Indian Gaming and the New York Times' Crystal Ball

Today the New York Times tells a fascinating story about the plight of the world's largest casino, Foxwoods Resort Casino. For gaming tribes, the story should serve as yet another loud and clear wake up call that Indian gaming, as we currently know it, will not last forever. Consider these passages from the ominously titled story, "Foxwoods Casino is Fighting for Its Life":

[H]ow the casino reached this point, and the challenges its owners and operators now confront, is part of a much larger story — one involving the gradual relaxation of moral prohibitions against gambling, a desperate search for new revenue by state governments and the proliferation of new casinos across America. Casino gambling has become a commodity, available within a day’s drive to the vast majority of U.S. residents. Some in the industry talk of there being an oversupply, as if their product were lumber or soybeans.

Yes, the casino gambling market is saturated, and it will only continue to saturate.

In October, a casino opened at the Aqueduct racetrack in Queens with 4,500 slot machines, and Gov. Andrew Cuomo is pushing an expansion plan for the site that includes a hotel and what would be the nation’s largest convention center. And lawmakers in Massachusetts recently voted to issue licenses for a slots parlor and three full resort casinos — an especially ominous development for the Connecticut casinos, which draw about 30 percent of their clientele from Massachusetts, because many gamblers are ruled by what is known in the business as the law of gravity. They stop where the pull is the strongest, which is usually the nearest casino.

Yes, new non-tribal, brick-and-mortar casinos and racinos are coming to a state near you; perhaps even a neighboring state that does not run afoul of tribal Class III gaming exclusivity.

Resistance to gambling, however, has been overwhelmed by the need for new sources of public revenue in an era when it has become nearly impossible, at any level of government, to raise taxes or even to let temporary tax cuts expire. A kind of self-perpetuating momentum fuels gambling’s growth: the more states that legalize it, the more politicians in states that haven’t done so argue that if their citizens are going to throw money into slot machines, they might as well do it at home.

Yes, while states cannot effectively raises taxes in today's political climate, they can and will create new taxing objects, namely commercial gaming.

Foxwoods had been an early mover, built to stand astride a huge geographic area — much like the Pequot tribe once dominated a big swath of New England. But as the casino business in America has expanded, Foxwoods’s piece of it has become smaller and will continue to shrink.

Indeed, other successful gaming tribes and early movers, also built to stand astride huge, exclusive geographic areas, very well may, as the casino business in American continues to expand, also begin to shrink. If or when that day comes, those tribes must be prepared to fill the void of gaming revenues with other profit streams.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  Gabe helps tribes and Indian small businesses with economic diversification efforts, with an emphasis on minimizing state interference or taxation. Gabe can be reached at 206.691.3631 or gabe@galandabroadman.com.

If You Haven't Drank The Tribal Economic Diversification Kool-Aid, You Better Quickly Take A Sip

Indian gaming is the first tribal economy that has ever brought the type of non-Indian capital to Indian Country to make a meaningful difference in the lives of Reservation Indians. Today, however, Indian gaming is under it's most severe threat since states attempted to outlaw Indian gaming in the 1980s, prior to the Supreme Court's Cabazon decision. According to the New York Times today::

After shunning the concept for years, Massachusetts, seeking solutions to its budget woes, last fall became the first New England state to pass a broad law allowing resort casinos. Now others may not be far behind. . . . In New Hampshire, which dreads losing tourism money to Massachusetts, lawmakers are considering a bill that would allow up to four casinos there. Maine just granted its first casino license to a six-year-old Bangor slot parlor that will add table games next month, and a second casino is expected to open in Oxford this year. Both are the result of voter referendums. Rhode Island, which already has two slot parlors, will hold a referendum in November on whether to allow table games at one of them.

State-supported commercial, brick-and-mortar casinos are likely coming to a state, if not neighborhood, near you.

If that force weren't a threat enough to the Indian gaming industry, there is the December 23, 2011 decision to declare intrastate Internet gaming legal. The Las Vegas Sun headline, "DOJ opinion ‘important day’ in efforts to legalize online gaming," says it all.

It is widely believed that sooner or later the legalization of interstate iGaming will follow, meaning legalized Internet gaming throughout all of the United States.  Imagine Indian Country's best gaming patrons commencing play of Class III slot machines or other gaming devices on their laptop computers, from the comforts of their bedrooms and home offices.  That reality is in fact what is on the horizon.

Indeed, it is not a question of if the $26 billion tribal governmental gaming economy will recede as a result of mounting state and commercial gaming forces; it is a question of when -- and to what extent. So if you and your tribe aren't yet aggressively diversifying your  tribal economy away from sole reliance on gaming, what are you waiting for?

