Introduction
The Indian Gaming Regulatory Act
Economically Speaking...
The PositiveThe NegativeOppositionCompetitionConclusionFootnotesBibliography
Americans love to gamble. In 1995, almost 100 million Americans legally wagered $400 billion and lost $39 billion to the house.[1] "...Americans spent more on legal games of chance than on films, books, amusement attractions and recorded music combined." (from source dated February 1994)[2] Most of this action took place in major, well-known casinos in Nevada and New Jersey, meaning private, individual pockets (like Donald Trumpís or Steven Wynnís of Mirage Resorts) were filled. Interestingly though, Native American Indians are becoming involved with the glamour and glitz of casinos. Indian reservations across the United States are opening their own casinos. In fact, Foxwoods High Stakes Bingo & Casino of Ledyard, Connecticut, operated by the Mashantucket Pequot tribe, is believed to be the most profitable casino in the Western Hemisphere.[3]
Introduction
"Economic and social problems on Indian reservations in the United States and in other countries are well documented."[4] Government entities, private research firms, and Indian groups have detailed reports concerning poverty, alcohol and drug abuse, juvenile delinquency, high crime rates, poor educational facilities, and many other problems. Tribal governments push for change and greater Indian self-determination to deal with their people's problems. The argument is that tribes are sovereign entities and are therefore responsible for their own affairs without interference from other governments; and self-determination is a central component of sovereignty.[5]
"Any mention of Las Vegas conjures up images of glitzy casinos with neon facades, a city built by gangsters to prey on the hopes of reckless tourists. Itís an extraordinary place that is also quintessentially American, a mecca for money-worshippers everywhere."[6] Up until 1988, gambling was only legal in the two states of Nevada and New Jersey. Now gambling is only not legal in the two states of Hawaii and Utah.[7] Traditionally, Nevada and New Jersey were the only states involved in the American gambling industry, now they are feeling the pressure of an additional 46 states entering the gambling arena.
Return to Table of Contents In 1988, Congress passed the Indian Gaming Regulatory Act which recognized the right of Indian tribes in the United States to establish gambling and gaming facilities on their reservations as long as the states in which they are located have some form of legalized gambling. Two cases in the 1980's led up to this act: Seminole Tribe of Florida v. Butterworth[8] and California v. Cabazon Band of Mission Indians.[9]
The Indian Gaming Regulatory Act
The Seminole case opened the doors to high-stakes bingo on reservations all over the country. Florida tried to close the Seminole tribe's high-stakes bingo parlor (opened in 1979), but the court ruled that bingo fell under statutes classed as regulatory rather than prohibitory.[10]
The Cabazon case established that once a state has legalized any form of gambling, Indian tribes within that state can offer the same game on trust land without any state interference or restrictions. [Trust land is reserved for and owned by Indians but held "in trust" by federal government for the benefit of the Indian owners.] This case brought up concerns about tribal regulation of Indian gaming among many groups (i.e. Nevada and New Jersey where gambling is legal, the National Association of Attorney Generals, the National Sheriffs' Association).[11]
In response to the concerns arising, Congress passed the Indian Gaming Regulatory Act (IGRA).[12] This act went into effect on October 17, 1988:
The act is intended to 1) promote tribal economic development, self-sufficiency, and strong tribal government; 2) provide for a regulatory base to protect Indian gaming from organized crime; and 3) establish the National Indian Gaming Commission.[13]Class I gaming is within the jurisdiction of the tribe. Class II gaming is allowed if the state within which the tribe is located allows the gaming to anyone or under any conditions. A tribe is allowed to license and regulate Class II gaming on Indian lands. Class III gaming requires a tribe-state compact. The National Indian Gaming Commission (NIGC) was established to approve the compacts and prevent abuses.[15]The act defines three classes of gambling and gaming: Class I: Social games solely for prizes of minimal value or traditional forms of Indian gaming engages in by individuals as a part of, or in connection with, tribal ceremonies or celebrations. Class II: All forms of bingo, and other games similar to bingo such as pull tabs, lotto, etc. and card games that are explicitly authorized by state law, not including blackjack, baccarat, or chemin de fer. Class III: All forms of gaming that are not Class I gaming or Class II gaming.[14]
The IGRA is having a major impact on intergovernmental relationships among Indian tribes, states, and the federal government. First, the revenues generated have helped spur economic development in Indian country (which, too, supports the goals of tribal sovereignty and economic self-sufficiency). Second, intergovernmental conflicts have started between the tribes and the states over issues involving state sovereignty, criminal jurisdiction, and gambling revenues. Third, the IGRA ensures that the federal government maintains its position of supremacy over tribes and tribe/state relations.[16]
Return to Table of Contents Lack of economic independence: "It is widely known that Indians living on reservations have the highest unemployment rate in the nation[17] and the lowest life expectancy rate.[18] Reservations are often compared to Third World nations."[19]
Economically Speaking...
