California Casinos May Skip State Regulation, Opting for Direct Federal Oversight

The Rincon Band of Luiseño Indians moved from state to federal regulation this month. That may mean 28 other tribes that operate California casinos could end up following suit when their state compacts expire at the end of the year.

This is the first time a California tribe has opted out of state regulation in favor of federal oversight, according to The San Diego Union-Tribune.

Rincon, the tribe that owns Harrah’s Resort Southern California, posted a link to the newspaper article on its Facebook page on Jan. 23 with the comment:

We’re committed to increasing our tribal sovereignty to benefit our people and community.

If California tribal casinos choose federal oversight over state regulation, it could cost California millions a year in regulatory fees.

All 82 California casinos are tribal casinos. According to the most recent gross gaming revenue (GGR) report from the American Gaming Association (AGA), those retail casinos generated $8.41 billion in 2016.

That near-monopoly – because there are no commercial casinos in the state, but there are cardrooms – is one clue about how powerful tribes are in California gaming. Elsewhere in the US, commercial casinos are almost exclusively state-regulated and provide local tax revenue.

Another example of California casinos’ influence is their successful effort to prevent competition from online sportsbooks. In November, they were a significant reason voters defeated two ballot propositions that would’ve legalized sports betting in the state.

So if more California casinos follow Rincon’s lead, it could significantly impact state regulatory income. However, tribes would continue to deposit millions into California’s revenue-sharing trust fund for distribution to non-gaming tribes. The California Nations Indian Gaming Association (CNIGA) said 43 California tribes don’t engage in gaming.

Meanwhile, Rincon will instead pay regulatory fees to the National Indian Gaming Commission (NIGC). On Jan. 3, the tribe signed the agreement with the commission by the Indian Gaming Regulatory Act (IGRA), the Escondido Times-Advocate reported on Jan. 23.

Why Would California Casinos Eschew State Regulation?

Recent events souring California tribes on state regulation may mean the 25-year-old tribal-state gaming compacts may not last much longer.

First, California’s attempts to shoehorn non-gaming provisions into gaming compacts rankled tribes. Gov. Gavin Newsom‘s admission that the state negotiated in bad faith with the tribes didn’t seem to make tribal leaders much happier.

Second, the California Senate’s Governmental Organization Committee deadlocked on a bill that would have extended the California cardroom moratorium.

Therefore, the more than 20-year-old moratorium expired on New Year’s Day 2023.

Stacey Luna Baxter, the executive director of the California Gambling Control Commission (CGCC), wrote on Sept. 14, 2022:

Despite the expiration of the moratorium, existing Cardrooms seeking to increase their authorized permanent tables, or individuals seeking to own or operate a new cardroom, must be in compliance with all relevant federal, state, and local laws.

California Casinos Likely Watching Rincon Choice

Rincon may be the first to eschew state regulation.

However, it likely won’t be the last, reported the Union-Tribune.

Quoting George Forman, a tribal gaming lawyer in Northern California, the Union-Tribune article said:

To make a similar move, a tribe would need to be in the position to renegotiate its compact upon approaching its expiration date. After being unable to come to an agreement, a tribe would need to then sue the state for failing to negotiate the compact in good faith and win its case.

“Tribes cannot simply opt out. These compacts — the more recent ones — are 25-year agreements,” Forman said.

CNIGA explains:

On September 10, 1999, 58 tribal governments signed tribal-state compacts with Governor Gray Davis. Since that time, several additional tribes have signed tribal-state gaming compacts bringing the total number of approved compacts in California to 75. Additionally, three other tribes operating under a process known as Secretarial Procedures, or a process directed by the federal Department of Interior, when it is deemed that the state did not negotiate in good faith with tribal governments.

So, in addition to the 28 compacts tribes have with California that are expiring at the end of 2023, Forman notes for the Union-Tribune that 16 more tribes may also opt for federal regulation. They’ve “already won cases against California over bad faith gaming negotiations,” he told the newspaper.

That leaves 22 tribes that may still employ state regulation, according to CNIGA figures.

In essence, the nature of California casinos may change at the end of the year unless state regulators find a way to retain state-tribal gaming compacts. Otherwise, federal regulators may take over the job.

About the Author

Heather Fletcher

Heather Fletcher

Heather Fletcher is Lead Writer at Bonus, concentrating on online casino coverage. She specializes in breaking news, legislative coverage, and gambling marketing strategy overviews. To reach Heather with a news tip, email [email protected].
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