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An escalating legal conflict in Oklahoma has the potential to blow up into a federal battle with ramifications for the tribal gaming industry nationwide. In the latest development, two tribal organizations controlling 10 casinos have chosen to defy the state’s Supreme Court.
The Comanche Nation and Otoe-Missouria Tribe (OMT) have said they will continue to follow compacts they signed this year with Gov. Kevin Stitt. This is despite the Supreme Court’s decision to rule those compacts invalid.
The new compacts provide the Comanche and OMT with certain advantages over the prior ones still followed by other tribes in the state. Gov. Stitt claims those compacts have expired, though the courts disagree. By insisting on the new ones, the Comanche and OMT risk incurring the wrath of not only the state’s attorney general, but also their fellow tribes.
Already, the case has spun off one federal lawsuit. The plaintiffs are the Cherokee, Chickasaw, Choctaw, and Citizen Potawatomi tribes, who claim that the Department of the Interior (DOI) failed in its duties by implicitly approving the compacts when it had the authority to invalidate them. Gov. Stitt is a co-defendant, as are William Nelson and John Shotton, the chairmen of the Comanche and OMT, respectively.
Battles over tribal rights are a persistent feature of the gambling industry in the US. In some sense, they can all be seen as a single dispute that pops up in different places and different forms. Fundamentally, it stems from a conflict between two principles:
The Indian Gaming Regulatory Act of 1988 split gambling activities into three classes. States have no right to prohibit tribes from engaging in Class I and II gaming, which cover low-stakes traditional tribal games, bingo, pull tabs, and the like. On the other hand, Class III games, which include most things you’d see in a casino, require the negotiation of a compact between the tribe and the state.
The IGRA also mandates that if a tribe wants to enter such a compact, the state must negotiate in good faith. Unfortunately, this became unenforceable less than a decade later. The Seminole Tribe of Florida sued the state on exactly those grounds, and the case went to the Supreme Court. It ruled that notwithstanding the IGRA, the 11th Amendment protected states from such suits.
The result is a general lack of clarity about the respective rights and avenues of recourse available to tribes and state governments. This becomes a problem whenever that expectation of good faith between them breaks down, as it has in Oklahoma.
The issue of good faith negotiations has many facets. At play in Oklahoma is the question of exactly who, on the state’s side, has the authority to engage in such negotiations.
The existing compacts in the state allow the tribes to offer a limited subset of Class III games, including slots and certain games using dice or balls, but not house-banked table games. They were signed in 2004, with voter approval via referendum, and were set to expire on January 1, 2020. However, they contain an automatic renewal clause that takes effect unless one side or the other asks to renegotiate within 180 days of expiration.
Oklahoma, like many states, has faced a budget crisis in recent years. Gov. Stitt wanted to take the opportunity to renegotiate the compacts and attempt to generate additional revenue that way. He didn’t have the backing of other branches of government, however, and attempted to reopen negotiations on his own.
Meanwhile, the Oklahoma Horse Racing Commission (OHRC) reissued licenses under the terms of the existing compacts. The tribes collectively took that as tacit confirmation that the compacts would be renewed.
Several tribes, led by the Cherokee Nation, challenged the governor in federal court and won. Judge Timothy DeGiusti ruled that the actions of the OHRC constituted implicit acceptance by the state of the current terms, and therefore triggered renewal of the compacts until 2035.
In the meantime, however, Gov. Stitt had already successfully negotiated new compacts with certain tribes. He had given the Comanche and OMT a fixed 4.5% exclusivity fee, the right to offer house-banked table games, and approval to build one new casino apiece. A few weeks later, he signed additional compacts with two small tribes that previously had none, authorizing them to build one casino each.
Compacts require approval from the DOI to take effect. There is a deadline for it to issue its opinion, however, which in this case was June 7. When that date came and went with no action, the compacts went into effect on their own without the DOI’s explicit endorsement.
Meanwhile, the Oklahoma Supreme Court ruled the new compacts to be invalid, saying they constitute gubernatorial overreach. However, the Comanche and OMT insist that the court is overstepping its own authority. Their stance is that only federal courts have the authority to make such a ruling.
Even the Comanche and OMT themselves acknowledge that the new games would require a change in state legislation and have not begun offering them. However, they insist on the overall validity of the compacts. They will therefore carry on their existing operations while paying the 4.5% rate. This should work out to around $1.2 million less than the combined amount they were paying under the old system, which charged a variable rate of between 4% and 10%.
Naturally, their competitors still paying the old rate are unhappy with this. This is why there is a new federal lawsuit targeting the DOI for its failure to strike down the new compacts within the deadline.
At the moment, the state Attorney General’s Office is scrambling to figure out where it stands on the issue. Whichever side it comes down on, however, it’s hard to imagine a scenario under which the situation will be resolved at the state level. One group of tribes or the other will be unhappy with the decision and continue to escalate matters through the federal court system.
That’s a battle that could easily wind up going all the way to the Supreme Court. Many aspects of the dispute are specific to Oklahoma. However, the question of how much authority the governor has to negotiate with tribes without involving the legislative branch is one with far-reaching implications. In some ways, this echoes the battle between the Seminole and the State of Florida two decades ago.
Tribal sovereignty was a big issue this spring and summer, for instance. Around the country, tribal casinos exercised it to decide for themselves when to reopen following the COVID-19 shutdown. In many cases, that happened amicably, but in Connecticut, for example, it sparked a conflict between the tribes and the governor’s office. Elsewhere, such as in California, breakdowns in negotiations with tribes have stalled the legislative process for gaming expansion.
How federal courts settle Oklahoma’s problems won’t resolve those other battles. It may, however, have a big impact on how they play out in years to come.