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Native American Tribal Casinos

Chapter 5
Native American Tribal Casinos


Casinos operated by Native American tribes made $26 billion in 2007. (See Figure 5.1.) The American Gaming Association (AGA) reports in 2008 State of the States: The AGA Survey of Casino Entertainment (2008, that commercial casinos made $34.1 billion during the same year. Therefore, in 2007 Native American casinos took in 43% of total casino revenues, the same percentage as in 2005.

According to the U.S. Census Bureau (April 30, 2008,, the National Indian Gaming Association (NIGA) indicates that in 2007 there were 562 federally recognized tribes in the United States. Furthermore, 225 tribes ran 423 gaming enterprises in 2007. The NIGA reports in An Analysis of the Economic Impact of Indian Gaming in 2005 (2005, that more than twenty-two million Americans visited tribal gaming facilities in 2005, generating $22.6 billion in gross revenue from gaming and an additional $2.7 billion in gross revenue from hospitality and entertainment services related to gaming. In 2006 tribal gaming facilities generated $25.7 billion in revenues. (See Figure 5.2.)


The growth of tribal casinos can be traced to the late 1970s, when Native American tribes began operating bingo halls to raise funds for tribal purposes. Tribes in Florida and Wisconsin tried opening high-stakes bingo games on their reservations. Bingo games were legal in those states but subject to restrictions on the size of the jackpot and how often games could be held. The Oneida Tribe of Wisconsin and the Seminole Tribe of Florida took their respective states to court, arguing that the tribes were sovereign nations and not subject to state limitations on gambling.

In 1981 the U.S. Fifth Circuit Court of Appeals ruled in Seminole Tribe of Florida v. Butterworth (658 F.2d 310) that the tribe could operate a high-stakes bingo parlor because the state of Florida did not have regulatory power over the tribe, a sovereign governing entity. A similar ruling was issued in Oneida Tribe of Indians v. State of Wisconsin (518 F.Supp. 712 [1981]). Both cases concluded that the states' gambling laws were regulatory, or civil, in nature rather than criminal, because the states already allowed bingo games to take place.

Other tribes also sued, and the issue eventually reached the U.S. Supreme Court. In California v. Cabazon Band of Mission Indians (480 U.S. 202 [1987]), the Court ruled that California could not prohibit a tribe from conducting activities (in this case, high-stakes bingo and poker games) that were legal elsewhere in the state. In 1989 the Bay Mills Indian Community opened the King's Club in Brimley, Michigan, the first Native American gambling hall to offer slot machines and blackjack.


In 1988 Congress passed the Indian Gaming Regulatory Act, in response to the court decisions. The act allows federally recognized tribes to open gambling establishments on their reservations if the state in which they are located already permits legalized gambling. It set up a regulatory system and three classes of gambling activities:

  • Class Isocial gaming for minimal prizes and traditional gaming (e.g., in tribal ceremonies or celebrations)
  • Class IIbingo and bingolike games, lotto, pull tabs (paper tickets that have tabs concealing symbols or

numbers), tip jars (lotterylike games played with preprinted tickets), punch boards (thick cardboard with symbols or numbers concealed behind foil), and nonbanking card games (such as the type of poker that is played against other players instead of the house)

  • Class IIIbanking card games (card games in which the player bets against the house), casino games, slot machines, pari-mutuel betting (in which those who bet on the top competitors share the total amount bet and the house gets a percentage) on horse and dog racing and jai alai, electronic facsimiles of any game of chance, and any other forms of gaming not included in Class I or II

Class I gaming is regulated exclusively by the tribes and requires no financial reporting to other authorities. Class II and III games are allowed only if such games are already permitted in the state where the tribe is located. According to the U.S. Government Accountability Office (GAO), the investigatory branch of Congress, court rulings have maintained that tribes can operate casinos where state-run lotteries exist and charitable casino nights are permitted.

