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### ATTORNEY GENERAL OFTEXAS

GREG ABBOTT

December 8,2004

The Honorable Frank J. Corte Jr. Chair, Committee on Defense Affairs and Opinion No. GA-0278 State-Federal Relations Re: Whether constitutional authorization ofvideo Texas House ofRepresentatives lottery terminals on Indian tribal lands would Post Office Box 2910 permit Indian tribes to offer casino gambling in Austin, Texas 78768-2910 Texas (RQ-0214-GA)
Dear Representative Corte: You request an opinion on questions related to House Joint Resolution 1of the Seventyeighth Legislature, Fourth Called Session.’ See Tex. H.R.J. Res. 1,78th Leg., 4th C.S. (2004). This resolution proposed amending Texas Constitution article III, section 47 to authorize the state to operate video lottery terminals (“VLTs”) at racetracks and on Indian lands. “VLTs are electronic games of chance played on video terminals.” HOUSERESEARCHORGANIZATION, Focus REPORT, BETTINGONVIDEOLOTTERYTERMINALSTORAISEREVENUE2 (Mar. 5, 2004)? Visually and internally they are similar to slot machines. See id. “Most VLTs are video-based, overseen by state lottery agencies, and can be monitored, controlled, and audited by acentral computer system[.]” Id. “Some VLT games arepurely games ofchance, while others arevideo versions ofcard games such as poker and blackjack.” Id. See also Tex. Att’y Gen. Op. No. GA-0103 (2003) at 2 (defining VLTs). Article IR, section 47 of the Texas Constitution prohibits lotteries except for those specifically excepted by section 47(e). See id. at 8; see also TEX.CONST.art. III, 547. Thus, a constitutional amendment would be necessary to legalize VLTs in Texas. See Tex. Att’y Gen. Op. No. GA-0103 (2003) at 8. The legislature did not approve the proposed constitutional amendment that would have placed on the ballot aproposition to authorize video lottery terminals. See Tex. H.R.J.Res.1,78thLeg.,4thC.S.(2004);H.J.o~T~~.,78thLeg.,4thC.S.218(2004).~Nordidthe legislature approve legislation thatwould have implemented theproposed constitutional amendment,

‘Letter from Honorable Frank J. Cork Jr., Chair, Committee on Defense Affairs and State-Federal Relations, Texas House of Representatives, tp Honorable Greg Abbott, Texas Attorney General (Apr. 27, 2004) (on tile with Opinion Committee, also available afhttp://www.oag.state.tx.us) [hereinafter Request Letter].

2Avaikzbk at http://www.capitol.state.tx.us/hrofr/frac.

‘House Joint Resolution 1failed of adoption on the House floor.The Honorable Frank J. Corte Jr -Page 2 (GA-0278)

See Tex. H.B. 1,78th Leg., 4th C.S. (2004); H.J. OF TEX., 78th Leg., 4th C.S. 193 (2004); S.J. OF TEX., 78th Leg., 4th C.S. 58 (2004): 

### I. Questions You ask about the effect aconstitutional amendment authorizing the state to operate VLTs atracetracks and on Indian lands would have on the following groups ofIndian tribes:

The Texas Band of Oklahoma Kickapoos, who were recognized by the federal government inPublic Law 97-429,25 U.S.C. 5 13OOb-11, without any reference to the tribe’s right to offer gaming.’ The other two recognized tribes in Texas -the Alabama-Coushatta Tribes of Texas and the Ysleta de1 Sur Pueblo (also known as the Tigua Indian tribe) -which were recognized under the Ysleta de1Sur Pueblo and Alabama-Coushatta Tribes ofTexas Restoration Act in 1987, 25 U.S.C. 5 13OOg-1;that legislation specifically states that

“[a]11gaming activities which areprohibited by the laws ofthe State ofTexas arehereby prohibited on the reservation and on the lands of the tribe.” 25 U.S.C. §[§I 737(a)[, 13OOg-6.1 Other Indian tribes not currently resident in Texas but with a historical relationship to Texas lands, such as the Comanche, the Kiowa, the Mescalero Apaches, and the Cherokees. Indian tribes inTexas that have not been recognized officially [bythe federal government], but may be recognized in the future. See Request Letter, supra note 1,at 1-2 (footnote added). Your questions are summarized as follows: (1) may the state “authorize VLT gaming on tribal lands outside the jurisdiction of the federal Indian Gaming Regulatory Act;” (2) if a constitutional amendment and enabling legislation authorize VLTs on Indian reservations, will the Indian Gaming Regulatory Act “authorize Texas tribes toconduct all forms ofcasino-style gaming;” and (3) does the Indian Gaming Regulatory Act bar the state horn “receiving ashare ofthe revenues from VLTs without agrant ofterritorial exclusivity orother unique benefit tothe tribe?” See id. at2. In addressing your questions, which raise issues offederal law, we rely on the relevant federal statutes andjudicial decisions.

