Letter to William Brooks

Review of Agreements between FireKeepers Development Authority and NYX Digital Gaming
(USA), LLC

Page 5 of 13

Schedules 6

egardless of the services chosen, <—mine retains discretion to request services rand
discretion whether to use the end product created by SG Digital.”

Ill. | Online Casino Platform:

The online casino platform will be hosted on a server outfitted with SG Digital’s Open
Gaming System (software used for real money, online and mobile gaming) and SG Digital’s
player account management software, the same software used to manage patron accounts for the
sports betting platform. FireKeepers agrees to exclusively us use 8G Digital's Open Gaming

g vlatfo

(b) (4)

eepers will choose which games to

7 1d. §§ 3.1.1, 3.1.2.
281d. $44.1.

1d. § 4.4.1,

20 7d, § 3.1.3,

Yd. §3.5.

21d. § 7.1.

Bd. 871.

41d. §§ LAAT.



Letter to William Brooks

Review of Agreements between FireKeepers Development Authority and NYX Digital Gaming
(USA), LLC

Page 10 of 13

the right to possess, use, and convey something.” “Appurtenant” means “belonging to;
accessory or incident to ....”°? Case law similarly defines “proprictary interest” as “one who has
an interest in, control of, or present use of certain property.” “4

To determine whether an agreement violates the sole proprietary interest requirement, the
NIGC analyzes three criteria: (1) the term of the relationship; (2) the amount of revenue paid to
the third party; and (3) a third party’s right to exercise control over all or any part of the gaming
activity.°° Accordingly, if a party, other than the tribe receives a high level of compensation, for
a long period of time, and possess some aspect of control, an improper proprietary interest may
exist.

Sole Proprietary Interest_Analysis:

Term of the Relationship:

The Sports Book and Casino Agreement has ‘he General Counsel has
reviewed other agreements with and concluded that those agreements
on their faces did not violate IGRA’s sole proprietary interest requirement.

Amount of Revenue Paid to a Third Party:

The Sports Book and Casino Agreement provides a where baseline and
optional services have SG Digital’s he sports book will
be comprised of For example, FireKeepers
estimates paying SG Digital tor the Open#et services, but paying

or the PAM. If FireKeepers earns more than its projections, esnecially once the sports
book becomes established in the marketolace. SG Digital’s fee will be

Based on
financial projections which, show substantial due. diligence bv Fire eepers, the parties estimate
that SG Digital will receive tom FireKeepers’ retail and

online sports book.

SG Digital’s fee for the online casino games will be based entirely or
Rased_on financial projections from FireKeepers, SG

Digital will receive from the online casino games.

Overall, SG Digital’s fees seem reasonable. FireK eepers described its process of
interviewing potential vendors and the goals FireKeepers wanted to accomplish with its retail

1 fil,

3 Id,

*4 See Evans v. United States, 349 F.2d 653, 659 (Sth Cir. 1965).

55 See NIGC NOV-11-02, (July 12, 201 1); see also City of Duluth v. Fond du Lac Band of Lake Superior Chippewa,
830 F. Supp. 2d 712, 723 (D. Minn, 2011), aff'd in pertinent part, 702 F.3d 1147 (8th Cir. 2013) (discussing NIGC
adjudication of proprietary interest provision).


Letter to William Brooks

Review of Agreements between FireKeepers Development Authority and NYX Digital Gaming
(USA), LLC

Page 7 of 13

(b) (4)

38 SBSC Agreement, Schedule 9,


Letter to William Brooks

Review of Agreements between FireKeepers Development Authority and NYX Digital Gaming
(USA), LLC

Page 6 of 13

IV. Fees:

jvital wi ae for building the sportsbook platforms.?> SG Digital will
receiv 1 of ie OpenBet platform in its various forms (retail.
mobil et-based, and SSBT) and the patron account management (PAM

(mobile/internet/SSBT 2.0).>> The following chart is a summary of SG Digital
structure for the sports betting platforms:
(b) (4)

xia Schedule 9.
(b) (4)


Letter to William Brooks

Review of Agreements between FireKeepers Development Authority and NYX Digital Gaming
(USA), LLC

Page 9 of 13

If a contract requires or permits the performance of any management activity with respect
to all or part of the gaming operation, the contract is a management contract within the meaning
of IGRA and requires the Chair’s approval.“° Management contracts that have not been approved

by the Chair are void.”

Management Analysis:

On its face, the FireXeepers Agreements do not permit any management by SG Digital.
The scope of services for the sports betting and online casino game platforms are finite and well-
defined. The functions and capabilities of the platforms are pre-determined by the schedules and

phases.*® SG Digital will receive a from FireKeepers’
sports book and online gaming, but SG Digital’s ied to specific work performed, The
nereases and decreases based on the selected services and phases, The or

each additional service are pre-determined.

