Article Tag: has_thumbnail

In the 1980s, the United States Congress didn’t want to consider a bill that legalized the rapidly growing business of Indian gaming, but it had no choice. While Congress was concerned with the spread of Indian gaming, it was content for the most part to leave its control to the states and/or the courts.

But when the Supreme Court ruled on the Cabazon case in 1987, Congress came under increasing pressure from the states to define Indian gaming and how the states could control its expansion. This pressure was the catalyst to the birth of the Indian Gaming Regulatory Act of 1988.

There were many major players on the road to IGRA: senators, congressmen, governors, tribal chairmen and chairwomen… But the real work, as usual, was performed in the trenches by staff members, advisers and attorneys. These are stories from three of the less-celebrated participants in the Cabazon case and the negotiations that led to the final version of IGRA. And as with most good pieces of legislation, no one was fully satisfied with the final project, but no one can deny it has worked effectively for the last 25 years, since it was passed in 1988.

Glenn Feldman was a young lawyer in the mid-1980s who represented the 25 members of the Cabazon tribe. In order to supplement their dirt-poor existence, the Cabazons had opened up a poker room in the fall of 1980 on their reservation in the Southern California desert, just like the poker rooms operated by other Californians just down the road. When two days later Indio police and later Riverside County deputies raided the casino in full SWAT regalia, Feldman defended the Cabazons all the way to the Supreme Court. Today, Feldman is a partner with Dickenson Wright in Phoenix.

Henry Buffalo was the in-house attorney for the Fond du Lac Band of Lake Superior Chippewa. His boss was Chairman Bill Houle, who tapped him to represent the tribe in gaming because he had already been doing work on natural resources on the tribe’s reservation. Buffalo today is a shareholder in the firm of Jacobson Buffalo Magnuson Anderson & Hogen, P.C., in Minneapolis.

Patricia Zell was the staff director and chief counsel for the Senate Indian Affairs Committee from 1987 through 2005, when Senator Daniel Inouye (D-Hawaii) was chairman, and was known to be very friendly to causes of Native American tribes. Zell was closely involved with the IGRA negotiations, trying to bring all the diverse views together to craft a bill that would pass Congress quickly. Today, she is a partner at Zell & Cox Law, P.C. in Alexandria, Virginia.

Cabazon Creation

Feldman traces the timeline from the raids on the Cabazon poker room until the Supreme Court decision.

“We had filed lawsuits in several courts the first two years, gotten some favorable and other not-so-favorable rulings, and when the Riverside deputies raided, we had to start over again. But when the state of California intervened in 1983, it became really serious. It had been just the tribe against the local authorities, but now the state was involved.

“So then, we’re back in the District Court against the county and the state. In December of ’84, the District Court ruled in our favor. In February of ’86, the Ninth Circuit affirms. Then they appeal to the U.S. Supreme Court, asking the court to review the case, and in June of ’86 the Supreme Court agrees to hear the case. In December of ’86, we argue the case before the Supreme Court, and in February of ’87, the court issues its ruling. So it takes a full seven years to get there.”

Zell says even before the Cabazon decision, Congress was concerned and looking at ways to define federal oversight of gaming on Indian lands. It was the Cabazon case that crystalized the need for federal legislation, Zell said. But once the case reached the Supreme Court, all progress toward a federal bill halted.

“The Cabazons thought they had a solid wall of law behind them, but nobody knew for sure,” says Zell. “And that made the negotiations certainly interesting, probably more precarious, and made it hard for either side to exercise the sole amount of brinksmanship, because nobody knew where the ultimate power lay.”

Long before, Buffalo says tribes had been asking the Indian Affairs section of the Interior Department (BIA) to help them protect their bingo halls and poker rooms.

“One of the responses from the bureau was to establish a gaming or bingo commission, as it was known. And it selected several tribal leaders, and Bill Houle was one of those who was selected. He had me participate with him on that. The commission met for about a year or two, and visited many reservations. At the conclusion of the hearings, their report back to the bureau was that bingo was being conducted without regulations. And that was in ’85 or ’86, when the proposals in Congress were all anti-Indian gaming, either wipe it out or put it under state control.”

One of the meetings was at the Eden Roc hotel in Miami, where racetrack operators were also holding a conference at the Fontainebleau. Buffalo remembers visiting the hotel and seeing a huge ice sculpture of a thoroughbred racehorse.

“That was an eye-opener for us,” he explains. “We knew at that point that the thoroughbred guys, the dog track guys, and the commercial gaming guys and the state governments were all against us. So, the next day at the meeting, we encouraged the tribes to call for a national meeting to create a new organization, that would be the catalyst of any legislation going forward.”

Difficult Negotiations

The Cabazon decision was the watershed moment that spurred Congress to act.

“So the court rules in favor of the tribes, and the floodgates open,” says Feldman. “Everyone in Congress agrees. ‘Now we’ve got to do something.’ The court had given the tribes pretty much carte blanche here, so Congress felt it needed to step in and do something. And so from early ’87 until the fall of ’88, there’s a lot of bills introduced, a lot of hearings held, a lot of negotiations taking place. And finally, the legislative sausage factory came up with what came to be the Indian Gaming Regulatory Act in the fall of ’88.”

Zell says there were senators on both sides of the issue, but few had much knowledge of the gaming industry. So the Senate Indian Affairs Committee took road trips to Nevada and New Jersey to examine their regulatory systems.

“(Nevada) Senator Harry Reid certainly kept up the drumbeat of his concerns about the potential for infiltration of organized, or unorganized crime, for that matter, and so we—Senator Inouye and his staff—spent a few days in Nevada, meeting with regulators and others, and really learned their system very well.”

When Inouye’s counterpart John McCain came back with a similar experience, there was a consensus that a regulatory system was necessary. But the extent of that system was hotly debated.

“The tribes, having won the Cabazon victory, were very adamant that they didn’t need to be regulated and to the extent there needed to be regulation, they could do it themselves,” says Zell. “But no one could dream that Indian gaming would become what it is today. We didn’t have crystal balls, and still don’t, and so the idea that Indian gaming would become what it has become was far, far from our imagination. No one could anticipate—at least not in the public service sector—the proliferation that gaming technology would enable.”
But there was a problem. The Reagan administration was in office and resisted the implementation of any additional federal regulations.

“John Bolton, who was then a deputy attorney general in the Justice Department, told us there could be no federal presence in a national regulatory system should there be one, and Reagan would veto any bill that has any federal presence in Indian gaming,” Buffalo says. “And states wanted to be able to regulate Indian gaming themselves.”

But there was a flaw in that argument because in some states where Indian gaming would flourish, there was no state regulatory apparatus.

“We had some very, very helpful dialogues with the National Governors Association, with individual governors, with attorneys general, and that really helped to be able to identify where there needed to be much more oversight and focus. Even though the National Indian Gaming commission was not given authorization to have a role in Class III gaming, it certainly was a mechanism by which one could, through a commission, begin to address how to enhance state systems and how to enhance the cooperative relationships between states and tribes. In some cases, the tribes had been in gaming long enough, and they knew more than the states.”

Buffalo’s meeting led to the creation of the National Indian Gaming Association, and the tribes sat down to craft a series of demands that would be included in any bill. As the organization grew, it signed up members from all over the country.

“At first, we just thought we were going to be dealing with bingo,” Buffalo says. “But the Shakopee in Minnesota had Class II gaming machines, and we lobbied pretty hard to protect those machines, to grandfather them in. Later, they decided to broaden the gaming activities. Not only Class II, but then they created Class I and Class III—the traditional games, the bingo games, and also casino games, or Class III games.”

