I. INTRODUCTION--THE USE OF TRIBAL GAMING REVENUE TO FOSTER TRIBAL
ECONOMIC DEVELOPMENT AND DIVERSIFICATION
Tribes in California, Florida, Maine, New York, and Wisconsin, in
search of funding for tribal governmental services, opened high-stakes
bingo parlors during the 1960s and 1970s long before any federal laws
were enacted to address Indian gaming. (1) At the time the Indian Gaming
Regulatory Act (2) (IGRA) was enacted in 1988, there were over eighty
tribes licensing, conducting, and operating bingo and card games
throughout Indian country. (3) Despite the relative infancy of Indian
gaming at that time and lack of profitable slot machines, these Indian
gaming facilities managed to gross over $110 million for the year. (4)
At this point, there are over 382 tribal gaming facilities in 28
states, operated by approximately 225 tribes, with gaming revenue
surpassing $26 billion for the year 2007. (5) Much of the revenue
generated, however, comes from tribal gaming facilities located in
metropolitan or at least somewhat populated areas. (6) For example, the
two Indian gaming facilities in Connecticut, Foxwoods Resort and Casino
(owned by the Mashantucket Pequot Tribe) and the Mohegan Sun (owned by
the Mohegan Tribe) account for nearly 10% of all revenue generated by
tribal casinos. (7)
Based upon the yearly tribal gaming revenue statistics released by
the National Indian Gaming Commission (NIGC), 22 tribal gaming
facilities account for 42% of all tribal gaming revenue. (8) Each of
these 22 casinos generates over $250 million yearly in gaming revenue.
(9) By contrast, there are 210 tribal facilities generating less than
$10 million in yearly revenue, and these tribes account for only 2% of
all tribal gaming revenue. (10) In short, not every tribe or individual
tribal member is making millions and millions of dollars from tribal
gaming facilities and most facilities are rather modest. (11)
There are 562 Indian tribes recognized by the United States. (12)
Roughly one-third of these federally-recognized tribes make up almost
all Indian gaming revenue. (13) Not all tribal casinos are successful
and many earn only marginal profits. (14) As Professor Kevin Washburn
noted, many of the non-gaming tribes include some of the most poverty
infested regions of the United States: "Not surprisingly, the most
successful gaming operations are located in close proximity to large
urban areas. A handful of tribes blessed by geography and demographics
have been fabulously successful. The Poorest of tribes have remained the
poorest communities in the United States." (15)
Even though much of the gaming revenue generated by Indian casinos
comes from a small minority of tribal facilities, there are still states
and citizens' groups that pour a substantial amount of resources
into compact negotiations and litigating gaming-related trust land
acquisitions. (16) These anti-IGRA states and citizens' groups
completely misunderstand the intent and basis behind the enactment of
IGRA. Overall, they are ignorant of basic concepts of federal Indian law
and seem offended by the notion of tribal sovereignty. Some groups and
media continue to assert IGRA must be revisited because IGRA "gives
too much power to tribes." (17)
Of the tribes that have established gaming facilities, class III
(casino-style) gaming is generally the most lucrative class of Indian
gaming. (18) Class III gaming includes slot machines and other
casino-style gaming. (19) In order for tribes to conduct class III
gaming, however, a gaming compact must be executed between the tribe and
the state in which the tribe is located. (20)
If and when a state is willing to negotiate with the tribe, the
executive branch of state government, generally, will act as the lead
state negotiator for state-tribal gaming compacts. Ratification by the
state legislature, depending on the state constitution, state law, or
state case law, may be required before a compact is finalized; this
process has become a constant struggle under state constitutional law as
the authority of each branch of state government with regard to state
acceptance of tribal gaming compacts. (21)
Revenue sharing between the tribe and the state has become a topic
of much debate among tribes, state governors, and if applicable, state
legislatures even though IGRA specifically prohibits the state from
taxing gaming revenue. (22) The explicit prohibition on state taxation
of Indian gaming revenue is viewed, however, in a seemingly different
manner since the United States Supreme Court's decision in Seminole
Tribe v. Florida. (23)
One major effect of the Seminole Tribe decision is that
"revenue sharing" between the tribe and the state is now the
norm. (24) Many gaming compact negotiations, in fact, are concentrated
not on whether any revenue sharing provisions will be included, but
rather what the percentage will be. (25) This major impact of the
decision in Seminole Tribe negates any statutory bargaining leverage
that tribes had under IGRA, and essentially permits states to engage in
legal extortion. (26) If tribes are not going to "pony up" and
give the state a percentage of gaming revenue (not a small percentage
either), tribes are left with absolutely no statutory recourse to
require a state to negotiate a class III gaming compact in the wake of
Seminole Tribe. (27)
According to the United States Department of the Interior (DOI),
revenue sharing, generally, does not constitute illegal state taxation
if the tribes receive "a valuable economic benefit" in return
for "substantial exclusivity." (28) DOI officials have
testified before Congress regarding revenue sharing provisions and
Essentially, if "substantial exclusivity" is not
available, and therefore, the bargained-for exchange of a valuable
economic benefit is not available, then revenue sharing payments must be
relinquished for the compact to be valid under IGRA. (30) Although
officials from the DOI have testified before the Senate Committee on
Indian Affairs to garner congressional support for amendments to IGRA
that would have provided a stronger statutory basis for revenue sharing,
the Department has continued to approve compacts containing revenue
sharing provisions. (31) DOI, in fact, recommended the maximum revenue
sharing payment should be capped at 10% or the payment would constitute
a tax in violation of IGRA. (32)
In the absence of congressional clarification at least one federal
court has offered an interpretation of what constitutes
"exclusive" by holding that exclusivity means the state will
not itself engage in gaming or the state will not permit or will limit
non-Indian commercial gaming:
If exclusivity or substantial exclusivity constitutes the
bargained-for exchange in return for sharing revenues to the state
pursuant to a class III gaming compact, the tribes have negotiated to
cease payments (34) or at least decrease the amount (35) given to the
state (36) in the event the exclusivity provision is breached. In some
cases, however, even if the substantial exclusivity provision is
breached by the state and the payment amount is eliminated or decreased,
in the event the tribe is able to actually increase revenue levels to
110% of net gaming revenue prior to the state's breach, the tribe
will again be required to submit payments to the state. (37)
Fair enough ... but what does "valuable economic benefit"
or "substantial economic benefit" mean? Alternatively, what if
the state already engages in, permits, or licenses non-Indian commercial
gaming or allows commercial gaming in the form of racinos? Maybe
exclusivity does not match the economic benefit of revenue sharing
payments distributed to the state. Are there other options available to
the tribes? Could a tribe negotiate for other economic benefits in lieu
of exclusivity? The recent amendments to the gaming compacts of the
Little River Band of Ottawa Indians and Little Traverse Bay Bands of
Odawa Indians in Michigan show the DOI discomfort in revenue sharing
where there is not a clear showing of substantial exclusivity, or other
meaningful concessions. (38)
This article argues that tribes, in some circumstances, can and
absolutely should negotiate economic incentives, as part of the
compacting process (whether negotiating an original, an amendment, or a
renewal) to further reservation economic development. The DOI has taken
a very broad interpretation of what IGRA requires and prohibits from
being included within a class III gaming compact. (39) The key is to
negotiate non-traditional compact subjects and still satisfy the
administratively created "substantial economic benefits" test.
If state and even local governments are going to rely upon tribal gaming
revenues to the point where payments are included in yearly budgets,
then tribes must use any leverage available to take advantage of the
overgrowing state and local governmental reliance upon tribal revenue
The first part of this article explores the background and history
of IGRA's good faith requirement debacle. The background and
history over the past twenty years since IGRA's enactment is
critical for understanding why the current revenue sharing concept is in
effect in the first place. The second part of the article outlines what
may or may not be included in a gaming compact. The final section
examines some of the barriers to reservation economic development and
how incorporating solutions to these barriers into gaming compacts in
exchange for revenue sharing with the state may be a viable option for
II. TRIBAL GAMING AS A MEANS TO AN END
A. INDIAN GAMING COMES ALIVE: CALIFORNIA V. CABAZON BAND OF MISSION
In California v. Cabazon Band of Mission Indians, the State of
California, along with Riverside County, argued they had jurisdiction to
regulate and/or shut down tribal bingo halls and casinos. (40) Both the
Cabazon Band and Morongo Band of Mission Indians operated bingo halls in
an environment where California had been granted criminal jurisdiction
over crimes occurring within the boundaries of Indian reservations via
Public Law 280. (41)
The Tribes, eventually, sued the County and sought a declaratory
judgment that the County had no authority to apply its ordinance inside
the reservations and requested an injunction against enforcement of the
county's ordinance. The State of California intervened but the
district court granted the Tribes' motion for summary judgment,
holding that neither the State nor the County had any authority to
enforce its gambling laws on reservations. (42) The Court of Appeals for
the Ninth Circuit affirmed (43) and the State and the County appealed.
The Cabazon Court relied upon the plain language of Public Law 280
and the decision in Bryan v. Itasca County (44) and adopted the analysis
distinguishing between the criminal-prohibitory and civil-regulatory
nature of Public Law 280. (45) In Bryan, the Court held the
congressional intent behind section 2 of Public Law 280 (46) is a grant
of criminal jurisdiction over Indian country and that section 4 of
Public Law 280 (47) is a limited grant of civil jurisdiction over
tribes. In sum, the Cabazon Court recognized that Public Law 280 does
not grant states general civil regulatory jurisdiction over reservation
Under the holding in Bryan then, as applied to the Cabazon and
Morongo bands and the gambling laws of California and the ordinances of
the county, section 2 applies only to private civil litigation in state
court: "[I]t must be determined whether the law is criminal in
nature, and thus fully applicable to the reservation under section 2, or
civil in nature, and applicable only as it may be relevant to private
civil litigation in state court." (49)
Prior to Cabazon reaching the U.S. Supreme Court, congressional
legislation had been proposed to regulate Indian gaming. (50) The
Supreme Court's decision in Cabazon, however, certainly invited (or
forced) congressional action as to Indian gaming activities. (51)
B. THE GREAT (AND FRAGILE) COMPROMISE: THE INDIAN GAMING REGULATORY
The Indian Gaming Regulatory Act (IGRA) was enacted by Congress on
September 15, 1988, and IGRA contains three overriding and explicit
policies forwarded by Congress through IGRA's passage. IGRA's
"Declaration of Policy" states IGRA was passed: "to
provide a statutory basis for the operation of gaming by Indian tribes
as a means of promoting tribal economic development, self-sufficiency,
and strong tribal governments...." (52) Congress enacted IGRA only
after much debate and, in painstaking fashion, attempted to craft a
balance between the interest of tribes and states. (53) The crucial part
of the balance was the compacting process. (54) The tribes, on the one
hand, were strongly opposed to any inclusion of state jurisdiction over
tribal lands, and the states, on the other hand, were very concerned
about state laws not applying to the tribal gaming facilities operating
within the boundaries of the state and how exactly proper regulation of
such facilities would be ensured. (55)
1. Classes of Indian Gaming
IGRA mandates that Indian gaming may only be conducted on
"Indian lands" (56) and divides Indian gaming in three
categorical classifications. (57) The classifications of Indian gaming
are class I, class II, and class III. (58) Class I games are traditional
and social games played for no significant financial stakes. (59) Class
I gaming, although exclusively regulated by tribes, (60) is certainly
the least lucrative form of Indian gaming and is generally non-existent
in tribal gaming facilities. (61)
The class 11 classification was crafted to include games that
traditionally include an element of chance. (62) Class II games,
generally, include bingo, card games (whether or not electronic,
computer, or other technologic aids) that are "explicitly
authorized by the laws of the state" as well as card games that
state does not prohibit and that occur in the state where the tribe is
located. (63) Class II games are regulated by the tribes, but each tribe
conducting class II gaming is required to have a tribal gaming ordinance
approved by the NIGC. (64)
Class III gaming is the catch-all category including "all
forms of gaming that are not Class I gaming or Class 11 gaming."
