The Southern Ute Indian Tribe says the state’s handling of the online sports betting rollout and resulting legal dispute has brought tribal-state relations to “one of the lowest points” in recent history.
A recent federal court ruling against the tribes hasn’t helped. The tribe sued Gov. Jared Polis and the director of the Colorado Division of Gaming, Christopher Schroder, in federal court in 2024, alleging Colorado was illegally freezing them out of the lucrative online sports betting market. The Ute Mountain Ute Tribe joined the lawsuit shortly after.
The lawsuit claimed Colorado acted in bad faith, used delay tactics, and belatedly made legal arguments that conflict with federal law and a state gaming compact with the tribes. The state defended its position, saying it had the authority to regulate sports betting that happened off tribal land, even if the tribes were running the platform.
A federal court decision accepted the state’s request to dismiss the lawsuit and closed the case. The ruling homed in on a central legal conundrum in the case, one that arrived with the rise of the internet age: The tribal gaming regulation from the 1980s was based on where bettors and casino floors were located — but what happens when the bettor uses a cellphone in Denver to bet on a game processed by Southern Ute Indian Tribe servers in southwestern Colorado?
“Where then does the gaming occur?” U.S. District Court Judge Gordon Gallagher wrote in his opinion issued Thursday.
Gallagher ruled gaming happens where the bettor is located, and that’s the only factor to determine whether gaming is on tribal land.
“That distinction is crucial in this action and fatal to the Tribes’ case,” Gallagher wrote in his decision.
The Colorado Office of the Attorney General declined to comment on the ruling.
The growing sports betting industry has produced millions of dollars of tax revenue for Colorado. The two tribal nations have not been able to participate in online sports betting during the legal standoff.
The Southern Ute Indian Tribe plans to keep pushing the issue, according to a written statement Friday.
“The Tribe respects Judge Gallagher and appreciates the time he has given this issue. We believe a different result is mandated by federal law and will be evaluating how to move forward in the coming weeks,” the tribe wrote.
The Southern Ute Indian Tribe’s gaming compact with the state clearly allows the tribe to engage in all Class III games authorized by state law, including sports betting, the statement said.
“These actions by the Polis Administration in refusing to honor the Gaming Compacts entered into with Colorado’s two federally-recognized Tribes represents one of the lowest points in State-Tribal relations in recent history,” the Southern Ute Indian Tribe’s statement said.
The Ute Mountain Ute Indian Tribe could not be reached for comment late Monday afternoon.
Online sports betting in Colorado
Colorado voters approved sports betting, both at casinos and online, by a narrow margin in 2019. The ballot measure authorized the state of Colorado to levy a 10% tax on sports betting operations and to use most of the money to fund Colorado water projects, like conservation programs, habitat and stream restoration projects, water plans and storage efforts.
Colorado needs between $1.6 billion and $6.1 billion in funding over the next 30 years to tackle a long list of water projects. But its current funding is falling short, leaving a funding gap of $1.5 billion, or about $50 million per year through 2050, according to the 2023 Colorado Water Plan.
Tax collections from sports betting offered a new way to pay for these projects. Wagers totaled about $18.8 billion between 2020 and 2024. Total tax collections were about $77 million for water projects and other funding pots, according to the state Department of Revenue’s 2023-2024 report.
That funding source is primed to grow. In 2024, Colorado voters chose to allow the state to keep all of the tax collections from sports betting, removing a previous $29 million cap.
In early 2020, the Southern Ute and Ute Mountain Ute tribes were preparing to enter the online sports betting market and meeting with Colorado officials about their plans. Both tribes already operate casinos on their reservations.
The Southern Ute officials launched an online platform in June 2020. Two weeks later, the Colorado Division of Gaming sent a letter to one of the tribe’s vendors saying its sports betting — happening off tribal lands but within Colorado — was illegal.
The conflict continued, stalling the tribes’ efforts while other nontribal casinos in Black Hawk, Central City and Cripple Creek were able to wedge their way into the growing market.
Sovereignty and the digital age
The state said the Southern Ute Indian Tribe could get a state betting license but was not able to license and regulate its own sports betting operations, according to the federal ruling issued Thursday. To get a license, the tribe would have to pay 10% of the net proceeds placed with the tribe’s operation by bettors located off tribal land.
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.
Gallagher’s ruling said the tribes have the option to accept the state’s license and pay 10% of their proceeds to the state.
The case also looked closely at the Indian Gaming Regulatory Act, which was enacted in 1988 — when bettors needed to go in-person to a casino to gamble.
IGRA grants tribes “the exclusive right to regulate gaming activity on Indian lands” if the gaming activity is not specifically prohibited by federal or state law. Gaming compacts between Colorado and tribal nations authorize the tribes to conduct class III gaming that is authorized by state law.
“If gaming is on Indian land, IGRA applies. If gaming is off Indian land, IGRA does not apply,” Gallagher said. Based on his decision, online sports betting is off tribal land when the bettor is off tribal land, regardless of where and how the bets are processed.
Colorado’s dispute arose months after the federal government updated the regulatory act to make clear that online gambling by tribal communities was allowable and affirming tribes’ right to collect revenue for their communities.
The Southern Ute Indian Tribe pointed out a “bitter irony”: Sports betting revenue is collected by Colorado to protect the state’s water resources. And yet, Colorado’s response to a 97,000-gallon gasoline spill in La Plata County and the reservation has been lackluster, the tribe said.
“We are confident that had this spill been in Denver instead of a remote, rural part of the state, the response would have been more robust,” the Southern Ute statement said.
The tribal government has used its resources to protect local waterways without a single dollar of sports betting revenue from the state or its own tribal platforms, it said.
“It brings to mind the troubling legacy of how states have historically disregarded Tribal relations, an approach that is wholly unacceptable in today’s society,” the tribe’s statement said.
Print