Gaming Regulations for Native Americans Under Federal Law
Native American casinos have become a familiar feature of the landscape in many areas of the United States. These emerged after federal courts allowed tribes to operate gaming activities free from state regulations. In the 1970s, tribes in Florida and Wisconsin brought lawsuits challenging the application of state rules to their bingo operations. Both tribes persuaded the courts that the traditional concept of tribal sovereignty exempted them from state regulations. The courts ruled that the tribes could determine the frequency of bingo games and the size of jackpots on their lands. Similar lawsuits followed, culminating in a 1987 Supreme Court decision that upheld the authority of tribes to manage gaming on reservations and other tribal lands without being subject to state laws.
Hundreds of tribes now manage gaming operations, generating billions of dollars each year. Gaming creates employment opportunities for Native Americans and provides tribes with an important funding channel. Revenues from gaming often are allocated to infrastructure, education, and other critical features of life on tribal lands. Other tribes allocate revenues to tribal members through direct payments. As a result, Native Americans generally have welcomed the boost to their economies, despite the social problems that can accompany gambling.
The Indian Gaming Regulatory Act
Responding to the Supreme Court decision, Congress enacted the Indian Gaming Regulatory Act. This law codified the rule that Native American tribes have the exclusive right to regulate gaming on their lands, unless the state in which the gaming operation is located prohibits this type of gaming activity under criminal laws. Any gaming activities that are specifically prohibited by federal laws are also forbidden. The IGRA created the National Indian Gaming Commission (NIGC) and divided gaming into three categories:
- Class I: traditional games associated with tribal ceremonies or celebrations
- Class II: bingo games and similar games
- Class III: all other games, such as casino games, slot games, and horse racing
Only tribes have the authority to regulate Class I games, while Class II games are regulated by tribes with oversight from the NIGC. Tribes have the authority to conduct Class III games if the state where the reservation or other tribal land is located permits these games for any purpose, and if the tribe has reached an agreement with the state with approval from the US Secretary of the Interior. The tribe also must adopt an ordinance governing Class III gaming activities that has received the approval of the NIGC chair.
Tax Issues and Native American Gaming Operations
In the early 21st century, disputes arose over whether revenues from pull-tab games are subject to tax under the Internal Revenue Code. (These games resemble lottery tickets.) Two intermediate federal appellate courts reached opposite conclusions on this issue. The Supreme Court eventually ruled that revenues from pull-tab games are subject to federal taxes. The tax laws in this area applied specifically to Native American tribes, although not to states. The Court acknowledged the principle that federal laws affecting tribal activities should be interpreted in favor of tribes when an ambiguity exists. However, it found no ambiguity here.
