The United States Court of Appeals for the Ninth Circuit recently rendered a decision based on the Unlawful Internet Gaming Enforcement Act (“UIGEA”) that could have broad implications for online tribal gaming. In the lawsuit, the State of California and the United States (the “Government”) sought an injunction to prohibit the Iipay Nation of Santa Ysabel (“the Iipay Nation”) from continuing to operate “Desert Rose Casino,” which is a server-based computerized bingo game that can be played on the Internet.

The Iipay Nation is a federally recognized Indian tribe with tribal lands located in San Diego County, California. Desert Rose Bingo was offered exclusively online to all California residents over the age of eighteen. In playing the Iipay Nation’s online Desert Rose Bingo game, players purchase bingo cards containing a grid of numbers. Numbers are then drawn, and those that correspond with the numbers on the card are “daubed.” A winning card has daubed numbers that match a predetermined pattern.

Desert Rose Bingo launched in November, 2014. The Government immediately commenced suit on the ground that it violated UIGEA and obtained a temporary restraining order prohibiting the Iipay Nation from continuing to operate the online game during the pendency of the litigation. The Iipay Nation asserted that Desert Rose Bingo was conducted on tribal lands and was thus expressly legal under the Indian Gaming Regulatory Act (“IGRA”). The District Court granted summary judgment to the Government, and the Iipay Nation appealed the decision. On August 2, 2018, the Ninth Circuit affirmed the District Court’s tribal gaming decision. The Circuit Court described the issue before it as one of first impression, namely the interrelationship between UIEGA and the IGRA as it relates to an Indian tribe offering online gaming to patrons who are not physically located on Indian lands in jurisdictions where the subject gambling would otherwise be illegal. The Circuit Court found such conduct to be unlawful.

Why did the Court find that Desert Rose Bingo Violated Federal Law?

The Ninth Circuit considered the scope of the IGRA and concluded that if Desert Rose Bingo took place entirely on Indian lands, it would be within the jurisdictional purview of the Indian tribes, such as the Iipay Nation. But the Court also concluded that the IGRA did not address certain Internet-based financial transactions associated with gaming on Indian lands.

The Circuit Court recognized that UIGEA does not prohibit otherwise legal tribal gambling. But, the Court observed that UIGEA does make it illegal for a person engaged in the business of betting or wagering to knowingly accept payment from an individual who is engaged in unlawful Internet gambling. Unlawful Internet gambling, in turn, occurs if it is illegal in the State “in which the bet or wager is initiated, received or otherwise made.” 31 U.S.C. § 5362(10(A). In other words, under UIGEA, the bet or wager must be legal both where it is initiated and where it is received. The Court had no trouble concluding that while the online tribal gaming activity at issue occurred on Indian lands under the Iipay Nation’s jurisdiction, it also occurred off Indian lands (where bettors were located), thereby subjecting it to California’s anti-wagering laws, such as its prohibition on betting on “percentage games” like bingo. Thus, even though Desert Rose Bingo was legal in the jurisdiction where the wagering was accepted (tribal lands of the Iipay Nation), it was not legal in the jurisdiction where the wagering was initiated (the State of California). The Court saw no direct conflict between the IGRA and UIGEA in this respect and, therefore, concluded that it was giving force and effect to both statutes by finding Desert Rose Bingo to be unlawful.

Tribal Gaming – Proceed with Caution

We have previously blogged about court rulings involving the legality of online casino games, as well as issues relating to fantasy sports law, sweepstakes law and other gaming law matters. The Ninth Circuit’s recent interpretation of UIGEA as it relates to tribal gaming in California demonstrates that the legality of online games continues to pivot on the interplay of state and federal laws. Against this backdrop, before launching any online gaming enterprise, it is important to retain qualified legal counsel to help navigate the nuanced issues presented by applicable law.