The National Indian Gaming Commission (NIGC) – a federal regulatory agency within the US Department of the Interior – has issued a bulletin warning tribal operators to ensure they maintain of sole propriety interest of sports betting operations.
The Indian Gaming Regulatory Act (IGRA) requires tribes to maintain “the sole proprietary interest and responsibility for the conduct of any gaming activity” for any gaming facilities located on Indian lands. While it is common to partner with third parties such as suppliers and commercial operators who may act as vendors, any “management” of a sportsbook by a third party requires specific approval from the NIGC.
Tribes were warned of potential regulatory challenges presented by sports betting back in 2020.
The NIGC analyzes multiple factors – contract terms, revenue shares and rights to exercise control – to determine a third party’s involvement in the management of a sportsbook.
The body examines the terms of a vendor’s contract with a tribe in case provisions in a contract enable a vendor to have control over a sportsbook’s house rules – which is prohibited by the IGRA. Long term contracts or statements of exemption (“unless otherwise stated in this agreement” for example) are also considered red flags.
The amount of revenue a vendor receives is also taken into account to determine whether an agreement between tribe and vendor constitutes a partnership or a provision of services – while the NIGC cannot rule on business decisions, an even split of net gaming revenue suggests the former, which is prohibited by the IGRA.
The NIGC also monitors a vendor’s right to exercise control over the conduct of the gaming activity, as they are not permitted to have any influence on how a tribe operates its sportsbook. For example, marketing is a criteria the NIGC examines, as third parties are not allowed to influence how a sportsbook is advertised or make any decisions on signage for a sportsbook.
The implementation of kiosks also raises management concerns as they use data provided by vendors despite being used by sportsbooks. Agreements for vendors to cover shortfalls in gaming revenue, as well as issues regarding compensation and sportsbook investment are also points of concern for the NIGC.
An NIGC statement said: “Generally, if a contract requires or permits the performance of any management activity with respect to all or any part of a gaming operation, the contract is a management contract within the meaning of IGRA and requires the chair’s approval.
“Any action by a third party that constitutes ‘planning, organizing, directing, coordinating, or controlling’ all or any portion of a sports book can trigger concerns about whether the third party is managing the sportsbook operations.”