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California Sues Indian Tribe In Opening Salvo Over Regulated Internet Gambling

The Iipay Nation of Santa Ysabel has come under fire from the state of California after it became the first Indian tribe to begin offering an online bingo game earlier this month to California residents over the age of eighteen.

California State Attorney General Kamala D. Harris filed a motion in Federal District Court last week seeking a “temporary restraining order enjoining the Tribe and the other defendants from offering Internet gambling to residents of, and visitors to, California and accepting payments that violate the UIGEA,” according to court documents.

The State is accusing the Tribe of breaching a 2003 tribal-state class III gaming compact of non-compliance with the Indian Gaming Regulatory Act (IGRA), and of violating the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA).

State Arguments

In its brief, the State says that in the 2003 compact, “the Tribe agreed not to engage in class III gaming that is not expressly authorized in the Compact.”

It then argues that because the IGRA definition of class III gaming encompasses “electronic facsimiles of any game of chance” (which includes bingo), the Tribe can therefore only offer online bingo if the Compact specifically says it is allowed.

However, according to the State, the Tribe is not authorized to offer online gaming by the Compact. Instead, its interpretation is that it is expressly prohibited from doing so:

Under [the] Compact, the Tribe is authorized and permitted to operate…provided that the Tribe will not offer such games through use of the Internet unless others in the state are permitted to do so under state and federal law.”

The State concludes that the Tribe may only legally host gambling activities online “if conducted entirely on Indian lands.”

Tribal Arguments

The State anticipates two key arguments by the Tribe.

The first is that because the servers used to host the game on the Internet are physically located on Indian lands, the bingo game should be considered legal under the Compact. The second is that even if it is in violation of the Compact, the long standing principle of “sovereign immunity” for Indian Tribes precludes the state from enforcing it.

However, it is unlikely that either will be successful.

The UIGEA states that “intermediate routing of electronic data shall not determine the location or locations in which a bet or wager is initiated, received, or otherwise made.” This seems to make it impossible for the Tribe to argue that despite offering gaming to individuals outside its Indian lands, all gaming is legally being done on them simply because the servers are physically located there.

Additionally, while there is a long established principle of “Tribal Sovereign Immunity” in the United States, the State asserts that this principle does not apply in this case because the Compact contains language explicitly waiving it in non-monetary disputes arising over the Compact itself:

In the event that a dispute is to be resolved in federal court…the State and [Tribe] expressly consent to…waive any immunity therefrom.”

An Eye Towards Regulated Online Poker

The potential revenue from iGaming and online poker in California are coveted prizes (no pun intended).

If the state does ultimately legalize online gambling there will be a scramble between operators to get as large a piece of that pie as possible. Although it is only currently offering dollar bingo games, the true intent of the Tribe is lost on no one.

In fact, the State even flat-out mentions in its brief that it believes the real purpose behind the Tribe offering online bingo now is so that it can be the first to offer poker in a theoretical legalized market.

It does appear clear that the Tribe is operating its online bingo offering illegally. That being said, it is also not hard to connect the dots from the State’s interest in a one dollar bingo game, straight to ensuring that no one gets a head-start on building brand recognition until they are legally able to pay for the privilege.

Should the State prevail, the Tribe would be forced to halt all of its online gambling offerings immediately. It would then only be able to restart operations if future legislation legalizing them were to pass.

 

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Bradley Chalupski

Bradley Chalupski made his first deposit onto an online poker site in 2009 and has been paying rake and following the poker scene ever since. He received his J.D. from the Seton Hall University School of Law in 2010.

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