Efforts to overhaul the $23 billion Indian gaming industry were reignited on Friday with an appeals court decision that limits the role of federal regulators.

The National Indian Gaming Commission has been pushing Congress to increase its authority over tribal casinos. Officials want to tell tribes how to operate Class III games such as slot machines, poker and blackjack.

But the D.C. Circuit Court of Appeals said the most lucrative form of gaming is regulated by tribal laws and tribal-state compacts. In a unanimous decision, a three-judge panel couldn't find anything in the Indian Gaming Regulatory Act that gives NIGC a role.

"Even now the commission concedes that no provision of the act explicitly grants it the power to impose operational standards on class III gaming," Judge A. Raymond Randolph wrote for the majority.

The ruling is a major win for the Colorado River Indian Tribes of Arizona. Backed by the largest tribal gaming organization and others around the country, the CRIT lawsuit questioned the NIGC's authority to issue the Minimum Internal Control Standards (MICS), a set of complex and comprehensive rules that address nearly every single aspect of casino gaming.

"Today, the federal court of appeals told us what Indian tribes always knew -- it is not the NIGC's job to establish federal regulations that override the sovereign decisions of tribes and states made through Class III gaming compacts," said NIGA Chairman Ernie Stevens Jr.

The victory, however, could be short lived as the decision plays into controversial efforts by Sen. John McCain (R-Arizona) to overhaul IGRA. Last fall, he introduced a bill that would grant the NIGC the authority that a slew of judges have said it lacks.

McCain, the chairman of the Senate Indian Affairs Committee, has questioned the "logic" of the lawsuit. "The purpose of IGRA was to regulate Class III gaming," he said at a hearing in April 2005.

But the D.C. Circuit quoted language from the Senate committee's report on IGRA that contradicted McCain, one of the authors of the law. The report stated "there is no adequate federal regulatory system in place for class III gaming, nor do tribes have such systems for the regulation of class III gaming currently in place."

"Thus a logical choice is to make use of existing state regulatory systems," the report stated.

The court noted that tribal laws and Arizona tribal-state compact address regulation of Class III games. "Both the ordinance and the compact contain their own internal control standards," Randolph wrote.

"The state of Arizona monitors the tribe's compliance with the standards, for which the Tribe reimburses the state about $250,000 per year," he continued. "The tribe's gaming agency employs twenty-nine employees and has an annual budget of $1.2 million."

McCain's bill, S.2078, is currently subject to a dozen holds in the Senate. The objections, from all sides of the debate, make passage before the end of the year highly unlikely.

But former Sen. Ben Nighthorse Campbell (R-Colorado) said it's possible that the bill, or even parts of it, could be revived after the November elections. "I know the rules in the Senate," Campbell said at the National Congress of American Indians annual conference earlier this month. "That could be attached to anything."

The NIGC recently issued a new version of the MICS over tribal objections. NIGC Chairman Phil Hogen has asserted that the litigation only applies to CRIT and that all other tribes must still comply with the rules.

The NIGC still has the power to review tribal gaming ordinances and tribal gaming management contracts. Under IGRA, the Bureau of Indian Affairs has the authority to approve or disapprove tribal-state gaming compacts.

The MICS were first issued in 1999. The NIGC sought to audit the CRIT Blue Water Resort and Casino in order to determine whether the facility complied with the regulations.

The tribe challenged the audit, first before the Interior Department's Office of Hearings and Appeals. An administrative law judge ruled that the NIGC's attempt to enforce the MICS infringed on tribal and state sovereignty.

Officials at the NIGC refused to accept the decision, so they fined the tribe. Under a settlement, the tribe agreed to pay the fine but reserved a court challenge to IGRA.

Appeals Court Decision:
Colorado River Indian Tribes v. NIGC (October 20, 2006)

Lower Court Decision:
Colorado River Indian Tribes v. NIGC | Order (August 24, 2005)

Relevant Links:
Colorado River Indian Tribes - http://www.critonline.com
BlueWater Resort and Casino - http://www.bluewaterfun.com
National Indian Gaming Commission - http://www.nigc.gov
National Indian Gaming Association - http://www.indiangaming.org