GEORGE HENNINGSEN
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In an op-ed published last week, Sportech, PLC blamed the Mashantucket and Mohegan tribes for “blocking” proposed legislation to legalize sports betting in Connecticut. That position ignores, of course, the fact that both tribes fully supported state Senator Cathy Osten’s proposal to authorize, among other things, sports betting.
A more candid approach from Sportech would have acknowledged that the tribes have, for more than three years, presented a clear path forward, which unfortunately, absent the agreement of the tribes, does not include Sportech. As the beneficiary of its own “exclusive” monopolistic contract with the state, one would think that Sportech would appreciate and better understand how and why the tribes insist that the “exclusivity,” for which they’ve already paid over $8 billion to the state, will only be compromised if the tribes choose to do so.
Whatever else the Sportech op-ed doesn’t do, it does clearly reinforce the fact that the topic of tribal gaming in Connecticut is as easily misunderstood, as it is misrepresented. I’ll try to be brief, but we have to start at the beginning.
1. Some commentators, even legislators and now Sportech, are under the impression that the State of Connecticut “gave” the tribes the right to open casinos: nothing could be further from the truth. The Indian Gaming Regulatory Act, passed in 1988, was a mandate from the federal government that directed states that offered any form of gaming to their citizens to negotiate “Compacts” with tribes within their borders, to allow those tribes to also offer gaming on their reservations, subject only to their own (tribal) regulatory oversight: i.e. either partial, or no state involvement.
2. The State, for its part, resisted that mandate and fought the Mashantucket Tribe in federal court. It wasn’t until the federal Appellate Court affirmed the federal District Court’s ruling in the Tribe’s favor, that the State reluctantly began “Compact” negotiations with the Tribe. Because the Tribe and the State could not reach agreement on all points (it is a 64-page document) the federal mediator responsible for overseeing that process exercised his authority to end the negotiations, finally authorizing the last version “on the table.” Because the Tribe and the State never reached final “agreed upon” terms, the resultant document is referred to as “the Procedures,” rather than a “Compact.” Nonetheless, the Mashantucket “Procedures” were used, word for word, as the template for what would later become the Mohegan Compact.
3. Despite their extended negotiations, one of the provisions they could not reach agreement on was the operation of slot machines (referenced in the Procedures and subsequent MOU’s as “video facsimiles of games of chance”) as part of the “approved games.” Agreeing to disagree, they created a section (often referenced as the “moratoria” language) that allowed for a future resolution of that disagreement by (among other ways) a mutual agreement of the parties.
4. As a result, Foxwoods opened in February of 1992 as a “table games only” casino. While successful beyond all expectations, the Tribe was well aware that some 60% of casino revenue in other jurisdictions was generated by slots. As the State was otherwise precluded by federal law from “taxing” a tribe’s gaming revenue, the parties saw the “moratoria’ language on slots as a way for both of them to benefit: i.e. a “mutual agreement” that granted the tribe the “exclusive” right to operate slots, in exchange for which the state would receive 25% of the tribe’s slot “win.” That agreement was memorialized in a MOU signed in February 1993. It was amended shortly thereafter when the State anticipated a $13M budget shortfall, and asked the Tribe to increase its initial $100M guarantee to $113M, which it did.
5. In April of 1994, the MOU was amended again, to address Gov. Weicker’s concerns that Nevada casino interests (Wynn and Harrah’s were mentioned in the press) were seeking to circumvent the existing “exclusivity” agreement, through proposed legislative initiatives to build casinos that offered everything except slot machines: i.e. no slots, no violation of tribal slot exclusivity. Per the legislative discussions, as those facilities generated non slots revenue, the casino infrastructure to add slots would be created, so that the Tribe would be obligated to continue its slot payments, until such time as the “new” slots were authorized by the legislature, and activated at the “new” casinos. This strategy is referenced in the “Preamble” to the 1994 amended MOU.
6. As Governor Weicker was adamantly opposed to any casino expansion in Connecticut, and also feared the potential of misguided legislative initiatives that might jeopardize the Mashantucket slot payments (which would thereafter be combined with the Mohegan slot payments), he sought to “close the loophole” by expanding tribal gaming exclusivity to include all “… commercial casino games.” The execution of the 1994 MOU, under the referenced circumstances, clearly supports the conclusion that, at that time – April 1994 – it was the State’s intent to limit all future casino gaming to the Mashantucket and Mohegan tribes. The Tribes remain both committed to, and confident of, our ability to prove that in court, should that be necessary.