Regarding any planning, organizing, directing, coordinating, and controlling, the Sports
Betting and Casino Agreement contains a provision that explicitly prohibits SG Digital from
performing any management activities.” Further, the FireKeepers Agreements do not grant SG
Digital the ability to plan, organize, direct, or control all or part of FireKeepers gaming
operations. SG Digital will provide the RAS for the sports book, but FireKeepers retains the
discretion to use or not use the data and services, FireKeepers is not required to implement the
data or services, and FireKeepers may adjust the line or suspend betting for a sporting event if it
disagrees with SG Digital’s data feed or for whatever reason. SG Digital will provide online
content selected by FireKeepers for the online casino games. This relationship will function
essentially like a gaming machine lease between a vendor and a tribe where the games are
selected by the tribe. Accordingly, it is my opinion that the FireKeepers Agreements are not
management agreements and do not need to be submitted to the NIGC Chairman for review and

approval.

Sole Proprietary Interest:

IGRA requires a tribe to possess “the sole proprietary interest and responsibility for the
conduct of any gaming activity.”°° “Proprietary interest” is not defined in IGRA or the NIGC’s
implementing regulations. Black’s Law Dictionary defines a “proprietary interest” as an “interest
held by a property owner together with all appurtenant rights ....”°! An “owner” is “one who has

become the de facto manager in the sense that he or she is simply executing management decisions through a tribal

management official.

425 U.S.C. § 2711.

4725 C.F.R. § 533.7; see also Wells Fargo Bank, Nat'l Ass’n v. Lake of the Torches Econ. Dev. Corp., 658 F.3d 684,
688 (7th Cir. 2011).

48 See generally SBCS Agreement, Schedules 2-9,

Id. § 15.4,

25 U.S.C. § 2710(b)(2)(A); see also 25 C.F.R. § 522.4(b)(1).

5) BLACK’S LAW DICTIONARY (LOth ed. 2014).


ty,
Ye cow”
January 2, 2020
VIA FIRST CLASS MAIL AND EMAIL

William Brooks

Special Counsel

Nottawaseppi Huron Band of the Potawatomi
1485 Mno-Bmadzewen Way

Fulton, MI 49052

Re: Review of Agreements between FireKeepers Development Authority and
NYX Digital Gaming (USA), LLC

Dear Mr. Brooks:

This letter responds to your August 21, 2019 request for the National Indian Gaming
Commission’s Office of General Counsel to review agreements between the FireKeepers
Development Authority, d/b/a FireXeepers Casino Hotel (FireKeepers), and NYX Digital
Gaming (USA), LLC, d/b/a SG Digital (SG Digital). Specifically, you have asked for my opinion
whether the agreements are management contracts requiring the NIGC Chair’s approval under
the Indian Gaming Regulatory Act. You also asked for my opinion whether the agreements
violate IGRA’s requirement that the Tribe have the sole proprietary interest in its gaming
activity.

In my review, I considered the following submissions (collectively, “the FireKeepers
Agreements”) all of which are unexecuted, but were represented to be in substantially final form:

e “Sports Betting and Casino Software License and Services Agreement” (no identifying
marks; draft dated October 2, 2019, 46 total pages, 12 schedules) (Sports Betting and
Casino Agreement)

o Schedule 1 — Definitions

Schedule 2 — List of Products Licensed by FireKeepers

Schedule 3 — Customizations Services / Bespoke Product Development Team

Schedule 4 — Acceptance testing

Schedule 5 — Risk Analysis Services

Schedule 6 — Marketing Services

Schedule 7 — Operations and strategy Services

Schedule 8 —Customer Service, fraud, and anti-money laundering Services

Schedule 9 — Fees

Schedule 10 — Third Party Game terms

Schedule 11 — Hardware and software requirements

cooo0o0o000 000

{MAILING ADDRESS: NIGC/DEPARTMENT OF THE INTERIOR 1849 C Street NW, Mail Stop #1621 Washington, DC 20240 Tel: 202.632.7003 Fax: 202.632.7066

REGIONAL OFFICES Portland, OR; Sacramento, CA; Phoenix, AZ; St. Poul, MN; Tulsa, OK; Oklohome City, OK

WWWANIGC.GOV


Letter to William Brooks

Review of Agreements between FireKeepers Development Authority and NYX Digital Gaming
(USA), LLC

Page 12 of 13

on Indian lands. The Sports Betting and Casino Agreement implicitly references those fees and
taxes by providing that such amounts are deducted from “gross gaming revenues” before
calculating the fees payable to SG Digital.

