for New York are not always reliable figures for comparison.”

Indeed, industry experts analyzing the New York sports betting revenue projections acknowledge that the percentage being collected by New York state is high, but it reflects a number that someone is willing to pay for the rights to a near monopoly on sports betting there, and Florida should push harder for a similar deal.

Bitner declined to speculate on specific projections for Florida’s sports betting market, but underscored the point that $50 million was just a guaranteed minimum.

“The more important number is the amount that the Tribe is paying the State for exclusivity on sports betting – a minimum of 13.75% of Net Win,” Bitner said.

While the revenue projections might offer plenty of fodder for lawmakers and lobbyists to bicker over, major legal issues also loom. Among the biggest is whether or not the Compact “expands” gaming in such a way that it violates Amendment 3, passed in 2018, which explicitly vested all authority to expand gaming with voters, not the governor or the legislature. One of the provisions that has lawmakers and lobbyists alike scratching their heads is the idea that even though gamblers would be allowed to place a wager using a mobile phone located anywhere in the state, the Compact isn’t technically an “expansion” of gaming because the server receiving the wager is located on Tribal lands.

Legal opponents of the Compact say that logic ignores mountains of previous case law in which both sides of an online wire transaction, both the sender and the receiver of a wager, bear significant legal relevance, and predict that the courts will view that element of the Compact as a “work of fiction.”

“How many ways does something have to run afoul of the constitution before somebody says this is a bad idea?” said John Sowinski, President of No Casinos, who believes that many of the provisions in the Compact must be presented to voters for approval. His group released a poll earlier this week showing voters demanding a say on the issue. “If this is such a good deal for the state, why not let the voters decide?”

But the Tribe, which has worked with Sowinksi’s group in the past, has adopted a different legal view. Bitner referred to language in the Indian Gaming Regulatory Act which he says “allows a tribe and state to agree on matters of jurisdiction and the numerous states that have used the ‘deemed’ approach for mobile gaming, such as New Jersey, New York, Michigan and Rhode Island” allows a state and tribe to specify where a bet is deemed to have taken place. “It’s tried and true language,” Bittner said.

 

 

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