30 Years of Tribal Gaming

Las Vegas’ greatest casino competitor cuts the bottom line but increases opportunities

February 25, 1987, was a milestone date for gambling in America. On that day, the United States Supreme Court handed down its decision in California v. Cabazon Band of Mission Indians, a verdict that paved the way for the rapid expansion of casino gambling on tribal lands in the decades to follow. Thirty years on, the Court’s decision still reverberates throughout the casino industry and Las Vegas.

First, an important note: Neither the Cabazon decision nor the following year’s Indian Gaming Regulatory Act created or legalized tribal gaming. On the contrary, tribes had been offering various kinds of gambling for years, which is how the Cabazon Band ended up in court in the first place. A small tribe of Cahuilla Indians located between Indio and Palm Springs in Riverside County, California, the Cabazon offered bingo games to the general public, as did the nearby Morongo Band; the Cabazon also opened a card room.

The state of California and Riverside County sued to shut down these gambling operations, arguing that the tribes’ bingo games flouted state bingo betting limits. After a lengthy legal battle, the Supreme Court found that, although the state had legitimate concerns about possible organized crime infiltration of high-stakes bingo, any state regulation would “impermissibly infringe” on tribal government.

The decision affirmed a ruling previously enunciated by the Fifth Circuit Court of Appeals in Seminole Tribe of Florida v. Butterworth: If a state permitted gambling, tribes were allowed to offer that type of gambling without state regulation or interference. Unless a state made gambling illegal, it could do nothing to prevent tribal gaming operations.

It is worth saying that government figured deeply into California v. Cabazon. In his majority decision, Justice Byron White specifically noted that California, far from barring gambling, operated a lottery and “daily encourage[d] its citizens to participate in this state-run gambling.” The state, far from exercising police powers to restrict undesirable behaviors by its citizens, was in the gambling business. Since the state was a promoter of gambling, the Court held that it regulated rather than prohibited gambling, with a few enumerated exceptions.

Time has proven that a mature tribal gaming industry and Las Vegas can not only coexist, but can bolster each other.

It is also worth pointing out that this decision did not come from an envelope-pushing activist court. As White noted in his decision, President Ronald Reagan’s 1983 Statement on Indian Policy had endorsed bingo as a method of reducing tribal dependence on federal funds, and that the Department of the Interior had promoted tribal bingo. Public-interest gambling had been expanding in the United States since 1925, when Florida legalized racetrack pari-mutuel wagering, and successive waves of racing, bingo and lottery legalization have made gambling an essential contributor to many state budgets.

California v. Cabazon’s impact was immediate. The following year, the Indian Gaming Regulatory Act provided a framework for tribal gambling operations and for the compacts (treaties) between tribes and states necessary for Class III gambling, which included Las Vegas–style casinos. These compacts allowed for revenue sharing between tribes and states, which greatly incentivized states to broker deals with tribes. By 1996, tribal casinos nationwide were earning more than Atlantic City or the Las Vegas Strip, and tribal casinos have grown even as commercial casinos have multiplied. Today, Indian casinos make about $30 billion annually in revenue, about three-quarters the total of their commercial rivals.

Tribal gaming has had a twofold impact on Nevada casinos. Its spread in California, the Pacific Northwest and Arizona has slowed revenue growth from Lake Tahoe to Laughlin, although Las Vegas has proven more resilient. With California’s total revenues estimated near $7 billion, it’s easy to see Indian casinos as the winner of a zero-sum game: Every dollar wagered in the Golden State is a dollar not bet in Nevada.

But there’s another dimension to that growth. Tribal casinos offer career opportunities at every level, increasing the value of job skills specific to the gaming industry. It used to be that casino employees and managers would face a substantial career readjustment if they wanted to move outside of Nevada or Atlantic City. Now, leaving Las Vegas doesn’t necessarily mean exiting the casino business, as tribes from California to Connecticut have hired line employees and managers with Las Vegas pedigrees.

In the early years of tribal gaming, it didn’t seem that way—industry attitudes were more likely to be hostile or dismissive—but time has proven that a mature tribal gaming industry and Las Vegas can not only coexist, but can bolster each other. Back in 1987, few Strip pit bosses could have imagined that a Supreme Court decision about tribal bingo might create an alternate career path for them, but today it’s taken for granted. Thirty years after California v. Cabazon, there might be fewer people coming to Nevada to gamble, but there’s a little bit of Las Vegas planted in the most unlikely soil.

David G. Schwartz is the director of UNLV’s Center  for Gaming Research.