4House Bill 1passed to engrossment on theHouse floor and was referred tothe Senate Committee oftheWhole, but failed toprogress beyond apublic hearing scheduled for May 14,2004, before the Senate Committee ofthe Whole.

‘For purposes ofthis opinion, “gambling” is synonymous with “gaming.” See Ellis v.State, 162 S.W.Zd 407, 408 (Tex. Grim. App. 1942) (“to bet or wager means to gamble or game for mmey or other stakes”).The Honorable Frank J. Corte Jr -Page 3 (GA-0278)

II. VLT LeGslation. Seventv-eighth Lepislature, Fourth Called Session House Joint Resolution 1proposed the following addition to article III, section 47:

(0 The Legislature by general law may authorize the State to operate video lottery games and to contract with one or more of the following legal entities tooperate video lottery games onbehalf ofthe State: (1) aperson licensed in this State to conduct wagering on ahorse race or greyhound race; or (2) an Indian tribe recognized by the United States government under federal law.

TEX. H.R.J. I&S. 1, 5 l(f),78th Leg., 4th C.S. (2004) (as introduced) (emphasis added). The Secretary of the Interior (the “Secretary”) is required to publish a list of federally recognized tribes in the Federal Register. See 25 U.S.C. 5479a-l(a) (2000). The most recent list includes the Alabama-Coushatta Tribes6 ofTexas, the Kickapoo Traditional Tribe ofTexas, and the Ysleta de1Sur Pueblo ofTexas. See 68Fed. Reg. 68180-84 (Dec. 5,2003). The Secretary has also adopted procedures whereby an American Indian group may seek federal recognition as an Indian tribe. See 25 C.F.R. pt. 83 (2004). The Committee Substitute toHouse Joint Resolution 1expressly identified the three federally recognized Texas Indian tribes, providing that the legislature might “allow only the following legal entities to operate video lottery games on behalf ofthe State”: (A) aperson licensed inthis State on May 1,2004, to conduct wagering on ahorse race or greyhound race . ; @) the Ysleta de1SurPueblo and Alabama-Coushatta Indian tribes, which, under an agreement with this State in the form prescribed by general law or negotiated by the governor and ratified by the Legislature, operate the games on lands held in trust by the United States for such tribes on May 1,2004 ;and (C) the Kickapoo Traditional Tribe ofTexas, which, under an agreement with this State in the form prescribed by general law or

‘Under federal law, the Alabama and Coushatta Indian Tribes of Texas are considered as one tribal unit, and we will refer to them at times as the Alabama-Coushatta Tribe. See 25 U.S.C. $732 (2000).

‘YsletadelSur Pueblo isalso!amwnasTigua. S~~HOLJSEF~ESEARCHORGATION,FOCUSREPORT,BETTING ONVIDEO

LOTTERY

TERMINALS

TORAISERWENUE6 (Mar. 5, 2004), available af http:llwww.capitol.state.tx.us/hrofr Iframe4.htm#foc.The Honorable Frank J. Corte Jr -Page 4 (GA-0278)

