Indian Gaming and the New York Times' Crystal Ball

Today the New York Times tells a fascinating story about the plight of the world's largest casino, Foxwoods Resort Casino. For gaming tribes, the story should serve as yet another loud and clear wake up call that Indian gaming, as we currently know it, will not last forever. Consider these passages from the ominously titled story, "Foxwoods Casino is Fighting for Its Life":

[H]ow the casino reached this point, and the challenges its owners and operators now confront, is part of a much larger story — one involving the gradual relaxation of moral prohibitions against gambling, a desperate search for new revenue by state governments and the proliferation of new casinos across America. Casino gambling has become a commodity, available within a day’s drive to the vast majority of U.S. residents. Some in the industry talk of there being an oversupply, as if their product were lumber or soybeans.

Yes, the casino gambling market is saturated, and it will only continue to saturate.

In October, a casino opened at the Aqueduct racetrack in Queens with 4,500 slot machines, and Gov. Andrew Cuomo is pushing an expansion plan for the site that includes a hotel and what would be the nation’s largest convention center. And lawmakers in Massachusetts recently voted to issue licenses for a slots parlor and three full resort casinos — an especially ominous development for the Connecticut casinos, which draw about 30 percent of their clientele from Massachusetts, because many gamblers are ruled by what is known in the business as the law of gravity. They stop where the pull is the strongest, which is usually the nearest casino.

Yes, new non-tribal, brick-and-mortar casinos and racinos are coming to a state near you; perhaps even a neighboring state that does not run afoul of tribal Class III gaming exclusivity.

Resistance to gambling, however, has been overwhelmed by the need for new sources of public revenue in an era when it has become nearly impossible, at any level of government, to raise taxes or even to let temporary tax cuts expire. A kind of self-perpetuating momentum fuels gambling’s growth: the more states that legalize it, the more politicians in states that haven’t done so argue that if their citizens are going to throw money into slot machines, they might as well do it at home.

Yes, while states cannot effectively raises taxes in today's political climate, they can and will create new taxing objects, namely commercial gaming.

Foxwoods had been an early mover, built to stand astride a huge geographic area — much like the Pequot tribe once dominated a big swath of New England. But as the casino business in America has expanded, Foxwoods’s piece of it has become smaller and will continue to shrink.

Indeed, other successful gaming tribes and early movers, also built to stand astride huge, exclusive geographic areas, very well may, as the casino business in American continues to expand, also begin to shrink. If or when that day comes, those tribes must be prepared to fill the void of gaming revenues with other profit streams.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  Gabe helps tribes and Indian small businesses with economic diversification efforts, with an emphasis on minimizing state interference or taxation. Gabe can be reached at 206.691.3631 or gabe@galandabroadman.com.

If You Haven't Drank The Tribal Economic Diversification Kool-Aid, You Better Quickly Take A Sip

Indian gaming is the first tribal economy that has ever brought the type of non-Indian capital to Indian Country to make a meaningful difference in the lives of Reservation Indians. Today, however, Indian gaming is under it's most severe threat since states attempted to outlaw Indian gaming in the 1980s, prior to the Supreme Court's Cabazon decision. According to the New York Times today::

After shunning the concept for years, Massachusetts, seeking solutions to its budget woes, last fall became the first New England state to pass a broad law allowing resort casinos. Now others may not be far behind. . . . In New Hampshire, which dreads losing tourism money to Massachusetts, lawmakers are considering a bill that would allow up to four casinos there. Maine just granted its first casino license to a six-year-old Bangor slot parlor that will add table games next month, and a second casino is expected to open in Oxford this year. Both are the result of voter referendums. Rhode Island, which already has two slot parlors, will hold a referendum in November on whether to allow table games at one of them.

State-supported commercial, brick-and-mortar casinos are likely coming to a state, if not neighborhood, near you.

If that force weren't a threat enough to the Indian gaming industry, there is the December 23, 2011 decision to declare intrastate Internet gaming legal. The Las Vegas Sun headline, "DOJ opinion ‘important day’ in efforts to legalize online gaming," says it all.

