From Dave Palermo at Gaming Compliance via Pechanga:

For two decades American Indians have complained that states have been extorting unreasonable if not illegal revenue sharing agreements from tribal governments in exchange for the right to operate casinos.

Tribal leaders claim revenue sharing called for in the agreements, referred to as “compacts” under the Indian Gaming Regulatory Act of 1988, violate the intent if not the letter of the act, which prohibits taxation of tribal governments.

Indigenous Americans got a measure of satisfaction in an April 20 decision by a three-judge panel of the 9th Circuit Court of Appeals in San Francisco which ruled California Gov. Arnold Schwarzenegger negotiated in bad faith by demanding an illegal taxin tribal-state compact negotiations with the Rincon Band of Luiseño Indians, a small but prosperous tribe near San Diego.

“We applaud this decision because it confirms one of the basic foundations of the relationship between American Indian tribes and states, that Indian tribes are sovereign governments, which, like other governments, cannot be taxed,” Rincon Chairman Bo Mazzetti said.

The ruling also was a respite from what tribes believe is a backlash against Indian gambling and a growing public perception of tribes not as sovereign governments and culturally rich first Americans, but wealthy purveyors of casinos.

Legal experts believe the 2-1 ruling, should it be upheld on appeal to a full panel of 9th Circuit judges and the US Supreme Court, will not influence compacts in the other 27 states with tribal casinos. They contend it will only impact California compactswith some 61 tribes.

But tribal leaders found comfort in the harsh language of the court’s ruling, not to mention newspaper headlines which claimed Schwarzenegger “broke the law” and “strong-armed” tribes into paying onerous revenue sharing payments in exchange for the right to increase their volume of slot machines.

“We are mindful that many states, and especially California, are currently writhing in the financial maw created by the clash of certain mandatory state expenditures at a time when state revenues have plummeted from historic levels,” wrote 9th Circuit Judge Milan Smith Jr.

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