negotiated by the governor and ratified by the Legislature, operates the games on lands held in trust by the United States for the benefit ofthe tribe on which Class Ill gaming ispermitted under the Indian Gaming Regulatory Act of 1988 Tex. Comm. Substitute H.R.J. Res. 1,s l(f)(4)(A)-(C), 78th Leg., 4th C.S. (2004); see alsoH.J. OF TEX., 78th Leg., 4th C.S., 8,29 (2004). The Committee Substitute also required the law authorizing the video lottery system toprovide that “netrevenue generated from video lottery terminals operated by an Indian tribe on Indian lands shall be distributed as set forth in the agreement authorizing the tribe to operate video lottery games, provided that the State must receive not less than 25 percent ofthe net revenue.” Tex. Comm. SubstituteH.R.J. Res. 1,§ l(f)(9)@), 78th Leg., 4th C.S. (2004). III. The Indian Gaming Regulatory Act In 1988, Congress adopted the Indian Gaming Regulatory Act (“1GRA”or “Act”), 25U.S.C. $42701-21 (2000), inresponse to state concerns about the United States Supreme Court’s decision in California v. Cabazon Band ofMission Indians, 480 U.S. 202 (1987). See S. REP. NO. loo-446 (1988), reprinted in 1988 U.S.C.C.A.N. 3071-72. Cubazon considered whether gaming on an Indian reservation was subject to state regulation pursuant to Public Law 53-280,8 a federal law granting California broad criminal jurisdiction over offenses committed byoragainst Indians within Indian lands in the state. See Cubuzon, 480 US. at 207-08; 18U.S.C. 5 1162 (2000); see also 28 U.S.C. 5 1360 (2000) (civil jurisdiction). The Supreme Court held that ifthe intent of a state law is to prohibit certain conduct, it falls within Public Law 280’s grant of criminal jurisdiction to the state, but if the state law generally permits the conduct at issue, subject to regulation, it is a civil/regulatory law and the state is not authorized to enforce it on an Indian reservation. See Cabazon, 480 U.S. at 209. “The shorthand test iswhether the conduct atissue violates the State’s public policy.” Id. The court in Cabazon held that Indian tribes in states that otherwise allow gaming have aright to conduct gaming activities on Indian lands, unimpeded by state regulation. See id. at 221-22. IGRA permits federally recognized Indian tribes to conduct gaming activities under stated circumstances and creates the National Indian Gaming Commission to regulate such activity. See 25 U.S.C. $3 2704-2710 (2000). The Act establishes three classes of gaming subject to differing degrees of federal, state, and tribal regulation. See id. 52710. Class I gaming is limited to social games, either ceremonial or for nominal prizes, and is free of all but tribal regulation. See id. $52703(6),2710(a)(l). ClassIIgamingincludesbingo andrelated games, i.e., gamesplayed against other players inwhich the house has no economic interest inthe outcome. See id. 52703(7). Itdoes not include “electronic or electromechanical facsimiles of any game ofchance or slot machines of any kind.” Id. 52703(7)(B)(ii). A tribe may engage in Class II gaming ifthe state in which the tribe is located “permits such gaming for any purpose by any person, organization or entity (and such gaming is not otherwise specifically prohibited on Indian lands by Federal law).” Id. 52710(b)(l)(A). Class II games are free of state regulation but are subject to tribal regulation and some federal oversight by the National Indian Gaming Commission. See id. §2710(b)-(c).

*SeePub. L. No. 53-280, 67 Stat. 588 (codified at 18U.S.C. 1162 and 28 USC. 1360).The Honorable Frank J. Corte Jr -Page 5 (GA-0278)

Class III gaming includes all other forms of gaming, see id. 5 2703(g), in particular, the “lucrative casino-style games such asblackjack, slot machines, roulette, and baccarat.” Ysletu del &o-Pueblo v. Texas, 36F.3d 1325,133l (5th Cir. 1994), cert. denied, 514 U.S. 1016 (1995). Class IIl gaming thus includes VLTs. See 25U.S.C. 52710(d)(l)(A) (2000). Atribe may engage in Class III gaming ifthe state in which it is located “permits such gaming for any purpose by any person, organization, or entity.” Id. 52710(d)(l)(B). Class III gaming must also be authorized by tribal ordinance and must be “conducted in conformance with a Tribal-State compact entered into by the Indian tribe and the State under paragraph (3) that is in effect.” Id. § 2710(d)(l)(C); see id. 52710(d)(3) (negotiation and terms oftribal-state compact). The compact must be submitted tothe Secretary ofthe Interior, who has 45 days in which to (1) approve the compact, (2) disapprove the compact, or(3)take no action, inwhich case the compact isdeemed approved, but only tothe extent it is consistent with the provisions of IGRA. See id. 5 2710(d)(8). IGRA includes aprovision authorizing atribe to sue a state in federal court ifthe state refuses tonegotiate acompact with the tribe, see id. 52710(d)(7)(A)(i), but the Supreme Court has held this provision tobeunconstitutional for violating the Eleventh Amendment of the United States Constitution. See Seminole Tribe v. Florida, 517 U.S. 44, 72-76 (1996). IV. Whether the State Mav Authorize VLT Gaming on Tribal Lands Outside the Jurisdiction ofIGRA A. Lands Belonging to the Alabama-Coushatta or YsIeta de1Sur Pueblo Tribe You first ask whether the state may authorize VLT gaming on tribal lands outside the jurisdiction ofthe federal Indian Gaming Regulatory Act. The Kickapoo Traditional Tribe ofTexas is subject to IGRA. See NATIONAL INDIAN GAMING COMMISSION, GAMING TRIBES.~ Seegenerally Diamond Game Enters., Inc. v.Rena, 230 F.3d 365 (D.C. Cir. 2000) (Kickapoo Traditional Tribe ofTexas requested National Indian Gaming Commission to classify mechanical device as Class II aid). Thus, this question does not relate to gaming on Kickapoo tribal lands in Texas, but itdoes relate to gaming on Alabama-Coushatta and Ysleta de1Sur Pueblo tribal lands.

