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As IGRA Intended

The Washington state tribal gaming industry is a model of how sovereign nations deal with state governments on gaming

As IGRA Intended

If there were a hall of fame for contemporary American Indian leaders who championed native sovereignty and self-determination, Washington state would be well-represented.

From Chairman Ron Allen of the Jamestown S’Klallam to the late Joe DeLaCruz of the Quinault Nation, Lummi Sam Cagey and Nisqually Billy Frank—from Mel Tonasket of the Colville Reservation to Yakama Mel Sampson and Tulalip Stan Jones—Washington’s list of pioneers in self-determination is long and distinguished.

Much of their efforts in building strong tribal governance grew out of the fishing wars and the landmark Boldt federal court decision of 1974, which gave Washington’s indigenous communities the right to co-manage salmon and other fisheries with the state.

Indian self-governance in the state of Alki (indigenous Australian for “bye and bye”) was further solidified with the Centennial Accord of 1989, which established a framework for government relations between the state and its 29 federally recognized tribes.

“We have had strong leadership dealing with a whole lot of concerns, beyond fisheries,” says Allen, who for decades has served in high-level positions with the National Congress of American Indians. “We have a long history of political activism.”

Strong and mutually respectful tribal-state relations greatly facilitated the emergence in the early 1990s of what is today a $2.3 billion tribal gambling industry that has closely adhered to the congressional intent of the Indian Gaming Regulatory Act (IGRA) of 1988.

IGRA ignited legal and political confrontations in several states opposed to Indian casinos. Tribes and states warred over regulations, market exclusivity, revenue sharing, machine limits and casinos on newly acquired trust lands, often referred to as “off-reservation gambling.”

But those controversies failed to materialize in Washington. And when gambling disputes did arise, they were diplomatically resolved by tribal and state officials.

As a result, indigenous governments in Washington are not required by regulatory agreements, or compacts, to share casino revenue, a common practice in several states although prohibited in IRGA and discouraged by the U.S. Department of the Interior, which reviews compacts.

Continued Cooperation

Initial confusion over the types of slot machines allowable under state prohibitions was settled in a “friendly” lawsuit that in 1998 defined the nearly 30,000 tribal lottery devices found in 27 of 28 Washington casinos, one of which operates only Class II, bingo-style gambling.

A landmark 2015 compact amendment eliminated an artificial cap on machines, allowing tribes to increase their inventory based on market demands.

And state regulators are working with tribes to expedite the approval process for new devices and eliminate duplication of compliance audits.

Tribes and the state are partners in economic progress ignited by tribal government gambling, on and off tribal lands.

“We have a pretty good relationship with our 29 tribal governments,” says Nicholas Brown, general counsel to Washington Governor Jay Inslee. “Tribes are a big part of the landscape on a lot of different fronts, gaming being one of them.

“The governor really supports the idea that gaming is a very important aspect of economic development for the tribes. And that’s worked pretty well for both the state and the tribes,” he says, creating non-Indian jobs in largely rural parts of the state.

“Tribes have been allowed to prosper… without a massive expansion of gaming.”

“One of the big things that separates Washington from most of the other states is we don’t have revenue sharing,” says Chris Stearns, chairman of the Washington Gambling Control Commission (WGCC). “The tribes are able to keep much more of what they bring in. That really is the intent of IGRA, to help tribes develop not only their economies but also their governmental infrastructure—health care, fire, police, you name it.

“When you look at IGRA and its intent to help tribes strengthen their governments, that’s exactly what’s happening in Washington.”

Washington tribes employ some 30,000 mostly non-Indians in casino and government jobs, dispersing more than $1.4 billion in annual wages and benefits, according to a 2012 economic impact study by the Taylor Policy Group.

The industry generates roughly $2.4 billion in goods and services and has a $3.5 billion value to the state economy, according to the study.

Tribal governments strengthened by gambling work closely with the state, counties and municipalities on environmental and conservation projects. Two percent of tribal casino revenues go to local governments with additional money going to charities. Tribal health clinics often serve citizens from reservations and the surrounding communities.

“We are realizing the maximum benefit of Indian gaming, for both the tribes and the state,” says Bill Iyall, chairman of the Cowlitz Indian Tribe of southwest Washington, which received federal recognition in 2002 and is currently building its ilani resort casino in La Center.

“It’s been a collaborative relationship, proactive rather than reactive.”

Doing It Right

IGRA was enacted in response to a 1987 U.S. Supreme Court ruling upholding the right of tribes to operate gambling on Indian lands. Gambling was intended to primarily benefit tribes seeking to strengthen governments and build diversified economies, generating revenue to subsidize poorly funded federal health, education, law enforcement and other programs for tribal citizens.

Non-Indian communities near largely rural and often impoverished reservations were expected to benefit from jobs and economic growth generated by casinos and related development.

But the emergence of tribal government gambling as intended under IGRA was far from smooth.

Indian casinos in many states sparked legal and political disputes over market exclusivity, revenue sharing, tribal-state regulatory compacts, mitigation with local communities and land/trust issues.

