The Iipay Nation of Santa Ysabel, located in the southern California mountains not far from San Diego, is likely out of options after the US Ninth Circuit Court of Appeals upheld a US District of Southern California ruling that the Iipay Nation’s planned online gambling offerings violate the US’s 2006 Unlawful Internet Gambling Enforcement Act (UIGEA).
The Ninth Circuit’s affirmation of the district court’s ruling in California v. Iipay Nation of Santa Ysabel leaves in place a permanent restraining order barring the Santa Ysabels from reopening their online-bingo offering, Desert Rose Bingo, which was shuttered almost immediately after it began accepting real-money bets from gamblers in late 2014. The tribal nation had also announced plans for an online-poker site, PrivateTable.com, though that project was put into cold storage as the Desert Rose Bingo case played out in the US court system.
The state of California and the US itself were joint plaintiffs in the case, as separate state and federal actions against the Iipay Nation and its offerings were combined into a single case long ago. The Iipay Nation, its tribal economic development entity (Santa Ysabel Interactive), and numerous individual tribal executives were all named as defendants in the case.
The federal appellate ruling denied the Santa Ysabel’s workaround to the off-reservation gambling issue at the heart of the case. The tribal nation’s online sites would have been fully legal had they accepted traffic from online customers who were physically present themselves on the Iipay Nation’s land, or on off-reservation land placed in trust for the tribe or within some other pr-approved jurisdiction.
Instead, the Santa Ysabels tried to accept traffic from anywhere, offering the legal argument that customers’ computers were just proxies for gambling taking place on the reservation, since that’s where the Santa Ysabel gaming servers were located — actually within the walls of a defunct casino building once operated by the tribe.
The appellate court ruled, however, that the proxy argument did not hold, and that the UIGEA’s requirement that both the operator and the gambling consumer must both be in online gambling-approved jurisdictions for the wager to be legal. It’s the same legal principle that forced many international online gambling operators to abandon the US market in late 2006, when the UIGEA went into effect. The Santa Ysabel projects attempted a legal detour by claiming that the sites were legal as Class II gaming offerings under the 1980s-vintage IGRA, the Indian Gaming Regulatory Act, and that the UIGEA, for all intent and purpose, didn’t apply.
Nope, said the appellate court. In a unanimous opinion penned by Judge Carlos T. Bea, he wrote, “The panel affirmed the district court’s summary judgment in favor of the State of California and the United States in their action seeking injunctive relief prohibiting Iipay Nation of Santa Ysabel from continuing to operate Desert Rose Casino.”
Added Bea, “The panel held that Iipay Nation’s operation of Desert Rose Casino violated the Unlawful Internet Gambling
Enforcement Act (“UIGEA”). The panel held that the Indian Gaming Regulatory Act protected gaming activity conducted on Indian lands, but the patrons’ act of placing a bet or wager on a game of Desert Rose Casino while located in California, violated the UIGEA, and was not protected by the Indian Gaming Regulatory Act. The panel further held that even if all of the “gaming activity” associated with Desert Rose Casino occurred on Indian lands, the patrons’ act of placing bets or wagers over the internet while located in a jurisdiction where those bets or wagers were illegal made Iipay Nation’s decision to accept financial payments associated with those bets or wagers a violation of the UIGEA.”
This excerpt represented the meat of the appellate ruling:
We reject Iipay’s argument that the patron’s decision to submit a requested wager of a particular monetary denomination is merely a pre-gaming communication with the patron’s designated proxy. [The “proxy” was defined as a single person, a Santa Ysabel Interactive employee who was always present at the server site, on Santa Ysabel land.] The district court found that it was uncontested that the act of clicking “Submit Request!” by a patron was a “bet or wager” within the meaning of the UIGEA. The district court based this finding on the fact that the patrons were staking something of value on the outcome of the bingo game, but the court could have just as easily found that the patrons were giving “instructions or information pertaining to the establishment or movement of funds by the bettor or customer in, to, or from an account with the business of betting or wagering.” … Additionally, the district court found that DRB’s patrons were located in California when they clicked the “Submit Request!” button and that betting on bingo violates California law. See Cal. Penal Code § 330 (prohibiting “percentage games”). Iipay does not contest these findings on appeal.
Two key conclusions can be drawn from these uncontested findings. First, as the Government argues, the patrons are engaging in “gaming activity” by initiating a bet or a wager in California and off Indian lands. Consistent with the Supreme Court’s holding in Bay Mills, the act of placing a bet or wager is the “gambling in the poker hall,” not “off-site licensing or operation of the games.” 134 S. Ct. …. As a result, it seems clear that at least some of the “gaming activity” associated with DRB does not occur on Indian lands and is thus not subject to Iipay’s jurisdiction under IGRA. Second, these uncontested facts undermine Iipay’s position that IGRA can shield DRB from the application of the UIGEA. Iipay has admitted that patrons initiate bets or wagers within the meaning of the UIGEA while located in California, where those bets are illegal. Even if DRB is completely legal in the place where the bet is accepted, on Iipay’s lands, the bets are not legal in the jurisdiction where they are initiated, in this case California. Thus, when Iipay accepts financial payments over the internet as part of those bets or wagers, Iipay violates the UIGEA.
In this respect, Iipay’s argument regarding proxies actually works against Iipay’s position. Iipay argues that the patron’s action in selecting a wager amount and clicking “Submit Request!” is pre-gaming communication with the proxy, not “gaming activity.” But if clicking “Submit Request!” is not “gaming activity” within the meaning of IGRA, but merely an administrative issue, it cannot be protected by IGRA. …”
The sum of the appellate ruling carves the heart out of the middle of the Iipay Nation’s legally aggressive plan to offer online gambling beyond the boundaries of its own tribal lands. The tribal nation could attempt a US Supreme Court appeal, but that appears unlikely, and the tribe’s gaming commission has offered no public comment to date regarding the ruling.
