By Daniel Wallach
November 19, 2018
Florida’s gubernatorial and Senate races are not the only ballot items from Election Day that underwent re-examination. It also turns out that the ballot question on the future of casino gambling in the Sunshine State is likewise the subject of some post-election intrigue. Amendment 3, which passed with more than 70% of the vote (considerably higher than the 60% threshold needed for passage), grants Florida voters the exclusive right to decide whether to authorize the expansion of casino gambling in Florida.
But does it apply to sports betting? After all, dozens of editorials and op-eds encouraging people to vote either “yes” or “no” on Amendment 3 focused on how the amendment would impact the prospects of sports betting legalization in Florida. I should know, as I was the author of one of those op-eds. (For the record, I urged people to vote “no” on Amendment 3 because I believed that its passage would make it far more difficult to legalize sports betting.)
On the day after Election Day, stunned at the landslide margin by which voters passed Amendment 3, I wondered where it all went so wrong. Could 71% of Florida voters really want to make it more difficult to legalize sports betting, when survey after survey (see here and here) indicated broad support for legalizing wagering on professional sporting events? Did the tens of millions of dollars of advertising spent by the sponsors and supporters of Amendment 3 – none of which even mentioned sports betting – sway voters? Or was there some other explanation?
In searching for answers to these questions, I decided to re-examine the Amendment 3 petition form for clues. And there it was – in all its glorious fine print. The definition of “casino gambling” used in Amendment 3 gives no indication to voters that it includes sports betting. It doesn’t even mention the words. Further, it defines “casino gambling” in such a specific and unique way that it could not logically encompass sports betting.
The two-part test for “casino gambling” in Amendment 3
As expressly defined by the Amendment 3 petition form, “casino gambling” means: (1) “any of the types of games typically found in casinos”; and (2) games that are within the definition of “Class III” gaming under the Indian Gaming Regulatory Act (“IGRA”), the federal law that governs Indian gaming.
Both prongs of this definition – according to the Amendment 3 petition form– are to be assessed “upon the adoption of this Amendment” (which is the date that Amendment 3 was “approved” by voters). However, in the case of the Class III definition (the second prong of the analysis), the petition form states that it also includes any games “that are added to such definition of Class III gaming in the future.” The open-ended nature of the second prong – with no cut-off date or expiration – is not nearly as relevant here because the IGRA regulations already categorize sports betting as a form of Class III gaming.
It’s the first prong of the analysis – which asks whether sports betting is the “type of game” that is “typically found” in “casinos” as of November 6, 2018 (the date of Amendment 3’s adoption) – that decidedly tips the scales in favor of sports betting legalization remaining within the purview of the Florida Legislature.
Sports betting is not a game “typically found” in a casino
As of November 6, 2018 (the date for assessing “typicality” according to the Amendment 3 petition form), there were 40 U.S. states that had legal casino gambling (counting both commercial casinos and tribal casinos), according to a recent report by the American Gaming Association, the trade association for the U.S. casino industry. Of these 40 states, only six (Nevada, Delaware, New Jersey, Mississippi, West Virginia and New Mexico) had casinos which included sports betting as an amenity for patrons. Stated another way, in only 15 percent of the eligible states (i.e., those with legal casinos) could it be said that sports betting was “found” in a casino. In other words, not “typical.”
To put an even finer point on it, there are more than 500 Native American casinos in the United States, according to the gaming industry website PlayUSA.com. But only three tribal casinos – the Avi Resort & Casino in Laughlin, Nevada, Santa Ana Star Casino & Hotel in Santa Pueblo, New Mexico, and the Golden Moon Hotel Resort and Casino, in Choctaw, Mississippi– or less than one percent of all tribal casinos in the United States – have sports betting as an amenity. This is not even a close call.