(65) Any casino-style games (blackjack, roulette, craps, etc), slot
machines, and lotteries constitute class III gaming activities (66) in
addition to any
"electronic or electromechanical facsimiles" of class
II games. (67) Significantly, class III Indian gaming is essentially
prohibited absent a negotiated gaming compact executed between the tribe
and the state (68) and duly approved by the Secretary of the Interior.
(69) If the state public policy prohibits, moreover, the type of
casino-style gaming classified as class III gaming, the tribe will be
garnered ineligible for a class III compact. (70)
Class II gaming, on the other hand, may be licensed and conducted
by a tribe without the execution of a gaming compact. (71) There are
tribes that have generated revenue for governmental functions without
class III gaming. (72) Where states have been unwilling to negotiate
class III compacts, class II gaming is the only option available and is
not as lucrative but will certainly generate more revenue for essential
governmental services than no gaming at all. For example, the Seminole
Tribe and Miccosukee Tribe in Florida have been able to generate
significant revenue solely from class II gaming. (73)
Technological advances have electronically advanced the playability
of class Il games, such as bingo and non-banking card games (where the
house does not play). (74) The NIGC is often requested to determine
whether a gaming machine is a class II or class III machine. (75) All
NIGC game classification opinions/determinations are appealable, (76)
and due to technological advances, the distinction between class II and
class III gaming machines has resulted in a wide variety of litigation.
The NIGC proposed regulations that would have drawn a bright line
between class II and class III gaming machines. (78) The bright-line
created by the proposed regulations would have classified many
technologically advanced bingo and non-banking card gaming machines, as
class III machines, and therefore, could only be used by tribes if the
tribe had a valid gaming compact in place with the state and bringing in
possible revenue sharing. (79)
The NIGC Chairman announced the proposed regulations would
establish a bright-line between class II and class III gaming machines
but were initially set aside until a cost-benefit analysis could be
conducted. (80) Tribes operating a large number of class II machines,
such as many of the Oklahoma tribes and other tribes in states where no
gaming compacts has been negotiated, urged the NIGC Chairman to withdraw
the proposed regulations. The bright-line created by the proposed
regulations would have classified some machines as class III although
currently such machines are classified as class II. (81) Due to massive
amounts of pressure by tribes upon the NIGC to withdraw the regulations,
due in large part to the possible financial impact/burden placed upon
tribes reliant upon class II gaming, the NIGC then withdrew the
regulations roughly a year later. (82)
2. The Tribal Trump Card: IGRA's Good Faith Negotiation
Tribes were provided with statutory protections against state
interference or intrusion upon tribal sovereignty during the compacting
process. First, if a state refused to negotiate in good faith a class
III gaming compact with a tribe, the tribe could file suit in federal
court to force negotiations. (83) Congress specifically intended for
tribes to have a solid remedy in place where the tribe could still
conduct class III gaming even if a state that "permits such
gaming" ignored the tribe. (84) Secondly, states are prohibited
from levying any "tax, fee, charge, or other assessment"
against or upon a tribe engaged in or licensing an entity to conduct
class III gaming on Indian lands (85) or refusing to negotiate a class
III gaming compact due to the lack of authority to tax the Indian gaming
The balance struck by Congress with IGRA, unsurprisingly, led
directly to litigation between tribes, states, and the federal
government relating to the authority of Congress to enact IGRA as a
constitutional exercise of authority. (87) After the dust had settled
and IGRA was still a valid act of Congress, another round of litigation
ensued when tribes alleged that states refused to negotiate compacts in
good faith as required under IGRA. (88)
IGRA requires states to enter into negotiations with tribes for a
class III gaming compact or the tribe may file suit in federal court to
mandate negotiations. (89) If the state continues to refuse, the
Secretary of the Interior may impose a compact (called gaming
procedures) upon the state which is selected by a court-appointed
mediator. (90) The tribal remedy in federal court under IGRA played a
key role in allowing some tribes to force negotiations with the states
in some cases (91) and could require the parties honor a compact
selected by a mediator and enforced by the Secretary of the Interior.
(92) The balance carefully constructed by Congress, however, would
evaporate in light of the U.S. Supreme Court's decision in Seminole
Tribe v. Florida and leave tribes without a remedy. (93)
3. The Trump Card is Trumped: Judicial Elimination of the Tribal
Remedy Under IGRA and the One-Sided Compacting Process Since Seminole
In Seminole Tribe, the Seminole Tribe of Florida sued the State of
Florida and its overnor to force the governor to negotiate and enforce
IGRA's tribal remedy. (94) The State of Florida argued that the
suit should be dismissed as Eleventh Amendment sovereign immunity
precluded the Seminole Tribe from filing the suit. (95) The Court,
despite a clear recognition that Congress "unmistakably"
intended to abrogate state sovereign immunity in IGRA, (96) held the
Indian Commerce Clause does not provide Congress with authority to waive
state immunity from suit. (97)
The Court's decision in Seminole Tribe left IGRA at the very
least crippled, but at the most, completely broken (at least from the
tribal prospective). Tribes were left with virtually no negotiating
power. After Seminole Tribe, it was approximately two years before
another class III gaming compact was finalized. (98) States simply
refuse to negotiate if they do not want a tribe to conduct class III
gaming without sharing revenue or for any other reason.
Tribes, pursuant to IGRA, are free to pursue class II gaming
without having to negotiate a gaming compact and are subject only to the
oversight of the NIGC. (99) There are tribes that have generated
significant revenue conducting solely class II gaming. The Seminole
Tribe, for example, has operated class 11 gaming for the past
twenty-five years and since the Court's decision in Seminole Tribe
has generated a significant amount of gaming revenue. In a showing of
the economic status of the Seminole Tribe, the Tribe purchased the Hard
Rock Cafe business for $965 million. (100) When a tribal gaming facility
is located near heavily populated urban areas, such as the Seminole
Tribe's facilities, class 11 gaming can flourish. The vast majority
of tribes, however, do not have the luxury of people living in large
population centers coming onto the reservation to play bingo. In order
to entice people to tribal gaming facilities, the full gamut of
casino-style (class III) gaming needs to be offered by the tribe.
If class II was simply not an option, then tribes were left with
little choice but to succumb to the legal extortion created by Seminole
Tribe allowing states to demand a percentage of class III tribal gaming
profits. (101) Even before Seminole Tribe there were several tribes that
negotiated class III compacts with revenue sharing provisions. (102)
Nowhere in this specific declaration of policy, nor anywhere else
in IGRA, did Congress permit a state or local government to demand
payments from or a percentage of tribal gaming revenue. (103) The
quandary for tribes is that a tribe cannot license or operate a class
III (casino-style) gaming facility without a valid and duly approved
tribal-state class III gamin compact executed between the tribe and the
state in which the tribe is located. (104)
4. 25 C.F.R. Part 291: The Department of the Interior
Administratively Replaces the Tribal Trump Card in Response to Seminole
In Mashantucket Pequot Tribe v. State of Connecticut, the Second
Circuit forced the State of Connecticut to negotiate a class III gaming
compact in good faith with the Mashantucket pursuant to the "tribal
trump card" contained in IGRA. (105) The Pequot Court determined
that class III casino-style gaming was not contrary to
Connecticut's public policy and, as such, the state was obligated
to negotiate a compact. (106) The Mashantucket Tribe and Connecticut,
however, were unable to come to an agreement. Following the procedure
dictated by IGRA, the federal court appointed a mediator (107) and
allowed the Tribe and Connecticut to submit their version or "last
best offer" compact to the mediator. The mediator then selected the
compact that closely comported to IGRA in addition to the order of the
This is the process that was judicially destroyed by the U.S.
Supreme Court in Seminole Tribe. In response to this destruction of
IGRA's tribal trump card, the Department of the Interior
promulgated regulations allowing the Secretary of the Interior to issue
"secretarial procedures" in the event the state refuses to
negotiate a class III gaming compact and hides behind Eleventh Amendment
immunity. (109) This way the intent of Congress in forcing a state to at
least negotiate in good faith is restored under IGRA by way of the
Secretary's overall trust responsibility toward tribes to prescribe
regulations for the benefit of Indians. (110) As is the case with most
IGRA-related battles, the states will not go quietly into the night.
The U.S. Supreme Court recently denied a petition for certiorari in
Texas v. United States. (111) During the fall of 2007, a divided panel
of the Fifth Circuit found that, through the promulgation of the
secretarial procedures, or an alternative mechanism of judicial good
faith determinations, IGRA had effectively negated the authority of the
Secretary of the Interior to promulgate such regulations. The Fifth
Circuit declined to hear the case en banc, even though the intent behind
the Secretarial Procedures was to solve the Seminole Tribe problem.
At this point, the Secretarial Procedures are invalid, at least in
the Fifth Circuit (i.e., Texas, Louisiana, and Mississippi), and other
challenges may arise. The possibility the U.S. Supreme Court will
address the validity of the secretarial procedures may only occur if
another circuit or circuits reach a different conclusion than that of
the Fifth Circuit. The possibility the Supreme Court, moreover, will
actually affirm the Secretarial Procedures as valid, based upon recent
Indian law opinions including Seminole Tribe of Florida v. Florida, 517
U.S. 44 (1996), is less than likely. This may mean, therefore, that
revenue sharing in gaming compacts is here to stay as the states will
again retain virtually all of the leverage when negotiating compacts.
III. GAMING COMPACT SUBJECT AREAS: THE ECONOMIC BENEFITS TEST
Generally speaking, gaming compacts may include a wide variety of
subjects. (112) Section 2710(d)(3)(C) (113) lists the seven general
subject areas that may be included in gaming compacts:
Any Tribal-State compact negotiated under subparagraph (A) may
include provisions relating to--
(i) the application of the criminal and civil laws and regulations
of the Indian tribe or the [s]tate that are directly related to, and
necessary for, the licensing and regulation of [gaming] activity;
(ii) the allocation of criminal and civil jurisdiction between the
[s]tate and the Indian tribe necessary for the enforcement of such laws
(iii) the assessment by the [s]tate of such activities in such
amounts as are necessary to defray the costs of regulating such
(iv) taxation by the Indian tribe of such activity in amounts
comparable to amounts assessed by the [s]tate for comparable activities;
(v) remedies for breach of contract;
(vi) standards for the operation of such activity and maintenance
of the gaming facility, including licensing; and
(vii) any other subjects that are directly related to the operation
of gaming activities.
This list establishes the general framework of negotiating compacts
and, generally, the over 250 gaming compacts approved by the federal
government include provisions that address these subjects. (114) In the
case of In Re Indian Gaming Related Cases, (115) the Ninth Circuit
upheld a revenue-sharing agreement challenged by the Coyote Valley Band
of Pomo Indians. The revenue-sharing agreement was structured according
to demands by the State of California to create a "Revenue Sharing
Trust Fund" (RSTF) allowing other California tribes without a
stream of gaming revenue to share in the proceeds. (116) The Ninth
Circuit held the provision did not offend 1GRA's gaming compact
subject area provision as IGRA specifically allows any subject directly
related to the operation of gaming activities to be negotiated into a
gaming compact. (117) The Court, for support, looked to the overall
congressional policy in enacting IGRA:
One could glean from the Ninth Circuit's interpretation of
IGRA that as long as the issue or subject addressed in the gaming
compact somehow strengthens tribal governments and economies, then IGRA
is not violated. This seems to be the approach the federal government
has adopted in approving compacts:
Based upon the Ninth Circuit's overall view of congressional
policy with the enactment of IGRA, along with the interpretation of what
are permissible subjects for inclusion in gaming compacts, there is
wiggle room for permissible subjects of negotiation. If the statements
and guidance provided by the federal government are added to the
equation, there is ample support to negotiate other tribal economic
incentives, aside from substantial exclusivity, in exchange for revenue
sharing payments to state and/or local governments. On the other hand,
the statements and guidance of the DOI would not constitute a final
agency action or determination, and therefore are not entitled to
Chevron or Skidmore deference; the statements may still assist a court
in balancing the merits of a case.
