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The advent of internet gambling and the ongoing spread of commercial casinos will likely cut into a slumbering American Indian casino industry, analysts predict, diminishing the economic and social progress tribes are achieving through gambling.

Perhaps more important is the concern, shared by many tribal leaders, that the shifting gaming landscape will erode principles of sovereignty and self-governance crucial to the preservation of indigenous communities.

Coming Competition

This is particularly true as tribes, faced with increasing competition for the wagering dollar, wrestle with options to pursue expanded gambling either as commercial ventures or government enterprises promoting tribal tax exemptions and regulatory authorities.

“We need to really be careful,” says Leslie Lohse, vice chairwoman of the California Tribal Business Alliance, a coalition of three tribes. “Tribes can take a business approach, but they’d better make sure their governmental sovereignty is protected.

“We don’t know what will become of the gaming business in four or five years. But we know our sovereignty will remain the mainstay of our relationship with the federal government.”

Industry analysts predict online wagering and expansion of commercial casinos and racetrack casinos will diminish the $26.5 billion Indian gambling industry, impeding tribal efforts to grow and diversify their economies, strengthen their governments and preserve languages and traditions.

“The expansion of commercial gaming licenses across the U.S. is clearly a threat to tribal gaming,” consultant Grant Eve told tribal leaders at the National Indian Gaming Association winter summit. New York, Illinois, Florida and Kentucky are among states considering legalizing casinos.

Meanwhile, draft federal legislation to legalize and tax online poker has come under fire from tribal leaders who claim the bills favor commercial gambling companies and ignore tribal government tax exemptions and regulatory authorities.

And a recent Department of Justice opinion that online gambling other than sports betting does not violate the Wire Act appears to open the door to online state lotteries, yet another threat to tribal casinos.  

“The situation is so fluid, I don’t think anyone really knows where the major threat is coming from,” said attorney Glenn Feldman, a specialist in Indian law who testified on internet gambling before the Senate Committee on Indian Affairs. “Federal legislation that ignores or cuts the tribes out completely is as much of a threat as state lotteries. Which is worse, I can’t tell you.” 

Playing Defense

The challenge to tribal leaders is not simply to protect Indian Country’s nearly 30 percent share of the legal U.S. gambling market of casinos, racinos, card clubs and lotteries which, combined, generate more than $90 billion a year.

The greater challenge is to preserve Indian gambling in a manner that does not further erode political and legal principles that form the basis of tribal sovereignty and self-governance.

Fundamentals of sovereignty crucial to Indian nations—particularly the concept that government revenues are exempt from taxation—may be challenged by Congress and the courts if tribes pursue online wagering and other economic opportunities as commercial business ventures rather than government enterprises.

“It does not appear legalization of internet gambling will have anything tailored to tribal sovereignty,” Kathryn Rand, dean of the University of North Dakota School of Law, told GamblingCompliance.com. “There won’t be a mechanism in federal or state legislation allowing tribes to exercise their sovereignty.

“Because tribes are not just commercial operators—in fact, they’re governments—I think it’s important that tribes weigh the policy issues, including the effects pursuing internet gaming will have on tribal sovereignty.

“While others would counsel tribes to be sure their technological capacity is ready to go, what we would argue is, ‘You’ve got to be sure this is the direction you want to take as a matter of policy and good governance.’”

The tribal share of the gambling market grew dramatically after passage of the Indian Gaming Regulatory Act of 1988. Tribal government casinos currently generate nearly as much annual revenue as commercial casinos, which according to the American Gaming Association won about $28 billion in 2011.

But the growth of tribal gambling stabilized with maturation of the largely rural industry and political and legal difficulties Indian governments face acquiring new lands off existing reservations.

The explosion of tribal casinos that spread to 28 states and today number about 440 facilities grew to a relative halt in 2007. Gambling revenues that year reached $26.1 billion, but have since leveled off.

Some tribes seeking to grow their markets have pursued off-reservation commercial casinos and racetracks that do not enjoy the tax exemptions and self-regulation components of tribal government gambling enterprises under IGRA.

The Chickasaw Nation of Oklahoma has acquired racetracks in Oklahoma and Texas, and the Mohegan Tribe of Connecticut purchased the Pocono Downs racetrack in Pennsylvania, operations that are subject to state taxes and regulations. The Seminole Tribe of Florida, in acquiring Hard Rock International, owns a number of tribal and commercial casinos. 

Perception of Tribes Is Crucial

The status of tribes as domestic sovereign governments is written in the U.S. Constitution and confirmed in treaty agreements, and has been upheld by the U.S. Supreme Court.

But the ability of tribes to exercise self-governance rests largely with congressional Indian policy, which over the past 200 years has ranged from termination and assimilation to land allotment, to self-determination under the late President Richard Nixon.

The Nixon doctrine remains in force. But some tribal leaders are concerned the growing perception of Indian tribes on Capitol Hill is no longer that of indigenous, culturally rich governments, but business entities and purveyors of gambling.

“We have to be very careful of how we are perceived and what we are using our money for, and keep ourselves separate and distinguishable from corporations,” Lohse said.

Involvement in casino gambling by two-thirds of the 365 federally recognized tribes in the lower 48 states is blamed by many for congressional action and court rulings detrimental to Indian sovereignty.

IGRA’s requirement that tribes operating Las Vegas-style casinos enter into regulatory agreements, or compacts, with the states in which they are located is regarded by tribes as an affront to their governmental status.