It is widely believed that sooner or later the legalization of interstate iGaming will follow, meaning legalized Internet gaming throughout all of the United States.  Imagine Indian Country's best gaming patrons commencing play of Class III slot machines or other gaming devices on their laptop computers, from the comforts of their bedrooms and home offices.  That reality is in fact what is on the horizon.

Indeed, it is not a question of if the $26 billion tribal governmental gaming economy will recede as a result of mounting state and commercial gaming forces; it is a question of when -- and to what extent. So if you and your tribe aren't yet aggressively diversifying your  tribal economy away from sole reliance on gaming, what are you waiting for?

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  Gabe helps tribes and Indian small businesses with economic diversification efforts, with an emphasis on minimizing state interference or taxation. Gabe can be reached at 206.691.3631 or gabe@galandabroadman.com.

Gabe Galanda to Speak to RES 2012 Assembly Twice

Gabe Galanda will be speaking at RES 2012, twice. As featured in this Indian Country Today Media Network article:

“Talking Sports Entertainment: Lessons to Be Learned” will feature Cherokee rapper Litefoot, NFL player Levi Horn, boxer George “Comanche Boy” Tahdooahnippah and lawyer/ICTMN columnist Gabriel Galanda.

Gabe will also speak during a breakout session on the "myths and realities" of limited tribal sovereign immunity waiver.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  Gabe helps tribes and Indian small businesses with economic diversification efforts, with an emphasis on minimizing state interference or taxation. Gabe can be reached at 206.691.3631 or gabe@galandabroadman.com.

Turtle Talk Publishes Seattle Tribal Lawyer Ryan Dreveskracht's “Keeping Tribal Business Partners Close – and Their Lawyers Closer”

Ryan Dreveskracht's occasional paper, “Keeping Tribal Business Partners Close – and Their Lawyers Closer,” was published today by Turtle Talk, the leading blog on issues of federal Indian and tribal law, with the following editorial comment from Professor Matthew Fletcher.

I’m largely in agreement with Dreveskracht. When I started practicing in the 1990s, senior attorneys counseled me to draft contract language that would facilitate these kinds of traps. One example involved a private vendor that refused to adjudicate disputes in tribal court, insisting on state court jurisdiction and governing law. We negotiated for federal court review as a “compromise.” Of course, there is no federal subject matter jurisdiction over contract claims just because one of the parties is an Indian tribe. In California especially, cases started coming out in the 2000s where federal court judges were forced to dismiss contract claims, but the federal judges openly criticized tribal lawyers for negotiating those provisions. They frankly are borderline unethical, and may implicate professional responsibility canons.

Business partners are partners before they are adversaries, and tribal businesses depend on goodwill of their own businesses and those of other tribes to create a groundwork for doing business with non-Indian entities. It seems reasonable to rethink the arms-length negotiations strategies in at least some contracts. It may be a difficult pill to swallow for tribal lawyers. Well, face it, most just won’t do it. Lawyers are trained in an adversarial process, and always lean toward strictly assessing risk. Maybe that’s why lawyers are such lousy business people.

Ryan Dreveskracht is an Associate at Galanda Broadman PLLC, of Seattle, an American Indian majority-owned law firm. His practice focuses on representing businesses and tribal governments in public affairs, energy, gaming, taxation, and general economic development. He can be reached at 206.909.3842 or ryan@galandabroadman.com.

Amend IRA Section 17 To Allow Federal Incorporation For Tribal Members

Tribal entrepreneurs frequently have only one avenue to charter a business, be it a sole proprietorship, corporation or limited liability company: state incorporation. That is because many tribal governments still do not have business structures laws or incorporation regimes in place. The problem with state incorporation of a tribal member-owned business, though, is that a state charter is the first thing a state tax collector will cite when attempting to tax the business.  An Indian business' state incorporation should not matter. The U.S. Supreme Court has rejected the notion that state taxation arises from the form in which a tribal party chooses to conduct its business. Mescalero Apache Tribe v. Jones, 411 U.S. 145, 157 n.13 (1972). In Pourier v. South Dakota Dept. of Revenue, 658 N.W.2d 395, 405 (2003), a state supreme court explained:

Congress’ primary objective in Indian law for several decades has been to encourage tribal economic independence and development. By finding that incorporation under state law deprives a business of its Indian identity, we would force economic developers on reservations to forgo the benefits of incorporation in order to maintain their guaranteed protections under federal Indian law. This could hinder economic development.

