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Wisconsin's Compacts - Bad Law And Politics

2 September 2004

The Supreme Court of Wisconsin has thrown the future of Indian gaming and the fiscal health of the state into doubt.

And it was not entirely the Court's fault.

In a long and carefully drafted opinion, Justice David C. Prosser, writing for a narrow 4 to 3 majority, ruled that Gov. Jim Doyle had exceeded his authority in agreeing to extend and expand the state's casino compact with the Forest County Potawatomi Tribe. Although the decision is limited, on its face, to terms contained in this one compact, it impacts all tribal-state agreements in Wisconsin.

Which means the tribes may not be able to expand their already large casinos. And the state may not get the additional $100 million in tribal payments it desperately needs.

Everyone involved in the fight over Indian gaming, the Governor, Legislature and even the Court, is careful to declare that the legal fight is over the changes made in 2003 and that the compacts themselves are legal. To some extent this is true, because if the State Supreme Court says a compact is legal, who is to say differently?

Actually, there is someone -- the United States Supreme Court. Even a lower federal court could easily find that the Governor did not have the power to sign tribal-state compacts for casinos because Wisconsin does not permit casinos.

The original compacts were all negotiated and signed by Gov. Tommy Thompson and the state's 11 tribes by June 1992. Gov. Thompson was at a disadvantage because a federal Judge Barbara Crabb had ruled, incorrectly, in 1991 that Wisconsin permitted casino gambling. She based her decision on the fact that there was a State Lottery, and Wisconsin defined a lottery as all games of prize, chance and consideration. She also relied on a poorly reasoned Opinion from then-Attorney General Doyle that in amending their State Constitution to bring in a Lottery, the voters had said the State Legislature could authorize casinos.

The original compacts expressly limited tribes to video and electro-mechanical gaming devices (slot machines), blackjack and pull-tabs not played in bingo halls. The compacts had terms of seven years, with automatic rollovers of five years, unless the tribe, or more likely the state, sent a written notice of nonrenewal. The state and tribes were careful to protect their sovereign immunity from lawsuits.

In 2003, now-Gov. Doyle, facing opposition from the Legislature, rushed through some startling amendments to these compacts: He agreed that tribes could now offer variations on the game of Blackjack, including, but not limited to, Spanish 21 and additional wagers offered in the game of blackjack, including additional wagers, multiple action blackjack, bonus wagers, and progressive blackjack wagers; pari-mutuel wagering on live simulcast horse, harness, and dog racing events; electronic keno; and the game of roulette, the game of craps, the game of poker and similar non-house banked card games, and games played at Blackjack-style tables, such as Let it Ride, Casino Stud, and Casino War.

Even more amazing, Gov. Doyle committed the state to these compacts to the end of time and waived the state's sovereign immunity, agreeing that the tribe could sue the state.

Naturally, a few people were upset. These included racetracks, which were trying to compete against tribal casinos and the State Legislature, which was hoping to squeeze more money from the tribes.

The Supreme Court's recent Opinion is the latest in a series of legal decisions -- some good, some simply awful -- handed down by Wisconsin state courts, federal courts, Legislatures and Attorneys General involving Indian gaming. Lurking behind many of these legal declarations are political fights and the smell of big money.

There wasn't much subtlety about the latest fight. Gov. Doyle is a Democrat, but the Legislature is controlled by the Republicans. Suit was filed in the Wisconsin Supreme Court by Mary E. Panzer, the Majority Leader of the Senate, John G. Gard, the Speaker of the Assembly, and a Legislative Committee. The defendants were Gov. Doyle and one of his officials.

The Republican-controlled Legislature has authorized $94,385 -- so far -- in taxpayers' money for the lawsuit. Responding to complaints from the Democrats, they noted that this was less than the $125,000 in taxpayers' money Gov. Doyle paid an outside consultant last year to help negotiate what turned out to be unconstitutional compacts.

The money at stake is much bigger. The Potawatomi alone are supposed to pay the state $40.5 million in June 2004. At the time this is written, the tribe says that it will probably pay only the $6.4 million it was obligated under the old compact.

The legal problem began in 1848, with the state's first Constitution, which reflected the morality of the time: "The Legislature shall never authorize any lottery, or grant any divorce."

It is clear the ban on lotteries was only supposed to cover lotteries, not other forms of gambling. However, over the next 150 years, bad decisions led to the word "lottery" often being defined as all games of prize, chance and consideration. This, of course, would make "lottery" synonymous with "gambling."

The Legislature helped create the current mess in 1990 by giving then-Gov. Thompson a blank check: "The Governor may, on behalf of this state, enter into any compact that has been negotiated under 25 USC 2710(d) [the federal Indian Gaming Regulatory Act ("IGRA")]."

Having authorized the Governor to do whatever he wants, the Legislature now is unhappy with the result.

The Court rather meekly found that the compacts, in general, were constitutional. It first decided that the test was whether there were adequate safeguards in place, such as the unrealistic idea that the voters would let the Governor know if they did not like the compacts he negotiated.

But a majority of the Court found the Legislature had given the Governor more power than it had to give. Specifically, it held that the compacts had to have expiration dates, and the Governor could not give away that state's sovereign immunity. The most interesting ruling was that the compacts could not allow games like poker and craps, because Wisconsin does not permit those games.

The inevitable question then should be, how can the compacts allow slot machines and blackjack, since Wisconsin does not permit those either?

The State Supreme Court really did not have an answer for that. The best it could come up with was Judge Crabb's obviously wrong ruling and its own prior refusal to hear appeals about the scope of gaming in the original compacts.

A strict reading of the IGRA should lead a federal court to declare all of the compacts illegal, since neither the voters nor the Legislature has approved any form of casino gaming.

But even if that happens, the Legislature will immediately pass an Act or propose a constitutional amendment. Tribal casinos will never close in Wisconsin. The state needs the money.

© Copyright 2004, all rights reserved worldwide GAMBLING AND THE LAW® is a registered trademark of Professor I Nelson Rose, Whittier Law School, Costa Mesa, CA

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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:

> More Books By I. Nelson Rose