Florida Legislature Ratifies Compact Including Sports Betting, But Legal Challenges Expected

Posted By Matthew Kredell on May 19, 2021

The Florida legislature had a busy few days in the special legislative session on gaming. Lawmakers ratified a gaming compact with the Seminole Tribe that brings sports betting to the state, changed the way pari-mutuels do business, and created a Gaming Control Commission to crack down on illegal gambling.

The three-day session concluded Wednesday with the House ratifying the compact that the Senate approved a day earlier. The Senate voted 38-1. While there was more opposition in the House, it still voted overwhelmingly in favor 97-17.

“By comprehensively addressing issues raised for almost a decade, this historic legislation restores Florida’s relationship with the Seminole Tribe, offers new opportunities for Florida’s legacy pari-mutuel industry, and provides substantial new revenues for our state,” said Senate President Wilton Simpson, who spent years working on negotiating a new compact with the Seminoles.

The legislature’s work is done, but there’s plenty that needs to happen before Florida online sports betting is up and running.

Is it the best deal for Florida? Will it get federal approval? Will the sports betting model hold up in court? Are the Seminoles really intending on including all who want to participate in sports betting?

These and many more questions will be answered in the coming months and years.

Here’s a comprehensive look at the discussion and issues brought up in the special session and how they may affect the future of sports betting and gambling in the Sunshine State.

Status of Florida gambling industry entering year

Florida and the Seminoles entered into a compact in 2010. Technically, that compact remained in place.

The 2010 compact gave the tribe the exclusive right to offer banked card games in Florida. In return, the Seminoles shared in excess of $300 million in annual gaming revenues with the state.

However, pari-mutuels began using a “designated player” system to offer traditionally banked card games.

In 2016, a US District Court judge ruled this violated the compact. Given the breach of compact, the Seminoles ceased revenue share payments to the state in 2019.

In other words, the Florida gambling industry was a mess and it was hurting state revenue.

In 2019, then-Senate President Bill Galvano tasked Simpson to work on a new compact with the Seminoles. It was known at the time that Simpson would be the next Senate leader.

Years of negotiation with the tribe from Simpson and Sen. Travis Hutson produced much of the language of the compact.

Details of Seminole gaming compact

They handed the compact off to Gov. Ron DeSantis, who worked out state guarantees on revenue and the percentages of sports betting revenue split between the pari-mutuels and tribe. DeSantis signed the compact last month.

Key details of the compact include:

  • Statewide online sports betting takes place through a hub-and-spoke model with servers located on tribal lands.
  • Tribal casinos can offer craps and roulette.
  • For sports betting, the tribe must partner with at least three pari-mutuel facilities, allowing them to access the Tribe’s wagering platform using their own brand. Pari-mutuels get no less than 60% of the revenue from bets placed through their skins.
  • The Seminoles give the state 13.75% on net win for sports wagers made directly through the tribe’s platform, and 10% on net win for wagers made via software using a brand of a pari-mutuel.
  • Allows the Seminoles to build three more casinos on its Hollywood Reservation. The tribe currently operates seven casinos.
  • The Seminoles drop their opposition of pari-mutuels operating designated-player card games.
  • pandemic clause allows for a reduction on the minimum contribution requirements if an act of god disrupts operations.

Previously, the compact included a provision providing for continued discussions on Florida online casino. If the tribe and state agreed on online casino implementation within 36 months, they could amend the compact.

With the possibility that the House would vote down the compact because of that language, the Seminoles agreed to remove the online casino clause prior to the start of the special session.

Other changes made to gaming during special session

The legislature passed several additional gaming bills focusing on two issues:

  • Creating an independent, five-member Gaming Control Commission.
  • Decoupling, or allowing pari-mutuel facilities to offer slot machines and card games without requirements to hold live races or other events.

The Commission will have no authority over gaming at tribal casinos. As a sovereign nation, the Seminole has its own Seminole Tribal Gaming Commission. The new state commission also won’t regulate sports betting, as that takes place through the tribe.

The Gaming Control Commission will oversee pari-mutuel gaming. But Hutson said its real importance was as a state compliance agency. By going after internet cafes and any other illicit gaming activity that pops up in Florida, the Commission will ensure the state does not breach the compact with the Seminoles again.

“It’s easy to say, well, you’ve expanded gaming because now there’s going to be a sportsbook,” Simpson said. “But how much gaming did we shrink by having a gaming commission? So I think if you look at the totality of the gaming bill, if you were to go out three years and look back, you might have less gaming in the state.”

Pari-mutuel facilities may stop offering live greyhound, jai alai, harness and quarter-horse racing, and just focus on gaming. However, facilities offering thoroughbred racing cannot decouple.

The bill raised concerns in the House for its potential impact on the state’s horse racing industry. Rep. Dan Daley failed, despite vocal support in the chamber, Wednesday with an amendment attempting to save harness racing.