NIGA became the driving force behind IGRA, working late into the night and on weekends to outline a bill that would work for tribes, but also satisfy the members of Congress who needed to show a certain “control” over Indian gaming. The result was the formation of the National Indian Gaming Commission.

“After the bill was passed, the first thing that had to be done was the adoption of regulations to implement the bill that would govern the National Indian Gaming Commission,” Buffalo says. “I participated in the task force that was set up through the National Indian Gaming Association, under the leadership of Rick Hill. The task was to assist the federal government, or Interior in drafting the regulations that would implement the act.”

Feldman says the addition of Class III games to the IGRA draft created a confusion that continues to this day.

“It’s a function of the ambiguity in IGRA,” he says. “There were hard-fought views on both sides of this issue, and so the bill that was passed in ’88 was a compromise, and the one way that you sometimes get compromise in legislation is to put in language that everybody can read their own way. That’s exactly what happened in IGRA.

“For Class III games, this ambiguity lasted until 2005, when the Colorado River Indian Tribes won a case that determined that states, not the NIGC, can regulate Class III Indian gaming.”

IGRA Initiation

Buffalo says that negotiations during the crafting of IGRA could only go so far. Congress would push back at tribal demands, and there were several impasses.

“The evolution of the language of the bill ultimately resulted in the majority of tribes saying, ‘Well, let’s go with it; it’s probably the best that we have right now, but at least it will be protected—by both a Supreme Court decision and legislation.’ So the tribes thought it important to have a neutral party adjudicate disputes between tribes and states. And that’s what the states fought over the most, too. But tribes absolutely felt it was necessary to have a neutral party address any disputes that would arise out of the negotiation of compacts.”

Zell says that as the states pushed to be the regulator over Indian gaming, the tribes began to lessen their resistance to federal oversight.

“There seemed to be some convergence in this area, and there were very few areas were there was convergence,” she says. “So the tribes, if they had to be regulated, preferred the federal government, and the states said, ‘that’s fine with us, because we don’t really want the feds looking down over our shoulders and telling us how well or not we are regulating.’”

Another problem, says Zell, is that tribes often couldn’t offer their input in the 1980s.

“Before gaming, most tribes didn’t have the wherewithal to send one or more leaders to Washington. They had to have bake sales, they had to raise money in every possible way to buy an airline ticket to send one member of the tribe to Washington. So the tribes were really disadvantages because they couldn’t be at the table in the same way that the states could be at the table.”

Buffalo says there where things that tribes did want controlled, however.

“A big concern was those early management contracts that tribes were signing where the tribes were getting 20 percent and the managers were getting 80 percent. They were just awful arrangements. That was a critical, important piece to the tribes. So the tribes were really interested in getting that language into the policy—that the tribe should be the primary beneficiary and were the sole proprietors of the gaming businesses.”

Limiting participation to tribal governments was also a point of contention.

“Some tribes from the Northwest had, up to that point, a history of individual tribal members operating gaming facilities on the reservations,” says Buffalo. “They argued within NIGA that was part of the history from their region of supporting individual business on reservations and they wanted to protect that somehow.But those operations really flew in the face of what everybody else was doing around the country, which was the tribal governments operating them, either with managers or by themselves, but not owned by an individual. What NIGA was saying was that Indian gaming was all about governmental gaming, no different than those activities that each of the states were authorized through their lotteries, and/or their charitable activities, and/or their authorization of commercial gaming. That point eventually won the day.”

Zell says tribal government gaming was one of the most important developments ever experienced in Indian Country.

“There weren’t many businesses in those days that tribes could get into that would be profitable, and certainly not the way gaming has become profitable,” she says. “So there were quite a few things that came to pass, that we couldn’t have foreseen, and most of it worked for tribes all over the country.”

Tribal gaming is entering a unique crossroads. Three prosperous decades have lured abundant competition and sparked the need to revamp.

This is a logical path. Tribal gaming strength speaks volumes, with estimated revenues approaching $28 billion. Disciplined self-financing helped tribes withstand the freefall of the Great Recession far better than non-native properties over the past five years. And some tribes have purchased land outside their reservations, hoping to survive court battles or work with municipalities to build more competitive casinos.

On the flip side, saturation lurks. There are approximately 400 casinos operated by tribes in the United States. Blended with non-native properties, competition continually sharpens. Online poker, off-track betting, sports betting and state lotteries all bid for the attention of the bettor.

Go ahead, find the rare, non-congested market. It’s almost impossible to do.

Nobody should stand pat, but what’s the smart choice between renovation and building new? Does one plan for several years or for just a couple?

Several renowned architects and engineers, with longtime ties to Indian gaming, have weighed in. They outline the best bang for the building buck.

Amenities: The Chief Argument

Thalden Boyd Emery principal Chief Boyd knows what works in Indian Country.

With more than 50 years of architectural experience, Boyd has a unique insight to numerous tribal entities, including his own, the Cherokees. Many of them unfold in Oklahoma, where Thalden Boyd Emery has a Tulsa branch. Boyd considers garages, RV parks, theaters and rooms excellent returns on investment, while golf courses often under-achieve.

“The tribes have a good sense of what they are building and the business reasons behind it,” he says. “You get this expansion and refurbishing question all the time in Oklahoma, where you have over 100 casinos. We have one spot in northeast Oklahoma which is the 13th casino within a 20-minute drive.

“We get asked by customers, ‘When are you going to stop building?’ The answer is ‘when they stop donating to the tribe,’” he laughs.

Boyd helps tribes understand the amenity pecking order. He says parking garages have an excellent payback period of just over a year, even without charging customers. The garage may cost $10,000 per space. Boyd estimates the average space contributes $22 a day to the floor. In one year, that spot has returned 74 percent of its building cost. Early in year two, the parking space now constitutes profit. Even a moderate-sized, 100-car garage contributes handsomely to the bottom line by year two.

Given the low cost of construction, the garage is the key amenity player. But RV parks in Indian Country come in a strong second. Boyd indicates that each space may cost an average of $15,000 to build, but operators can charge for it and recapture $10,000 a year. Each spot also delivers to the bottom line by the second year. That doesn’t even include what the customer drops inside the casino.

Hotel rooms also play a strong role. When occupied, they pay down the cost of construction. If empty, they can be used to lure players into extending their stay. Players not only remain on property, but have been psychologically massaged by the freebie. Boyd says new hotel rooms pay for themselves within two years.

Movie theaters? They may average $6,000 per seat to construct, but daily revenue will produce a break-even point in just over two years. Then, it’s all cinematic “cha-ching.”

Golf courses, however, are overrated. Boyd indicates the average facility costs $7 million to construct. Then, it must be staffed and maintained. The costs of water and electricity are staggering in this area, and the course only operates during daylight. It is hampered by significant downtime.

It may take a couple decades to recoup the price of this “going green” amenity. Operators must decide whether their goals are short-term, as in return on investment, or long term, to drive an image of splendor, magnificence, etc.

Cuningham Displays Versatility

Minnesota-based Cuningham Group, which has risen alongside Indian gaming since the early 1990s, embodies the amenity concept from several directions. It has orchestrated large-scale endeavors like the $650 million re-creation of the Harrah’s Cherokee Casino Resort in North Carolina. It also worked mid-sized expansions in the $100 million-$150 million range via a new hotel tower for the Potawatomi Bingo Casino in Milwaukee, Wisconsin, and a resort hotel and convention center for the Isleta Casino in Albuquerque, New Mexico.

