Abstract
On March 28, 2022, the United States Department of the Interior (DOI), through Assistant Secretary of Indian Affairs Bryan Newland, scheduled four virtual sessions to consult with Indian tribes on, inter alia, proposed amendments to the Tribal-State compact procedures for Class III gaming, 25 C.F.R. Part 293. 1 Along with its March 28, 2022 notification, DOI provided a summary of its proposed revisions and draft regulation language. 2
The development is consequential because the regulations have sat, nearly identical to the original version enacted 14 years ago. 3 Much has changed since 2008, which is also true for even the last four years as the $34.6 billion dollar industry 4 responds to, the ongoing state-level proliferation of legal sports betting vis-à-vis Murphy v. NCAA, 5 the ongoing COVID-19 pandemic, reaffirmation of Tribal jurisdiction over Indian country 6 in McGirt v. Oklahoma 7 and its subsequent curtailing in Oklahoma v. Castro-Huerta. 8
Irrespective of the post-Murphy, post-McGirt, post-Castro-Huerta, and unfortunately not post-pandemic landscape, it is still difficult to predict the industry's collective response to the proposed amendments if one exists. DOI's proposed revisions to Part 293 could be considered a welcome attempt to provide additional guidance and transparency to the compact review process. Alternatively, DOI's attempts to elucidate the permissible bargaining chips in compact negotiations may be construed as a further erosion of Tribal sovereignty. 9
I. BACKGROUND ON THE INDIAN GAMING REGULATORY ACT AND COMPACTING PROCESS
25 C.F.R. Part 293 governs the Tribal-State Gaming Compact regulations under the Indian Gaming Regulatory Act of 1988 (the IGRA). 10 The IGRA is a dynamic piece of legislation, contemplating the Tribal, federal, and state interests within specific gaming on Indian lands. 11 It is administered by two distinct federal agencies, the DOI Office of Indian Gaming (OIG) and the National Indian Gaming Commission. 12 The OIG is responsible for reviewing proposed compacts in accordance with the IGRA and regulations promulgated thereunder. 13
Not all gaming on Indian lands 14 is subject to the compacting regulations. The IGRA divides gaming by class. 15 Class I gaming includes “social games solely for prizes of minimal value or traditional forms of Indian gaming engaged in by individuals as a part of, or in connection with, tribal ceremonies or celebrations” and is conducted under the exclusive jurisdiction of Indian tribes and not subject to the provisions of the IGRA. 16 Class II gaming includes bingo (whether or not technological aids are used) lotto, punch boards, tip jars, instant bingo, and other similar games (if played in the same location as bingo) and card games (provided such card games are authorized or at least not expressly prohibited by the state(s) wherein the Tribe's gaming operations sit). 17 Class II gaming is administered by the Tribe as the primary regulator and no compact is required to conduct gaming. 18 Class III gaming is every type of gaming not class I or II and is colloquially known as “Vegas style” gaming, including slot machines, blackjack, baccarat, and roulette. 19
It is the operation of Vegas style gaming on Indian lands where the IGRA contemplates tribal, federal, and state interests, and mandates the parties engage in a process whereby a compact delineating Class III gaming is executed and approved by the parties and forwarded to DOI for review.
A compact is not the only prerequisite either. Before an Indian tribe may lawfully offer Class III gaming on Indian lands, there are three statutory requirements necessary to be met. 20 First, the Tribe must have an ordinance or resolution governing the conduct or regulation of Class III gaming. 21 Second, each Class III game must be authorized or not expressly prohibited by state law in the state(s) in which a tribe's gaming operations sit. 22 Third, the games need to be “conducted in conformance with a Tribal State compact entered into by the Indian tribe and the State … that is in effect.” 23 The proposed changes to Part 293 delineated by DOI's March 22, 2022 notification are only pertinent to compacting for Class III gaming. 24
Compact negotiations can be multifaceted and politically charged on both sides of the negotiating table, 25 sometimes dividing members of the same political party and branches of government. 26 However, despite the repeated platitudes uttered by legislators and persistent fear of constituent backlash, the allure of millions of dollars (or more) of revenue 27 is too important for tribes and states to ignore. Although the IGRA prohibits states from levying taxes on Indian tribes for participating in Class III gaming, states often avoid this prohibition by negotiating revenue sharing payments based on providing the tribe something in return, the most common being “exclusivity payments” where the state receives payments for providing tribe(s) the exclusive rights to offer Class III gaming. The ideal conclusion of the negotiations is a contract articulating the nature of Class III gaming at Indian casinos between a state and Indian tribe as sovereigns, which is submitted to OIG for review.
