Saltsman and Solomon: Letting the genie out of the bottle?

Ralph B. Saltsman and Stephen Warren Solomon
1/7/11

Well, do we let the genie out of the bottle? Does this genie lavish untold wealth on its owner or wreak devastation on an established treasured enterprise? By the way, to whom does this genie belong?

In California, state legislation appears from time to time allowing intrastate Internet gaming. One such bill in preliminary discussion in Sacramento and elsewhere would grant a license for Internet intrastate poker to an enterprise consisting of card clubs and Indian tribes. That license would unleash a genie co-owned by those two sets of entities. This bill would allow for online poker and not Class III gaming. What is not included in this discussion is the race track or state lottery.

Class III gaming includes card games played against the house and Las Vegas-style slot machines. In time more than one license could be issued to more than one business entity. This intrastate gaming by definition would be confined to California. Intrastate Internet poker where there is no bank and no percentage take could yield hundreds of millions of dollars.

That genie could be key to further fortune or could be the self-chosen means of destruction of the existing enterprise sustaining so many tribes.

Internet gaming may: 1) reap billions for its owners; or 2) generate a lot of excitement and not much else; or 3) diminish the most successful gaming structure in California – Native American land.

Indian casinos in California are billion dollar industries. According to the National Indian Gaming Commission, California casinos had gross incomes of $7.8 billion in 2007 and $7.36 billion in 2008. No one would consciously want to dismantle or endanger those generous structures. On the other hand, who would want to ignore tomorrow’s multibillion dollar money machine that is Internet gaming?

At present there is no lawful Internet gaming in the United States. In California, through state constitutional amendment, legislation and compacts between tribe and state, Indian casinos have Class III gaming. Card clubs do not. California Indian casinos are holding the cards over the competing card clubs. This could change.

The statistical array of poker players, Internet gamblers and casino patrons is only part of the equation under debate. Regardless of what the numbers show as to who is gambling and how they are doing it, no one can seriously argue the limits and potential for intrastate California Internet gambling. Internet gaming may prove to be without easily predictable limit. But Indian tribes are wrestling with the issue of structure. One very serious argument in opposition to Internet gaming is the inclusion of card clubs into the world of tribal gaming capabilities. Card clubs are not presently part of that success story. Inclusion into an Internet gaming system of card clubs partnered with Indian tribes may be the card clubs’ first step toward intrusion into what is now the tribes’ exclusive domain.

The issue of Indian gaming exclusivity in California raises the perplexing question: Is it in the Indian nation’s best interest to allow intrastate Internet gaming to be born if it means ultimately losing the exclusivity in Class III gaming Indian Nations presently enjoy? The above referenced legislation under early discussion in California would restrict games to poker thereby preserving Indian casinos’ exclusive right to provide Class III gaming, but many in Indian country are wondering out loud if poker is but step one in a continuum of graduated legislation and constitutional amendment that will end with full Class III Internet gambling. At that point, the tribes’ exclusivity is lost, the genie has destroyed the brick and mortar enterprise that has sustained Indian tribes, and there is no putting the genie back in the bottle.

On the other hand, how can Indian nations which had the foresight to create and build casino gaming allow the lucrative opportunity of Internet gaming to pass?

The argument in favor of immediate passage of state legislation permitting Internet intrastate poker, is this gaming will be restricted to poker and not Class III gaming. The sanctity of the Indian casino will be therefore undisturbed. Moreover, failure to act now will allow legal Internet intrastate poker to take off leaving the tribes behind.

Most observers believe Native American tribes can now effectively block gaming legislation.

However, once allowed the financial wherewithal, cache of success and the attendant political power, card clubs could have a platform from which further and additional Internet gaming could be modified by legislation and constitutional amendment by ballot all at card club instigation. Most observers believe Native American tribes can now effectively block gaming legislation. Will that still be true when financially successful card clubs participating in a tribal-card club Internet intrastate poker system go to the legislature and ballot proposition in the future with new laws and constitutional provision allowing Class III Internet gaming?

Those in favor of Internet intrastate poker point out that absent tribal leaders’ foresight in the 1980s and 1990s, the Las Vegas-style casinos on Indian reservation lands would not exist. That foresight now calls for action to take advantage of the computer phenomenon which will grow exponentially with or without tribal participation.

It is also true that when Native Americans won passage of state constitutional amendments and attendant legislation, and the federal government and state law adopted the machinery for Native American casinos with Class III gaming, and the tribes built those casinos, there were no billion dollar casino businesses in California to lose. Now the intricacies of the arguments are dangerous, because the stakes are high.

To some Native Americans contemplating their economic status during the mid-20th century, their memories recall deprivation without the nostalgia for those good old days. That genie could be key to further fortune or could be the self-chosen means of destruction of the existing enterprise sustaining so many Native American tribes and the communities in which those Indian casinos stand.

The decision to allow passage of legislation in California to establish lawful Internet intrastate gaming must be made wisely to protect the existing casinos and, at the same time, provide for the future.

So, do we let this genie out of the bottle? And whose genie is it?

Ralph B. Saltsman is a lawyer with Solomon, Saltsman & Jamieson in Los Angeles. He has been a lawyer for 36 years, 34 of which have been in the area of land use licenses and permits. Stephen Warren Solomon practices administrative law at Solomon, Saltsman & Jamieson. His expertise centers on licensing and Indian gaming and catastrophic personal injury.

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