Cuningham principal Tom Hoskens offers his own rating of amenities, which is tied to important points. One is the concept of periodic refurbishing. This is the engine that drives the entire financial resort.

“What I think is trending is the idea of breaking out of the box,” he says. “You have ended up with a lot of casinos that seem very regimented, like they were laid out by a drill sergeant. It bores people on end. It’s an excellent idea to change the amenities.”

Sometimes, a tweak works wonders.

“There are a lot of different ways to do that, and most of the time it depends on the competition around a property,” he says. “I like to see pieces of it every year. This takes care of your customer who comes there continually. You always want to be giving that customer a little excitement. That customer likes to think you are always looking to improve the facility for him. You can change out the carpets, or do something with the pathways around you.”

Like Boyd, Hoskens advances the concept of covered garages near the property. They are inexpensive to build and maintain, and, because they are free, they give customers their first comp before leaving their vehicles. The garage must constitute easy walking distance to the casino and be covered to guard against rain and snow.

New hotels and convention centers attack another industry prize, midweek traffic. Hoskens says most of Cuninghams’s newest projects contain this component. They give customers a venue in which to socialize. Their extended stays make gaming a more leisurely activity.

Local properties share the lessons learned from operators like Station in Las Vegas: provide family entertainment like bowling alleys and theaters.

“Native American properties have adopted the same philosophy,” he indicates. “You can create a wonderful entertainment opportunity when people come in. The parents can drop their kids off at the cinema, and with someone to watch them, go play for two and a half hours, pick up the kids and go home. Or you can do a bowling league, followed by some gambling. Amenities like that give you a real return on investment.”

They also make it easy for patrons to return.

Then comes the mystique factor, placed into the subconscious realm of economic planning: create a buzz. This is a dynamic recognized from casino boardrooms and architectural plans to the entertainment stage.

If considering an addition, Hoskens says casinos need to create a big bang. It could be a landscaped pool or nightclub, a pool by day and club by night. A concept like this creates a buzz and foot traffic.

Outdoor amphitheaters also rank strongly for investment return. They host high-quality entertainment acts, which can both draw customers and create long-term revenue.

Finally, he favors a retail chain connected to or nearby the property. Customers can’t help but wander from the store to the gaming floor.

Worth The Investment

Tribal entities have been savvy with their finances, according to Brian Fagerstrom, president of Denver-based WorthGroup Architects. The company finished three significant projects in late 2012—renovation and expansion for Harrah’s Ak-Chin Casino in Phoenix, the Cherokee Hard Rock in Tulsa and the Choctaw Pocola in Oklahoma. It also built new for Jena Choctaw Casino in Louisiana, which opened in February.

A common theme ran through all properties.

“All the projects are cash-funded,” Fagerstrom says. “None of these has financing associated with it. That tells a huge story about how the tribes have been able to develop their properties at a pace in which they have cash flow. The smart ones are able to figure it out without ever having to finance.”

Harrah’s Ak-Chin does have capital funding from itself. The property amassed an improvement budget over the years and spent it. When expanding, they seek the smart packages of additional gaming space, resort luxury and a tilt toward the younger audience.

“What’s trending now is how entertainment brings all the amenities together,” Fagerstrom asserts. “Entertainment is more and more prevalent in how the design is implemented.

“Beyond the restoration, beyond the gaming part, and beyond the hotel component, you find that entertainment is at the forefront of the architectural design.”

Its form embraces younger demographics. Many operators proclaim the benefit of “gaming lounges” where people with smart phones, mobile apps and a fine grasp of technology can gamble.

“It’s not traditional entertainment,” Fagerstrom says. “You don’t see a band and listen to a lounge act in all of them. Much of this is about, ‘How can I sit and use my smart phone? How can I get information? Where can I sit down with a drink, be part of the gaming action and be relaxed?’

“Part of it is technology, part of it is equipment and part of it is flexibility. As places continue to grow, gaming, hospitality and the amenities help properties distinguish themselves.”

Take the new lounge at Hard Rock. Although the project was noted for its suites, it included a stunning new lounge-in-the-round. Comfortable chairs with sleek red backs adorn the floor. A circular design, draped in blue, marks the wall and ceiling. The curves create the sense of wide-open space. Several mid-sized screens display an abundance of sporting events. Actual scores of games can be seen on a ticker running across the top of the bar. Patrons can sit, order drinks and watch events they may have even wagered upon online. The facility even creates a good environment for a DJ.

This amenity, directed at younger players, complemented the overall renovation project. Hard Rock added the all-suite tower of approximately 100 rooms with the intention of pleasing high-end players.

A thrill factor usually accompanies the renovation. While properties upgrade to stay competitive, they often do something new to make a statement.

The Pocola project encompassed both. The operators did not have a hotel on the property. They added one, re-branded the entire facility, created a resort look and went from a two-story casino building to an eight-story structure.

It was an important leap, because this property competes with about 30 operators in a one-hour radius.

“All of this created a new image for their location,” Fagerstrom says. “They got four-for-one (four benefits to one project), including the extra capacity for gaming.”

As for Choctaw Pines, the operators skipped entry-level positioning. They sought a mid-sized, impressive casino which figured to hit the ground running. The building is the closest gaming property to an area of 180,000 people, Fagerstrom says.

It opened as a casino and the hotel is already planned. Fagerstrom indicates that the tribe sought high-end construction, which enables flexibility and future expansion.

SOSH Scores

Tribes pay attention both to finance and flexibility, which create interesting expansion discussions.

“With the economy having gone through freefall over the past four to five years, we are finding that our clients look for ways to renovate on much tighter budgets,” says Tom O’Connor, a principal at SOSH Architects in Atlantic City. The company has extensive inroads with the Native American community.

“Whether it’s a hotel room refresh or a restaurant re-branding, owners and their funding sources are looking long and hard at the bottom line,” O’Connor says. “Prioritizing features and materials, phasing construction schedules and (the much dreaded) ‘value engineering’ are the new normal. The goal is to not have the cost-conscious decisions be apparent.”

It can be done. The mindset often means smaller outlays for everything from the energy-efficient HVAC system to light dimming, audio video systems and railings. Off-the-shelf carpeting, simplified landscape design features and less durable exterior building materials can also be used to reduce cost.

Then there are faux finishes, the paint and wall coverings that mimic (especially from a distance) expensive wood, marble and stone finishes. These are the wrinkles that an architect would notice, but the players would not.

Master planning becomes more critical as Native American casinos morph into world-class resorts, with amenities expected from destination properties, O’Connor says. Money becomes a big subject for operators thinking several years ahead.

This concept was practically unheard of a few years ago. An expansion involving added gaming space practically ensured a huge return. Yet, the crunch of competition in this challenged economy shifts the landscape.

Expansion projects that once appeared limitless in scope and cultural design features must be become cost-effective. Architects share the conference table with accountants.

“That’s always a battle in the business environment,” O’Connor says. “If you think about the hard times we had in the ’90s, General Motors was being run by the bean counters. They ran the company into the ground. You need to have a fine balance between project cost and design.

“Quite often, you will have the bean counter at the meeting, trying to tamper down anything they perceive as too expensive. But you also have a real good executive at that meeting who understands the value good design brings to a project.”

Somewhere between those perspectives, projects become finalized.

SOSH’s key tribal associations include the Senecas in New York and the Seminoles in Florida. The company performs varied expansion projects along with a brand new $300 million property for the Seminoles set open later this year at Ohio’s Northfield Park racetrack.

