New York Law Review

Tag: Indian Gaming Regulatory Act

  • Dalton v. Pataki, 5 N.Y.3d 243 (2005): Constitutionality of Tribal-State Gaming Compacts, Video Lottery Terminals, and Multi-State Lotteries

    5 N.Y.3d 243 (2005)

    New York’s constitutional prohibition on commercial gambling does not prevent the state from entering into tribal-state compacts for casino gaming on Indian lands, authorizing video lottery terminals, or participating in multi-state lotteries, provided that such activities are consistent with federal law and state constitutional requirements regarding lottery proceeds.

    Summary

    This case addresses the constitutionality of New York legislation authorizing tribal-state compacts for casino gaming, video lottery terminals (VLTs), and participation in the multi-state Mega Millions lottery. Citizen taxpayers and state legislators challenged the laws, arguing they violated the state constitution’s prohibition on commercial gambling. The New York Court of Appeals upheld the legislation, finding that the Indian Gaming Regulatory Act (IGRA) preempts state law regarding gaming on Indian lands, and that VLTs and Mega Millions are permissible state-operated lotteries with proceeds dedicated to education. The court emphasized the strong presumption of constitutionality afforded to legislative enactments.

    Facts

    In 2001, New York enacted Chapter 383 of the Laws of 2001 to counter the economic effects of the September 11th attacks. The law contained provisions (parts B, C, and D) authorizing: (1) tribal-state compacts with the Seneca Nation and other tribes for casino gaming (Part B); (2) the use of video lottery terminals (VLTs) at racetracks (Part C); and (3) participation in a multi-jurisdictional lottery, Mega Millions (Part D). The Governor submitted a message of necessity to expedite the bill’s passage.

    Procedural History

    Plaintiffs sued, seeking a declaration that parts B, C, and D of Chapter 383 were unconstitutional. The Supreme Court granted summary judgment to the defendants, upholding the law. The Appellate Division modified the decision, declaring part C (VLTs) unconstitutional because of a provision requiring reinvestment of vendor fees in the racing industry, which it found violated the constitutional requirement that lottery proceeds be dedicated exclusively to education. Both plaintiffs and defendants appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether the authorization for the Governor to enter into tribal-state compacts for casino gaming (Part B) violates the New York Constitution’s prohibition on commercial gambling, considering the federal Indian Gaming Regulatory Act (IGRA)?

    2. Whether the authorization of Video Lottery Terminals (VLTs) at racetracks (Part C) constitutes a valid state-operated lottery under the New York Constitution?

    3. Whether the provision requiring reinvestment of a portion of VLT vendor fees for enhancing purses and breeding funds (Part C) violates the constitutional requirement that lottery proceeds be dedicated exclusively to education?

    4. Whether the State’s participation in the multi-state Mega Millions lottery (Part D) is constitutional, specifically whether it is “operated by the state” and whether the net proceeds are “applied exclusively to or in aid or support of education in this state” as required by the New York Constitution?

    Holding

    1. Yes, because IGRA preempts state law and permits class III gaming on Indian lands in states that allow such gaming for any purpose.

    2. Yes, because the video lottery, utilizing electronic tickets and involving multiple participation, constitutes a valid lottery under the New York Constitution.

    3. Yes, because the reinvestment provision is considered part of the vendor fee, representing a regulated use of the racetracks’ profits, and the legislature determines net proceeds.

    4. Yes, because New York retains sufficient control over the sale of Mega Millions tickets within the state to be considered operating the lottery, and the net proceeds, less necessary administrative expenses, remain in New York and are dedicated to education.

    Court’s Reasoning

    Regarding tribal-state compacts, the court relied on IGRA, which allows class III gaming on Indian lands in states that permit such gaming for any purpose. The court determined that because New York allows some forms of class III gaming for charitable purposes, IGRA preempts the state’s general prohibition on commercial gambling. The court cited California v. Cabazon Band of Mission Indians, 480 U.S. 202 (1987), and Mashantucket Pequot Tribe v. State of Conn., 913 F.2d 1024 (2d Cir. 1990), emphasizing that IGRA was “intended to expressly preempt the field in the governance of gaming activities on Indian lands.” The court noted that through the compacting process, IGRA confers a benefit on the state by allowing it to negotiate and to have some input into how class III gaming will be conducted.

    Regarding VLTs, the court reasoned that the key elements of a constitutional lottery are the sale of tickets and multiple participation. It found that the video lottery satisfied these elements because players purchase electronic tickets and compete against one another for prizes through a central system. The court found that it was of no constitutional significance that the tickets are electronic instead of paper. “The language of the Constitution is not so rigid as to prevent this type of update and modernization.”