While gaming activity that occurs off of Indian lands, as defined by IGRA, is not subject
to the Act or NIGC jurisdiction, the gaming activity that does occur on Indian lands is. IGRA
sets forth what role a state may play in IGRA gaming” and the permissible uses of gaming
revenue,>” It also explicitly prohibits the application of state taxes on IGRA gaming revenue.** In
reaching a determination that the fees paid to SG Digital under the Sports Betting and Casino
Agreement do not indicate a violation of IGRA’s sole proprietary interest requirement, I do not
opine on the permissibility of those fees or the tax under IGRA or any other federal law,

It is my understanding that the drafts are represented to be in substantially final form, and
if the FireXeepers Agreements change in any material way prior to closing or are inconsistent
with assumptions made herein, this opinion shall not apply. Further, this opinion is limited to the
FireKeepers Agreements listed above. This opinion does not include or extend to any other
agreements not submitted for review.

Please note that it is my intent that this letter be released to the public through the
NIGC’s website. If you have any objection to this disclosure, please provide a written statement
explaining the grounds for the objection and highlighting the information that you believe should
be withheld.* If you object on the grounds that the information qualifies as confidential
commercial information subject to withholding under Exemption Four of the Freedom of
Information Act (FOIA), please be advised that any withholding should be analyzed under the
standard set forth in Food Marketing Institute v. Argus Leader Media.5' Any claim of
confidentiality should also be supported with “a statement or certification by an officer or
authorized representative of the submitter.” Please submit any written objection to
FOJASubmitterReply@nige.gov within thirty (30) days of the date of this letter. After this
time elapses, the letter wil] be made public and objections will no longer be considered.® If you
need any additional guidance regarding potential grounds for withholding, please see the United
States Department of Justice’s Guide to the Freedom of Information Act at
https://www justice.gov/oip/doj-guide-freedom-information-act-0.

5625 USC. § 2710(4)(3)(C).
5725 U.S.C. § 2710(b)(2)(B).
5825 U.S.C. § 2710(0)(4),

9 See 25 CER. § 517.1(c).
6 5 U.S.C. § 552(b)(4).

41 139 8, Ct. 2356 (2019).

© See 25 CFR. § 517.1(d).
9 Ia.


Letter to William Brooks

Review of Agreements between FireKeepers Development Authority and NYX Digital Gaming
(USA), LLC

Page 11 of 13

sports book and online sportsbook and casino games. FireKeepers determined that SG Digital
met its specific needs regarding experience, content, integration, and branding. Further,
FireKeepers received nronosals from other vendors for comparable services that were
substantially yom the sports book. For all of these
reasons, the fee contemplated in the FireKeepers Agreements does not raise a sole proprietary

interest concern.
Third Party’s Right to Exercise Control over Gaming Activity:

Both the hardware and software platforms, including ‘or the sports book, are
pre-determined. FireKeepers and SG Digital have agreed to a pre-determined list of hardware,
and the scope and functionalities of the sports betting and online casino platforms are also pre-
determined. SG Digital has no discretion to change the platform’s capabilities. Regarding the
sports book, FireKeepers has the discretion to accept or reject the sports betting data provided by
SG Digital, and FireKeepers bears the risk of loss from wagers. Accordingly, there are no issues

of control in the FireKeepers Agreements.

Upon review of these three criteria — term, compensation, and control — it is my opinion
that the FireKeepers Agreements do not violate IGRA’s requirement that the Tribe maintain the
sole proprietary interest in its gaming operation. It is important to note that the Office of General
Counsel reviews each agreement on its own terms. We did so here with the FireKeepers
Agreements. This opinion does not mean that every agreement with a similar fee or term,
including future agreements proposed by the Tribe, will necessarily result in a favorable
declination letter opinion.

Additional Considerations:

The FireKeepers Agreements contemplate several areas that require additional attention
to clarify the scope of this opinion and this office’s stance on issues related to Indian gaming.
Based on the financial projections provided by FireKeepers, the optional services described in
Sports Betting and Casino Agreement will require a SG Divital if
FireKeevers chooses It FireKeeners

nis Opinion snail no 1onger apply.

