Lawsuits aim to derail sports betting in Arizona ahead of September launch

Football fans looking to place legal bets on their favorite teams when the NFL season starts next month will be out of luck if a pair of recently filed lawsuits succeed in stopping Arizona’s new sports betting law.

Two entities that aren’t eligible to allow sports betting under a law that Gov. Doug Ducey signed earlier this year — the Yavapai-Prescott Indian Tribe and Turf Paradise race track — are asking the courts to put the law on hold, which would upend plans to begin legal sports betting on Sept. 9, when the 2021 football season starts. A provision of the law allowing gambling on fantasy sports goes into effect on Aug. 28.

The Yavapai-Prescott tribe argues in its lawsuit that the sports wagering bill violates the Voter Protection Act, a provision of the Arizona Constitution which severely restricts the legislature’s ability to alter voter-approved laws, because it flies in the face of the 2002 ballot measure that permitted tribes to offer casino-style gaming. 

The lawsuit argues that the sports wagering law violates the Voter Protection Act in two ways — by impermissibly expanding who can offer gaming and by expanding the types of gaming permitted by Prop. 202. Attorney Luis Ochoa of the law firm Quarles and Brady, who is representing the tribe, also noted that the new law permits non-tribal entities to offer keno, which was only permitted to Indian tribes by Prop. 202. 

Though the law signed this year allowing both tribes and professional sports franchises in Arizona to offer sports wagering did not amend any laws that were created by Proposition 202 in 2002, the tribe’s lawsuit argues that it violates ballot measure’s intent of restricting most types of gaming to tribal nations. Voters rejected a separate ballot measure that year that would have also allowed some gaming by non-tribal operators, the lawsuit noted.

“The primary purpose of Proposition 202 was to grant the exclusive right to Indian tribes to engage in gaming activities on Indian lands for the critical purpose of providing jobs and revenue to fund tribal government operations, and programs for education, housing, health care, clean water, and other basic services for the benefit of tribal members,” the lawsuit reads.

Prop. 202 didn’t explicitly prohibit non-tribal entities from offering Class III gaming — things like slot machines, blackjack and roulette — but it only allowed tribes to offer those types of gaming. Ochoa emphasized that in the publicity pamphlet for 2002 ballot propositions, supporters emphasized that Prop. 202 would only allow such gaming on tribal lands. Then-Gov. Jane Dee Hull, for example, wrote that the proposal “keeps gaming on Indian Reservations and does not allow it to move into our neighborhoods.”

“Voters in 2002 said we don’t want gambling off of the reservations,” Ochoa told the Arizona Mirror.

The Voter Protection Act requires a three-fourths vote in both chambers of the legislature to amend a voter-approved law, and those changes must further the intent of the voters. House Bill 2772, the sports wagering law, mustered a three-fourths vote in both the House of Representatives and Senate.

The tribe also alleges that the law violates the Arizona Constitution’s ban on “special legislation” — laws that are narrowly tailored to favor a particular group. That’s because it allows 10 professional sports franchises or organizations to provide sports wagering, which the lawsuit says would include almost every eligible group, while only about half of the state’s 21 tribes would be able to obtain one of the 10 tribal sports wagering licenses. 

Both entities must pay the same non-refundable $100,000 application fees, the lawsuit noted, “despite the stark differences in likelihood of obtaining a license.”

“Special legislation prohibitions exist to prevent discrimination in favor of a select group, and prevents the Legislature from providing special benefits or favors to certain groups or localities,” read the lawsuit.

The Yavapai-Prescott tribe is one of only two tribes that did not sign the new tribal gaming compact earlier this year, and is thus not eligible to offer sports betting. The law restricts sports wagering to tribes that signed the new compact and “was clearly enacted to favor those Tribes who agreed to the terms” the governor established, and “thus, should be declared a special law barred by the Arizona Constitution,” the lawsuit said.

Ochoa said the tribe was excluded from negotiations because it refused to sign a series of preliminary compact amendment agreements that the Ducey administration established as a prerequisite.

Lawsuit: Unequal treatment in new sports betting law

The law also treats tribes and professional sports franchises differently, the lawsuit argues. Professional sports entities can offer sports wagering via mobile device or in brick-and-mortar locations, while tribes are limited to mobile wagering.

Ochoa said the Yavapai-Prescott tribe doesn’t oppose sports wagering. But if the governor and lawmakers wanted to legalize it, they should have either put the issue back before the voters or limited it to tribal nations.

Furthermore, the tribe alleged that the sports wagering law didn’t state why it was necessary for the legislature to enact the law with an emergency clause that allowed it to go into effect immediately with a two-thirds vote, as the Arizona Constitution requires. The law said only that an emergency clause was “necessary to preserve the public peace, health or safety.”

Tribes aren’t the only entities left out of the sports betting law. In its lawsuit, Phoenix horse-racing track Turf Paradise argues that it should be eligible for a license as a professional sports franchise. The Arizona Department of Gaming rejected its application earlier this month after concluding that the race track doesn’t meet the law’s qualifications, according to the lawsuit. 

Turf Paradise is administratively appealing the Department of Gaming’s denial of its license application. But its attorney argued that the race track will suffer irreparable harm if the Department of Gaming is permitted to finalize its licenses on Friday, as planned, and to allow licensees to begin marketing, advertising and unveiling their wagering websites and apps before it concludes its appeal.

The race track is asking the court to bar the Department of Gaming from allocating licenses or authorization recipients from engaging in sports betting until TP Racing’s appeal is over. 

The sports betting law restricts non-tribal wagering licenses to owners or operators, or their designees, of professional sports franchises in Arizona, or of facilities that host annual PGA tournaments or a promoter of stock car racing events. TP Racing, the company that owns Turf Paradise, argued that the Department of Gaming erroneously concluded that it doesn’t meet those qualifications. 

TP Racing’s lawsuit notes that the wagering law doesn’t define “team” or “franchise.” But it notes that a section of the Department of Gaming’s website that details the history of racing in Arizona states that Turf Paradise opened in 1956, “becoming one of Arizona’s first sports franchises.”

In its application, TP Racing said that the horse racing that takes place at Turf Paradise qualifies as a professional sport, which HB2772 defined as “a sport conducted at the highest level league or organizational play,” including baseball, basketball, football, golf, hockey, soccer and motorsports. 

“The Department based its decision to deny TP Racing’s application for an event wagering operator’s license in whole or in part on a condition or requirement that is not specifically authorized by state statute,” the lawsuit alleged.

Maricopa County Superior Court Judge James Smith scheduled emergency hearings in both cases for Sept. 3.

A spokesman for the Ducey administration said the governor’s office was aware of the lawsuits but had not yet seen them, and declined to comment. The Department of Gaming had also not seen the lawsuits and had no comment. 

Sen. T.J. Shope. R-Coolidge, who was an active proponent of the sports wagering bill, said legislation included “fair and equitable guidelines for merit-based distribution” of licenses, and questioned the timing of the Yavapai-Prescott tribe and TP Racing’s lawsuits.

“The timing of these challenges, at the dawn of selection rather than during the legislative session or upon the bill’s enactment, amount to an end-around on that qualifications-based awarding process at the Department of Gaming. I expect any legal challenges to be quickly dismissed so that the economic opportunities already happening as the result of Tribal-State Gaming Compact Amendment can continue to materialize,” Shope said in a press statement on Friday afternoon.

On Friday afternoon, the Arizona Department of Gaming announced that it had awarded sports betting licenses to 10 tribes and 8 professional sports teams or organizations.

***UPDATE: This story has been updated to include additional information.