Exploring the Differences Between Tribal and Commercial Casinos

Casino Gaming

On the surface, the difference between a tribal and a commercial casino seems obvious: tribal casinos are built on reservations or other land owned by Native American tribes, while commercial casinos aren’t. 

There are more things differentiating these two types of gaming facilities than just where they’re located, though. In this post, we’ll take a closer look at how tribal casinos differ from their commercial counterparts and what that means for players and the gaming professionals who work in these establishments. 

 

History and Regulation of Tribal Casinos

To fully understand what sets a tribal casino apart from other gambling establishments, it helps to know some of the history of Indian casinos and reservations in general in the United States. A reservation contains sovereign lands which are governed by a Native American tribe. Often, this land is put into a trust, which is a non-profit agency that manages it. If that reservation or tribe-owned land is located in a state where gambling is legal, they may choose to build a casino to bring revenue into their community. 

The first Native American gaming operations weren’t casinos, but rather high-stakes bingo halls. The first commercial bingo halls run by indigenous nations were started in the 1970s by the Seminole tribe in Florida and the Cabazon Band of the Mission Indians in California. 

Modern tribal gaming started with the Indian Gaming Regulatory Act (IGRA) enacted in 1988. This act established the jurisdiction framework and federal regulations in place today. The act separated gaming into three classes:

  • Class I – Traditional gaming included in tribal ceremonies and celebrations, or social gaming for minimal prizes or small amounts of money. Regulatory authority for Class I games is exclusively vested in tribal governments and not subject to federal or state laws. 
  • Class II – Defined as bingo and non-banked card games, which are games played only against other players rather than the house. This category also includes games of chance like pull tabs or punch boards. Class II games can be conducted by tribes in any state where such games are legal for any purpose. Tribes retain regulatory authority over Class II games under the oversight of the National Indian Gaming Commission.
  • Class III – All other types of gaming fall into this category. This includes slot machines, craps, roulette, and table games like blackjack and poker. The regulation of Class III games is the most complicated. Many regulatory issues are addressed in Tribal-State compacts, but some functions are controlled at the federal level.

Under the IGRA, a tribe can be casino operators in a state where gambling isn’t otherwise legal by reaching an agreement with the state governor. In some cases, this agreement must also be ratified by voters before it goes into effect.

As of 2023, there are more than 500 tribal gaming facilities operating in 29 states across the country. Roughly a fifth of these are located in Oklahoma, though many of these are not full casinos. That number includes places that only offer class II games, or smoke shops and travel plazas that have slot machine games or similar forms of gambling. California has the most tribal-operated full casinos, followed by Washington, Arizona, Wisconsin, Michigan, and New Mexico, all of which have at least 20 tribal gaming facilities. 

Since casinos are under state law as well as federal regulations, not all tribal casinos are under the same rules. This is true even if multiple casinos are operated by the same tribe. The reservation of the Navajo Nation, for example, spans portions of Arizona, New Mexico, and Utah. While they’re located on the same reservation, however, they have separate compacts with the state governments of Arizona and New Mexico. They also are not allowed to operate a casino on the Utah portion of their land since that state doesn’t allow gaming industry activities to operate in any form.

 

Taxation Differences Between Tribal and Commercial Casinos

Commercial casinos are for-profit, private businesses and are taxed as such, while tribal casinos are tax-exempt. This doesn’t mean they keep all the profits they earn, though. Instead of taxes, the compact between the tribe and state government usually includes a revenue sharing agreement. This varies between states and properties, but normally states collect 10-20% of the casino’s revenue. 

The way these funds are used varies from one site to the next, too. In some areas, this revenue is simply added to the state’s budget and is functionally identical to a tax. Other times, the Tribal-State compact specifies how these funds can be used. For instance, all or a part of the revenue may be earmarked for local budgets, dedicated to developing the infrastructure or supporting schools and law enforcement in the area. As a result, these types of agreements can ultimately benefit the local economy more directly than if casinos were taxed like for-profit corporations.

 

Revenue Use and Economic Development

After a commercial casino has paid its taxes, whatever profit is left over is kept by the business. This is not the case with tribal casinos. The IGRA outlines specific rules about how tribal casino revenue should be used to promote tribal self-sufficiency and economic growth. The long and short of these rules is that whatever income is generated by tribal gaming organizations must be reinvested into their communities. 

And that revenue is substantial. Gross gaming revenues for tribal casinos across the U.S. exceeded $39 billion in 2021. That’s an impressive 40% jump compared to 2020, when revenue was severely impacted by the pandemic. 

