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Best of I. Nelson Rose

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A Modest Proposal from Governor Davis

6 April 2000

Whether you favor or oppose Indian casinos in California, you should take a close look at the proposal that was passed by the people of California on their March 2000 ballot. If you liked Prop. 5, you will love this proposal. And if you disliked Prop. 5 . . .

In 1998, gaming tribes won a tremendous victory at the polls after the most expensive initiative fight in history. But in 1999, the California Supreme Court ruled Prop. 5 violated the State Constitutional prohibition on "casinos of the type currently operating in Nevada and New Jersey."

Governor Gray Davis immediately commenced intensive negotiations with gaming tribes. The result was a two-part agreement:

  1. To put a Constitutional Amendment on the 2000 primary ballot; and
  2. To sign Tribal-State Gaming Compacts that would go into effect if voters approved the Amendment.

The deal was struck literally at the last minute -- at 1:30 a.m. on the last day of the legislative session.

Normally, even minor bills are first analyzed by the Legislature's lawyers. Here a major change in public policy--legalizing Nevada-style casinos--was approved by the Governor and Legislature without any review of the Constitutional Amendment or 38-page long Compact, let alone any public hearings.

Due to the backroom nature of the deal, Gov. Davis has been able to get away with saying things like, "I am not generally inclined to support measures that allow more than a modest expansion of gaming." Gov. Davis's "modest expansion of gaming" is one of the most massive legalizations of casinos in history. It took Nevada 40 years to accomplish what this will do overnight.

As one example, the Compacts allow tribes to have up to 2,000 slot machines. There are approximately 500 full commercial casinos in this country. Less than 10% have that many slots, even including casinos in Nevada and New Jersey. There are none that large in Colorado, South Dakota or Montana, and no more than a handful among the large riverboat and boat-in-a-moat casinos in Illinois, Indiana, Iowa, Louisiana, Mississippi and Missouri.

We do not know what the initial statewide limit on slot machines is. The Compact's formula is pure gobbledegook:

"The maximum number of machines that all Compact Tribes in the aggregate may license pursuant to this Section shall be a sum equal to 350 multiplied by the number of Non-Compact tribes as of September 1, 1999, plus the difference between 350 and the lesser number authorized under Section 4.3.1."

It does not really matter, because three years after the Compact is approved, any tribe can renegotiate to increase the number of its slot machines.

Tribes will immediately have the right to operate "any banking or percentage card game" and "slot machines." The first compacted casinos will thus have casino-style blackjack and Caribbean Stud, electromechanical slot machines and video poker.

No craps and roulette. But the state must renegotiate after 12 months if a tribe wishes to operate any other form of Class III gaming. This could include Internet lotteries.

All renegotiations will be between the Tribal leader and the Governor. Unlike the laws in many other states, this Compact will impose no limit on the amounts of money casino companies may contribute to the Governor.

Gaming tribes have to pay a yearly fee on every slot machine, ranging from $0 for 1-350 devices to $4,350 for 1,251-2,000 devices. From this fund, every other tribe in the state that does not have a casino will get $1.1 million per year. California's tribes range from as large as a few thousand people to as small as a single individual.

Gaming tribes also have to make a "contribution" to the state, though only "with respect to the number of Gaming Devices operated by the Tribe on September 1, 1999." This non-tax tax, legally a payment in lieu of taxes, runs from 0%-13% of the average net win. Most gaming tribes will be paying 7% on 201-500 slot machines.

The amount the state collects will actually decrease over time: as more machines are put in the average net win per machine goes down.

In a major concession of their sovereignty, tribes agree to let their workers unionize. They did not agree to allow picketing.

Tribes also agree to abide by state standards for health and safety.

Legal gambling age is set at 18, drinking age is 21.

Players may not sue a tribe if there is a dispute over a bet.

Tribes are required to carry at least $5 million in "public liability insurance for patron claims." Tribes are not required to waive their immunity from suits for patron injuries.