O’Connor says businesses often can renovate for 70 cents on the dollar compared to building new. That gives tribes distinct but different methods to create their image.

One popular concept is creating a long shelf life for an expansion by building for future considerations. SOSH recently prepared a five- to 10-year master plan for Fantasy Springs Golf Resort and Casino in Indio, California. The original property had expanded without planning future venues to complement the changeover from casino to resort.

The SOSH master plan would provide phased expansions to the hotel towers and pool complexes, secluded casitas, an 18-hole golf course, a retail town center, additional restaurant/entertainment venues and a new, enlarged casino. The first phase of restaurant, bar and casino renovations was recently completed. The master plan provides a road map but remains flexible to accommodate future considerations.

Hnedak Bobo: A Varied Approach

Many tribal gaming operators reposition their properties to stay fresh and build greater awareness with customers, according to Dike Bacon, principal for Memphis-based Hnedak Bobo Group.

Some opt for the heavy-hitting implications of branding.

“One such strategy tribes are considering is the drawing power of recognized national brands,” he indicates. “They are powerful motivators for customers and can significantly enhance a property’s ability to stay top-of-mind. Bringing a national brand to an existing property can have positive implications to the diversification of player demographics while adding new features and attractions that existing customers desire.”

Bacon says Hnedak Bobo Group’s recent project for the Pokagon Potawatomi at the Four Winds New Buffalo Casino Resort bears this out. The expansion, which opened last summer in southwest Michigan, 90 minutes outside Chicago, not only added a new 250-room hotel and 1,500-seat event center, but included a 12,000-square-foot Hard Rock Café.

“The Hard Rock name has significant staying power and supports the property’s efforts to reach out to a larger and broader demographic,” Bacon says. “The property’s new Silver Creek Event Center complements a crossover Hard Rock demographic, while opening up the resort to conferences and business clientele on weekdays. The design of the iconic café includes a large guitar element that literally pulls guests inside with neon LED lights used as the instrument’s strings. This design feature makes a significant visual impact and helps to set the venue apart from the rest of the casino floor.”

Just outside another major metropolitan market, the Coushatta Casino Resort, which draws customers from Houston and across southern Louisiana, looked to hotel expansion as a means to stay competitive. The Coushatta Tribe of Louisiana wanted to boost customer convenience while redefining its own brand in the marketplace.

Developed by DreamCatcher Hotels and designed by Hnedak Bobo, the Seven Clans Hotel at Coushatta Casino Resort integrates both customer convenience and a higher-quality guest experience into the new 401-room property, which sits adjacent to the Coushatta Casino.

“We all know that guest experience is a top concern at any casino—when you add a hotel to the amenity mix, you can significantly impact customer loyalty through the convenience, quality and service you deliver to those customers,” says Greg Hnedak, partner of DreamCatcher Hotels.

Hnedak formed the hotel development company on the idea of delivering high perceived value and quality to the customer, at the lowest possible cost for the owner. He believes the critical point in the hotel guest experience begins after they turn the doorknob to their guest room. “Those are the ‘moments of truth;’” Hnedak says, “the guest immediately perceives the level of detail and value designed into every touch point—from the quality of the bed and linens to details in the bath fixtures.”

Engineering Excellence

While architects deliver beautiful exterior design and imagery, engineers provide a crucial, unheralded component to enrich clients. They make sure everything works.

Engineers know it takes a certain mindset to thrive while others grab the headlines. Their excellence is assumed, even though it won’t draw the “oohs” and “aahs” associated with breathtaking architecture.

That’s fine with JBA Consulting Engineers, a Las Vegas-based company with worldwide projects serving both small clients and giants like Wynn Resorts.

Vic Sibilla, director of operations for JBA’s Orange County, California branch, understands that if the integrated resort space is a musical band, someone must play bass guitar.

“We are the unsung heroes of the gaming world,” Sibilla laughs. “We impact people’s lives because of what we do and we accept the fact they may not notice it was us. I mean, we don’t expect people to come away from a concert and say, ‘Hey, the Foo Fighters were great, but the electrical engineers really killed it.’

“And no, we won’t hear somebody say, ‘Look at that diffuser,’ or ‘My hair dryer works.’ But we’ll hear about it if it doesn’t.”

JBA is an industry leader for integrated resorts via mechanical, electric, plumbing, fire protection, telecommunication, security/surveillance and audio-visual systems.

By delivering state-of-the-art functionality, it designs systems that are both cost-effective and efficient.

Its recent Native American work includes casino projects in California (San Manuel in Highland, Thunder Valley in Lincoln and Tribal Black Oak in Tuolumne), Oregon (Wild Horse in Pendleton), Arizona (soon-to-be-opened Twin Arrows in Flagstaff) and Connecticut (Foxwoods). Total construction costs range from $45 million to $200 million.

Sibilla says tribal tastes have become more entailed, reflecting the spread of Indian gaming from Minnesota in the early 1990s through California, Florida and the American heartland. Destination resorts have become a significant tribal ideology.

“It used to be card rooms and bingo halls for Native American clients,” he says. “Now it’s golf courses, first-class hotels, spas and high-end dining. From the mid 1990s to 2007 there was a big push in that regard, and since then, you are seeing things done smaller, with retrofits and redesigns to make them more appealing and increase their market share.”

The engineering work impacts key elements like mechanical, electrical and plumbing systems. JBA’s service spreads to technology areas like telecom/data, audio-visual, security/surveillance, acoustics and fire protection—.

Holding the line on revenue sharing in tribal-state casino compacts and helping American Indian governments restore ancestral lands will continue to be priorities for the U.S. Department of Interior in President Barack Obama’s second term, current and former federal officials say.

DOI policy under Obama “is based upon principles that tribes must have an adequate land base to develop their economies,” says attorney Bryan Newland, policy adviser to Larry Echo Hawk, Obama’s initial appointee as assistant secretary for Indian affairs.

Newland, a citizen of Michigan’s Bay Mills Indian Community who left federal service to enter private practice, says DOI and its Bureau of Indian Affairs under Obama “operates on the belief tribes should exercise control over their own lands.”

Sovereign Land

So it was no surprise last October that Kevin Washburn’s first act as successor to Echo Hawk was to reject a draft compact between Massachusetts and the Mashpee Wampanoag that infringed on tribal authority and called for a 21.5 percent state share of casino revenues.

Washburn’s tribal gambling mantra for the next four years as head of the BIA is apparently written in the congressional intent of the Indian Gaming Regulatory Act of 1988.

Gambling under IGRA, according to the legislation, is to serve as “a means of promoting tribal economic development, self-sufficiency and strong tribal governments.”

That means the $27 billion that annually flows from 460 tribal casinos should not be onerously shared with states, counties and municipalities.

“Interior has an important role to play ensuring that gaming remains primarily a tribal asset,” says Washburn, an Oklahoma Chickasaw and former dean of the University of New Mexico School of Law.

It’s also crucial that tribal-state compacts not stray beyond the scope and regulation of gambling. The Mashpee agreement included hunting and fishing rights and other items that encroach on tribal jurisdiction over Indian lands.

“The law fairly strongly determines what can be negotiated between states and tribes,” Washburn says. “States should not be able to use gaming and a compact as a stalking horse to deal with tribal water rights, land claims and things of that nature. Congress did not authorize that. A compact is supposed to be primarily about gaming.”

Perhaps most important is Interior’s commitment to assist tribes seeking trust lands—not so much for gambling, but largely for infrastructure, homes, schools, clinics and economic development.