State taxation or other regulation of tribal member businesses most certainly hinders -- it is in fact anathema to -- Indian economic development. Again, though, an Indian's state business charter becomes the proverbial Exhibit A in a state's case to tax or otherwise regulate the business.  In fact, it may be all a state tax collector needs to assess the Indian business, deferring the (il)legalities until later, meaning when the business will find itself enmeshed in a costly tax litigation battle.

Section 17 of the Indian Reorganization Act, 25 U.S.C. § 461 et seq. (1934), provides that “[t]he Secretary of the Interior may, upon petition by any tribe, issue a charter of incorporation to such tribe . . . .” 25 U.S.C. § 477. Although the title of the IRA states that the statute was intended “to extend to Indians the right to form business and other organizations” (48 Stat. 984), and Section 19 defines an “Indian” as “all persons of Indian descent who are members of any recognized tribe now under Federal jurisdiction" (25 U.S.C. § 479), Interior takes the position that Section 17 itself mandates that charters only be issued to a “tribe” and not any tribal member.

That position, though technically correct perhaps, is myopic. It remains Congress’ primary objective relative to Indian Country to encourage tribal economic independence and development (at least on paper). As such, the Obama Administration, especially given its current campaign to protect the American middle class, should support legislation that would allow tribal member entrepreneurs to incorporate, while maintaining their guaranteed protections under federal Indian law to be free of state interference.

A narrow amendment to Section 17 that would allow Indian persons to federally charter businesses in fulfillment of the law's expressed intent, rather than incorporate under state law and thereby risk destruction via state taxation and other regulation -- yes, certainly easier said than done in this political moment -- should be proposed by the Obama Administration and considered by the Congress.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  He can be reached at 206.691.3631 or gabe@galandabroadman.com.

Tribal 'Disobedience' and Internet Gaming

Modern Indian gaming was born when tribal governments refused to follow state laws in the 70s and 80s. There is no reason to think modern Indian Internet gaming will arrive any differently. If Indian Country hopes to remain at the forefront of gaming, it will have to have a role in Internet gaming this year.  And that role will not be given to tribes; it must be taken. Had the Cabazon and Morongo Tribes waited for Congress to give tribes the unobstructed right to game, there’s a real chance that the 422-casino, $26 billion dollar industry would have never materialized. See California v. Cabazon Band of Mission Indians, 480 U.S. 202 (1987). Indian gaming exists because tribal governments opened gaming facilities and dealt with the consequences afterward. Tribes took what was rightfully theirs. Had they simply asked for recognition of their gaming rights from states or Congress, they would never have received them. Like anything worthwhile, it took a fight.

Call it breaking state laws (which we know have never applied to tribal governments), or exercising tribal sovereignty, the result was the same. When tribes took what was theirs, Congress, and the states reacted. IGRA was born, and the rest, though fraught with intergovernmental dispute, is history.  There is no reason to think that tribes can enter the Internet gaming market any differently.  Indeed, according to Professor Robert O. Porter, “Tribal disobedience,” the “process by which Indigenous people engage in ‘disobedient’ actions against the colonizing government in order to protect and defend their inherent and treaty-recognized rights,” is absolutely necessary to ensure the survival of tribal sovereignty.

Certainly, it’s naïve to think that Indian Country will get a seat at the table simply by asking for one. First, states will never treat tribal governments with the requisite respect for such a seat to mean anything.  And the federal government doesn’t do anything it doesn’t have to do.  Second, the Internet gaming table isn’t even set.  We know it’s coming, but we don’t know how.  We think it will be federally regulated, by Commerce or Treasury, but as of now we don’t know whether the NIGC will be consulted before it comes, let alone have any role in regulating it. None of the bills before Congress contemplate the NIGC having any role, even though gaming on Indian lands is subject to IGRA.

On Friday, the Department of Justice made public for the first time its new opinion that interstate Internet lotteries do not violate the Wire Act. And that, probably not coincidentally, was right after Nevada regulators on Thursday paved the way for intra-Nevada online poker. Whatever its form, nationally regulated Internet gaming will change gaming permanently and unrecognizably, and it is thus crucial that tribes get involved now. Regulated online gaming will do for gaming what email did to college. Or business. It’s hard to fathom what Internet gaming will mean. But put simply: it will change everything.