After the Seminole Tribe decision shifted most negotiation leverage
away from the tribes, however, states began to explore the universe of
what could be negotiated as part of a gaming compact. There were and are
states (such as Wisconsin under former Governor Tommy Thompson and
Michigan under former Governor John Engler) in addition to citizens
groups that hold the viewpoint that tribes, in order to conduct gaming
activities on tribal lands, should not only give the state a percentage
of the gaming revenue, but should relinquish treaty rights in exchange
to conduct class III gaming. (120) Tribes that retain treaty rights have
argued and would certainly argue such a negotiation tactic is outside
the scope of the subject areas contained in IGRA. This negotiating
tactic exemplifies the overwhelming leverage states have after Seminole
In some regions of the country, exclusivity provisions may still
constitute effective consideration when amendments or compact renewal
periods arise. Connecticut has effectively prohibited casino-style
gambling within the state in exchange for 25% of net gaming revenue
generated by the Foxwoods Resort, owned by the Mashantucket Pequots, and
the Mohegan Sun Resort, owned by the Mohegan Tribe of Connecticut. (122)
If the State of Oklahoma, however, offers a similar guarantee to a
tribe in Oklahoma, the bargained-for exchange may not reap the same
benefit as there are over ninety tribal casinos or bingo halls in
Oklahoma operating both class 11 and class III gaming. If Oklahoma
allows further casino-style gaming at racetracks (which already are
permitted a limited number of slot machines), allowing state-licensed
gaming would simply be another casino to compete with. The real issue,
however, is that Oklahoma gaming compacts are "one size fits
all" and if an Oklahoma tribes seeks to conduct class III gaming,
then the tribe must agree upon the terms in the statute. (123) There
does not appear to be any room for negotiating any additional economic
incentives into the gaming
In some states, for example Michigan, there are non-Indian
commercial casinos regulated and licensed by the state. (124) In
Oklahoma horse racing tracks are permitted by state law to have a
limited amount of slot machines at the race track. These facilities are
referred to as "racinos." In Michigan, the non-Indian
commercial casinos are all located in Detroit. There are over twenty
tribal gaming facilities throughout Michigan, ten of which are located
in Michigan's Upper Peninsula, (125) and in some cases, the tribal
gaming facilities are closer to Wisconsin than Detroit or anywhere in
the Lower Peninsula. For those tribes in the Upper Peninsula, therefore,
the main source of competition is the other tribal casinos, not casinos
some 500 or 600 miles away in Detroit.
Michigan tribal casinos may have saturated the market to the point
that the prospect of giving the state anywhere from 8% to 20% of tribal
gaming revenue is unreasonable, and more importantly, unprofitable when
the bargained-for exchange is the state's promise not to game or to
license non-Indian commercial gaming outside of Detroit. This is
especially true if the compacting tribe is located in a remote region
where the state, a non-Indian commercial casino developer, or a
different tribe is likely to attempt to open a gaming facility. Where is
the meaningful concession from the state if a tribe in Michigan's
Upper Peninsula is offered a guarantee the state will not permit gaming
in the five or six county region surrounding the tribe? More than
likely, the tribe would receive little benefit from such a guarantee.
In Michigan, more recently negotiated compacts and amendments to
existing compacts, the compacts use the term "competitive
market" to denote the level of exclusivity promised. (126) The
Pokagon Band of Potawatomi Indians, however, negotiated an amendment
permitting gaming at two additional sites. (127) The Pokagon Band and
the State agreed that the ability to open satellite gaming facilities
constitutes enough of a valuable economic benefit to promise revenue
sharing payments of 6% of net gaming revenue at the Band's Four
Winds Casino, and to provide 8% of any net gaming revenue in the event
the other two casinos open. (128) The State, in no uncertain terms, does
not promise complete exclusivity, but rather contractually obligates
itself to not allow a "commercial gaming facility" (129) to
open within certain counties close in proximity to the tribal
DOI took issue with the "Competitive Market" terminology
but in the case of the Little River Band and Little Traverse Bay Bands,
DOI neither approved nor disapproved the amendments to the gaming
compacts within the 45-day review period. (131) In the Pokagon
Amendment, there is no competitive market provision, but rather the
ability to open additional gaming facilities is the benefit received by
the Band from the state. In both cases, however, because DOI neither
approved nor disapproved the amendments with the 45-day period, the
compact as amended is deemed approved "but only to the extent the
compact is consistent with the provisions" of IGRA. (132) The DOI,
presumably (with the Tribes' urging), could bring suit on behalf of
the Tribes to strike the legality of the revenue sharing provision based
upon the dictates of IGRA against state taxation of tribal gaming
revenue, although this scenario may be unlikely.
After examining the amendments, DOI was satisfied that their
implementation would put the tribes in a better contractual position
than the terms of the extant agreement. (133) DOI, nevertheless,
remained concerned as to whether the state made any meaningful
concessions in exchange for a percentage of gaming revenue:
While some tribes may seek to negotiate for an extremely low
revenue sharing percentage under a compact or a renewed compact, the
state, and in some cases local governments, formulate governmental
budgets assuming some gaming revenue will balance the budget.
Nevertheless, what if the tribe can get other
"non-traditional" economic incentives or meaningful
concessions from the state in exchange for sharing a percentage of
IV. BARRIERS TO ECONOMIC DEVELOPMENT ON THE RESERVATION AND THE
SUBSTANTIAL BENEFITS TEST
Tribes should consider whether negotiating with states to eliminate
various problems or quandaries of federal Indian law in an effort to
promote further economic development on or near the reservation. For
example, the problem of double taxation could be eliminated via compact
provisions or a separate agreement that would allow non-Indian
businesses to conduct on-reservation business without facing both state
and tribal taxation.
A. QUANDARIES WITH TRUST LAND AND TAXATION ISSUES
The Indian Reorganization Act of 1934 (135) (IRA) signified a
change in congressional policy toward Indians as individuals and as
citizens of tribal communities. The policy change shifted away from the
assimilation and allotment policies codified by the General Allotment
Act (or Dawes Act) of 1887. The term "codified" is used, as
opposed to "instituted," as the allotment of Indian lands
began as early as 1633 (136) and continued until the passage of the
Indian Reorganization Act. The General Allotment Act, generally, sought
to end the communal ownership of tribal lands and convert or
"assimilate" the Indians in mainstream America by converting
reservation lands into property owned by individual Indians. (137)
There are approximately 560 federally-recognized tribes in the
United States, of which 334 are located in the lower 48 states and 226
in Alaska. (138) Following the enactment of the IRA, 181 tribes
(representing 129,750 Indians) adopted the terms of the IRA, while 77
tribes (representing 86,365 Indians) voted to reject it. (139) By 1947,
195 were organized pursuant to the IRA (excluding Oklahoma and Alaskan
Indians). (140) Since that time other tribes, including those more
recently recognized by the U.S. Government, have also organized under
the IRA and adopted IRA constitutions. Many IRA tribes, however, have
deviated from the boilerplate structure of the IRA constitutions forced
upon tribes during the 1930s and 1940s.
For example, upon receiving federal recognition on May 27, 1980,
the Grand Traverse Band of Ottawa and Chippewa Indians adopted an IRA
constitution. (141) Notably, the Grand Traverse Band Constitution
established a separate and independent judiciary. (142) After the
passage of the IRA, many tribal judiciaries served at the pleasure of
the tribes' governing body. (143) This created a government
structure that severely hampered the independence of tribal courts.
(144) In the last fifteen to twenty years, tribes in Michigan and
elsewhere in Indian country have recognized the need to establish the
separation of powers between the judiciary and legislative branch.
Perhaps the most devastating impact caused by the General Allotment
Act can still be felt and seen across Indian country even today. (145)
At the time the IRA became law approximately 90 million acres of Indian
land passed into non Indian ownership. (146) The IRA, overall, focused
on bringing local control back to tribes. (147) Part of the IRA's
goal was to foster reservation economic development by placing
restrictions on the alienation (i.e. sale) of Indian lands, taxation,
establish a mechanism where tribes could reorganize and adopt
The IRA authorized the Secretary of the Interior to place land into
trust for the benefit of Indians (individual and communal), and any land
placed into trust would then be restricted from alienation and the land
would be free of taxation. (149) Some tribes elected to utilize the
structure, privileges, and detriments, while other tribes remained wary
of any grant of federal authority over Indian tribes and remained
"unorganized" or continued to operate under an existing
The vast majority of tribally-held lands are lands placed into
trust status by the Secretary of the Interior. Since 1934, once a tribe
was able to reacquire land lost to the General Allotment Act, it seems
the tribal government would follow the steps to place the land into
trust. After all, when land is placed into trust, the tribe has
jurisdiction over the land and state law has no applicability. (151)
Some have mixed feelings as to the so-called economic benefits of
placing land into trust status. Lance Morgan, Chief Executive Officer of
Ho-Chunk, Inc., (a multi-million dollar tribally-chartered company
started from scratch by Mr. Morgan) has said that trust land ensured
decades of poverty for Indian tribes. (152)
One glaring issue with tribal trust land and economic development
on the reservation is that tribal gaming may only be conducted on
"Indian lands," and generally speaking, the only
gaming-eligible lands are tribal trust lands. (153) There are some
tribes with reservation boundaries that have not been disestablished or
that have been judicially defined that conduct gaming on lands held in
fee by the tribe within the reservation boundaries, and the NIGC has
determined that fee lands within the exterior boundaries of a
tribe's reservation could be classified as Indian Lands, (154) and
therefore tribal gaming can occur on tribal fee land. (155)
Even now, there are tribes that do not have any land (fee or trust)
to conduct gaming upon whether it is economically unfeasible or the
tribe is recently recognized. Due to the involved and discretionary
process of taking land into trust, there are states and citizens'
groups that oppose land being taken into trust for gaming purposes, and
will litigate the matter as far as it takes them. (156) Tribes may
consider demanding that the state either take no action or affirmatively
prevent local governments from taking any action when a tribe requests
the Secretary to place land into trust for gaming purposes.
Gaming-related trust applications can occasionally be controversial, and
in order for states and/or local governments to demand a percentage of
tribal gaming revenue through a compact, such entities should be
prevented from opposing a tribal request to have land placed into trust.
In a non-gaming related context, the benefits of placing land into
trust can work against a tribe depending on how the property is
utilized. A tribe, for example, may acquire a hotel to further develop
or expand a tribal gaming operation and the tribe acquires the property
in the hopes it will serve as a solid investment. The tribe does not
necessarily seek to conduct gaming at the hotel but the initial reaction
of the tribe's governing body or tribal professionals may be to
place the land into trust.