In most cases, this money doesn’t go directly to tribal members. Some tribes distribute revenue to members in per-capita payments, but this isn’t common. Instead, it’s reinvested into the community in a few ways. It may be used to fund social services, provide small business loans for individuals, or to pay for infrastructure and education on the reservation. Each tribe is required to outline how they’ll use the casino’s profits in the documents they submit to the NIGC before opening the establishment. 

This rule only applies to the profits that remain after the casino’s expenses have been paid. Some tribes partner with corporations to manage their property, for example, in which case that company’s share is exempt from these regulations.

 

Tribal vs. Commercial Casinos: Player Experience

Both commercial and tribal casinos vary widely in their size, amenities, and the variety of games that customers can play. Some tribal gaming facilities are small bingo halls, while others are massive resorts that offer luxury accommodations, entertainment venues, and fine dining restaurants, like WinStar World Casino in Oklahoma or Foxwoods Resort Casino in Connecticut, both of which are among the ten largest casinos in the world. 

Which Class III games a tribal casino offers is determined by their Tribal-State compact. This can vary from state to state or even from one facility to the next. Many tribal casinos do not have roulette or craps because of their compact’s wording, or are prohibited from offering a specific type of game, such as poker. 

You’ll find that same variety in commercial casinos, which range from a room with a few slots to massive resorts like the MGM Grand in Las Vegas. Riverboat casinos are common in states whose gambling laws prohibit land-based commercial casinos. In other places, land-based gaming is limited to sports betting facilities like racetracks, which are often also permitted to offer slots but may not be allowed to have table games. 

One major difference between tribal and commercial casinos from a player’s perspective is that many tribal casinos aren’t required to report their payback percentages. This is the ratio of money paid out to total wagers, which can give players a sense of their odds of winning. Some tribal casinos do still report these figures, such as the Mohegan Sun and Foxwoods in Connecticut, but whether they are required to do so is determined by each tribe’s compact, not state laws.

Regulations regarding the serving of alcohol is another area where commercial and tribal casinos often differ. Casinos in Las Vegas and Atlantic City are allowed to serve free drinks to people while they gamble. This typically isn’t permitted in tribal casinos. Many tribal casinos can sell alcoholic drinks to patrons, though they need to first obtain a liquor license and are subject to the same rules that bars and restaurants have to follow when it comes to where and when alcohol is served. Some tribal casinos choose to operate dry in an effort to combat alcoholism, a prevalent issue on Native American reservations. Again, it all comes down to the specific property and the compact its owners have made with their state.

 

Employment in Tribal and Commercial Casinos

One common reason tribes choose to open a casino is to bring more jobs to the reservation and the people who live there. That doesn’t mean you need to be a Native American to work at a tribal casino, though. While many tribal casinos prefer to hire from within the tribe, most don’t exclusively do so. It’s especially common for management and leadership roles to be filled by non-tribal employees who have experience working in a commercial casino. According to data from the National Indian Gaming Association, more than 75% of those employed in the tribal gambling industry in 2009 were non-Native American. 

The biggest difference between working in a tribal casino and a commercial one is that not all U.S. labor laws apply on tribal lands. The 1960 Supreme Court decision Federal Power Commission v. Tuscarora Indian Nation states that federal laws do not apply to tribes when they would interfere with the tribe’s self-governance. One law that has been a point of contention between tribes and government agencies is the National Labor Relations Act (NLRA) and whether tribal casino employees have collective bargaining rights. 

Historically, the National Labor Relations Board established by the NLRA has only asserted jurisdiction on tribal land leased by a private organization. This precedent was reversed in a 2007 decision, and the impact of the NLRA on tribal sovereignty remains a hot-button issue among tribal casino operators. California specifies in its Tribal-State compacts that tribal casinos must permit labor relations like those in the NLRA but this isn’t the case in other states. In Connecticut, for example, when dealers at Foxwoods Casino voted to unionize in 2007, the casino president initially would not recognize the election because of concerns over tribal sovereignty. 

 

Tribal vs. Commercial Casinos: The Bottom Line

While there are key differences in how tribal and commercial casinos are operated, the majority of these focus on how the revenue they generate is taxed and utilized. For the most part, the experience of working in or visiting a casino will be similar whether it’s a private company or a facility run by a Native American tribe. 

Bristol Associates, Inc. is an executive search firm with over 55 years of excellence in recruiting nationwide. Bristol specializes in recruiting for the Casino Gaming; CBD; Facility and Concession; Food and Beverage Manufacturing; Healthcare; Hotel and Resort; Nonprofit; Restaurant and Foodservice; and Travel, Tourism, and Attraction industries.

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