State-sanctioned handheld lotto is just the beginning. Your Monday night football picks, with your season winnings to date, might appear automatically on Facebook, with your online poker or blackjack daily or lifetime winnings appearing in your profile. People will still play in casinos. But there’s a real chance that brick-and-mortar casino numbers will pale in comparison to the daily drop we will see among 20-somethings on their iPhones. New markets flocking to regulated online gaming will be born overnight. And players who frequent tribal casinos may still do so. But new players may never set foot in one, choosing instead to play regulated online slots on their bus rides, roulette while waiting for movies to start, or, as was common at one law school in 2006, online poker during Contracts class.

The regulated online gaming burst may coincide with the bust of tribal exclusivity. Pressure from non-tribal gaming is growing, coupled with hemorrhaging state and local budgets. And there’s simply too much at stake for non-tribal casinos to pack up and go away. Two Oregon businessmen are at it for the fourth time outside of Portland.  And the old saw about leveling the playing field comes up about every two years in Washington State.  Eventually something will stick.

What’s the answer for Indian Country?  In addition to pursuing non-gaming economic development, tribal governments accustomed to steady growth at their brick and mortar casinos have to appreciate what gaming will look like in 2015, 2020, and beyond.  Some tribes have already stuck a toe in the water, launching free poker sites and laying the infrastructure for pay poker. It may not be the first tribe who submits an ordinance that includes Internet poker to the NIGC that blows open Internet gaming. But if tribes begin doing so, the NIGC will have to act, and Congress will respond.  And if tribes can offer gaming online without triggering IGRA or NIGC/DOJ involvement, Congress will react.  It will take an event like Seminole v. Butterworth, or California v. Cabazon, or maybe even some missteps like the Bay Mills off-reservation casino. But when the gaming pundits and lawyers suggest asking for a “seat at the table,” recall that tribal governmental gaming has never been given anything.  If tribes are to have a seat at the Internet gaming table, they must take it.

Anthony Broadman is a partner with Galanda Broadman PLLC in Seattle, and focuses his practice on issues critical to Indian Country. He can be reached at anthony@galandabroadman.com or 206.321.2672.

Dear Santa, Please Buy Indian Again (2011)

Dear Santa, I've been good again this year and am very excited for Christmas.

Thank you for all of the wonderful Native-made presents you brought my family and me last year. Will you please do the same this year? Since none of this stuff is made at the North Pole you'll have to buy it again from Indian Country -- you know, Buy Indian -- OK?

For my mom, please bring her a purse or scarf made by Dorothy Grant. She will feel so good wearing something so beautiful.

For my dad, please bring him all the Umqua Indian Foods beef jerky he can eat. He’s easy to please.

For my oldest brother, please bring him a Louie Gong print Psycho Killer Whale Linocut Print. It will look cool in his college dorm room.

For my older sister, please bring her a Litefoot action figurine, with flat-billed lid, high tops and beat-box accessories. She has a major crush on him. If he is out of stock, please bring her a Litefoot gift set.

For me and all of my brothers and sisters, please bring them something from Native Threads, Nakota Designs, HYDZ Gear, or Haida Shoes. All of that Native-made gear is awesome.

For me and my cousins, please bring us Gyasi Ross' new book, "Don't Know Much About Indians."

For the singers and drummers in my family, please bring them a JBear Rawhide hand drum.

For my great aunties, please bring them something authentic from the Quileute Nation. They are huge Twilight fans and would love anything made by Quileute People.

For my mom, aunties and grandmas, please bring them Sister Sky indigenous bath and beauty products. I know they’ll love the stuff's smell and feel.

For my uncles and grandpas, please bring them Tanka Gift Baskets. They’ll love the buffalo snacks.

For everyone, please put Tanka Bars in our stockings. Another great stocking stuffer: Star Nayea’s Christmas Dream CD. Life’s Beautiful Journey holiday cards by Linley Logan would also be a nice touch.

