Indians’ Casino Control Upheld

Boosting the already expanding Indian casino industry, a federal judge on Monday upheld a California ballot measure that granted tribes a monopoly on slot machines and other Nevada-style games of chance. U.S. District Judge David F. Levi of Sacramento rejected a lawsuit by four Bay Area card rooms challenging the state’s right to allow highly profitable slot machines and other Nevada-style casino games on Indian reservations, while denying them to card rooms not on tribal land.

By rejecting the one legal challenge to Indian casino gambling in the state, Levi’s decision solidifies the tribes’ position and could help accelerate the expansion of their operations. California’s tribal casinos don’t reveal their gross income from gambling, but outside experts say it could be $4 billion a year, a sum that approaches the take on the Las Vegas Strip or in Atlantic City.

Levi acted on a lawsuit filed by four Bay Area card rooms led by Artichoke Joe’s in San Bruno. The card rooms sued Gov. Gray Davis, who negotiated the compacts permitting gambling on reservations, and the U.S. Department of Interior, which signed off on the agreements.

After the Legislature approved the compacts, voters ratified them in the form of Proposition 1A in March 2000. Approved by more than 64% of voters, the measure amended the California constitutional prohibition against “Nevada-style” casinos, granting Indians a monopoly. The tribes, which have become the state’s top campaign donors in recent years, spent $24 million to ensure passage of the ballot measure, which had limited political opposition.

“The grant of an economic monopoly to any group presents serious questions that should cause careful consideration and hesitation,” Levi wrote in the 97-page opinion. “Important questions” related to gambling can be debated, the judge added. But, he concluded: “Where the political branches and the people of California have adopted a policy that does not violate either federal law or the U.S. Constitution, that policy is entitled to prevail.”

Levi rejected the card clubs’ argument that the compacts violated the constitutional guarantee of equal protection by granting rights to Indians that are denied to non-Indians. The judge also held that the state complied with the federal Indian Gaming Regulatory Act of 1988, and rejected the card clubs’ claim that the federal act says Indians could operate only those games permitted elsewhere in the state.

Tribal representatives hailed the ruling; attorneys for the card rooms vowed to appeal to the U.S. Circuit Court of Appeals.

“If tribes can have a monopoly on casino gaming, why not a monopoly on car dealerships or gas stations?” asked Bo Links, one of the card rooms’ lawyers.

Davis called the ruling “a victory for California voters who overwhelmingly passed Proposition 1A,” adding that the decision “protects” more than 200,000 jobs in the casino industry.

“We’re thrilled that the judge upheld the overwhelming will of the electorate,” said Mark Macarro, chairman of the Pechanga Band of Luiseno Mission Indians. Macarro was the main television spokesman for Proposition 1-A and Proposition 5, a 1998 initiative pushed by the tribes that was struck down by the state Supreme Court.

Macarro said Monday’s ruling provides the tribes with legal and economic stability, making it easier for them to attract investment capital which in turn could help them finance casino expansions and public works improvements.

“One of the frustrating things for the tribes has been an inability to plan and know where they stand,” added Jerome Levine, an attorney representing the tribes in the case. “It has impaired their ability to get financing.”

Major Southern California card rooms and race tracks did not join the suit. They are seeking legislative solutions to what they see as their declining market share as Indian casinos expand in the Palm Springs area and in more rural parts of San Diego County.

The Bay Area card rooms felt more threatened. Although the card rooms did not name any tribes in their suit, the action was prompted in part by a effort by the Lytton Band of Pomo Indians to buy a card club in the East Bay city of San Pablo, and turn it into a full casino. The Lyttons are a landless group of roughly 45 members, whose rancheria had been located in Sonoma County, north of San Francisco.

In order to proceed with its casino development, the tribe must negotiate with Davis. The governor put talks on hold pending the outcome of the lawsuit. Levi did not rule directly on the legality of the Lytton band’s plan. But Tony Cohen, attorney for the Lytton band, said the judge’s ruling opens the way for the tribe to press Davis to negotiate.

Tribes and other backers of ballot measures approved by voters in 1998 and 2000 had contended that gambling would remain in rural areas where most reservations are located, and discounted opponents’ claims that in time, casinos would open in urban areas.

The band’s attempt to move into an urban area may be a first, but may not be the last. Other small groups of Native Americans, many in urban counties, are petitioning the federal government seeking to reconstitute themselves as tribes.

Davis and his aides negotiated the compacts in a series of marathon, contentious and closed sessions held in his office and at a hotel across from the Capitol in September 1999. At the time, Davis said it would allow for a “modest” expansion of gambling that would permit Indians to operate 45,000 slot machines. The nonpartisan Legislative Analyst’s Office concluded that that the hastily drawn compact could permit 113,000 slot machines--more than any state other than Nevada.

Since March 2000 when voters approved Proposition 1-A, operators have more than doubled the size of their casinos. At least seven tribes operate casinos with 2,000 highly profitable slot machines, the maximum number allowed to any one tribe under the compacts. Altogether, 46 tribes operated 40,883 slot machines as of the state Department of Justice’s most recent check in November. That’s more than twice the 19,137 in use after voters approved Proposition 1-A.

Slot machines are by far the houses’ biggest source of revenue. With each machine bringing in between $100 and $300 a day, California’s tribal casinos are making between $1.5 billion and $4.4 billion a year off their slot machines alone. By comparison, the Las Vegas Strip’s take is $4.5 billion a year, and Atlantic City’s is $4.2 billion.

“This year will be the year that California gambling will be bigger than the Las Vegas Strip,” said professor I. Nelson Rose, of Whittier Law School in Costa Mesa and a gambling expert. “It will still be a few years before California passes all of Nevada.”

Rose predicted that if Levi’s decision is affirmed on appeal, the ruling could have an impact on other states such as Arizona and Connecticut where tribes have broader rights to operate gambling than do non-Indians. “It is a clean win for the tribes in California,” Rose said.