The Mouthpiece


By Martin Owens
Contributing Editor


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    Martin Owens

    Landing the Biggest Fish: Gaming Tribes Warm Up to Internet Gambling.

    "Sitting still and wishing Made no person great; The good Lord sends the fishing, but you must dig the bait" - Old Proverb

    Philadelphia, PA (Sports Network) - In Mid August, a curious Federal case was decided in Ohio. An Indian tribe called the Ottawas, now located in Oklahoma, were rebuffed in their effort to re-claim ancestral fishing rights in Lake Erie. True, fishing in the lake has been getting better in recent years, what with cleaner water, and the native walleyed pike have always been great eating. But Oklahoma's a long way to travel for a fish fry. The smart money says the Ottawas weren't after the fish with fins, but the ones with wallets. The Buckeye State, you see, is finally legalizing racino gambling (slot machines at race tracks). And Federal law would give tribes with Ohio land claims a shot at setting up casinos of their own there. So the rights to troll for walleye were only the first step in the process - a fishing expedition, as we lawyers say.

    Remember the science-class diorama of the fish crawling up on land, and evolving into a reptile, then a bird, then an ape and so on? Same thing here. First the fishing rights, then the land rights to a recognized reservation, then the casino. Too bad for the Ottawas, evolution is still against the law in Ohio. And worse, Internet gaming may be making the whole game obsolete.

    For even as the have-not Ottawas fought for a foothold to make land claims in the Eastern US and get into the Indian casino game, another tribe, in the West , was fighting to get out. California's Morongo tribe, a long established success in the Indian casino business, organized an ad-hoc consortium of card rooms and Indians and sponsored a bill in the State legislature. The proposed law would have handed their group the keys to California's proposed internet poker system. That's right - these gaming Indians were fighting to get off the reservation, not on.

    Indians Gambling and Reservation Limits

    If there was ever a textbook example of unintended consequences, it has to be the story of Indian gambling in the USA . Indians got the official right to offer gambling on their lands from the Indian Gambling Regulatory Act of 1988. The idea was to wean the tribes off welfare by giving them the equivalent of church bingo, which lots of them already had anyway. Further, it would strengthen independent tribal governments by giving them something to manage.

    Predictably, matters soon progressed beyond the neighborhood charity level. ? Way beyond. Today, Indian gambling is a $25 billion dollar industry, active in thirty of the Fifty States. Native Americans and their lobbyists are a fixture in Congress and the statehouses, happily wielding the political clout that comes with multi-million dollar revenue streams. But even though Indian gaming is an overall success, local conditions may vary. While tribal casinos built close to major population centers like New York or LA are great successes, gambling facilities on remote reservations garner only limited returns. In fact, a number of tribes have opened up gambling, only to close it again when not enough customers came. Location, location, location. Which was just fine (for the winners, anyway). But then along came the Internet, and all of a sudden location was no longer so important, for gambling and for many other things. In fact, in the context of online gambling, American laws that govern Indian gambling's location are a handicap.

    The IGRA was designed to allow Indian gaming- but only by "recognized tribes" - on land they controlled when the law was passed. There are occasional surprises, as when a newly recognized tribe moves to build a casino where no one thought it could be done, but by and large, Indian lands are fixed, and so is the location of Indian gaming. So, for the same reason that Harrah's or MGM can't send an online keno game home with its patrons, Indian gaming cannot take place outside of Indian land.

    No big deal: back then, most gambling was land-based anyhow. This was the way government controlled gambling - with zoning, with rules for how many square feet of gambling floor, how many slot machines or roulette tables, hours of operation. But technology changed all that. Remote betting on sports was made possible by telephones. The Internet made everything possible everywhere, and made a multi- billion dollar market out of it.

