State commission contemplates new casino rules

A fight over the regulation of tribal casinos has come back before the gambling control commission, once again raising questions about who is regulating the state’s multi-billion dollar gaming industry.

Differences over the casino’s minimum internal controls – known as MICs – surfaced in 2007 when state lawmakers held up five major new gaming compacts in part over differences about those minimum controls.

“There was tension there between the state of California and the California tribes,” said Phil Hogen, chairman of the National Indian Gaming Commission. “There wasn’t just one model of compact, so the concept was born then that NIGC has the authority to take enforcement action, and the NIGC already has regulations in place.”

Hogen said it appears now that there is an agreement to defer to the federal government on most auditing and regulatory issues.
“There is some continuing tension between the tribes and the state” gaming control commission, he said. “Hopefully, the action being considered in California will lessen that.”

Hogen is referring to new draft regulations before the state’s Gaming Control Commission that would essentially defer to federal standards when it comes to auditing and monitoring casino operation. But the agreement will still not end California’s multi-tiered system of tribal gaming enforcement.

In 2007, some of the state’s largest gaming tribes agreed to new state-based gaming regulations. Under pressure from Speaker Fabian Nuñez, four tribes agreed to new oversight from state regulators in exchange for permission to expand their gaming operations. Those tribes – the Agua Caliente Band of Cahuilla Indians, the Morongo Band of Mission Indians, the Pechanga Band of Luiseno Mission Indians, San Manuel Band of Mission Indians are now subject to state gaming regulation.

A fifth tribe, the Sycuan Band of the Kumeyaay Nation, agreed to the state regulators, but later backed out of the entire compact.
But those compacts simply added to the fractured nature of tribal casino regulations. Some tribes have agreed to be subject to state regulators; others have signed deals making them subject to federal regulation from the National Indian Gaming Commission. Still other tribes do not have any state or federal regulators overseeing the operation of their casinos, and are regulated by gaming commissions formed by the tribes themselves.

Those individual tribal gaming commissions often reach out to local law enforcement and other experts to help with casino oversight, but membership of these commissions is decided on by each sovereign tribe.

Minimum Control Standards are the basic rules that govern the operation of a casino. Everything from how the money is handled to the percentage payouts slot machines must make is governed by these regulations. Minimum Control Standards are standard procedure in tribal and non-tribal casinos around the country.

But a recent federal court decision limited the regulators scope. The case of Colorado River Indian Tribes v. NIGC limited federal regulators’ ability to monitor Class 3 gaming facilities around the country. Class 3 games are games that are not house-banked, but rather link a player’s winnings to the amount of money wagered by other players. California tribal casinos are all Class 3 facilities.

Forces at the state gambling control commission argue that self-regulation of tribal casinos is akin to no regulation at all. But others say the commission is simply trying to expand its influence, and seek to address an issue that has not been a problem.

“It’s a solution in search of a problem,” said Alison Harvey, executive director of the California Tribal Business Alliance. All of CTBA’s members have agreed to oversight from the federal NIGC. “The question is, for those tribes, why do we need yet another agency reviewing what is already under federal review?”

Members of the commission have argued they would like to see a uniform system of state gaming regulation.

The issue gets to the heart of the most controversial issues in tribal gaming – the rights of sovereign Indian nations to conduct their own business versus the right of state regulators or lawmakers to direct what goes on on Indian lands.

Harvey dismissed the implication that tribes would mismanage the regulation of their own casinos. “Tribes take this very seriously,” she said. “The gaming agency is protecting the government from things that could be going on in the casino.”

Hogen agreed that tribes do a good job of regulating themselves. But he says outside regulators perform an important function. “The tribes do a quality job for the most part,” he said. “But one of the reasons they got where they are is they had a (federal) standard to adhere to. They can do that voluntarily, but my experience has been if there isn’t some pressure, then compliance may not be quite as quick or as strong as it ought to be.”