The District of Columbia Circuit Court of Appeals, in a 2007 ruling involving the San Manual Band of Mission Indians, trashed a historic tribal exemption from the National Labor Relations Act, largely because most San Manuel casino customers are non-Indian.

And a 2009 U.S. Supreme Court ruling that the Department of the Interior should not place land in trust status for tribes not under “federal jurisdiction” in 1934 continues to play havoc with some 2,000 land/trust applications, only 20 of which involve casinos.

The court ruling in Carcieri v. Salazar is blamed on growing public opposition to a handful of new casinos off existing reservations, many by newly recognized, restored and landless tribes. 

Many tribal leaders and lawyers believe the political and legal backlash against Indian sovereignty will continue if they do not take a hard-line, pro-Indian government position on federal and state legislation on internet wagering. 

Internet Gaming: Commercial Or Tribal?

A profitable internet wagering scheme requires that tribes accept bets from off their reservations, a concept that runs contrary to IGRA, the federal law limiting tribal casino jurisdiction to land held in trust by the U.S. Department of the Interior.

As Congress drafts a federal scheme for online gambling, industry observers contend it is not politically realistic for tribes to press for tax exemptions and a regulatory or licensing role for the National Indian Gaming Commission, the agency that oversees tribal casinos.

Many tribal lawyers and lobbyists recommend that tribes pursue internet gambling as a purely commercial venture, ceding tax exemptions and regulatory authorities guaranteed under IGRA.

“The internet is not a tribal government gaming enterprise. It is not Indian gaming,” said a tribal attorney who requested anonymity. “Forget about IGRA and Indian gaming.”

Nevertheless, the attorney said it is important tribes remain competitive in online wagering to both maintain their share of the nationwide gambling market and preserve sovereignty.

“As a major player in a business, you need to be a participant to maintain your strength,” the attorney said. “That’s why it’s a sovereignty issue. Without their revenue and position in the gaming industry, tribes wouldn’t have much sovereignty.”

“Most tribal leaders don’t completely understand” the need to embrace the internet as a commercial venture, says Tom Foley, partner in Lowry Strategies, a Washington, D.C. government consulting firm.

“A handful of people do. They realize the internet is probably a commercial enterprise. The bets are being taken from off the reservation. It’s a business that they need to get into with the understanding it’s a commercial operation. It’s not Indian gaming.”

Should online wagering remain a state issue in the absence of federal legislation, industry analysts contend tribes would likely have to cede to state taxation and non-Indian regulations. Such is the case with the California Online Poker Association (COPA), a coalition of tribes and card clubs seeking intrastate online poker legislation.

But Indian advocates believe a federal scheme for nationwide internet wagering should allow some components of IGRA tax exemptions and regulations.

That’s the model being promoted by NIGA, the tribal casino industry lobby. A NIGA resolution approved in 2010 endorses “principles” for online wagering legislation that call for tax exemptions, the ability to accept off-reservation wagers and a regulatory role for NIGC.

“The principles involve using an IGRA model with a non-geographical overlay,” says Tom Rodgers, principal of Carlyle Consulting.

The NIGA model would give tribes a competitive tax advantage over commercial gambling companies. “That’s creating the tension,” Rodgers says. “Everybody is trying to align that architecture, and it is tough.”

Mark Van Norman, NIGA senior adviser, says Congress and Indian tribes should not concede long-held tenets of tribal sovereignty and self-governance, particularly the principle that tribal government revenues are tax-exempt.

He told a recent meeting of the Senate Committee on Indian Affairs that to do so could establish a dangerous precedent not just for the 238 tribes with casinos, but all the more than 560 federally recognized tribes and Alaska Native villages.

“What tribal governments are saying is we’re funding the essential government functions of schools, hospitals, water and sewer, roads, many times picking up the responsibility of the federal government,” Van Norman told the Senate committee. “We don’t want to see an overlay of federal and state dollars on that.

“There has been a history in this country that tribal governments—under the Internal Revenue Code—are not considered income taxpayers because we are governments. That’s an important principle for us to maintain. We’re concerned about maintaining our government status.”

Tribal governments under a federal scheme for internet gambling should be permitted the same tax exemptions as state government lotteries, Van Norman said.

A House Divided

There is little tribal consensus on methods of approaching internet wagering.

Several Indian governments are steadfast in opposition to any legalization of online wagering, fearing it will erode revenue from their casinos.

But a growing number of tribes believe it is inevitable online wagering will become widespread. Whether they embrace it as a commercial venture or a tribal government enterprise, it will soon be a part of their business portfolios.

“I’ve got clients all over the board on this issue,” Feldman says. “I’m not recommending anything.

“Internet gaming today, like Indian gaming 25 years ago, is complicated and controversial,” says Feldman, who successfully argued the landmark California v. Cabazon Indians case that led to enactment of IGRA. “But it is coming, and so tribal governments need to be smart and flexible in their thinking on the issue.”

Senator Daniel K. Akaka (D-Hawaii), chairman the Senate Committee on Indian Affairs, says tribes need to be a party to efforts to enact internet gambling legislation.

“Tribal concerns and priorities must be considered,” he says, “and tribal voices must be heard when judicial, administrative or legislative decisions are made on gaming because of its significant role in the economy of Indian Country.”

