Friday, December 10, 2010

Costs and conflicts associated with Indian gaming - is it worth it?

The conflict between the states and Indian tribes arises because both are sovereign entities. As such, states are severely limited from taxing and exercising jurisdiction over activities on tribal land. When the interests of the Indian tribes and the states differ, this sets up a conflict. The history of tribal-state relations have been not always been free of conflict and tension. The states, in order to prevent the off-reservation effects of certain activities that occur on the reservation have sought to extend authority over reservations. The result has been substantial litigation between the states and tribes in an attempt to define the relationship between the two. The high stakes of gaming and the fact it is an area traditionally regulated by the state have intensified the conflicts.” 

This is part of the finding of an extensive review by the California Research Bureau in 1997.  They further reported  the following conclusions about Indian gaming and state jurisdictions, corruption and challenges for localities.  Here are some of their findings: 

  •         “Gaming Companies and Tribes Are Large Political Contributors.”  Tribes and their financial backers have spent tens of millions in political contributions to state elected officials.  Contributions are not limited to local officials, among all gaming interests, Indian tribes are the top contributors to federal elected office holders and gambling is among the top overall interest group givers to Congress, just below the National Rifle Association.  This has resulted in numerous political corruption scandals in states like California, Missouri, South Carolina, Arizona, Louisiana and Massachusetts.


  •        The Role of Organized Crime and Indian Gaming has been controversial..  As noted in the section on Indian gaming, the charge that Indian gaming has been infiltrated by organized crime has been made.  Others counter that inadequate regulation and oversight make it harder to find evidence. As a result, many Indian tribes complain that their “backers” aren’t passing through the Indian’s fare share of profits. Non-Indian managers who helped tribes establish gaming operations were taking the majority of the profits.  This mirrors experiences reported by Indian tribes in New England – who are now billions of dollars in debt while their out-of-state financial backers take out hundreds of millions annually in profits.  Backers of Massachusetts Indian gaming efforts include offshore interests like the Asian gambling syndicate giant Genting – further removing them from any interests of the state and local communities.


  •        No publicly collected and released statics figures and financials, as there would be with a public corporation involved in gaming.  While some statistics are reported, many are not, allowing “management companies” and  investors backing Indian gaming operations to take significant, undisclosed shares of the revenues.


  •        Federal Concern for Money Laundering Evidence by New Regulatory Requirements. During 1996, the U.S. Department of Treasury's Financial Crime Enforcement Network proposed to more tightly regulate cash transactions at Indian casinos. The federal regulation added Indian casinos to the definition of financial institutions under the Bank Secrecy Act.  The purpose is to try and prevent fraud and tax evasion. 


  •        Indian gaming cause declines in state lottery revenues and other gaming.  In addition to harming existing non-Indian gaming through competition from tax-exempt local Indian ‘reservation’ gaming,  research in California showed increases in Indian gaming resulted in declines in lottery revenues AND local government revenue falls.  


  •         Local government revenues and business suffer- Indian gaming doesn't results in the tax revenues from the establishments. Local governments may have to provide services for which they are not paid for. The people who gain from this subsidy are the people who enjoy gambling and the financial investment backers of Indian casinos.   Meanwhile, local businesses suffer due to unfair competition from lower priced sales of goods sold on reservations as they are exempt from local sales taxes.  Many ‘reservation’ casinos include convenience and other stores which compete unfairly with existing local businesses.
  •         Costly litigation.  California, Florida, Kansas, Wisconsin and other states with Indian gaming have been “locked in litigation with the tribes” according to the report.  Economic impact studies don’t include the unanticipated but highly likely protracted legal battles states and localities end up having with Indian casinos.  Millions of dollars in state funds are expended on these cases, creating further drains on local government budget resources.


  • What defines an Indian Tribe and its membership?  The majority of people living on reservations and trust land in California, for example, did not identify themselves as American Indians in the 1990 census. Tribal membership is determined by individual tribes, and is frequently based on some minimum blood requirement and/or descent from a historical list of tribal members.  

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