Prior to the 1988 enactment of the Indian Gaming Regulatory Act (IGRA), a few tribes ran small-scale commercial gambling operations on their reservations. Consisting of poker games and bingo, these businesses were conducted with federal approval but were not subject to state law. Gaming revenues at this time were modest, generating only about $212 million annually ("Indian Gaming," 2005, 858).
Because Native American tribes and nations have attributes of sovereignty, state law is inapplicable to tribal lands in some cases, absent express congressional intent to the contrary. For this reason, before IGRA, tribes were able to establish commercial gaming enterprises on tribal trust lands without regard for the law of the surrounding state. Yet conflicts arose between states and tribes as states tried to impose their laws on tribal gaming enterprises. An attempt by the state of California to enforce its laws on the Cabazon Reservation ended up as the Supreme Court case of California v. Cabazon Band of Mission Indians, 480 U.S. 202 (1987).
With Public Law (PL) 83-280, Congress had made state criminal laws applicable on tribal lands located in California. However, PL280 extended only state criminal laws to reservations—not civil and regulatory laws. Thus, the primary issue in Cabazon became whether California's law limiting the conduct of bingo games to charitable organizations was criminal or regulatory in nature.
The state argued that, because the laws were enforced as misdemeanor criminal offenses, they should be considered criminal. However, the court found that, since California permitted gambling in some circumstances—a state lottery, parimutuel horse race betting, and charitable bingo and card games—gambling did not violate state public policy. Rather, the court found that California permitted gambling, although it was subject to regulation. As a result, the court concluded that the state's gaming laws were regulatory rather than criminal and therefore were not applicable to Indian reservations located in the state.
The general rule derived from Cabazon was that, if a state permitted any form of gambling, then tribes located in the state could conduct gaming operations. In contrast, tribes located in states that prohibited all forms of gambling were prohibited from operating gaming enterprises. By clearing up legal ambiguities, this ruling encouraged tribes across the country to open gaming enterprises. The expansion of tribal gaming in turn led to an increasing number of conflicts among states, citizen groups, and tribes. To ease the conflicts, Congress quickly acted to develop a comprehensive federal regulatory scheme for tribal gaming. In 1988, Congress passed the Indian Gaming Regulatory Act, which superseded the ruling in Cabazon by completely controlling the field of Indian gaming regulation.
Central to IGRA is the Act's division of gambling activities into three separate categories: Class I, Class II, and Class III. Each class is regulated differently. Class I gaming includes games played socially or as part of traditional activities for prizes of low monetary value. Tribes have exclusive jurisdiction over Class I games. Class II games are bingo, games similar to bingo, and some nonbanking card games, such as poker. Class III is a catchall category that incorporates all other games, such as slot machines and casino table games. IGRA limits Class II and III gaming to states in which such games are permitted. In addition, Class II and III games require the enactment of a tribal resolution, and Class III gaming requires the negotiation of a tribal–state gaming compact. (Additional regulations apply to tribal management and federal oversight of Class II and Class III gaming operations.)
Casinos and game designers are always at work developing new games to attract customers. Because Class II gaming can be conducted without a tribal–state agreement, determining whether a new game or machine fits into Class II or Class III is an important and sometimes contentious decision.
Tribes that wish to conduct full-scale casino gambling must negotiate a gaming compact with the state. A compact is a written agreement between the tribe and the state that sets out how the tribe will conduct its Class III gaming operations. IGRA sets out some suggestions for compact provisions, but the Act's parameters are quite broad and permit provisions regarding any "subjects that are directly related to the operation of gaming activities" (Indian Gaming Regulatory Act, fn 2 25 U.S.C. § 2710[d] [C][vii]). Existing compacts vary widely. Some common provisions relate to the waiver of the tribe's sovereign immunity related to gaming activities, state inspection of gaming facilities, licensing, enforcement of compact provisions, and casino security.
A key provision of IGRA is its waiver of state immunity from suit. States are generally immune from suit in federal court. However, to ensure that states will negotiate with tribes in good faith toward the adoption of a tribal–state gaming compact, Congress, under its Indian commerce clause authority, included in IGRA a provision giving tribes a cause of action in federal court against states that fail to negotiate a gaming compact in good faith. The U.S. Supreme Court invalidated this provision in a five-to-four decision in the 1996 case, Seminole Tribe of Florida v. Florida, holding that Congress does not have the authority to waive a state's sovereign immunity from suit. Seminole Tribe, which overturned earlier case law allowing Congress to waive a state's immunity from suit, has had repercussions stretching far beyond the field of Indian law. However, the immediate effect of the ruling was to preclude tribes from enforcing in federal court IGRA's requirement that a state negotiate a gaming compact in good faith. Although Seminole pulled some of the teeth out of IGRA, it left in place alternate remedies that have helped ensure the cooperation of states in the compact negotiation process.
IGRA represents a compromise between state and tribal interests. Similar to the ruling in Cabazon, the Act permits tribes to open gaming enterprises in states that allow some form of gambling. Yet the Act infringes on tribal sovereignty in several ways. First, it permits tribal gaming only in states where gambling is legal. In other words, the ability of a tribe to open a commercial gaming operation on tribal lands is dependent on state law. The Act also forces tribes to negotiate with states. In the course of these negotiations, states may demand that tribes allow state boards to license casino employees or permit state inspectors to inspect tribal facilities. In addition, although states cannot tax tribes directly, tribal–state gaming agreements often include a revenue-sharing provision that requires tribes to give a state a sizable percentage of tribal gaming revenues, often in exchange for the exclusive right to conduct casino gambling in the state. Tribes with gaming enterprises have been willing to accept these infringements on their sovereignty in exchange for the substantial economic benefits that gaming provides.
In the more than 200 years since the establishment of the first Indian reservations, gaming has been by far the most successful means of economic development. According to the National Indian Gaming Commission, the federal regulatory agency charged with oversight of Indian gaming, 2004 total revenue from the country's more than 300 tribal gaming enterprises was about $19.4 billion. Tribes have used gaming revenues to fund health clinics, schools and scholarship programs, tribal government, and infrastructure improvements. Some tribes also distribute gaming revenues as per-capita payments to tribal members. Today, casino gambling is one of the fastest growing sectors of the U.S. economy. However, the future of the industry and of tribal gaming in particular is uncertain. As a buffer against future uncertainty, some tribes have begun to use their gaming revenues to create more diverse tribal economies by investing in other enterprises.
Many tribes see gaming as the best option for tribal economic development and some have received a large financial benefit from their gaming operations. However, not all tribes are able to operate financially successful casinos. The tribes that have been the most successful usually have land close to a major highway or urban area. Tribes with land in remote rural areas far from major roads have had little success attracting nonmember customers to their casinos. In addition, market saturation can reduce revenues. Some tribes choose not to open casinos, for reasons of tradition, religion, or economics. Thus IGRA, while providing a boon to some, has caused a deep economic division and some political friction between successful gaming tribes and the many other tribes who are still struggling to develop viable economies.
Amy L. Propps
"Indian Gaming." 2005. In Cohen's Handbook of Federal Indian Law. Albuquerque, NM: American Indian Law Center.; California v. Cabazon Band of Mission Indians, 480 U.S. 202 (1987).; Canby, William C., Jr. 1998. "Indian Gaming." In American Indian Law in a Nutshell. St. Paul, MN: West.; Indian Gaming Regulatory Act. 1988. 25 U.S.C. §§ 2701–2721.; Mezey, Naomi. 1996. "The Distribution of Wealth, Sovereignty, and Culture Through Indian Gaming." Stanford Law Review 48, no. 3: 711–737.