Class II and III operations require that the tribe adopt a gaming ordinance that is approved by the National Indian Gaming Commission (NIGC), a government body set up to regulate gaming on tribal lands. In addition, Class III gaming requires that the tribe and state have an agreement, called a tribal-state compact (or treaty), that is approved by the U.S. secretary of the interior. A compact is supposed to balance the interests of the state and the tribe in regard to standards for operation and maintenance, the applicability of state and tribal laws and regulations, and the amount needed by the state to defray its regulatory costs. Tribes may have compacts with more than one state and may have different compacts for different types of gambling operations.


Native American casinos are regulated at three levels of government: federal, state, and tribal. Federal regulation is performed by the NIGC, which oversees the licensing of gaming employees and management and reviews tribal gaming ordinances. The NIGC also has enforcement powers. For example, in June 2004 the commission temporarily closed a casino operated by the Coyote Valley Band of Pomo Indians in Redwood Valley, California, for allegedly operating Class III gambling devices without a compact with the state. However, most violations do not result in closure, but in notification followed by fines. In 2006, for instance, the Santa Rosa Rancheria Tachi-Yokut Tribe was found in violation for failing to conduct proper background checks on casino employees. The tribe had ninety days to check the background of the employees in question or face fines of up to $25,000 per day. Most violations concern tribes' failure to submit annual audits by required deadlines.

The federal government also has criminal jurisdiction over cases involving embezzlement, cheating, and fraud at tribal gaming operations, because such crimes are federal offenses.

State regulation is spelled out in the tribal-state compacts. They cover matters such as the number of slot machines that may be operated; limits on types and quantities of card games that can be offered; minimum gambling ages in the casinos; authorization for casino workers to unionize; public health and safety issues; compulsive gambling issues; the effects of tribal gaming on other state enterprises; and how much revenue should be paid to the state and how often.

The tribes themselves are the primary regulators of tribal gaming. The NIGA, a trade organization for Native American casinos, reports in An Analysis of the Economic Impact of Indian Gaming in 2005 that $245 million was spent by the tribes on regulation of their industry in 2005.


Native American casinos must be a tribal endeavor, not an individual endeavorthat is, a random group of Native Americans cannot start a tribal casino. Only a tribe's status as a sovereign entity, granted by the federal government, allows it to conduct gaming.

The list of federally recognized tribes is maintained by the Bureau of Indian Affairs (BIA), an agency of the U.S. Department of the Interior. The most current list, which includes 561 tribes, was published in Indian Entities Recognized and Eligible to Receive Services from the United States Bureau of Indian Affairs (Federal Register, vol. 72, no. 55, March 22, 2007).

Throughout U.S. history, tribes have received federal recognition through treaties with the U.S. government, via congressional actions, or through BIA decisions. Most tribes were officially recognized during the eighteenth and nineteenth centuries. In the twenty-first century recognition can be achieved either through an act of Congress or through a series of actions, known as the federal acknowledgment process, that can take many years. Under the Code of Federal Regulations, Title 25, Part 83 (April 1, 2001,, a group of Native Americans must meet seven criteria to be federally recognized as a tribe:

  • They must have been identified as an Native American entity on a substantially continuous basis since 1900.
  • A predominant portion of the group must comprise a distinct community and have existed as a community from historical times to the present.
  • They must have maintained political influence or authority over their members as an autonomous entity from historical times until the present.
  • They must submit a copy of the group's current governing documents, including membership criteria.
  • The group's membership must consist of individuals who descended from a historical Native American tribe or from historical Native American tribes that combined and functioned as a single autonomous political entity.
  • The membership of the group must be composed primarily of people who are not members of an existing acknowledged Native American tribe.
  • The tribe must not be the subject of congressional legislation that has terminated or forbidden a federal relationship.

Federal recognition is important to Native American tribes if they are to be eligible for billions of dollars in federal assistance. According to the BIA (July 25, 2008,, in 2008 the federal government held about 66 million acres (27 million ha) of land in trust for federally recognized Native Amerian tribes and their members. If a tribe does not have a land base, the federal government can take land in trust for the tribe once it receives recognition. That land is no longer subject to local jurisdiction, including property taxes and zoning ordinances.

