Casino Gambling

In the early 1980s long-term economic problems on Indian reservations led several Michigan Indian tribes to seek tribal revenue and jobs for tribal members by opening large-scale bingo operations. Several tribes considered moving beyond bingo halls and opening Las Vegas style casinos. But casinos clearly violated state law. Like most states in this period, Michigan banned virtually all forms of gaming. In Michigan the state allowed only the state lottery, authorized by the voters in 1972, bingo, betting at horse races, and a variety of casino-like activities used by charitable organizations at so-called "Las Vegas" night fundraisers. In the early 1980s casino gambling was illegal in Michigan, as it was in every state except Nevada.

Eventually an individual tribal member of the Keweenaw Bay Indian tribe, Fred Dakota, personally challenged the state's right to regulate Indian gaming. In January 1984 Dakota opened a casino named "The Pines," that consisted of a lone blackjack table located in his two-car garage. Dakota's personal action was quickly followed by the Bay Mills Indian Band, which opened the first tribal-sanctioned casino in the state on July 4, 1984 in Brimley. Later in 1984, the Grand Traverse Band of Ottawa & Chippewa opened a casino in Peshawbestow. In the years immediately following casinos were opened by the Keweenaw Bay Indian Council (Baraga, opened 1985), the Sault Ste. Marie Band of Chippewa Indians (St. Ignace, opened 1985), Hannahville Potawatomi (Near Harris, 1985), Saginaw Chippewa Indian Tribe (Mount Pleasant, card games introduced into Bingo Hall, 1985), and the Lac Vieux Desert Band of Lake Superior Chippewa (Watersmeet, 1987)

All of these early casinos existed in the shadow of state law. In 1987 the United States Supreme Court, in two separate rulings, made clear that Indian Nations had broad rights to engage in gaming activities on reservation land. In the first ruling, regarding a dispute between the Seminole tribe and the state of Florida, the court held that the Seminole could engage in "high stakes" bingo games with jackpots of up to $10,000 despite Florida state law making any bingo game paying more than $100 to the winner illegal. In a second, more sweeping ruling, the court held that the tiny Cabazon Tribe in California was entitled to operate on reservation land any and all gaming activities that the state of California authorized in any form. This ruling was significant in that California and most other states allowed charitable organizations to hold "Las Vegas" nights in which casino style gambling was allowed. Although state laws controlled this charitable gambling with a variety of regulations, because of the mere existence of such activities within the law the court held that tribal governments could sponsor similar events in casinos on reservation land, but without state control.

These two Supreme Court rulings caused considerable legal turmoil and in 1988 Congress acted to create a structure to rationalize the relationship between state gaming regulations and Indian gaming activities. The Indian Gaming Regulatory Act (IGRA) rationalized the relationship between state authorities and Indian casinos by defining classes of gambling and requiring in certain situations that mutually agreed upon "compacts" be signed between state and tribal governments.

IGRA defined three classes of gambling. Regulation of "social" games conducted for prizes of minimum value as well as bingo and card games where players play against each other rather than against "the house" were largely left to Indian tribes. In some cases these games were also regulated by a federal agency. In contrast, "class III" gaming, which was largely made up of casino gambling, was to be regulated through a "compact" agreed to between the relevant Indian tribal government and the state government in which the gaming occurred. States could regulate Indian casino gaming only insofar as tribes voluntarily agreed to through a compact, but tribes could legally operate casinos on reservation land only after a compact had been signed.

In 1988 the Michigan tribes operating casinos began negotiations with the governor's office to draft the compact required by the IGRA. The negotiations quickly came stalled, however, on the issue of video gambling. The state was strongly opposed to video gambling devices while the tribal governments were equally adamant in demanding the devices. For several years negotiations all but ceased. Indian casinos, however, continued to operate despite the lack of a compact. This continued operation was made legal by a United States Department of Justice ruling that allowed existing casinos to operate while compact negotiations were "underway" but which did not establish any milestones to judge the progress of "underway" negotiations nor create a date by which "underway" negotiations were to be completed.

In April 1993 a Michigan appellate court decision made clear that the state courts were unlikely to uphold the state's longstanding opposition to video games of chance on Indian reservations. Given this turn of events negotiations over the long delayed compact soon resumed in earnest. The thirteen page compact was agreed to relatively quickly and won legislative approval in late summer 1993.

As part of the compact, the signatory tribal governments were given exclusive rights to operate casinos in the state, both on and off reservations, and allowed the privilege of using video gambling devices. In return the tribes agreed to pay ten percent of all profits from those machines to government. Eight of the ten percent went to the state's "Michigan Strategic Fund." The remaining two percent was reserved for the local governments in the communities where the casinos operated. The compact further stated that should the state allow non-Indian owned casinos to operate, the tribes would no longer be obligated to make payments into the Strategic Fund.

The possibility that the tribes might be allowed to operate casinos in places other than federally defined reservations created considerable opposition to the agreement within the legislature. In particular some Detroit area legislators who opposed casino gambling in that city attempted, but failed, to block the compact. This opposition was grounded in Detroit voters' repeated rejection in prior years of referendums to allow casino gambling in their city as well as a 1988 city ordinance banning casinos in Detroit should the state authorize them. In 1994, however, Detroit voters demonstrated a sea change of public sentiment by passing a referendum authorizing the establishment of Indian owned and operated casinos.

In 1996 Detroit voters took a second step, authorizing three casinos within their city to be run by any group of investors who made the best offer for those licenses. Such a casino would violate the exclusivity clause found in the 1993 State Compact. If and when such a casino began operation the tribal governments could legally withhold their payments to the state's "Strategic Fund," although they would be required to continue to make payments to local units of government.

The change in sentiment by voters in Detroit regarding casinos may well have been influenced by the tremendous economic impact gaming has had on economically depressed Indian tribes. By way of example, in 1985 the Sault Ste. Marie band of Chippewa employed approximately 200 people with a tribal budget of $6.1 million. Eight years later in 1993, the same tribe, now with a vibrant casino, employed 2,000 individuals and had a $131 million tribal budget. By 1995 the Sault Ste. Marie Chippewa had become the largest employer in Michigan upper peninsula. Other tribes that operate casinos have experienced similar dramatic increases in tribal budgets and number of tribal employees, making clear the potential economic impact of gaming.