The Rincon Band of Luiseño Indians has become the first tribe in California to end state oversight of its gambling operation. The tribe will be overseen by the federal government on a nation-to-nation level moving forward.
The decision to remove California as a middleman came from a US Supreme Court ruling against the state. This resolution opens the door for other tribes in California to follow suit.
Federal government now has direct oversight over tribe’s gaming operations
There are nearly 70 tribal casinos in California. More than half of them could be in position to opt out of their gaming contracts with the state.
Under the deal, the state of California will no longer have control over the Rincon-owned Harrah’s Resort Southern California casino. Instead, the federal government will directly oversee the tribe’s operations to ensure compliance with federal policy. Money the tribe paid the state to fund oversight services will also cease.
How did this happen, and why is it meaningful?
A tribal gaming compact
Before getting into the legal discourse surrounding this unprecedented decision, it’s important to explain all of the pieces in play. The first is the tribal gaming compact between the state of California and the Rincon tribe.
A gaming compact is an agreement between tribes and states when a tribe wants to open a California gambling venue. Once a deal is struck, it is sent to the federal government for approval. If approved, a tribal casino is then awarded a Class III gaming license. That allows it to house games like slot machines and blackjack, which require a house bank to pay out winnings.
These negotiations usually are centered around the location of the casino, how many games will be housed and other regulatory points of emphasis to stay compliant with National Indian Gaming Commission (NIGC) policies. In California specifically, compacts can include language on child support enforcement and environmental issues.
Tribes lacking a gaming compact with the state that houses their establishment can operate under a Class II gaming license. It allows venues to offer bingo and other games that do not require a house bank. Those gaming houses do not require state oversight and operate simply under federal oversight.
How the Rincon tribe was able to opt out of its compact with the state
For the Rincon tribe, the decision was not about a funding dispute. It was more about increasing the tribe’s control over its own businesses. Now, the tribe has more ability to self-govern.
The fight started in 2004 when the tribe first opened Harrah’s. The tribe promptly filed a lawsuit against former Gov. Arnold Schwarzenegger, claiming that negotiations between the tribe and the governor were unfair and unconstitutional.
It took about seven years for the case to end up at the Supreme Court. The Court agreed with a lower court ruling. That ruling said the state demanded additional payments into the Indian Gaming Special Distribution Fund in exchange for the tribe’s ability to add more slot machines. That was a violation of federal tribal gaming laws.
The state of California negotiated unconstitutionally with the Rincon tribe, the courts ruled. Because of that, the tribe could opt out of the compact with the state. Elizabeth L. Homer, a tribal gaming attorney in Washington D.C. and former NIGC vice chair, said the ruling protected tribal sovereignty.
“Compacts are really only supposed to govern the conduct of Class III gaming and are not intended as a mechanism for the state to start pressing its policies onto tribal governments.”
Deal struck more than a decade after ruling
Twelve years after the ruling, there was still no new agreement between the tribe and the state of California. The tribe operated its gaming under a secretarial procedure. That allowed them to be under federal oversight as opposed to state oversight.
Late last year, the state and the tribe agreed that the NIGC will take over as the regulating entity. The tribe would no longer pay the state for regulatory costs, a spokesperson for Gov. Gavin Newsom said. The agreement was signed on Jan. 3, according to the San Diego Union-Tribune.
Rincon Chairman Bo Mazzetti believes other tribes will follow his tribe’s lead.
“We are the first to go through the full process and help develop the process where the state has agreed to opt out from regulatory oversight of our gaming operations. Basically, making it simple, the middleman is being taken out.”
With the deal, the tribe will no longer pay the state for oversight services. It paid nearly $67 million into a state fund over the last year. That money was used to fund the California Gambling Control Commission, Bureau of Gambling Control, Office of the Attorney General and the Office of Problem Gambling.
In addition, the state will no longer represent the tribe in federal matters. They now have a working relationship directly with the feds, allowing them a more dynamic and hopefully more productive nation-to-nation relationship, Mazzetti said.
“We had all three of them before – our tribal gaming commission, the state of California and the National Gaming Commission. Basically, now we’ve just moved the state out, and the national gaming commission is going to provide the oversight that the state used to provide.”
State may be overcharging tribes for services
Now, there could be a shift in the power struggle between tribal casinos and the state of California. Beyond the state’s unconstitutional negotiations, its improper use of state funds from tribal casino regulatory fees is under scrutiny.
The Indian Gaming Special Distribution Fund had a surplus, about $127 million. That is enough to pay for four years of expenses and costs to run all of its programs related to regulating tribal gaming. According to the Union-Tribune, the state collected $34 million more in distribution fund fees than the cost of regulation in 2021.
To make matters worse, the same report also showed that the Public Health’s Office of Problem Gambling was failing at monitoring its treatment and prevention programs, which are funded by the Indian Gaming Special Distribution Fund. So, not only was the state taking too much money from tribes, the tribes got no benefit from the use of the money.
That puts the state of California in a precarious position if other tribes attempt to follow the same path as the Rincon tribe.
This agreement could have a major impact on tribal gaming in California
If another tribe wanted to follow suit, it would have to be nearing a window to renegotiate its gaming compact with the state, tribal gaming lawyer George Forman told the Union-Tribune.
“Tribes cannot simply opt out. These compacts – the more recent ones – are 25-year agreements.”
That being said, there are around 28 tribes that have tribal gaming compacts set to expire by the end of the year. Sixteen other tribes have already won legal battles over unconstitutional negotiations with the state.
Five different tribes have also won related lawsuits. One ruling said the state “demanded that the tribes agree to compact provisions relating to family law, environmental regulation and tort law.” With none of those related to gaming operations, the compact was deemed illegal under the Indian Gaming Regulatory Act.
Those five tribes – Blue Lake Rancheria, the Chemehuevi Indian Tribe, Chicken Ranch Racheria, Hopland Band of Pomo Indians and Robinson Rancheria – will now enter into post-ruling negotiations that will determine the future of their regulation by the state. There is no signal that there will be a push for more tribes to opt out of their tribal gaming compact, but the possibility is real, Forman said.
“It’s going to depend on whether tribes entering into new compacts are able to reach agreement with the state on new compacts. In which case, the state will continue to exercise the regulatory authority conferred on them by the compacts.”