The Mouthpiece


By Martin Owens
Contributing Editor


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    Martin Owens

    War Drums in the West

    Will California's gaming tribes ambush themselves?



    In 2013, California's State Senate will once again consider a bill to legalize and license online poker, to be offered within the state's borders. This is nothing new; California has been wrestling with this issue since about 2005. The current bill, SB 51, also plows familiar ground. Authored by Senator Rod Wright, one of the few state legislators in the country who actually knows what he's talking about in regard to online gambling, it offers licenses to any current brick and mortar licensee operating within the Golden State. Background checks and player protection feature prominently, and it avoids the mistakes of previous bills by other parties. No exorbitant up-front fees are demanded. Licenses will last for five years. Comprehensive state supervision is built-in. So what's not to like? Unfortunately, also as before, there is opposition

    To be sure, the opposition is not nearly as strong as in previous years. At first there was almost universal resistance to the notion of Internet poker. The two principal vested interests in state licensed gambling, municipal card rooms and the gaming tribes, feared that online gambling would cannibalize their existing customer base. But a crumbling economy and the meteoric rise of social media combined with video games of all kinds, pointed to the handwriting on the wall. The brick-and-mortar demographic is slowly giving way to the millennial generations. To ignore the online dimension is to throw away future customers. Today most of the stakeholders in California gambling have come to realize that going online is inevitable, and that it is very much in everyone's interest to smooth the path.

    But things are never that simple in politics, particularly California politics. It would seem that with a super-majority in both houses of the state legislature, Liberal Democrats could do what they liked. But there are images and standards to maintain. And one of the pillars is good race relations. To do anything which might be seen as screwing over minority constituents is therefore absolutely taboo. This very much includes Native Americans.

    Now of the 500 recognized Indian tribes in the United States, no fewer than 108 reside in California. Which means that even a few small tribes or bands, or even a few disgruntled individuals, can threaten bad publicity, lawsuits, and the rest. In PC, PR conscious California, this is a far more effective threat than it looks . It has kept California's online poker legislation bottled up in committee every year. How can they do that?

    Trail of Confusion

    It would take volumes to describe the interplay between the United States government and the Native American tribes over the past hundred years or so, most of it damned confusing reading. The Federal government has literally shoved the various tribes and nations around like pawns on a chessboard. It has shot at them, made peace with them, shot at them some more, recognized them, de-recognized them, and currently seems to be in a pattern of slowly re-recognizing most of them. But not all.

    One of the peculiarities of American law is the idea that the various tribes are "dependent sovereigns". They are not independent nations, however much this wrong idea may be hyped. There is no such thing as a Navajo Air Force, or a Seminole Post Office, or an Apache National Mint. Today the American Indians have no independent national authority. All are born citizens of the USA, subject to income tax, the draft, Social Security, Obamacare, and all the rest. But in certain circumstances, tribal governments, on tribal land, have an almost co-equal status with state governments, and can essentially run things their way. And they also have the privilege known as sovereign immunity. Simply put, mostly they cannot be sued unless they consent, same as a state or national government.

    All right, what does all this have to do with gambling? In 1988, Congress passed the Indian Gaming Regulatory Act, which allowed tribes, under Federal supervision, to open up gambling operations on their tribal land- which a number of them were doing anyway. Indian gambling became a multibillion-dollar industry overnight. In California, as usual, there were unique wrinkles. It took a modification of the state constitution to allow Vegas style gaming at all. California's tribes were essentially granted a monopoly of what is called Class III gaming (table games against the house and slot machines, but no sports betting). Class II gaming, (bingo and card games, no house) was also allowed- but not as a tribal monopoly. The IGRA says that any type of gambling licensed outside the reservations can be conducted inside the reservations. Since California's already existing card rooms were prevented from any meaningful expansion, they lost lots of business to the new tribal operations, Class II or not. (Just to keep the scorecard straight, Class III gaming requires a compact between the tribe and the state. Class II does not. And these classifications apply only to Indian gaming).

    Tribes whose lands were located close to major metropolitan areas, such as the Pechangas and Agua Calientes, signed compacts with the state and built full-blown resorts, featuring everything but sports betting. California's Indian gaming became an industry worth $5 billion all by itself, and the gaming tribes became power players in California politics. Smaller tribes in more remote locations did not do as well, and in fact provision was made to pay stipends to those who did not open up gambling.

