QUESTION:  HOW ARE TRIBAL CASINOS REGULATED?

ANSWER: Based on the explosion of Native American gaming as an industry since the passage of the Indian Gaming Regulatory Act ("IGRA") in 1988, many gaming companies — previously involved only in Nevada or Atlantic City gaming — have made the Native American gaming market a top priority.  In so doing, these companies have found it imperative to understand and assure compliance with Native American gaming regulation at the Tribal, State and federal level.

The following provides an overview of the regulatory framework.

I.                    TRIBAL-STATE COMPACTS

A.                 Allocation of Jurisdiction between Tribe and State

It is recommended that the role of the applicable State Gaming Agency with the Tribal casinos located in that state be understood right from the start.  Do not assume that the State Gaming Agency has regulatory jurisdiction over the Tribal casinos.  Several states do not exercise any control from a regulatory standpoint over the Tribal casinos and leave the regulation solely up to the Tribe and the National Indian Gaming Commission (“NIGC”).

The allocation of regulatory controls between the State and the Tribe over the Tribal casino is set forth in the terms of the Tribal-State compact.  A compact negotiated between the State and Tribe is mandated by the IGRA in order for a Tribe to conduct Class III gaming on its land.  Class III gaming (defined by the IGRA) is generally described as "casino-style" gaming and includes slot machines, banked card games, and table games.  See 25 U.S.C. § 2703(8). 

A Tribal-State compact is not required for Class II gaming.  Class II gaming includes bingo, pull-tabs, lotto, punchboards, tip jars, and other games similar to bingo, as well as non-banked card games not prohibited in the state and played at any location in the state.  Class II gaming also includes certain electronic gaming devices deemed to be “technological aids” to bingo or other Class II games.  See U.S.C. § 2703(7).  The Tribe and the NIGC have concurrent regulatory jurisdiction over Class II gaming.  The State has no regulatory jurisdiction over Class II gaming. 

Class I gaming entails social games solely for prizes of minimal value or traditional forms of Indian gaming engaged in as part of tribal ceremonies or celebrations.  See 25 U.S.C. § 2703(6).  The Tribe has exclusive regulatory jurisdiction over Class I gaming.

The compacts are public documents.  Most can be obtained from State Gaming Agency websites or the websites of the Tribes themselves.  Contact also can be made directly with the State Gaming Agency or the Tribal Gaming Agency to request a copy.

Although not an ironclad rule, the form of Tribal-State compact for one Tribe in the state usually will be fundamentally similar for all other Tribes in the state.  For instance, all of the Arizona gaming Tribes have virtually identical compacts.  Because this is not always the case, it is advisable to obtain a copy of the Tribal-State compact for the specific Tribe involved. 

Some states, like Washington, allow for continued negotiations and “improvement” of the compact terms, but require that all compacted Tribes receive the same increased benefits received by the negotiating Tribe.

B.                Differences between Tribal-State Compacts

The Tribal-State compacts may differ significantly from state to state.  Never assume that a compact applicable in one state will contain the same terms as one in place in another state.  As a result, the amount of regulatory control the State may have over a Tribal casino (if any) varies greatly from state to state.  Similarly, the role of a State Gaming Agency or other State Agency in regulating the Tribal casinos varies widely.

In Arizona, the Arizona Department of Gaming has concurrent regulatory jurisdiction with the various Tribal gaming agencies.  Pursuant to the Arizona Tribal-State Compact, the State conducts background investigations of companies and individuals doing business with the Tribal casinos.  If deemed suitable, the State will issue a certification to the company or individual.  An individual or company is not permitted to do business with any Tribal casino until it has obtained temporary certification from the State.  Temporary certifications can usually be issued by the State within 30 days if the application documents are deemed "complete" and the State has received a "sponsorship" letter from a Tribe requesting that the individual or company be reviewed for certification purposes.

Pursuant to the compact, the Arizona gaming Tribes have established Tribal gaming agencies or commissions.  These regulatory bodies are empowered pursuant to a Tribal gaming ordinance, which must be approved by the NIGC.  Some of the Arizona Tribal gaming agencies have extensive licensing requirements – in some cases as stringent as the information and background required in the State certification process.  Other Tribal gaming agencies require the completion of a basic one or two-page license application, and generally defer the background investigation and suitability finding to the State.