The trouble with placing the land into trust status is the federal
restriction upon alienating the land destroys the notion of a solid
investment and the ability to leverage property is lost as no value can
be assigned to the land. (157) By converting land into trust status,
tribes lose the ability to freely sell the land at a moment's
notice for a large profit or to measure equity on the property to
procure financing for other projects. (158) On non-trust, freely
alienable tribal land, for example, a hotel is purchased for $10
million. The tribe elects to invest an additional $2 million for
renovations. After the renovations are complete, an appraisal is
conducted and reflects a market value of $15 million. Now the tribe may
be able to borrow against the $3 million in equity gained after the
If the tribal fee land used in the previous example is within the
exterior boundaries of a reservation, the state is prohibited from
taxing tribes. (159) If the tribal fee land, however, is outside the
exterior boundaries of the reservation, tribes are subject to
nondiscriminatory state taxes. (160) The businesses operating upon the
land may be subject to state jurisdiction depending on the business
structure, place of incorporation, and whether the business is owned by
an Indian tribe. (161) If the tribe elects to form a corporation
established pursuant to Section 17 of the IRA, the entity has the same
status as a tribe for purposes of federal and state taxation. (162)
Tribal corporations formed under state law, however, are not exempt from
state or federal income taxes. (163) Whether a corporation formed under
tribal law, whether or not owned by the tribe, retains the same tax
status as a tribe or in the case of a non-Indian owned business
incorporated under tribal law and operating on tribal land held in fee,
is subject to only the tribal tax is unclear. (164)
B. ATTEMPTING TO RESOLVE THE "DOUBLE TAXATION" PROBLEM AS
A SUBJECT OF A GAMING COMPACT TO PROVIDE TRIBES WITH A TAX BASE
There are a considerable number of issues for non-Indian businesses
seeking to enter into commercial transactions with tribes or tribal
businesses. (165) Indian tribes, as sovereign nations, retain the
sovereign authority to tax within Indian country subject only to federal
law, (166) and because tribal taxation is an exercise of sovereignty, no
prior federal authorization is required. (167) The power of tribes to
tax non-Indians or non-tribal members when entering into economic
activity on trust land (168) has remained strong despite the U.S.
Supreme Court's slow assault upon tribal sovereignty over the past
three decades. (169) Taxing nonmember business is a critical source of
tribal revenue in circumstances where the tribe cannot rely upon gaming
revenue or natural resources to fund essential governmental services.
The varying levels of regulation and taxation, including tribal,
federal, or state, to which a non-tribal member business may be
subjected, all can assist to bar reservation economic development. (171)
Overall, Indian tribes and states have concurrent taxation authority
with respect to non-Indian activity within Indian country boundaries.
(172) States cannot enforce state law upon the actual tribe or tribal
business(es), (173) and therefore states cannot enforce any state tax
laws upon tribes. Moreover, even if the property is owned in fee the
state cannot tax the land if it is on the reservation. (174)
The problem is that tribal taxes do not preempt concurrent state
taxes (175) so non-member businesses may be taxed by both tribes and
states. (176) Nonmembers, generally, may be taxed by the state if the
legal incidence of the tax falls on non-members doing business with
tribes in Indian country. (177) This creates a disincentive for
non-member businesses from developing economic opportunities on the
reservation. (178) Based upon the multiple levels of taxation possible
on a reservation for non-member business, in many circumstances, tribes
have no tax base to derive revenue for essential governmental services.
Many cases involving taxation of non-member entities operating
within Indian country are generally very fact-intensive. When a dispute
regarding taxation arises between a tribe and a state, the courts will
generally utilize the balancing test created in Montana v. United States
(180) to determine whether the tribe's interest or the state's
interest is greater. The cost of litigating such fact-intensive issues
can be very costly and many tribes have successfully created tax bases
through tax agreements or tax compacts. (181) The concept of a
state-tribal tax agreement, however, is certainly not anything new as
there are currently more than 200 tribal-state taxation compacts, and
the scope of each compact can vary from state to state. (182) For
example, the Michigan Tribal-State Tax Agreements address sales and use
taxes, tobacco and motor fuel taxes, individual income taxes, business
taxes, exemptions, as well as dispute resolution. (183) In Oklahoma,
separate compacts have been negotiated for tobacco taxes (184) and motor
fuel taxes. In other states as well, including South Dakota, New Mexico,
Montana, and Minnesota, for example, tax compacts have been executed.
(185) In both circumstances, the tribes and the state recognized the
need to voluntarily develop a method to properly allocate tax revenues
between the state and tribes. The tobacco tax compact provides that the
state shall exempt all sales of tobacco products to and by the tribes,
and the tribes agree to make payments in lieu of state taxes. (186)
The Oklahoma motor fuels compacts provide a "solution" to
the decision in Oklahoma Tax Commission v. Chickasaw Nation, (187) where
the Court found that Oklahoma's motor fuel tax laws in place at the
time of the litigation could not be applied to sales of fuel by Indian
tribes. The basic premise of the motor fuel compacts allows tribes to
contract with the state to receive an apportionment of the annual gross
motor fuel revenues collected by the state. (188)
Many of the existing tax compacts address and clarify the
non-taxability of Indians and tribes within Indian country or share a
percentage of tax revenue. (189) These compacts, however, do not contain
a concession on the part of the state where non-members and non-member
businesses are completely free or effectively free of state taxation and
permit tribes to have a true unadulterated tax base. (190)
Complex taxation issues and costs of litigation tax issues can be
addressed if a tribe could ensure that non-members and non-member
businesses would not be taxed by the state for conducting business on
the reservation. Then the tribe would have the actual ability to raise
additional tax revenue and possibly offer tax incentives to businesses
to foster reservation economic development.
Just as some states have crafted state tax laws to attract
businesses by offering incentives, a tribe may be able to attract
businesses to the reservation with further tax incentives in addition to
the federal tax incentives for doing business on the reservation. (191)
The incentives would be in addition to any federal tax incentives in
place such as rapid depreciation of certain business property, (192)
incentives for empowerment zone credits/incentives, (193) and new market
tax credits for community development. (194)
If a state agrees not to tax any business or tax at a lower rate,
as part of negotiating a class III gaming compact, these economic
incentives in exchange for the payment of a percentage of gaming revenue
may qualify as a "valuable economic benefit" for the tribe.
(195) If the DOI reviewed a compact containing concessions by the state
of the concurrent taxation authority over non-members, DOI's
"obligation to ensure that the benefit received by the state under
the proposed compact is appropriate in light of the benefit conferred on
the tribe" could be reasonably satisfied through tax benefits.
(196) Negotiating tax clarity for purposes of tribal economic
development would not constitute a situation where subjects negotiated
are worlds apart, such as tribal treaty rights or water rights, from
what is generally negotiated in a gaming compact. (197)
The state, in essence, would agree not to levy any taxes upon
businesses located and business occurring on the reservation. The double
taxation issue would be resolved and the tribe is left to determine
what, if any, tax to levy upon any business occurring on the
reservation. If the state is unwilling to concede what amounts to a
substantial economic benefit for the tribe in the form of substantial
exclusivity, then the tribes can use any leverage possible to get
meaningful concessions from the state in exchange for submission of
revenue sharing payments. (198)
In many areas of Indian country, tribal gaming continues to grow
but at a slower pace than over the last two decades. As Indian gaming
levels out, tribes need to use whatever revenue available to diversify
economies beyond gaming, natural resources, or any solitary source of
funding for governmental services. In short, diversifying tribal
economies through economic development is a must. Class III gaming
compacts are an avenue to procure economic incentives and meaningful
concessions of substantial economic value to the tribes from the state
governments to foster reservation economic development. Although this
article focuses on tribes resolving barriers to reservation economic
development, such as trust land issues and taxation problems, if tribes
can get meaningful concessions resulting in economic benefits, then IGRA
is not violated. Tribes should do everything in their power to leverage
any bargaining tools available, and if states and local governments are
relying upon gaming revenue to balance budgets or pay for their own
governmental programs, then additional concessions should be made.
Although IGRA seems to explicitly prohibit states from taxing or
levying any assessment upon tribal gaming revenue, the question is no
longer whether revenue sharing agreements violate IGRA. Too many states,
local governments, and even charities rely upon tribal gaming revenue
sharing payments prescribed by class III gaming compacts to balance
budgets and fund programs. When it comes time for a tribe to negotiate,
re-negotiate, or amend a gaming compact, it is unreasonable for a tribe
to assume a state government will even come to the table without some
revenue sharing structure as a given. In recognition of this, tribes
need to use any leverage possible to negotiate advantages into compacts.
Overall, tribes need to become more creative when negotiating
compacts or renewing existing compacts with states as "substantial
exclusivity" becomes unrealistic from a state perspective or
ineffective from a tribal perspective. Tribes should encourage DOI not
to sit back and approve compacts where tribes will pay 8% to 20% of
gaming revenue in exchange for the exclusive right to game in a sparsely
populated five to eight county area. As evident by reading George
Skibine's letter to Michigan's Governor, DOI recognizes the
lack of substantial exclusivity and therefore, the lack of meaningful
concessions resulting in a substantial economic benefit to the tribes in
some gaming compacts. States will continue to insist upon revenue
sharing payments, but further substantial economic benefits for tribes
must be negotiated and included in each gaming compact in order to match
the substantial benefits the state receives, and remain consistent with
the intent and the plain language of IGRA--to benefit tribes, not
EZEKIEL J.N. FLETCHER, J.D., University of Wisconsin, 2006; B.A.,
University of Michigan, 2003. Associate, Rosette & Associates, P.C.
Enrolled citizen of the Grand Traverse Band of Ottawa and Chippewa
Indians and former Grand Traverse Band Assistant General Counsel. I
would like to thank Matthew Fletcher, Kathryn Tierney, John Petoskey,
Michael Phelan, Joan Summers, and the editors of the South Dakota Law
Review for comments, guidance, and assistance offered during the writing
of this Article. All views expressed by this Article are solely those of
the author and not of Rosette & Associates, P.C. All errors are my
own. The author can be reached at email@example.com.
(1.) See KATHRYN R.L. RAND & STEVEN ANDREW LIGHT, INDIAN GAMING
LAW AND POLICY 17, 21 (2006) [hereinafter RAND & LIGHT]; Matthew L.
M. Fletcher, Bringing Balance to Indian Gaming, 44 HARV. J. ON LEGIS.
39, 45 (2007); STEVEN ANDREW LIGHT & KATHRYN R.L. RAND, INDIAN
GAMING AND TRIBAL SOVEREIGNTY: THE CASINO COMPROMISE 39 (2005)
[hereinafter LIGHT & RAND] (California and Florida); Ray Halbriter
& Steven Paul McSloy, Empowerment or Dependence? The Practical Value
and Meaning of Native American Sovereignty, 26 N.Y.U. J. INT'L L.
& POL. 531, 565 (1994) (New York); Sidney M. Wolf, Killing the New
Buffalo: State Eleventh Amendment Defense to Enforcement of IGRA Indian
Gaming Compacts, 47 WASH. U. J. URB. & CONTEMP. L. 51, 69 (1995)
(Florida and Wisconsin); Anthony J. Marks, Note & Comment, A House
of Cards: Has the Federal Government Succeeded in Regulating Indian
Gaming?, 17 LOY. L.A. ENT. L. REV. 157, 158-59 (1996) (Florida and
(2.) Indian Gaming Regulatory Act, 25 U.S.C. [section][section]
(3.) RAND & LIGHT, supra note 1, at 23. The term "Indian
country" is defined in 18 U.S.C. [section] It 51 (2006) as:
(a) all land within the limits of any Indian reservation under the
jurisdiction of the United States Government, notwithstanding the
issuance of any patent, and, including rights-of-way running through the
(b) all dependent Indian communities within the borders of the
United States whether within the original or subsequently acquired
territory thereof, and whether within or without the limits of a state,
(c) all Indian allotments, the Indian titles to which have not been
extinguished, including rights-of-way running through the same.
Id. Although this statute defines what constitutes Indian country
for purposes of criminal jurisdiction, this definition is also used for
purposes of civil jurisdiction. See DeCoteau v. Dist. County Ct. for
Tenth Jud. Dist., 420 U.S. 425, 427 n.2 (1975). In addition to using
Indian country in the context of both criminal or civil jurisdiction,
this Article uses Indian country to reference Indians, tribes, and
tribal land generally.