The word “typically” means “commonly”, “generally”, “naturally”,” normally”, “ordinarily”, or “usually”, according to the Merriam-Webster Online Dictionary. Under this plain-language definition, which would likely be utilized by a Florida court should the breadth and scope of Amendment 3 ever be litigated (and it very well may be resolved by the courts), it cannot credibly be asserted that sports wagering is the type of game that is “typically found” in casinos, when only a small percentage of U.S. casinos presently offer sports betting. In fact, it wouldn’t even require a trial, it’s that clear-cut.
Was “fair notice” given to Florida voters?
It is a basic precept of Florida constitutional law that a ballot question must give a voter “fair notice” of what he or she is voting for (or against). Florida law, as codified in Section 101.161 of the Florida Statutes, requires that voters must be told, “in clear and unambiguous language,” what the primary effect of the proposed ballot question will be. As the Florida Supreme Court explained in Askew v. Firestone, voters who are asked to consider constitutional changes “must be able to comprehend the sweep of each proposal from a fair notification in the proposition itself.”
In analyzing the scope (or “sweep”) of Amendment 3 -- and whether it extends to sports betting – three factors stand out. First, the words “sports betting” or “sports wagering” do not appear anywhere on the official ballot card for Amendment 3. (Here are samples from Hendry County, Jackson County, Lee County and Flagler County). There is no mention of sports betting in either the ballot title, summary, or the text of the proposed amendment.
Second, the definition of “casino gambling” in Amendment 3 does not provide voters with any indication -- much less the requisite "fair notice" -- that it encompasses sports betting. Instead, it supplies voters with a complex two-part definitional test for “casino gambling” spread out over 11 lines, requiring intricate knowledge of both: (1) the types of “games” that are “typically played” in “casinos”; and (2) the types of games that are “within the definition of Class III gaming in the Federal Indian Gaming Regulatory Act, 25 U.S.C. § 2701 et seq. (“IGRA”), and in 25 C.F.R. §502.4.”
How many Florida voters – aside from gaming lawyers and casino loyalty program members – would know the full range of games that are “typically played” in casinos? Further, how many Florida voters have even heard of IGRA, much less are familiar with how it defines “Class III” gaming? Was there a law library available in the polling station?
It would seem to me that a ballot question that aspires to give voters “fair notice” of the types of games included within Class III of IGRA might actually go to the trouble of supplying the definition of “Class III” gaming right on the ballot form, instead of forcing voters to look up the IGRA statute and regulations. It wouldn’t have been too onerous for the ballot drafters to have supplied this information on the ballot form. The list of Class III games – pulled directly from the IGRA regulations (which notes that sports betting is included in Class III) – is not that long, and, certainly, is much shorter than the numerous illustrative examples already listed on the ballot form.
Speaking which, the examples of “casino gambling” provided on the ballot form would also lead a Florida voter to reasonably conclude that sports betting was not covered by Amendment 3.
The Amendment 3 definition of “casino gambling” lists the following examples: (1) "any house banking game, including but not limited to card games such as baccarat, chemin de fer,  blackjack . . . and pai gow"; (2) "any player-banked game that simulates a house banking game, such as California black jack; casino games such as roulette, craps, and keno"; (3) "slot machines"; and (4) "any other game . . . in which outcomes are determined by [a] random number generator or are similarly assigned randomly, such as instant or historical racing."
Does any of this sound like sports betting? Of course not. It refers only to slot machines, table games, and dice games. The common thread among each of these illustrative examples is that they are games which are played – and its outcomes are primarily determined – within the “four walls” of a casino. By contrast, sports wagering centers on the results of real-world events and athletic performances taking place wholly outside of a casino property.
Taking each of these factors individually or collectively, it seems fairly obvious that a ballot question that does not mention the words “sports betting” and ties the definition of “casino gambling” to “games typically found in casinos” (listing as examples only those games confined to a casino property) could not have reasonably given Florida voters the requisite “fair notice” that sports betting – a form of gambling found in casinos in only 6 out of 40 states and where the outcome is largely determined by performances taking place outside the four walls of a casino – would be included within its scope.
As a result, Florida lawmakers remain free to legislate in this area without voter consent.