When a proposed compact is received, the OIG reviews the proposed compacts in accordance with the rules set forth in Part 293 and has three options: (1) approval; 28 (2) disapproval; 29 or (3) inaction, which amounts to an approval by operation of law, but “only to the extent the compact does not violate the IGRA.” 30 The third option, approval by inaction, is sometimes contentious. 31 For further review, OIG publishes compact decisions online. 32
II. PROPOSED AMENDMENTS
DOI's proposed revisions to 25 C.F.R. Part 293 include substantive, procedural, and clarifying amendments. The rules in effect today are short, especially compared to other federal regulations (less than four standard pages). 33 The downside to the regulations' length is that they sometimes fail to adequately provide for the complex nature of the agreements that are submitted to the department. In the absence of the current regulations codifying all the pieces, the OIG resorts to certain practices employed by necessity.
Some of the proposed revisions in the March 28, 2022 notification promulgate DOI's practices into law including: (1) definitions of key terms; 34 (2) authorizing DOI to provide guidance letters on: (i) compacts approved by operation of law and (ii) proposed compact amendments; 35 (3) authorizing tribes to submit electronic documents; 36 and (4) clarifying the agency's authority to not affirmatively disapprove a compact but for the purposes set forth in the IGRA or if a tribe fails to submit the required documentation with its submission. 37
Presumably, most of the Tribal comments received by DOI will contain input on the proposed substantive revisions to Part 293, found in newly proposed section (D). 38 These changes, if promulgated, will affect the content and tailoring of future compact submissions and the federal government's corresponding analysis during review. These include provisions addressing: (1) application and allocation of criminal and civil jurisdiction; (2) the state's costs associated with regulating Class III gaming on Indian lands if the tribe agrees to this framework; (3) the Tribe's taxation of its gaming; (4) remedies for breach of the compact; (5) standards for the operation of gaming and maintenance of the gaming activity; (6) any other subjects that are “directly related to the operation of gaming activities.” 39
Specifically, the focus of the industry in the coming months will be on DOI's attempt to codify its interpretation of two important provisions of the IGRA into law. Those two provisions concern what the language “directly related to the operation of gaming activities” means and the process whereby DOI will review proposed revenue sharing agreements.
First, the IGRA permits tribes and states to include any other subjects “directly related to the operation of gaming activities” within a compact. 40 Far from being an exemplary provision edifying Congress' intent on what is allowed in a joint agreement between sovereigns, the colloquially known “catch-all provision” is an opaque punt at best. 41
It is likely a question that has lingered ever since the enactment of the IGRA, but DOI decided to test the waters this year. 42 The proposed language provides that “[s]ubjects that address patron conduct within the gaming facility are generally regarded as directly related to gaming,” and identifies alcohol service, nonsmoking areas, and self-exclusion programs for patrons as permissible subjects to compact on. 43
The next subsection provides “[m]utually beneficial proximity” or “co-management” alone “is insufficient to establish ‘direct connection’ between a Tribe's [C]lass gaming and adjacent business or amenities.” 44
The following subsection identifies the following subjects as “not directly related to the operation of gaming activities,” distinguishing: (1) limiting third party tribes' rights to conduct gaming; (2) treaty rights; (3) tobacco sales; (4) compliance with or adoption of state environmental regulation unrelated to tribes' gaming operations; (5) non-gaming tribal economic activities in or adjacent to the gaming facility; and (6) Tribal Class I or Class II gaming activities. 45
The proposed language here is likely the product of reasoned analysis, potentially involving a mix of inductive logic, empirical review, and case law interpretation. However, it is curious where the lines are drawn. First, all of the patron conduct listed in the proposed language is arguably centered on behaviors occurring in by the casino, but does patron conduct include patron data?