Finally, for my tribe’s and all tribes’ leaders, please give them the tools to build vibrant small Indian business sectors and inter-tribal economies so Indian Country will prosper for generations to come, especially when Indian gaming fades away. Unfortunately you must have run short on these tools last Christmas, as Buy Indian still isn’t a reality in Indian Country in 2011. Hopefully that will change in 2012.

Oh, and although I left you homemade chocolate chip cookies last year, I hope you will try the Tanka Bar I left you this year. It should allow you to squeeze down those chimneys a bit easier.

Thank you, Santa!

Jimmy Indian, age 9

Small Business Saturday Another Opportunity to Buy Indian

November 26, 2011, "Small Business Saturday" -- AND Native American Heritage Day! -- presents another opportunity for Indian Country to buy Indian -- to walk the walk.

The 2nd annual Small Business Saturday® is a day dedicated to supporting small businesses on one of the busiest shopping weekends of the year.

On November 26, we're asking millions of people to Shop Small® at their favorite local stores and help fuel the economy. When we all shop small, it will be huge.

Today, and throughout the holidays, shop small and buy Indian on your reservation or via the Internet.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian majority-owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  He can be reached at 206.691.3631 or gabe@galandabroadman.com, or via galandabroadman.com.

Buy Indian, Buy Local This Black Friday

Indian Country, especially its new middle class, wields formidable purchasing power, spending millions upon millions of dollars annually on goods and services. Yet “[o]n most reservations, there are few retail stores and tribal members must go off reservation and pay state taxes on everything they buy. Nationwide, this amounts to $246 million annually in tax revenues to state governments.” Although the infrastructure needed to support a robust reservation retail sector is largely still lacking in Indian Country, tribal citizens can still buy Indian/local, most notably via the Internet, where all varieties of tribal retail goods and services are available for sale. Indeed, "when you buy from an independent, locally owned business, rather than a nationally owned businesses, significantly more of your money is used to make purchases from other local businesses, service providers and farms -- continuing to strengthen the economic base of the community." This is especially true in Indian Country.

To the extent there are retail stores and/or tribally authorized sales taxation on a reservation, "locally-owned businesses generate a premium in enhanced economic impact to the community and our tax base."

Indian Country, starting this Black Friday and throughout this holiday season, buy Indian, buy local; buy early and often. Hopefully if you give Indian, you shall receive Indian.  Either way, make the effort to buy from your tribal community or to buy from the inter-tribal economy via the Internet, rather than buying from non-tribal economies. Yes, we can.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian majority-owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  He can be reached at 206.691.3631 or gabe@galandabroadman.com, or via galandabroadman.com.

Tax-Free Inter-Tribal Commerce Upheld By U.S. District Court

On October 18, the U.S. District Court for the Southern District of California issued a preliminary injunction ruling that affirmed the tax-free distribution and discount sale of tribal fuel. A quick overview of the facts: -- The Torres-Martinez Tribe developed the Red Earth Travel Center on tribal trust lands; -- A Yakama-member-owned business, First American Petroleum, provides tax-free fuel to the Red Earth Travel Center; -- The Torres-Martinez Tribe has delegated certain fuel management authority to First American Petroleum for purpose of obtaining tax-free fuel for the Red Earth Travel Center; -- First American Petroleum transports tax-free fuel to Red Earth Travel Center; -- The Torres-Martinez Tribe "sells fuel and convenience stores items at the travel center to help support the tribal economy"; and -- Ultimately, state fuel or travel-related taxes are not imposed on the Torres-Martinez Tribe or First American Petroleum and those tax savings are passed on to non-Indian patrons of Red Earth Travel Center.

Not only did the District Court hold that fuel or travel-related taxes could not be assessed on First American Petroleum (at least preliminarily) but it acknowledged that the Torres-Martinez Tribe could not be sued for tax collection due to its sovereign immunity. In other words, any California right to collect excise taxes on the fuel sold at the Red Earth Travel Center cannot, as a practical matter, be collected.

The Southern District of California's decision currently stands as a wonderful affirmation of tax-free inter-tribal commerce.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian majority-owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  He can be reached at 206.691.3631 or gabe@galandabroadman.com, or via galandabroadman.com.