Prop. JJ decides if Colorado keeps sports betting revenue. Tribes suing to keep their share.

A legal standoff over sports betting continues in Colorado as voters prepare to weigh in on whether to raise the revenue cap, in the hope of providing more funding for water projects.

The state can currently keep up to $29 million in tax revenue from sports betting. Proposition JJ would remove that cap, allowing the state to keep more revenue for water projects.

The federal lawsuit was initially filed in July by the Ignacio-based Southern Ute Indian Tribe. It alleges that Gov. Jared Polis and the Colorado Department of Revenue deliberately sought to keep the tribe from participating in the lucrative online sports betting industry.

In September, a second Colorado tribe, the Towaoc-based Ute Mountain Utes, joined the lawsuit in federal district court in Denver. The state has asked that the case be dismissed, citing its immunity to prosecution. The tribes have until Dec. 5 to respond.

In Proposition JJ, referred to the ballot by lawmakers in House Bill 1436, voters will weigh in on whether to allow the state to keep more of the revenue generated by sports betting. Taxes collected on those bets, which were authorized in 2019, are projected to generate $34.2 million in tax revenue this fiscal year, which began July 1.

This Fresh Water News story is a collaboration between The Colorado Sun and Water Education Colorado. It also appears at wateredco.org/fresh-water-news.

Colorado voters approved limited gambling in 1990 and the Ute Mountain Ute and Southern Ute tribes opened their casinos soon after.

Online sports betting is offered by nontribal casinos in Black Hawk, Central City and Cripple Creek, but the tribes have so far not been allowed to participate because of the lack of an agreement with the state on how the program would operate, according to Peter Ortego, general counsel for the Ute Mountain Ute Tribe.

One of the issues is taxation. Because tribes are sovereign nations, they are exempt from paying state taxes. That tax-free status is problematic from the state’s perspective, because if tribes allowed other commercial gaming companies to locate remote sports betting kiosks on tribal land, they too would be exempt from taxation. Lawmakers such as state Sen. Dylan Roberts, D-Frisco, worry this would reduce the amount of money the state could collect for water programs including conservation, habitat restoration, stream protection and planning and storage.

“I am not opposed to in-person sports betting on tribal lands,” Roberts said. “But when it comes to online sports betting, it’s clear voters approved it in 2019 to generate money for water projects. We need to respect the will of the voters.”

But Ortego said federal law makes clear that tribes are not subject to state tax laws and that all revenues from gaming should flow to the Native American communities.

Peggi O’Keefe, a spokeswoman for the Colorado Gaming Association, which represents nontribal casino operators, said the trade group would like the tribes to be treated the same as commercial operators.

“We would like to see a level playing field,” she said.

The dispute comes just months after the federal government updated the Indian Gaming Regulatory Act to make clear that online gaming by tribal communities was allowable and affirming tribes’ right to collect revenue for their communities.

In a news release at the time the rules were updated, Secretary of the Interior Deb Haaland said gaming was critical to the economic health of Native American communities.

“Not only does Indian Gaming support tribal economies, the funding it generates helps to support the vital services that tribal nations provide to their citizens — from language preservation to health care,” Haaland said in the statement. “By updating these regulations, we will provide certainty and clarity to tribes for an industry that remains one of the most significant sources of economic development in Indian Country.”

In another major legal development this year, the Seminole Tribe in Florida won a lawsuit challenging its right to engage in online gambling.

The American Gaming Association, which represents companies and tribes nationwide, said it supports efforts to regulate and implement online gaming programs because they ensure more people can participate.

But states are allowed to determine for themselves how they will treat tribal gambling operations, according to Dara Cohen, spokesperson for the Washington, D.C.-based gaming trade group.

“Under the Indian Gaming Regulatory Act … there isn’t one size fits all,” Cohen said. “We don’t have an opinion on the Colorado case. But it is a continued priority to make sure that tribal casinos are regulated in a fair way.”

Based on facts, either observed and verified directly by the reporter, or reported and verified from knowledgeable sources.

Jerd Smith writes about water and drought in Colorado and the American West. She approaches water stories from different angles, covering law and policy, regulation, agriculture, climate and the environment, as well as in main street stories... More by Jerd Smith