Gaming Guru

Bits and Pieces from Indian Country - July 2006

Gambling revenue at American Indian casinos nationwide grew to nearly $23 billion last year, climbing at a rate more than three times faster than traditional gambling operations. California tribes accounted for nearly a third of the money, according to a comprehensive report on Indian gambling to be released Wednesday. Nationwide, Indian gambling revenue grew by 15.6 percent in 2005, even though no major casinos opened last year, according to the Indian Gaming Industry Report, compiled by economist Alan Meister. It was the 10th consecutive year in which revenues increased by about 15 percent. The report shows tribal casinos closing in on the amount of profits taken in by other casinos, which had $29.6 billion in revenue in 2005, a 4.6 percent rise from the previous year. California's tribes saw revenue climb by 24 percent, to $7.2 billion, in a state where 55 tribes operate 57 casinos. Juliet Williams, Associated Press, New York News Day, 6-21-06

California may still be expanding, but there are some storm clouds on the horizon. The state legislature is balking at approving the governor's latest compacts, and Governor Arnold Schwarzenegger is threatening to close six casinos over a definition. The tribes in California are limited to 2,000 slot machines, but, as one can see from the expansion of the two casinos in Connecticut, if a casino has the right market, 6,000 machines could easily be utilized and would certainly be more profitable. The tribes in California have tried two approaches to do an end run around the limitations. The first involves using Class II games as the tribes in Florida and Oklahoma have done to get around state restrictions. The second approach (the one that has the governor in a huff this time) utilizes the multi-station game, which is often argued as being one game for licensing purposes, but which the state terms to be one game for each seat. We will have to wait and see how this works out.

California's tribes saw revenue climb by 24 percent, to $7.2 billion, in a state where 55 tribes operate 57 casinos. Juliet Williams, Associated Press, Sacramento Bee, 6-20-06

An Assembly committee rejected proposed side-by-side Indian casinos by so-called reservation-shopping tribes hoping to lure Las Vegas-bound gamblers off Interstate 15 in Barstow. Wednesday's vote by the Assembly Governmental Organizational Committee likely dooms Barstow casinos for the Los Coyotes Band of Cahuilla and Cupeno Indians of San Diego County and the Big Lagoon Rancheria of Humboldt County. Associated Press, San Francisco Chronicle, 6-29-06

Tribes limited to 2,000 slots count each multistation game as one machine because it's controlled by one computer chip. The state contends that each station of the game counts as a slot for purposes of licensing and calculating the fees tribes must pay the state. Just weeks after extending an olive branch to the state's most powerful Indian tribes, Gov. Arnold Schwarzenegger is threatening to try to shut down six of their casinos - including two of the largest in San Diego County - in a dispute over how their slot machine numbers are tallied…According to the state Gambling Control Commission's latest figures, for March, 12 casinos statewide had a total of 40 multistation machines with a total of 348 terminals. Chet Barfield, San Diego Union-Tribune, 6-30-06

Two interesting legal issues surfaced in June. In Washington, the Puyallup tribe has been told by the National Indian Gaming Commission that the tribe's system of per capita distribution does not meet federal guidelines, and the tribe has been ordered to stop those payments. One of the major misconceptions of Indian gaming has to do with payment of gaming revenues to individual tribal members. It is commonly believed that all of the money is distributed tax-free to members. This case illustrates that the distribution of funds is controlled by federal regulation and monitored. By law the majority of the funds must go to tribal general funds and be used for the benefit of the community and not individuals.

Every member receives $2,000 a month in "per capita payments," which last year used up 65 percent of the tribe's $134 million in net gambling revenues.
Federal regulators are demanding that the Puyallup Tribe of Indians cut by half the amount of money given to tribal members each month. The National Indian Gaming Commission issued a notice of violation to the tribe Monday, claiming it is misallocating its gambling profits, giving away twice as much money as is permissible under the tribe's own rules. For the past four years, the majority of the profits from the tribe's gambling operations have gone straight into the pockets of its 3,450 members, rather than into social programs…The commission ordered the tribe to "immediately cease and desist" making the excess payments. Rob Carson; Tacoma News Tribune, 6-15-06

The second issue is at the core of Indian gaming - sovereignty. In California, former employees of Thunder Valley Casino, operated for the United Auburn Indian Community by Station Casinos, are trying to sue the casino over alleged sexual harassment and discrimination. In the past, courts have held that tribes were protected from such suits by sovereignty immunity. In this case an arbitrator ruled the tribe had agreed to abide by the laws of the state in the compacting process and therefore could not claim immunity. This one bears watching also; if the ruling is upheld, it could have a major impact on Indian gaming in general.

…new twist to the legal battle between Thunder Valley Casino and seven former employees who allege sexual harassment and discrimination. The ruling by Commissioner Margaret Wells, if confirmed, would allow the plaintiffs to continue their case, despite the Indian casino's claim that tribal sovereignty makes it immune from civil rights lawsuits …Wells turned the sovereign immunity defense on its head…"Applying those laws to defendants would not impair the tribe's interest in governing on its lands as the tribe has committed itself to abiding by those laws," Wells wrote. Dorothy Korber, Sacramento Bee, 6-21-06

In a way, the legal battles resemble the actions of New Jersey's Governor, Jon S. Corzine. They illustrate just how fragile the framework is upon which gaming is constructed. Indian gaming may not be subject to the tax fluctuations that make gaming so difficult in some states, but it is highly regulated and subject to regulation changes, such as the ones Congress is currently deliberating, any of which can change the viability of an operation overnight. Well, now that you are up-to-date on all of the current risks and problems, you can rush out and buy some casino stocks, which just happen to be available at bargain prices, at least for the moment.

But now, that is simply my opinion, isn't it?

Ken