Gulfstream Park, which offers 80% of thoroughbred races in the state, asked to be treated the same as other pari-mutuels. Hutson assured Gulfstream that the legislature can look at decoupling thoroughbred facilities in the future if the market changes.

Economic terms of compact

The 30-year compact guarantees $2.5 billion to the state over the first five years, if it is kept whole.

Seminole Gaming CEO Jim Allen stated that the total value of the compact will exceed $20 billion to the state of Florida. Rep. Randy Fine called it $1.5 million a day.

Due to the previous breach of compact, the tribe could have paid Florida nothing over the next 10 years. By making this compact, Florida could get $6 billion over that period, mostly for gaming activities the Seminoles already do.

As long as there’s no “act of God,” or the pandemic flaring up again, in no year may the Seminoles share with the state less than $400 million. That number holds up even if a court invalidates the online sports betting portion.

Did Florida get enough money from the Seminoles?

Some lawmakers weren’t happy with those numbers negotiated by the governor for the exclusivity the tribe is getting.

“I think the (Senate) President would have negotiated a much better deal for the citizens of Florida,” Sen. Jason Pizzo said. “I think the current posture that we’re in right now shows that one side is very good at negotiating, the other has never made a payroll or signed the front of a paycheck.”

Sen. Annette Taddeo agreed that this wasn’t the best deal for Florida. She explained why she voted for the compact anyway:

“I still think, good deal or bad deal, it is the deal we have on the table and I can’t in good conscience turn down the money. I was critical of the fact that for all these years we haven’t been getting anything. That’s not a good deal at all.”

Rep. Joseph Geller disparaged the money the state will get from sports betting, specifically.

“Compared to what other states are getting just on sportsboook, a guarantee of $50 million? Really? For the state of Florida? This big state? It’s not enough money.”

Fine countered that his colleagues need to understand the sports betting business is not that big. It’s dwarfed by the business done by the Seminoles today.

“This is a good deal for our state,” Fine said. “Could we get a better deal? I don’t know. I like to think I could, sure. But I don’t have that choice. I have this deal and a closer path to $1.5 million a day.”

There’s more to the compact than just money

Hutson asserted that this was a great deal for the state, and it wasn’t just about the money coming to the state through the compact.

The Seminoles also agreed to let designated-player games stay with the pari-mutuels. Pari-mutuels will be able to continue operating as they have, and that generates money to the state.

The compact sets up the possibility that all the gaming entities in the state can work together in harmony, even in partnership.

Over the past decade, peace in the Florida gambling industry seemed unlikely. How does one quantify that value to the state?

“The money is endless in terms of where we can plug these holes,” Hutson said. “But, more importantly, if you look at what we’re doing with our pari-mutuels and with the tribe, we brought everybody to the table, and almost every single person has signed off on it.”

When is a monopoly not a monopoly?

To gain federal approval for a compact that pays revenue share to the state, a tribe needs to get something in return. In this compact, a big part of that is control over sports betting.

For sports wagering, the compact essentially sets up a monopoly for the Seminoles. There’s hope it won’t become a monopoly, but that’s only by the grace of the company with exclusivity.

Sen. Jeff Brandes, the only Senator to vote against ratification, said this was his reason for opposition.

“What we’re telling everyone else, specifically in one area of the economy, is that we’re no longer open and that if you’re going to do business you’re only going to do business with one vendor. This is not about the money, it’s about the principle. We will get the money one way or the other, no matter if we deal with just one vendor or multiple vendors. We’ve chosen a monopoly. That’s something my grandfather would never have stood for, and it’s something I’m not going to stand for.”

Fine admitted that the compact does set up a monopoly, but that doesn’t mean it has to stay that way. Voters could choose to create a commercial model for online sports betting in the future.

“There’s nothing that stops anyone from going and trying to put sports betting on the ballot and letting commercial people do that,” Fine said. “And the Seminoles acknowledged yesterday if that happens that doesn’t void the compact. They just don’t have to pay for the sports betting. So we could end up with not a monopoly if that’s what the voters decide.”

Will the Seminoles really share the wealth?

The tribe could just set up online wagering through one sports betting operator and call it a day. But Allen said that is not its intention.

Allen told lawmakers that the Seminoles have proposals from all the major sports betting companies, including DraftKings, FanDuel, BetMGM and Barstool.

“I have spent the last month doing virtually nothing but meeting with the pari-mutuels and companies that are not pari-mutuels but also have interest in online sports betting making sure we send the message on behalf of the tribe that yes, we do want a partnership. Yes, we want to work with them.”

Operators could participate in the Florida sports betting market by partnering with the Seminoles or one of the pari-mutuel “spokes.” That is, if the Seminoles follow through on their pledge of working with the pari-mutuels.

If the tribe doesn’t sign sports betting contracts with at least three pari-mutuel operators within three months of the compact taking effect, its revenue share with the state increases from 13.75% to 15.75%. Some lawmakers pointed out that 2% wasn’t much.