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  Gabe helps tribes and Indian small businesses with economic diversification efforts, with an emphasis on minimizing state interference or taxation. Gabe can be reached at 206.691.3631 or gabe@galandabroadman.com.

Seattle Native American Lawyer Gabe Galanda Named One of the "Best Lawyers in the Business" by Seattle Business Magazine for 2012

Gabe Galanda was named one of the "Best Lawyers in the Business" by Seattle Business magazine. More specifically, he was honored as one of the "leading lawyers in the Puget Sound region for 2012" in both the arenas of Native American Law, and Gaming Law. This is the second time he has been honored by Seattle Business magazine. Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  He can be reached at 206.691.3631 or gabe@galandabroadman.com.

Tribal 'Disobedience' and Internet Gaming

Modern Indian gaming was born when tribal governments refused to follow state laws in the 70s and 80s. There is no reason to think modern Indian Internet gaming will arrive any differently. If Indian Country hopes to remain at the forefront of gaming, it will have to have a role in Internet gaming this year.  And that role will not be given to tribes; it must be taken. Had the Cabazon and Morongo Tribes waited for Congress to give tribes the unobstructed right to game, there’s a real chance that the 422-casino, $26 billion dollar industry would have never materialized. See California v. Cabazon Band of Mission Indians, 480 U.S. 202 (1987). Indian gaming exists because tribal governments opened gaming facilities and dealt with the consequences afterward. Tribes took what was rightfully theirs. Had they simply asked for recognition of their gaming rights from states or Congress, they would never have received them. Like anything worthwhile, it took a fight.

Call it breaking state laws (which we know have never applied to tribal governments), or exercising tribal sovereignty, the result was the same. When tribes took what was theirs, Congress, and the states reacted. IGRA was born, and the rest, though fraught with intergovernmental dispute, is history.  There is no reason to think that tribes can enter the Internet gaming market any differently.  Indeed, according to Professor Robert O. Porter, “Tribal disobedience,” the “process by which Indigenous people engage in ‘disobedient’ actions against the colonizing government in order to protect and defend their inherent and treaty-recognized rights,” is absolutely necessary to ensure the survival of tribal sovereignty.

Certainly, it’s naïve to think that Indian Country will get a seat at the table simply by asking for one. First, states will never treat tribal governments with the requisite respect for such a seat to mean anything.  And the federal government doesn’t do anything it doesn’t have to do.  Second, the Internet gaming table isn’t even set.  We know it’s coming, but we don’t know how.  We think it will be federally regulated, by Commerce or Treasury, but as of now we don’t know whether the NIGC will be consulted before it comes, let alone have any role in regulating it. None of the bills before Congress contemplate the NIGC having any role, even though gaming on Indian lands is subject to IGRA.

On Friday, the Department of Justice made public for the first time its new opinion that interstate Internet lotteries do not violate the Wire Act. And that, probably not coincidentally, was right after Nevada regulators on Thursday paved the way for intra-Nevada online poker. Whatever its form, nationally regulated Internet gaming will change gaming permanently and unrecognizably, and it is thus crucial that tribes get involved now. Regulated online gaming will do for gaming what email did to college. Or business. It’s hard to fathom what Internet gaming will mean. But put simply: it will change everything.

State-sanctioned handheld lotto is just the beginning. Your Monday night football picks, with your season winnings to date, might appear automatically on Facebook, with your online poker or blackjack daily or lifetime winnings appearing in your profile. People will still play in casinos. But there’s a real chance that brick-and-mortar casino numbers will pale in comparison to the daily drop we will see among 20-somethings on their iPhones. New markets flocking to regulated online gaming will be born overnight. And players who frequent tribal casinos may still do so. But new players may never set foot in one, choosing instead to play regulated online slots on their bus rides, roulette while waiting for movies to start, or, as was common at one law school in 2006, online poker during Contracts class.

The regulated online gaming burst may coincide with the bust of tribal exclusivity. Pressure from non-tribal gaming is growing, coupled with hemorrhaging state and local budgets. And there’s simply too much at stake for non-tribal casinos to pack up and go away. Two Oregon businessmen are at it for the fourth time outside of Portland.  And the old saw about leveling the playing field comes up about every two years in Washington State.  Eventually something will stick.

