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Indy Gaming: SCOTUS ruling favoring Texas tribal casinos has ‘wider implications’

Howard Stutz
Howard Stutz
EconomyGaming
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Good morning, and welcome to the Indy Gaming newsletter, a weekly look at gaming matters nationally and internationally and how the events tie back to Nevada.

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A U.S. Supreme Court ruling last week was a victory for a Native American tribe in Texas that had been in a legal tussle with the state over the use of electronic bingo games on tribal land going back to the 1990s.

But the decision could have other ramifications for the Texas gaming landscape, where efforts led by Las Vegas Sands to legalize commercial casinos have been unsuccessful since the mid-2000s.

States bordering Texas have Las Vegas-style casinos. Texas gaming proponents have long lamented the state is losing potential tax dollars to casino operators in Oklahoma, Louisiana and New Mexico.

For example, WinStar World Casino and Resort is located in Thackerville, Oklahoma, on Interstate 35, just across the state line from Texas. The casino, operated by the Chickasaw Nation, has the largest casino floor in the U.S. – 698,000 square feet – and draws much of its business from the Dallas-Fort Worth metroplex.

The 5-4 ruling by the justices allows the Tigua Indians of El Paso, formally known as the Ysleta del Sur Pueblo, to operate bingo at an El Paso entertainment center. Analysts said the ruling will also benefit the Alabama-Coushatta tribe, which has been fighting with Texas officials over bingo operations on its reservation, which is located an hour’s drive north of Houston.

A third tribe, Kickapoo Traditional Tribe, has bingo-based games at a casino in Eagle Pass, two hours west of San Antonio. But the tribe’s gaming operations are covered under a different federal law.

In a research note written shortly after the Supreme Court decision was announced, Truist Securities gaming analyst Barry Jonas said the ruling would have “wider implications across the industry.”

Jonas said the decision “could further discussions around the eventual legalization of (commercial casinos) in Texas.” Subsequently, any Texas casino legalization would have repercussions for casino operators in Louisiana, notably Penn National Gaming, Caesars Entertainment and Boyd Gaming.

After reviewing the justices’ opinion, B2 Global Managing Partner Brendan Bussmann said he doesn’t foresee an immediate change in the gaming landscape in Texas. However, “it may start to force the conversation as locations near El Paso and Houston offer a regulated gaming experience to customers in those parts of the state.”

Last year, Texas lawmakers rejected a Las Vegas Sands-backed casino gaming proposal. In February, the Texas Tribune reported the company launched a political action committee with more than $2 million in funding to support a renewed effort.

Las Vegas Sands Senior Vice President Andy Abboud, who has overseen the legislative effort to legalize casinos in Texas, said the company will work with the Legislature next year to put a casino referendum on the ballot.

Abboud said the Supreme Court ruling “gives the existing tribes certainty” concerning their gaming operations. He added that the company has met with all the tribes with the exception of the Kickapoos.

“They are strong supporters of our initiative,” Abboud wrote in a text message. “The Kickapoos are not opposed, just worried about the impact.”

U.S. Supreme Court in Washington, D.C., on Aug. 6, 2021. (Humberto Sanchez/The Nevada Independent)

Bussmann said the Supreme Court ruling added an “extra element to that conversation” concerning casino legalization efforts in Texas.

“It’s a complex topic that spans sports betting to casino gaming that has been debated for 20 years and is likely far from over,” he said.

The Supreme Court opinion was authored by Justice Neil Gorsuch and was joined by Justices Stephen Breyer, Sonia Sotomayor, Elena Kagan and Amy Coney Barrett. Gorsuch based much of the ruling on a 1987 Supreme Court case, California v. Cabazon Band of Mission Indians, which involved the growing development of casino-style gaming by North American tribes.

That 6-3 ruling by the court in favor of the Cabazon tribe effectively overturned existing laws restricting gaming on tribal reservations, and led to the creation of the Indian Gaming Regulatory Act.

National Indian Gaming Commission Chairman Sequoyah Simermeyer said in a statement last week that the ruling in the Texas case recognized “the importance of Indian gaming’s long-standing regulatory framework.”

In the ruling, Gorsuch rejected Texas’ argument that its laws on bingo prohibit the kind of games offered by the tribe. 

“No one questions that Texas ‘regulates’ bingo by fixing the time, place, and manner in which the game may be conducted,” Gorsuch wrote. “The state submits only that, in some sense, its laws also ‘prohibit’ bingo — when the game fails to comply with the state’s time, place, and manner regulations. But on that reading, the law’s dichotomy between prohibition and regulation collapses.”