    The court further reasoned that the reinvestment of vendor fees was constitutional because it represented a regulated use of the racetracks’ profits, not a separate deduction from the state’s lottery proceeds. The court said, “These moneys are not a separate deduction, beyond other costs and expenses, from the amount paid to the racetracks as a vendor fee. Rather, they constitute simply a part of the vendor fee itself—but a part whose use the State has decided to regulate.”

    Regarding Mega Millions, the court held that New York retained sufficient control over the lottery’s operation within the state to satisfy the constitutional requirement that it be “operated by the state.” It emphasized that New York retained the authority to specify where and how lottery tickets could be sold and to license ticket agents. The Court also concluded that the net proceeds of Mega Millions were applied exclusively to education, as required by the constitution, finding that the administrative expenses paid by New York were reasonable and necessary for the operation of the lottery.

  • Saratoga County Chamber of Commerce v. Pataki, 100 N.Y.2d 801 (2003): Separation of Powers and Tribal-State Gaming Compacts

    100 N.Y.2d 801 (2003)

    The governor’s unilateral negotiation and execution of tribal-state gaming compacts, without legislative authorization or approval, violates the separation of powers doctrine under the New York State Constitution, as it encroaches upon the legislature’s policymaking authority.

    Summary

    This case addresses the constitutional authority of the Governor of New York to enter into agreements with Indian tribes allowing casino gaming on tribal lands. Plaintiffs, including legislators and organizations opposed to casino gambling, challenged the Governor’s actions as a violation of the separation of powers. The Court of Appeals held that the Governor’s unilateral actions in negotiating and signing the 1993 compact with the St. Regis Mohawk Tribe, allowing casino gaming on the Akwesasne Reservation, were unconstitutional because they constituted policymaking, a power reserved for the Legislature. The court emphasized that issues such as licensing, taxation, and criminal jurisdiction within the compact required legislative input and approval.

    Facts

    In 1993, Governor Mario Cuomo entered into a Tribal-State Compact with the St. Regis Mohawk Tribe, permitting casino gaming on the Akwesasne Reservation. This agreement stemmed from the Federal Indian Gaming Regulatory Act (IGRA). Later, Governor George Pataki executed an amendment to the compact in 1999, allowing electronic gaming. Plaintiffs subsequently filed suit, contending that these actions violated the separation of powers enshrined in the New York State Constitution.

    Procedural History

    The Supreme Court initially dismissed the case for failure to join the Tribe as an indispensable party. The Appellate Division reversed, finding the Tribe was not an indispensable party. On remand, the Supreme Court granted summary judgment to the plaintiffs, declaring the compact and amendment void. The Appellate Division affirmed. The Court of Appeals reviewed the case due to the substantial constitutional question presented.

    Issue(s)

    Whether the Governor’s negotiation and execution of the Tribal-State Compact, without legislative authorization, violated the separation of powers doctrine under the New York Constitution?

    Holding

    Yes, because the negotiation and execution of the Tribal-State Compact by the Governor without legislative approval constitutes policymaking, which is a legislative function, thereby violating the separation of powers doctrine.

    Court’s Reasoning

    The court reasoned that the IGRA does not preempt state law regarding which state actors can negotiate gaming compacts, leaving this determination to state law. The court emphasized the significant policy choices inherent in gaming compacts, including licensing, taxation, and the allocation of criminal and civil jurisdiction. These are traditionally legislative functions involving a balancing of competing interests. The court stated that, “Compacts addressing these issues necessarily make fundamental policy choices that epitomize ‘legislative power.’” The court also noted that the compacts require the State Racing and Wagering Board to adopt new regulations, a task that can only be assigned by the Legislature. Furthermore, the court dismissed the argument that legislative appropriations signaled approval of the compact, stating these are not substitutes for formal ratification. Quoting from the opinion, “It thus falls to the courts, and ultimately to this Court, to determine whether a challenged gubernatorial action is ‘legislative’ and therefore ultra vires. In this case we have no difficulty determining that the Governor’s actions were policymaking, and thus legislative in character.” The court also addressed arguments of mootness, standing, statute of limitations, and laches, finding none of these barred the action. The court noted that if standing were denied, “an important constitutional issue would be effectively insulated from judicial review.” Finally, the court also found that the Tribe was not an indispensable party. Dissenting opinions argued that the compact was consistent with the State Constitution and laws, highlighting that the legislature supported the compact, and that the Tribe was an indispensable party. However, the majority held that the compact violated the separation of powers and was therefore unconstitutional.