Are states beating the house?: The validity of tribal-state revenue sharing under the Indian Gaming Regulatory Act

Georgetown Law Journal, Jan 2003 by Lent, Eric S

INTRODUCTION

The Indian gaming industry has exploded since Congress enacted the Indian Gaming Regulatory Act (IGRA)1 in 1988. By the year 2000, gross revenues from Indian gaming exceeded $10.6 billion, up from approximately $100 million before the passage of IGRA.2 This is an increase of more than two thousand percent over twelve years.3 Of course, the number of Indian tribes engaged in gaming activities is also increasing. According to the Bureau of Indian Affairs, Office of Indian Gaming Management, 212 tribes have entered into agreements that permit gaming on reservation lands in twenty-four states.4 In California alone, sixty-two tribes have negotiated gaming agreements since March 2000.5 The extraordinary expansion of the Indian gaming industry-most notably its mushrooming revenues-has caused various disputes among tribal members, tribes, states, and the federal government. Disputes relating to the use and allocation of tribes' newfound gaming wealth are unsurprisingly common.6 Specifically, the dispute over whether states can share in Indian gaming revenues via the tribal-state compacting process required by IGRA has become especially heated in the aftermath of the Supreme Court's decision in Seminole Tribe v. Florida.7

Pursuant to the Seminole Tribe decision, states are immune from suit by Indian tribes for failure to engage in the good faith negotiations for gaming compacts required by IGRA.8 In effect, the decision invalidated portions of IGRA that enabled tribes to enforce their gaming rights; as a result, tribes have been left with little recourse when a state demands revenue from tribal gaming or refuses to negotiate over gaming rights.9 Some fear that, practically speaking, states can hold tribes hostage by demanding a share of tribal gaming revenues.10 Indeed, in the year immediately following Seminole Tribe, no state that had not previously had a gaming compact with an Indian tribe negotiated one.11 To date, only a small number of states (including California, Connecticut, Michigan, New Mexico, and Wisconsin) have tribal gaming compacts that require revenue sharing.12 However, as compacts that predate Seminole Tribe begin to expire in other states, tribes wishing to renew their compacts will likely find states reticent to do so unless revenue sharing is a part of the new deal.13 Tribes negotiating with a state for the first time likely will be forced to share revenue as well.14

This Note argues that gaming compacts requiring tribal-state revenue sharing violate IGRA. Before detailing why such compacts violate IGRA, Part I introduces the current state of Indian gaming law by outlining IGRA and the Seminole Tribe decision. Part II examines instances in which tribes and states have entered into a revenue sharing agreement. Part III analyzes the plain language of IGRA, its legislative history, and relevant case law to determine whether these agreements are appropriate under IGRA. Part IV discusses the justification offered by the Department of the Interior for its approval of revenue sharing agreements that grant tribes the exclusive right to Class III gaming in a state. Finally, Part V sets forth proposals that seek to protect Indian gaming rights in light of the Seminole Tribe decision.

I. INDIAN GAMING LAW UNDER IGRA AND SEMINOLE TRIBE V. FLORIDA

After providing a general description of IGRA, Part I specifically discusses the law governing tribal-state gaming compacts. It concludes by examining the impact of the Supreme Court's Seminole Tribe decision on Indian gaming law.

A. IGRA AND THE INCORPORATION OF THE CABAZON RATIONALE

In 1987, the Supreme Court handed down the landmark decision of California v. Cabazon Band of Mission Indians,15 which held that Indian tribes have the right to conduct gaming activities on reservations without being regulated by state or local authorities.16 In response to the decision, Congress enacted IGRA in an effort to balance Indian autonomy in the gaming arena with state assertions of police power over tribal gaming.17 Thus, IGRA essentially served as a compromise. Although IGRA encouraged Indian gaming, it also gave the states some opportunity to regulate the conduct of casino-style tribal gaming activities.18

Under IGRA, tribes are given the right to conduct gaming activities on Indian lands if the gaming does not violate federal law and if it is conducted within a state that does not, as a matter of criminal law and public policy, prohibit such gaming.19 The statute's language incorporates the reasoning of the Cabazon decision by distinguishing civil-regulatory laws from criminal-prohibitory laws.20 Under IGRA, when a state allows a gaming activity for "any purpose by any person, organization or entity," it does not, by law, consider that gaming to be contrary to public policy.21 Therefore, a state may ban a certain Indian game only if it bans that game in all circumstances.22

IGRA divides gaming activities into three categories. Class I games are "social games solely for prizes of minimal value or traditional forms of Indian gaming . . . in connection with tribal ceremonies or celebrations."23 These games are not subject to IGRA and are within the exclusive control of the tribes.24 Class II games consist primarily of bingo or bingo-like games25 and are permitted in any state that allows similar games for any purpose.26 Class III games include all forms of gaming not covered by Class I or II.27 Like Class II games, Class III games are permitted in states that allow similar games for any purpose,28 but to engage in Class III gaming operations a tribe must enter into a compact with the state regarding its gaming activities.29 This Note focuses on the validity of Class III compact provisions that require tribes to share gaming revenues with the states.30