Prop. 5 v. Pala Compact - Are They Both Unconstitutional?

The fight over Proposition 5 and the Pala compacts continues. Although voters in California approved Prop. 5 overwhelmingly (after a $100 million campaign), the state Supreme Court ordered that the new law cannot go into effect. The Court said that it needed time to decide whether Prop. 5 violates the state constitution.

Meanwhile, a pro-Prop. 5 tribe has qualified a ballot referendum which would overturn the more restrictive compacts outgoing Gov. Wilson signed with the Pala Band and ten other tribes. The Agua Caliente Band, which runs a profitable casino, without compacts, in the heart of Palm Springs, spent $2 million to gather 752,129 signatures in just three weeks. This puts the issue on the March 7, 2000 ballot and also prevents the Pala compacts from going into effect until after the election.

It is clear that the fight over slots has turned into a tribe-against-tribe civil war. One of the dangers of war is that both sides can lose. That is a real possibility here, because the ultimate decisions will be made by courts, not voters.

Opening the Prop. 5 and Pala compacts to constitutional challenges may be fatal for both. I believe that every court that is called upon to decide the question would rule that tribes may not have gaming machines, no matter what they are called or how they are played.

The problem for both compacts comes from a legally incorrect, yet binding nonetheless, decision of the 9th Circuit. This Court of Appeals for the western U.S. had to decide in the Rumsey decision in 1996 what forms of Class III games are allowed under the Indian Gaming Regulatory Act. This is called "the scope of gaming."

Every other court that has looked at the question has ruled that the state’s public policy determines the scope of gaming. Instead, the 9th Circuit directed lower courts to look at which specific games are permitted by state law: "A state need only allow Indian tribes to operate games that others can operate, but need not give tribes what others cannot have."

Sacramento-based federal District Court Judge Garland E. Burrell, Jr., applied that test to the question of whether the state had to negotiate to allow tribes to have slot machines. Finding no state statute existing prior to the election which specifically allowed gaming devices, Judge Burrell ruled the tribes may not have slot machines.

If the 9th Circuit is looking for a state statute that allows these specific machines, Prop. 5, by its own terms, is such a statute. The Pala compacts similarly have the status of being statutes.

The authors of the two compact proposals tried to distinguish their gaming devices from casino slots by prohibiting handles and payouts of coins and currency, and by requiring prizes be paid from a players’ pool, made up of prior player losses.

The Pala compacts may appear to authorize different machines, because its games have additional restrictions. But both Pala and Prop. 5 allow players to gamble using a video screen, not with lottery tickets or other pieces of paper dispensed from a machine.

Neither Prop. 5 nor the Pala compacts are amendments to the state Constitution. The Pala compacts were approved by the state Assembly, Senate and Governor, and the U.S. Secretary of Interior. But none of these have the power to overrule the California Constitution.

Judge Burrell based his decision solely on the State Lottery Act, but he did make a passing reference to Prop. 37. That 1984 initiative created the Lottery Act, but it also amended the constitution in two ways: to allow a state lottery and to prohibit "casinos of the types currently operating in Nevada and New Jersey."

Burrell’s decision: "The Lottery Act authorizes the California State Lottery to conduct 'lottery games'..."

This is virtually identical to the language used by the supreme courts of three other states in questioning whether video lottery games are allowed simply because voters have approved a state lottery.

In 1994 the Supreme Court of South Dakota, with extreme reluctance, ordered 6,000 gaming devices throughout the state be unplugged. The Justices ruled that voters wanted only a lottery, not other games of chance. (It took a constitutional amendment to bring back the machines.)

In ruling that the Legislature had not given the Lottery Commission authority to put in video lotteries, the highest court of West Virginia stated, "The fact that electronic video lottery is different from the common state-run lottery games... also raises a question as to whether electronic video lottery is actually a lottery as contemplated by the constitution." (The West Virginia Legislature has now defined video lotteries; so far the Supreme Court has not had to decide whether that statute is constitutional.)

The most important case comes from Oregon, where voters also put in a constitutional amendment prohibiting "casinos" when they approved a state lottery. In 1994 the Supreme Court allowed bars to have up to five video poker machines, but only because the number was so small and only in businesses that were not primarily for gambling. (Apparently no one has challenged later compacts allowing large tribal casinos.)

Given the rising feelings against legal gambling, judges are in no mood to approve expansions of gaming. If asked, courts will rule that Californians wanted only passive lottery games when they voted in a state lottery -- and voted out casinos.