The U.S. government recognizes 558 Native American tribes. In 1990 there were almost 2 million Native Americans. An equivalent number of First Nation bands is found in Canada. Of the tribes in the United States, 198 had some kind of gambling operation in 1999. The operations included bingo games, which are considered Class II games, and various kinds of casino-type games, or Class III games (classifications found in the Indian Gaming Regulatory Act of 1988). The Class III operations are found in twenty-four states. As described in this entry, these games are conducted in accordance with agreements made between the tribes and the state governments.
Since 1990 Native American gambling has been the fastest-growing sector of casino gambling in the United States. Tens of billions of dollars are gambled at the Native American bingo halls and casinos each year. As a result, tribes take in approximately 15 percent of all the gambling revenues in the United States. In 1999, the gambling facilities had wins of $8.26 billion. The revenues support over 200,000 employees as well as critically needed social programs for many Native Americans who have collectively been the most economically deprived subpopulation in the United States. Gambling monies have also been vitally important for economic development projects, making many tribes self-sufficient. Gambling has not been a panacea for all, however, as a majority of the revenues go to only twenty-two casino operations out of more than 150 casinos. Some of the largest tribes have no gambling operations.
One of the tribes, the small Mashantucket Pequot tribe of Connecticut, has the largest casino in the world. The 300 members of this community control a casino that wins over $1 billion a year, or about 12% of the Native gambling money. Their casino, Foxwoods, is located in Ledyard, Connecticut, near the interstate highway that links New York City with Boston. For most of the 1990s, the casino was the only casino in all of New England. The facility has more than 250,000 square feet of gambling space, with a casino with more than 5,500 machines, 200 table games, and a bingo hall. The gaming resort complex also has two hotels, several theaters, amusement game rooms, and a sports arena. The facility is larger than any casino in Las Vegas, and it earns twice the revenues of the largest Las Vegas casino. Except for the state government itself, the casino is the largest employer in Connecticut.
Other leading Native American casinos are found on Oneida reservations in both Oneida, New York, and Green Bay, Wisconsin; on Chippewa reservations at Sault St. Marie and Mount Pleasant, Michigan, and Mille Lacs, Minnesota; on a Dakota Sioux reservation at Shakopee, Minnesota; on the Choctaw reservation near Philadelphia, Mississippi; and on the Ft. McDowell Apache reservation north of Phoenix, Arizona. Any of these gaming facilities could be transplanted to the Las Vegas Strip, and customers would be hard-pressed to notice the difference in gambling operations, although their markets all tend to be contained within areas of a one-day car drive, and few have large hotels.
Historical Development
In the 1970s many Native American tribes began to participate in charity gambling in accordance with state rules regarding how the games would be played and the types of prizes that could be offered. In 1979, the Seminole Nation decided to do something different for the bingo hall on its reservation in Hollywood, Florida. Faced with considerable competition from other charities, the tribe threw aside the state’s prize limits and began a high-stakes game with prizes in the thousands of dollars. The Broward County sheriff filed criminal charges and sought to close down the Seminole bingo game. His actions led to a series of law cases, culminating in the 1981 approval of the games without state limits by a federal court of appeals (Seminole Tribe v. Butterworth, 658 F. 2d. 310). In 1982 the U.S. Supreme Court refused to review the ruling. In a very similar case in 1982, another federal court of appeals permitted a California tribe to conduct bingo games and other card games in manners that violated state rules. Key to the cases was the fact that in both Florida and California the games themselves were legal and could be played. The tribes were only violating the manner in which the games were played. The courts of appeals ruled that states did not have regulatory authority over Native nations’ activities unless the activities were totally prohibited by the states as a matter of public policy.
