Over the past 20 years, the San Manuel Band of Mission Indians has donated over $300 million to organizations in tribal communities and across the US. The extra funding wouldn’t have been possible without gambling revenue.
However, tribal gaming revenue didn’t always boast the eye-popping figures it does today. In fact, it wasn’t until recently, relatively speaking, that tribes became intrinsically linked with casinos.
The road to tribal gaming began with one tribal chief in Florida whose small tweak to bingo launched an industry.
Now, tribal gaming is present in several states, including in California casinos, and is critical for some tribal nations.
Let’s take a closer look at how tribal gaming became an economic lifeline for numerous communities across the country.
Gaming leads to tribal transformations
A 2015 study of the Indian Gaming Regulatory Act’s impact on tribal well-being found that over the two decades following IGRA’s passage in 1988, tribal real per capita income increased 48.6% compared with the 7.8% national average.
Tribal child poverty levels fell 11.8%, while the average child poverty rate rose 0.9% across the US. In addition, the tribal unemployment rate fell 6.9%, and the national unemployment rose by 1.6%.
“I went through that experience as a young child on the reservation when the welfare trucks would come up and deliver the canned goods to us,” San Manuel Band of Mission Indians Chairwoman Lynn Valbuena said in a video testimonial on the California Nations Indian Gaming Association website.
On the same web page, Feather Falls Casino General Manager Edward Gilbert touts the 500 jobs the casino’s opening created. Debbi Wilson, a non-tribal employee of Feather Falls Casino, spoke about how her job got her family off welfare.
“Having those medical benefits and having a stable position with a good wage changed our lives,” Wilson said.
Tribal gaming began with bingo jackpot
In 1979, Seminole Chief James Billie’s lawyer informed him that he should raise money from bingo. Under Florida law, gambling was illegal, but small-stakes bingo charity games with $100 jackpot limits were allowed.
However, state regulations don’t apply to Native American reservations.
If a state regulates an activity like bingo, then tribes can offer that same activity on their reservations under their own regulations. So, the lawyer argued the Seminole tribe could offer bingo with higher jackpots, attract gamblers from off the reservation and generate new revenue.
The Seminole’s bingo hall offered jackpots that ranged from $250 to $10,000. In its first year, the bingo hall made back its $1.5 million startup cost. Not a bad start. Suddenly, an area experiencing food insecurity and receiving decreasing amounts of federal aid was attracting out-of-state tourists to a multimillion-dollar business.
Tribes in other states took notice.
They visited the Seminole bingo hall to learn how to build their own profitable gambling operations.
Florida law enforcement took notice, too. Broward County Sheriff Robert Butterworth threatened arrests on the reservation related to the tribe’s bingo operation. The Seminole tribe sued for relief against Butterworth.
By 1981, the Southern District of Florida and the Fifth Court of Appeals both ruled in favor of the Seminole tribe.
Billie’s lawyer’s interpretation of the law was correct, upheld by two lawsuits in Florida, and helped lay the foundation for tribal gaming across the US.
California tribes take tribal gaming to the Supreme Court
During the 1980s, the Cabazon and Morongo Bands of Mission Indians operated bingo halls on their reservations in California. The Cabazon Band of Cahuilla Indians also hosted a card room. California allowed both activities in limited capacities, so the Cabazon tribe decided to offer them on its reservation with its own regulations.
This time, the state of California sued the Cabazon and Morongo Bands. The case went to the US Supreme Court, where the justices ruled that state laws and regulations do not apply to tribal regulations without Congress’ consent. Congress had not passed laws allowing states to regulate how tribes conduct gambling, so California’s efforts to restrict tribal gaming failed.
The 1987 Cabazon decision protected tribal gaming across the country.
The next year, though, Congress would pass a law reducing some of those protections.
Passing the Indian Gaming Regulatory Act
By the late 1980s, some Native American tribes had built thriving bingo halls and card rooms. This was great news for tribes struggling with low federal payments and generations-old economic challenges.
State governments whose legislatures prohibited the relaxed gambling regulations that attracted state residents to tribal reservations were less enthused. While tribal self-sufficiency had been a longstanding policy goal, successful gaming tribes were generating large sums of revenue that states couldn’t tax.
The states began to lobby Congress to grant the states some authority over tribal gambling policy so that state governments could cash in.
The Indian Gaming Regulatory Act was the result. Passed in 1988, it broke down gambling into three types, or classes:
- Class I
- Class II
- Class III
|Class I gaming||Includes tribal games with prizes of “minimal value” and games that are part of tribal celebrations. This includes small wagers on games like stickball, a game similar to lacrosse. Class I games require no state oversight.|
|Class II gaming||All bingo games. Bingo games that are designed to look like flashy slot machines fall under this category. Class II games are overseen by the National Indian Gaming Commission, a tribal-run regulator established by IGRA.|
|Class III gaming||All games that aren’t covered in the first two categories. These are the slots, table games and card games that drive revenue at casinos. These are the most profitable gambling activities and the ones that require state and tribal agreement.|
Why tribes and states must agree on Class III gaming
If a state offers Class III gaming in any capacity for any group, usually for charity, a tribe can enter negotiations with the state to create a tribal-state compact.
