State Gambling regulators are in a battle with three New Mexico Native American tribes over $40 million in casino revenue they believe they are owed. The trio of pueblos contends the state is misinterpreting an old agreement.

New Mexico Casino dispute

New Mexico gambling regulators have demanded three Native American-run casinos pay approximately $40 million in slot machine revenue they believe is being demanded illegally. (Image: Sandia Resort & Casino)

The Tesuque, Sandia and Isleta pueblos have taken their case to court, asking a judge to prevent the state from collecting the money. They argue that it is an illegal tax and a money grab by government officials that violates federal law.

A spokesman for Republican Governor, Susana Martinez told The New Mexican that it is a simple matter of a business paying what they owe.

“We simply believe in being accountable for state dollars,” the unidentified spokesman said. “However, we have only been made aware of this lawsuit and cannot comment further.”

The Land of Enchantment has 28 casinos and five state-licensed racetracks with gaming, also known as racinos. It is unclear if the other facilities will join the lawsuit.

Free Play Not so Free

The dispute is on free play credits, which establishments use to entice customers to play slot machines. It is a marketing plan that has helped make the devices a billion dollar industry.

The concept is casinos pay every dollar earned from gamblers. So if a patron puts in $20 in a contraption and wins $2, the facility is on the hook for $18. If $20 in free credits are utilized and all the money is lost, none of that is reported. They don’t believe that cash should be figured into what they pay.

When a new gambling compact was signed in 2015, the free credits were not counted. But in April, regulators sent letters to the businesses demanding payment from that source.

They estimated that Tesuque Pueblo owes about $3.2 million, Sandia Pueblo $26.5 million and Isleta Pueblo $10.3 million. The other places were not mentioned.

State Searching for Money

The group believes the government’s motivation is not about enforcing a policy belief, but a desperate solution to bring money into their coffers.

Facing a budget shortfall of $70 million, the governor and the democratic legislature are arguing over how to fix the deficit. Martinez wants to make more cuts, while the House and Senate want to raise taxes on gasoline, vehicle sales and other transactions. The state constitution requires a balanced budget and the new fiscal year begins, July 1.

Two years ago there was a budget surplus, fueled by oil production, but that has begun to dry up. There were 102 oil rigs in December 2014, but only 30 two years later. The industry did provide a glimmer of hope in April, with production increasing 3.4 percent compared to the prior year.

The money the state wants from casinos would cut the gap by more than half, but they can expect serious resistance from the casinos and the issue will probably not be settled before the July 1 deadline.