Indian gaming is a multi-billion dollar industry spanning 29 states and employing hundreds of thousands of people. The industry's rapid expansion in recent years has revitalised many small communities and continues to make a substantial contribution to the overall US economy.
Its development has certainly not been without its obstacles, and, as gaming remains a crucial economic driver for many tribes, the debate over states’ rights versus tribal sovereignty is as contentious as ever.
Indian nations have always been granted the sovereign right to conduct all governmental activities. Some tribes had been operating large-scale gaming operations in the late 1970s, creating a conflict with several states, which felt they had the right to regulate them. In 1987, the Cabazon Band of Mission Indians, which operated bingo and card games, successfully argued that the State of California did not have authority to enforce its gambling laws within its reservations. The US Supreme Court ruled that although state laws may be applied to tribal Indians on their reservations if Congress has expressly consented, in this particular case it had not done so.
The 1988 Indian Gaming Regulatory Act was, in a number of ways, a compromise between the two points of view - providing protection for tribal gaming operators, while offering a degree of greater regulatory control via negotiated compacts for state legislatures. IGRA allows tribes to run the same gaming activities on their tribal land as are permitted for any other purpose in the state. In turn, the state is able to negotiate compacts that stipulate the conditions and regulations for gaming operations.
The IGRA was a truly monumental piece of legislation and ushered in a new phase of expansion of the US casino industry outside of the traditional gaming hubs. Shawn D Pensoneau, director of congressional and public affairs at the National Indian Gaming Commission, the independent regulatory agency established under the IGRA, said that the law represented a major change for many state governments.
"In some states there was very little experience of gaming. All of a sudden they were involved in it," he remarked.
The National Indian Gaming Association asserts that IGRA represented an "unprecedented infringement" on tribes’ sovereignty, yet nonetheless provided an opportunity to bring economic benefits to both their communities and those around them.
For the Agua Caliente Band of Cahuilla Indians, one of over 50 tribes operating gaming in California, maintaining a good relationship with the state is very important. The tribe owns and operates the Agua Caliente Casino Resort Spa in Rancho Mirage, a $350m 16-storey resort and hotel, and the Spa Resort Casino in downtown Palm Springs.
"The Agua Caliente Band of Cahuilla Indians operates its casinos under what’s known as a tribal compact; it’s basically a piece of legislation that is mutually agreed upon by the tribe and the State of California," explained David Fendrick, chief operating officer for the tribe. "We value our relationship with the state and the local community, and continually strive to be good neighbours by providing millions of dollars in funding for public projects, as well as charitable giving."
Gaming is largely mutually beneficial for both states and the tribes who run gaming activities on their reservations. In 2007, Indian gaming revenues stood at over $26bn, enabling tribes to strengthen their governments and to improve the general welfare of their members.
"Gaming definitely has provided tribes with economic opportunities that haven’t been there in the past," Pensoneau said.
Sheila Morago, executive director of the Arizona Indian Gaming Association, argues that for communities that traditionally earn less and have a poorer quality of life than most, gaming is the only ‘economic engine’ that has ever been a success.
"Because of gaming revenues, tribal governments are now able to provide and improve basic services for their members - education, healthcare, housing, roads and telephone and social services - services that have been woefully lacking for generations," she said. "Just as important, gaming is a major source of employment for tribal and non-tribal people alike, especially in non-metropolitan areas where there are fewer opportunities for employment for everyone.
"In Arizona, gaming tribes share revenues with non-gaming tribes, which helps all American Indian people in the state who live on reservations. Tribes are also sharing revenue with the state and supporting education, emergency health care services, economic development and conservation and wildlife preservation - which is helping everyone in Arizona."
The majority of tribal casinos are ‘day trip entertainment’, rather than the large supercasinos associated with Las Vegas or Atlantic City, but a growing number of tribes are establishing large resorts intended to compete with internationally-renowned destinations.
"Agua Caliente Casino Resort Spa and Spa Resort Casino attract players from just about everywhere," Fendrick remarked. "We certainly have a very loyal local customer base and Los Angeles is one of our main drive markets. Our location also attracts guests from around the world."
Morago explains that Arizona’s casinos tend to attract local players from within a 50-mile radius, but new venues are tapping into other broader markets.
"In the metropolitan areas, where tribes have built casino hotel resorts, casinos are also attracting players who are part of the tourism and convention industry," she said.
The terms of compacts may impinge upon tribes’ expansion plans by restricting the type and number of games they can offer players. Anthony Miranda, chairman of the California Nations Indian Gaming Association, which was founded in 1988 to protect the sovereign right of Indian tribes to have gaming on federally recognised lands, believes the current legislative framework creates an obstacle to the expansion of Indian gaming.
"The IGRA states that if a tribal government would like to operate a Class III ‘Nevada-style’ casino they must first initiate negotiations with the state for a gaming compact," he explained. "During negotiations, tribes often face limits on the number of machines they may offer and are frequently faced with significant concessions in order to increase that limit."
However, Fendrick insists that the only difference between the casinos his tribe operates and others is that they do not use dice, but use cards to achieve the same results.
"Together, our two casinos offer exciting slots, a variety of table games, including blackjack, Pai Gow poker, mini-baccarat, craps and more, as well as live poker and high-limit gaming," he said.
The State of Arizona also limits the type of games played and the number of tables and slot machines that are allowed. Restrictions have also been placed on the maximum bets per game. In November 2002, voters in Arizona passed Proposition 202, which updated the compact for tribes.
"The compact is explicit regarding the kinds of games allowed and the numbers of slot machines, table games, and the number of facilities each tribe can operate," said Morago.
Rather than boosting business, diversifying into other areas of entertainment and leisure may risk greater exposure to the economic downturn currently plaguing the US. Meeting higher operating costs that result from offering non-gaming attractions when consumer spending is falling is proving a challenge for the majority of casino operators.
"The impact has been felt more by the larger casinos which derive income from destination resorts offering amenities such as lodging, golf and spa services," Miranda asserted. "Nevertheless, many tribal casinos are reporting solid earnings despite the economic downturn."
Fendrick suggested that the downturn actually presents an opportunity for gaming companies to cement their place within the market.
"This challenging economic climate is actually pushing us to improve our game; to sharpen our skills as they relate to strategy and execution within the marketplace," he said. "We’re streamlining processes while maintaining a deep commitment to providing the best gaming experience in southern California."
The Gaming Commission recently unveiled its strategy for the next five years and outlined its vision for the future of the Indian gaming industry. The industry, it said, should be structured so tribes are the primary beneficiaries of gaming revenues, gaming ought to be conducted fairly and honestly by operators and players, and the sector should remain free from organised crime.
Preserving the economic prosperity brought about by gaming is a key aim for the commission and, as revenues generated by casino operations are reinvested and channeled into other areas, a larger number of tribes throughout the US are likely to benefit.
In his message at the launch of the strategic plan, the commission’s chairman, Philip N Hogen, reiterated gaming’s profound effect on tribal communities, describing it as the most effective economic development tool to ever be used in Indian country.
"While Indian gaming will only work effectively where there is a market for gaming, and while the extent of Indian gaming’s success will be proportionate to the size of that market and the competition therein, it has proven to be a remarkable success in many parts of Indian country," he said. "The Indian gaming industry has grown annually at significant rates, increasing in complexity and sophistication, and producing positive impacts in many areas of Indian society."