What’s the answer for Indian Country?  In addition to pursuing non-gaming economic development, tribal governments accustomed to steady growth at their brick and mortar casinos have to appreciate what gaming will look like in 2015, 2020, and beyond.  Some tribes have already stuck a toe in the water, launching free poker sites and laying the infrastructure for pay poker. It may not be the first tribe who submits an ordinance that includes Internet poker to the NIGC that blows open Internet gaming. But if tribes begin doing so, the NIGC will have to act, and Congress will respond.  And if tribes can offer gaming online without triggering IGRA or NIGC/DOJ involvement, Congress will react.  It will take an event like Seminole v. Butterworth, or California v. Cabazon, or maybe even some missteps like the Bay Mills off-reservation casino. But when the gaming pundits and lawyers suggest asking for a “seat at the table,” recall that tribal governmental gaming has never been given anything.  If tribes are to have a seat at the Internet gaming table, they must take it.

Anthony Broadman is a partner with Galanda Broadman PLLC in Seattle, and focuses his practice on issues critical to Indian Country. He can be reached at anthony@galandabroadman.com or 206.321.2672.

Seattle Indian Gaming Lawyer Gabe Galanda to Co-Chair Northwest Gaming Law Summit

Gabe Galanda will co-chair the 9th Annual Northwest Gaming Law Summit in Seattle on December 1-2, 2011. Program topics include: -- The State of Indian Gaming in 2012, by NIGA Chairman Ernie Stevens -- NIGC’s Class III MICS: Necessary or Unlawful? -- Status & the Nationwide Impact of the Rincon Decision -- Won’t You Be My Neighbor? Inter-Local Relations Vis-à-vis Indian Gaming -- State Criminal Jurisdiction in Northwest Indian Casinos -- Federal & State Legalization of Internet Gaming: Are We There Yet? -- Fee-to-Trust Acquisitions for Gaming Purposes

Gabe has co-chaired the event since 2005.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian majority-owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  He can be reached at 206.691.3631 or gabe@galandabroadman.com, or via galandabroadman.com.

Anthony Broadman Makes the Case for an Advisory Set of NIGC MICS

Anthony Broadman has published "At a Minimum: The Legal Case for Advisory MICS," in Casino Enterprise Magazine.

For Indian gaming attorneys, the CRIT decision evoked many questions that have yet to be answered. Earlier this year, Norman H. DesRosiers, Commissioner of the San Manuel Tribal Gaming Commission, brought some of these questions to the forefront in his article, A Closer Look at the NIGC’s Class III MICS, INDIAN GAMING, March 2011, at 28. Some of the gaps created by the CRIT opinion and exposed by Mr. DesRosiers deserve further exploration. In denying the NIGC the regulatory authority to issue binding regulations, the CRIT opinion struck the proper balance between tribal and federal regulatory powers. CRIT did not, however, render the NIGC MICS inoperable or unnecessary, nor did it strike down the authority of the NIGC to promulgate MICS pursuant to other administrative procedures. Indeed, CRIT revealed the appropriate place for the NIGC MICS: advisory regulations issued in order to provide a default template for tribal-state compact negotiation. In short, short of an intolerable intrusion of the NIGC into tribal regulatory authority, NIGC MICS are still permissible and potentially useful – if for no other reason than to keep states out of the tribal internal gaming control arena and Congress from seeking to amend the Indian Gaming Regulatory Act (IGRA).

Anthony Broadman is a partner at Galanda Broadman PLLC, of Seattle, an American Indian majority-owned law firm.  His practice focuses on company-critical business litigation and representing tribal governments. He can be reached at 206.691.3631 or anthony@galandabroadman.com, or or via galandabroadman.com.

Galanda Broadman Tribal Lawyers in the News

Indian Gaming magazine features Gabe Galanda ("Galanda Named to Best Lawyers in America") and Anthony Broadman ("Indian Law Attorney Elected as Chair of Washington State Bar Administrative Law Section") in the publication's mega G2E edition. Galanda Broadman is a majority Indian-owned law firm that represents tribal governments, businesses and members in critical litigation, business and regulatory matters.

Beware: The Washington State Tax Man Cometh to Indian Country

Washington Indian Country, With the state down $1.4 billion in tax monies yet unable to raise taxes thanks to Tim Eyman, brace for continued tax attacks by Washington state and local government -- and dare I say, discussion of state-tribal gaming revenue sharing like never before.

The Washington State Tax Man Cometh. Be prepared.

Gabe

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian majority-owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  He can be reached at 206.691.3631 or gabe@galandabroadman.com, or via galandabroadman.com.

Indian Gaming Is Not Forever

This syndicated opinion, "America's gambling addiction threatens the nation's soul," which appears in newspapers across the country today, brings into stark focus why Indian gaming is not forever. While Indian gaming, i.e. the tribal brick-and-mortar casino as we currently know it, has not outlasted its useful life, there will come a time when Indian gaming, or at least its $26 billion in annual gross revenues, will fall off, if not fade away.