Additionally, the analysis of financial projections provided by FireKeepers for both
internet sports betting and internet casino games included certain fees and taxes. FireKeepers
will be required to pay application fees, license fees, fees paid to sports leagues for use of official
league data for in-play wagers, and taxes paid to the State of Michigan calculated as a percentage
of “adjusted gross receipts” derived from wagers initiated or placed by persons who are not
physically present on Indian lands at the time such wagers are initiated or placed. Those fees and
taxes are required by legislation recently enacted by the State of Michigan in order for the Tribe
to receive internet wagers initiated by persons located off Indian lands, but accepted by the Tribe


Letter to William Brooks

Review of Agreements between FireKeepers Development Authority and NYX Digital Gaming
(USA), LLC

Page 8 of 13

(b) (4)

Man: it i

The NIGC has defined a “management contract” to mean “any contract, subcontract, or
collateral agreement between an Indian tribe and a contractor or between a contractor and a
subcontractor if such contract or agreement provides for the management of all or part of a
gaming operation.”*° A “collateral contract” is defined as “any contract, whether or not in
writing, that is related, either directly or indirectly, to a management contract, or to any rights,
duties or obligations created between a tribe (or any of its members, entities, or organizations)
and a management contractor or subcontractor (or any person or entity related to a management
contractor or subcontractor).

While NIGC regulations do not define “management,” the Agency has clarified that the
term encompasses activities such as planning, organizing, directing, coordinating, and
controlling."! A “primary management official” includes “any person who has the authority ...
[t]o set up working policy for the gaming operation.”"” Further, management employees are
“those who formulate and effectuate management policies by expressing and making operative
the decision of their employer.”*? Whether a particular employee is managerial is not controlled
by an employee’s actual job responsibilities, authority, and relationship to management.‘*
Essentially an employee may qualify as management if the employee possesses the actual
authority to take discretionary actions — a de jure manager — or, in certain circumstances, where
the employee acts as a de facto manager by directing the gaming operation through others
possessing actual authority to manage the gaming operation.

3925 CFR. § 502.15.

425 CER. § 502.5.

4" See NIGC Bulletin No. 94-5, “Approved Management Contracts v. Consulting Agreements (Unapproved
Management Contracts are Void).”

25 C.F.R. § 502.19(b)(2).

* N.L.R.B. v. Bell Aerospace Co., 416 U.S. 267, 288 (1974).

4 See Waldau v. M.S.P.B., 19 F.3d (395, 1399 (Fed, Cir. 1994).

45 Id. at 1399 (citing N.L.R.B. v. Yeshiva, 444 U.S. 672, 683 (1980)). It is uncommon to see de facto management in
the terms of an agreement, as it is typically an activity that arises in the day-to-day implementation of a consulting
agreement. If, for example, a tribe is required to make the ultimate decision on whether the accept the advice of a
consultant, but has no one on staff with the expertise or experience to make such a determination, the consultant may


Letter to William Brooks

Review of Agreements between FireKeepers Development Authority and NYX Digital Gaming
(USA), LLC

Page 4 of 13

pha inctionality of a phase, is contingent on that activity or
the applicable law.

The development and installation i: determined by FireKeepers. The)

ill automatically begin once the agreement is executed and FireKeepers is permitted to

offer sports betting according Sicilia already agreed to
the hardware and software BO ° f the sports betting
platform is determined by F ineKeepers, Once constructed, SG Digital will submit the work for
FireKeepers’ testing and acceptance. '?

FireKeepers is also granting a: FireKeepers
wishes to launch a sportsbook beyond the “‘lerritory,”“” which is defined as “the geographic area

within which the Nottawaseppi Huron Band of Potawatomi (NHBP) and/or FireKeepers is
legally permitted to offer and accept Bets on Sports Betting and/or other Games through the
OGS under the laws of NHBP, the State of Michigan, and applicable federal and tribal laws[.]”?!

IL. ‘The RAS and Supporting Services:

SG Digital’s Risk Analysis Services (RAS) will be incorporated into the OpenBet
software used in the sports betting platforms. SG Digital’s RAS will include a live data feed of
odds on sporting events (including pregame odds, live odds, and results), pricing models,

ed ot required to use

may adjust the line on a spo:  KireKeepers disagrees with SG
Digital’s RAS or for whatever reason. FireKeepers retains overall control over the day- to-day
operations of its sportsbook and always maintains the discretion to use or disre; i

'6 Jd, at Schedule 2 (pp. 36-37).

'7 See Hardware Agreement, pp 1-2.

'8 SBCS Agreement § 4.5.

'° SBCS Agreement, Schedule 4 (“Acceptance Testing”).

0 Id, § 3.5, The right of first refusal also applies where Firekeepers desires to expand online gaming beyond the
Territory. fd.

21 Id, at Schedule 1 (Definitions “Territory”),

? Id. at Schedule 5.


