Achieving the Upper Hand

How to establish control in compact negotiations

The Department of the Interior (DOI) is revising its rules for review and approval (or disapproval) of tribal-state Class III compacts. The Rulemaking Announcement began with an extended review of tribal comments on a consultation draft. Comments on the public draft were due by March 1. The proposed rules would add guidelines and guardrails to existing DOI practice by publicly codifying current legal and administrative standards.

Currently, tribes wishing to conduct gaming under the Indian Gaming Regulatory Act (IGRA) must negotiate a compact—allocating gaming regulatory responsibility—with the state, then submit that compact for DOI review. The Secretary has 45 days to approve or disapprove the compact. Without any action, the compact is “deemed approved,” meaning that it goes into effect upon publication— but only to the extent it is consistent with law.

Nearly 35 years after the 1988 enactment of IGRA, the tribal-state gaming compact process remains problematic. Early fights concerned the scope of gaming that states must negotiate. When the Supreme Court rejected the Seminole Tribe’s suit to enforce good-faith compact negotiations against the state of Florida, as barred by state sovereign immunity, states seized leverage. Some compacts incorporated provisions that infringed on other tribal sovereign rights, in violation of IGRA. Absent a congressional “Seminole fix” to restore negotiation obligations, the secretary must protect tribes against state overreach.

Illegal Provisions

After a long struggle to achieve a compact, tribes have sometimes accepted questionable concessions, such as impermissible state taxes, allocation of state jurisdiction and non-gaming subject matter, and have asked the secretary to take no action on the compact, allowing it to go into effect as “deemed approved.”

The strategy permitted a tribe to establish a relatively stable basis for Class III gaming, even when some provisions diminished tribal rights protected by IGRA. The proposed regulations contemplate that a guidance letter, issued after the

45-day period, may list all provisions in a “deemed approved” compact found to violate IGRA. Upon publication, the compact is fully effective only to the extent consistent with IGRA. Compacted gaming can begin, but illegal provisions (even if not listed in the guidance letter) remain subject to challenge in court.

Violation of IGRA – But Still Approved?

By law, the secretary may disapprove a compact only if it violates IGRA, any other federal law or the trust obligation of the United States, but disapproval is not required. Sometimes, the DOI affirmatively approves a compact containing illegal provisions. The proposed rules recite the secretary’s discretion to do so.

This practice has and will continue to engender confusion for tribes attempting to negotiate new compacts. For example, in 2012, the DOI rejected a compact that would have governed Mashpee Wampanoag gaming in Massachusetts, detailing a number of violations, including attempts to regulate Class II gaming. But in 2021, the secretary affirmatively approved Arizona compacts that specifically limit tribes’ authority to conduct Class II games, perpetuating earlier compact provisions that included Class II positions in the number of maximum gaming positions permissible.

The proposed guidelines include regulation of Class II gaming in a list of activities that are considered evidence of a violation of IGRA, but this list will be only as helpful as the secretary’s willingness to enforce it.

Revenue Share

The regulations discuss “great scrutiny” of revenue sharing provisions to determine if any amounts in excess of regulatory fees are impermissible taxes, with specific reference to whether the state has provided substantial economic benefits to justify revenue sharing. Revenue sharing provisions have been perennially controversial since they were first approved nearly 30 years ago.

The Rincon Tribe successfully established, in 2010, that California offered inadequate consideration for significant revenue share demands in a

By Judy Shapiro

compact amendment. By regulation, such a demand is “evidence of a violation of IGRA” and a basis to demonstrate in court that the state has not negotiated in good faith. Because California had earlier waived its sovereign immunity, Rincon could secure a remedy.

Protecting 21st Century Gaming Expansion

Competition for sports betting is fierce and litigious. The proposed regulations acknowledge tribes’ right to negotiate the conduct of statewide remote wagering or iGaming, provided that either state law or the compact establishes that the wagering take place at a server located on Indian lands, that the tribe regulates the gaming, and the player is not located on another tribe’s Indian lands. Whether approved or “deemed approved,” compacts may still be challenged. In Florida, third-party competitors are seeking to invalidate sports betting provisions of the “deemed approved” 2021 compact for the Seminole Tribe. More recently, in Washington state, a card room seeks to invalidate sports betting provisions by claiming that tribal exclusivity violates Equal Protection.

Each case challenges the DOI directly and leaves out the compacting parties, while the impacted tribes have intervened as the “real party in interest” for the limited purpose of interposing their own sovereign immunity to defeat the challenge, preventing a court from considering the complaint at all. Decades after state sovereign immunity barred tribes from compelling compact negotiation, tribes are deploying their sovereign immunity to protect hard-won compact terms. A variant on the long-sought “Seminole fix.”

While they stop short of a “Seminole fix,” the proposed regulations announce standards to enhance protection of tribal compact rights. It remains to be seen how they will be applied and enforced.

Judy Shapiro is a strategic partner in the Washington, D.C. office of Big Fire Law & Policy. She can be reached via email at jshapiro@Bigfirelaw.com or at 202-257-6436.