The tribal-state compact accomplishes two things.
First, it gives the state government a way to regulate the most profitable forms of gambling. Among the most common clauses within a tribal-state compact is a revenue-sharing agreement in which tribal funds are deposited into an account for the local or state government. Michigan tribes make payments to Michigan even though tribes don’t pay state taxes per their tribal-state compacts, for instance.
Second, the tribal-state compact solves a technicality in the law that, on its face, appears to make tribal gaming illegal at the federal level.
The 1951 Johnson Act
The early 1950s saw a crackdown on organized crime, which included federal scrutiny of all gambling.
The Johnson Act, which prohibited the interstate traffic of gambling machines, was one outcome. It also prohibited the “manufacture, possession, use, sale, or transportation of any ‘gambling device’ in Indian Country, the District of Columbia, and possessions of the United States.”
That appears to make slot machines illegal on tribal lands. However, state and local governments can opt out of the Johnson Act. That opt-out was how Atlantic City became a gambling hotspot in New Jersey.
On the other hand, Native American tribes don’t have the ability to opt out of the Johnson Act as states do. The tribes needed a legal procedure to opt out of the Johnson Act. The tribal-state compact provided this opt-out mechanism.
Once a state and tribe agree on terms, it’s sent to the Secretary of the Interior for approval. Once Interior approves the compact, the tribes get their green light to develop and operate their casinos and other Class III gambling operations.
In California, the tribal-state compact serves another legal purpose. California has a law prohibiting any gambling game with a bank or house, such as baccarat or blackjack. The tribal-state compact overrules this state law, so California tribes can legally offer gambling even though there are state and federal laws on the books prohibiting much of it.
Modern gambling expansion and threats to tribal well-being
When former casino executive and California gambling regulator Richard Schuetz arrived in Minnesota in 1991, the Mille Lacs Band of Chippewa Indians was struggling.
“When we went to that reservation, 65% of the tribal population existed below federal poverty levels,” Schuetz told PlayCA. “The male life expectancy was 44 years. … They had no access to medical care. They were living under horrendous conditions.”
Two years later, Schuetz’s company partnered with the tribe to build Grand Casino Mille Lacs. By the time the Grand Casino Hinckley’s opened, living conditions had transformed.
“Everyone on the reservation who wanted a job got a job,” Schuetz said. “We were able to provide child care for the entire tribal nation. … We were able to provide elder housing. We were able to develop a spiritual center. We were able to provide medical insurance for the entire tribal population, and they had a water system that was really polluted with lead and that was able to be replaced.”
After making such significant gains, tribes whose quality of life has been transformed by gambling revenue, either through successful gambling operations or financial assistance from other tribes with high gambling revenue, do not want to lose the most consistent source of revenue.
Implications of state commercial gambling policy
Commercial and online gambling expansion has begun to threaten the competitive edge that tribal casinos used to enjoy. The New York Times reported that North Dakota’s allowance of slot-like machines at local businesses generated $182 million in revenue during the state’s 2022 fiscal year.
It also meant that North Dakotans could access casino-esque gambling without driving to one of the state’s 11 tribal casinos. The Mandan, Hidatsa and Arikara tribes lost up to 70% of their gambling revenue and as much as 70% of their jobs.
The encroachment of commercial gambling has been as uneven as the successes of gambling. While Arizona’s largest gambling tribes benefitted from partnerships with commercial online gambling companies, smaller tribes have lost crucial deals in the state’s reorganization of the gambling industry.
The San Juan Southern Paiute Tribe, for example, lost its sole source of consistent income when one of its casino partners canceled a deal to lease the Paiutes’ slot machines. The loss of revenue has caused the Paiutes’ tribal council president to consider food and water rations.
In many markets, tribal reservations are no longer the only gambling locations. Commercial gaming operations that offer gambling products off-reservation are convenient for customers but economically threaten many tribes.
Online casino gaming that cuts tribal operators out of the pool of customers off-reservation also eliminates the customers that tribal economies depend on.
Looking toward an uncertain future
Commercial gambling policies disproportionately impact tribal economies. Gambling became an economic lifeline when tribes enjoyed monopolies over casino gambling. As the most effective revenue driver, gambling became the engine that powered many tribal hospitality services.
As that engine’s power chips away, tribes in states where gambling has not yet expanded will scrutinize new state gambling policies more closely and resist policy changes that not only threaten gambling industries but the quality of life gains that wouldn’t have been possible without them.