Second, the revision provides “co-management” or “proximity alone” for adjacent businesses or amenities fails to suffice as “directly related,” despite occurring in the same building and being next to gambling operations. A non-wagering patron's behaviors are swept into the “directly related” language. Other incidental behaviors located inside the casino building itself, such as when next to the slot machines or poker tables, requires additional evidence to be considered “directly related”.
Third, the excluded categories appear reasonable, but what about tribes that genuinely wish to utilize these factors in their negotiations? 46 If a tribe has the infrastructure to provide drinking water according to state regulations, why should it be unable to use that as a bargaining chip in a compact negotiation?
The questions are, of course, rhetorical, but the industry's practitioners are no doubt poised to argue about these questions and more in the coming months because the proposed revision also provides that the consequences for a state's failure to comply will be considered evidence of bad faith negotiating under 25 U.S.C. § 2710(d)(7)(a). 47
The second provision is DOI's methodology used in determining whether a proposed compact's revenue sharing agreement is lawful. As mentioned, states are not permitted to levy taxes on Class III gaming, but that does not mean the state is without access to the revenue. Proposed § 293.24 provides that DOI reviews revenue sharing provisions with “great scrutiny” and that its analysis “begins with the presumption that a Tribe's payment to a State or local government for anything beyond regulatory fees (section 293.19) are a prohibited ‘tax, fee, charge, or other assessment.’” 48 The proposed language further provides the parties must show that the state has offered “meaningful concessions [it] was otherwise not required to negotiate,” and “the value of the concessions provides substantial economic benefits to the Tribe in a manner justifying the revenue sharing required by the compact.” 49
Alternatively stated, every payment, excluding regulatory fees, carries a presumption it is an impermissible tax unless the state provides something without compulsion constituting “substantial economic benefits” to the tribe. The problem with this language is that there is no identifiable measure or definition identifying what substantial economic benefits means. The concept of substantial economic benefit itself is subjective and certainly varies from person to person and government to government. Further, the implication of this language is that DOI gets to decide what constitutes substantial economic benefit for each tribe, which appears to vest a significant amount of obscurity in the agency that is seeking to increase transparency in the process. Without changes here, expect a challenge to this provision because, if enacted, a state's failure to comply will be considered evidence of bad faith in negotiating under 25 U.S.C. § 2710(d)(7)(a). 50
III. PROCESS FOR ADOPTION
After June 30, 2022, if it is not already doing so, DOI will amalgamate and review the oral and written comments received during the consultations and conclude whether to pursue formal rulemaking and, if so, which provisions will be amended. DOI is under no obligation to take any action on this matter at the time of publishing, but it is reasonable to believe it will file a notice of proposed rulemaking under the federal Administrative Procedure Act encapsulating most, if not all, of its proposed revisions. Once DOI issues a notice of proposed rulemaking, the public will be authorized to submit comments, which will be considered by the Secretary before DOI formally amends the regulations. 51 Once the revisions are approved, they will be subject to the challenges provided by 5 U.S.C. § 706(1) and (2). 52
IV. CONCLUSION
What follows remains to be seen. If the revisions are promulgated into the regulations without material change and survive what may be an inevitable courtroom showdown or two, tribes and states will draft compacts and amendments accordingly. Similarly, there is no doubt that the entire industry will carefully monitor DOI's actions in the coming months. Although imperfect, for the changes that largely purport to codify DOI's existing practices into the regulations, Tribes and their corresponding gaming regulatory authorities are likely to welcome the transparency that comes with the proposed amendments. Accordingly, DOI's attempt to provide clarity, guidance, and transparency, especially in an area Congress accurately determined to be a means to tribal economic development, self-sufficiency, and governance, 53 is praiseworthy.
PART 293—CLASS III TRIBAL-STATE GAMING COMPACT
Authority: 5 U.S.C. 301; 25 U.S.C. 2, 9, 2710.
Subpart A – General Provisions and Scope
§ 293.1 What is the purpose of this part?
This part contains:
(a) Procedures that Indian Tribes and States must use when submitting Tribal-State compacts and compact amendments to the Department of the Interior; and (b) Procedures and criteria that the Secretary will use for reviewing such Tribal-State compacts or compact amendments.
§ 293.2 How are key terms defined in this part?