Mike Andrews, who oversees the Native American Policy group at Washington D.C.-based McGuireWoods Consulting, said the court’s ruling established the National Indian Gaming Commission as the regulator for the tribe’s bingo operations, not Texas.

“This case will have significant impact in Texas by essentially cutting the state out of any monetary amounts they could have claimed if this was truly indeed gaming,” said Andrews, a former chief counsel to the U.S. Senate Committee on Indian Affairs.

“This also sets up a future fight between the tribes, the State of Texas and the Governor’s office regarding Class III (commercial) gaming,” he said.

Las Vegas-based gaming equipment provider AGS leases electronic bingo games to the Alabama-Coushatta tribe’s gaming facility. In 2021, the company said revenue from the games was between $9 million and $10 million.

Jonas said AGS and other gaming equipment providers “could see growth opportunities as Texas tribes presumably contemplate expansions following the ruling.”

AGS CEO David Lopez said in a statement that the Supreme Court decision “allows the Texas tribes to gain economic freedom and confirms their rights as federally recognized tribes.”


Everi’s smartphone cashless technology on Thursday, Sept. 9, 2021. (Jeff Scheid/The Nevada Independent)

 Judge tosses out Sightline patent infringement lawsuit against Everi

A patent infringement lawsuit filed by Sightline Payments against Everi Holdings was dismissed earlier this month by a federal judge in Texas, who ruled the state was the improper venue for the case.

Las Vegas-based Sightline filed the lawsuit on Sept. 30, alleging that financial technology and payment processing rival Everi infringed on five of the company’s patents related to cashless gaming, including technology that allows a player to transfer funds from their financial account to a digital wallet for gaming play.

U.S. District Court Judge Alan Albright ruled a claim for patent infringement must be brought in the judicial district where the defendant either resides or has a regular and established place of business.

Everi's corporate offices and financial technology division are located in Las Vegas, while the company maintains its games division offices in Austin, Texas. The judge didn’t rule on the merits of the lawsuit, only that Texas was an improper venue for the case because Sightline failed to allege any acts of infringement committed within Texas by any of the Everi companies.

A spokesman for Everi declined to comment on the ruling.

In an emailed statement, a Sightline spokesperson said, “We are committed to vigorously defending our intellectual property and maintain that this is the appropriate jurisdiction for our claim.”

Sightline said in its original filing that its intellectual property counsel reviewed Everi’s mobile wallet for potential patent infringements, and claimed to have found five violations.

More than a decade ago, intellectual property disputes over slot machine innovations flooded federal courtrooms. Analysts said it’s too early to determine if lawsuits over cashless gaming technology would spawn similar legal tussles.At last year’s Global Gaming Expo in Las Vegas, major gaming equipment providers displayed a multitude of new cashless gaming and digital payment products. The technology, including mobile wallets — smartphone apps that store payment cards and other information in a digital format – is being heralded as a transition for one of the last cash-dependent industries.


Sands Macau. Photo via Wikimedia Commons

Macau casinos headed for another dismal month following COVID outbreak

The Macau government did not impose a shutdown of its struggling casino industry following the special administrative region’s most recent COVID-19 outbreak.

But it might as well have.

The government-ordered testing of more than 600,000 residents came with stay-at-home orders and the closures of most restaurants and other businesses in Macau. China has a “zero-COVID” policy and seeks to eliminate any outbreaks, no matter the economic toll.

Gaming revenue from Macau casinos has declined 44 percent over the first five months of 2022, compared with the same five months of 2021.

“Macau gaming revenue should hit new year-to-date lows,” Jefferies gaming analyst Andrew Lee, who is based in Hong Kong, told investors in a research note Sunday. “We believe (this action) removes any prospects for Macau relaxing quarantine policies further ahead of summer.”

The latest outbreak came suddenly and has been spreading rapidly with the source still unknown, Macau Chief Executive Ho Iat Seng, the region’s top political official, said in a statement on the government's website.

According to Reuters, Macau reported 21 preliminary-positive cases in the local community as of Sunday evening. The shutdown was in effect through Tuesday to allow time for the mass testing. People going to Macau via Zhuhai-Macao were required to present proof of a negative result of a PCR test within 48 hours of arrival.

On Tuesday, one positive case of COVID was found at the Macau Hotel Fortuna, which led to the lockdown of the entire hotel and the quarantine of some 500 to 700 guests and employees, according to Inside Asian Gaming.

In May, Macau casinos reported gaming revenue of $410 million, the second-lowest amount the Chinese gaming market had seen since September 2020. Analysts had expressed hope that June would provide a boost to Macau casinos after COVID-19 restrictions were reduced in Shanghai and Beijing.