Unclogging a Bush administration moratorium on land/trust petitions, Interior in three years processed 1,041 applications involving nearly 100,000 acres. Eleven applications involved casinos.

Interior accomplished that goal despite constraints imposed by the U.S. Supreme Court’s 2009 decision in Carcieri v. Salazar, ruling Interior could not place land in trust for tribes not “under federal jurisdiction” with passage of the Indian Reorganization Act of 1934.

So Long Salazar

Much of the renewed federal focus on tribes began with Obama appointee Ken Salazar as Interior secretary.

And it hasn’t hurt that Obama has been the recipient of Indian largesse. Tribes contributed more than $2.5 million to the 2012 Obama campaign, according to the Center for Responsible Politics, far exceeding previous presidential elections. Republican Mitt Romney got $750,000.

Tribes made great strides in Obama’s first term. Along with land/trust and revenue sharing matters, the administration settled Cobell trust litigation, permanently reauthorized health care legislation, settled several water rights matters and streamlined the tribal land leasing process.

“I’ve never seen a commitment like this from an administration,” says Larry Rosenthal, partner in IETAN, a Washington government relations firm.

“Secretary Salazar will be remembered as one of the most forceful allies of Indian Country to have occupied the position,” Newland says.

Salazar is retiring, but tribes are hopeful Interior’s policy direction will continue under REI executive Sally Jewell, Obama’s nominee to fill Salazar’s seat. In any event, the DOI secretary normally relegates indigenous issues to the BIA, now headed by Washburn.

“NCAI welcomes the news that the Obama administration has moved quickly to nominate an innovative leader to continue the momentum of the Department of the Interior achieved under Secretary Salazar,” the National Congress of American Indians said in a statement.

“If the Senate confirms Miss Jewell we will be very excited to work with her,” Washburn says. “We’re specifically excited about her experience with Indian tribes.”

Haves And Have-Nots

The Bush administration land/trust logjam was alleviated when Salazar streamlined DOI’s administrative process, delegating final action on non-gaming applications to Interior’s eight regional offices.

“It was basically boring stuff that makes government work well,” Newland says of the administrative changes. “Sending stuff back out to the regional directors, revising the fee-to-trust handbook; there were some environmental review procedures that were rolled back.

 “We put processing fee-to-trust applications in the performance standards for regional directors. We held them accountable for completing review of the applications.”

But failure to get a congressional fix to the Carcieri decision continues to pose hardships for the agency, requiring that trust applications undergo a legal analysis by Interior Solicitor Hilary Tompkins, a Navajo, or her regional counterparts.

Reviews surround the legal definition of “under federal jurisdiction.” Of 366 federal recognized tribes in the lower 48 states, about 50 received recognition after 1934.

“We have been careful to consider that issue with virtually every land-into-trust decision,” Washburn says. “At a minimum it means we’ve had analysis from the solicitor’s office, sometimes a full-blown opinion. Obviously it has added quite a bit of work to our solicitor.

“There are easy cases where everybody knows the tribe was under federal jurisdiction in 1934. And there are tribes where it is a little more complicated. We’re processing land into trust for some tribes and not at all for others.

“We think it’s a matter of simple justice, really, that every tribe has access. We are all equal and we all should have the right to restore our homelands.

“We don’t disapprove many of these. You won’t find a whole lot of decisions from us saying, ‘No, this is rejected because of the Carcieri analysis.’”

Washburn has also proposed eliminating a 30-day review on placing land in trust, a response to a Supreme Court ruling giving persons six years to legally contest land/trust actions.

Gambling Land/Trust

In rescinding the infamous Bush-era “commutability memo,” Salazar lifted what was essentially a moratorium on gambling land/trust applications. 

The applications included not only existing tribes, but newly recognized, restored and landless tribes as well as federal land claims.

IGRA generally limits casinos to tribes recognized when the act was passed in 1988. Tribes seeking casinos on new lands off existing reservations are required to go through a “two-part determination” in Section 20 of the act.

The “two-part determination” requires approval from state governors and a discretionary—and often controversial—finding that the project benefits a tribe and is not “deemed detrimental” to nearby indigenous and non-Indian communities.

Salazar also demanded that the BIA move on “equal footing” exceptions for newly recognized and restored tribes not federally recognized when the act was passed and seeking gambling on “initial reservations.” There were also tribes acquiring land through claims against the federal government for lost acreage.

“These decisions often raise difficult and contentious issues among the parties involved,” Echo Hawk said when Salazar issued his directive.

Echo Hawk is a master of the understatement. Off-reservation gambling has generated opposition from states, local governments and even tribes angry that new casinos were encroaching on ancestral lands and casino markets.

Although “equal footing” applications do not require state approvals, environmental impact studies are extensive.

“Communities are affected by gaming operations,” Washburn says. “We certainly think the local voice is important, whether it be from the city, county or local community groups.”

There are 21 applications pending at Interior from tribes seeking land for casinos. Many off-reservation proposals have been resubmitted since Salazar rescinded the “commutability memo.” California and Oklahoma each have five of the applicants and Wisconsin has three.

“One area that has been very controversial, has generated much litigation, and could use some clarification, has been the process of placing off-reservation fee land into trust for the purpose of gaming,” writes Alexander Skibine, University of Utah law professor and onetime counsel to the House Committee on Interior and Insular Affairs.

“Unfortunately, much of this litigation has involved tribes against other tribes.”

Tribal Competition

Ancestral lands and potential encroachment are a part of Interior’s analysis of gambling on newly acquired lands. But in many cases the issue is competition.

“I wish all tribes would hold hands and sing ‘Kumbaya,’” Washburn says. “Each tribal leader has, I hope, an interest in looking out for the benefit of all tribes.

“But tribal leaders also have the responsibility—first and foremost—to protect their own communities, their market share and their ancestral lands.”

Expanded tribal gambling has generated opposition from such influential lawmakers as Majority Leader Harry Reid (D-Nevada), and Senators Dianne Feinstein (D-California) and John McCain (R-Arizona), the latter angry that a Tohono O’odham land claim threatens to bring off-reservation gambling to the Phoenix area.

Feinstein, McCain and others are demanding IGRA amendments to Section 20 exceptions. They blocked congressional efforts last year to remedy Carcieri, angering tribal leaders who contend the land/trust process is more about economic and social progress than gambling.

“Carcieri is really about tribes recovering and restoring our homelands. This is not about gaming,” says Ron Allen, chairman of the Jamestown S’Klallam Tribe and Washington Indian Gaming Association.

“My concern is Interior should treat all tribes equally,” says Allen, who also serves as treasurer for the National Congress of American Indians. “It currently doesn’t. To the credit of Interior and the BIA, they have moved the agenda forward with respect to the way the courts have interpreted Carcieri.”

The greatest victims of the controversy may be many of the 352 indigenous groups who since 1978 have sought official recognition, according to Interior’s Office of Federal Acknowledgment.

DOI and Congress have ruled on 73 of the cases, nine are under investigation, five are awaiting a judgment and five others are in litigation.

The lengthy, expensive and complex recognition process has been seriously muddled, with policymakers often suspicious that gambling is the motive behind the petitions. To be sure, many applicants are being financed by potential casino developers.

Generating nearly four times combined federal appropriations for the BIA ($2.54 billion) and Indian Health Service ($4.3 billion), gambling has hijacked federal Indian policy, complicating land/trust, labor and tax issues and delaying congressional action on health care, housing, law enforcement and, of course, Carcieri.

“Gaming is the big gorilla in the room in any discussion of Indian policy, which is sometimes a shame because gaming is not the most important activity that tribes do by any means,” Washburn told GamblingCompliance.com.