As the November 6, 2012 presidential election approaches, the major candidates are now focused on the key issues of the day: creating jobs, improving the economy, regulating the price of gasoline, and managing conflicts in the Middle East.

Like most citizens across the country, Native Americans are closely following the candidates’ various views on these issues. Tribal government officials are even more attuned to the campaign because of the unique relationship Indian nations enjoy with the federal government. Whoever is elected president next fall will convene an administration that will have profound effects on tribal governments, whether through the National Indian Gaming Commission or the departments of Interior, Justice or Health and Human Services.

Long-serving elected tribal leaders have become accustomed to the differing policy goals of past presidents like Clinton and Bush, and the ongoing initiatives of President Barack Obama. This election could result in similar changes with respect to federal Indian policy and administration prerogatives.

President Obama’s direction is, of course, the easiest to ascertain, given his three years in office. While limited information exists concerning the specific American Indian policies of former U.S. House Speaker Newt Gingrich, former Governor Mitt Romney, former Senator Rick Santorum and Congressman Ron Paul, their views on the legalization of online gaming provide some insights.

Let’s explore the potential impact of each candidate on American Indian gaming issues.

President Barack Obama

President Obama’s record on American Indian gaming issues is the easiest to examine. Overall, Obama enjoys broad support from elected tribal leaders, as evidenced by comments from these leaders at various annual White House summits and as measured by tribal contributions to President Obama’s re-election campaign.

For example, on January 27, President Obama attended a fundraiser specifically dedicated to Native Americans and reportedly raised over $1 million at this event. Among the various points of support for President Obama expressed over the recent past has been his administration’s appointment of officials like Assistant Secretary for Indian Affairs Larry Echohawk, Department of Interior Solicitor Hilary Tompkins and National Indian Gaming Commission Chair Tracie Stevens.

While the administration got off to an agonizingly slow start with respect to processing applications for land into trust for gaming operations, 2011 saw numerous Interior Department decisions that, for better or worse, approved or denied these applications.

Most controversial has been the administration’s approach to off-reservation gaming applications through the so called “two-part determination” process contained in the Indian Gaming Regulatory Act. “Two-part” decisions require certain findings by the secretary of the interior and concurrence from the requisite state governor for Indian gaming to occur on lands acquired in trust after October 17, 1988.

Assistant Secretary of Interior Echohawk issued positive determinations for a small number of these applications, including notably two California-based tribes, Enterprise Rancheria and North Fork Rancheria. By contrast, Echohawk denied an application from the Jemez Pueblo tribe to create a gaming site 300 miles away from its home reservation. While individual tribal governments have differing views on the correctness of these decisions, almost all Native officials give the administration credit for resolving pending applications.

The Obama administration received almost universal acclaim in Indian Country for seeking to resolve the negative effects of the United States Supreme Court decision in Carcieri v. Salazar, a decision that appears to restrict the ability of the secretary of interior to take land into trust for certain tribes not formally “recognized” by the United States in 1934, the year the Indian Reorganization Act was enacted.

The Obama administration has been vocal in its support for a “clean” Carcieri legislative fix to clarify that the secretary of interior has authority to take land into trust for all federally recognized tribes. The Obama administration’s position mirrors the position of the National Congress of American Indians and the National Indian Gaming Association.

The administration also took bold action in its administrative approach to the Carcieri decision by issuing a favorable record of decision for the Cowlitz Tribe in Washington. This decision interpreted the IRA and the phrase “under federal jurisdiction” to authorize the secretary to take land into trust for the Cowlitz tribe, even though it was not formally recognized as a tribe by the United States until the year 2000.

In an analogous matter, the Department of Justice supported the Match-E-Be-Nash-She-Wish petition to the United States Supreme Court for relief from a Carcieri challenge. The Supreme Court accepted the petition and should give clarity to the Carcieri case within the next year.

In summary, while there are dozens of decisions from the Obama administration regarding Indian gaming issues, some of which tribes liked and some to which they objected, the fundamental integrity of IGRA has been preserved over the past three years, and even during a recession, the Indian gaming industry has enjoyed modest growth.

While the administration’s position on internet gaming and Indian tribes has not fully evolved, it seems very likely the administration would seek to protect and facilitate tribal government entry into the online market should Congress authorize a national bill. This support would likely include expanding the role of the National Indian Gaming Commission to regulate online gaming versus a state entity, and clarifying the ability of tribes to offer online gaming to customers off Indian lands.

Absent an unforeseen shift in the Obama administration’s current approach, it appears a second Obama term would continue to support and protect Indian gaming.

Newt Gingrich, Former U.S. House Speaker

The Republican candidates for president have a less expansive record on Native American gaming issues than President Obama, but some insights into their views have emerged. Former House Speaker Newt Gingrich has a close, personal relationship with Sheldon Adelson, chairman of Las Vegas Sands Corporation. Adelson is the primary donor to a Super PAC supporting Gingrich.

These donations have reportedly topped $21 million. While Gingrich has not proposed any specific policy initiatives favoring the gaming industry, he seems comfortable with the industry overall, and has not denounced gambling establishments, as some, like Senator Dianne Feinstein, have done for reasons including the alleged increase of crime near casinos.