“With ease of travel the key driver, we believe this is another bump along the road for eventual Macau recovery,” Lee wrote. 

Las Vegas Sands, Wynn Resorts and MGM Resorts International have casino holdings in Macau.

Ahead of the outbreak, Fitch Ratings Service downgraded its view of Las Vegas Sands’ unsecured debt. At the end of March, Las Vegas Sands had total debt of almost $15 billion. The company did not say how much is unsecured (loans not backed by any collateral and carry higher interest rates).

In a research note, Fitch gaming analyst Colin Mansfield wrote the advisory firm’s confidence in the recovery of Macau's gaming industry has been reduced. The firm blamed the Chinese government’s strict COVID-19 policies and continued weak visitation to Macau.

“Las Vegas Sands’ leverage trajectory is no longer consistent with an investment-grade rating,” Mansfield wrote.

Shares of Las Vegas Sands have fallen almost 11 percent in the last six months and are down more than 18 percent year to date.

Macau casinos collected $10.8 billion in gaming revenue in all of 2021, an increase of 43.7 percent over the nearly $7.6 billion collected during pandemic-ravaged 2020.

But the 2021 total was more than 70 percent below pre-pandemic 2019, when casinos in the region produced $36.6 billion. The gaming revenues produced in 2020 and 2021 are the lowest single-year back-to-back totals since 2006 and 2007.

Macau's all-time gaming revenue record was $45 billion in 2013.

On Tuesday, the Macau Legislative Assembly voted 32-1 to adopt the region’s new gaming law, which allows for six new 10-year gaming licenses to the current operators along with three-year extensions under certain circumstances.


Entrance to the BetMGM sportsbook at ParkMGM on the Strip. (Courtesy photo)

Sports betting, online gaming set sail in deal between MGM and Carnival

Passengers aboard the U.S. branded luxury ships operated by Carnival Corp. will soon be able to gamble online and bet on sports in international waters through an agreement with MGM Resorts International.

In a deal announced last week, more than 50 ships ported in the U.S. covering Carnival Cruise Line, Holland America Line and Princess Cruises, will offer the online gaming and sports betting platform operated by BetMGM. In a statement, BetMGM said the wagering system will roll out over the next few months.

BetMGM is a 50-50 joint venture between MGM Resorts International and Entain Plc. 

“This is another great opportunity for us to further expand BetMGM's footprint,” said company CEO Adam Greenblatt. BetMGM operates in 18 states, Washington, D.C., and Ontario, Canada.

Financial terms for the deal were not disclosed.

The news was initially well received by Carnival investors, who sent the company’s shares up almost 10 percent on Friday after the agreement was announced. The pandemic grounded the cruise industry and fears over outbreaks on self-contained cruise ships caused a slowdown in the industry’s recovery.

Carnival’s stock price is down more than 55 percent year to date.

In a statement, Carnival Senior Vice President Marty Goldman suggested gaming could be a way to bring customers aboard the company’s ships.

"We're very proud to be able to deliver the excitement and engagement of sports betting and iGaming to our guests through our partnership with BetMGM,” Goldman said.

In the four years since a U.S. Supreme Court decision allowed states to legalize and regulate sports betting, the activity has grown to more than 30 states. Since June 2018, more than $125 billion has been wagered on sports, according to GamingToday.com.


G2E attendees play Wheel of Fortune slots at the IGT booth on Tuesday, Oct. 5, 2021. (Jeff Scheid/The Nevada Independent)

Wheel of Fortune Casino coming to the internet, but not in Nevada

International Game Technology has created more than 250 versions of the Wheel of Fortune slot machine since the game was introduced more than two decades ago.

Now, in a partnership with BetMGM and Sony Pictures Television, IGT is launching Wheel of Fortune Casino, an online gaming site based on the syndicated television game show that is entering its 40th season.

The site will open in New Jersey, one of six states that allow legal and regulated online casino gaming. MGM Resorts owns Borgata Resort in Atlantic City.

Nevada has one online poker site and does not allow for regulated online casino gaming.

"Once live, Wheel of Fortune Casino will offer players the excitement of their favorite game show and real money wagering in the palm of their hand,” BetMGM Chief Revenue Officer Matt Prevost said in a statement.

The Wheel of Fortune Casino will include online versions of Wheel of Fortune slot games and online versions of other themed slot games produced by IGT.

IGT CEO of Digital Enrico Drago credited BetMGM’s digital platform and the company’s promotional capabilities in helping create the online casino.

“The Wheel of Fortune brand has been synonymous with slot gaming for more than 25 years, and this unprecedented brand-led online casino is well-positioned to engage and entertain new and long-time players,” Drago said.

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