Legislation proposed this year to authorize daily fantasy sports contests could strike a blow to Oklahoma education funding as well as tribal gaming exclusivity.

The Oklahoma Fantasy Contests Acts, HB 2278 and SB 1396, would legalize the operation of fantasy gaming leagues in Oklahoma. The bills would go into effect on November 1 if they are approved by the Oklahoma Legislature. However, legalization would jeopardize over $125 million in state income derived from tribal gaming fees.

State Question 712 (SQ 712), approved by Oklahoma voters in 2004, established legal compacts between Native American tribes and the state of Oklahoma to regulate tribal gaming, according to the Oklahoma Policy Institute. The state’s Native American tribes are the sole exception to Oklahoma’s restrictions on gambling. Part 11 of the Model Tribal Gaming Compact (pdf) approved by SQ 712 grants tribes exclusive rights to operate gaming facilities in return for sharing part of their revenue from Class III tribal gaming operations with the state. A majority of those “exclusivity payments” fund a state education fund (1017 Fund).

However, under the 2004 compact the agreement is only binding if the “state does not change its laws after the effective date of this Compact to permit the operation of any additional form of gaming by any such organizational licensee, or change its laws to permit any additional electronic or machine gaming within Oklahoma.” If that happens the tribes are within their rights to disengage from the agreement with the state and cease paying fees, which would mean a substantial loss in revenue from state tribes.

The gaming compact includes 31 tribes. The largest share of revenue (70 percent) comes from four tribes including, $45.4 million from the Chickasaw, $21.0 million from the Choctaw, $14.3 million from the Cherokee, and $9.0 million coming from the Muscogee (Creek) nations.

Gene Perry, policy director of the Oklahoma Policy Institute, said, “The bill tries to define the fantasy sports games as not gambling, which is what the nationwide industry is trying to push,” according to The Oklahoma Daily. Perry added, “But in a lot of other states, that hasn’t been upheld, and there’s been several court decisions in other states to say ‘this is gambling.'” He said, when fantasy gaming is defined as gambling by Oklahoma that is when it will lose funding from the tribes. Revenues from tribal gaming contributed $128.4 million to Oklahoma in fiscal year 2015.

If the legislation is passed, it’s possible the fantasy sports industry can shield itself from the anti-gambling laws in Oklahoma. In return for the state receiving an annual registration fee of $2,500 from each of the operators offering fantasy sports contests within the state. However, the state would then be open to a challenge that under the terms of the tribal gaming compacts, offering the contests would be permitting “the operation of any additional form of gaming.” The Cherokee Nation, Chickasaw Nation, Muscogee (Creek) Nation, and other tribes have already asserted that claim.