(4.) RAND & LIGHT, supra note 1, at 23; I. Nelson Rose,
Commentary, The Indian Gaming Act and the Political Process, in INDIAN
GAMING AND THE LAW 4 (William R. Eadington, ed., 2d ed. 1998).
(5.) Press Release, National Indian Gaming Commission, NIGC
Announces 2007 Indian Gaming Revenue (June 18, 2008) (NIGC statistics
are based upon the audit reports received by the NIGC from the tribes),
available at http://www.nigc.gov/ReadingRoom/PressReleases/
PressReleasesMain/PR93062008/tabid/841 /Default. a spx [hereinafter NIGC
Press Release]. See also Kathryn R. L. Rand & Steven Andrew Light,
How Congress Can and Should "Fix" the Indian Gaming Regulatory
Act: Recommendations for Law and Policy Reform, 13 VA. J. SOC.
POL'Y & L. 396, 397 (2006).
(6.) See Kevin K. Washburn, Recurring Problems in Indian Gaming, 1
WYO. L. REV. 427, 435 (2001).
(7.) For a comprehensive review of the economic status of Indian
gaming, region by region, see generally ALAN MEISTER, CASINO CITY'S
INDIAN GAMING INDUSTRY REPORT 2008-2009 ed. (2008).
(8.) See NIGC Press Release, supra note 5.
(11.) See Kathryn R.L. Rand, There Are No Pequots on the Plains:
Assessing the Success of Indian Gaming, 5 CHAP. L. REV. 47, 52-53 (2002)
("Of the 554 tribes in the United States recognized by the federal
government, only a third or so conduct class III gaming on their
reservations."); G. WILLIAM RICE, TRIBAL GOVERNMENT GAMING LAW:
CASES AND MATERIALS 3 (2006) (noting that a majority of tribes have no
gaming or only small scale gaming operations).
(12.) Indian Entities Recognized and Eligible to Receive Services
From the United States Bureau of Indian Affairs, 73 Fed. Reg. 18,553
(April 4, 2008) (notice).
(13.) Rand, supra note 11, at 53.
(14.) Id. at 53 n.34 ("Of course, not all tribal casinos are
successful. Some operate at a loss, while many others break even or make
only modest profits.").
(15.) See Washburn, supra note 6, at 435.
(16.) See, e.g., Mich. Gambling Opposition v. Kempthorne, 525 F.3d
23 (D.C. Cit. 2008) (holding that the provision of Indian Reorganization
Act (IRA) that authorized the Secretary of Interior to acquire land for
Indians contained an intelligible principle to guide the
Secretary's discretion, and thus did not violate non-delegation
doctrine); Carcieri v. Kempthorne, 497 F.3d 15 (1st Cit. 2007);
Taxpayers of Mich. Against Casinos v. Norton, 433 F.3d 852 (D.C. Cir.
2006); Citizens Exposing the Truth About Casinos v. Norton, No. 02-1754,
2004 U.S. Dist. LEXIS 27498 (D.D.C. Apr. 23, 2004).
(17.) See Editorial, Landmark American Indian Gaming Law Gives Too
Much Power to Tribes, GRAND RAPIDS PRESS, September 21, 2008 (contending
that the "fundamental flaw with IGRA is that it tilts power far too
much in the direction of tribes and leaves states almost no control over
where casinos are placed, much less whether they open").
(18.) 25 U.S.C. [section] 2703(8) (2006). The different classes of
Indian gaming under IGRA are described infra Part I.
(19.) 25 U.S.C. [section] 2703(8).
(20.) Id. [section] 2710(d)(3)(A).
(21.) See Dewberry v. Kulongiski, 406 F. Supp. 2d 1136, 1155 (D.
Or. 2005) (holding the governor has constitutional authority to enter
into compacts under constitutional provision authorizing governor to
"transact all necessary business" on behalf of the state);
Taxpayers of Mich. Against Casinos v. State of Mich., 732 NW.2d 487
(Mich. 2007) (upholding validity of amendment process by governor in
gaming compacts); Dairyland Greyhound Park v. Doyle, 719 N.W. 2d 408
(Wis. 2006) (limiting the decision in Panzer v. Doyle, 680 NW.2d 666
(Wis. 2004), that stated the governor did not have authority to waive
immunity of the state or to authorize gaming compacts in perpetuity but
Dairlyland Greyhound was found to not jeopardize existing gaming
compacts or renewals of those compacts).
(22.) 25 U.S.C. [section] 2710(d)(4) states:
Except for any assessments that may be agreed to under paragraph
(3)(C)(iii) [costs of regulation] of this subsection, nothing in this
section shall be interpreted as conferring upon a [s]tate or any of its
political subdivisions authority to impose any tax, fee, charge, or
other assessment upon an Indian tribe or upon any other person or entity
authorized by an Indian tribe to engage in a class III activity. No
[s]tate may refuse to enter into the negotiations described in paragraph
(3)(A) based upon the lack of authority in such [s]tate, or its
political subdivisions, to impose such a tax, fee, charge, or other
(23.) 517 U.S. 44 (1996).
(24.) See Fletcher, supra note 1 (arguing for congressional
legislation to ratify all existing revenue sharing compacts/agreements
to which tribes would first consent and instituting an IGRA requirement
that all future gaming compacts include revenue sharing).
(25.) See Fletcher, supra note l, at 80 ("Such a mandatory
revenue sharing provision would eliminate a majority of the negotiating
points that currently consume states and tribes in their compact
negotiations. This would greatly reduce the transaction costs of
reaching agreements and eliminate the nasty 'crossover'
negotiating tactics, such as making treaty rights and tax agreements
contingent upon gaming, which have been employed in some states.").
(26.) See, e.g., Katie Eidson, Will States Continue to Provide
Exclusivity in Tribal Gaming Compacts or Will Tribes Bust on the Hand of
the State in Order to Expand Indian Gaming, 29 AM. INDIAN L. REV. 319,
327 (2004-2005) (quoting Pojoaque Governor Jacob Viarrial, who informed
lawmakers that "revenue sharing has become a smokescreen for
extortion") (footnotes omitted); K. Alexa Koenig, Comment, Gambling
on Proposition IA: The California Indian Self-Reliance Amendment, 36
U.S.F. L. REV. 1033, 1059-60 (2002) ("The compact tries to avoid
potential illegality by expressly stating that revenue percentages were
not imposed as a condition to compact negotiations (which would be
extortion)...."); Steven Andrew Light, Kathryn R.L. Rand & Alan
P. Meister, Spreading the Wealth: Indian Gaming and Revenue-Sharing
Agreements, 80 N.D. L. REV. 657, 666 (2004) ("Without the ability
to challenge a state's demand for revenue sharing in federal court
under IGRA (unless, of course, the state consents to suit, as has
California), the danger for tribes is that states can simply charge
tribes what, in practice, amounts to a multi-million dollar fee to
conduct Class III gaming, in direct contravention to tribes'
sovereign right under Cabazon and Congress's intent under
IGRA."); Kathryn R.L. Rand & Steven A. Light, Do "Fish and
Chips" Mix? The Politics of Gaming in Wisconsin, 2 GAMING L. REV.
129, 140 (1998) (contending that "Wisconsin is using the compact
negotiations in order to extort revenue from the tribes in return for
'allowing' them to maintain their already highly tenuous
(27.) See RAND & LIGHT, supra note 1, at 94-95; Alex Tallcheif
Skibine, Gaming on Indian Reservations: Defining the Trustee's Duty
in the Wake of Seminole Tribe v. Florida, 29 ARIZ. ST. L.J. 121, 122
(1997); Rebecca Tsosie, Negotiating Economic Survival: The Consent
Principle and Tribal-State Compacts Under the Indian Gaming Regulatory
Act, 29 ARIZ. ST. L.J. 25, 66 (1997); Washburn, supra note 6, at 430.
(28.) See, e.g., Oversight Hearing on Indian Gaming Regulatory Act;
Role and Funding of the National Indian Gaming Commission Before the S.
Comm. on Indian Affairs, 108th Cong. 2 (2003) (statement of Aurene M.
Martin, Acting Assistant Secretary of Indian Affairs, Department of the
Interior) [hereinafter Statement of A. Martin]; Press Release, Bruce
Babbitt, Secretary of the Interior, Department of the Interior (Aug. 23,
1997) [hereinafter Babbitt Press Release] (on file with author),
available at http://www.scienceblog.com/community/older/archives/N/
(29.) See Statement of A. Martin, supra note 28, at 5.
(30.) See Babbitt Press Release, supra note 28, at 1.
(31.) The Indian Gaming Regulatory Act Amendments of 2003: Hearing
on S. 1529 Before the S. Comm. on Indian Affairs, 108 Cong. 1 (2004)
(statement of George Skibine, Acting Deputy Assistant Secretary for
Policy and Economic Development, Office of the Assistant Secretary,
Indian Affairs, Department of the Interior). See Statement of A. Martin,
supra note 28.
(32.) See Eidson, supra note 26, at 339.
(33.) Sault Ste. Marie Tribe of Chippewa Indians v. Engler, 93 F.
Supp. 2d 850, 852 (W.D. Mich. 2000).
(34.) See infra note 102 for examples of gaming compacts where if
the "exclusivity" provision is breached, the tribe may cease
revenue sharing payments to states.
(35.) See Little River Band of Ottawa Indians and the State of
Michigan, Gaming Compact of 1998 [section] 17, December 3, 1998, amended
January 24, 2008, available at http://www.michigan.gov/documents/mgcb/
LRB_Compact_Amd_2008-01-24_244326_7.pdf, Little Traverse Bay Bands of
Odawa Indians and the State of Michigan, Gaming Compact of 1998
[section] 17, December 3, 1998, amended January 24, 2008, available at
(36.) See Babbitt Press Release, supra note 28.
(37.) See supra note 35.
(38.) See infra notes 125-29.
(39.) See supra notes 28-30 and accompanying text.
(40.) 480 U.S. 202 (1987).
(41.) Public Law 280, ch. 505, 67 Stat. 588 (1953) (codified as
amended at 18 U.S.C. [section] 1162 (2006), 28 U.S.C. [section] 1360
(2006)). During the "termination era" Congress withdrew
federal criminal jurisdiction and extended the criminal jurisdiction of
California, Minnesota (except Red Lake), Nebraska, Oregon (except the
Warm Springs Reservation), Wisconsin (except later the Menominee
Reservation) and Alaska. See generally Carole Goldberg & Duane
Champagne, Is Public Law 280 Fit for the Twenty-First Century? Some Data
at Last, 38 CONN. L. REV. 697 (2006).
(42.) Cabazon, 480 U.S. at 206.
(43.) Id. (citing Cabazon Band of Mission Indians v. California,
783 F.2d 900 (9th Cir. 1986)).
(44.) 426 U.S. 373 (1976).
(45.) See Cabazon, 480 U.S. at 210.
(46.) See 18 U.S.C. [section] 1162.
(47.) Id. [section] 1360.
(48.) See Cabazon, 480 U.S. at 208 (citing Bryan v. Itasca County,
426 U.S. 373, 385 (1976)).
(50.) See The Impact of the U.S. Supreme Court's Recent
Decision in Seminole v. Florida on the Indian Gaming Regulatory Act of
1988, 104th Cong. 171 (1996) (statement of Franklin Ducheneaux)
("In 1983, in the 98th Congress, Mr. Udall introduced the first
bill to affect ... gambling activities by Indian tribes.")
[hereinafter Testimony of F. Ducheneaux]. See also H.R. Rep. No. 1920
(1985); H.R. Rep. No. 3130 (1985).
