Ute Tribe Sues Colorado Tribal Sports Betting Law

The Southern Ute (Ute) Nation has sued the Governor of Colorado and the State Director of Gaming Enforcement, seeking a declaration that the Ute Tribe’s sports betting operations are lawful, injunctions against the state’s allegedly unlawful actions, and costs, interest, and attorneys’ fees.

The Utes first entered into a gaming agreement with the state in 1993, which was amended in 1995. The Utes’ agreement is unique in that it does not contain revenue-sharing provisions between the Utes and the state. In addition, the Utes’ agreement recognizes that the Utes may engage in any gambling activity that is authorized elsewhere in Colorado, provided that the activity mirrors the state’s activities and authorized wagering amounts.

The lawsuit stems from the Utes’ decision to attempt to engage in off-reservation online sports betting when such activities became legal in Colorado. The Utes launched Sky Ute Sportsbook in June 2020. In response, the state took the position that the sportsbook should be regulated by the state and therefore subject to a 10% income tax, as well as other regulations, thereby ignoring the provisions of the Ute Compact and the Indian Gaming Regulatory Act (IGRA). The Utes further claim that the state failed to negotiate any potential changes to the state-tribal relationship in good faith, and that the state pressured the Utes’ sportsbook providers and otherwise interfered with their business operations, ultimately contributing to the closure of the sportsbook in 2023. The Utes claim that they intend to re-enter the market.

Although the state has not yet filed its response, its position appears to be that off-reservation online betting is somehow exempt from the provisions of the Ute Compact, such that it requires the Utes to be licensed and regulated by Colorado. The only issue that could potentially spur this activity seems to be the nature of off-reservation online sports betting, as the Ute Compact states that the tribe may conduct any Class III gaming activity that is expressly authorized by state law. Therefore, the state’s decision appears to be based on the assumption that while the Utes could conduct sports betting on their reservation, a state license is required when betting is conducted online by off-reservation bettors.

The Utes rely on W. Flagler Assocs. part Haaland71 F.4th 1059 (DC Cir 2023), certificate rejected144 Sup. Ct. 10 (2024), as additional support for the position that sports betting activities are permissible. There, the D.C. Circuit held that nothing in the IGRA expressly prohibits a tribal-state gambling compact from authorizing statewide online sports betting from servers located on the reservation. The ruling also noted that “the IGRA compact cannot provide independent legal authorization for gambling activities off Indian lands where the activities would otherwise violate state law.” ID. at 1068.

This case appears to be the first time a state court will have to apply state law and provisions of the compact to off-reservation wagering in light of West Flagler holding. Colorado does not appear to have any additional, unlisted restrictions in its state sports betting laws that would otherwise limit the scope of permissible bettors for a state licensee. Thus, the key question seems to be whether the express authorization for statewide sports betting means that the Utes can engage in hub-and-spoke betting as an activity “identical to an activity…authorized by the State of Colorado” under the provisions of their gaming compact.