Putting The Kibosh On Revenue Sharing

In the 25 years since IGRA, tribes have often complained that states were engaging in extortion, demanding Indian governments share gambling revenues in exchange for tribal-state compacts required to operate Class III, Las Vegas-style casinos.

IGRA generally prohibits taxation of tribal casino revenues, but allows for exceptions if states give tribes a “benefit,” often statewide or regional exclusivity to operate casinos. Tribes have had little recourse as the 11th Amendment prevents tribes from suing states suspected of “bad faith” negotiations.

Of the 28 states with tribal casinos, 10 require some form of revenue sharing.

George Skibine, former head of the BIA Office of Indian Gaming, says proposed compacts with onerous revenue sharing components were often “deemed approved” during the Bush administration, meaning the agency took no action and allowed agreements to go into effect.

“There were a lot of deemed approvals,” Skibine says, under the guise that if the tribes and states agree to the compacts, “who are we to object?”

Perhaps the most blatant “extortion” of tribes was in California, where Governor Arnold Schwarzenegger (2003-2011) demanded Indian governments pay their “fair share” in helping alleviate a state deficit.

Sitting down with tribes to hash out new and renegotiated compacts, Schwarzenegger demanded general fund payments in exchange for allowing tribes to exceed a 2,000-slot machine limit in 1999 agreements. Fourteen tribes now pay $345 million a year to the general fund.

California tribal exclusivity, however, is vested not in compacts, but an amendment to the state constitution.

Unfortunately for Schwarzenegger, the state waived its 11th Amendment protections.

The Rincon Band of Luiseño Indians near San Diego last year won a nearly decade-long legal battle when the 9th Circuit Court of Appeals ruled Schwarzenegger acted in bad faith by demanding general fund payments in exchange for the additional slot machines.

The ruling, upheld when the U.S. Supreme Court refused to hear the matter on appeal, noted that the payments were in violation of IGRA tax prohibitions.

“Someone had to make the state own up to the fact its negotiations with tribes were illegal,” Rincon Chairman Bo Mazzetti says. “We fought this battle for all tribes.”

Newland says the Rincon decision “was a vindication of the standards that were already in place” when Echo Hawk rescinded the commutability memo.

Determining the revenue sharing value of statewide or regional exclusivity is now done “on a case-by-case basis,” Washburn says.

But Washburn, a former U.S. prosecutor and counsel to the National Indian Gambling Commission, has mixed emotions about federal involvement in compact negotiations.

“We try to give tribes and states the room to negotiate in a certain space and we will generally defer to their negotiations, at least until the state revenue share amount makes us gag,” he says.

“I personally haven’t been working on these decisions long enough to be able to state a real clear, bright line,” Washburn says. “In the end Indian gaming must primarily benefit tribes, not states or other outsiders.”

Although Washburn rejected the Mashpee compact (“We didn’t feel like we had a whole lot of choices there.”), he hopes in the future to encourage tribal/state partnerships on gambling issues.

“If the state and the tribe have worked hard together to come up with an agreement, it really does, sometimes, seem paternalistic to disapprove that agreement,” he say. It’s a beautiful thing when a tribe and a state can work through their difficulties and come up with an agreement.

“But we do have a law we have to follow.”

The issue of online gaming has split land-based casinos into separate camps. Whether Native American or commercial, the existing bricks-and-mortar casinos haven’t kept up with the pace of development of online gaming in other countries.

In Europe, where online gaming is legal and thriving, the existing casinos have felt a small impact. Ron Goudsmit, the president of the European Casino Association, has been quoted that revenues for his member casinos slipped 5 percent since the advent of legal online gaming across Europe. But the land-based casinos of Europe aren’t of the size and scope found in the United States, so a small revenue drop is hardly noticeable. In the U.S., it could be significant.

Commercial casinos that are members of the American Gaming Association had been opposed to online gaming since a position was first taken early in the first decade of the 21st century. But that changed in 2011, when the AGA shifted its position to support a bill that would have legalized online poker at the federal level. While not all members supported the bill, it was an option that most of the larger companies could at least tolerate, if not capitalize on.
   
But efforts in Congress to legalize online gaming have fallen short. In each of the last two sessions, online gaming bills either were not even introduced or simply ignored. Cursory hearings in the House did not clarify anything. Even after a letter from the Department of Justice released in late 2011 that offered a new opinion on the Wire Act (that the only online gambling strictly prohibited is sports betting), Congress was not motivated to act.
   
So, some states got into the game first. Delaware has legalized full-blown online gaming (minus sports betting) and Nevada approved online poker. New Jersey Governor Chris Christie recently approved a bill that legalizes online gaming in the Garden State, with Atlantic City casinos the home of the servers and site of the wagers.
   
So even though online gaming has been ignored by Congress, it is alive and well in the states.

Two Sides

There are essentially two arguments that land-based casino operators make about online gaming.

The defense of legal online gaming goes like this: Online gaming is already occurring in the U.S. The “Black Friday” busts of PokerStars, Full Tilt Poker and Absolute Poker, among other sites, proved that millions of Americans were utilizing sites that the U.S. government considered illegal, under the Wire Act and the Unlawful Internet Gaming Enforcement Act of 2006 (UIGEA). So whether the government likes it or not, or tries to enforce it or not, millions of dollars are being transferred into the accounts of offshore online gaming sites, mostly poker and sports betting. To try to shut it down would be trying to stick your finger in a dyke.

The groups that want to continue the ban on online poker/gaming contend that any legalization will open the floodgates, and millions more Americans will flock to the online casinos, making visits to casinos less frequently and probably spending much of their disposable income on those websites. They want the government to tighten the screws on illegal offshore gaming sites. They point to the reaction of players after the Black Friday sites were shut down, which halted much online wagering for a time. But that wagering has since picked up to pre-Black Friday levels.

The pro group says that legalizing online poker, which has a limited appeal to a smaller group of players, would not impact the larger full-casino games player, who would not decrease visits to land-based casinos.

But the anti group says any foot in the door will open it wide, and the player who wants to play all the casino games will find a way to do so.

 
Tribal Tussle

This argument is especially fierce among Native American gaming tribes. Largely located in rural areas that depend upon people driving to their facilities, many tribes fear that online gaming would simply allow their customers to stay home and gamble. And also in many cases, tribes have a monopoly on casino gaming in the states where they are located, and see any incursion by online gaming into their markets as a threat to their compacts and to tribal sovereignty.

Other tribes who subscribe to the pro-online gaming divide are more realistic. They believe online gaming is inevitable, and unless tribes get their foot in the door now and play a role in its legalization, the consequences can be grave.

John Tahsuda, a former Senate Indian Affairs staffer and now a principal with Washington, D.C.-based Navigators Global, says tribes are leery about giving up what they already have.

“There is still not a level of comfort of how this potential industry might work,” he says. “When they were starting out in gaming, they didn’t really understand how that would work either, but they had nothing to lose. So they just plunged along at full speed and made some mistakes along the way. But there was nothing to lose.”

With success now in gaming, tribes are uncertain how online gaming would work in a tribal gaming setting.

“They’re concerned about how it would affect the bricks-and-mortar casinos,” he says. “Some don’t believe it would hurt, but a majority of tribal leaders haven’t reached the point where they are willing to support it wholeheartedly.”

Jana McKeag, a former member of the National Indian Gaming Commission and now a lobbyist with Lowry Strategies, says that while tribes haven’t been paying attention to the issue, recent developments have made it crucial.