Exceptions to compact exclusivity: South Florida’s racinos
The more salient question going forward is whether – and to what extent -- Florida lawmakers can legalize sports betting without jeopardizing the lucrative revenue-sharing payments that the State of Florida receives from the Seminole Tribe under a 2010 gaming compact.
Under the 2010 compact, the Seminole Tribe has the exclusive right to offer “banked” table games, such as blackjack, and “any new game authorized by law” (which would presumably include sports betting), in exchange for making annual payments to the state. Last year, these annual payments totaled more than $290 million.
The 2010 compact gives the Seminoles the right to cease or reduce these payments if they lose their “exclusivity” through a change in Florida law. One such trigger is where Florida law is amended by the Florida Legislature to allow “new forms of Class III gaming or other casino-style gaming that were not in operation as of February 1, 2010.”
Certainly, if the Florida Legislative were to legalize sports betting on a statewide basis, the Seminole Tribe would likely have the right to cease all payments made to the state.
But it’s an entirely different story if the Legislature were to allow sports betting at the eight racetrack casinos – or “racinos” – located in Broward and Miami-Dade Counties. These racinos – which include Gulfstream Park, Isle Casino Racing Pompano Park, Calder Casino & Race Course, Big Easy Casino, and Magic City Casino-- are accorded special status under Florida law by virtue of a 2004 voter referendum that authorized slot machines at the existing pari-mutuel facilities in Miami-Dade and Broward counties.
This special status carries forward to the 2010 compact as well, where any new form of gaming (such as sports betting) authorized for the South Florida racinos falls under an "exception" to compact exclusivity.
In Part XII, Section B.3.(a) of the 2010 compact, there is an “exception” to the compact’s exclusivity provision if “at any time” the Florida Legislature “allows for the play of any additional type of Class III or other casino-style gaming at any of the presently operating licensed pari-mutuel facilities in Broward and Miami-Dade Counties.” This refers to the South Florida racinos. (Note: Since this provision is designated as an “exception” to exclusivity, allowing sports betting at the South Florida racinos would not be subject to the bar in the Tribe’s 2018 settlement agreement with the State forbidding lawmakers from passing legislation to expand gaming “subject to exclusivity” during the 2019 legislative session)
Critically, this compact provision does not mandate a reduction in the Seminole Tribe’s revenue-sharing payments to the State. Rather, Part XII, Section B.3.(a) of the compact states that the Tribe “may be entitled to a reduction” in their revenue-sharing payments if any additional form of Class III gaming (such as sports betting) were allowed “at any of the presently operating licensed pari-mutuel facilities in Broward and Miami-Dade Counties.” The operative terms here are “may be entitled,” not “shall be entitled.”
Compact payments would likely remain the same under this exception
The Seminole Tribe’s ability to reduce its revenue-sharing payments in this circumstance has two important limitations: (1) payment reductions, if any, would be limited to the Tribe’s three Broward County properties (two in Hollywood, and one in Coconut Creek), and, critically, would not affect (meaning would not lower) the revenue-sharing payments associated with any of the Tribe's other Florida venues (including the Tampa Hard Rock, which is responsible for nearly one-half of the Tribe's annual revenue-sharing payments to the State of Florida); and (2) there would be reduced payments only if – and only to the extent that – the Tribe’s gaming revenues (defined as “Net Win”) at its Broward facilities declined in the 12-month period after sports betting was introduced at any of the South Florida racinos.
Under Part XII, Section B.3.(b) of the Compact, the Tribe would be allowed to reduce its revenue-sharing payments by fifty percent (50%) of the amount, at the applicable tax rate (12%-15%), by which its annual “Net Win" from its three Broward facilities for the 12-month period after the new form of Class III gaming was offered at any of the South Florida racinos “is less than” the Net Win for the 12-month period preceding the commencement of such expansion. (Note: the Hard Rock Tampa, the Tribe’s top-performing casino property, would be excluded from this calculation).