Gingrich has expressed concerns regarding excessive gambling by poor people if online gambling is legalized, but these concerns are shared by many supporters of online gaming as well. Given his support from Las Vegas interests like Adelson, it is unlikely a President Gingrich would propose restrictions on the gaming industry. Indeed, it is possible he might even support legislation to authorize online gambling if supporters like Adelson endorsed such efforts.

With respect to Native American gaming, one anecdote from infamous lobbyist and convicted felon Jack Abramoff was recently reported by Ben Adler of the Nation magazine. In Adler’s reporting, while speaker, Gingrich did not oppose direct federal taxation of Indian tribes and their casino revenues. A legislative initiative in the mid-1990s sought to impose this type of tax (led by House Ways and Means Chairman William Archer), and according to Adler’s conversations with then-lobbyist  Abramoff, the speaker did not oppose such a tax.

Ultimately, the tax proposal failed and Indian tribes avoided an unprecedented direct tax on their gaming establishments. This preserved the distinction of governmental gaming by Indian tribes from commercial gaming by private interests.

Around the same time, Gingrich actively opposed the imposition of new taxes on commercial casinos, raising the question as to why he apparently favored Las Vegas interests over Indian casinos on tax issues.

One other potential cautionary note may exist with respect to a President Gingrich’s policies on Native American gaming. The speaker has expressed strong support for the 10th Amendment to the United States Constitution and its “reserved powers” to the states provision. While this tension between federal responsibilities and states’ rights has existed from the foundation of the United States, suggestions to Native American leaders that there may be a tilt in favor of states’ rights—and away from federal protection—are likely to be met with trepidation and even hostility.

These tensions arise in the modern era when agencies like the Department of the Interior must weigh the concerns of local communities and states, which may oppose the acquisition of land into trust by American Indian tribes. A federal policy shift in favor of local communities and away from the rebuilding of tribal homelands would certainly delay, complicate or even halt many fee-to-trust transactions.

In summary, there are reasons for concern for supporters of Native American gaming interests if Speaker Gingrich is elected president with respect to both taxation and land-into-trust transactions.

Former Governor Mitt Romney

As governor of Massachusetts from 2003 to 2007, Mitt Romney had peripheral dealings with the Gay Head Wampanoag tribe and the Mashpee Wampanoag, which were not federally recognized at the beginning of Romney’s tenure. This included a somewhat bizarre proposal in 2003 that he would be willing to block the Gay Head casino efforts if casino enterprises outside of the state proffered at least $75 million in “casino mitigation” fees.

If such payments were made, Governor Romney also agreed to refrain from introducing video lottery terminals into Massachusetts. The chairman of the Mohegan Tribe in Connecticut likened this proposal to a “form of extortion.” In the end, Romney abandoned the plan.

More recently, Romney has made it clear that as president he would not support legalizing online gaming because of the “social costs and people’s addictive gambling habits.” Romney’s position opposing online gaming is in accord with many Native American leaders who fear the internet’s impact on brick-and-mortar casinos. However, Romney has apparently not reached his position with regard to any Native American concerns on the matter.

Like Gingrich, Romney also expresses strong support for the 10th Amendment, which could lead to detrimental results with respect to tribal-state conflicts. In summary, a President Romney would raise significant concerns from Native American leaders on the future progress of Indian gaming.

Congressman Ron Paul

As a Republican with strong Libertarian views, Congressman Ron Paul has some interesting views on gaming. Paul supports internet gaming, and in a number of interviews, including with Nevada journalist John Ralston on Face to Face, has stated that people should be free to make their own decisions, and there should be no regulation of the internet. Paul has also co-sponsored bills to legalize online gaming.

To date, Paul has not weighed in on Native American concerns regarding the shaping of any potential online gaming bill. Given his Libertarian leanings, it is not likely Paul would seek to restrict Indian gaming at the federal level. However, like the other Republican candidates, his strong support of the Tenth Amendment and the role of state-reserved rights could spell trouble for Indian gaming interests.

Former Senator Rick Santorum

Former Senator Rick Santorum has expressed his opposition to online gaming, terming it “dangerous” in a recent interview. Given Santorum’s strong Christian beliefs and appeals to evangelical voters, it is unlikely he would be a proponent of Indian gaming matters.

While Native American gaming matters have largely been ignored by the presidential candidates, there have been some viewpoints expressed with respect to online gaming. These views, from firm opposition to online gaming from Romney and Santorum to outright support from Paul, may contain some clues on how as president they would treat Native American gaming issues.

President Obama has the most well-developed record of support for Indian gaming, and a single-issue voter focused solely on Indian gaming matters would be very likely to support the re-election of the president.

Commercial casinos have traditionally maintained a reputation for being, perhaps, a step behind the mainstream when it comes to new technologies. But not in Indian Country.

Native American casinos have been the scene of some of the most groundbreaking advances in casino system and marketing technology, particularly in the past decade.

“From the start of Indian gaming to the present, tribal governments have been leaders in the use of gaming technology,” says Knute Knudson, vice president of global business development for slot manufacturer International Game Technology. “This tribal innovation has been driven by tribal government’s desire for economic self-sufficiency, and by the lack of preconceived thoughts on what worked in the past in traditional gaming.”

Knudson has been involved in Indian gaming since its start in the early 1990s, when he was vice president of Sodak Gaming, a major supplier to gaming tribes. He says as Indian gaming matured, mastering new technologies was a necessity in overcoming a number of challenges.