Tribes across the United States took notice of the very successful gambling activities of the tribes and especially of the legal cases, which seemed to affirm the special status the tribes enjoyed in this realm of economic enterprise. During the early years of the 1980s, gambling began to appear on most of the reservations of the United States. Except for internal tribal regulations, there was almost no oversight for the gambling activities. As the activities involved larger and larger sums of money, there were both perceived and real problems. There were cases of non-Native managers setting up games and then taking the bulk of the revenues. Evidence of cheating emerged. Members of organized crime families made their presence felt on some reservations. There were also some unscrupulous tribal members who used gaming for personal advantages in ways adverse to their tribes’ interests. Organized commercial casino interests, especially those in Nevada and New Jersey, expressed fears that corruption and organized crime activity on the reservations could result in a popular backlash against all casinos along with calls for federal regulation of commercial casinos. Of course, they also had concerns about the competitive positions held by unregulated casinos in monopoly-like markets. Congress began to explore the manner in which the Native gambling could be regulated.
Congressional action was held back, however, as the U.S. Supreme Court had not ruled on the legality of Native gambling, and many state governments sought to have the highest court overrule the previous decisions of lower federal courts. This did not happen. In 1987 the U.S. Supreme Court upheld the earlier rulings by a six to three vote in California v. Cabazon Band of Mission Indians. Moreover, the Court endorsed Native gambling as being consistent with federal policies designed to promote self-sufficiency for tribes. The Court pointed out that the Bureau of Indian Affairs had actually given grants for construction of some of the gambling facilities, that gambling revenues were accomplishing goals for federal policy, and that gambling revenues “provide the sole source of revenues for the operation of tribal governments, and the provision of tribal services. They are also major sources of employment on the reservations”. The Court added, “Self-determination and economic development are not within reach if the Tribes cannot raise revenues and provide employment for their members. The Tribes’ interests obviously parallel the federal interests”. The Court added that state regulation or any other regulation by a nontribal entity could take place only if there were a specific act of Congress authorizing the regulation. Now the states besieged members of Congress to act. Conversely, the tribal interests were less inclined to endorse congressional action, as the status quo was quite acceptable to their desires. A compromise was reached with the passage of the Indian Gaming Regulatory Act of 1988, signed into law by President Reagan on 7 October 1988.
The Indian Gaming Regulatory Act of 1988
The l988 Indian Gaming Regulatory Act (IGRA) established a three-member National Indian Gaming Commission. Two of the three members must be enrolled members of Native tribes. The chairman is appointed by the president and the two other members by the secretary of the interior. The commission is given some direct regulatory authority over bingo-type gaming. It is also empowered to make general rules for gambling operations. The chairman has subpoena powers, and the commission may assess fines against tribal gambling operations and even close them if it feels they are not sufficiently abiding by the rules. The commission approves all agreements outside operators make with Native gambling establishments and conducts background checks on gambling personnel.
Casino-type gambling was to be regulated in accordance with rules established in negotiations between the tribes and the state governments. These negotiated compacts would be given the force of law by the secretary of the interior. If the states refused to negotiate compacts in good faith, tribes could sue the states, and the states could be mandated by federal courts to negotiate. On 27 March 1996, in a five to four vote, the U.S. Supreme Court ruled that the provision of the act that allowed tribes to sue states in federal courts over the lack of good faith negotiations was unconstitutional because of the 11th Amendment. The amendment implies that states are sovereign units and generally cannot be sued in federal courts.
The Court did not rule the entire act unconstitutional, nor did the Court address how negotiations impasses would be resolved in the future – whether states could simply say no to tribes, or whether tribes could seek relief from the secretary of the interior. In 1999, the secretary of the interior issued guidelines for tribes to take appeals to the secretary’s office when states refused to negotiate compacts.
The act defined three classes of gambling. Class I gambling consists of small prize games between tribal members. It also consists of games traditionally played by tribes in ceremonies or celebrations. These activities are regulated entirely by the tribes. No issues have arisen over Class I games since the passage of the act.
Class II gaming encompasses bingo in its various forms as well as pull-tab cards, punch boards, and tip jars (jars filled with a fixed number of pull tabs, hence guaranteeing a predetermined number of winners). Certain card games such as poker are also included as long as the games are nonbanking, that is, do not involve bets between the casino and the player instead of bets among players. Tribes can conduct Class II gaming as long as the game involved is permitted in the state to be played “for any purpose, by any person, organization or entity”. The tribe must pass an ordinance in order to offer Class II games. The ordinance is then approved by the National Indian Gaming Commission chairman. The commission conducts background investigations on the gambling facility and its employees.