Most tribes require that a person have a particular degree of Native American heritage (usually 25%) to be an enrolled member. Some tribes require proof of line-age. The BIA states that in 2008 federally recognized tribes had approximately 1.7 million members.

One of the most contentious issues related to tribal casinos is the authenticity of the tribes themselves. Critics charge that some Native American groups want

federal recognition only as a means to enter the lucrative gambling business. The GAO examines this issue in Indian Issues: Improvements Needed in Tribal Recognition Process (November 2001, http://wwwgaogov/newitems/d0249pdf). There were 193 tribes with gambling facilities in 2001. According to the GAO, 170 (88%) of the tribes could trace their federal recognition at least back to the time of the Indian Reorganization Act of 1934 or similar legislation from the 1930s. About 59% of those tribes were engaged in gambling operations in 2001. By contrast, 45% of the tribes recognized since 1960 were engaged in gambling operations.

The GAO indicates that the procedures established by the BIA in 1978 to ensure that the recognition of tribes be uniform and objective had become too long and inconsistent. Backlogs became constant because the number of petitions for recognition began to climb during the 1990s. However, the GAO explains in Indian Issues: Timeliness of the Tribal Recognition Process Has Improved, but It Will Take Years to Clear the Existing Backlog of Petitions (February 10, 2005, and Process of Federal Recognition of Indian Tribes (September 19, 2007, 110_senate_hearings&docid f:38917.pdf), report waits¼ of as long as fifteen, twenty, or even thirty years.


Because tribes are sovereign governments, they are not required by law to make public statements of their revenues, so financial information on individual tribal casinos is not publicly released. Each year the NIGC announces total gaming revenue from the previous year for all tribal gaming facilities combined. It also breaks down the revenue by U.S. region and revenue class. The NIGC indicates in the press release NIGC Announces 2007 Indian Gaming Revenues (June 18, 2008, that in fiscal year 2007 tribal casinos made $26 billion, up from $24.9 billion in fiscal year 2006. This revenue is broken down by region in Table 5.1.

Tribal casinos in Region II (California and northern Nevada) were the most profitable in 2007, earning $7.8 billion. (See Table 5.1.) Because there are no tribal casinos in northern Nevada, all of this revenue was actually from California tribal casinos. California tribes with gaming facilities earned 30% of all tribal casino revenue nationwide. Their market share was $1 billion more than that reported for commercial casinos on the Las Vegas Strip during 2007, according to the Nevada State Gaming Control Board, in State of Nevada Gaming Revenue Report: Year Ended December 31 (2008, http://gamingnvgov/documents/pdf/1g_07decpdf).

The second-most profitable region for tribes with gaming operations during 2007 was Region VI, which encompasses the states of Alabama, Connecticut, Florida, Louisiana, Mississippi, New York, and North Carolina. The region took in $6.4 billion in casino revenues, or 25% of total tribal revenue. (See Table 5.1.) Casinos

TABLE 5.1 Tribal gaming revenues by region, fiscal years 2007 and 2006 [$ in thousands]
  Fiscal year 2007 Fiscal year 2006 Increase (decrease)
  Number of operations Gaming revenues Number of operations Gaming revenues Number of operations Gaming revenues Revenue percentage
Region I Alaska, Idaho, Oregon, and Washington.
Region II California, and Northern Nevada.
Region III Arizona, Colorado, New Mexico, and Southern Nevada.
Region IV Iowa, Michigan, Minnesota, Montana, North Dakota, Nebraska, South Dakota, Wisconsin and Wyoming.
Region V Kansas, Oklahoma, and Texas.
Region VI Alabama, Connecticut, Florida, Louisiana, Mississippi, North Carolina, and New York.
SOURCE: National Indian Gaming Commission Tribal Gaming Revenues (in Thousands) by Region, Fiscal Year 2007 and 2006, in NIGC Announces 2007 Indian Gaming Revenues, National Indian Gaming Commission, June 18, 2008, (accessed July 18, 2008)
Region I 43 2,208,190 46 2,080,369 (3) 127,821 6.1%
Region II 58 7,796,488 56 7,674,794 2 121,693 1.6%
Region III 44 2,840,585 45 2,718,914 (1) 121,672 4.5%
Region IV 109 4,217,960 122 4,069,940 (13) 148,021 3.6%
Region V 100 2,553,034 98 2,125,906 2 427,127 20.1%
Region VI 28 6,399,841 27 6,219,100 1 180,742 2.9%
Totals 382 26,016,098 394 24,889,022 (12) 1,127,075 4.53%

