Gambling’s move online likely to cost tribes

WASHINGTON -- Indian tribes that have made billions of dollars from legalized gambling stand the most to lose as gaming migrates to the Internet, experts told Congress on Thursday.

So much so, some said, that lawmakers should consider forms of protection for tribes, perhaps even compensation for lost revenue they have come to count on to sustain themselves and provide services on their reservations.

The discussion before the Senate Indian Affairs Committee shed light on an emerging issue as Congress and states consider legalizing and regulating online poker. Indian tribes brought in $26.48 billion from brick and mortar casinos and bingo halls in 2009.

Many tribes operate through special state compacts that limit gaming to their reservations. But that concept suddenly seems outdated as states consider legalizing forms of gaming via ethernet and wireless in the wake of a Justice Department ruling in December.

"In much less than one decade we are going to see Internet gambling legalized by all the states," gaming law expert I. Nelson Rose, distinguished senior professor at Whittier Law School, told senators. "Unless Congress figures out a way to protect particularly those in small states, I think a lot of the tribes are going to be out of luck."

Fitting tribes into the Internet gaming puzzle is one of the most complex issues facing policymakers, Rose said.

"The gambling issues are extremely complex, the Internet is complex and you have Indian law," he said. Also, "there are different laws from state to state and you can have different laws with tribes from inside the state. And we really didn't get into international law."

Kevin Washburn, dean of the University of New Mexico School of Law Administration, said issues facing gaming tribes is one reason Congress needs to pass a bill putting the federal government in charge of Internet gambling rather than leaving it to the states.

"An entity at the federal level would be keenly focused on protecting the importance of Indian gaming to Indian tribes," he said, noting the revenues that sustain tribal services.

"Internet gaming poses some risk to that very strong revenue source, and if that revenue source goes away that is going to be a federal responsibility to meet those needs," he said.

Rose said with few exceptions tribes won't have the money or the political clout to claim invaluable state licenses to offer online poker. In California, he predicted a license would go for "one hundred million dollars up front."

Tribes now are granted a form of geographic exclusivity through their compacts with states, a status that would be encroached by online offerings, senators were told.

"We've invested nearly a billion dollars tied to our geographic area. That is what we have negotiated for," said Robert Odawi Porter, president of the Seneca Nation of Indians in western New York. "Opening up Internet gaming beyond those geographic borders and allowing... the New York lottery to prey upon and seize business opportunities from patrons in our exclusivity zone is our greatest threat."

"We cannot stand for the disruption of these compacts either in New York or anywhere in Indian country," Porter said.

Patrick Fleming, representing the Poker Players Alliance, said Internet poker is not a threat to tribes. Poker, he said, accounts for only 1 percent of tribal gaming revenue.

On the other hand, he said, it has been shown the popularity of online poker has driven players to try their skills at brick and mortar casinos. "There is a symbiotic relationship between those who play poker online and those who play it live," he said.

Committee chairman Sen. Daniel Akaka, D-Hawaii,  posed a question about possible compensation for tribes that might be affected by changes.

Akaka got affirmation from Glenn Feldman, a Phoenix attorney who represents the Cabazon Band of Mission Indians.  In 1986, Feldman argued for the Southern California tribe before the Supreme Court in a case that yielded the  landmark ruling leading to the legalization of gambling on Indian reservations.

"There needs to be some accommodation for that loss of exclusivity," Feldman said. "Tribes probably have more to lose from the expansion of Internet gaming than any other segment of the gaming industry.

"I can't give you a formula but it is entirely appropriate that Congress give some consideration to that potential loss  of exclusivity and protect it in some  way. The $26 billion in revenue today is funding health programs, education programs, senior citizen programs, and tribes can't afford to lose that revenue stream."

Contact Stephens Washington Bureau Chief Steve Tetreault at stetreault@stephensmedia.com or 202-783-1760.