Gaming goldmines grow green: limited gaming, good faith negotiations, and the economic impact of the Indian Gaming Regulatory Act in South Dakota.

• Author: Swier, Brooke DeLores

1. INTRODUCTION

   "This is high-stakes litigation...."

   --Judge Edith H. Jones (1)

   In 1876, Deadwood became legendary for its wild and lawless ways. (2) The history of gaming in Deadwood, South Dakota, is a true Wild West tale. (3) Gamin thrived in Deadwood with the Black Hills' Gold Rush in the late 1800s. (4) Gaming, although unconstitutional, flourished illegally until South Dakota officially ended gaming in Deadwood in 1947 by raiding gaming parlors and burning seized slot machines. (5) The discontinuation of gaming did not last long, however, and gamblers were once again placing bets in Deadwood. (6) During the 1960s, illegal gambling in private clubs was again targeted by the sheriff of Deadwood. (7) In the 1980s, an organized effort took place to legalize gaming; the proponents argued that legalized gaming would revitalize the Deadwood community. (8)

   In 1986, South Dakota became the first state in the nation to organize a state-sanctioned lottery. (9) Two years later, South Dakota residents passed the "Deadwood Amendment." (10) This constitutional amendment permitted "limited gaming" within the city limits of Deadwood. (11)

   At approximately the same time that Deadwood began redeveloping its gaming industry, Congress passed the Indian Gaming Regulatory Act (IGRA). (12) The IGRA provides that if a type of gaming is permitted by state law, a federally-recognized Indian tribe can conduct the same type of gaming on tribal land. (13) As a result of the "Deadwood Amendment" and the IGRA, all of South Dakota's Indian tribes have engaged in some type of gaming since the early 1990s. (14)

   This comment first reviews the IGRA's legislative history and complex substantive and procedural framework. (15) Next, this comment provides a brief historical analysis of gaming in South Dakota, (16) reviews gaming's economic impact on the state, (17) and examines whether the Governor has the authority to unilaterally execute gaming compacts. (18) This comment then reviews the interpretation of the IGRA's good faith requirement by the most recent federal court in South Dakota to review the issue. (19)

   Ultimately, this comment reaches three conclusions. First, the Governor's unilateral role in executing gaming compacts likely violates the South Dakota Constitution. (20) Second, South Dakota has consistently adhered to its public policy of limited gaming. (21) Third, by remaining a state of limited gaming, South Dakota has satisfied the IGRA's requirement of good faith in its recent gaming compact negotiations with the Flandreau Santee Sioux Tribe (FSST). (22)

2. BACKGROUND

   1. THE INDIAN GAMING REGULATORY ACT

      1. The Legislative History of the IGRA

         Indian gaming dates back to the 1970s and early 1980s when a few Indian tribes in California and Florida opened high-stakes bingo halls to generate revenue. (23) Kathryn R.L. Rand and Steven Andrew Light, co-directors of the Institute for the Study of Tribal Gaming Law and Policy, (24) explained: "As one of the few viable strategies for reservation economic development, bingo presented an attractive option to tribal governments: start-up costs were relatively low, the facilities had a minimal impact on the environment, and the game had potential for high returns on the tribes' investment." (25)

         As Indian gaming began to flourish around the country, the United States Supreme Court delivered a pivotal decision in 1987 in California v. Cabazon Band of Mission Indians. (26) The Cabazon Band of Mission Indians (Cabazon Band) conducted bingo games and opened a card club in which draw poker and other card games were played. (27) The State of California sought to enforce a state statute which only permitted the game of bingo if operated for charitable purposes and if the maximum prize did not exceed $250. (28) The State maintained that the Tribe must comply with state law and that the Tribe's current operation was in violation of the state statute. (29)

         The United States Supreme Court concluded that state laws may be applicable to Indian reservations if Congress expressly granted that authority to the state. (30) "The shorthand test is whether the conduct at issue violates the state's public policy." (31) When California law was examined, the United States Supreme Court found that California did not prohibit all forms of gambling because the state operates and encourages citizens to participate in a state Iottery. (32) Because California allows gaming, including bingo, and promotes gambling through the state lottery, the Court concluded that California could not regulate bingo on Indian reservations. (33) "The Court's decision in Cabazon opened the door for the expansion of gaming in Indian country free from state regulatory control." (34)

