National Tribal Impact Unlikely in Southern Ute's Lawsuit against Colorado

The Tribe launched a lawsuit against Colorado earlier this summer, arguing that taxes on betting shouldn't apply to it under an existing compact with the stateImage Source: Shutterstock.com

Coloradowas among the states that launched online and retail sports betting in 2020. The activity was legalized through Proposition DD which received the approval of voters on November 5, 2019.

Under a compact dating back to the 90s, the Southern Ute Indian Tribewas also permitted to launch sports betting. However, the state required the Tribe to pay tax on its betting revenue in a move the operator said was unfair and challenged it in court.

Earlier this summer, the Southern Ute Indian Tribe filed a lawsuitwith the US District Court, District of Colorado, naming state Gov. Jared Polisand Colorado Division of Gaming’s director, Christopher Schroder, as defendants.

Despite the legal challenge, an expert believes that a decision would not have a nationwide impact, primarily because of the unique compact conditions between the state and Native American Tribes in Colorado. Scott Crowell, an expert attorney in tribal matters, who was recently interviewed by PlayUSA, said about the legal battle: “I don’t think that it evolves in a way that impacts other tribes.”

Moreover, he predicted: “Because of the unique nature of tribal agreements in Colorado, we’re likely to get a decision out of this case that does not have a national impact.” He spoke about the Southern Ute Indian Tribe’s compact with Colorado, revealing that due to “various political reasons,” the Tribe isn’t looking for a way to resolve the current issue via a renegotiation of the compact.

Tax Shouldn’t Apply to the Tribe’s Betting Activities

But what makes the Tribe’s compact so unique? The compact permits the Tribe to offer “any gaming activity” available elsewhere in Coloradoas long as the “gaming activity mirrors Colorado bet amounts.” This otherwise means that the Southern Ute Indian Tribe was permitted to offer sports betting once the state legalized the activity.

Yet, while the Tribe attempted and launched the activity, the Colorado gambling regulator required it to submit an application for a license. At the same time, the state required the Tribe to pay a 10% taxon its sports betting revenues. These requirements, the Tribe argued were in breach of its compact and put in an unfair position.

Ultimately, while the Southern Ute Indian Tribe launched its sports betting app temporarily, it was effectively shut down last summer. Not unexpectedly, the Tribe filed its lawsuit as a way to resolve the issue.

In its legal challenge, the Tribe explained that the required 10% tax on sports betting revenue doesn’t apply to “Tribal gaming under federal law.” Moreover, it wrote: “Therefore, the State sought to freeze the Tribe out of internet sports betting.”