Ninth Circuit Affirms Illegality of Tribe’s Online Gambling Site

Manatt, Phelps & Phillips, LLP

Manatt, Phelps & Phillips, LLP

An online bingo site operated by a Native American tribe constituted illegal gambling, the U.S. Court of Appeals for the Ninth Circuit has ruled, answering a question of first impression.

The Iipay Nation of Santa Ysabel operated a traditional brick-and-mortar casino on its tribal lands located in San Diego County. When the casino failed, the tribe launched Desert Rose Bingo (DRB) in an effort to revitalize its gaming revenue stream. The server-based bingo game allowed patrons to play computerized bingo over the Internet.

To play, participants in DRB purchased cards labeled with a grid of numbers and won when numbers drawn corresponded with those on their card to form bingo. Iipay operated DRB through a wholly owned subsidiary on a set of servers located in the defunct casino on tribal lands. Iipay did not provide any physical computer terminals located on its lands on which California residents could play DRB; instead, games were offered exclusively through the Internet. Participants needed to create an account with DRB, fund it, select the number of games and cards, and then click “Submit Request!”

Within weeks of the launch of DRB in November 2014, the state of California and the federal government sued Iipay seeking injunctive relief prohibiting the tribe from continuing to operate the site. A district court issued a temporary restraining order as well as summary judgment in favor of the government. Iipay appealed.

The case presented an issue of first impression regarding the intersection of two federal statutes, the Ninth Circuit explained: the Indian Gaming Regulatory Act (IGRA), which was passed to provide a regime for the regulation of gaming on Indian lands, and the Unlawful Internet Gambling Enforcement Act (UIGEA), which was enacted to regulate Internet gambling.

Importantly, the UIGEA does not prohibit otherwise legal gambling, the court said, but it established a system where a “bet or wager” must be legal both where it is “initiated” and where it is “received.”

If the court found DRB took place on Indian lands, then it would fall under Iipay’s jurisdiction and the UIGEA would not apply. Iipay argued that DRB was operated on its own lands because the servers—which determined the patterns on the bingo cards, drew the numbers and marked the cards—were located in its former casino.

The government countered that the actual gaming activity—selecting the denomination and number of games and submitting the final request to play—happened elsewhere in the state. Under the UIGEA, “gambling” is the participant’s decision to wager money on the bingo game, the government told the court, which occurs off Indian lands.

“We reject Iipay’s argument that the patron’s decision to submit a requested wager of a particular monetary denomination is merely a pre-gaming communication with the patron’s designated proxy,” the Ninth Circuit wrote, siding with the government. “The district court found that it was uncontested that the act of clicking ‘Submit Request!’ by a patron was a ‘bet or wager’ within the meaning of the UIGEA. The district court based this finding on the fact that the patrons were staking something of value on the outcome of the bingo game, but the court could just have easily found that the patrons were giving ‘instructions or information pertaining to the establishment or movement of funds by the bettor or customer in, to, or from an account with the business of betting or wagering.’”

Iipay did not contest the findings on appeal and “it seems clear that at least some of the ‘gaming activity’ associated with DRB does not occur on Indian lands and is thus not subject to Iipay’s jurisdiction under [the] IGRA,” the court said.

The findings also undermined the tribe’s position that the IGRA shielded DRB from the application of the UIGEA. “Even if DRB is completely legal in the place where the bet is accepted, on Iipay’s lands, the bets are not legal in the jurisdiction where they are initiated, in this case California. Thus, when Iipay accepts financial payments over the internet as part of those bets or wagers, Iipay violates the UIGEA.”

Finding no direct conflict between the IGRA and the UIGEA, the Ninth Circuit affirmed summary judgment for the government.

“Iipay is correct that [the] IGRA protects gaming activity conducted on Indian lands,” the panel wrote. “However, the patrons’ act of placing a bet or wager on a game of DRB while located in California constitutes gaming activity that is not located on Indian lands, violates the UIGEA, and is not protected by [the] IGRA. Further, even if Iipay is correct that all of the ‘gaming activity’ associated with DRB occurs on Indian lands, the patrons’ act of placing bets or wagers over the internet while located in a jurisdiction where those bets or wagers is illegal makes Iipay’s decision to accept financial payments associated with those bets or wagers a violation of the UIGEA.”

To read the opinion in California v. Iipay Nation of Santa Ysabel, click here.

Why it matters: The Ninth Circuit was not persuaded that the Iipay tribe’s online bingo platform was legal under the UIGEA even if it was permissible under the IGRA, finding no direct conflict between the two federal statutes.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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