         In response to the United States Supreme Court's decision in Cabazon, Congress enacted the IGRA in 1988. (35) The IGRA is intended to balance the state's, tribe's, and federal government's interests regarding gaming. (36) One of the IGRA's primary purposes is "to provide a statutory basis for the operation of gaming by Indian tribes as a means of promoting tribal economic development, self-sufficiency, and strong tribal governments." (37) Additionally, the IGRA is intended to shield Indian gaming from organized crime, ensure tribes are the beneficiaries of the gaming, and guarantee gaming is conducted fairly. (38) As one federal court opined in 2002:

         [The] IGRA was Congress' [s] compromise solution to the difficult questions involving Indian gaming. The Act was passed in order to provide "a statutory basis for the operation of gaming by Indian tribes as a means of promoting tribal economic development, self-sufficiency, and strong tribal governments" and "to shield [tribal gaming] from organized crime and other corrupting influences to ensure that the Indian tribe is the primary beneficiary of the gaming operation." 25 U.S.C. [section] 2702(1), (2). The IGRA is an example of "cooperative federalism" in that it seeks to balance the competing sovereign interests of the federal government, state governments, and Indian tribes, by giving each a role in the regulatory scheme. (39) The IGRA applies to gamin activities conducted by federally-recognized Indian tribes (40) on Indian lands. (41) To meet congressional concerns regarding gaming and to ensure gaming revenues actually benefit the tribes, the IGRA declares independent federal regulatory authority for gaming on Indian lands, creates federal standards for gaming, and establishes a National Indian Gaming Commission. (42) In other words, the IGRA "provides a comprehensive scheme for regulating gaming activities on Indian land." (43)

      2. The IGRA's Three Classes of Gaming

         The IGRA divides gaming into three classes, each subject to differing levels of regulation. (44) According to Rand and Light, "[o]ne of [the] IGRA's key innovations was its categorization of tribal gaming for regulatory purposes." (45)

         Class I gaming includes "social games solely for prizes of minimal value or traditional forms of Indian gaming engaged in by individuals as part of, or in connection with, tribal ceremonies or celebrations." (46) Regulation of class I gaming is within the exclusive jurisdiction of the Indian tribes and is not subject to the provisions of the IGRA. (47)

         Class II gaming includes bingo, pull-tabs, lotto, punch cards, tip jars, and card games as well as banking card games operated on or before May 1, 1988, if played in conformity with state law regarding wagers, pot sizes, and hours of operation. (48) Class II gaming does not include banking card games such as baccarat, chemin de fer, blackjack, or electronic games of chance or slot machines. (49) Regulation of class II gaming is within the jurisdiction of the Indian tribes but is subject to the provisions set forth in the IGRA. (50) In addition, the National Indian Gaming Commission is authorized to approve any ordinance or resolution pertaining to the conduct or regulation of class II gaming. (51)

         Class III gaming includes casino-type games, pari-mutuel horse and dog racing, slot machines, lotteries, and all other forms of gaming that are not class I or class II gaming. (52) Three conditions must be met before a tribe may conduct class III gaming on Indian land. (53) First, all gaming activities must be authorized by an ordinance or resolution adopted by the governing body of the tribe and approved by the National Indian Gaming Commission chairman. (54) Second, the state must permit the type of gaming requested for any purpose, by any person, organization, or entity. (55) And third, all gaming must be conducted in conformance with a tribal-state gaming compact (gaming compact). (56)

      3. The IGRA's Unique Procedural Framework and the Requirement of Good Faith Negotiation

         The IGRA is based on the legislative conclusion that class III gaming should only be conducted under a valid tribal-state gaming compact. The IGRA provides a precise and systematic framework for negotiating a gaming compact. (58) Under the IGRA, an Indian tribe must first request a state to enter into gaming compact negotiations. (59) After a state receives a tribe's request, "the State shall negotiate with the Indian tribe in good faith to enter into such a compact." (60) If a tribe and a state reach an agreement, the compact takes effect upon the approval of the Secretary of the Interior. (61)

         Although the IGRA mandates a gaming compact, it does not require any specific gaming compact provisions. (62) However, the IGRA provides guidance on provisions that may be included. (63) These may include provisions relating to criminal laws and regulations, the licensing and regulation of gaming activities, the state's assessment of the cost of regulating gaming, and other subjects that are directly related to gaming activities. (64)

         If a tribe and a state cannot reach an agreement within 180 days after a tribe's initial request for negotiations, the tribe may file suit in federal court. (65) The...