1. Restoration Act Gaming on Alabama-Coushatta and Ysleta de1 Sur Pueblo tribal lands is not governed by IGRA, but by another federal statute, the Ysleta de1 Sur Pueblo and Alabama and Coushatta Indian Tribes ofTexas Restoration Act,” (“the Restoration Act”), which restored federal recognition to these two tribes. See 25 USC. $9 731-737 (2000) (restoring federal supervision to Alabama-Coushatta tribe); id. 55 13OOg-13OOg-7(restoring federal supervision to Ysleta de1 Sur Pueblo); see also Ysletu de1Sur Pueblo, 36 F.3d at 1334-35 (addressing gaming on Ysleta de1Sur Pueblo tribal lands). Section 737, which applies to the Alabama-Coushatta tribe, states as follows:

“‘&e Ysleta de1Su Pueblo and Alabama and Coushatta Indian Tribes of Texas Restoration Act, Pub. L. No. 100-89, 101 Stat. 666 (1987) (codified at 25 U.S.C. $5 13OOg-13OOg-7and25 U.S.C. $5 731-737).The Honorable Frank J. Corte Jr -Page 6 (GA-0278)

(a) In general All gaming activities which areprohibited by the laws ofthe State of Texas are hereby prohibited on the reservation and on lands of the tribe. Any violation of the prohibition provided in this subsection shall be subject to the same civil and criminal penalties that are provided by the laws of the State of Texas. The provisions of this subsection areenacted inaccordance with the tribe’s request inTribal Resolution No. T.C.-86-07 which was approved and certified on March 10,1986. (b) No State regulatory jurisdiction Nothing in this section shall be construed as a grant of civil or criminal regulatory jurisdiction to the State of Texas. (c) the courts of the United States shall have exclusive jurisdiction over any offense in violation of subsection (a) of this section that is committed by the tribe, orby any member ofthe tribe, on the reservation or on lands ofthe tribe.

. 25U.S.C. 3737 (2000). Identical provisions apply tothe Ysleta de1Sur Pueblo. See id. 5 13OOg-6. The Fifth Circuit in Ysletu de1 Sur Pueblo, after reviewing the Restoration Act and its legislative history, concluded that the Restoration Act’s specific provisions on gaming applicable to the Ysleta de1Sur Pueblo prevailed over IGRA and governed gaming on that tribe’s lands. See Ysleta delSurPueblo, 36F.3d at 1329, n.3,1332. Thus, the Restoration Act, and not IGRA, “would govern the determination ofwhether gaming activities proposed by the Ysleta de1 Sur Pueblo are allowed under Texas law, which functions as surrogate federal law.” Id. at 1335. The federal district court inAlabama-Coushatta Tribes v. Texas, 208 F. Supp. 2d 670 (E.D. Tex. 2002), relying on the Fifth Circuit decision in Ysleta de1Sur Pueblo, held that the Restoration Act provisions on gaming also govern gaming on Alabama-Coushatta tribal lands. See AlabamaCoushatta Tribes, 208 F. Supp. 2d at 674, 681 (25 U.S.C. 5731-37 governs gaming on AlabamaCoushatta tribal lands). The Alabama-Coushatta and the Ysleta de1Sur Pueblo tribes are subject to Texas law governing gaming just asother citizens orentities located in Texas. See generally Texas v. Ysleta de1Sur Pueblo, 220 F. Supp. 2d 668,688-91 (W.D. Tex. 2001), aff 69 Fed. Appx. 659, 2003 WL 21356043 (5th Cir.), cert. denied, 124 S.Ct. 497 (2003). ’

2. Johnson Act The federal Gambling Devices Act, 15 U.S.C. $5 1171-1178 (2000), commonly known asthe Johnson Act, isalso relevant to the Alabama-Coushatta and Ysleta de1Sur Pueblo tribes. These two tribes are subject to the following provision of the Johnson Act:The Honorable Frank .I.Corte Jr -Page 7 (GA-0278)

It shall be unlawful to manufacture, recondition, repair, sell, transport, possess, or use any gambling device within Indian country as defined in section 1151 ofTitle 18 Id. 5 1175(a). “Indian country’means “(a) all land within the limits ofany Indian reservation under thejurisdiction ofthe United States Government, notwithstanding the issuance of any patent, and, including rights-of-way running through the reservation, (b) all dependent Indian communities within the borders ofthe United States ,and (c) all Indian allotments, the Indian titles to which have not been extinguished, including rights-of-way running through the same.” 18U.S.C. 5 1151 (2000). The Johnson Act defines “gambling device” as follows:

(1) any so-called “slotmachine” orany other machine ormechanical device an essential part of which is a drum or reel with insignia thereon, and (A) which when operated may deliver, as the result of the application of an element of chance, any money or property, or (B) by the operation of which a person may become entitled to receive, asthe result ofthe application of an element ofchance, any money orproperty; or (2) any other machine or mechanical device (including, but not limited to, roulette wheels and similar devices) designed and manufactured primarily foruse inconnection with gambling, and (A) which when operated may deliver, asthe result ofthe application of an element ofchance, anymoney orproperty, or (B)bythe operation ofwhich aperson may become entitled toreceive, asthe result ofthe application of an element of chance, any money orproperty. 15 U.S.C. 5 1171(a)(l)-(2) (2000). Video lottery terminals are gambling devices within this definition. See Citizen Band Potawatomi Indian Tribe v. Green, 995 F.2d 179, 180-81 (10th Cir. 1993). IGRA includes the following partial exemption from the Johnson Act: The provisions of section 1175 of Title 15shall not apply to any gaming conducted under aTribal-State compact that-

(A) is entered into under paragraph (3) [relating to Tribal-State compact] by aState inwhich gambling devices are legal, and (B) isin effect. 25U.S.C. 52710(d)(6) (2000). See Citizen BandPotawatomiZndian Tribe, 995 F.2d at 181 (IGRA for limited waiver ofJohnson Act liability under certain circumstances). The Alabama-Coushatta and Ysleta de1 Sur Pueblo tribes are subject to the Restoration Act and not IGRA. Because theThe Honorable Frank J. Corte Jr -Page 8 (GA-0278)

Restoration Act does not explicitly exempt these two tribes from the Johnson Act, it appears they may not possess or use VLTs on their lands.” B. Lands Belonging to Other Groups ofIndians You also ask whether the state may authorize VLT gaming on tribal lands belonging to Indian tribes “not currently resident in Texas but with ahistorical relationship to Texas lands”” or“Indian tribes inTexas that have not been recognized [bythe federal government] but may be recognized in the future.” Request Letter, supra note 1,at 2. Ofcourse, Texas may not authorize VLT gaming on any such lands that are subject to the Johnson Act. Any legislation singling out such groups ofIndians for special treatment would raise issues under the Equal Protection Clause ofthe United States Constitution. See U.S. CONST. amend. XIV, 5 1;see also Washington v. Confederated Bands and Tribes ofthe Yakima Indian Nation, 439 U.S. 463, 500-01 (1979); Am. Greyhound Racing, Inc. v. Hull, 146 F. Supp. 2d 1012, 1075-76 (D. Arizona 2001), vacated on other grounds, 305 F.3d 1015, 1018 (9th Cir. 2002). Pursuant to the Equal Protection Clause, racial classifications are given strict scrutiny by areviewing court and are constitutional only ifthey are narrowly tailored to further compelling governmental interests. See Adarand Constructors, Inc. v.Pena, 515 U.S. 200,227 (1995); see also Rice v. Cayetano, 528U.S. 495, 517-24 (2000) (striking down a race-based voting limitation). Federal authority to enact legislation singling out tribal Indians for special treatment derives from the power of Congress to regulate commerce with Indian tribes, from the treaty power, and from the federal trusteeship over Indian lands established by federal statute. See U.S. CONST. art. I, 5 8, cl. 3; art. II, 52, cl. 2; 25 U.S.C. 3 177 (2000). Thus, Indian tribes occupy aunique status that allows the federal government to enact legislation singling out tribal Indians even where the legislation “might otherwise be constitutionally offensive.” Confederated Bands and Tribes ofthe Yakima Indian Nation 439 U.S. at 501. Federal laws “reasonably designed to further the cause of Indian self-government” and applicable only to members of a federally recognized tribe involve a political and not a racial classification and are subject to the rational basis test for equal protection. SeeMorton v.Mancari, 417 U.S. 535, 554 (1974). States do not have asimilar unique relationship with Indian tribes and may enact legislation according special treatment to Indian tribes only when authorized to do so by Congress. See Confederated Bands and Tribes ofthe Yakima Indian Nation, 439 U.S. at 500-01; Peyote Way Church ofGod, Inc., v. Thornburgh, 922 F.2d 1210, 1218 (5thCir. 1991). We findno federal law authorizing Texas to adopt laws singling out groups ofIndians “not currently resident in Texas but

“The Restoration Act is silent with respect to the process, procedure and oversight of any gaming activity that may be authorized by the State of Texas. Under the language of the Restoration Act and IGRA, federal policy and oversight provided for under IGRA that is not inconsistent with the Restoration Act applies to the tribes subject to the Restoration Act. Itis not clear how a court might address this question and whether it might fmd the limited waiver of the Johnson Act liability found in IGRA applicable also to the Alabama-Coushatta and Ysleta de1Sur Pueblo hibes.