operating in Connecticut, especially Foxwoods, are thought to be the largest source of that region's revenue.

The GAO reports in Indian Issues: Improvements Needed in Tribal Recognition Process that in 1988, the year the Indian Gaming Regulatory Act was passed, tribal gambling revenues were $171 million. That amount grew to $9.8 billion by 1999. Revenues reported by the NIGC for 1998 through 2007 are shown in Figure 5.1. Over this period, tribal casino revenues grew from $8.5 billion to $26 billion, an increase of more than 206%. By contrast, the AGA indicates in 2008 State of the States that revenues at commercial casinos grew from $19.7 billion in 1998 to $34.1 billion in 2007, an increase of 73%.

Tribal gaming revenues reported by the NIGC for 2007 are broken down by revenue class in Figure 5.3. About 33% of tribal gambling operations reported revenues of less than $10 million each. In NIGC Announces 2007 Indian Gaming Revenues, the NIGC states that sixty-nine operations (18% of the total number) earned $100 million or more. Those sixty-nine facilities took in 72% of all tribal casino revenue.

The Indian Gaming Regulatory Act requires that net revenues from tribal gaming be used:

  • To fund tribal government operations or programs
  • To provide for the general welfare of the tribe and its members
  • To promote tribal economic development To donate to charitable organizations
  • To help fund operations of local government agencies

Tribes with gaming operations may distribute gaming revenues to individual tribe members through per capita payments but are not required to do so. Such payments must be approved by the U.S. secretary of the interior as part of the tribe's Revenue Allocation Plan and are subject to federal income tax.


Building casinos can be expensive. Tribes that have built them have had to borrow large sums of money and/ or obtain investors to do so. In general, the law requires that tribes partner with companies for no more than five years at a time and limits the companies' take to 30% of the total revenue. Under some circumstances, the partnership can last seven years and the companies' portion can be as much as 40% of total revenue. These five- to seven-year contracts can also be renewed if both parties and the state government agree to the renewal.

The NIGC (2008, reports that in 2008 fifty-three tribes had management contracts in place with commercial companies. Nearly one-third of the contracts were with gaming companies based in Las Vegas and Reno, Nevada. Harrah's Entertainment was a partner in six of these contracts.

Native American casinos have often faced fierce opposition from commercial casino operators hoping to thwart competition. For example, tribal casinos in California could cut deeply into the Nevada casino business because California residents, who have long provided a large share of Nevada's gambling revenue, could gamble closer to home. However, some commercial casino operators have seen expanded opportunities for revenue through partnerships with Native American tribes, and some tribesespecially small tribeshave welcomed the investment capital and management experience offered by commercial partners.

For example, Thunder Valley Casino is a $215 million venture about 30 miles (48 km) northeast of Sacramento, California. The casino, which opened in June 2004, is owned by the United Auburn Indian Community, which has around 250 adult members. The casino was financially backed and managed by Station Casinos of Las Vegas. The tribe selected the company because it was willing to put up $200 million to build the casino and agreed to manage the casino for the tribe; in return Station receives 24% of the casino's net revenues. Before the casino opened, tribe members lived in poverty on a 3-acre (1.2-ha) reservation. However, with the casino came full health, dental, and vision insurance for each tribe

member. Gaming revenues also funded the United Auburn Indian Community Tribal School, which has a teacher-student ratio of 1 to 7. The casino is building on its success. Babette Hermann reports in From Termination to Triumph (Indian Country Today, February 6, 2008) that in 2007 the tribe announced plans to build a new 650-room resort hotel at Thunder Valley Casino.

