North Carolina has voted to legalize sports betting twice.
In 2019, the state legislature passed a bill that allowed sportsbooks at tribal casinos, of which there are three.
This year, the legislature passed another bill that legalized online sports betting in North Carolina.
However, the state is taking an unprecedented step in its sports betting expansion efforts. If the tribes want to operate an online sportsbook, the state must regulate them.
According to Melanie laCour, an attorney focusing on gaming-related issues for the ZwillGen law firm, it’s a unique approach.
“It’s interesting. The way the sports wagering enabling legislation is drafted actually allows the tribal gaming enterprises to apply for a license by the state rather than going through a compact amendment process,” laCour told NCSharp.
Tribes must be regulated by state to provide online betting
Native American tribes are considered sovereign entities by state governments. That’s why they usually create gaming compacts with governing bodies instead of a licensing arrangement.
The compact signifies an agreement between the tribe and the state. It’s a voluntary arrangement rather than the more typical power dynamic between state and commercial gaming companies.
It is why commercial entities are taxed while tribes agree to revenue-sharing payments in the compacts. But at this time, North Carolina tribes must submit to state regulation if they want a piece of the online betting market.
“The tribes can apply for a state license and then must thereafter agree to be regulated by the state,” said laCour. “Interestingly, the enabling legislation allows tribes to obtain a mobile sports wagering license, but these licenses do not count towards the limit of 12 operator licenses that can be awarded by the North Carolina State Lottery Commission. So, tribal gaming enterprises can apply for a state license to operate mobile sports wagering on top of the 12 mobile operate licenses authorized by the state. It provides a unique opportunity in North Carolina for tribal operators to get into the mobile sports wagering space through state licensure.”
Before the recent sports betting legislation, North Carolina didn’t have much in the way of commercial gambling. The state has a lottery, and the rest of the gaming options were relegated to its tribal casinos. Those properties are concentrated in the western part of the state, so betting wasn’t a reality for most residents.
An infringement on sovereignty?
In states where tribes control the bulk of the gambling market, they usually fight to control sports betting.
For example, the Florida gaming compact gave the Seminole Tribe a near-monopoly on sports betting. The compact faced legal challenges from pari-mutuel facilities. But it’s apparent the state is willing to cede gaming control to the tribe.
In California, there were two competing sports betting ballot initiatives. And the tribes fought to make sure the one that would’ve given commercial entities market access failed miserably on election day.
On the other hand, there doesn’t seem to be significant pushback from North Carolina tribes.
No partnership required for online sports betting market access
The tribal aspect of the bill wasn’t the only aspect where North Carolina took a distinctive approach. The Tar Heel State doesn’t require commercial online sportsbooks to partner with a land-based entity to obtain a license.
“They chose a model where mobile sports wagering licenses are untethered. There’s no requirement for a market access partner. Many of the states that have previously legalized mobile sports wagering require a mobile operator to have a market access partner,” laCour told NCSharp.
For example, Kentucky mandated online sportsbooks to partner with one of the state’s licensed horse tracks. Otherwise, those companies couldn’t accept wagers from Kentuckians.
One possible reason for the lack of partnerships in the Tar Heel State is that there aren’t enough potential partners.
The tribes are the only gambling entities in the state thus far. Other states in a similar situation required partnerships with professional sports franchises. But the state will award up to 12 licenses, and there aren’t that many North Carolina-based pro sports teams.
Online operators can partner with a sports franchise if they want to, but it’s not a requirement. Instead, it’s just another data point for regulators to consider when deciding whether to award a license.
“At that point, the operators will be able to have a brick-and-mortar operation as well through the partnership, but it’s not required,” said laCour. “However, it is considered in the licensure process by the commission.”
Still plenty of regulatory unknowns remain
While it’s clear North Carolina is taking steps not made by other states, much of the regulatory framework is still a blank slate.
The legislation put the North Carolina Lottery Commission in charge of overseeing the industry. But the NC Lottery hasn’t written any rules for the new market yet. Indeed, the NCLC is still in the process of hiring a licensing director who will implement a licensing framework. Once the rules are written, the picture becomes much clearer.
“It’s difficult to anticipate how a regulator is going to approach regulating a new area of gambling prior to the actual implementation of their rules,” laCour said. “In the case of North Carolina, at this point, no regulations have been promulgated by the North Carolina State Lottery. It’s difficult to forecast their stance on a lot of issues given the discretion maintained by a body regarding the contents of their rules.”
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