(51.) For a thorough discussion of the political landscape after
Cabazon was decided, see RAND & LIGHT, supra note 1, at 29-33;
Fletcher, supra note 1, at 50 (noting that "Cabazon Band created
the political impetus to finalize an Indian gaming act").
(52.) 25 U.S.C. [section] 2702(1) (2006) (emphasis added). The
other two purposes of IGRA, as described in the "Declaration of
Policy" in 25 U.S.C. [section] 2702(2)-(3) are:
(2) to provide a statutory basis for the regulation of gaming by an
Indian tribe adequate to shield it from organized crime and other
corrupting influences, to ensure that the Indian tribe is the primary
beneficiary of the gaming operation, and to assure that gaming is
conducted fairly and honestly by both the operator and players; and
(3) to declare that the establishment of independent Federal
regulatory authority for gaming on Indian lands, the establishment of
Federal standards for gaming on Indian lands, and the establishment of a
National Indian Gaming Commission are necessary to meet congressional
concerns regarding gaming and to protect such gaming as a means of
generating tribal revenue.
(53.) See Fletcher, supra note 1, at 55.
(54.) S. REP. 100-446, at 3083-84 (1988), reprinted in 1988
U.S.C.C.A.N. 3071. (reporting that "the Committee concluded that
the use of compacts between tribes and states is the best mechanism to
assure that the interests of both sovereign entities are met with
respect to the regulation of complex gaming enterprises....")
[hereinafter Senate Report 100-446]; see Testimony of F. Ducheneaux,
supra note 50, at 175 ("The concept of a Tribe-State compact was
the mechanism through which the Congress attempted to resolve the two
opposing extreme positions in a manner which would preserve tribal
self-government, yet recognize and accommodate legitimate state
(55.) See Senate Report 100-446, supra note 54, at 3083.
(56.) 25 U.S.C. [section] 2703(4) (2006) provides that "Indian
(A) all lands within the limits of any Indian reservation; and
(B) any lands title to which is either held in trust by the United
States for the benefit of any Indian tribe or individual or held by any
Indian tribe or individual subject to restriction by the United States
against alienation and over which an Indian tribe exercises governmental
(57.) 25 U.S.C. [section] 2703.
(59.) Id. [section] 2703(6).
(60.) Id. [section] 2710(a)(1).
(61.) See Fletcher, supra note 1, at 51; WILLIAM C. CANBY, JR.,
AMERICAN INDIAN LAW IN A NUTSHELL 306 (4th ed. 2004) (noting that class
I gaming is not of legal or economic significance); Mark J. Cowan,
Leaving Money on the Table(s): An Examination of Federal Income Tax
Policy Towards Indian Tribes, 6 FLA. TAX REV. 345, 382 (2004)
("Such games are not regulated by the IGRA and tend to generate
(62.) 25 U.S.C. [section] 2703(7)(A)(i).
(63.) Id. [section] 2703(7)(A)(ii).
(64.) Id. [section] 2710(b)(1)(B).
(65.) Id. [section] 2703(8).
(67.) Id. [section] 2703(7)(B)(ii).
(68.) Id. [section] 2710(d)(3)(A).
(69.) Id. [section] 2710(d)(3)(13).
(70.) Id. [section] 2710(d)(1)(B); Rumsey Indian Rancheria of
Wintun Indians v. Wilson, 64 F.3d 1250 (9th Cir. 1994), reh'g
denied, 99 F.3d 321 (1996) (holding that if the state does not permit
other forms of gambling, it need not negotiate gaming compacts with
Indian tribes); Washburn, supra note 6, at 429; Rand, supra note 11, at
(71). 25 U.S.C. [section] 2703(7) provides:
(A) The term "class II gaming" means--
(i) the game of chance commonly known as bingo (whether or not
electronic, computer, or other technologic aids are used in connection
(I) which is played for prizes, including monetary prizes, with
cards bearing numbers or other designations,
(II) in which the holder of the card covers such numbers or
designations when objects, similarly numbered or designated, are drawn
or electronically determined, and
(III) in which the game is won by the first person covering a
previously designated arrangement of numbers or designations on such
cards, including (if played in the same location) pull-tabs, lotto,
punch boards, tip jars, instant bingo, and other games similar to bingo,
(ii) card games that--
(I) are explicitly authorized by the laws of the State, or
(II) are not explicitly prohibited by the laws of the State and are
played at any location in the State, but only if such card games are
played in conformity with those laws and regulations (if any) of the
State regarding hours or periods of operation of such card games or
limitations on wagers or pot sizes in such card games.
(B) The term "class II gaming" does not include--
(i) any banking card games, including baccarat, chemin de fer, or
blackjack (21), or
(ii) electronic or electromechanical facsimiles of any game of
chance or slot machines of any kind.
(72.) See Kevin K. Washburn, Federal Law, State Policy, and Indian
Gaming, 4 NEV. L.J. 285, 290 (2004) (referencing so-called class II slot
machines); Fletcher, supra note 1, at 51. See also Alan Meister, The
Potential Economic Impact of the October 2007 Proposed Class II Gaming
Regulations, submitted to the NIGC, February 1, 2008 (on file with
(73.) Recently the Seminole Tribe was able to negotiate a class III
gaming compact with Florida Governor Crist and the Tribe is currently
operating class III machines in the Tribe's facilities. The
compact, however, is being challenged and the Florida Supreme Court held
that the governor did not have authority under the state constitution to
bind the State of Florida to a compact that was contrary to state public
policy. See Fla. House of Representatives v. Crist, 990 So. 2d 1035
(74.) CANBY, supra note 61, at 324.
(75.) See FELIX S. COHEN, COHEN'S HANDBOOK OF FEDERAL INDIAN
LAW 863 (Nell Jessup Newton et al. eds., LexisNexis 2005).
(76.) See Shakopee Mdewakanton Sioux Cmty v. Hope, 16 F.3d 261 (8th
(77.) See, e.g., United States v. 103 Elec. Gambling Devices, 223
F.3d 1091 (9th Cir. 2000); United States v. 162 MegaMania Gambling
Devices, 231 F.3d 713 (10th Cir. 2000); Cabazon Band of Mission Indians
v. Nat'l Indian Gaming Comm'n, 14 F.3d 633 (D.C. Cir. 1994);
Sycuan Band of Mission Indians v. Roache, 54 F.3d 535 (9th Cir. 1994);
Spokane Indian Tribe v. United States, 972 F.2d 1090 (9th Cit. 1992).
(78.) Definition for Electronic or Electromechanical Facsimile, 72
Fed. Reg. 60,482-01 (proposed Oct. 24, 2007) (to be codified at 25
C.F.R. pt. 502).
(79.) Classification Standards for Bingo, Lotto, Other Games
Similar to Bingo, Pull Tabs, and Instant Bingo as Class II Gaming When
Played Through an Electronic Medium Using "Electronic Computer, or
Other Technologic Aids", 72 Fed. Reg. 60,483 (proposed Oct. 24,
2007) (to be codified at 25 C.F.R. pt. 502 and 546).
(80.) Press Release, National Indian Gaming Commission, NIGC Sets
Aside Class II Classification, Definition Regulations (June 5, 2008),
available at http://www.nigc.gov/ReadingRoom/PressReleases/PR92062008/
(81.) Seethe two proposed regulations by the NIGC, supra note
(82.) Definition for Electronic or Electromechanical Facsimile, 73
Fed. Reg. 60,490-01 (Oct. 10, 2008) (Notice of Withdrawal of Proposed
Rule); Classification Standards for Bingo, Lotto, Other Games Similar to
Bingo, Pull Tabs and Instant Bingo as Class II Gaming When Played
Through an Electronic Medium Using "Electronic, Computer, or Other
Technologic Aids", 73 Fed. Reg. 60,490-02 (Oct. 10, 2008) (Notice
of Withdrawal of Proposed Rule).
(83.) 25 U.S.C. [section] 2710(d)(7)(A) (2006).
(84.) See supra note 54, at 3084-85, 3088-89.
(85.) 25 U.S.C. [section] 2710(d)(4). See Cabazon Band of Mission
Indians v. Wilson, 37 F.3d 430, 433-35 (9th Cir. 1994) (holding the
Indian law preemption test applied to IGRA so any state tax relating to
Indian gaming was preempted).
(86.) See 25 U.S.C. [section] 2710(d)(4).
(87.) See Fletcher, supra note 1, at 56-57 (describing the various
"waves" of IGRA-related litigation).
(88.) See Rumsey Indian Rancheria of Wintun Indians v. Wilson, 64
F.3d 1250 (9th Cir. 1994) (en bane) (Canby, C.J., dissenting from denial
of reh'g en bane), amended on denial of reh g, 99 F.3d 321 (9th
Cir. 1996) (en bane), cert. denied sub nom., Sycuan Band of Mission
Indians v. Wilson, 521 U.S. 1118 (1997); Kickapoo Tribe of Indians of
Kickapoo Reservation in Kan. v. Babbitt, 43 F.3d 1491 (D.C. Cir. 1995);
Ponca Tribe of Okla. v. Oklahoma, 37 F.3d 1422 (10th Cir. 1994); Ysleta
del Sur Pueblo v. Texas, 36 F.3d 1325 (5th Cir. 1994), cent. denied, 514
U.S. 1016 (1995); Wis. Winnebago Nation v. Thompson, 22 F.3d 719 (7th
Cir. 1994); Rhode Island v. Narragansett Tribe, 19 F.3d 685 (1st Cir.
1994), cert. denied, 513 U.S. 919 (1994); Sault Ste. Marie Tribe of
Chippewa Indians v. Michigan, 5 F.3d 147 (6th Cir. 1993); Cheyenne River
Sioux Tribe v. South Dakota, 3 F.3d 273 (8th Cir. 1993); Mashantucket
Pequot Tribe v. Connecticut, 913 F.2d 1024 (2d Cir. 1990), cert. denied,
499 U.S. 975 (1991).
(89.) 25 U.S.C. [section] 2710(d)(3)(A), [section] 2710(d)(7).
(90.) Id. [section] 2710(d)(7)(B)(iv)-(vii).
(91.) See Wis. Winnebago Nation, 22 F.3d at 719 (referring to
litigation against Wisconsin); Sault Ste. Marie Tribe of Chippewa
Indians, 5 F.3 d at 147 (referring to litigation against Michigan).
(92.) Mashantucket Pequot Tribe v. Connecticut, 913 F.2d 1024 (2d
Cir. 1990), cert. denied, 499 U.S. 975 (1991) (referring to litigation
(93.) 517 U.S. 44 (1996). See Fletcher, supra note 1, at 57;
Washburn, supra note 6, at 441.
(94.) Seminole Tribe, 517 U.S. at 51-52 (citing 25 U.S.C. [section]
(95.) Id. at 52.
(96.) Id. at 56-57 (quoting Dellmuth v. Muth, 491 U.S. 223, 227-28
(97.) Id. at 72-73.
(98.) See Fletcher, supra note 1, at 57-58; LIGHT & RAND, supra
note l, at 50.
(99.) see 25 U.S.C. [section] 2710(a)-(b) (2006).
(100.) Seminole Tribe Buys Hard Rock Cafe Business: $965 Million
Deal Gives Tribe World's Largest Rock Memorabilia Collection,
ASSOCIATED PRESS WIRE, Dec. 8, 2006, available at
(101.) Oversight Hearing on Indian Gaming Regulatory Act; Role and
Funding of the National Indian Gaming Commission Before the S. Comm. on
Indian Affairs, 109th Cong. 89 (2003) (prepared statement of Aurene M.