“When the December DOJ letter came out, that should have been a warning for tribes,” she says. “They have to realize that if they don’t get involved in this, the states and the lotteries will dominate the internet gaming space.”

Tribal Strategy

Up until a bill failed to be even introduced in the 2012 Senate, the National Indian Gaming Association claimed to be following the progress of any measure.

“There was really no reason to get too excited,” said Jason Giles, the executive director of NIGA, at the American Bar Assocation’s “Gaming Law Minefield” conference in Las Vegas in February. “We were assured it wasn’t going to go anywhere, so we weren’t too worried about it.”

As in all issues, NIGA tries to reach a consensus with tribes. But because of the divisiveness of the online issue, it was a difficult task. But there were a series of points upon which all tribes agreed, that became NIGA’s statement of principles on the issue (see bottom).

Tahsuda says the statement doesn’t say too much.

“The NIGA principles are very broad, so it’s almost impossible to find someone who doesn’t agree with them,” he said.

And McKeag says the generalities of the NIGA statement “make it hard to convert into legislative language.”

One source told Global Gaming Business that tribes don’t understand what they are facing.

“Overall, most of Indian gaming is not engaged in the issue,” the source said. “When I’ve met with Senate and House staffers about this issue, they tell me that no one had talked to them about online gaming and tribes.”

But with the opportunity slipping away in 2012, the new Congress doesn’t seem to be much interested in online gaming. Senator Jon Kyl, a Republican from Arizona, and Senate Majority Leader Harry Reid’s ally on the issue, retired at the end of the term, as did the House champion, Massachusetts’ Barney Frank.

“The loss of Senator Kyl is a big problem,” says Tahsuda. “He had an appreciation for the difficulty in regulating and the law enforcement side of online poker. He was able to get more Republican members on board. I don’t see anyone replacing that skill set.

“And without Barney Frank on the House side, it’s uncertain who will pick up the mantle. No one else was as outspoken as he was. And when you take away the incentive of online poker being a revenue generator, which is what would have happened under a Reid-Kyl bill, it allows the negative perceptions of online gaming to take over.”

McKeag agrees.

“No one knows what is going to happen, either on the commercial or tribal side,” she says. “With Kyl gone, there is no champion on the Republican side.”

While Leslie Lohse, vice chairwoman of the California Tribal Business Alliance, breathed a sigh of relief when the bill failed, she is leery of something else coming up.

“It would be difficult to find any bill that would address all the concerns that we have,” she said, adding that they want to be part of any process, however.

State Direction

With no federal bill on the horizon, the states have been quick to act. This creates a special problem for tribes because of the Indian Gaming Regulatory Act and tribal-state compacts.

“There’s an ever-shifting legal landscape to contend with as well,” says Tahsuda. “Will it be the feds that control it or are the states going to be in the driver’s seat? What will be the tribal role in any case? It’s hard to get your arms around the industry without knowing that.”

McKeag says the current process in the states is worrisome for tribes and all other aspects of the gaming industry.

“It’s a huge problem for their bricks-and-mortar casinos,” she contends. “This is going to have a big impact, not just on tribal casinos, but on commercial casinos as well. It opens a huge Pandora’s Box, and once you see one big state legalize it, there’s going to be a rush to get involved. And by that time, it might be too late for the tribes.”

Tahsuda also points out that the disparity already between the states that have legalized or are considering legalization is an issue.

“There’s some question about the kinds of games, what player pool you can access and how successful it is going to be,” he says. “All those unknowns make tribes uncomfortable.”

Lohse says tribes are more comfortable with poker only. Even commercial casino companies are a little leery of the full online gaming concept.

“Are we talking about online poker or online gaming?” she asks. “We’d be more opposed to online gaming, but want to be sure that if we approve online poker, it’s not the camel’s nose under the tent.”

McKeag agrees about the scope of the games.

“Tribes would be OK with poker because they believe it won’t harm them too much,” she says. “The wide range of games would be a problem.”

Other clauses in the leaked Reid-Kyl bill were also a problem.

“There were definitely some issues in the opt-in/opt-out clause (which allows individual states to decide if they wanted to participate in a federal poker bill),” she says. “It wasn’t explained very clearly how that would affect tribes. And it also seemed to be very slanted toward Nevada. There just wasn’t full consideration of what it would do to tribes.”

The big problem for tribes, in both a federal and state-by-state scenario, is a possible reopening of the IGRA law. As stated in the NIGA principles, that would be a game-changer, for while tribes have never been completely happy with IGRA—to this day, some call it a severe attack on tribal sovereignty—tribes don’t want its beneficial elements reduced or changed in any way.

One source told GGB that there is little doubt that IGRA will come into play under any federal bill.

“It’s going to be difficult to get Congress to consider crafting some kind of bill that would include tribal gaming options without opening up IGRA,” he said.

Lohse agrees that it “definitely brings IGRA into play.”

Tahsuda points to the difficulties that a federal bill might cause the compacting process.

“It will be interesting to see what happens in states where tribal gaming is part of the state economy,” he says. “There are a lot of questions and lawyers are all over the map on this. Does internet gaming violate state compacts? What happens if the lottery offers it rather than private companies? Tribes will have to take this head-on within their states.”

Indeed, the lottery involvement was one that the casino industry overlooked, even though the 2011 DOJ memo was specifically written to allow lotteries to sell tickets online within a state.

“The big secret is the involvement of the lotteries,” says McKeag. “They have a good message because they want to bring revenues to their states. And the lotteries are playing it low-key and will corner the market. If tribes don’t pay attention to this, they’re going to blink and the next thing you know it’s going to be over, and it will really harm this industry.”

Another issue is how tribal online gaming would be regulated. Under the Reid-Kyl bill, the Department of Commerce would be the regulatory body, with licensing duties held by the Nevada authorities. This isn’t a winning formula for tribes. Most would prefer the National Indian Gaming Commission to expand its role over land-based tribal gaming to the internet. But NIGC Chairwoman Tracie Stevens has declined to comment on the proposal because, she says, there is no bill that outlines the NIGC responsibilities in that area. Lohse says that response doesn’t help move the issue forward.

“NIGC has been close mouthed about what their role would be,” she says. “They have experience in Indian gaming, and I would hope that they would be useful in online gaming. We don’t want the IRS or Commerce Department involved in online gaming.

“It’s not helpful to us, but I can understand they don’t want to box themselves in to any specific predetermined role.”

McKeag says the tribes would definitely prefer NIGC involvement, but she believes it can be overcome.

“There’s also the argument that the Department of Commerce, which is the designated regulatory body under a federal online gaming bill, doesn’t understand the tribes,” she says. “But the fact is that tribes are involved with every federal agency, including Commerce.”

Model For Success

Without opening up IGRA at the federal level and clearly defining the roles of tribes in any nationwide online gaming industry, the way forward for tribes in the new reality of state-by-state legalization is hazy.

In Connecticut, where the Mashantucket Pequots and the Mohegans have been preparing for online gaming for several years now, the model is clear, and is consistent with the participation of commercial casinos in a possible legalization in New Jersey. After the state approves a measure to go forward, the servers would be located within the casinos permitted to conduct online gaming, thereby asserting that the betting is still being done within the casinos.

At February’s Western Indian Gaming Conference in California, George Forman, a managing partner with Forman & Associates, contended that scenario is legally defensible.

“When is a bet a bet?” he asked. “A bet is a bet when and where it is accepted. You can bet all you want from your home computer, but it’s not a bet until it is accepted at the site where the server is located. So the wagering actually takes place on Indian land,” in the case of servers at tribal casinos.

