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Southern Ute Indian Tribe sues Colorado over online betting | Courts

The Southern Ute Indian Tribe is suing the state of Colorado in federal court for lack of access to the online sports betting market.

During the inaugural meeting of the state legislature’s interim committee on Indian affairs, Southern Ute Indian Tribe Chairman Melvin Baker announced the lawsuit against Governor Jared Polis and the director of the Colorado Division of Gaming, calling the tribe’s inability to generate revenue from online betting an “ongoing injustice.”

“This is the first time in decades that we have been forced to file a lawsuit against the state of Colorado,” Baker said Monday during his address to the committee.

Specifically, the lawsuit references the passage of Proposition DD in 2019, which legalized online sports betting in Colorado, as well as a 1995 federal gaming compact between the tribe and the state that allows the tribe to engage in gambling activities and wagering identical to those permitted throughout the state.

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What the agreement failed to address over the past five years was the tribe’s ability to benefit financially through sports betting, as it generates taxable revenue. The complaint alleges the state failed to take steps to ensure its local tribes were afforded the same “economic opportunities” as other betting options.

When passed, Prop DD imposed a 10 percent tax on sports betting winnings paid by casinos, online sportsbooks, and bettors.

Because federally recognized tribes are not taxable entities, all revenue from tribal gaming activities is exempt from federal and state income taxes. Federal law also requires that this type of revenue must be used for government operations and the general welfare of the tribes.

Following the passage of Proposition DD, the tribe established its own online sports betting option, Sky Ute Sportsbook, in 2020, with similar rules, regulations and restrictions as Colorado’s online offerings.

In its complaint, the tribe alleges that Polis and the state Division of Gaming unlawfully stripped the Tribal Gaming Commission of control over its sports betting operations without consulting the tribe about possible regulatory options.

It was not until May 2021, about a year later, that the Division of Gaming suggested that the tribe obtain a state license and pay 10% of revenue from off-reservation betting winnings to the state.

The tribe argued that this proposal violated the agreed-upon gaming compact. Because of this, they claim, they were “locked out” of online sports betting during this time while other non-Native companies had a head start in “saturating” the market.

The Sky Ute Sportsbook would close in July 2023.

“The state’s erroneous legal position also jeopardizes the tribe’s future sports betting activities and other potential future activities under the Gaming Compact,” the complaint states.

Baker told the committee that the state had ample opportunity before and after the passage of Proposition DD to meet with individual tribes and work out individual sports betting agreements.

“This is unfair and violates our existing agreement under federal law and the trust we have built with the state,” Baker said.

A spokesman for Polis’ office said they had “no comment on this pending litigation.”

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Baker pointed to recent cases in states that have recently legalized online gambling and reached agreements with their resident tribes. In Kansas, lawmakers voted to amend the state’s gaming agreement with the Iowa Tribe of Kansas and Nebraska and allow sports betting on tribal lands.

Earlier this year, the U.S. Supreme Court ruled that the Seminole Tribe was allowed to offer online sports betting in Florida.

“Every legal objection to the Southern Ute and Ute Mountain participating in statewide sports betting has been eliminated,” Baker said. “But as of last week, the administration has refused to budge.”

The tribe is demanding that the court recognize that its sportsbook meets all legal requirements as an online gambling company, that the state stop interfering in its operations, and that it reimburse all costs, interest and attorneys’ fees incurred in the prosecution.

“This lawsuit is not a decision we make lightly. It is about achieving a fair resolution and ensuring the state meets its obligations to the tribes as set forth in agreements and federal law,” Baker said in a statement Tuesday. “We will fight tirelessly to ensure the state meets its obligations.”