Martin, Acting Assistant Secretary of Indian Affairs, Department of the
Interior, stating that the Seminole Tribe decision has resulted in
states including revenue-sharing provisions in Class Il compacts). See
Light, Rand & Meister, supra note 26, at 665-66. See generally Eric
S. Lent, Note, Are States Beating the House?: The Validity of
Tribal-State Revenue Sharing Under the Indian Gaming Regulatory Act, 91
GEO. L.J. 451 (2003); Gatsby Contreras, Note, Exclusivity Agreements in
Tribal-State Compacts: Mutual Benefit Revenue-Sharing or Illegal State
Taxation?, 5 J. GENDER, RACE & JUST. 487 (2002).
(102.) See Memorandum of Understanding between State of Connecticut
and Mashantucket Pequot Tribe, January 13, 1993, available at
http://www.ct.gov/dosr/lib/dosr/Memorandum_Of_Understanding_Foxwoods.pdf, Tribal-State Compact between the Mohegan Tribe and the State of
Connecticut, May 17, 1994, available at
Vieux Desert Band of Lake Superior Chippewa Indians and the State of
Michigan, Gaming Compact of 1993, August 20, 1993, available at
http://www.michigan.gov/documents/LVD_Compact_70616_7.pdf; Bay Mills
Indian Community and the State of Michigan, Gaming Compact of 1993,
August 20, 1993, available at
Traverse Band of Ottawa and Chippewa Indians and the State of Michigan,
Gaming Compact of 1993, August 20, 1993, available at
http://www.michigan.gov/documents/GTB_Compact_70613_7.pdf, Keweenaw Bay
Indian Community and the State of Michigan, Gaming Compact of 1993,
August 20, 1993, available at
Indian Community and the State of Michigan, Gaming Compact of 1993,
August 20, 1993, available at
Chippewa Indian Tribe of Michigan and the State of Michigan, Gaming
Compact of 1993, August 20, 1993, available at
(103.) See generally Indian Gaming Regulatory Act, 25 U.S.C.
[section][section] 2701-2721 (2006).
(104.) Id. [section] 2710(d).
(105.) 913 F.2d 1024 (2nd Cir. 1990) (addressing "good
faith" negotiation requirement in IGRA).
(106.) Id. at 1032.
(107.) See Mashantucket Pequot Tribe v. State of Conn., et al.,
Civil Action No. H89-717 (1989) (on file with author). The
court-appointed mediator was Mr. Henry J. Naruk.
(108.) 25 U.S.C. [section] 2710(d)(7)(B)(iv).
(109.) See 25 C.F.R. [section] 291.3 (1999).
(110.) See 25 U.S.C. [section][section] 2, 9. See also United
States v. Spokane Tribe of Indians, 139 F.3d 1297, 1300 (9th Cir. 1998).
(111.) 497 F.3d 491 (5th Cir. 2007).
(112.) See COHEN, supra note 75, at 77-78.
(113.) 25 U.S.C. [section] 2710(d)(3)(C).
(114.) See Statement of A. Martin, supra note 28, at 5 (stating
approximately 250 compacts have been approved); COHEN, supra note 75, at
873 (stating over 200 compacts have been approved).
(115.) 331 F.3d 1094 (9th Cir. 2003).
(116.) Id. at 1105.
(117.) Id. at 1111.
(119.) Statement of A. Martin, supra note 28, at 5 (emphasis
added). See Eidson, supra note 26, at 326.
(120.) See RAND & LIGHT, supra note 1, at 153; Fletcher, supra
note 1, at 80 ("This would greatly reduce the transaction costs of
reaching agreements and eliminate the nasty 'crossover'
negotiating tactics, such as making treaty rights and tax agreements
contingent upon gaming, which have been employed in some states.").
(121.) See generally Fletcher, supra note 1.
(122.) See RAND & LIGHT, supra note 1, at 152.
(123.) See State-Tribal Gaming Act, OKLA. STAT. ANN. tit. 3A,
[section] 281 (West 2008). State Question No. 712, Legislative
Referendum No. 335, adopted at statewide referendum held on Nov. 2,
(124.) See, e.g., MICH. COMP. LAWS [section] 432.201 (2006).
(125.) The tribes and tribal casinos in Michigan's Upper
Peninsula include the Keweenaw Bay Indian Community: Ojibwa Casino
(Marquette), Ojibwa Casino Resort (Baraga); Hannahville Indian
Community: Island Resort & Casino (Harris); Bay Mills Indian
Community: Bay Mills Resort & Casino (Brimley); Lac Vieux Desert
Band of Lake Superior Chippewa Indians of Michigan: Lac Vieux Desert
Resort Casino & Golf Course (Watersmeet); Sault Ste. Marie Tribe of
Chippewa Indians: Kewadin Casino (Christmas), Kewadin Casino (Hessel),
Kewadin Casino (Manistique), Kewadin Casino, Hotel and Convention Center
(Sault Ste Marie), and Kewadin Shores Casino (St. Ignace). A complete
list of all Michigan tribal casinos can be found on the Michigan Gaming
Control Board website,
http://www.michigan.gov/mgcb/0,1607,7-120-1380_1414_2183-, 00.htmi (last
visited March 21, 2009).
(126.) See Little River Band of Ottawa Indians Gaming Compact,
supra note 35, [section] 17; Little Traverse Bay Bands of Ottawa Indians
Gaming Compact, supra note 35, [section] 17.
(127.) See Pokagon Band of Potawatomi Indians and the State of
Michigan, Gaming Compact of 1998 [section] 17, December 3, 1998, amended
August 14, 2008, available at
(129.) See for example, the Little River Band of Ottawa Indians
Gaming Compact, supra note 35, at [section] 17(c)(2), stating:
(130.) Letter from George Skibine to Jennifer Granholm, Governor of
Michigan (March 11, 2008) (regarding the amendments to the 1998 class
III gaming compacts between the Little River Band and the Little
Traverse Bay Bands and the State of Michigan), available at
(131.) 25 U.S.C. [section] 2710(d)(8)(C) (2006).
(132.) Id. [section] 2710(d)(8)(C).
(133.) See Little River Band of Ottawa Indians and Little Traverse
Bay Bands of Ottawa Indians v. Michigan, 5:05-CV-95 (W.D. Mich. 2007)
(on file with author).
(134.) See Skibine Letter, supra note 130, at 2-3.
(135.) Act of June 18, 1934, ch. 576, 48 Stat. 984 (1934) (codified
as amended at 25 U.S.C. [section][section] 461 (2006) (also known as the
Wheeler Howard Act).
(136.) See COHEN, supra note 75, at 77-78.
(138.) See supra note 12.
(139.) THEODORE H. HAAS, TEN YEARS OF TRIBAL GOVERNMENT UNDER THE
I.R.A. 3 (1947).
(141.) See CONSTITUTION OF THE GRAND TRAVERSE BAND OF OTTAWA AND
CHIPPEWA INDIANS (1988).
(142.) Id. art. V.
(143.) See Michael D. Petoskey, Tribal Courts, 67 MICH. B. J. 366,
368-69 (1988) (on file with author); Matthew Fletcher & Zeke
Fletcher, A Restatement Of The Common Law Of The Grand Traverse Band Of
Ottawa And Chippewa Indians, 7 TRIBAL LAW JOURNAL (2008), available at
(144.) Matthew Fletcher & Zeke Fletcher, A Restatement Of The
Common Law Of The Grand Traverse Band Of Ottawa And Chippewa Indians, 7
TRIBAL LAW JOURNAL (2008).
(145.) See generally Judith V. Royster, The Legacy of Allotment, 27
ARIZ. ST. L.J. 1 (1995).
(146.) See id.
(147.) See Morton v. Mancari, 417 U.S. 535 (1974) (upholding
employment preference for Indians in the Bureau of Indian Affairs, as
provided by the Indian Reorganization Act); see also Mescalero Apache
Tribe v. Jones, 411 U.S. 145, 152 (1973) ("The Reorganization Act
did not strip Indian tribes and their reservation lands of their
historic immunity from state and local control.").
(148.) See 25 U.S.C. [section][section] 461 et seq. (2006).
(149.) Id. [section] 465.
(150.) See generally Haas, supra note 139.
(151.) See Public Law 280, supra note 41. Public Law 280 does grant
criminal jurisdiction and does contain a very limited grant of civil
jurisdiction to California, Minnesota (except the Red Lake Reservation),
Nebraska, Oregon (except the Warm Springs Reservation), Wisconsin
(except the Menominee Reservation), and Alaska.
(152.) See Lance Morgan, Ho-Chunk Inca Made in Native America,
Keynote Address at the Honigman Second Annual Great Lakes Tribal
Economic Development Symposium (Nov. 30, 2007) (on file with author).
(153.) See supra note 56.
(154.) 25 U.S.C. [section] 2703(4)(A) (2006); 25 C.F.R. [section]
(155.) NIGC Lands Determination, Status of the Picayune Rancheria
Lands, 2-3, 7-8 (Dep't of Interior Dec. 3, 2001); Opinion of NIGC
General Counsel Kevin K. Washburn, Picayune Tribe, 1-3 (Dep't of
Interior March 3, 2001); NIGC Lands Determination, Tribal Jurisdiction
over Gaming on Fee Land at White Earth Reservation, 9-10 (Dep't of
Interior March 14, 2005).
(156.) See supra note 16.
(157.) 25 U.S.C. [section] 465.
(159.) See City of Sherrill v. Oneida Indian Nation, 544 U.S. 197
(2005); Moe v. Confederated Salish & Kootenai Tribes of the Flathead
Reservation, 425 U.S. 463 (1976).
(160.) See Okla. Tax Comm'n v. Chickasaw Nation, 515 U.S. 450,
462-63 (1995); Mescalero Apache Tribe v. Jones, 411 U.S. 145, 149-50
(161.) See COHEN, supra note 75, at 686-728.
(162.) See Rev. Rut. 94-16,1994-1 C.B. 19.
(164.) See generally Ezekiel J.N. Fletcher, De Facto Judicial
Preemption of Tribal Labor and Employment Law, 2008 MICH. ST. L. REV.
435 (2008) (discussing whether a non-member business incorporated under
tribal law would be subject to tribal or federal labor and employment
laws and arguing that absent an explicit congressional statute
preempting tribal labor and employment laws, non-member businesses are
subject to tribal law).
(165.) See COHEN, supra note 75, at 1287-88.
(166.) Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 137-40
(1982); Washington v. Confederated Tribes of the Colville Indian
Reservation, 447 U.S. 134, 152-53 (1980).
(167.) Kerr-McGee Corp. v. Navajo Tribe, 471 U.S. 195, 198-200
(168.) Merrion, 455 U.S. at 136-37; Washington, 447 U.S. at 152-53.
(169.) See Plains Commerce Bank v. Long Family Land & Cattle
Co., 128 S. Ct. 2709 (2008); City of Sherrill v. Oneida Indian Nation,
544 U.S. 197 (2005); Nevada v. Hicks, 533 U.S. 353 (2001); Atkinson
Trading Co. v. Shirley, 532 U.S. 645 (2001); Strate v. A-1 Contractors,
520 U.S. 438 (1997); Brendale v. Confederated Tribes of Yakima Nation,
492 U.S. 408 (1989); Oliphant v. Suquamish Indian Tribe, 435 U.S. 191
(1978). For a thorough discussion of the U.S. Supreme Court's
recent anti-tribal jurisprudence, see Matthew L.M. Fletcher, The Supreme
Court's Indian Problem, 59 HASTINGS L.J. 579, 588 (2008) (noting
that "the Court has decided forty-eight Indian law cases since 1988
following California v. Cabazon Band of Mission Indians, with
thirty-three of the cases going against the tribal interest and four
being neutral" [footnote omitted] (citing Alex Tallchief Skibine,
Teaching Indian Law in an Anti-Tribal Era, 82 N.D. L. Rev. 777, 781
(170.) See Atkinson Trading Co., 532 U.S. at 648.