On the other end of the spectrum, the State of Michigan defers all licensing of Tribal casino vendors to the Tribal gaming agencies.  Indeed, the Michigan Tribal-State compact specifically requires the Tribal casinos to post in a prominent place within their facilities the following notice:

THIS FACILITY IS REGULATED BY ONE OR MORE OF THE FOLLOWING: THE NATIONAL INDIAN GAMING COMMISSION, BUREAU OF INDIAN AFFAIRS OF THE U.S. DEPARTMENT OF THE INTERIOR AND THE GOVERNMENT OF THE [NAME OF TRIBE].  THIS FACILITY IS NOT REGULATED BY THE STATE OF MICHIGAN.

Pursuant to the Michigan Tribal-State compact, the Tribes are required to license, operate and regulate the casino operations pursuant to the compact, Tribal law, IGRA and all other applicable federal law.  As a result, many of the Michigan Tribes have extensive licensing forms and requirements.

California is a newcomer to the Indian gaming scene from a state regulatory standpoint.  Although Tribal casinos have operated in the state for many years, the State had no regulatory jurisdiction until there were approved compacts in place.  Under California's current regulatory scheme, all vendors have been required to send a letter to the California Division of Gambling Control seeking a suitability determination.  To date, vendors have been permitted to do business with the Tribal casinos, so long as they obtain a license from the applicable Tribal gaming agency and also send a letter request to the State seeking the suitability application.  The Division of Gambling Control is in charge of sending out suitability application forms to the vendors and conducting the background investigations. 

The California Gambling Control Commission, which was not fully operational until 2001, oversees the Division of Gambling Control’s investigative activities and issues the suitability determinations based on the Gambling Control’s recommendations and conclusions.

As in Arizona, the California Tribal gaming agencies vary in their licensing requirements.  The Viejas Tribal Gaming Commission is among the leaders in the California Tribal regulatory process.  On this basis, if a vendor has complied with and satisfied the regulatory requirements of Viejas, there is a good chance that the vendor can likewise comply with the requirements of the other Tribal gaming agencies in the state. 

Additionally, the California Nations Indian Gaming Association (“CNIGA”) is active in regulatory issues and can serve as a good resource on Tribal gaming in California. 

From a national standpoint, the National Indian Gaming Association (“NIGA”) has a wealth of information on Indian gaming activities around the country.  For example, a recent survey commissioned by NIGA disclosed that Indian Tribes devote an estimated $150 million annually for Tribal gaming regulation and employ more than 2,750 Tribal gaming commissioners and regulatory staff.  Additionally, Indian Tribes reimburse state regulatory agencies more than $31 million for their regulatory activities.  The Tribes also fund the NIGC's $8 million budget for various types of gaming.  These statistics certainly support the contention that Indian gaming is the most highly regulated form of gaming in the country (and, perhaps, the world).

ANSWER It is incumbent that an individual or company seeking to do business with a Tribal casino determine the specific licensure requirements for that particular Tribe.  It is also advisable that copies of the relevant Tribal gaming ordinance and any Tribal gaming regulations be obtained to assure knowledge of and compliance with same.  Sometimes a general business license or other permit is required by the Tribe in order to do business with the casino, in addition to the gaming license.

Too frequently, Tribal regulators have commented that a vendor has not accorded them with the same deference as that vendor would give, say, the Nevada Gaming Control Board.  Because the Tribal Gaming Agency has the power and authority over licensure and therefore controls who can and cannot do business with the Tribal casino, Tribal regulators should not be treated lightly or as irrelevant.  Rather, Tribal regulators deserve the same amount of respect as a State regulator.

The Tribal Gaming Agencies have full power and authority to pursue disciplinary actions against vendors doing business with the Tribal casinos.  A license suspension or revocation or a hefty fine paid to a Tribal Gaming Agency will, in many cases, trigger notice to other regulatory jurisdictions where that vendor is licensed or certified.  As a result, compliance with Tribal gaming laws and regulations is as important as compliance with state and foreign gaming laws.

From a procedural standpoint, there usually is a process for appealing the Tribal Gaming Agency's decision on a disciplinary matter.  The appeal may be to the Tribal Court or the Tribal Council.  These procedures are generally contained in the Tribal Gaming Agency’s ordinance or regulations.