Structural hindrance to economic development on reservations: trust land. Trust lands have given tribes a land base and some cultural integrity, but they make it difficult to attract industry and commercial enterprises to the reservation. Trust land can only by leased by industries. Banks are usually unwilling to lend money towards construction on reservations because they may not be able to repossess the structure in a case of default.[20]
Return to Table of Contents The economic benefits that have arisen from gambling can best be seen in the labor market. Indian casinos have hired a large number of both Indian and non-Indian peoples for both skilled and unskilled jobs. Tribal unemployment and welfare rates have dropped.[21]
The Positive...
In Anne Merline McCulloch's article, she quotes:
According to the Midwest Hospitality Advisors report on Indian gaming in Minnesota, the 13 Indian gaming operations in the State of Minnesota currently employ approximately 5,700 people. Four casinos have become the largest employer for their nearest city, four others are among the top five employers for their communities, and one other is in the top ten. Current employment includes 1,350 Native Americans, or approximately 24 percent of total employees.[22]The report also notes that between 1990 and 1992 the percent of Indian AFDC (Aid to Families with Dependent Children) recipients residing in counties with Indian casinos decreased by 3.2 percent, while recipients in non-casino counties increased by 14.6 percent.[23]
Indian unemployment rates of 30 percent and more are dropping to almost nothing with the emergence of Indian casinos.[24]
Since the enactment of the IGRA, revenues from Indian gaming operations have grown exponentially. Nationwide, total revenues from Indian gaming are projected to top the $6 billion mark, with total profits exceeding $1 billion, in 1995.[25]
To continue with positive aspects, tribes use their profits for the betterment of the reservation and its people. They are building schools/colleges (there are currently 26 tribal colleges nationwide) and community centers, setting up education trust funds/scholarships, investing in alcohol and drug treatment programs, financing new business enterprises (entrepreneurships), and putting in water and sewer systems on the reservations.[26]
Return to Table of Contents With the many positive affects, there also come negative affects: gambling addiction. Is there a correlation between increased pathological gambling and the growth in tribal casinos? (Pathological gambling is defined as compulsive gambling behavior where it is beyond the control of the individual.) In Minnesota, the number of individuals calling the compulsive gambling hotline increased dramatically over the last three years. All of Minnesota's compulsive gambling treatment centers are full, and the state is considering devoting more resources towards the problem. Furthermore, preliminary evidence suggests that pathological gambling is more prevalent among Indians than non-Indians, but much more research is needed.[27]
The Negative...
Another negative aspect involves an argument researchers debate: those who can least afford to gamble usually are the most affected. "The poor spent a greater percentage of their income on gambling than the wealthy, giving gambling the same effect on incomes as regressive taxes--the poor are hit the hardest."[28]
For example, residents of Chelsea, Massachusetts, the poorest city in the state, spend an average of $572 per year on the state lottery, but from that they get back only $80 a person in local aid, according to The Boston Globe. By contrast, the wealthier residents of Lincoln spend only $26 a person on lottery tickets annually, and they get more than that back in local aid.[29]
Return to Table of Contents Opposition to gambling on the Indian reservations has arisen from both Indians and non-Indians:
Opposition
Among Indians, bands have been divided over the gambling issue. Elderly fear losing their traditional values to corruption and organized crime.[30] "...the proliferation of gaming is a spiritual cancer eating away at what is left of the soul of Native American communities."[31] Many of the younger generation see gambling as an opportunity to advance their people; improve life in their community. "...many are willing to face those stakes [corruption and organized crime] for economic salvation. Casinos are 'one of the first real tools natives have gotten to become self-sufficient,' said Phillip Pelletier, the economic development officer of Fort William First National..."[32]
In 1990, an incident arose among the Mohawks on the Akwesasne reservation, which is located inside the New York state, Quebec, and Ontario borders along the St. Lawrence River near Cornwall, Ontario. The dispute involved six gambling casinos along Route 37, a New York highway. The casinos were illegal under New York law, but their operators insisted that they were on sovereign territory. The contention between the pro- and anti-gambling Mohawks had been holding each other off at gun point. The fighting came to a peak when two lives were taken one night; a Mohawk Indian from each side of the dispute.[33]
Donald Trump charged that tribal gaming operations were riddled with crime at a Senate hearing in Washington, D.C. in May of 1993.[34] Trump led some of the U.S. gaming syndicates towards the workings of getting the 1988 Indian Gaming Regulatory Act repealed.[35] ...[he] decided to sue the federal government to get the special rights of the Indian tribes revoked."[36]
In June of 1993, legislation was sought for an amendment to the Indian Gaming Regulatory Act requiring Indian owned casino to record and report all large transactions due to concerns that tribal casinos could be used by organized crime to launder money and evade taxes.[37]
Some state cases of opposition include: KANSAS - the Kansas attorney general successfully sued the governor in blocking legal recognition of a gaming compact that had been reached with the stateís Kickapoo tribe; OKLAHOMA - a court decision blocked implementation of federally approved Indian casino compacts as unlawful under the stateís constitution; WASHINGTON - a federal judge ruled against the Colville tribe in its attempt to compel the governor to negotiate a gambling compact with the tribe, finding such negotiations constitutionally flawed.[38]