“Since the passage of the Indian Gaming Regulatory Act, tribes have used technology to address unique regulatory challenges,” Knudson says. “Regulatory requirements in certain jurisdictions prompted tribal casinos to be among the first casinos to use ticket technology rather than cash. Ticket technology has revolutionized the commercial casino, replacing tokens or coins with vouchers. The first time I saw cash-in/ticket-out technology deployed in a casino was in a tribal operation.

“Video products, ticket technology, server outcome determination and non-slot math solutions for player interface devices were all used to overcome difficult hurdles that tribal governments were forced to clear. The technology utilized to meet these obstacles resulted in new and better products for the entire gaming industry.”

He adds that Class II gaming in itself has formed the basis of new slot technologies in central-determinant video lottery markets and elsewhere. “Many Class II gaming technologies that were originally developed exclusively for tribal gaming are used today in gaming jurisdictions throughout the world,” he says.

Knudson says tribes have also broken new technological ground without being prompted by regulation. “Consider wide-area progressive system games,” he says. “In the ’90s, early in the history of tribal gaming, tribal casinos were the first to use WAPs to link games in multiple jurisdictions, creating the critical mass necessary for growth in mega-jackpot gaming solutions to satisfy customer demands. This enabled tribes to offer substantial jackpots, which generated increased customer play at the linked casinos.

“Tribes have also created innovative solutions for slot floor performance analysis, bonusing features within games and systems, and marketing techniques.

New Frontiers

It wasn’t long after the first Indian casinos appeared that tribes began to become leaders in technological innovation.

“In the early 1990s, as Native American casinos developed, they took the best available technology out of the non-tribal casinos,” notes Bruce Rowe, senior vice president of strategy and customer consulting for slot manufacturer Bally Technologies. “Most of that technology was developed outside of the tribal casino industry. However, in the 2000s, as tribal properties became more profitable as well as more independent, more innovation started coming out of tribal casinos.”

Rowe adds that the structure of tribal gaming helped speed the transformation of the tribes into technology leaders. “They were independent, with a level of autonomy at both the property and capital-approval levels that let them make decisions fast,” he says. “They remained focused on the property, and what would be good for the property. The fact that they were single properties managed by their own gaming commission, that they were GLI locations (for product certification), and that they were spending a lot of cash, created an environment for new technology.”

Starting with the Class II environment—the first server-based gaming in the U.S.—tribes were “familiar with a certain level of networking and infrastructure traditional casinos were not,” Rowe says.

Rowe should know. Some of the most promising new system technology that Bally has produced was seen first in Native American casinos. “We developed a beverage-ordering system with the Poarch Band of Creek Indians in Alabama,” he recalls. “We worked with the Seminoles to place 9,000 games on a high-speed floor, the first casino in the country to have that many games on a high-speed network, both Class II and Class III.”

More recently, that leadership has accelerated, as Bally has partnered with the Mashantucket Pequot tribe in Connecticut, California’s Barona Band of Mission Indians and Pechanga Tribal Nation, and other tribes to launch never-before-seen technology. Some of the innovation has been within the confines of the company’s industry-standard SDS casino management system; other strides in networked technology have utilized the iVIEW Display Manager system and Bally’s Elite Bonusing Suite, with some bonus events played out on the groundbreaking iDeck virtual button panel.

“We’re implementing our Service Tracking Manager at Foxwoods,” Rowe says. “This takes real-time transactional data out of SDS and allows us to use that to offer differentiated service on the casino floor.” For employees, the system tracks jackpots, door-open messages, printer paper levels and other service-related issues and alerts employees on mobile devices, dispatching employees immediately to minimize machine downtime.

The Barona and Pechanga tribes have been host to a wealth of networked Bally events at their San Diego-area casinos that have driven coin-in and maximized carded play. Barona Valley Ranch Resort & Casino was the first to launch “Virtual Racing,” a networked operation that links all slots with player cards inserted to a virtual horse race—players who qualify with $50 of coin-in during the previous hour have the event pop up on their iVIEW video screens (slots of several different manufacturers at Barona are equipped with the small iVIEW monitors).

Players select from a field of horses, and a horse race plays out on each iVIEW display on the slots and on 80 giant Bally “CoolSign” video displays throughout the casino. Everyone picking the winning horse splits a prize pool.

Mike Murphy, vice president of technology at Barona, says the casino was packed on the Saturday night in July 2010 when Virtual Racing was launched, but the real difference it made was evident mid-week. “On a Wednesday night, we got about a 30 percent increase in head count,” Murphy says. “And, while we had really high carded play already, it increased even more with Virtual Racing.”

Murphy says another obvious benefit was more coin-in, as players qualified for the tournament. “Out of 2,000 machines in the casino, we’ve hit more than 1,500 people qualifying for Virtual Racing,” he says. “That means 1,500 people not only playing with their cards, but playing enough to get over the $50 threshold to get into the race.

“The main thing it does is create a lot of excitement on the floor; people are having more fun. Our head counts increase, it makes people play more, and a lot of people who came just because we have Virtual Racing stay a long time.”

Pechanga Resort Casino also launched Virtual Racing, but

on the Bally iVIEW Display Manager system—instead of the small iVIEW screen, the virtual races and other events appear directly on each video slot’s main monitor. Players can reduce the size of the race screen to keep playing their slot games while the race goes on.

