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$6B Betting Deal Puts Florida in 'Uncharted Waters'

$6B Betting Deal Puts Florida in 'Uncharted Waters'
In this Jan. 19, 2021, file pot, The Guitar Hotel at Seminole Hard Rock Hotel & Casino Hollywood is illuminated at night in Hollywood, Fla. (Wilfredo Lee/AP)

Friday, 30 April 2021 07:29 AM EDT

After years of debate and negotiation, Florida Governor Ron DeSantis signed a new compact giving the state’s Seminole tribe a lock on one of the fastest-growing businesses in the U.S.: sports betting.

The deal, announced last week, gives the tribe exclusive rights to offer sports betting in the state — with some provisions. The Seminoles, who operate the Hard Rock brand, are being encouraged to contract with other gambling operators, including horse tracks and jai alai frontons. But the computer servers that support the wagering will remain on Indian land, and the tribe gets a 40% cut of the betting even on competing sites, well more than is typical in such deals.

It’s a big market, with 17 million adult residents and tens of millions more who visit each year for vacation or business. Within three years, Florida could see $10 billion annually in sports wagers, estimates PlayFL.com, an industry news site.

As part of the overall deal with the tribe, slot machines may be extended to other locations, including possibly Donald Trump’s Doral golf resort in Miami and the Fontainebleau, a legendary resort in Miami Beach.

“This is uncharted waters because no state has ever constructed their online sports-betting market like Florida is proposing to here,” said James Kilsby, an analyst at VIXIO GamblingCompliance. “It is pushing the boundaries of federal law and could be an area that becomes subject to litigation.”

Sports betting has exploded in the U.S. since the Supreme Court allowed states outside of Nevada to offer such wagers three years ago. Some 21 states now offer it, and more are announcing plans almost every month. Most states license multiple private operators or, in a handful of cases, run the wagering out of the state lottery. That makes the Florida model an outlier.

The Seminoles, who operate seven casinos in the state and dozens of other properties under the Hard Rock brand, have a lot of bargaining clout in Florida. They were paying the state more than $300 million annually in gaming taxes before halting the payments in 2019, arguing that Florida had violated an earlier compact by allowing casino expansion at other locations.

Under the terms of the new compact, the Seminoles have guaranteed the state at least $500 million a year in taxes in the first five years and $6 billion total over the 30-year life of the deal.

The Florida legislature needs to approve the terms in a special session beginning May 17. The U.S. secretary of the interior, who has jurisdiction over tribal compacts, must also bless the agreement.

Jim Allen, head of Hard Rock International and Seminole Gaming, said the terms of the compact will allow the entry of an unlimited number of competing sites, including those at some 26 racetracks and other locations. Sports-team owners can also participate, as can national players such as DraftKings Inc. and FanDuel, a unit of Flutter Entertainment Plc, if they contract with the local operators. Because the tribe gets a cut of betting from the others, it wants to see competition flourish.

“The concept is that it’s a hub-and-spoke model,” Allen said in an interview. “It’s in our best interest also to have as much exposure as possible. The more exposure, the better it is for all parties.”

Fast Start

The deal allows the state to get sports betting up and running fairly quickly, notes Union Gaming analyst John Decree. It also offers a workaround to a referendum passed three years ago that requires voter approval of any gambling expansion.

“By giving sports betting exclusivity to the tribe, the state is not technically expanding gambling in the state,” he said in a research note this month.

But John Sowinski, an Orlando public-relations executive who wrote the 2018 referendum, said the deal violates the spirit of his amendment, which was designed to give voters the chance to weigh in on gambling expansion.

“It’s unconstitutional, it’s a bad business deal, it’s the wrong policy decision,” he said in an interview. “It violates the will of the people.”

Federal Restrictions

Daniel Wallach, a Florida attorney who follows the industry, said the agreement may also exceed federal statute, which only covers gambling on Indian land and doesn’t permit tribal compacts to govern wagers made off of those sites.

“It makes more sense for the state to approve sports betting for all operators and to do a compact at the same time, rather than try to funnel all of this off-reservation betting through the vehicle of a compact only to have it rebuked by a federal court,” he said.

Though they may not like the deal, other operators of betting sites have been silent, perhaps because they believe they will have to make their own agreements with the tribe to access the market and don’t want to offend them, reasons Chris Grove, an analyst with Eilers & Krejcik Gaming LLC.

The Hard Rock’s Allen acknowledges that there may be some people who aren’t sold on the new compact, but he said he’s working on that.

“We certainly have heard from a lot of the companies, I think some of them like it, I think some are still trying to learn what it means,” he said. “Hopefully the more that we can explain it to them, that we do think there are ways for us to all work together, then they will support it.”

© Copyright 2022 Bloomberg News. All rights reserved.

After years of debate and negotiation, Florida Governor Ron DeSantis signed a new compact giving the state's Seminole tribe a lock on one of the fastest-growing businesses in the U.S.: sports betting. The deal, announced last week...
Friday, 30 April 2021 07:29 AM
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