Other state governments have avoided signing federally required gambling compacts with tribes by invoking the 10th and 11th Amendments. (The 10th asserts a stateís sovereignty and its freedom from being told what to do by Congress. The 11th protects states from being sued.)[39] Other courts have allowed Indians to offer games that are not permitted anywhere else in the state. For example, in California, a federal judge allowed tribal casinos to operate an array of games the state objects of, including video poker and Keno.[40]
Return to Table of Contents Indian gaming facilities have entered a market where, at this time, they have little or no competition (from other Indian facilities). "While only 90 of the nation's 557 tribes are involved in gaming, according to the national Indian Gaming Association, their operations account for about 200 gaming sites in 19 states,"[41] As more tribes enter the market, the smaller the share for each. However, Indian competition is not the real threat. Lawmakers are experiencing pressures to open gambling to all. If casinos were to open within major population centers, gamblers would have no reason to travel to Indian reservations. Tribes could be left with empty casinos and high unemployment rates, again.[42] Where is the market saturation point? "The laws of supply-and-demand govern profits and losses and ultimately economic survival."[43]
Competition
"The national prominence of tribal casinos has also given Indian leaders potential political clout, especially with the federal government."[44] '"Tribal governments realize that a casino is not an end in itself. It is a means to achieve what no state or federal economic development program has been able to achieve for Indian people in 200 years--the return of self-respect and economic self-sufficiency," says JoAnn Jones, tribal chair of the Wisconsin Winnebago Nation.'[45]
Native American Indian reservations are not international (although they are often compared to Third World nations [46]), but they are not governed by the same laws as the states either. States have no power to tax, regulate, or police casinos run by Indian tribes. Indian gambling revenues are exempt from federal, state, and local taxes! Of course this does not leave state officials or other casino competitors with a good taste in their mouths.[47] (New Jersey imposes an eight percent tax on casino revenues which funds senior citizen and handicapped programs.[48])
Donald Trump has also attempted to interrupt the growth of Indian reservation casinos. On April 30, 1993, he filed a civil suit in U.S. District Court in Newark, New Jersey against U.S. Secretary of the Interior, Bruce Babbitt, and Tony Hope, chairman of the National Indian Gaming Commission, claiming that the Indian Gaming Regulatory Act is unconstitutional and gives Indians preferential treatment and an unfair advantage in acquiring licenses for setting up legal casinos on their land.[49] [50]
Coincidentally, Trumpís three Atlantic City casinos, Trump Castle, Trump Plaza, and Trump Taj Mahal, are feeling the heat from the Mashantucket Pequotís Foxwoods casino in Connecticut and are fearing the possibility of the Ramapough Indians of Northern New Jersey opening a gambling operation near Atlantic City. "Unabashed motor mouth Donald Trump lived up to his reputation on Oct. 5 when he told a congressional hearing that organized crime is rampant on Indian reservations. Trump went on to predict that if the trend toward gaming on Native American land continues, ëthis will be the biggest crime problem in this countryís history.í"[51]
From the Nightly Business Report transcript of December 20, 1993, announcer Mikkelson said, "...others say the fate of Atlantic City still rests in the hands of the state,... And competition is getting closer. Indian run Foxwood Casino in Connecticut is luring high rollers away."[52]
Guest Hector Mon, Executive Vice President of Harrahís Casino, responded with, "We do recognize that weíre no longer a regional monopoly and we will have to work harder to keep our customers in the future."[53]
"Atlantic City Mayor James Whelan said the region recognized that the proliferation of gaming was a 'serious' threat and is taking 'significant' steps to stay competitive. ëWe must change our image from that of a convenient location to gamble back to the destination resort that we once were,í he said," including improvement to the cityís infrastructure, transportation system and attractions.[54]
Las Vegas Mayor Jan Laverty Jones said officials in that city have long predicted gaming would expand nationally and have taken appropriate measures. "We have been looking to diversify our economic base so as not to be so dependent on gaming. Weíve been bringing in other businesses and developing the mega-resorts to draw the family market. Though gaming is certainly central here, it is not the only entertainment available, and I think weíve been very successful at letting people know that."[55]
"...opponents say government-sanctioned Indian casinos like Foxwoods will pull business away from privately run casinos in Atlantic City, Las Vegas and elsewhere."[56] Other enterprises have complained that Indian gambling has ruined their business. In Wisconsin, Indian reservation gambling began in 1991. By July of 1993 there were 17 Indian casinos in the state. Also in the area, a $17 million dog-racing track had opened in 1990. During 1991 and 1992, it lost $6 million with high probability of being closed in the summer of 1993, taking jobs and tax revenues with it.[57]
Return to Table of Contents Since the settlement of America, Native Americans have received the short end of the stick. Settlers continuously encroached upon Native American land, completely disregarding the fact the Indians were there first. After years of displacing the Indians and fighting with them, the government allotted reservations for the Indians to call their own, how generous!