This part relies on but does not restate all defined terms set forth in the definitional section of IGRA.
(a) Amendment means a change to a class III Tribal-State gaming compact other than an extension.
(b) Compact or Tribal-State Gaming Compact means an intergovernmental agreement executed between Tribal and State governments under IGRA that establishes between the parties the terms and conditions for the operation and regulation of the Tribe's Class III gaming activities.
(c) Extension means a change to the duration of a compact or amendment.
(d) Gaming activity or gaming activities means the conduct of class III gaming involving the three required elements of chance, consideration, and prize.
(e) Gaming facility means the physical building or space within a building where the gaming activity occurs and the spaces that are necessary for conduct of gaming including the casino floor, vault, count, surveillance, management, information technology, class III gaming device, and supplies storage areas.
(f) IGRA means the Indian Gaming Regulatory Act of 1988 (Public Law 100-497) 102 Stat. 2467 dated October 17, 1988, (Codified at 25 U.S.C. 2701-2721 (1988)) and any amendments.
(g) Tribe means Indian Tribe as defined in 25 U.S.C. 2703(5).
§ 293.3 What authority does the Secretary have to approve or disapprove compacts and amendments?
The Secretary has the authority to approve a compact or amendment “entered into” by a Tribe and a State, as evidenced by the appropriate signature of both parties. See §293.15 for the Secretary's authority to disapprove compacts or amendments.
§ 293.4 Are compacts and amendments subject to review and approval?
(a) Yes. All compacts, amendments, agreements, or other documents – including, but not limited to, any dispute resolutions, settlement agreements, or arbitration decisions – which establish, change, or interpret the terms and conditions for the operation and regulation of a Tribe's class III gaming activities regardless of whether they are substantive or technical, must be submitted for review and approval by the Secretary.
(b) If a Tribe or a State (including its political subdivisions) are concerned that their agreement may be considered a “compact” or “amendment,” either party may request in writing a determination from the Department if their agreement is a compact or amendment and therefore must be approved and a notice published in the Federal Register prior to the agreement becoming effective. If the Secretary determines that an agreement is or is not a compact or amendment, the Department will issue a letter stating this determination.
§ 293.5 Are extensions to compacts subject to review and approval?
No. Approval of an extension is not required if the extension of the compact does not include any amendment to any of the other terms of the compact. However, the parties must submit the documents required by § 293.8. The extension becomes effective only upon publication in the Federal Register.
Subpart B – Submission of Tribal-State Gaming Compacts
§ 293.6 Who can submit a compact or amendment?
Either party (Tribe or State) to a compact or amendment can submit the compact or amendment to the Secretary for review and approval.
§ 293.7 When should the Tribe or State submit a compact or amendment for review and approval?
The Tribe or State should submit the compact or amendment after it has been legally entered into by both parties.
§ 293.8 What documents must be submitted with a compact or amendment?
Documentation submitted with a compact or amendment must include:
(a) At least one original compact or amendment executed by both the Tribe and the State;
(b) A Tribal resolution or other document, including the date and place of adoption and the result of any vote taken, that certifies that the Tribe has approved the compact or amendment in accordance with applicable Tribal law;
(c) Certification from the Governor or other representative of the State that they are authorized under State law to enter into the compact or amendment;
(d) Any ancillary agreements, documents, ordinances, or laws required by the compact or amendment; and
(e) Any other documentation requested by the Secretary that is necessary to determine whether to approve or disapprove the compact or amendment.
§ 293.9 Where should a compact or amendment be submitted for review and approval?
Submit compacts and amendments to the Director, Office of Indian Gaming, U.S. Department of the Interior, 1849 C Street NW, Mail Stop 3543, Main Interior Building, Washington, DC 20240. If this address changes, a notice with the new address will be published in the Federal Register within 5 business days. Compacts and amendments may also be submitted electronically to [OIG Compact email address] as long as the original copy is submitted to the address listed above.
Subpart C – Secretarial Review of Tribal-State Gaming Compacts
§ 293.10 How long will the Secretary take to review a compact or amendment?
(a) The Secretary must approve or disapprove a compact or amendment within 45 calendar days after receiving the compact or amendment.
(b) The Secretary will notify the Tribe and the State in writing of the decision to approve or disapprove a compact or amendment.
