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Seminole Tribe Suspends Compact Payments to State of Florida

Posted on by John Lathram

Seminole Tribe of FloridaThe failure of Florida´s gambling regulators to enforce the law has resulted in the Seminole Tribe suspending its $350 million per year payments to the state.

In 2010, the Seminole Tribe agreed to a twenty-year compact with the state of Florida giving the Tribe exclusivity to run house-banked card games (i.e. blackjack) for a period of five years. In return the Tribe guaranteed to pay a minimum of $1 billion to the state over the five years – more if net win exceeded $1 billion per year. To date, the average annual payments have been around $350 million.

When the compact expired in 2015, former Governor Rick Scott and Tribal Leader James Billie reached a provisional agreement for an extension to the compact that would also allow the Tribe to add craps and roulette to its existing casino operations. Florida´s legislature failed to approve the agreement, but the tribe continued to make revenue-sharing payments in good faith.

There then followed a round of tit-for-tat lawsuits in which the state (under pressure from Florida´s racinos) claimed the Tribe no longer had the exclusive right to run house-banked card games. The Tribe responded by claiming the state had breached the compact by allowing racinos to run “designated-player games” in which a player stands in for the bank. Both court cases went against the state.

In August 2016, an administrative law judge ruled the designated-player games were violations of the compact and had to be withdrawn. Three months later, a federal judge ruled that, under the wording of the original compact, the Seminole Tribe had exclusivity to run house-banked card games until 2030. Despite the Tribe having the right to withdraw from the revenue sharing agreement, the payments continued in good faith to smooth the passage for further negotiations.

Negotiations Complicated by PASPA and Amendment 3

In the past couple of years, negotiations have gone nowhere. The Seminole Tribe has offered to pay as much as $500 million per year for the right to add craps and roulette to its existing casino operations, but with the proviso that Florida´s gambling regulators take the promised “aggressive enforcement action” to shut down illegal designated-player games.

Then, when the Supreme Court repealed PASPA in May 2018, the Tribe held out an olive branch to the racinos by suggesting they work together to bring regulated sports betting to Florida. The proposed deal was reliant on the racinos complying with the court judgement to stop providing designated-player games, but the racinos declined and the state´s gambling regulators allowed the games to continue while discussions were ongoing. Then came the passage of Amendment 3 in last year´s ballot.

Amendment 3 removes the power of Florida´s legislature to approve any expansion of gambling without a state-wide referendum. There is some dispute about whether the Amendment applies only to casino gambling (as PASPA had not yet been repealed at the time the language of the proposal was approved), or whether it applies to any type of gambling activity. Some lawmakers believe the Amendment can be circumnavigated, but the legislative session ran out before their proposals could be discussed.

Seminole Patience Runs Out and Payments Stop

Throughout the negotiations, the Seminole Tribe continued to make payments to the state, despite not getting what they were paying for (exclusivity to house-banked card games). Eventually the Tribe´s patience ran out, and it warned the state that if it allowed racinos to continue running player-designated games, it´s payments would stop at the end of the current legislative session (May 4th). As threatened, the Seminole Tribe has now confirmed it will no longer make payments to the state.

On Tuesday, a letter from the Seminole Tribe was delivered to Governor Ron DeSantis in which the current Tribal Leader – Marcellus Osceola Jr. – announced the Tribe is suspending its revenue share agreement until the issue of the player-designated games was resolved. Osceola acknowledged there are proposals waiting to be discussed, and he expressed a desire to resume negotiations in the summer. Although gentle in its language, the letter notes the failure of the state´s gambling regulators.

The withdrawal of the revenue-sharing payments is not really a surprise. The income had already been removed from the budget, and – in a prepared statement – House Speaker José Oliva said yesterday the legislature was not relying on Tribal income in any future planning – a comment that implies Oliva does not anticipate a quick resolution to the issue. However, the longer regulators fail to enforce the law banning player-designated games, it is going to cost the state – and its tax payers – $350 million per year.

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