«to William Brooks
view of Agreements between FireKeepers Development Authority and NYX Digital Gaming
(USA), LLC
Page 3 of 13

Sports Betting and Casino Agreement:

The Sports Betting and Casino Agreement has term, The agreement has an
initial term | from the “Go-Live” date, whicn 1s tne “ate that either cnorte hetting or.
internet casino saminy 1s offered to the public.® The agreement

Under the Snorts Betting and Casino Agreement. either party may terminate the
agreement if (1):

I. Sports Betting Platforms:

Firekeeners will purchase certain hardware and software'? from SG Digital
3G Digital will install the hardware and will be responsible for maintenance,
upgrades, and renairs to the hardware. |? SG Digital will license its proprietary sports betting
software, called :0 FireKeepers, and FireKeepers is required to use the
OpenBet platform for its sports betting platform.

FireKeepers has three options for sports betting platforms: (1) retail; (2) mobile/internet-
based; and (3) self-serve betting kiosks (anonymous and account-based).'? The retail platform
will include electronic points of sale to accept anonymous, cash wagers.' FireKeepers staff will
handle all betting at physical locations within Fireeepers casinos. The mobile/internet-based
platform will include the same software from the retail phase but with a mobile and internet-
based user interface to allow patrons to initiate bets online or through mobile devices.'° The
mobile/internet phase will also allow patrons to link their wagers to player accounts (account-

® SBCS Agreement § 13.1 and Schedule 1 (Definitions “initial term” and “Go-Live Date”).

7 SBCS Agreement § 13.1.

8 [d. § 13.6.1. “Tercitory” is defined as “the geographic area within which the Nottawaseppi Huron Band of
Potawatomi (“NEIBP”) and/or FireKeepers is legally permitted to offer and accept Bets on Sports Betting and/or
other Games through the OGS under the laws of NHBP, the State of Michigan, and applicable federal and tribal
laws[.]” SBCS Agreement at Schedule | (Definitions). This definition is broader than Indian lands, likely because
the Tribe is anticipating that its online casino and sportsbook will accept wagers from patrons located on and off
Indian lands. For those wagers accepted from patrons located off Indian lands, HB 4311 and HB 4916 would apply
and the Tribe must be licensed by the State of Michigan.

° SBCS Agreement §§ 13.6, 13.8.

"© Td, at Schedule 11 (to be determined).

"Ud. § 44.4,

2d $441.

3 /d. at Schedule 2,

4 Jd. at Schedule 2 (p. 33).

'5 Id. at Schedule 2 (p. 35).


Letter to William Brooks

Review of Agreements between FireKeepers Development Authority and NYX Digital Gaming
(USA), LLC

Page 2 of 13

o Schedule 12 —Service Level Agreement for USA
e “Hardware Agreement & Operations Reimbursement Letter” (no identifying marks, draft
date September 18, 2019, 4 total pages) (Hardware Agreement)

FireKeepers is organized under a charter approved by the Nottawaseppi Huron Band of
Potawatomi’s (NHBP) Tribal Council to serve as a wholly-owned instrumentality and political
subdivision to own and operate the FireKeepers Casino Hotel. FireKeepers intends to expand its
gaming portfolio by offering retail sports betting and online sports betting and casino games
through a website hosted by FireKeepers, In two separate bills, the State of Michigan approved
online sports betting and online casino games.!

Hardware Agreement:

To create the sports betting and online gaming platforms contemplated in the Sports
Betting and Casino Agreement, SG Digital will purchase a substantial amount of computer
hardware and pd sofare FireKeepers agrees to purchase this hardware and software from SG

' See Michigan House Bill Nos. 4311 (online casino games), 4916 (online sports betting) (Dec. 20, 2019) available
at https://www_legislature.mi.gov/(S(tcbagcequ2jbmnjszpkjm55r))/mileg. aspx? page=gelObjecté&objectName=2019-
HB-43 11 and
https://www.legislature.mi,gov/(S(tcbagecqu2jbmnjszpkjm55r))/mileg.aspx?page=getObject&objectName=2019-
HB-4916.

? Sports Betting and Casino Services Agreement (SBCS Agreement) § 4.4.4. Schedule 11 of the Sports Betting and
Casino Agreement will describe the hardware and software required for the initial construction of the various
platforms,

3 See Hardware Agreement, pp. 1-2.

4Id.atp. 1.

5 Telephone conference with William Brooks, Special Counsel Nottawaseppi Band (Sept. 4, 2019).


Letter to William Brooks
Review of Agreements between FireKeepers Development Authority and NYX Digital Gaming

(USA), LLC
Page 13 of 13

If you have any questions, please contact NIGC Staff Attorney Steve Iverson at (202)
632-7003 or by email at steven_iverson@nigc.gov.

i

Michael Hoenig
General Counsel