In 2020, Colorado joined the ranks of states that launched online and retail sports betting following the passage of Proposition DD, which was approved by voters on November 5, 2019.
The Southern Ute Indian Tribe, under a compact dating back to the 1990s, was also permitted to offer sports betting. However, the state of Colorado required the Tribe to pay taxes on its betting revenue, a condition the Tribe deemed unfair, leading to a legal challenge.
Earlier this summer, the Southern Ute Indian Tribe filed a lawsuit in the US District Court for the District of Colorado, naming Governor Jared Polis and Colorado Division of Gaming Director Christopher Schroder as defendants.
Despite the lawsuit, experts believe that the case is unlikely to have a broad impact on other tribes nationwide. Scott Crowell, an attorney specializing in tribal matters, explained in an interview with PlayUSA that the unique conditions of the compact between Colorado and the Southern Ute Indian Tribe mean the case will likely remain a state-specific issue. “I don’t think that it evolves in a way that impacts other tribes,” Crowell said.
He further predicted that due to the distinct nature of tribal agreements in Colorado, the outcome of this case is unlikely to set a national precedent. Crowell also mentioned that the Southern Ute Indian Tribe is not seeking to resolve the issue through renegotiation of their compact due to “various political reasons.”
Taxation dispute at the heart of the legal challenge
The compact between the Southern Ute Indian Tribe and Colorado is unique because it allows the Tribe to offer “any gaming activity” available elsewhere in the state, provided that the “gaming activity mirrors Colorado bet amounts.” This provision meant that the Tribe was permitted to offer sports betting once Colorado legalized the activity.
However, when the Tribe launched its sports betting operations, the Colorado gambling regulator required it to apply for a license and pay a 10% tax on sports betting revenues. The Tribe argued that these requirements violated the terms of its compact and placed it at an unfair disadvantage.
As a result of these disputes, the Southern Ute Indian Tribe temporarily launched a sports betting app but was forced to shut it down last summer. The Tribe subsequently filed a lawsuit to address the issue.
In its legal filing, the Tribe contended that the 10% tax on sports betting revenue should not apply to “Tribal gaming under federal law.” The Tribe further claimed that the state’s actions were an attempt to “freeze the Tribe out of internet sports betting.”
This case continues to unfold, but experts like Crowell suggest that its implications will likely remain confined to Colorado, without setting a broader legal precedent for other tribes across the country.
