The Southern Ute Indian Tribe is suing the state of Colorado in a federal court over a lack of access to the online sports betting market.
During the state legislature’s inaugural American Indian Affairs Interim Study Committee meeting, Southern Ute Indian Tribe Chairman Melvin Baker announced the lawsuit against Gov. Jared Polis and the director the Colorado Division of Gaming, calling the tribe’s inability to engage in online betting revenue an “ongoing injustice.”
“This is the first time we have been forced to file a lawsuit against the state of Colorado in decades,” Baker said Monday during his address to the committee.
Specifically, the lawsuit pertains to the passage of Proposition DD in 2019, which legalized online sports betting in Colorado, and a federal gaming compact between the tribe and state dating back to 1995 that allows the tribe to engage in gaming activities and betting that is identical to those authorized throughout the state.
Where the agreement has fallen short over the past five years has been the tribe’s ability financially gain from sports betting through taxable revenue. The complaint alleges the state has failed to take action to ensure its local tribes are granted the same “economic opportunities” as other betting options.
Through its passage, Prop DD levied a 10% tax on sports betting proceeds, paid for by casinos, online sportsbooks and bettors.
Since federally recognized tribes aren’t taxable entities, any revenue from tribal gaming activities is exempt from federal and state income taxes. Federal law also mandates that this type of revenue must be used for tribal governmental operations and general welfare.
Following the passage of Proposition DD, the tribe established its own online sports betting option in 2020, the Sky Ute Sportsbook, using rules, regulations and restrictions similar to online offerings in Colorado.
In their complaint, the tribe alleges that Polis and the state Division of Gaming unlawfully seized authority of their sportsbook from the Tribal Gaming Commission without consulting the tribe over any regulatory options.
It was only until May 2021, roughly a year later, that the Division of Gaming proposed the tribe acquire state licensure and pay 10% of revenues earned from betting proceeds outside the reservation to the state.
The tribe argued this proposal ran contrary to the agreed-upon gaming compact. Because of this, they allege, they were “frozen out” of online sports betting during this time while other nonnative entities got a head start to “saturate” the market.
The Sky Ute Sportsbook would close in July 2023.
“The State’s wrongful legal posture also threatens the Tribe’s future sports betting activity and other potential future activities under the Gaming Compact,” the complaint read.
Baker told the committee that the state had ample opportunities before and after Proposition DD’s passage to meet with individual tribes and work out individual agreements for sports betting.
“This is unfair and breaches our existing agreement per federal law and the trust we have developed with the state,” Baker said.
A spokesperson with Polis’ office said they “don’t have a comment on this pending litigation.”
Baker pointed to recent cases in states where online gambling was recently legalized and followed by agreements with their local tribes. In Kansas, the legislature voted to amend the state’s gambling compact with the Iowa Tribe of Kansas and Nebraska and sports betting on tribal land.
Earlier this year, the U.S. Supreme Court ruled that the Seminole Tribe was entitled to handle online sports betting in Florida.
“Any legal objection to the Southern Ute and Ute Mountain engaging in statewide sports betting is gone,” Baker said. “But as of last week, the administration refused to budge.”
The tribe is asking that the court recognize their sportsbook as being in compliance with all legal requirements as an online gambling entity, that the state no longer interferes with their operations, and that it award all costs, interests, and attorneys’ fees incurred during the prosecution.
“This lawsuit is not a decision we take lightly. It is about securing a fair resolution and ensuring the State lives up to its obligations to the Tribes as outlined in agreements and federal law,” Baker said in a Tuesday statement. “We will fight tirelessly to hold the State accountable for its commitments.”
