Online Gaming: How Tribes Can Use a Hub-and-Spoke Gaming Model to Link Reservations, Increase Play, and Reduce Costs

After the Supreme Court overturned the federal ban on sports wagering in 2018, sports wagering not only exploded in popularity but was also quickly launched into the 21st century with the proliferation of online sportsbooks, particularly mobile app-based sports betting platforms. It is impossible to turn on the TV without being flooded with advertisements for sportsbooks from DraftKings, FanDuel, Caesars, BetMGM, and more. While some bettors may choose to place bets the old-fashioned way, at a physical ticket window inside a casino, more and more players are going to expect the convenience of mobile sports wagering.

Where does this new gaming experience leave Tribes?

Under the Indian Gaming Regulatory Act (“IGRA”), Tribes are limited to offering gaming on their Indian lands, which would generally prohibit Tribes from offering wagers of any kind, including sports wagers, to players off-reservation through online connections. However, that doesn’t mean that Tribes can’t find ways to enter the mobile sportsbook market. The most straightforward option for Tribes to offer a mobile sports wagering experience is through a “geofenced” on-reservation product.

What is Geofencing?

Geofencing is a technology that can use different data sources, such as GPS, RFID, or cellular data, to create a virtual “fence” around a physical area. Using this technology, a Tribe can offer a mobile sports wagering app, with a geofence going around the perimeter of the Tribe’s Indian lands, that only works when the phone or other mobile device is inside the virtual fence. This ensures the wager occurs within the Tribe’s Indian lands and is in compliance with IGRA.

In Washington State, all Tribes that offer a mobile sportsbook utilize this technology. Statewide mobile sportsbooks are prohibited by Washington State law, but Tribes are allowed to offer a mobile sportsbook provided that it is geofenced to their lands. That solution may work in a State with no commercial competition that offers a statewide platform, but how can this option compete with Statewide offerings in states where such applications are legal?

The Hub-and-Spoke Model

IGRA requires that gaming take place on Indian lands but where does gaming take place when it is entirely online? One potential solution to this dilemma is to determine that the gaming occurs wherever the servers are located. In this analogy the servers are the virtual equivalent to the old-fashioned ticket window, where the bet is actually placed. If we imagine online sports wagering as a wheel, the servers then act as the “hub” of the gaming activity and that hub can connect out to players through the “spokes” of the wheel.

With this model in mind, some Tribes have attempted to negotiate compacts with their State to offer statewide mobile gaming. The Seminole Tribe of Florida updated their compact with the State of Florida to include just such a model, but that compact was challenged in Federal Court under the argument that the hub-and-spoke model violates IGRA. The case remains ongoing yet some Tribes, like the Prairie Band Potawatomi, are already updating their compacts to allow for similar Statewide offerings, should the Seminole Tribe of Florida be successful. However, should the Tribe lose the case, where does that leave the hub-and-spoke model?

A Tribal Hub-and-Spoke Model

The fundamental challenge to Seminole Compact is that the players (the “spokes”) may be off-reservation when the bets are placed. What if all the “spokes” still ended on Indian lands? Through a combination of geofencing and the hub-and-spoke model, Tribes could cooperate to offer mobile sportsbooks that can be used from property to property. This model has several potential advantages.

First, no wagers are happening outside of Indian lands so each participating Tribe would be on solid footing that the model does not violate IGRA. Second, it could defray the startup costs for a Tribe wanting to enter into sports wagering.

Once one Tribe has gone to the trouble of setting up its own sportsbook, it can offer that sportsbook to other Tribes, setting up the other Tribe with the necessary geofencing, kiosks, and access to their app, in exchange for splitting the net gaming revenue.

Lastly, it can help offer a competitive product to the consumer. The player no longer needs a different app for each property but can seamlessly wager from the same device, in the same application from property to property, which offers an experience much closer to other statewide mobile sportsbook applications.

About the Indian Law Team at mctlaw

Mctlaw’s tribal gaming practice helps bridge the gaps between the federal government, state government, tribe, business, and consumers. The casino and gaming industry rules and regulations are complex. Indian gaming adds an additional layer that can be nearly impossible to navigate. Our firm handles different aspects of Indian gaming to simplify the process. Contact us for a free consultation.