7. I’m sure when some of those opposed to our position on exclusivity over sports wagering read the last point they noted I said “… all future casino gaming” as opposed to the now much-analyzed expression “casino games.” It was not inadvertent. As I tried to make clear in my testimony before the Public Safety Committee earlier this year, when trying to resolve the meaning of a disputed term in a contract (which the MOU is for legal purposes) a court will look to the “intent of the parties” when they executed the contract: in this case Governor Weicker’s administration and the Mashantucket Pequot Tribe in April 1994. While some will argue that the plain meaning of “casino games” needs no further explanation, if that were the case the Public Safety Committee would not have sought the opinions of Attorney General Richard Blumenthal and Attorney General George Jepsen on that very question. AG Blumenthal offered the opinion that it meant “games prevalent in casinos” and AG Jepsen said it was an “open question.” My point? A court will seek additional proofs as to the “intent” of the parties in April 1994, and will not simply be swayed by a tortured grammatical analysis of the phrasing, nor will it even consider what the current administration or legislative leaders might want that term to mean in 2020. Respectfully, that’s simply irrelevant. (While relevant, but not binding on Connecticut courts, it should nonetheless be noted that a very recent court decision in Rhode Island specifically found that sports betting was “casino gaming.”)
8. While the testimony provided at last winter’s Public Safety hearing by Prof. Dan Wallach, was extremely interesting to me, it shed no light on what the parties intended in their 1994 MOU. Nor, did he chose to even acknowledge, much less explain, why the prior written opinions of Attorneys General Blumenthal and Jepsen were far less certain than his. Not only was sports betting “prevalent” in Nevada casinos in 1994, it was the only state jurisdiction where such wagering could legally occur.
9. Simply stated, while the State could easily have circumscribed/clarified its intended grant of “exclusivity” by referring back to the specific games listed in the Procedures, or drawn a distinction between games of skill and games of chance, they clearly chose not to, deliberately opting for the more generic and encompassing term “… commercial casino games.”
10. Prof. Wallach and various other commentators have highlighted the fact that sports betting is not even mentioned in the Procedures. While that’s true, the exclusivity provisions of the MOU are clearly meant to address what others CANNOT have, and although what the Tribes CAN have, as set forth in the detailed Procedures listings, certainly enlightens the exclusivity discussion, it does not control it: i.e. to protect its own “restrictive” interests, the State could, and did, provide a more encompassing grant of exclusivity than just the gaming covered by the Procedures.
11. As in “all things gaming,” money and odds are always a part of the picture. In this case, should any of the bills that simply ignore tribal exclusivity over sports betting be advanced, much less signed by the governor, the State would essentially be betting $250 million for a chance to “win” $13-15 million. While those are clearly bad odds, it’s all the more puzzling for an administration that is cowed into inaction by the mere “threat” of potential litigation from unknown third parties (the “litigation quagmire’), to nonetheless endorse a proposal that the Tribes (your business partners for 25+ years) have “guaranteed” will bring litigation – and the potential loss of roughly $250 million a year (in pre-COVID years) during the pendency of such litigation – simply defies logic. But, to advance that position on behalf of two other enterprises (Sportech and the Connecticut Lottery Corporation) that already enjoy state-sanctioned exclusivity for their gaming businesses, makes it all the more puzzling, and frankly, irrational.
Rhetoric aside, the Tribes have always been willing to discuss potential solutions to this current stalemate, including resolutions that might involve other gaming interests, even Sportech, for example. . But, if the State’s unwilling to even acknowledge that the “exclusivity pie” (as set forth above) is ours – not yours – to share, we’ll be left where we were in the late 1980s, waiting for some level of the federal court system to tell you, indeed, that’s the case. In the meantime, Connecticut taxpayers will continue to spend their sports betting dollars in other states, or with the still ubiquitous illegal markets.
While it shouldn’t have to come to that, if history is any indicator, there may still be those in both the administration and the legislature, who, despite our 25+ year partnership, can’t get past the paternalistic view that the State and the Tribes are not, in fact, sovereign equals. Very sad.
George Henningsen is Chairman of the Mashantucket Pequot Gaming Commission. The Mashantucket Pequot Tribe is included among the sponsors of this website through display advertising.
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