Seneca Nation to Pay $435m in Casino Revenue to New York State After Appeals Court Ruling

  • $150m will go to local and county governments, the rest will mostly fund state education
  • Indian tribe is now considering its options before deciding to pursue the matter further
  • It believes it no longer has to share casino revenue after the original state compact expired
  • Arbitrators, a US District Court judge, now a federal court of appeals all sided with New York State
  • New York is mulling statewide online sports betting, new casinos for some much-needed revenue
bronze statuette of Lady Justice with judge's gavel on open law book in the background
A federal appeals court sided with New York State in the Seneca Nation of Indians’ attempt to no longer have to pay casino revenue to the state. [Image: Shutterstock.com]

An unsuccessful appeal

The Seneca Nation of Indians has to pay a share of casino revenue to New York State following a decision on Monday by the US Court of Appeals for the Second Circuit. The tribe now owes about $435m to various bodies in the state.

State Budget Director Robert Mujica said that about $150m will go to local and county governments, with the remainder going to the state. Most of the funds will go towards education, Mujica stated.

Following the announcement of the court ruling, the Seneca Nation said it is reviewing the decision and will look at all of its available options. The tribe is able to ask for a review of the case by the full Second Circuit, as well as potentially bringing the issue to the Supreme Court.

high time the Seneca Nation follows the law and pays what they owe”

Officials from around New York State welcomed the news of the court’s decision, including City of Buffalo Mayor Byron Brown and Niagara Falls Mayor Robert Restaino. Reacting to the ruling, Governor Cuomo said: “It is high time the Seneca Nation follows the law and pays what they owe.”

Disagreement unfolds in court

The Seneca Nation currently has three casinos in New York State under its Class III gaming compact from 2002. The compact was in place initially for a 14-year period, with the option to extend it for another seven years if the two sides were in agreement.

the tribe stopped making payments in 2017

While both parties concurred to continue with the compact, the Seneca Nation leadership believed that the financial obligations of the original compact came to an end following the 14th year of the original deal. Therefore, the tribe stopped making payments in 2017. The parties entered an arbitration process, with arbitrators ruling in January 2019 that the Seneca Nation had to resume its annual payments. The decision led the tribe to take the matter to court in an attempt to overturn it.

The tribe argued that the arbitrators were not following the Indian Gaming Regulatory Act when making their decision. It also alleged that the panel’s ruling undermined the Interior Department’s authority, which is in charge of overseeing tribal issues. The tribe cited a letter from the Interior Department allegedly stating that the casino revenue payments were no longer necessary. The department subsequently withdrew the letter.

A US District Court judge ruled in November 2019 that the tribe owed over $255m to the state as a result of the conditions of its 2002 gaming compact. While the Seneca Nation appealed the decision, the federal court of appeals sided with the state. The three-judge panel concluded: “The arbitral panel did not manifestly disregard governing law, and the district court properly confirmed the award.”

Attempts to drum up state revenue

With New York State currently dealing with a budget deficit of up to $15bn, the Seneca Nation’s outstanding casino payments would provide a welcome revenue boost. The state government has been looking at various ways to create new revenue streams. Governor Cuomo is now in support of legal state-wide mobile sports betting, despite having previously opposed the activity.

annual gross gaming revenue of between $816m and $1.14bn

A study that Spectrum Gaming Group completed at the request of the New York State Gaming Commission estimated that retail and mobile sports betting statewide could eventually generate annual gross gaming revenue of between $816m and $1.14bn. Two bills that would create an open market for sports betting in the state are currently in the legislature.

Another area of consideration is the allowance of a casino in New York City. The state was planning on issuing three casino licenses starting in 2023, each costing $500m. Some stakeholders are now calling for an acceleration of this timeline.