Casino ventures between companies and small tribes are particularly controversial. According to Timothy Egan, in Lawsuit in California Asks, Whose Tribe Is It, Anyway? (New York Times, April 10, 2002), critics suggest that small tribes are being manipulated by outside investors who only want to cash in on tribal casinos. The California Nations Indian Gaming Association insists that small tribes should not be denied the tremendous economic opportunities offered by casinos. Egan notes that Susan Jensen, a spokesperson for the group, said, The reason some of these tribes have only one or two people left is because Indians were exterminated.

Tribal Casinos off the Reservation

Another hot topic is the construction of tribal casinos on land outside reservations. Brad Knickerbocker reports in Tribal Casinos Push beyond the Reservations (Christian Science Monitor, October 14, 2005) that by 2005 three dozen tribes had applied to the BIA to build casinos outside their reservations. Many of these tribes had casinos on their reservations and were looking to expand into different markets, many closer to major cities. To build a new casino on nonreservation land, tribes must convince the BIA that they have claim to a parcel of land where they would like to build the new casino. The BIA can then put the land into a trust for the tribe.

In 2008 the U.S. House of Representatives considered two bills, H.R. 2176: To Provide for and Approve the Settlement of Certain Land Claims of the Bay Mills Indian Community, and H.R. 4115: To Provide for and Approve the Settlement of Certain Land Claims of the Sault Ste. Marie Tribe of Chippewa Indians (, that would have authorized the construction of casinos in Michigan hundreds of miles from the reservation lands of the Bay Mills Indian Community and the Sault Ste. Marie Tribe of Chippewa Indians. On June 25, 2008, the House failed to pass the bills, preventing the expansion of off-reservation gambling.



Tribal casinos are not required by law to make their financial records public. Even though exact figures are not known, various reports indicate that the tribal casinos operating in Connecticut are extremely profitable. For example, in 200607 Indian Gaming Industry Report (2006), the economist Alan Meister estimates the annual revenue of Connecticut's tribal casinos to be $2.3 billion.

As of June 2008, only two tribal casinos were operating in Connecticut. Foxwoods Casino and Resort is operated by the Mashantucket Pequot in Ledyard, and the Mohegan Sun is operated by the Mohegan in nearby Uncasville. Both are located in a rural area of eastern Connecticut.

In About Foxwoods (2007,, Foxwoods describes itself as being the world's largest casino complex. In 2007 it had 6 casinos, 1,416 hotel rooms, 25 large conference rooms, a spa, a golf and country club, a shopping mall, dozens of restaurants, and a 1,400-seat theater. Foxwoods had over seven thousand slot machines, four hundred gaming tables, and the world's largest bingo hall. It also offers keno and sports gambling. The resort receives about forty thousand visitors every day.

The Mohegan Sun (2008, had twelve hundred hotel rooms, thirty-six restaurants, and three casinos in 2008. The complex also included a ten-thousand-seat arena, a showroom, an extensive retail complex, and its own gas station.

Foxwoods in particular has an interesting history. According to Kim Isaac Eisler, in Revenge of the Pequots: How a Small Native American Tribe Created the World's Most Profitable Casino (2001), a law passed in Connecticut in the 1980s allowed the wagering of play money on casino games such as blackjack, roulette, craps, and poker. The law was championed by the Mothers against Drunk Driving organization to encourage high schools to hold casino-type events following proms to reduce drunk driving by teenagers. Under this law, the Mashantucket Pequot Tribe was able to get a license for a charity gambling casino. It also procured $60 million from the resort developer Sol Kerzner (1935) to begin construction.

