Attorney General of Connecticut, George Jepsen, has raised concerns and warned state legislators that their plans to legalise and tax daily fantasy sports (DFS) matches could result in a violation of gaming compacts they have with tribal casino operators.
Like many other states, legislators in Connecticut have been flirting with the idea of legalising DFS and sanctioning a tax on their revenues; the Connecticut Senate had sent a formal request to the office of the State Attorney General for an official opinion. The Senate proposed to legalise DFS in the state and issue a tax of 8.75% on all entry fees collected by the operators and Jepsen responded to the request for an opinion on Monday.
Impacting the Tribes
Connecticut State has compacts with two tribes that could be affected by the proposed DFS legislation- the Mashantucket Pequot and the Mohegan Indian Tribe.
Foxwoods Resort Casino, a hotel casino in Ledyard, Connecticut, is on the Mashantucket Pequot Indian Reservation and is owned and operated by The Mashantucket Pequot, a federally recognized Native American tribe. Foxwoods Resort Casino is the world's largest resort casino in terms of gambling space and number of slot machines and was also the most successful casino in the USA until the economic recession drove the enterprise into debt in 2007.
Mohegan Sun, another of the largest casinos in the USA is located in Uncasville, Connecticut. The Mohegan Indian Tribe, one of two federally recognised tribes and one of five state recognised tribes in Connecticut, finally became owners of the Mohegan Sun casino in the mid-1990s
DFS treated like slots?
The broad definitions of “slots” in the state compacts with both tribes include the category of “video facsimile machines;” given that fantasy sports tournaments are operated entirely through the internet, Jepsen stated that in his legal opinion, it is entirely possible that the court could conclude that DFS contests fall under the category of “video facsimile machines.”
The compacts also mention that the state is prohibited from authorising “other commercial casino games” outside of the two tribal venues; again, given the ambiguity surrounding DFS, it could be considered a game of chance and therefore comparable to casino games
However, Jepsen believes the court may not classify DFS under the same umbrella as traditional gambling; he said that there are “sound legal arguments” for why a court might conclude that DFS doesn’t conflict with tribal compacts. Despite this, Jepsen takes note that “no one can predict with any level of certainty” which way the legal ruling would go.
Besides the question about violation of the tribal compacts, Jepsen is still unconvinced about the status of DFS as a game of skill or a game of chance; Jepsen’s opinion said that there is a “high degree of uncertainty” as to whether DFS contests “constitute games of skill or games of chance.” He mentioned several other state Attorney Generals, who have declared DFS illegal gambling activity in their state laws and banned the operators from running further paid matches in their states
The Connecticut government earned a total of $263 million in taxes in slot revenues from the two casinos and legalising and taxing DFS operators could potentially grant them an additional $9.5 million in state revenues. With the possible uncertainties surrounding DFS and the tribal compacts, it is debatable whether legislators would be willing to risk the large income that is generated from the two casinos for the smaller sum passage of the bill would bring.
Senate President, Martin Looney, said that after Jepsen’s opinion, it is “unlikely” that legislators would want to support a bill to legalise DFS in the current session.
Neither of the tribes has issued any form of objection against legalisation of DFS contests; however, they have insisted on being included in all discussions regarding the potential changes in the law. While the two Connecticut casinos were once the most successful in the country, following the down turn in income during the recession and recent increase in regional competition, it is unlikely they will be pleased if competition from DFS bring their profits down any more.
This is further highlighted by the financial reports that were disclosed last Friday; it was reported that slots revenue for Foxwood fell by 7.3% in March to $37.5m and slots handle was off 10.3% to $455.3m. Mohegan Sun reported more favourable figures but still suffered a loss; slots revenues were down by a smaller 1.4% to $50.5m.