Governors in Alabama, Florida, California and elsewhere initially refused to negotiate compacts required to operate Class III, casino-style gambling. Others insisted tribes sign onerous revenue-sharing agreements. Tribes in 10 of 28 states with casinos share their profits.

There were exceptions to the pushback against Indian gambling, notably Minnesota, Wisconsin and Mississippi, where the late Choctaw Chief Phillip Martin hammered out a generous compact with then-Governor Kirk Fordice, who Martin regarded as a friend as well as a political ally.

Allen met with a similar experience when he sat down to talk compact amendments with former Governor Gary Locke (1997-2005).

“He never liked gambling, for personal reasons,” recalls Allen, chairman of the Washington Indian Gaming Association (WIGA), a lobby and trade group. “But he recognized the right of tribes, as governments, to engage in the industry. He was respectful of tribal governments.”

An agreement was reached between the tribes, Locke and then-Attorney General Christine Gregoire to enter into a consensual or “friendly” lawsuit to define gambling devices that would fit the state’s prohibition against slot machines.

An agreement in principle was reached in 1998 on a gaming device modeled after the state lottery.

“The type of gaming they have is somewhat unique,” says economist Allen Meister of Nathan Associates, author of the annual Indian Gaming Industry Report. “They have tribal lottery systems that are not exactly slot machines, but they’re not Class II bingo, either. They’re something different. It’s sort of unique in terms of what’s offered in other states.”

Locke bought into Allen’s suggestion that tribes in remote areas of the state lacking the market to open casinos be allowed to lease machine allocations to tribes in urban areas. All 29 tribes have compacts, but only 21 operate casinos, according to regulators.

Locke and his successors embraced the concept of IGRA that tribes should be the primary beneficiary of gambling.

Tribal Power

Revenue sharing was broached when Gregoire in 2005 tentatively agreed to a compact with the Spokane Tribe, but she backed away from the agreement when pressured by tribes and opponents to gambling expansion.

“It wasn’t well-received by the legislature and the public,” Brown says. “Since that time, the idea of revenue sharing hasn’t arisen with any great support.”

“We’re not like other states such as New Mexico, where tribes were fighting with the governor over machines and revenue to the state,” Stearns says. “We don’t have that kind of atmosphere here. It’s pretty amazing.”

The amicable relationship between tribes and the state has continued under Inslee, who last year amended tribal-state compacts to raise a cap on video lottery machines and allow future increases based largely on market demands rather than artificial limitations.

The amendments are expected to help casino tribes expand hotel and non-gambling amenities needed to cope with a leveling-off of machine and table game revenue.

State tribal gambling revenues have largely plateaued at about $2.3 billion a year, according to several sources. Tribal governments don’t disclose revenue figures.

“These amendments are an important milestone for the people of Washington state and the Indian tribes,” Stearns says. “The commission is proud to have worked on a government-to-government basis with the tribes as well as with the governor’s office.”

“It’s another progressive step by Washington state, being respectful of the tribes and the needs of their communities,” Allen says. “These compact adjustments allow the tribes to continue with the moderate growth we’ve experienced over the last five years.

“This agreement ensures that if we need more machines in the future, they will be available. It took 20 years for us to achieve that relationship and the level of confidence between the tribes and the state that the growth in gaming will be moderate from this day forward.”

Regulatory Compliance and Cooperation

The WGCC was established in 1973 to regulate the card room industry, which once comprised about 100 “mini casinos” but has since fallen to some 50 facilities.

“We as a state agency have had a lot of experience licensing and regulating gambling prior to the Indian Gaming Regulatory Act,” WGCC Executive Director Dave Trujillo says. “Many of those on our staff have grown up with tribal leaders and tribal gaming commissioners.”

Tribal-agency relations mirror those of other state agencies.

“The constructive relationship can be proven by the lack of litigation as compared to other states,” Trujillo says. “The instances of litigation have been few and far between.”

With the emergence of tribal gambling, card rooms were allowed to extend their operations to include house-bank blackjack. The industry “continues to trend downward, though it may have stabilized just a little bit,” Trujillo says.

State and tribal regulators are currently working on methods of smoothing and accelerating the approval process for new devices. They also are attempting to do away with duplicative and expensive compliance audits.

“We’re taking an active lead in redefining the regulatory relationship between the state and the tribes,” Allen says. “We’re going to change the way we do business.”

IGRA gives the tribes primacy in regulating gambling. Brown says the state is aware many tribes have experienced regulatory agencies, eliminating the need for overlapping audits.

“A number of tribes have been in gaming for many years and have strong track records for successful management and regulations,” Brown says. “They perhaps might need less (state oversight) than other tribes that are new to the business and don’t have that record of success.

“Our compacts generally provide the same level of oversight for all our tribes. The challenge for the state will be how we transition to greater self-regulation and pull back from duplication of some services.

“There are a couple of tribes who have pushed for more independence. We’re exploring some options.”

