The Legal Framework for Tribal Casinos

With nearly 1,700 casinos, race tracks, cruise liners and resorts around the United States offering gaming thrills of one type or another, it was inevitable perhaps that the market would become segmented. One type that emerged were "Native American Gambling Enterprises": casinos, bingo parlors and others gambling businesses located on Indian reservations or tribal land.

At the very least, Indian casinos certainly hold the promise of a unique ambience for gamers seeking something different. One rather suspects they also cater to the newly-developed sensitivity of mainstream white/Anglo-Saxon Americans to be politically correct, to eschew any hint of racial discrimination.

This social phenomenon, coupled with Native Americans' search for indigenous income opportunities, led to a legal question and challenge being elevated to the U.S. Supreme Court. The Court ruled in 1987 that Indian reservations did have well-defined sovereignty.

Consequently, a Native American entity recognized by the federal government could establish any gambling facility it wished without the need for approval from the individual States. The most important proviso, affirming the non-discrimination clause, was that Indian tribes could operate any game of chance which was already generally permitted in the State.

The following year, Congress passed the enabling 1988 Indian Gaming Regulatory Act (IGRA). For purposes of regulation, the Act identified three classes of games that could be operated.

Class I was defined as purely social gambling and traditional Indian gaming with minimal prizes involved. The tribal government had complete sovereignty and regulatory authority over these.

Class II comprised bingo and card games played solely against other players rather than against the house or a player acting as a bank. Provided the state in which the tribe resided already allowed such gaming, a tribe could license, regulate and conduct class II gaming within the framework of National Indian Gaming Commission (NIGC) supervision.

Class III or casino-style gaming covered all other forms: slot machines, blackjack, craps, and roulette, as well as "wagering games and electronic facsimiles of any game of chance". The regulations for this class were more intricate:

(1) As for Class II, the specific form of class III gaming that the Tribe wished to conduct had to be permitted in the state;

(2) The Tribe and the state had to either negotiate a compact approved by the Secretary of the Interior, or the Secretary must have approved the applicable regulatory procedures; and,

(3) The Tribe had to have a Tribal gaming ordinance approved by the Chairman of the Commission.

Today, the National Indian Gaming Commission (NIGC) reports, 220 federally recognized tribes operate 360 Indian gaming venues in the United States or about 22% of the countrywide total. This is a disproportionately high share, considering that the 2000 Census reckoned the Native American share of population at only around 1%, spread across 562 federally-recognized tribes.

Certainly, tribe-operated casinos have generated healthy cash flows. Reported gross revenues have ballooned from $100 million in 1989 to estimates varying from $14.5 billion to $20 billion in recent years.

There is therefore support for the original rationale that a new, lucrative source of income would bolster economic development in otherwise depressed reservations. In fact, many tribal governments have been able to invest in new or improved infrastructure, put up schools, preserve native traditions and reduce chronic unemployment. It would seem, therefore, that the special privilege accorded Native Americans was merited.