The Commission then regulates the gambling for a period of three years, after which the tribe can apply for permission to self-regulate the Class II games. Most tribes have successfully won permission for self-regulation. The permission can be revoked if the commission feels that the self-regulation efforts are inadequate. Although the commission regulates the gambling, the commission may assess the tribes a fee for the cost of regulation.
Class III gaming consists of all forms of gambling not covered by Class I and Class II definitions. Basically, the Class III category covers all casino-banked games including blackjack, baccarat, roulette, craps, and all slot machines. Class III also includes lottery games as conducted by state governments and pari-mutuel racing wagers. As with Class II games, the Class III games may be played only if the tribe has an ordinance permitting them and if the games are permitted “for any purpose, by any person, organization or entity” in the state where the tribal facility is located. Additionally, for Class III gambling to be permitted, the tribe must enter into a compact with the state. The compact will provide a detailed provision on games allowed in the facility, the manner of offering the games, and the regulatory structures for oversight of the games.
The Class III negotiated compacts may provide very specific authority for tribal and nontribal (be they county, city, or state) law enforcement agencies to supervise and enforce provisions of the gaming agreements. Without such specific authority being granted to nontribal authorities, all enforcement activities regarding gaming on Indian lands remain in the hands of the tribal government and the federal government. In other words, if there is no compact, and tribes are permitting games the state believes to be Class III games, the state cannot enforce the law. The state must wait for federal district attorneys and marshals to make all enforcement actions. As these officials operate under direction of the U.S. attorney general, the basic enforcement activity is on the shoulders of one federal officer.
State governments may not tax the Native gaming facilities. The state may charge the tribes sums of money to cover the actual costs of state regulation of the facilities, however. In fact, many tribes have acquiesced in state requests for special fees in order to finalize negotiations. The secretary of the interior willingly closes his eyes to the legal violation and accepts that the fees are some how quid pro quos for some mysterious services the state or local governments might give the gambling facilities.
All net revenues from gambling must be allotted as the law provides. They must be used for tribal purposes. If the tribe shows that it is meeting its obligations to provide for the social welfare of its members, however, the tribe may authorize up to 40 percent to go to individual members in a per capita distribution. Some tribes have done so; others have not. In 1999 there were forty-seven tribal governments that gave per capita payments from gambling revenue to their members. Some have given the full 40 percent in per capita distributions; others have given smaller proportions. In the case of one Minnesota tribe with a small membership, the per capita distribution of funds was in excess of $800,000 per individual member for one year. Some other tribes have allocations exceeding $100,000 per member per year; however, most of the per capita payments are not so large.
The National Indian Gaming Commission also regulates non-Native persons who wish to work with the gambling facilities on reservations. Moreover, arrangements for outside management of games are regulated, with the outside managers being limited to agreements for no more than 30 percent of the net revenue of the facility going to them in exchange for their services. Agreements may not last for more than five years. Under special cases managers may receive 40 percent of net revenues for seven years if they also provide financing for the Native casino facilities.
The IGRA anticipated that tribal leaders and other entrepreneurs would see opportunities in creating new tribes in order to place gambling facilities in certain locations with outstanding market possibilities. The law provided that new lands designated as Indian lands by Congress or the Department of the Interior could have gambling only if such was approved by the secretary after some (unspecified) consultations with local residents of the area as well as rival gambling tribes in the vicinity. Moreover, the governor of the state would have to specifically approve the gambling, and of course there would have to be a compact. Plans for new tribes and new tribal lands proliferated, and many applications were made to Congress, the Interior Department, and governors. As of the beginning of 2001, however, only about a dozen tribes had been given new recognition by federal authorities, and only one of these had a casino operating. Only two existing tribes had been given authorization for gambling on new lands not adjacent to their existing reservations.
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