From a federal perspective, the IGRA makes clear that the Tribes have great regulatory powers over their Tribal casinos.  If the vendor is dissatisfied with the final decision from the Tribal Court or Tribal Council or other final decision-maker, there may not be any recourse to either the state or federal courts.  A Tribal Court or Tribal Council decision is generally accorded deference and comity by state and federal courts.  As a general rule, state courts have no jurisdiction on Indian lands unless Congress has specifically granted such authority.  Unless it can be shown that the Tribal Court or Tribal Council exceeded its jurisdiction in the decision-making process, the vendor may have no further recourse or appeal of an unfavorable decision.

As a result, it is imperative that vendors be aware of the pertinent Tribal regulatory requirements and maintain frequent contact with the Tribal regulators to obtain any revisions or amendments to their gaming ordinance or regulations.  From a public relations perspective, regular contact with the Tribal regulators also assists in projecting the vendor's image as a good corporate citizen seeking to comply with the applicable regulatory requirements.  This may translate to better communications and speedy resolution if a regulatory issue does arise down the road.

ANSWER The NIGC has certain regulatory powers over the Tribal casinos as enumerated in the IGRA.  For example, the NIGC has promulgated Minimum Internal Control Standards for Tribal casinos that are similar — and in some cases, more stringent — to those of the Nevada Gaming Control Board.  These standards address audits, cash and credit procedures, surveillance, electronic data processing, gaming devices, bingo and pull tabs, card and table games, and pari-mutuel wagering.  The NIGC also has issued standards governing environmental, health and safety issues relevant to Tribal casinos.  These requirements may be supplemented or enhanced in the Tribal-State Compact.  In addition, the NIGC has promulgated certain regulatory controls over background investigations and suitability findings conducted by the Tribal regulators, audits of the Tribal casino's financial and other operations, as well as other aspects of the Tribal casino.

Further, if a Tribal casino is managed by an outside company (as opposed to being self-managed by the Tribe), the management contract must be approved by the NIGC.  The NIGC has a specific management contract checklist which must be adhered to in order to obtain approval.  Approval of a management contract can take a year or more and entails compliance with the National Environmental Policy Act. 

The IGRA also requires the payment of certain fees in connection with any Class II gaming activity at the Tribal casino.

As a vendor, it is important to understand the NIGC's regulatory role over the Tribal casino and to determine the Tribal casino's compliance with the applicable rules.

ANSWER The best advice given by a Tribal regulator was simple: "Know your customer.”  By that he meant, some vendors, whether rightly or wrongly, believe that all Indian Tribes and Tribal Gaming Agencies are the same.  Nothing could be further from reality.  Indian Tribes' customs, traditions, laws and governance are certainly different depending on where the Tribe is located.  Tribes can — and do — vary widely just within a state.

Indian Tribes are sovereign nations and are treated as sovereigns by the United States.  Every Tribe has an established governance structure.  The Tribe may be led by a Tribal Chair, President, Governor, Chief or other head.  Generally, there is a governing Tribal council, business board or executive committee.  The Tribal casino may be established under a separate gaming enterprise of the Tribe or other entity and may be governed separately from the Tribal council or board.

The important lesson here is that the vendor should try to understand the differences between the Tribes and how such differences may impact his or her business.  For example, most Tribes have certain religious holidays or celebrations or "feast" days that are different from the federally recognized or state holidays observed off the reservation.  The Tribal offices and Tribal casino may be closed down in observance of the Tribe's religious holiday and, therefore, no one would be available to take delivery of the vendor's equipment or product.  In this regard, it would be a good practice for the vendor to compile a list of each Tribe's religious or other observances so that the vendor is cognizant of these issues.  Recognizing the Tribe's traditional celebrations is an additional way of "giving respect" to that Tribal customer.

The Indian gaming market is quickly becoming the largest and most profitable venue for gaming vendors and companies in the world.  Being successful in doing business with the numerous Tribal casinos around the United States requires the vendor to carefully do his or her "homework" and understand the interplay and relationship of applicable Tribal and state gaming laws and regulations.

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Prepared by Heidi McNeil Staudenmaier, who is a founding member of the International Masters of Gaming Law and partner coordinator of the Snell & Wilmer Indian Law & Gaming Practice Group in Phoenix.  She can be contacted at (602) 382-6366 or hstaudenmaier@swlaw.com