In a Dec. 22 decision, the N.C. Court of Appeals held that the state’s general ban on video poker is legal. In doing so, North Carolina’s second highest court ruled that federal law allows the state to grant the Eastern Band of Cherokee Indians the exclusive right to operate video poker within the state.
State gambling regulations are complex because the federal Indian Gaming Regulatory Act grants Indian tribes the right to operate gaming operations on their land. Whether the state can outlaw video poker except on tribal land depends on the interplay between federal law, state law, and agreements between the state and Indian tribes covering their gaming operations.
In 1994, North Carolina signed a compact with the Eastern Band of Cherokee Indians allowing the tribe to operate certain types of gaming, including video poker, on its land. The tribe operates Harrah’s Cherokee Casino, which attracts over 3.5 million visitors a year.
The state also had allowed video poker in the rest of the state with a variety of restrictions. That changed in 2006, when the General Assembly banned video poker in the state effective July 1, 2007. The law outlawing video poker did not affect the legality of the Cherokees’ gaming operating.
McCraken and Amick Inc. sells, leases, operates, and maintains a variety of amusement devices, including juke boxes, pool tables, and pinball machines. Its business also includes video poker terminals. In November 2008, the company sued the state, contending that under the IGRA, the state cannot grant the tribe a gaming monopoly.
On Feb. 19, 2009, Superior Court Judge Howard Manning ruled in favor of McCraken and Amick. Manning found that the “IGRA does not permit a state to ban the possession and operation of video gaming machines elsewhere in the state while allowing their possession and operation on tribal lands.”
The state challenged Manning’s ruling before the Court of Appeals.
As the appeals court’s three judges saw it, the case rested on the interpretation of a single provision of the IGRA, which provides that “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 … .” Video poker is classified as a Class III gaming activity.
The appeals court saw two separate issues. The first question was whether North Carolina “permits such gaming.” McCraken and Amick argued that a state that prohibits video poker generally, with exception of tribal gaming, has a public policy that does not “permit such gaming.”
The appeals court was not impressed by this argument. “Here, the General Assembly has expressed the public policy of the State through N.C. Gen. Stat. § 71A-8, which explicitly authorizes Indian gaming in accordance with IGRA, and N.C. Gen. Stat. § 14-306.1A, which criminalizes Class III gaming in North Carolina except for the Tribe’s enterprises,” wrote Judge Robert C. Hunter for the appeals court.
Also at issue was the meaning of the phrase “any person, organization, or entity.” The state argued that because tribal gaming enterprises were not specifically excluded from the phrase, the state can grant the tribe exclusive gaming rights.
“Under the State’s reading … ‘any’ means ‘one’ — the State may grant the Tribe exclusive Class III gaming rights under IGRA if state law permits Class III gaming for at least one purpose for at least one person, organization, or entity, including the Tribe itself,” wrote Hunter.
The appeals court found this argument to be reasonable.
The court noted that special rules apply when dealing with Indian law. The U.S. Supreme Court held in a 1985 case Montana v. Blackfeet Tribe that federal laws passed to benefit Indian tribes are to be liberally construed, with ambiguities being resolved in favor of the tribes.
The case is McCraken and Amick, Inc. v. Perdue (09-431).