The tribal challenge to the framework of Colorado sports betting did not succeed in court in large part because the judge did not buy the hub and spoke argument that a bet takes place where the server is located.
The Southern Ute and Ute Mountain tribes sued Colorado Gov. Jared Polis and Colorado Division of Gaming (CDOG) Director Christopher Schroder last year claiming that Polis and the gaming commission interfered with legal attempts for the tribes to offer sports betting.
Lawsuit looks at tribal betting apps in Colorado
After the state legalized sports betting in 2019, the Southern Ute tribe contracted U.S. Bookmaking as a partner to help develop and launch Sky Ute Sportsbook. The tribe argued that the compact allows them to offer any gaming on tribal lands that is legal elsewhere in the state, so it was absolutely within the scope of the law to launch in June 2020.
In May 2021, the head of the CDOG at the time, Dan Hartman, sent the tribe a letter telling them the CDOG believed the sportsbook to be in violation of the law but the tribe was welcome to seek a sports betting license from the state and pay taxes on revenue generated from the betting app.
The lawsuit also alleged that the regulato contacted U.S. Bookmaking and prospective Ute Mountain partner IGT warning them that participating in operating a tribal sportsbook in the state could jeopardize the companies’ supplier licenses.
Judge says bets take place where the bettors are, not the servers
While the tribes believed their interpretation of the gaming compact was correct, Colorado District Judge Gordon Gallagher disagreed almost solely because he was not persuaded by the hub and spoke argument around the location of the wagers.
“Online bets placed outside of reservation boundaries are not placed ‘on Indian lands’ because online betting occurs where the
bettor is located,” Gallagher concluded. Citing a series of cases regarding brick and mortar gambling, Gallgher noted that the definition of where gambling takes place in those cases focused on the actions of the bettor, not the actions of the house.
“In online gaming, the most closely analogous activity to rolling dice, betting chips, spinning a wheel, or playing cards is clicking a button to place a wager, setting the wager in motion. Therefore, the Court holds that online class III gaming activity occurs where the bettor, not the server, is located when he or she initiates the wager,” he added.
“The Tribe respects Judge Gallagher and appreciates the time he has given this issue. We believe a different result is mandated by federal law and will be evaluating how to move forward in the coming weeks,” the Southern Ute Tribe said in a release following the decision.
Florida case was not mentioned in ruling
Gallagher did not mention the lengthy legal battle in Florida in which the hub and spoke design of the compact between the Seminole Tribe of Florida and the state. In that case, however, the location of the server was included in the text of the compact itself and the lawsuit centered around whether or not the contract was enforceable not whether or not the server location was where the bet took place.
The hub and spoke structure is not unique to Florida, however. The idea was first put forth in New Jersey, where the law states all gambling in the state must take place in Atlantic City. To satisfy that request, operators must house servers within casinos in Atlantic City and the law considers the server location to be the location of any betting or gambling activity.
Opinions on vailidity of hub and spoke are mixed
The Colorado court is also not the only group to reject the hub and spoke model. Current Secretary of the Interior and former North Dakota Gov. Doug Burgum previously denied a proposal from North Dakota tribes to amend the state’s gaming compact to expand online gambling in the state using a hub and spoke approach. At the time, he said he did not feel there was a “clear, legal path” for such expansion.
Burgum now runs the Department of the Interior, which has said it is fine for tribal compacts to include hub and spoke language but has not offered any opinion on whether such an interpretation can be inferred in existing compacts.