Conversely, if the Tribe’s gaming revenues (Net Win) from its three Broward County facilities did not decline in the 12-month period following the introduction of sports betting at any of the eight (8) South Florida racinos, then the Tribe would not be entitled to any reduction of its revenue-sharing payments to the State, although this would be subject to recalculation in subsequent years, as per Part XII, Section B.3.(c) of the 2010 compact.
It is highly unlikely that gaming revenues at the Seminole Tribe’s three Broward County facilities would decline if sports betting were authorized at the eight racinos in South Florida. For one thing, the Tribe’s gaming revenues attributable to just its Hollywood casino alone are greater than the revenues of all eight South Florida racinos combined.
Additionally, if any of the South Florida racinos were allowed to have sports betting, then so too would the Seminole Tribe under the terms of the 2010 compact, which includes within the definition of “covered games” (meaning those that the Tribe are allowed to offer) “[a]ny new game authorized by Florida law for any person for any purpose.”
Given the Tribe’s vast economic resources – it took in over $2.3 billion in gaming revenues in 2016-17, and that figure is expected to grow by 8.9% for the 2017-18 fiscal year– and the fact that it has considerably more casino square footage than any of the South Florida racinos – and also wouldn’t be burdened by state land use regulations on sovereign land – there should be little doubt that the Seminole Tribe will (just as with its expansive casino operations) have the highest revenue-generating sports books in South Florida.
But even if the Tribe’s “Net Win” were to somehow decline (for the very first time in the history of the compact) in the 12-month period following the launch of sports betting at the South Florida racinos, that would not necessarily lead to a steep economic shortfall for the State. In that circumstance, the Tribe's revenue-sharing payments would only be marginally reduced (by 50% of the reduction of “Net Win,” at the applicable tax rate of 12-15%) with respect to its three Broward facilities only (and, critically, not its Tampa Hard Rock property, which generates nearly half of the Tribe’s statewide revenues). Further, any marginal reduction in revenue-sharing payments would be offset by the near-certain spike in overall gaming revenues (of which the State receives a percentage through taxing the racinos' gross gaming revenues) that would be generated by the eight South Florida racinos that launched sports betting operations.
Amending the compact could allow sports betting on a statewide basis
The ability of Florida lawmakers to legalize sports betting at the South Florida racinos without running afoul of Amendment 3 – or triggering a significant reduction in revenue-sharing payments under the 2010 compact – gives lawmakers some key ammunition for creative deal-making during the upcoming legislative session.
Remember, under the 2010 compact, the Seminole Tribe does not automatically get the right to conduct sports betting if Florida Governor-Elect Ron DeSantis agrees to an amended compact with the Tribe. Since sports betting is not a “Covered Game” under the 2010 compact, the Tribe would still need to obtain legislative ratification of any compact amendment that seeks to “alter the provisions relating to Covered Games.”
A similar compact amendment signed in 2015– which sought to dramatically expand the Tribe’s exclusivity over gambling statewide – failed to secure enough votes for passage in the Florida Legislature because of heavy opposition from commercial gaming interests.
A legislatively-approved amended compact is going to be even more difficult this time around due to the lingering bitterness over the passage of Amendment 3.
This creates an opportunity for compromise among the competing Florida gaming industry stakeholders, although such attempts have failed for several years running. One suggestion would be to amend the 2010 compact to provide the Tribe with additional covered games, such as live table games, and, perhaps, an extension of the duration of the 2010 compact and its exclusivity provisions, in exchange for allowing sports betting at all pari-mutuel facilities and card rooms in Florida.
One thing is certain: despite claims to the contrary, the Seminole Tribe does not have the “exclusive right” to offer sports betting throughout Florida. Amendment 3 does not provide that right, and the exceptions to exclusivity under the 2010 compact provide lawmakers with a narrow (but viable) pathway to sports betting legalization – via the South Florida racinos — that can forge an even broader path for all statewide stakeholders through further negotiation and compromise.
This article was originally published in Forbes.com on November 19, 2018.