§ 293.11 When will the 45-day timeline begin?
The 45-day timeline will begin when a compact or amendment is received, and date stamped by the Office of Indian Gaming.
§ 293.12 What happens if the Secretary does not act on the compact or amendment within the 45-day review period?
If the Secretary does not take action to approve or disapprove a compact or amendment within the 45-day review period, the compact or amendment is approved by operation of law, but only to the extent the compact or amendment complies with the provisions of IGRA. The Secretary, after the 45th day, may issue a guidance letter to the parties identifying certain provisions that are inconsistent with IGRA. The Secretary is not required to issue a letter, and if the Secretary does issue a letter, any such letter may offer guidance to the parties on the Department's interpretation of IGRA. The compact or amendment that is approved by operation of law becomes effective only upon publication in the Federal Register.
§ 293.13 Who can withdraw a compact or amendment after it has been received by the Secretary?
To withdraw a compact or amendment after it has been received by the Secretary, the Tribe and the State must submit a written request to the Director, Office of Indian Gaming at the address listed in §293.9.
§ 293.14 When does a compact or amendment take effect?
(a) A compact or amendment, that is affirmatively approved or approved by operation of law takes effect on the date that notice of its approval is published in the Federal Register.
(b) The notice of affirmative approval or approval by operation of law must be published in the Federal Register within 90 days from the date the compact or amendment is received by the Office of Indian Gaming.
§ 293.15 Is the Secretary required to disapprove a compact or amendment that violates IGRA?
No. The IGRA provides the Secretary with time limited authority to review a compact or amendment and discretionary disapproval authority. If the Secretary does not take action to approve or disapprove a compact or amendment within 45 days, it shall be considered to have been approved by the Secretary, but only to the extent the compact or amendment is consistent with IGRA.
§ 293.16 When may the Secretary disapprove a compact or amendment?
The Secretary may disapprove a compact or amendment only if:
(a) it violates:
Any provision of IGRA;
Any other provision of Federal law that does not relate to jurisdiction over gaming on Indian lands;
The trust obligations of the United States to Indians; or
(b) If the documents required in §293.8 are not submitted.
Subpart D – Scope of Tribal-State Gaming Compacts
§ 293.17 May a compact or amendment include provisions addressing the application of the Tribe's or the State's criminal and civil laws and regulations?
Yes. A compact or amendment may include provisions addressing the application of the criminal and civil laws and regulations of the Tribe or the State that are directly related to, and necessary for, the licensing and regulation of the gaming activity. The parties must show that these laws and regulations are both directly related to and necessary for, the licensing and regulation of the gaming activity.
§ 293.18 May a compact or amendment include provisions addressing the allocation of criminal and civil jurisdiction between the State and the Tribe?
Yes. A compact or amendment may include provisions allocating criminal and civil jurisdiction between the State and the Tribe necessary for the enforcement of the laws and regulations described in section (293.17 above).
§ 293.19 May a compact or amendment include provisions addressing the State's costs for regulating gaming activities?
Yes. If the compact or amendment includes a negotiated allocation of jurisdiction to the State for the regulation of the gaming activity, the compact or amendment may include provisions to defray the State's actual and reasonable costs for regulating the specific Tribe's gaming activity. If the State is unable to show actual expenses for regulating the specific Tribe's gaming activity this is considered evidence of bad faith.
§ 293.20 May a compact or amendment include provisions addressing the Tribe's taxation of gaming?
Yes. A compact or amendment may include provisions addressing the Tribe's taxation of the gaming activity in amounts comparable to the State's taxation of gaming activities. A compact may not include provisions addressing the Tribe's taxation of other activities that may occur within or near the Tribe's gaming facility. The inclusion of provisions addressing the Tribe's taxation of other activities is considered evidence of bad faith.
§ 293.21 May a compact or amendment include provisions addressing remedies for breach of the compact?
Yes. A compact or amendment may include provisions addressing how the parties will resolve a breach of the compact or other disputes arising from the compact including mutual limited waivers of sovereign immunity. Any dispute resolution agreement, arbitration award, settlement agreement, or other resolution of a dispute outside of Federal court must be submitted for review and approval by the Secretary. The inclusion of provisions addressing dispute resolution in a manner that seeks to avoid the Secretary's review is considered evidence of bad faith.