Both casinos have instituted a wealth of other Bally bonusing and player reward technology, often creating their own applications. “We did a car race on Virtual Racing in conjunction with the Daytona stock car race,” says Murphy, who says the casino also has used Bally’s “Power Winners” module for SDS for nearly five years to create casino-wide progressive jackpots independent of the individual slot games. Players with cards inserted are selected at random for periodic progressives, with the events heralded across the casino.

At Pechanga, Virtual Racing is joined by individualized bonuses through the networked iVIEW DM and Elite Bonusing Suite, and instant, enterprise-wide slot tournaments, the most high-profile of these taking place on Saturday, February 11, when the casino logged two world records—verified by representatives from the Guinness Book of World Records—by instantly switching 1,141 slots of five different manufacturers from revenue mode to tournament mode for what was verified by Guinness as the “World’s Largest Slot Tournament.” A second record went to the casino for “Most Slot Machines Running the Same Game Simultaneously at the Same Venue.”

“I think the real difference between this event and a ‘normal’ slot tournament was that once it was over—with the guests still pumped up from the competition—all 1,141 of the tournament machines automatically converted back to standard play in less than 15 minutes,” said Pechanga Vice President of Slot Operations Buddy Frank just after the event. “I’ve dreamed of this for years!”

Rowe says another record-breaking Virtual Racing event is coming up soon at one of the Seminole Hard Rock properties in Florida. “Interestingly, Virtual Racing is only at tribal casinos thus far,” he says.

Getting the Advantage

Bally is by no means alone among manufacturers in partnering with tribes to introduce new technologies. IGT has been at the forefront of tribal technology with its sbX server-based systems and its Advantage casino management system.

For instance, the company has worked with the Otoe-Missouria Tribe of Indians in its four tribal casinos in Oklahoma to launch several new applications for its server-based sbX Media Manger product. Two of the most recent product launches are “Random Riches” and “Carded Lucky Coin.”

“These are what we refer to as intelligent bonus applications,” explains Andy Fisher, IGT’s product manager for applications. “You do ‘X’ to get the ‘Y’ player achievement-oriented application. For example, you can target a specific segment or player, give them a coin-in target, and once they reach the achievement, they can play a game in the Service Window and be awarded with promotional credits.

“That does three things: It gives the casino the ability to target a specific market group; it allows a player achievement that increases coin-in; and it creates a new player experience.”

Richard Yim, IGT’s vice president of product management, says tailored awards such as these are part of an effort to move away from what he calls “entitled rewards”—comps and freebies the player expects just for showing up. “The bonus module allows the casino to set the rules, and in real time, initiate action on the floor, from groups down to the individual,” Yim says. “Imagine having various groups coming in, and being able to set the thresholds (for bonus awards) according to who’s coming in.”

Native American casinos such as those of the Otoe tribe are pioneering several of these applications, each designed differently according to the individual property, says Fisher.

IGT’s Tournament Manager module is another product of which tribal casinos were early adopters, says Yim. Another product that switches games of any manufacturer from revenue mode to tournament mode instantly, Tournament Manager doesn’t even require an IGT system such as Advantage or sbX.

Another IGT innovation breaking ground in Indian Country is the Universal Adapter, which converts any machine to a game-to-system setup to beam video or individualized bonuses directly to a slot’s game screen, in a picture-in-picture format. “This is much more exciting for the player, and it allows rich applications in older machines,” says Yim. “It’s very popular with our customers.”

Soon, tribal casinos will be among the first to adopt the IGT Cloud solution, which gives download capability and access to all the games in the company’s library, removing much of the overhead in implementing server-based functions. “Soon, sbX will be built into a simple deployment for remote download-and-configure as well as turn-key analytics,” Yim says. “IGT has over 300 games in its library. This gives casinos the opportunity to populate EGMs with those games whenever they want, without accessing the box—some of the things the big casinos have now, automated within sbX.”

Employee Apps

One of the hottest products in systems these days is the Konami Casino Management System. Since it is being adopted by an increasing number of casinos, Konami Gaming plans to implement a new feature to make the system as valuable for casino operations employees as it is for the marketing department—employee applications.

Once again, Indian Country will lead the way, as the new feature set for KCMS will be launched at the NIGA conference this month.

“The idea behind employee applications is to give the employees on the floor a sense of the action that is actively taking place, instead of having to sit at a computer monitor to get the same information,” says Michael Ratner, Konami’s director of product management. “The intent is to improve efficiencies in productivity and customer service.”

For instance, the new functionality will allow a host to monitor heavy play on a mobile device. The smart phone can be set to give an alert when a certain level of play is achieved, and if it is uncarded play, the player can be enrolled in the player’s club on the spot.

The system also will give technicians access to information on games that formerly was available only in the back of the house. Ticket jams and other malfunctions will send alerts to the technicians; low ticket paper and other maintenance requirements will be sent to the correct employees so as to be addressed immediately.

Konami is partnering with mobile technology company Joingo, Inc. to provide the smart phone applications for employees, as well as an application for players—player club members will be able to access their point totals; information on special events and entertainment at the casino will be sent right to the mobile devices; players will see the jackpot total for the casino that day; they can even check to see if their favorite machines are occupied.

“It gives players the ability to do a lot of the transactions normally done at the club booth right on their phones,” Ratner says. “The idea is to provide information to incentivize them to do something—come in and play even if they hadn’t been planning a visit; offer restaurant coupons and specials to try to generate a trip.