But Allen assured that the Seminoles hoped many pari-mutuels would be interested in partnering on sports betting.

He said the tribe intends to partner for two reasons:

  1. Partnering with parimutuels, sports teams and other companies will help grow the Florida sports betting market much more quickly.
  2. The tribe knows it’s important to live up to this commitment for the sake of its relationship with the state.

“If we alienate them in this process, our integrity will be questioned and our intentions moving forward would be diminished,” Allen said.

Will the compact get federal approval?

Now that the Florida legislature approved the compact signed by the governor and tribe, it heads to the Bureau of Indian Affairs for federal approval. The decision on the compact is due within 45 days of reception.

The Bureau is housed within the US Department of Interior, where Deb Haaland is the first Native American to hold the position of Secretary.

The Bureau has never received a compact like this. It will have to look at the way the state and tribe claim that wagers taken from a person in Tallahassee occur on tribal lands because of the location of the server.

But Allen revealed that the tribe and state had numerous conferences with the Department of Interior in writing the compact. This makes it seem more likely to receive federal approval.

“It’s important for me to state that they did not tell us they are going to approve the compact,” Allen said. “But I can assure you we took their guidance … and technical assistance as these documents were prepared.”

Fine, for one, said he thought the Secretary of Interior would approve the compact.

Will the compact hold up in court?

There’s no question among lawmakers that the compact will be challenged in court based on the sports betting model. Hutson told colleagues their discussion was important because it will be brought up during litigation.

It’s expected to be challenged in state court based on Amendment 3, a 2018 constitutional amendment requiring any Florida casino gambling expansion go through voters. Unless the expansion is through a compact for gaming “on tribal lands.”

A group called No Casinos already vowed to challenge the compact in court based on Amendment 3.

“When I hear that this does not trigger Amendment 3, it’s laughable,” Rep. Michael Grieco said. “We’re going to be in court, we’re going to lose and we’re going to see this on the ballot.”

In federal court, lawmakers expect a challenge based on the Indian Gaming Regulatory Act, which only permits compacts between state and tribe for gaming on tribal lands. There’s that phrase again.

“I think we’ve got a great product, and I think that the court system will have their turn at it now and we’ll see if it holds up,” Simpson said. “I have a lot of confidence that it will.”

Fine wasn’t so confident.

“Me personally, I don’t think it’s going to survive. So what happens if that’s the case? The Seminoles get to keep doing what they’re already doing with a small change, craps and roulette, and they start paying us $1.5 million a day, $500 million a year.”

If a judge strips online sports betting from the compact, the Seminoles get a brick-and-mortar monopoly. But the tribe would continue paying the state a minimum of $400 million a year.

And that could make it easier to pass a ballot proposal setting up commercial online sports betting.

How long will the compact really last?

Many lawmakers lamented that 30 years was too long of a commitment.

Geller tried an amendment reducing the compact from 30 to 20 years, but was told that the legislature could not amend the compact.

“It’s too long,” Geller said. “Can you imagine 30 years ago if we were talking anything about internet gaming or anything about internet anything?”

Allen said the tribe looked at it as a 20-year extension to the remainder of the compact signed in 2010.

Simpson explained that the 30-year term was needed for financing. The tribe will be looking to receive 30-year financing to build the new properties allowed in the compact.

Both Simpson and Allen expressed an expectation that the tribe will look to renegotiate the compact well before the term is up anyway. And they both implied the renegotiation could have to do with online casino.

“Eleven years ago, there was a compact signed and 11 years later it was renegotiated,” Simpson said. “I think there’s a great potential that between now and the next 30 years there will be something new, and we don’t know what that is. Obviously, internet gaming was something we all opposed but it was something the tribe was wanting to negotiate.”

When will sports betting start in Florida?

That all depends on what happens at the federal level and in the courts.

Prior to the session, along with striking the online casino language, the state and tribe amended the compact to delay the start of sports betting to Oct. 15.

The delay serves two purposes:

  • Giving the tribe and pari-mutuels time to work out partnerships.
  • Creating a window for legal challenges.

Once the governor signs the ratification bills, the compact heads to the Department of Interior. If the compact gets federal approval, it’s likely to happen in July. Then the legal challenges are expected to begin.

A judge may order that the Seminole hold off on offering sports betting beyond Oct. 15.

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Matthew Kredell

Matthew has covered efforts to legalize and regulate online gambling since 2007. His reporting on the legalization of sports betting began in 2010 with an article for Playboy Magazine on how the NFL was pushing US money overseas by fighting the expansion of regulated sports betting. A USC journalism alum, Matt started his career as a sportswriter at the Los Angeles Daily News and has written on a variety of topics for Playboy, Men’s Journal, Los Angeles magazine, LA Weekly and ESPN.com.

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