12Weassume that such tribes own land in Texas that might be affected by Texas law, even though they are not federally recognized in Texas.The Honorable Frank J. Corte Jr -Page 9 (GA-0278)

with ahistorical relationship toTexas lands” or“Indian tribes inTexas that have not been recognized

. [by the federal government] but may be recognized in the future.” Request Letter, supra note 1,at 2. Texas may authorize such groups ofIndians to engage in VLT gaming in the state to the same extent it authorizes any other person or group to conduct such gaming. But see 15U.S.C. $5 1171-1178 (Johnson Act). V. Whether Leealization of VLTs on Indian Reservation Also Legalizes Other Casino Games on Reservation You raise the following question: ifTexas permits one kind ofClass lII gaming activity, are all Class III gaming activities lawful on Indian lands or only the specific type of Class El gaming permitted by the state? See id. Federal appellate courts have reached different conclusions on this question. See Rumsey Indian Rancheria ofWin&n Indians v. Wilson, 64F.3d 1250,1256 (9th Cir. 1994) amended by99F.3d 321(9th Cir. 1996) (state need only allow Indian tribes to operate games that others can operate); accord Cheyenne River Sioux Tribe v.South Dakota, 3F.3d 273,279 (8th Cir. 1993). See also Mashantucket Pequot Tribe v. Connecticut, 913F.2d 1024,1029-l 031 (2d Cir. 1990), cert. denied, 499 U.S. 975 (1991) (where state permits some Class III games in a highly regulated form, itmust negotiate under IGRA for casino-type games ofchance); Lac duFlambeau BandofLake Superior Chippewa Indians v. Wisconsin, 770F.Supp. 480,487-88 (W.D. Wis. 1991), appeal dismissedfor w.oj., 957 F.2d 515 (7th Cir.1992) (where state was authorized to operate any kind oflottery, ithad tonegotiate with Indian tribe over including intribal-state compact anycasinotype game). Some judicial decisions on this question rely on the following IGRA provision: (1) Class III gaming activities shall be lawful on Indian lands only if such activities are-

(B) located in a State that permits such gaming for any purpose by any person, organization, or entity.

. 25 U.S.C. § 2710(d)(l)(B) (2000) (emphasis added). The court in Cheyenne River Sioux Tribe determined that “[tlhe ‘such gaming’ language of. .25 USC. [§I 2710(d)(l)(B) does not require the state to negotiate with respect to forms of [class III] gaming it does not presently permit.” Cheyenne River Sioux Tribe, 3 F.3d at 279; accord Dalton v. Pataki, 780 N.Y.S.2d 47, 59-60 (N.Y.A.D. 2004). Some courts have held that IGRA incorporates the holding of Cabazon that if state law generally permits gaming, subject to regulation, the state isnot authorized to enforce its law on an Indianreservation. See Cabazon, 480 U.S. at221-22;seealsoMashantucketPequot Tribe, 913 F.2d at 1031(Cabazon analysis applicable toClass Ill gaming). “Applying the Cabazon analysis toIGRA essentially requires states to negotiate over all [Class RI] games that are not specifically prohibited by criminal law or public policy, rather than the narrower class of games that the state expresslyThe Honorable Frank J. Corte Jr -Page 10 (GA-0278)

authorizes,” Amy Head, TheDeath ofthe New Buffalo: The Ftfth Circuit Slays Indian Gaming in Texas, 34 TEX.TECH.L.REV.377,392 (2003). In Ysleta de1Sur Pueblo v. Texas, 852 F. Supp. 587 (W.D. Texas 1993), rev;i, 36F.3d 1325 (5th Cir. 1994), the Ysleta de1Sur Pueblo tibe sought to negotiate with the Texas governor under IGRA for acompact allowing itto conduct various Class IIIgaming activities on itstribal land. The state maintained that only those Class IIIgaming activities expressly allowed in Texas could be the subject ofnegotiations with anIndian tribe. See Ysleta de1SWPueblo v. Texas, 852F. Supp. at593- 94. The trial court determined that IGRA applied to the Ysleta de1Sur Pueblo and construed that statute to incorporate the Cabazon analysis for determining the scope of Class III gaming. See id. at 591,595-96. Itfound that Texas law permitted some persons to engage in casino gaming under the “carnival exception” in Penal Code section 47.01. See id. at 595. Section 47.01(l), which defines the term “bet” for purposes ofthe chapter 47 prohibitions against gambling, provides that abet does not include:

an offer ofmerchandise, with avalue not greater than $25, made by the proprietor of abona tide carnival contest conducted at acarnival sponsored by a nonprofit religious, fraternal, school, law enforcement, youth, agricultural, or civic group, including any nonprofit agricultural or civic group incorporated by the state before 1955, ifthe person to receive the merchandise from the proprietor is the person who performs the carnival contest. TEX.PEN.CODE.ANN. 947.01(1)(C) (Vemon 2003). Because the “carnival exception” permitted some persons to engage in casino gaming, the state was required tonegotiate with the tribe about the Class IIIcasino games requested bythe tribe. Ysleta de1SurPueblo v. Texas, 852 F. Supp. at595-96 (also relying on definition of “lottery’ in Texas Lottery Act). The trial court opinion in Ysleta del Sur Pueblo v. Texas thus determined that afederally recognized tribe in Texas may negotiate with the state about conducting all Class III games. As we have noted, the Fifth Circuit disagreed and determined that the Restoration Act, and not IGRA, applied to the Ysleta de1Sur Pueblo. See Ysleta de1SW Pueblo, 36F.3d at 1327. This court expressly left open the question whether IGRA incorporates Cabazon with regard to Class III gaming. See id. at 1333, n. 17. While the Fifth Circuit determined that the Eleventh Amendment barred the tribe’s action against the state under the Restoration Act, remanding the case with directions to dismiss the tribe’s suit, see id. at 1332, 1335, the court inAlabama-Coushatta Tribes v. Texas, 208 F. Supp. 2d 670 (E.D. Tex. 2002), rejected the argument that all other holdings inthe Fifth Circuit case were dicta. SeeAlabama-Coushatta Tribes v. Texas, 208 F. Supp. 2d at 674-75 (CitingFlorida Cent. R. Co. v.Schutte, 103U.S. 118,143 (1880) andNardonev. Reynolds, 538F.2d 1131,1135 n. 11(5th Cir. 1976)). In summary, the Fitth Circuit determined that the Restoration Act did not incorporate the Cabazon test, see Ysleta de1Sur Pueblo, 36 F.3d at 1333-34, but it did not construe IGRA. The question before us involves an interpretation of IGRA, a federal statute. Neither the United States Supreme Court nor the Fifth Circuit has decided the scope of Class III gaming forThe Honorable Frank J. Corte Jr -Page 11 (GA-0278)

recognized Indian tribes in states that pefmit only limited kinds ofClass IlI gaming activities, while other federal courts of appeals have reached different decisions on this question. Under these circumstances, we conclude that this question isan open question offederal law inthis state, and as such, cannot be given a definitive answer in an attorney general opinion. See United States v. Gomez, 911 F.2d 219,221 n.2 (9th Cir. 1990) (giving no special weight to Idaho Attorney General Opinion construing federal law).13 The Kickapoo Traditional Tribe ofTexas is atpresent the only Texas tribe to which IGRA applies. Thus, itisthe only Texas Indian tribe that may negotiate with the state about conducting Class IIIgames. Ifany other Texas Indian tribes become subject toIGRA through federal recognition or congressional enactment, those tribes will also be able to negotiate about conducting Class IIIgames, and the scope oftheirpermissible gaming activity will depend on thejudicial construction ofIGRA provisions authorizing Class IIl gaming. VI. Whether IGRA Bars the State from Receiving aShare ofthe Revenues from VLTs tin Indian Reservations You ask whether IGRA bars the state horn receiving a share of the revenues from VLTs without agrant ofterritorial exclusivity or another unique benefit to the tribe. IGRA provides that a tribal-state compact for Class III gaming may include provisions relating to “the assessment by the State ofsuch activities in such amounts asare necessary to defray the costs ofregulating such activity.” 25U.S.C. 3271O(d)(3)(C)(iii) (2000). IGRA farther provides as follows: Except for any assessments that may be agreed to under

paragraph (3)(C)(iii) ofthis subsection, nothing in this section shall be interpreted as conferring upon a State or any of its political subdivisions authority to impose any tax, fee, charge, or other assessment upon an Indian tribe or upon any other person or entity authorized by an Indian tribe to engage in a class III activity. No State may refuse toenter into the negotiations described in paragraph (3)(A) based upon the lack of authority in such State, or its political subdivisions, to impose such atax, fee, charge, or other assessment. Id. §2710(d)(4). IGRA does not expressly provide that atribal-state compact forClass IIIgaming may include provisions for sharing gaming revenues with the state. The Interior Department has, however, approved revenue-sharing provisions in some tribal-state compacts negotiated under IGRA. See Oversight Hearing On the Indian Gaming Regulatory Act of1988 before the Senate Comm.

