The Southern Ute Indian Tribe filed a federal lawsuit alleging Colorado has illegally blocked it from participating in the state’s online sports betting industry.
The lawsuit, filed in US District Court in Denver on July 9, claims the state acted in bad faith in negotiating to allow the tribe to facilitate online sports betting. The tribe is asking the court for a preliminary injunction so that it can begin offering sports betting immediately.
Gov. Jared Polis and Colorado Division of Gaming Director Christopher Schroder are named in the lawsuit.
Tribe claims state sabotaged their online sportsbook
The Southern Utes launched their Sky Ute Sportsbook in June 2020, soon after Colorado online sports betting became legal.
The online sportsbook was initially available statewide. However, the tribe’s sportsbook failed to gain much traction, and it shuttered its operation last summer.
The lawsuit claims that after legalization passed, the state requested the tribe apply for a Colorado sports betting license. They would have then been subject to the state’s revenue tax.
The suit says the state then pressured the tribe’s sports betting vendor. It warned them that the sportsbook was operating illegally and threatened to take action against them.
They argue that the failure of the tribe’s online sportsbook was the direct result of the state “restricting competition.”
Southern Ute chairman Melvin J. Baker said the lawsuit was a last resort after years of attempting to negotiate a fair agreement with the state.
“Faced with this ongoing injustice, the Southern Ute Indian Tribe is now taking the unfortunate but necessary step of legal action. This is the first time we have been forced to file a lawsuit against the state of Colorado in decades. This lawsuit is not a decision we take lightly. It is about securing a fair resolution and ensuring the state lives up to its obligations to the tribes as outlined in agreements and federal law. We will fight tirelessly to hold the state accountable for its commitments.”
Tribe says it can offer any gaming activity offered elsewhere in state
After four years of legal sports betting in Colorado, the state has withheld authorizing the Southern Ute and Ute Mountain Ute tribes from participating, the lawsuit claims. The Southern Ute tribe says its gaming compacts with the state, in place for nearly 30 years and federally-approved, explicitly allow it to offer sports betting.
In a press release, the Southern Utes said their compact gives them the right to offer any gaming activities legal in Colorado.
Colorado voters legalized online sports betting via Proposition DD in 2019. Thus, the tribe argues they should be allowed to operate an online sportsbook.
The state’s efforts to “stonewall” the Southern Utes in negotiations and block them from participating are illegal, the tribe claims.
State wants tribe to pay taxes on sports betting, suit claims
The Southern Ute Tribe says Colorado blocked it from offering sports betting. The government couldn’t collect taxes on the tribe’s sportsbook. Therefore, it wouldn’t provide a financial benefit to the state.
According to the tribe, federal law requires revenue from compacted gaming activities to be used for tribal operations. In other words, the state government can’t tax it.
The Southern Utes say that has been the motivation behind the state’s disengagement.
“The state is not allowed to tax the tribes and they want to.”
Lawsuit first to reference Florida tribal sports betting case
The Southern Ute lawsuit makes reference to the recent US Supreme Court decision to not hear an appeal challenging the Seminole Tribe of Florida’s right to exclusively operate sports betting in Florida.
The court’s inaction left in place a previous decision approving the Seminole’s compact with the state that gives them a monopoly on statewide sports betting. It also cemented the legality of the so-called “hub and spoke” model of online sports wagering operations, which, per their compact, allows a tribe to offer online sports betting statewide if the servers used to facilitate it are on tribal lands.
The Supreme Court’s decision set legal precedent for tribes in other states to attempt to launch sports betting via compacts. The Southern Ute lawsuit is the first time a tribe has cited the Florida case in an effort to launch online sports betting.
In Florida, the Seminole Tribe’s compact includes revenue sharing with the state via a 10% “tax” on statewide sports betting revenue. With references in the lawsuit to the state’s inability to tax tribal gaming activity under federal law, it would appear the Colorado tribe would not be open to considering a similar provision.
The citation referencing the Florida decision is in a section of the lawsuit arguing the legality of the tribe offering online sports betting across Colorado:
“There is nothing in the text or structure of (the Indian Gaming Regulatory Act) that would prohibit a tribal-state gaming compact from authorizing online sports betting that would enable customers to access sports betting facilities located on a tribe’s reservation from personal devices located elsewhere or to otherwise expand tribal sovereign and authority beyond what is mandated by IGRA.”