    Today even the successful gaming tribes are confronted by this new reality, that location does not necessarily command market share. To be sure, most of the traditional customers like the idea of going someplace to gamble- it's a night out, a holiday. But today, no one has to go anywhere to play. Every personal computer, laptop, Blackberry and high-end cell phone is a potential casino. People can and do deal poker real-time across continents from their bedrooms. Internet poker alone is a market worth $15 billion, with half of that coming from the US market. Online gambling is clearly the wave of the future. But the problem is, the Tribes cannot simply pick up and move into Internet gaming. ? First, in order to keep slots and other "class III" gaming, each gambling tribe must sign a contract with its home state. And many states, like California, make it a condition that the tribes cannot use the Internet to promote or deliver their gambling services. And we can't forget the prevailing legal theory places the actual location of Internet gambling at the operator's server. Which means that if the tribes decided to offer Internet gaming anyway, the betting is located at their place. And unlike the offshore operators, Indian reservations can be reached by US law enforcement. "Indian sovereignty" may be some use against state governments, but it does not affect Federal jurisdiction at all. And the Bush Department of Justice made it more than clear they don't like Internet gambling, whatever the letter of the law may say. (Whether the Obama administration has repealed that attitude is yet to be seen).

    Second, the tribal authorities are worried about what is called "cannibalization" of their existing customer base. If someone is already driving out to the tribal casino to play the slots every Friday night, he likely eats in the resort restaurant and perhaps buys gasoline at a tribe-owned filling station. So shifting him to playing poker online is probably a net loss. All this means the tribes assume that a) they cannot participate in online gaming in any case, and that b) allowing it at the state level not only shuts them out of a new revenue stream, but diverts their old one. The idea makes the gaming tribes in Northern California particularly nervous. They know that much of their prosperity came from seducing the old clientele away from municipal card rooms and the Reno casinos, both much reduced these days, and they fear it could happen to them in turn.

    New Order, New Understandings
    > Fortunately for all concerned, these assumptions are not accurate. The process is beginning with state licensed Internet poker, but the new realities are the same for everyone.

    Changes in technology mean that gambling can no longer be controlled as it was before, by limiting physical access. That means that new rules must be written, and new bargains struck. But that will take the cooperation of all the stakeholders in the current gambling regime: legislators, regulators, card rooms, casinos, gaming tribes, and likely enough horse tracks and state lotteries as well. Each has a particular contribution to make, a particular constituency to protect, and the political power to interfere if it is badly used.

    Tribal gambling will not be cut off and isolated on the reservation unless they do it to themselves by clinging to the letter of the old arrangements, trying to use the status quo as a blunt instrument against the future. Even with the quasi monopoly many of them enjoy, receipts are down across the board. New times, in short, call for new solutions. Fortunately, the new solutions are there to be reached for.

    State gambling law remains the primary reference point of all American gambling jurisprudence. Simply put, there is no problem with a particular gambling setup unless the states say there is one. Therefore, a tribe or group of tribes with an interest in gambling might profit from reconsidering the assumption that the local state government is automatically their antagonist. In a digital, interactive, online frame of reference, working together promises to yield far greater benefit for all parties concerned. Arrangements can be worked out to allow a Native American contribution to the new online gaming regime and a fair reward for their efforts and participation. And of course the same goes for the other stakeholders.

    A state licensed network for offering poker or other games online is beyond the capacities of any one format or faction in the constellation of licensed gaming interests. Like capturing a whale, it's too much for any one fisherman. This effort will need the entire crew, and that very much includes existing and even potential gambling tribes .

    What can Individual players do?

    Individual gamblers have gotten the idea,, over time, that they have no legitimate interests. This is wrong. Anyone who would like to play poker online, or other games, has a perfect right to let the state lawmakers know about it. Make it clear that you will give your vote to the parties who behave reasonably and take your wishes seriously. Right, left, or center, that's the kind of support that every politician knows how to fish for.

    Mr. Owens is a California attorney specializing in the law of Internet and interactive gaming and related issues, serving clients worldwide since 1998. He co-authored INTERNET GAMING LAW with Professor Nelson Rose, America's senior authority on gambling law (Mary Ann Liebert Publishers 2005, second edition just out, 2009), as well numerous other articles. He is an Associate Editor for "Gaming Law Review and Economics" magazine. Comments and inquiries welcome at to mowens@trade-attorney.com.

    Copyright 2009


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