“We’re contacting all of our Native American KCMS customers and inviting them to our booth at the NIGA show for a demonstration.”

Online Portal

Of course, the emerging mobile technology is often linked to another emerging technology in which the tribes will be involved, one way or another—online gaming. One tribe on the upper Michigan peninsula is already taking the first step.

The Hannahville Indian Community, in partnership with slot-maker Aristocrat Technologies, will go live later this year with the tribal gaming industry’s first online play-for-fun site, linked to the tribe’s Island Resort & Casino in Harris, Michigan.

The casino uses Aristocrat’s popular Oasis 360 casino management system to monitor its 1,300 slots. Aristocrat is developing a complete virtual casino for the tribe, including poker, blackjack, roulette, slots and other games.

According to Kelly Shaw, vice president of systems and marketing for Aristocrat, the initial site will allow players to earn non-monetary awards like a free room night or entry into a live tournament, to drive visitation to the casino. Video versions of all the live table games will be accompanied by the most popular Aristocrat slot games, such as Queen of the Nile and Sun & Moon, but Shaw says the casino will be able to offer any other games as well.

“The idea of our platform is to offer open architecture, so anyone using it can put in not only Aristocrat content, but any third-party content,” Shaw says. “We’re replicating a brick-and-mortar casino in the virtual space.”

Island Resort & Casino General Manager Tom McChesney says the casino is now revamping its website to accommodate the virtual casino, and hopes to go live in mid-to-late summer. He says the main appeal of implementing the site now is that the casino will be ready when for-wager online gaming is legalized, which he says is not a matter of “if,” but “when.”

“We wanted to get started on (a virtual site) so when legalization comes down, we aren’t starting from scratch,” McChesney says. “We view it as one of the futures of gaming, and we want to be ahead of the game.”

In the meantime, the site will be used to bring new players into the casino. “We have a lot of marketing ideas on how to best use this, so we’re anxious to get it going,” says McChesney. “No. 1 is to start building the database, starting with people who already visit our casino and expanding, allowing us to go further out geographically.”

Shaw says Aristocrat already is working with other tribes to implement play-for-fun sites, and will offer the solution to casinos whether or not they use the Oasis 360 system. She predicts that eventually, after legalization, tribes will be able to form more alliances along the lines of the California Online Poker Alliance, which has partnered tribes with card rooms to work toward establishing a legal online poker industry in the state.

“This is a significant opportunity for Native Americans to be at the forefront of this kind of online gaming initiative,” Shaw says. “It needs to be wholeheartedly embraced, because this is the future of gaming. What better way to learn than from a free-play environment?

“If we look at what’s happened in the past 10 years in Europe, the entities who started in a free-play environment were able to convert free players into revenue players. It’s about getting in on the ground floor, instead of trying to join something in progress, and it’s about how to work in this new space.”

If prior history is any indication, tribal casinos will continue to be among the first adopters of new technology.

“Tribes have always been leaders in technology and innovation,” says IGT’s Knudson. “The history of tribal gaming is a history of innovation—innovation borne of need and innovation driven by creative, forward-looking tribal leadership.”

Even if there were no tribes in the United States, adopting appropriate legal rules for internet gambling would still be a difficult endeavor. To begin with, the major problem is distributing power between the federal and state governments. Although there are a few helpful guideposts for resolving the issue, for the most part it is completely unsettled legal territory.

The 50 state legislatures have traditionally enjoyed a constitutional right to make and enforce their own laws for gambling that takes place within their territory, and none of the states do so in precisely the same way. Nevada, for example, has authorized literally hundreds of gaming operators in its territory. Twenty-one other states also license and regulate casinos, but unlike Nevada, most states (except New Jersey and Mississippi) statutorily restrict the number of casinos to a small number.

Theoretically, the regulatory decisions of each state should be based on its citizens’ value judgments about the appropriateness of gambling in their communities. And a significant factor in making these decisions is the recognition that gambling is a unique sort of activity which creates no product of tangible value, but nonetheless can exert great social costs on the community, including addiction and crime, if not managed properly.

The state legislatures should maintain control over these decisions even when gambling takes place on the internet rather than in brick-and-mortar casinos. States like Utah might very well always continue to insist that all gambling be prohibited in their territory. But more importantly, among the states that will dare to allow gambling on the internet, there will be differences in terms of precisely how it should be regulated.

For example, states may disagree on what sort of consumer safeguards, such as betting limits and advertising restrictions,

will be necessary to protect communities from the social costs

of gambling. Other substantial considerations include how

many and what type of entities should be permitted to operate gambling on the internet, and what sort of tax rate will be acceptable.

Furthermore, these decisions will be influenced heavily by circumstances that are unique to each state. The presence of organizations with vested interests in the decisions, such as gambling companies and other informed groups, will be particularly important to the process. In 28 of the states, this includes Indian tribes.

Power Struggle

The unique status of tribes compounds the crisis of distributing power between the federal and state governments. Legally, tribes resemble states in important ways. Tribes generally enjoy the freedom to make and enforce their own laws, even if those laws differ from the laws of the state in which the tribe is located. But there are also important ways in which tribes are very different from states.

Tribes began experimenting with gambling in the late 1970s with games of bingo. Although the game of bingo was legal in the states in which the tribes who ran the games were located, the tribes did not completely comply with the laws of the states. For example, some of the tribes operated games for higher stakes than would otherwise be permitted by the states. Over time, some of the tribes grew bolder with regard to the wagering opportunities they provided on their territory.