A tribe may create its own Tribal Gaming Agency or be part of an intertribal agency approved by the National Indian Gaming Commission. This Agency has the final say in many important decisions. For example, the Agency licenses the casino facility and every gaming employee. The state is supposed to have some input, but not always.

Tribes will be able to employ individuals who the state has determined are unsuitable. This exemption applies not only to enrolled tribal members, but to anyone else who has worked for the tribe for at least three years. The Compact acts like a pardon: Tribes may employ persons denied licenses by the State Gaming Agency, if the state's decision is "based solely on activities, conduct, or associations" that occurred prior to the person's application.

As you can see, there is something to please--and outrage--everyone.

Recent Articles
Best of I. Nelson Rose
I. Nelson Rose

Professor I. Nelson Rose is an internationally known scholar, public speaker and writer and is recognized as one of the world's leading authorities on gambling law. A 1979 graduate of Harvard Law School, he is a tenured full Professor at Whittier Law School in Costa Mesa, California, where he teaches one of the first law school classes on gaming law.

Professor Rose is the author of more than 300 books, articles, book chapters columns. He is best known for his internationally syndicated column, "Gambling and the Law ®," and his landmark 1986 book by the same name. His most recent book is a collection of columns and analysis, co-authored with Bob Loeb, on Blackjack and the Law.

A consultant to governments and industry, Professor Rose has testified as an expert witness in administrative, civil and criminal cases in the U.S., Australia and New Zealand, and has acted as a consultant to major law firms, international corporations, licensed casinos, players, Indian tribes, and local, state and national governments, including Arizona, California, Florida, Illinois, Michigan, New Jersey, Texas and the federal governments of Canada and the United States.

With the rising interest in gambling throughout the world, Professor Rose has spoken before such diverse groups as the F.B.I., National Conference of State Legislatures, Congress of State Lotteries of Europe, United States Conference of Mayors, and the National Academy of Sciences. He has presented scholarly papers on gambling in Nevada, New Jersey, Puerto Rico, England, Australia, Antigua, Portugal, Italy, Argentina and the Czech Republic.

He is the author of Internet Gaming Law (1st & 2nd editions), Blackjack and the Law and Gaming Law: Cases and Materials.

I. Nelson Rose Websites:

www.gamblingandthelaw.com

Books by I. Nelson Rose:

Gambling and the Law

> More Books By I. Nelson Rose

I. Nelson Rose
Professor I. Nelson Rose is an internationally known scholar, public speaker and writer and is recognized as one of the world's leading authorities on gambling law. A 1979 graduate of Harvard Law School, he is a tenured full Professor at Whittier Law School in Costa Mesa, California, where he teaches one of the first law school classes on gaming law.

Professor Rose is the author of more than 300 books, articles, book chapters columns. He is best known for his internationally syndicated column, "Gambling and the Law ®," and his landmark 1986 book by the same name. His most recent book is a collection of columns and analysis, co-authored with Bob Loeb, on Blackjack and the Law.

A consultant to governments and industry, Professor Rose has testified as an expert witness in administrative, civil and criminal cases in the U.S., Australia and New Zealand, and has acted as a consultant to major law firms, international corporations, licensed casinos, players, Indian tribes, and local, state and national governments, including Arizona, California, Florida, Illinois, Michigan, New Jersey, Texas and the federal governments of Canada and the United States.

With the rising interest in gambling throughout the world, Professor Rose has spoken before such diverse groups as the F.B.I., National Conference of State Legislatures, Congress of State Lotteries of Europe, United States Conference of Mayors, and the National Academy of Sciences. He has presented scholarly papers on gambling in Nevada, New Jersey, Puerto Rico, England, Australia, Antigua, Portugal, Italy, Argentina and the Czech Republic.

He is the author of Internet Gaming Law (1st & 2nd editions), Blackjack and the Law and Gaming Law: Cases and Materials.

I. Nelson Rose Websites:

www.gamblingandthelaw.com

Books by I. Nelson Rose:

Compulsive Gambling and the Law

> More Books By I. Nelson Rose