Casino Executive #44 ©Copyright 1999 by I. Nelson Rose. All rights reserved worldwide. Gambling and the Law® is a registered trademark of Professor I. Nelson Rose, Whittier Law School, Costa Mesa, CA.

Prop. 5 v. Pala Compact - Are They Both Unconstitutional? by I. Nelson Rose

Political observers predict that as much as $100 million might be spent before the November 3 vote on Proposition 5, making this the most expensive initiative battle ever fought in the United States. Campaigns like this are bound to be nasty.

But few expected the fight would turn into a tribe against tribe civil war. Emotions are running hot, and the wounded feelings among the state's Native Americans will take years to heal.

One of the dangers of war is that both sides can lose. That is a real possibility here, because the ultimate decisions will be made by courts, not voters.

Interested parties have divided themselves into just two camps. Opponents of Indian gaming have basically given up and joined the movement behind the Pala compacts. These compacts, now signed by 11 tribes, would limit the state to 19,900 machines, a single tribe to no more than 975.

The other camp supports Prop. 5, which places no limits on the number of machines.

Each side accuses the other of making false claims, selling out, misleading the voters -- the standard nasty campaign rhetoric.

However, the tribes supporting the Pala compacts appear to be making a strategic mistake by going further and attacking Prop. 5 as violating the California Constitution. The most common defense we have heard since we were kids is, "Oh yeah! So are you!"

Opening the Pala compacts to constitutional challenge would probably be fatal. I believe that every court that is called upon to decide the question would rule that tribes may not have gaming machines, no matter what they are called or how they are played.

The problem for both Prop. 5 and the Pala compacts comes from a legally incorrect, yet binding nonetheless, decision of the 9th Circuit. This Court of Appeals for the western U.S. had to decide in the Rumsey decision in 1996 what forms of Class III games are allowed under the Indian Gaming Regulatory Act. Disagreeing with every other court that has looked at Class III games, and even with its own decision about Class II games, the 9th Circuit ruled that the scope of gaming is not determined by the state's public policy. Instead, the 9th Circuit directed courts to look at which specific games are permitted by state law: "A state need only allow Indian tribes to operate games that others can operate, but need not give tribes what others cannot have."

Sacramento-based federal District Court Judge Garland E. Burrell, Jr., applied that test to the question of whether the state had to negotiate to allow tribes to have slot machines. Finding no provision for slot machines in the California Lottery Act, in September 1998 Judge Burrell ruled the tribes may not have slot machines.

Opponents of Prop. 5 embraced the Burrell decision as somehow showing that Prop. 5 would be declared unconstitutional if it won. But, Judge Burrell never mentioned the constitution.

If the 9th Circuit is looking for a state statute that allows these specific machines, Prop. 5, by its own terms, will be such a statute. The Pala compacts similarly have the status of being statutes.

The authors of Prop. 5 tried to distinguish their gaming devices from casino slots by prohibiting handles and payouts of coins and currency, and by requiring prizes be paid from a players' pool, made up of prior player losses.

The Pala compacts may appear to authorize different machines, because its games have additional restrictions. But both Pala and Prop. 5 allow players to gamble using a video screen, not with lottery tickets or other pieces of paper dispensed from a machine.

Neither Prop. 5 nor the Pala compacts are amendments to the state Constitution. The Pala compacts were approved by the state Assembly, Senate and Governor, and the U.S. Secretary of Interior. But none of these have the power to overrule the California Constitution.

Judge Burrell based his decision solely on the State Lottery Act, but he did make a passing reference to Prop. 37. That 1984 initiative created the Lottery Act, but it also amended the constitution in two ways: to allow a state lottery and to prohibit "casinos of the types currently operating in Nevada and New Jersey."

Burrell's decision: "The Lottery Act authorizes the California State Lottery to conduct 'lottery games'..."

This is virtually identical to the language used by the supreme courts of three other states in questioning whether video lottery games are allowed simply because voters have approved a state lottery.

In 1994 the Supreme Court of South Dakota, with extreme reluctance, ordered 6,000 gaming devices throughout the state be unplugged. The Justices ruled that voters wanted only a lottery, not other games of chance. (It took a constitutional amendment to bring back the machines.)

In ruling that the legislature had not given the Lottery Commission authority to put in video lotteries, the highest court of West Virginia stated, "The fact that electronic video lottery is different from the common state-run lottery games... also raises a question as to whether electronic video lottery is actually a lottery as contemplated by the constitution." (The legislature has now defined video lotteries; so far the Supreme Court has not had to decide whether that statute is constitutional.)

The most important case comes from Oregon, where voters also put in a constitutional amendment prohibiting "casinos" when they approved a state lottery. In 1994 the Supreme Court allowed bars to have up to five video poker machines, but only because the number was so small and only in businesses that were not primarily for gambling. (Apparently no one has challenged later compacts allowing large tribal casinos.)

Given the rising feelings against legal gambling, judges are in no mood to approve expansions of gaming. If asked, courts will rule that Californians wanted only passive lottery games when they voted in a state lottery -- and voted out casinos.

[Professor Rose can be reached at rose@sprintmail.com]

Gambling and the Law® is a registered trademark of Professor I. Nelson Rose, Whittier Law School, Costa Mesa, CA. © Copyright 1999 by I. Nelson Rose. All rights reserved worldwide. I. Nelson Rose is a professor of law at Whittier Law School in Costa Mesa, California and is recognized as one of the world’s leading experts on gambling law.