§ 293.22 May a compact or amendment include provisions addressing standards for the operation of gaming activity and maintenance of the gaming facility?
Yes. A compact or amendment may include provisions addressing the Tribe's standards for the operation of the gaming activity as well as the Tribe's standards for the maintenance of the gaming facility, including licensing.
§ 293.23 What factors will be used to determine whether provisions in a compact or amendment are directly related to the operation of gaming activities?
(a) A compact or amendment may include provisions that are directly related to the operation of gaming activities. The parties must show that these provisions are directly connected to Tribe's conduct of class III gaming. Subjects that address patron conduct within the gaming facility are generally regarded as directly related to gaming. Examples include:
Service of alcohol to patrons;
Providing a non-smoking area; or
Patron self-exclusion.
(b) Mutually beneficial proximity, or even co-management alone is insufficient to establish a “direct connection” between the Tribe's class III gaming and adjacent business or amenities. Additionally, tribal infrastructure projects or economic development activities that are funded by gaming revenue and may service or otherwise provide an incidental benefit to the gaming facility are not directly related to the conduct of gaming without other evidence of a direct connection.
(c) Provisions which are
Limiting third party Tribes' rights to conduct gaming;
Treaty rights;
Tobacco sales;
Compliance with or adoption of State environmental regulation of things unrelated to the Tribe's operation of gaming activities and maintenance of the gaming facility;
Non-gaming Tribal economic activities including activities in or adjacent to the gaming facility; or
Tribal class I or class II gaming activities.
(d) The inclusion of provisions which the parties cannot show a direct connection to the Tribe's conduct of class III gaming is considered evidence of bad faith.
§ 293.24 What factors will the Secretary analyze to determine if revenue sharing is lawful?
(a) A compact or amendment may include provisions that address revenue sharing in exchange for a State's meaningful concessions resulting in a substantial economic benefit for the Tribe.
(b) The Department reviews revenue sharing provisions with great scrutiny. We begin with the presumption that a Tribe's payment to a State or local government for anything beyond regulatory fees (section 293.19) are a prohibited “tax, fee, charge, or other assessment.” In order for the Department to approve revenue sharing the parties must show:
the State has offered meaningful concessions the State was otherwise not required to negotiate; and
the value of the concessions provides substantial economic benefits to the Tribe in a manner justifying the revenue sharing required by the compact.
(c) The inclusion of revenue sharing provisions to the State that is not justified by meaningful concessions of substantial economic benefit to the Tribe is considered evidence of bad faith.
§ 293.25 May a compact or extension include provisions that limit the duration of the compact?
Yes. However, IGRA anticipates compacts are long-term agreements between a Tribe and a State. These agreements reflect carefully negotiated compromises between sovereigns. A refusal to negotiate a long-term compact, or a short-term extension to allow for negotiations to continue, is considered evidence of bad faith.
§ 293.26 May a compact or amendment permit a Tribe to engage in any form of class III gaming activity?
Yes. If the State allows any form of class III gaming, then the State is regulating all forms of class III gaming. A State's refusal to negotiate in a compact over all forms of class III gaming, not prohibited in the State, is considered evidence of bad faith.
§ 293.27 May any other contract outside of a compact regulate Indian gaming?
No. Any contract or other agreement between a Tribe and a State or its political subdivisions which seeks to regulate a Tribe's right to conduct gaming – as limited by IGRA – is a gaming compact that must comply with IGRA and be submitted for review and approval by the Secretary. Any agreement which includes provisions for the payment from a Tribe's gaming revenue or restricts or regulates a Tribe's use and enjoyment of its Indian Lands, including a Tribe's conduct of gaming, should be submitted for a determination if the agreement is a compact or amendment under 293.4(b).
§ 293.28 How does the Paperwork Reduction Act affect this part?
The information collection requirements contained in this part have been approved by the OMB under the Paperwork Reduction Act of 1995, 44 U.S.C. 3507(d), and assigned control number 1076-0172. A Federal agency may not conduct or sponsor, and you are not required to respond to, a collection of information unless it displays a currently valid OMB control number.