Foxwoods opened in 1992. At that time, slot machines were not permitted. In 1994 the tribe negotiated a deal with Lowell P. Weicker Jr. (1931), the governor of Connecticut, that provided the tribe with exclusive rights to operate slot machines within the state. In return, the tribe agreed to make yearly payments to the state of $100 million or 25% of the revenue from their slot machines, whichever was greater. By 1997 Foxwoods was considered the largest and most profitable casino in the United States.

The Mohegan tribe also signed in 1994 its own compact with Weicker to operate a casino. The Mashantucket Pequots granted the Mohegan tribe permission to include slot machines in its new casino. In return, the

state set the annual payment required from each tribe at $80 million or 25% of their slot revenue, whichever was greater. The Mohegan Sun opened in 1996 after receiving financing from Kerzner.

The Mashantucket Pequot's standing as a tribe is not without controversy. In Without Reservation: How a Controversial Indian Tribe Rose to Power and Built the World's Largest Casino (2001), Jeff Benedict claims that the Pequots never should have been legally recognized as a tribe by the federal government because some members were not actually descendants of the historic Pequot tribe. The tribe achieved its recognition by an act of Congress. Benedict made his allegations a major part of his unsuccessful run for Congress during the summer of 2002. He later helped found the Connecticut Alliance against Casino Expansion (CAACE), a nonprofit coalition that lobbies against additional casinos in Connecticut and successfully led the drive to repeal the state's Las Vegas Night law that provided the legal opening for the original casinos. CAACE also seeks federal legislation to reform the tribal recognition process.

In Connecticut, legalized gambling is regulated by the Division of Special Revenue, which conducts licensing, permitting, monitoring, and education. It also ensures that the correct revenues are transferred to the state's general fund and to each municipality that hosts a gaming facility or charitable game. Table 5.2 shows the annual and cumulative revenues paid into the general fund by Foxwoods and Mohegan Sun. The Division of Special Revenue indicates in Gaming Revenue and Statistics (July 16, 2008, that Connecticut collected nearly $2.7 billion from Foxwoods between 1993 and June 2008 and nearly $2 billion from Mohegan Sun between 1997 and June 2008. These casino revenues represented 39.5% of all gaming payments to the state general fund between 1972 and 2008. (See Figure 5.4.)


In Gaming Tribe Report (June 6, 2008,, the NIGC indicates that in 2008 fifty-five tribes in California had gaming operations, by far the most of any state. According to the NIGC, in NIGC Announces 2007 Indian Gaming Revenues, the state's tribal casinos earned nearly $7.8 billion in fiscal year 2007, approximately one-third of the nationwide tribal total and more than the casinos on the Las Vegas Strip. Industry analysts predict that this percentage will continue to grow as the California market matures. According to the National Conference of State Legislatures, in Federal and State Recognized Tribes (December 2007,

TABLE 5.2 Connecticut tribal gaming payments to state general fund, 1993-2008
FYE Foxwoods Mohegan Sun Subtotal
Revenue transferred on cash basis per fiscal year. FYE = Fiscal Year End.
The above transfers represent:
a) Actual lottery transfers through fiscal year 2008 as reported by the Connecticut Lottery Corporation.
b) Collection of parimutuel taxes, net of payments to municipalities and other entities, for the former jai alai and greyhound facilities.
c) Collection of parimutuel taxes, net of payments to municipalities and other entities, for races conducted through fiscal year 2008 for off-track betting (OTB).
d) Estimated sealed ticket and bingo revenue through fiscal year 2008.
e) Actual casino contributions through July 15, 2008, based on reported video facsimile/slot machine revenue through fiscal year 2008.
From its inception in 1976 through June 30, 1993, the OTB system was state operated. For that period, transfers represented the fund balance in excess of division needs. The OTB system was sold to a private operator effective July 1, 1993 and since then transfers are based on a statutory parimutuel tax rate.
SOURCE: Adapted from Transfers to General Fund, in Gaming Revenue and Statistics, State of Connecticut, Division of Special Revenue, July 16, 2008, (accessed August 8, 2008)
1993 $30,000,000   30,000,000
1994 113,000,000   113,000,000
1995 135,724,017   135,724,017
1996 148,702,765   148,702,765
1997 145,957,933 $57,643,836 203,601,769
1998 165,067,994 91,007,858 256,075,852
1999 173,581,104 113,450,294 287,031,398
2000 189,235,039 129,750,030 318,985,069
2001 190,683,773 141,734,541 332,418,314
2002 199,038,210 169,915,956 368,954,166
2003 196,300,528 190,953,944 387,254,472
2004 196,883,096 205,850,884 402,733,980
2005 204,953,050 212,884,444 417,837,494
2006 204,505,785 223,020,826 427,526,611
2007 201,380,257 229,095,455 430,475,712
2008 190,037,675 221,373,298 411,410,973
  $2,685,051,226 $1,986,681,366 4,671,732,592