(172.) See Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163
(1989); COHEN, supra note 75, at 724.
(173.) See Worcester v. Georgia, 31 U.S. (6 Pet.) 515, 561 (1832)
(holding that the Cherokee Nation "is a distinct community
occupying its own territory, with boundaries accurately described ...
which the citizens of Georgia have no right to enter").
(174.) See Bryan v. Itasca County, 426 U.S. 373 (1976); Moe v.
Confederated Salish & Kootenai Tribes, 425 U.S. 463 (1976); CANBY,
supra note 61, at 265.
(175.) Washington v. Confederated Tribes of the Colville Indian
Reservation, 447 U.S. 134, 158 (1980). See Cotton Petroleum Corp., 490
(176.) See Washington v. Confederated Tribes of the Colville Indian
Reservation, 447 U.S. 134.
(177.) Okla. Tax Comm'n v. Chickasaw Nation, 515 U.S. 450, 458
(1995). See Wagnon v. Prairie Band Potawatomi Nation, 546 U.S. 95
(2005); Moe, 425 U.S. at 482; McClanahan v. State Tax Comm'n of
Ariz., 411 U.S. 164, 179 (1973).
(178.) See White Mountain Apache Tribe v. Arizona, 649 F.2d 1274,
1283 (9th Cir. 1981) (acknowledging that dual taxation of tribes and
states ultimately reduces tribal tax revenue); Matthew L.M. Fletcher, In
Pursuit of Tribal Economic Development as a Substitute for Reservation
Tax Revenue, 80 N.D. L. REV. 759, 771 (2004); Judith V. Royster, Mineral
Development in Indian Country: The Evolution of Tribal Control Over
Mineral Resources, 29 TULSA L.J. 541, 611 (1993); Comment, The Case for
Exclusive Tribal Power to Tax Mineral Lessees of Indian Lands, 124 U.
PA. L. REV. 491, 491-92 (1975).
(179.) See Fletcher, supra note 178, at 771 ("Tribal
governments have extreme difficulty in raising revenue; they have
virtually no tax base."); Catherine T. Struve, Tribal Immunity and
Tribal Courts, 36 ARIZ. ST. L.J. 137, 169 (2004) ("But few tribes
have any significant tax base."); Milo Colton, Self-Determination
and the American Indian: A Case Study, 4 SCHOLAR 1, 35 n.270 (2001)
("In order to be successful, tribal governments must generate
revenue through the development of businesses because they are prevented
from establishing a stable tax base."); Note, In Defense of Tribal
Sovereign Immunity, 95 HARV. L. REV. 1058, 1073 (1982) ("Unlike
other governmental bodies, Indian tribes would find the loss of assets
more difficult to replace because tribes have only a limited revenue
base over which to spread any losses.").
(180.) 450 U.S. 544 (1981).
(181.) See, e.g., Matthew L.M. Fletcher, The Power to Tax, the
Power to Destroy, and the Michigan Tribal-State Tax Agreements, 82 U.
DET. MERCY. L. REV. 1, 44 (2004); Elizabeth Carvlin, South Dakota Signs
Third Tax Agreement with Indian Tribe, BOND BUYER, Dec. 29, 2003 (on
file with author).
(182.) See COHEN, supra note 75, at 725. See also Fletcher, supra
note 181, at 4.
(183.) See, e.g., Tax Agreement Between the Little Traverse Bay
Bands of Ottawa Indians and the State of Michigan, Dec. 20, 2002,
available at http://www.mi.gov/documents/LTBB_Agreement_58762_7.pdf; Tax
Agreement Between the Pokagon Band of Potawatomi Indians of Michigan and
the State of Michigan, Dec. 20, 2002, available at
http://www.dykema.com/indianlaw/PokagonBandTaxAgreement_85485_7%5B1%5D.pdf; Tax Agreement Between the Bay Mills Indian Community and the State
of Michigan, Dec 20, 2002, available at
BayMillsFinalTaxAgreement_61196_7.pdf; Agreement Between the Sault Ste.
Marie Tribe of Chippewa Indians and the State of Michigan, Dec. 20,
2002, available at http://www.michigan.gov/documents/
SaultSteFinalTaxAgreement_61197_7.pdf; Agreement Between the Hannahville
Indian Community and the State of Michigan, Dec. 20, 2002, available at
http://www.michigan.gov/documents/ HannahvilleAgreement_58669_7.pdf, Tax
Agreement Between the Grand Traverse Band of Ottawa and Chippewa Indians
and the State of Michigan, May 27, 2004, available at
(184.) See State of Oklahoma Indian Affairs Commission, Tobacco
Compacts, available at
http://www.ok.gov/oiac/Compacts-Contracts-and_Agreements/index.html#tobacco. This compact states:
(185.) See Fletcher, supra note 181, at 4 n.26.
(186.) See, e.g., Tobacco Tax Compacts Between the State of
Oklahoma and Seminole Nation (filed June 4, 1992) (on file with author);
Tobacco Tax Compacts Between the State of Oklahoma and Cherokee Nation
(filed June 8, 1992) (on file with author); Tobacco Tax Compacts Between
the State of Oklahoma and Chickasaw Nation (filed June 8, 1992) (on file
with author); Tobacco Tax Compacts Between the State of Oklahoma and
Choctaw Nation (filed June 8, 1992) (on file with author); Tobacco Tax
Compacts Between the State of Oklahoma and Quapaw Tribe of Oklahoma
(filed Sept. 3, 1992) (on file with author).
(187.) 515 U.S. 450 (1995).
(188.) See, e.g., Motor Fuel Compact Between the State of Oklahoma
and Chickasaw Nation (filed Sept. 26, 1996) (on file with author); Motor
Fuel Compact Between the State of Oklahoma and Cherokee Nation (filed
Sept. 26, 1996) (on file with author); Motor Fuel Compact Between the
State of Oklahoma and Choctaw Nation (filed Sept. 30, 1996) (on file
with author); Motor Fuel Compact Between the State of Oklahoma and
Ottawa Tribe (filed June 25, 1997) (on file with author); Motor Fuel
Compact Between the State of Oklahoma and Peoria Tribe (filed Oct. 8,
1997) (on file with author).
(189.) See Fletcher, supra note 181, at 4.
(190.) See COVEN, supra note 75, at 725-26.
(191.) See id. at 690.
(192.) 26 U.S.C. [section] 1680) (2006).
(193.) See id. [section] 1391(g)-(h); id. [section] 1392.
(194.) Id. [section] 45D.
(195.) See Statement of A. Martin, supra note 28, at 2; Skibine
Letter, supra note 130, at 2-3.
(196.) See Statement of A. Martin, supra note 28 at 5.
(197.) See BAND & LIGHT, supra note 1, at 153.
(198.) See Fletcher, supra note 1, at 72-75.
I. INTRODUCTION--THE USE OF TRIBAL GAMING REVENUE TO
FOSTER TRIBAL ECONOMIC DEVELOPMENT AND
II. TRIBAL GAMING AS A MEANS TO AN END
A. INDIAN GAMING COMES ALIVE: CALIFORNIA V. CABAZON BAND
OF MISSION INDIANS
B. THE GREAT (AND FRAGILE COMPROMISE: THE INDIAN GAMING
1. Classes of Indian Gaming
2. The Tribal Trump Card: IGRA's Good Faith Negotiation
3. The Trump Card is Trumped: Judicial Elimination of the
Tribal Remedy Under IGRA and the One-Sided Compacting
Process Since Seminole Tribe v. Florida
4. 25 C.F.R. Part 291: The Department of the Interior
Administratively Replaces the Tribal Trump Card in
Response to Seminole Tribe
III. GAMING COMPACT SUBJECT AREAS: THE ECONOMIC
IV. BARRIERS TO ECONOMIC DEVELOPMENT ON THE
RESERVATION AND THE SUBSTANTIAL BENEFITS TEST
A. QUANDARIES WITH TRUST LAND AND TAXATION ISSUES
B. ATTEMPTING TO RESOLVE THE "DOUBLE TAXATION" PROBLEM
AS A SUBJECT OF A GAMING COMPACT TO PROVIDE TRIBES
WITH A TAX BASE
Up to now, the Department has only accepted one type of benefit as
being sufficient to merit a revenue sharing payment, and that is
substantial exclusivity. That is in a [s]tate where Class III
gaming may be authorized but is not authorized for non-Indian
persons to operate commercial enterprises, but the tribe is
authorized to operate those enterprises. Then we would look at
whether a revenue sharing payment is warranted and to what degree,
given a particular tribe's circumstances. (29)
Tribes enjoy the exclusive "right to operate" so long as the
[t]ribes are the only person or entities who have and can exercise
the "right to operate" electronic games of chance in the [s]tate
or, in other words, as long as all others are prohibited or shut
out from the "right to operate" such games. (33)
It is clear that the RSTF provision falls within the scope of
paragraph (3)(C)(vii). Congress sought through IGRA to "promot[e]
tribal economic development, self-sufficiency, and strong tribal
governments." [citation omitted]. The RSTF provision advances this
Congressional goal by creating a mechanism whereby all of
California's tribes--not just those fortunate enough to have land
located in populous or accessible areas--can benefit from class III
gaming activities in the [s]tate. (118)
To date, the Department has only approved revenue sharing payments
that call for tribal payments when the [s]tate has agreed to
provide valuable economic benefit of what the Department [of the
Interior] has termed substantial exclusivity for Indian gaming in
exchange for the payment. As a consequence, if the Department
affirmatively approves a proposed compact, it has an obligation to
ensure that the benefit received by the State is equal or
appropriate in light of the benefit conferred on the tribe.
Accordingly, if a payment exceeds the benefit received by the
tribe, it would violate IGRA because it would amount to an unlawful
tax, fee, charge or other assessment. Though there has been
substantial disagreement over what constitutes a tax, fee, charge
or other assessment within this context, we believe that if the
payments are made in exchange for the grant of a valuable economic
benefit ... these payments do not fall within the category of a
prohibited tax, fee, charges, or assessments. (119)
There is no question that the Tribe has provided sufficient
documentation to show that it is in a far better position under the
terms of the Amendment than it would be under the terms of the
existing compact as interpreted by the U.S. District Court for the
Western District of Michigan. For that reason, we do not believe
that the Amendment should be disapproved. However, we are
sufficiently troubled by the reduction in the exclusivity zone, the
85 gaming-device exemption within that zone, and the contingent 4%
net win continued payment [even after the "competitive market" is
lost] to be unable to determine with certainly that new Section 17
of the Compact meets the two-prong test [(1) meaningful
concessions; (2) resulting in a substantial economic benefit to the
Tribe] as to warrant an affirmative approval of the Amendment.
"Commercial Gaming Facility" means a facility operated by any
person or entity including the [s]tate that contains 85 or more
electronic wagering devices that are electronic games of chance as
defined in Section 3(A)(5) of this Compact or other similar
electronic devices designed and intended to closely simulate an
electronic game of chance, regardless of how a device is
categorized under IGRA or whether the device operates independently
or through any type of common server, including video lottery
terminals, stand alone keno devices, and other similar devices.
The compacts were executed in response to the decision in Oklahoma
Tax Commission v. Citizen Band of Potawatomi, 498 U.S. 505 (1991),
where the Supreme Court held tribal sovereign immunity prevented
the State of Oklahoma from taxing goods purchased by a tribal
member on tribal land, but allowed the State to collect taxes on
sales to non-members of the tribe. Recognizing the need to develop
a method to properly allocate tax revenues between the State of
Oklahoma and the tribal governments, a tobacco tax compact system
was implemented. The tobacco tax compact provides that the State of
Oklahoma shall exempt all sales of tobacco products to and by the
Tribe, and the Tribe agrees to make payments in lieu of state