The National Indian Gaming Commission said on Monday it will challenge a court decision that limited the agency's role in the $23 billion tribal casino industry.

On October 20, the D.C. Circuit Court of Appeals ruled that the NIGC lacks the authority to regulate Class III gaming, the most lucrative segment of the industry. An estimated 90 percent of tribal revenues come from games such as slot machines.

Tribes across the nation hailed the decision as an affirmation of their sovereignty and their compacts with states. But NIGC officials say the court went too far in interpreting the Indian Gaming Regulatory Act of 1988.

"The NIGC believes that the continued growth and prosperity of the Indian gaming industry is dependent upon the original balance found in IGRA," said NIGC Chairman Phil Hogen. "That balance includes the tribes, the states and the federal government working together."

In response, the NIGC filed a petition with the court, asking for a rehearing on three instances of "overbroad language" in the October 20 opinion. "Unless the potentially confusing language in the opinion is corrected, this balance is threatened, because it could be misread to state that the NIGC is without Class III authority," Hogen said.

At the Global Gaming Expo in Las Vegas last month, Hogen said the ruling won't stop the NIGC from trying to audit Class III operations at tribal casinos. "We aren't going to discontinue those efforts," he said.

But in recent news reports, Hogen said 15 audits have been suspended and tribes in Oregon, California, Arizona, Minnesota and Oklahoma have refused to let NIGC come inside their casinos. "We've had doors slammed in our faces," Hogen told USA Today.

At issue are a set of rules known as the Minimum Internal Control Standards, or MICS. The controversial regulations, first implemented during the Clinton administration, describe in great detail how tribes must carry out their Class III operations.

The Colorado River Indian Tribes of Arizona challenged the legality of the rules after NIGC auditors showed up to look at the BlueWater Resort and Casino's books. In a slew of rulings, an administrative judge, a federal judge and a three-judge panel of the D.C. Circuit concluded the MICS impinged on tribal and state sovereignty.

The regulation of Class III gaming, the courts have said, belongs to tribes, through their own ordinances, and to states, through the compacting process. "Both the ordinance and the compact contain their own internal control standards," the D.C. Circuit said.

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

The courts haven't block the NIGC from the Class III realm altogether. Tribal ordinances and management agreements with third party companies must still be approved by the agency. Tribal-state compacts have to be reviewed by the Bureau of Indian Affairs.

But without express language in IGRA, the courts said the NIGC can't issue rules like the MICS, which recently went through some more revisions during the Bush administration.

By seeking a rehearing by the three-judge panel that issued the October 20 ruling, the NIGC has delayed the resolution of the case. If the rehearing is denied, or if it goes against the NIGC, the agency can ask for another rehearing before the full panel of the D.C. Circuit.

And if that fails, the government can appeal to the U.S. Supreme Court, although Hogen acknowledged last month that it's unlikely the justices would take the case.

Separately, NIGC has asked Congress to amend IGRA to clear up the debate. But a bill sponsored by Sen. John McCain (R-Arizona), the outgoing chairman of the Senate Indian Affairs Committee, has been held up by a dozen holds and is unlikely to pass as a single package.

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