Conclusion
In 1988, the Indian Gaming Regulatory Act gave the troubled Indians on the reservations the opportunity to better themselves through their own efforts. The fact that many tribes so far have been successful, and many more are desiring to start their own casinos to grab a piece of the industry is what kills the monopolistic-desirous moguls like Trump. They should not be taking away the window of opportunity that was opened only 8 years ago for the Indians. People like Trump fear loosing their billions of dollars and control of their mostly secluded industry that had little competition before.
Competition is an inevitable force. It is an entity that appears where success is experienced. Trump-ites should pursue the path of innovation and refinement as a means to prevent downfall. For example, Las Vegas' attempt at family entertainment (however, I'm not sure that family element is an ideal approach - is the mixture of amusement park with gambling, smoking, drinking, and prostitution the kind of environment you would like to take your children to for vacation?).
Tribes able to make large profits from gambling need to secure the welfare of the future through reinvestment within the tribe's people because market saturation might be reached, be it additional Indian casinos and/or lawmakers legalizing gambling to all. They should take advantage of what they have now, because it could be gone tomorrow!
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Author: Lora Abaurrea
Date: May 6, 1996
2. Jon Magnuson, "Casino Wars: Ethics and Economics in Indian Country," Christian Century (February 16, 1994): 169-171. Return
3. Richard L. Worsnop, "Gambling Boom," CQ Researcher (March 18, 1994): 255. Return
4. Don A. Cozzetto, "The Economic and Social Implications of Indian Gaming: The Case of Minnesota," American Indian Culture and Research Journal (Winter 1995): 119. Return
6. Betsy Reed, "Americaís New Addiction," Dollars and Sense (July/August 1994): 18. Return
8. 658 F.2d 310 (1981), cert. denied, 455 U.S. 1020 (1983). Return
9. 480 U.S. 202 (1987). Return
10. Anne Merline McCulloch, "The Politics of Indian Gaming: Tribe/State Relations and American Federalism," Publius (Summer 1994): 99-113. Return
17. U.S. Department of the Interior, Bureau of Labor Affairs, Indian Service Population and Labor Force Estimates (Washington, D.C.: Bureau of Indian Affairs, 1991): 2. Return
18. Marlita A. Reddy, ed, Statistical Record of Native North Americans (Detroit, Mich.: Gale Research, 1993): 685. Return
22. Midwest Hospitality Advisors, Impact: Indian Gaming in the State of Minnesota: A Study of the Economic Benefits and Tax Revenue Generated (Minneapolis, Minn.: MHA, 1992): II-1. Return
26. Ibid., 120,125. McCulloch, 99-113. Return
28. Judy Zelio, "The Fat New Buffalo," State Legislatures (June 1994): 38-41. Return
30. Marci McDonald, "Tribal Gamblers," Maclean's (May 30, 1994): 32-33. Return
33. Peeter Kopvillem, "Tribal Warfare," Maclean's (May 14, 1990): 14. Return
36. Pierre Briancon, "Betting with the Indians," World Press Review (December 1993): 36-7. Return
37. Rogers Worthington, "...and where it stops, nobody knows," Chicago Tribune (August 22, 1993 Final Edition): Sunday Magazine Section, zone C, p.14. Return
40. Thomas J. Maier. "The Big Gamble; Indian Gaming Law Remains Volatile Issue," The Record (May 14, 1993): Business Section, p.E01. Return
41. Dick Dahl, "The Gamble that Paid Off," American Bar Association Journal (May 1995): 86. Return
47. W. John Moore, "A Winning Hand?" The National Journal (July 17, 1993): 1796. Return
48. Anthony Birritteri, "Casino gaming industry prepares for battle of the century," New Jersey Business (August 1994): Section 1, p.48. Return
50. Judith Evans, "Calculated Gamble; Trump cries foul over Indian casinos," Newsday (May 4, 1993 City Edition): Business Section, p. 41. Return
51. Thane Peterson, "Bury His Mouth at Wounded Knee," Business Week (October 18, 1993): 42. Return
52. The Nightly Business Report (December 20, 1993): Community Television Foundation of Southern Florida, Inc. Return
54. Theresa J. Post, "Casino gambling on a roll, creating new markets for trade; tourist industry," Travel Weekly (May 10, 1993): 1. Return