From the states’ perspective, oversight over Indian gaming was essential because the great majority of customers were citizens of the states, which meant that the great majority of the social costs of gambling were absorbed by the states. Meanwhile, the tribes incurred few of the social costs of gambling and delivered no tax revenue to the states to justify or offset those costs.

A series of conflicts between states and tribes culminated in 1987 with the U.S. Supreme Court case California v. Cabazon Band of Mission Indians. In deciding the Cabazon case, the Supreme Court relied on an earlier case which held that the states have no power to apply gambling regulations to the tribes. The court noted, however, that the states could obtain the power to impose regulations on the tribes if the U.S. Congress were to delegate the necessary power to the states. The reason for this is that the U.S. Constitution empowers the federal government rather than the states with authority to enter legal relations with the tribes.

The logical result is that the states only have power to interact with tribes to the degree that Congress has delegated its own power to the states. Hence, the court ruled in favor of the Cabazon tribe because Congress had not delegated power to the states to administer gambling regulations on the tribes.

And so, one year later, as an immediate reaction to the Cabazon case, Congress enacted the National Indian Gaming Regulatory Act of 1988 as a means of delegating some of its power to the states. The statute was enacted as an attempt to

balance the states’ interest in controlling the social costs of

gambling against the tribes’ rights to sovereignty and economic development.

Internet Grounds

Today, Indian gaming is a $26.5 billion-per-year industry, regulated every bit as thoroughly as the state-licensed commercial casino industry. Overall, 237

tribes operate 442 casinos of varying sizes within 28 of the states.

Refusing to allow tribes to participate in internet gambling is not likely to severely harm their land-based establishments or the jobs they support. After all, internet gambling has already been flourishing in America despite its official prohibition. Simply introducing new state-approved operators into the market therefore seems unlikely to dramatically shift action away from Indian casinos.

But then again, since legislation on average will make it easier for Americans to establish accounts with internet operators and to feel safer about the funds they deposit, then the amount of wagering on the internet is likely to increase, so in that regard, there is a real chance that some dollars that might otherwise have been spent on Indian gaming will instead be spent on the internet. But there is also the chance that legalization of internet gambling could stimulate more land-based gaming as well. For many players, the internet is a way to practice, but it cannot replicate the thrill of playing and socializing at a casino.

The real question is not whether tribes will be hurt if they cannot compete, but rather whether they are entitled to compete on the internet with operators in the states. Of course, tribes already do possess the power to license and regulate internet gambling, but because of their small populations, the benefit of doing so is not very attractive unless they can reach outside their territory and into the states.

In some cases, there are compelling reasons why a state should select a tribal operator to become one of the state’s licensed internet operators. In Connecticut, for example, there are two large tribal casinos but no state-licensed casinos. These two casinos can therefore present a good case that they are the most competent prospective operators because of their already-existing relationship with the state and its citizens.

Meanwhile, in California, a coalition of 29 tribal poker operators has banded together for the purposes of competing for one single operating license in the state. Of course, if any of these tribes were to obtain licenses, they would be expected to deliver tax revenue to the state.

The few examples of legislation that has been introduced so far in the states generally give preference to entities that are already located within a state. Nevada’s interactive gaming statute, for example, only allows an entity to apply for a license if the entity is a “resort hotel” that already possesses a non-restricted gaming license. However, there really is no particular reason grounded in law why a state must prefer to award licenses to entities that already have a presence in the state.

If an entity from another state or tribe or country is a better candidate, then it would probably be in the state’s best interest to select that other entity rather than a local one, provided the foreign entity establishes necessary connections in the state. Hence, there is no legal reason why the coalition of California tribes should be barred from applying for a license in another state if they can show they are the most suitable operator and are willing to establish necessary connections in the state.

Jump In The Pool

While states may be perfectly capable of conducting their internet gaming markets in isolation, the ability to pool players together from multiple states presents the opportunity for better multi-player games such as poker and hence the potential for higher revenue. One way this could happen is through negotiated state-to-state and state-to-tribe agreements. Another way is through an enactment of Congress establishing minimum standards for participation in an interstate network.

In the event a federal statute were to be enacted, the fair and easy solution would be to permit tribes to participate in the interstate network to the same degree that the states and their operators can. In that scenario, tribal regulators would be permitted to license and regulate their own operators in conformity with the minimum standards of the federal statute.

Certain federal legislators already seem poised to make sure that Indian gaming interests are an active part of the discussion and will be dealt with fairly by any prospective federal legislation. The leaders of both committees who have conducted hearings on internet gambling—Rep. Mary Bono Mack of the House Subcommittee on Commerce, Manufacturing and Trade; and Senator Daniel Akaka of the Senate Committee on Indian Affairs—insist this must be the case.

Incidentally, the one already-existing federal agency with any experience regulating gambling is the National Indian Gaming Commission, which was created pursuant to the federal Indian Gaming Regulatory Act. The agency currently shares the responsibility of overseeing gaming on tribal land with regulatory bodies local to the tribe.

If the federal government is to assume new duties with regard to gambling on the internet, it might make good sense to delegate those duties to the agency that already has relevant experience. And based on its purpose and experience, there is good reason to believe the agency would make a fair guardian of tribal rights to participate.