That is because growing forces like Internet gaming (an if not a when), state-run gambling activities (for sake of balanced state budgets), and private casino development (or "government-countenanced" gaming via taxation) will eventually erode the tribal gaming market share. Indeed:

Currently, the Washington, D.C., government hopes to install an Internet gambling hub by the end of this year. California and Massachusetts have bills pending. Other states are watching with interest to see if the federal Justice Department chooses to enforce existing law that seems, at face value, to prohibit online wagering.

Today's economies and politics are fueling the push to universalized gambling. State governments struggling with monster deficits are desperate for any new form of revenue. And the nation seems seized by weirdly irrational politics that equates any tax increase with original sin.

Already, government-countenanced (or directly run) gambling is at a historical high-water mark. All but seven states have lotteries. Casino gambling, both state-countenanced and run by Indian tribes, is spreading like wildfire, especially in the Northeast. Each year, at least half of America's states consider new gambling outlets. "There is a legalized gambling avalanche in progress in America," Skolnik concludes.

In addition, the "social costs of gambling" highlighted in this column, including so-called problem gambling, will eventually cause policy changes in the national gaming space that will negatively impact the Indian gaming market.

Now is the time for tribal governments to diversify their economies; to diversify away from any tribe's sole reliance on its casino to fund essential governmental services and programs. Don't wait.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian majority-owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  He can be reached at 206.691.3631 or gabe@galandabroadman.com, or via galandabroadman.com.

Setting the Record Straight on Indian Taxation in Washington

Late this week, Washington State Republicans introduced three bills, seeking to balance the state's budget on the backs of Washington's 29 tribal governments. A legal and economic reality check is in order. Those bills are:

HB 2044 Concerning equity and fairness through the creation and regulation of electronic scratch ticket machines for nontribal gambling establishments.

HB 2045 Providing for fairness, equity, and transparency of tax preferences for federally recognized Indian tribes.

HB 2046 Concerning legislative involvement with compacts and compact amendments.

In support of those bills, Republican House members argue for "closing tribal tax loopholes." Here are some of the facts the Republicans either (a) do not understand, (b) do not care to understand, or (c) understand but do not care to help the public understand.

1. State taxation of Indian gaming revenues has been per se barred by Congress via the Indian Gaming Regulatory Act of 1988. Period. Still, local Republicans aspire to require "the non-taxpaying tribal mega casinos to pay a tax on the profits they make from the exclusive games they operate." Until they can figure out a way to do that (they can't), they hope to allow the largest expansion of gaming in the state's history, over-promising new state tax revenues. Indeed, according to a commercial gaming industry expert, the proposal "would cut into sales tax revenues in other segments of the state economy."

2. Governments don't tax other governments. Instead, governments -- be they state, local or tribal -- work with each other to devise accords that reflect the needs of each government in relation to the services they provide the public. That is why, according to one study, “[n]early every state that has Indian lands within its borders has reached some type of tax agreement with the tribes” -- including Washington.

3. State and local governments are already adequately compensated for the services they provide to tribal members. Under the economics of “tax exporting,” it is frequently tribal governments – not state or local governments –- who bear a disproportionate financial burden associated with the services they provide.

4. Washington State cannot legally enforce its fuel and tobacco excise tax regime on Indian reservations, according to the U.S. Supreme Court. Washington v. Confederated Tribes of Colville Indian Reservation, 447 U.S. 134, 162 (1980); Oklahoma Tax Commission v. Potawatomi Tribe, 498 U.S. 505, 514 (1991). Therefore, heeding advice from the High Court, the state has entered into fuel and tobacco tax compacts with tribes, in part so it can collect something from reservation-based fuel and tobacco sales, instead of engaging zero-sum litigation and enforcement activities.

5. Ten years ago, researchers at the Evergreen State College opined that Washington tribal governments contributed an estimated $140 million annually to the state and local tax structure. Today tribal tax contributions to the state are likely far greater, due in large part to the diversification of Washington tribal economies beyond gaming and tobacco commerce. Tribes are already contributing their so-called fair share of taxes.

One can only hope that the facts will enter the legislative discourse about HB 2044, 2045 and 2046.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian majority-owned law firm. He is an enrolled member of the Round Valley Indian Tribes of Covelo, California. Gabe co-authored "Taxing Times in Native America," Washington State Bar News, January 2011. He can be reached at 206.691.3631 or gabe@galandabroadman.com, or via galandabroadman.com.