    Wait a minute, though - wouldn't going online be a tremendous advantage for the "have not" tribes? Yes, but that's not what the diehard opposition is worried about. They claim that if California legalizes Internet poker it will violate tribal sovereignty, and the concept of exclusivity.

    These concerns are, however, erroneous. While it is true that the tribal casinos offer non-banked poker, that is not make-or-break for the deal they made with California. Poker was licensed and offered publicly before the IGRA - in other words the reason the Indians can have it is because California already had it. Senator Wright's bill does not authorize anything beyond poker- though technically speaking, it could.

    There is a parallel allegation that allowing Internet poker violates the state compacts with the various gambling tribes (they signed ?em one at a time, apparently just to make things more interesting) . The idea is that a computer which allows Internet poker is a "gambling device", and only the tribes are supposed to have such things. But this notion doesn't hold water either. Each and every one of the tribal gaming compacts which mentions gaming devices at all specifically defines them as slot machines and nothing else. Playing poker via computer violates no rights or entitlements of California's gaming tribes

    Then there is the argument that the tribes' sovereign immunity will be compromised because California Internet poker will be regulated by the state and not the tribes. But this too, ignores the statutory realities. Tribal authorities can indeed license and administer their own gambling programs, and are, for the moment, sovereignty immune. But this only applies to that gambling which is actually offered on the tribal lands themselves. Internet poker by definition is offered in and by California, which is not subject to tribal jurisdiction. Senator Wright is not asking to break tribal control over their existing operations. All he is asking is that any tribe entering the online poker arena - by definition outside the reservations - be subject to the same rules as everybody else operating in California. Which is hardly unfair.

    And the majority of the California gaming tribes have been sending quiet signals that they understand the new state of affairs. Several California Indian groups have in fact opened up free to play poker sites of their own, the better to stake out a clientele for the future.

    Boomerang?

    Up to now, Indian tribal authorities in California and across the country have enjoyed the protection of sovereign immunity, and it has been useful legal leverage, both in gambling related matters and in other areas. In fact, the mere threat of a lawsuit based on the theory of sovereign immunity has enabled tribal splinter factions to prevent California from making progress on Internet poker. But now the balance seems to be tipping as yet another complicating factor rears its head.. Today the very concept of Indian sovereign immunity has become quite unpopular with the Federal Courts.

    Professor Nelson Rose, one of America's foremost authorities on gambling law, has traced the evolution of the Federal position over about the past 10 years. It is not good news for the Indians. Even a Supreme Court split between liberals and conservatives, he points out, agrees on the necessity to get rid of sovereign immunity for America's tribes. Conservatives hate the idea of a countervailing authority to the Federal government (or at least one which is not clearly spelled out in the Constitution). Liberals are repelled by the notion of a dual standard of justice, whereby vendors and service providers may find themselves suddenly without recourse based on a technicality. In fact, Professor Rose notes, the Court has gone so far as to abjure the legal foundations of tribal sovereignty, calling it not a legal doctrine but "an anachronistic fiction" , something - developed almost by accident". By such pronouncements the Supreme Court has, in effect, been vigorously nudging the lower courts to begin the process of wiping it out altogether.

    Which means that if the California Senate should pass an Internet gambling bill, the splinter factions would find themselves splintered indeed. Any lawsuit of theirs would not only risk having their own argument slapped down by the Federal judiciary, but would further risk throwing away any remaining protection of sovereign immunity for ALL Indian tribes nationwide. In many ways, this would be a pity, for even today, Indian tribal authorities are often relatively unsophisticated folks, and sovereign immunity gives them a chance to call for a reboot when it becomes apparent they've been taken advantage of. Losing that protection would be a very high price to pay for what is, at bottom, little more than the wounded vanity of about four California Indian bands. The Indians would be essentially ambushing themselves, with themselves the only victims of the ensuing old-time frontier massacre.

    Of course, that would be what they call doing it the hard way. The easy way, much less in vogue these days but still available, would be as follows: make a deal with the future while there's still a deal left to make. This applies not only to the dissident California Indians, but to all parties involved.

    What happens next still remains to be seen.

    Mr. Owens is a California attorney specializing in the law of Internet and interactive gaming since 1998. Co-author of INTERNET GAMING LAW with Professor Nelson Rose, (Mary Ann Liebert Publishers, 2nd ed 2009) ; Associate Editor , Gaming Law Review & Economics; Contributing Editor, TSN. Com Comments and inquiries welcome at to mowens@trade-attorney.com.

    Copyright 2013


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