Machine Issues Remain

State law restricts tribes to tribal lottery system (TLS) devices and prohibits traditional slot machines, a frustration to casino operators exposed to the latest video technology at gambling industry trade shows, most of which are not permitted in their jurisdiction.

“They look nice, they sound nice and they’re marketed nice,” Trujillo says, but not to Washington.

“Slot machines are prohibited by statute,” Trujillo says. “Most of the country has slot machines. Vendors and manufacturers build to the greatest market. And the greatest market is not Washington.”

“How do you work with a manufacturer to devise a game that fits within our legal definition of an allowable game? That is a challenge,” Stearns says.

As partial compensation, the WGCC is working with tribes to speed up the testing and approval process for new devices.

“There is a need to streamline the review process with regard to vendors who want to bring their products into Washington state,” Allen says. “We need quicker access to the new devices.”

Trujillo says most applications are processed within time guidelines set down in the compacts.

“Generally, we’re better than the compact demands in turnaround time,” Trujillo says. “We think we have found the magical number for staffing.”

Allen believes Trujillo is sensitive to tribal concerns.

“He doesn’t want the commission to be an unnecessary burden to the ability of the tribes to obtain new products,” Allen says.

Spokane Controversy

Inslee’s decision earlier this year to approve the Spokane tribe’s petition to open a casino and commercial development on newly acquired trust land in Spokane County generated controversy.

It was the second “off-reservation” casino approved in Washington, the first being the Kalispel Tribe in 1998, which also operates a casino resort in the county.

The Spokane project—which underwent an exhaustive, expensive and lengthy federal review process—was opposed by several local agencies and a nearby Air Force base, despite the fact it is expected to generate 5,000 jobs and $400 million in revenue to the region.

Inslee contends the proposal is unique and not likely to establish a statewide trend of additional casinos on newly acquired lands.

“It doesn’t have any actual precedent. It’s not legally binding in any way on any future governor,” Brown says. “The governor felt it wasn’t likely to lead to any substantial proliferation.”

Allen remains concerned, however, that other tribes will follow Spokane’s lead.

“Every proposal has to be reviewed on its own merits. That’s true,” Allen says of attempts to launch casino projects off existing reservations.

But he notes the Skokomish Indian Tribe in Shelton has long contemplated opening a NASCAR racetrack and casino in Kittitas County, a project it said it would pursue if the Spokane casino was approved.

Stearns and Trujillo are skeptical the project will prompt other off-reservation projects.

“It’s hard to say this will be a trend now, based on that particular action,” Trujillo says. “Everything is unique.”

A Vibrant Gambling Market

Washington Indian gaming revenue jumped nearly 3 percent in 2014, Meister says, making it the third-largest tribal gambling market in the country, behind California and Oklahoma. The growth has been steady.

“The state of Washington has growth that is outperforming Indian gaming nationwide, if you look at overall figures,” Meister says, with the rate of increase slowing since before the recession of 2008.

“During the recession, things slowed down. They continue to be slower than they had been historically. That’s similar to a lot of states,” Meister says. “But in most years, Washington has outperformed tribes nationally. Since 2000, in every year except one, Washington outperformed other states. There has not been a year of decline.”

The leveling-off of double-digit growth that highlighted enactment of IGRA taught tribal casino operators some valuable lessons.

“It forced the tribes to step back and become more surgical in the way they operated their businesses,” Allen says. “They became more efficient. They started running tighter ships. They grew prepared for when the market improved, which it did. That’s what you see now.”

Future industry growth will likely to be tied to increased casino floor space and non-gambling amenities at existing properties, although Cowlitz and the off-reservation Spokane casino will likely increase statewide gambling revenues.

“A lot of the growth has been existing properties,” Meister says. “That’s similar to what we’re seeing in other states. We’re seeing the development of more non-gaming amenities, things like hotels, which not only expand the reach of casinos, but provide another revenue source.”

No Threat From Commercial Gambling

Meanwhile, tribal governments, through WIGA, have strengthened ties with state House and Senate leaders.

“We’ve done a very good job of developing a relationship with the leadership of both parties,” Allen says.

The political activism has managed to stymie legislative efforts to look to commercial gambling as a means of enhancing the state budget. Several states have turned to commercial gambling, creating competition for tribal casinos.

“That’s always possible, of course. But it’s much more likely to be the reverse situation, where the tribes would expand the offerings they have,” Stearns says. “They would be the ones driving change at the state level.”

“I haven’t seen any significant initiative by the legislature to explore that,” Brown says of the likelihood of commercial gambling in the state. “Frankly, I don’t necessarily think the market is there for a substantial expansion.

“We don’t want to see a rapid expansion of gaming. As a matter of policy, it should be slow and consistent.”

Dave Palermo is an award-winning metropolitan newspaper reporter. He has written about American Indian governments for more than 20 years, working as an advocate for several tribes and tribal associations. He also has co-authored books on gambling and gambling law. He can be reached at [email protected].

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