Other speakers at the conference urged California tribes to immediately begin offering online poker—considered a Class II game—because tribes have the unlimited right to offer Class II gaming on their reservations.

All agree, however, that should that happen, there will be multiple lawsuits and the measure would become bogged down in the courts, possibly for years.

But California is an anomaly for most tribes. As the most populous state, it has a built-in online gaming market. By some accounts, the state held as much as one-third of the market for illegal online gaming before the UIGEA was passed in 2006. Most states are far smaller and don’t have the benefits that California tribes will enjoy when online gaming gets under way.

The answer, according to some, is to pool resources. Tahsuda points to a Midwestern coalition that wants to create a poker room benefitting multiple tribes.

“This makes sense purely for the economics of it,” he says. “You can share the costs. And depending upon how it moves forward, there can be some joint coalition presence just to counter the larger presence in the market, especially the lotteries.”

One source, who asked not to be identified, says NIGA needs to take the lead on this issue.

“NIGA’s strategy was to issue their principles and the Senate would reach out to them to incorporate their principles in any bill,” he says. “That is not likely to happen.

“NIGA should really be promoting a federal bill because that’s the only way to protect the tribes. If they don’t get a bill through fairly soon, the lotteries will dominate, and that will prevent any federal legislation.”

NIGA’s Online Gaming Principles

• Indian tribes are sovereign governments with a right to operate, regulate, tax, and license internet gaming, and those rights must not be subordinated to any nonfederal authority;

• Internet gaming authorized by Indian tribes must be available to customers in any locale where internet gaming is not criminally prohibited;

• Consistent with longheld federal law and policy, tribal revenues must not be subject to tax;

• Existing tribal government rights under tribal-state compacts and IGRA must be respected;

• The legislation must not open up the Indian Gaming Regulatory Act for amendments;

• Federal legalization of internet gaming must provide positive economic benefits for Indian Country.

This tribal divide over online gaming has been most apparent in California, pitting some of the most important players in Indian gaming against each other. The Morongo tribe of Cabazon has spearheaded a drive that would legalize online poker in California, using the argument that if tribes don’t get involved at the very beginning of any online gaming discussion in the Golden State, they risk getting left behind.

The tribe did the unthinkable of partnering with some of California’s card clubs, usually the sworn enemy of Indian gaming.
   
Other tribes, led by the Palas, want to maintain the illegal status of online gaming, fearful that if it was to become legal, visits to the somewhat remote Indian gaming halls would plunge. The majority of the tribes hold this view, and an effort by the Morongos and the card clubs to establish the California Online Poker Association (COPA) with an accompanying play-for-free site was short lived.
   
COPA was formed to support a bill introduced by California Senator Rod Wright to legalize online poker. While the measure failed in the 2012 legislature, it is back this year, with some changes that address the concerns that some tribes had, but leave some of the objectionable issues intact.

Bill Details

Some of the provisions of Wright’s 2013 bill (SB 51) include:

• Legalizes only internet poker (Wright’s 2012 bill included other casino games) and only poker games approved by the state Department of Justice;

• A five-year license, with a $5 million licensing fee that covers investigations and suitability review, with additional fees determined for regulatory costs;

• A one-time $30 million deposit into the general fund which will be credited toward a 10 percent tax on gross revenues;

• Gaming tribes with casinos operating for three years or more, racetracks, card rooms and account deposit wagering companies (ADWs) in good standing are all eligible for licensing;

• Excludes non-gaming (non-compacted) tribes;

• Provides that internet poker does not violate the California Constitution, nor does it violate tribal exclusivity guaranteed under the state Indian gaming law and compacts;

• Requires investigations of all applicants, including tribes;

• Requires tribes to waive tribal sovereignty for licensing investigations and patron disputes;

• Regulatory power rests with state Gambling Control Commission;

• Prohibits “aggregation” of computers for internet poker play (bans internet cafés);

• Players must be located in state and be over 21, in order to qualify for the state waivers under the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA);

• Prohibits companies that accepted bets in the U.S. after the passage of UIGEA from participating in California online poker;

• Provides a long list of responsible gaming provisions that each online poker room must comply with;

• Requires winning players to declare their profits for tax purposes.

Pros and Cons

At the Western Indian Gaming Conference (WIGC) at the Morongo Casino Hotel in February, Morongo Band of Mission Indians Chairman Robert Martin explained why he continues to support a bill that would legalize online poker in California. Martin said the Morongo Band was behind an effort to organize pro-online gaming tribes and the card rooms in the California Online Poker Association, a group that disbanded following the failure of Wright’s 2012 bill.

“When I was serving on the Morongo tribal council 26 years ago, the U.S. Supreme Court ruled on the Cabazon case, transforming the lives of hundreds of thousands of Native Americans,” he explained. “That effort was not without controversy. We took some grief and criticism from public officials, the media and some other tribes. It all proved to be worthwhile and it was the right thing to do at the right time.

“We’re at another crossroads today. The internet has revolutionized every industry it touched, and gaming is no different. Online gaming is growing at five times the rate of land-based gaming. Tribes must be open to change and be able to adapt to the marketplace if we are to remain relevant. Pursuing internet poker doesn’t mean we are abandoning our bricks-and-mortar casinos.”

Leslie Lohse, the vice chairwoman of the California Tribal Business Alliance, an organization made up of tribes that opposed COPA’s path to online poker, says Wright’s new bill hasn’t changed enough to satisfy the tribes concerned about online gaming.

“So far, his language has not addressed the issues we raised,” she says. “The bill still rejects our sovereignty and doesn’t talk about what happens if our revenue streams from the bricks-and-mortar facilities fall. They keep telling us it will not affect us, but we have not seen any proof.”

George Forman, the managing partner with the law firm Forman & Associates, presented the case for and against Wright’s bill at the WIGC.

While he found many things in the bill acceptable to tribes, the only avenue for tribes to avoid investigations into their tribal gaming operations would be to set up a commercial company, an LLC. He also complained that the bill does not recognize existing licensees and tribes, and wondered why they should be charged an exorbitantly high $5 million fee for investigations that have for the most part been completed or are not necessary.

Martin said there will always be differences among state tribes, but there has to be some negotiation to get a general concensus.

“There is no one-size-fits-all solution to this issue in California,” he says. “While the legislature would like to put us all in one box, it just doesn’t work. There are more than 100 tribes in California. It’s unlikely that we’ll all agree completely on any issue.”

Lohse was encouraged when COPA was disbanded, and hopes that the two sides can meet in the middle.

“To their credit, they’re now considering what we have to say,” Lohse explains. “We’re not talking about totally opposing any kind of online gaming; we’re just concerned about the negative impacts that might occur to our businesses and our sovereignty. We hope we can open some dialogue with the other tribes without the involvement of card rooms, racetracks or ADWs, so we can look at it more collectively.

“We’re trying to start with things that we all agree upon and work up to the tougher issues. We’re hopeful we can get the tribes together on the same page, as much as that’s possible.”

Martin says the tribe can’t simply ignore what is happening.

“Tribes must have a voice in how internet gaming is developed,” he says. “If we don’t, others will. We don’t want to look back 25 years from now with regret if we let this opportunity pass.”

Lohse isn’t ready to ignore the bill, but wants to take it slow and address issues that tribes have with the bill.

“We have a monopoly here in California with regards to gaming,” she says, “and I haven’t seen anything yet that would fully protect what we have today. It’s going to be difficult to come up with any bill that would address all the concerns that we have.”