“Opinions of a state attorney general on state law questions are entitled to careful consideration by federal courts and are generally regarded ashighly persuasive. See Harris County Comm ‘rsCf. v.Moore, 420 U.S. 77,87 n. 10 (1975).The Honorable Frank J. Corte Jr -Page 12 (GA-0278)

on Indian Affairs, 108th Cong. (2003) (statement of Aurene M. Martin, Acting Assistant Secretary-Indian Affairs, Dept. ofthe Interior).‘4 The Interior Department stated its position to a Senate Committee in July 2003 as follows:

To date, the Department has only approved revenue-sharingpayments that call for tribal payments when the state has agreed to provide [a] valuable economic benefit of what the Department has termed “substantial exclusivity” for Indian gaming in exchange for the payment. As a consequence, if the Department affirmatively approves aproposed compact, ithas an obligation to ensure that the benefit received by the state under the proposed compact is appropriate inlight ofthebenefit conferred on the tribe. Accordingly, ifapayment exceeds the benefit received bythe tribe, itwould violate IGRA because it would amount to an unlawful tax, fee, charge, or assessment. While there has been substantial disagreement over what constitutes atax, fee, charge, or assessment within this context, we believe that ifthe payments are made in exchange for the grant of a valuable economic benefit that the governor has discretion toprovide, these payments do not fall within the category of prohibited taxes, fees, charges, or other assessments. Id.”
In answer to your question, the Interior Department will not approve atribal-state compact allowing the state to receive a share of the revenues from VLTs without a grant of territorial exclusivity or another unique economic benefit to the tribe. We point out that Senate Bill 1529, proposing amendments to IGRA, was introduced inthe United States Senate in 2003. See Indian Gaming Regulatory Act Amendments of 2003, S. 1529, 108th Cong. (2003). The proposed amendments include aprovision governing the apportionment of revenues, which states that the Secretary may not approve a compact or other agreement that includes an apportionment ofnet revenues with astate unless the following conditions are met:

(I) the total amount ofnet revenues [from gaming] (aa) exceeds the amounts necessary to meet the requirements of [tribal government operations or programs and to provide for the general welfare of the Indian tribe and its members pursuant to 25

“Availabk nf http:ilindian.senate.gov/2003~gs/O70903~~~.PDF 15Seealso Letter from Honorable Neal A. McCaleb, Assistant Secretary, Indian Affairs, Department of the Interior, toHonorable B. Cheryl1 Smith, Tribal Chief, Jena Band of Choctaw Indians, at l-2 (Mar. 7,2002) (on file with Opinion Committee) (disapproving tribal-state compact because itrequired payments ofgamingrevenues tostate without a state grant of exclusivity rights or other quantifiable economic benefit to the tribe).The Honorable Frank J. Corte Jr -Page 13 (GA-0278)

USC. 5 2710(b)(2)(B)(i) and (ii)‘” and to make apportionments pursuant to subsection (f)(4)(B)(ii) of S. 1529,]i7 if applicable; and (bb) [the apportionment] is in accordance with regulations promulgated by the Secretary under subparagraph (C); and (II) a substantial economic benefit is rendered by the State to the Indian tribe. See id. (footnote added) (proposing an amendment to 25 U.S.C. 52710). Because your questions relate to IGRA, we advise you to monitor Senate Bill 1529 and other amendments to IGRA that Congress may propose aswell as anyjudicial decisions on this statute.

?he citedprovisionpertainstoapportionmentofgamingrevenuestothetribe. See25U.S.C.52710@)(Z) (B)(i)-(ii)(2000). “Thecitedprovisionpertainstoapportionmentofgamingrevenuesinexcessofthoseapportionedfortribal needsunderasectionoftheproposedamendmentallowingtheseexcessrevenuestobeapportionedtolocalgovernments totheextentofactualcostsincurredbyaffectedlocalgovernmentsasaresultofthegamingactivities. See Indian GamingRegulatoryActAmendmentsof2003,S. 1529,10&hCong.$2(f)(2)(B)(ii)(2003).The Honorable Frank J. Corte Jr -Page 14 (GA-0278)

SUMMARY The Restoration Act does not authorize the AlabamaCoushatta and the Ysleta de1Sur Pueblo tribes to operate VLTs on tribal land. Whether a federally recognized Texas Indian tribe may negotiate with Texas under the Indian Gaming Regulatory Act about only the specific Class Ill games allowed by Texas law, orwhether it may negotiate about all Class Ill games is an open question in this state. Atribal-state compact forClass IlIgaming activities under the IGRA may include provisions allowing state assessments of gaming activities as necessary to defer the costs of regulating the gaming activities. A compact may not allow the state to receive a share of Class III gaming revenues unless the compact grants territorial exclusivity or another unique economic benefit to the tribe.

BARRY R. MCBEE First Assistant Attorney General DON R. WILLETT Deputy Attorney General for Legal Counsel NANCY S. FULLER Chair, Opinion Committee Susan L. Garrison Assistant Attorney General, Opinion Committee