.htm#state), the state had 115 federally recognized tribes in 2007, 20% of the national total. Most are described as small extended family groups living on a few acres of federal trust property called rancherias. Some tribes have only a handful of members.

Before 2000 California tribes were largely limited to bingo halls because state law prohibited the operation of slot machines and other gambling devices, certain card games, banked games, and games where the house collects a share of the amount wagered. In 2000 California voters passed Proposition 1A, which amended the state constitution to permit Native American tribes to operate lottery games, slot machines, and banking and percentage card games on tribal lands. The constitutionality of the measure was immediately challenged in court.

In January 2002 the California governor Gray Davis (1942) signed sixty-two gambling compacts with California tribes. The compacts allowed each tribe to have a maximum of two thousand slot machines. The governor also announced plans to cap the number of slot machines in the state at forty-five thousand. At the time, there were already forty thousand slot machines in operation and dozens of tribal casinos in the planning stages. The governor put a moratorium on new compacts while Proposition 1A made its way through the courts. In August 2002 a U.S. district court ruled that tribal casinos were entitled to operate under the provisions of the state gaming compacts and Proposition 1A.

False, the California Nations Indian Gaming Association (CNIGA) states that in televised campaign ads Schwarzenegger promised voters to make tribal casinos pay their fair share, arguing that their casinos make billions, yet pay no taxes and virtually nothing to the state. The CNIGA was outraged, calling the remarks hurtful and accusing Schwarzenegger of having a complete and almost frightening lack of understanding of the legal status of Indians and tribal governments. The CNIGA also reminded voters that the gaming tribes paid more than $100 million per year into a special fund designated to pay for the effects of tribal gaming on local communities.

In June 2004 Schwarzenegger signed new compacts that preserved the exclusive gaming rights of five California tribes: the Pala Band of Mission Indians, the Pauma Band of Mission Indians, the Rumsey Band of Wintun Indians, the United Auburn Indian Community, and the Viejas Band of Kumeyaay Indians. The slot machine cap was also raised above two thousand machines per tribe. In exchange, the tribes agreed to pay the state $1 billion up front and a licensing fee for each new slot machine added above the current limit. Payments were expected to total between $150 million and $275 million per year through the compacts' expiration date in 2030.

Schwarzenegger also announced plans to negotiate similar deals with other tribes in the state. However, several tribes decided to fight the new compacts. The Rincon Indian Tribe sued the state, arguing that the new compacts showed favoritism to some tribes and put others at an economic disadvantage. A federal judge, however, ruled against the Rincon. The judge reasoned that all tribes are sovereign entities, so different gambling deals can be structured by different tribes.

The state continued to form tribal compacts that permitted casino expansion in exchange for higher taxes. One of the more notable deals was made with the Agua Caliente Band of Cahuilla Indians. The tribe owned two casinos in Palm Springs. In August 2006 the state agreed to let the tribe open a third casino with five thousand slot machines if the tribe paid an estimated $1.9 billion in taxes over the following twenty-three years. Many Californians were concerned that if such deal-making were allowed to continue, casinos could be as prevalent as shopping malls and lead to higher instances of gambling addiction.

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