Kansas Attorney General Opinion 1992-001

January 2, 1992
ROBERT T. STEPHAN
ATTORNEY GENERAL
ATTORNEY GENERAL OPINION NO. 92- 1
The Honorable Edward F. Reilly, Jr.
State Senator, Third District
430 Delaware
Leavenworth, Kansas 66048-2733'
Re: Constitution of the State of Kansas--
Miscellaneous--Lotteries; Indian Gaming Regulatory
Act
Synopsis: If the legislature and the electorate choose to
remove the constitutional authority for a
state-owned and operated lottery, the types of
class III games Indian tribes could conduct in this
state pursuant to a compact would be limited to
on-track parimutuel wagering on horse and dog
races, as this would be the only permissible class
III gaming anywhere in the state. A tribe may not
conduct simulcasting/wagering operations pursuant
to a compact or otherwise since such conduct is
currently prohibited by state law. Statutorily
prohibiting certain specific class III games, if
across the board (i.e. no one, including the
state, may conduct or participate in it), would
foreclose the ability to include those specific
games in a compact.' 25 U.S.C. § 2719(d)
specifically makes provisions of the Internal
Revenue Code concerning the reporting and
withholding of taxes on winnings applicable to
Indian gaming operations.
As long as the state owns the business and has
ultimate and complete control of the operation,
article 15, section 3c of the constitution does not
require that the state actually own the building or
equipment used in a lottery operation. Cited

herein: Kan. Const., Art. 15, §§ 3b, 3c; 25
U.S.C. § 2719(d).
Dear Senator Reilly:
You request our opinion regarding gambling in the state of
Kansas. We address your questions about Indian gaming first.
"Does the constitutional provision
allowing parimutuel wagering, like that
allowing for a state lottery, result in
the possibility that type III gambling
(which includes a wide variety of gaming
activities) can be conducted on
reservations in Kansas? Would the
Legislature be forced to propose amending
the Constitution to remove or alter
existing permissive language regarding
both kinds of gambling in order to
prohibit casino gambling in the state?"
The Kansas Supreme Court has held that parimutuel wagering
on horse and dog races, if it includes the three elements of
consideration, chance and prize, constitutes a lottery.
State, ex rel., v. Bissing, 178 Kan. 111, 119 (1955).
This is due to the broad definition attributed to the term
"lottery" by our courts, see State, ex rel., v.
Merchantile Assn., 45 Kan. 351, 353 (1891); State, ex
rel, v. Fox Kansas Theater Co., 144 Kan. 687, 692 (1936),
and the fact that the term has not been otherwise defined by
the constitution. While parimutuel wagering has been held
to be a form of lottery, we do not believe the courts would
find in the reverse. Article 15, section 3b of the
constitution is specific in terms of what it allows: "the
operation or conduct . . . of horse and dog racing and
parimutuel wagering thereon . . . [excluding off track
betting]." Further, we do not interpret the Indian gaming
regulatory act (IGRA) to open the door to all class III
games solely because one particular class III game is
permitted. See Mashantucket Pequot Tribe v. State of
Conn., 737 F.Supp. 169, 176 (D.Conn. 1990) ("The type of
gaming permitted is identified by the type of play permitted,
not by bet, frequency, and prize limits."); U.S. v.
Sisseton-Wahpeton Sioux Tribe, 897 F.2d 358, 365 (8th

Cir. 1990) ("we believe that the legislative history reveals
that Congress intended to permit a particular gaming activity,
even if conducted in a manner inconsistent with state law, if
the state law merely regulated, as opposed to completely
barred, that particular gaming activity."); Lac Du
Flambeau Band of Lake Superior Chippewa Indians v. State
of Wisconsin, F.Supp. , Op. No. 90-C-408-C, 18
(W.D. Wisc. 1991). Thus, if the legislature and the
electorate choose to remove the constitutional authority for a
state-owned and operated lottery, we believe the types of
class III games Indian tribes could conduct in this state
pursuant to a compact would be limited to on-track
parimutuel wagering on horse and dog races, as this would
be the only permissible class III gaming anywhere in the
state.
"Since simulcasting of horse or dog
races has not been authorized by statute,
can parimutuel wagering on dog or horse
races simulcast to American Indian
gambling establishments be included among
the array of gambling permitted by
compacts with American Indian tribes? If
so, would that constitute off-track
betting which is banned by the Kansas
constitution?"
The fact that simulcasting is not specifically authorized by
statute or currently conducted in Kansas (see Attorney
General Opinion No. 88-116) is of no consequence; what is
important is whether the conduct is permitted, as opposed to
prohibited. See Attorney General Opinion No. 91-119.
Article 15, sections 3b and 3c together permit the state to
conduct or provide for simulcasting. However, we have
previously opined that Kansas statutes prohibit
simulcasting. Attorney General Opinion No. 88-116. Thus, a
tribe may not conduct simulcasting/wagering operations
pursuant to a compact. Even if simulcasting was permissible,
since off-track betting is constitutionally prohibited, Indian
tribes could not simulcast horse and dog races for the
purpose of betting thereon unless the wagers were placed at a
racing facility (track).
"In the absence of a law permitting
simulcasting in Kansas, could American
Indian gambling establishments receive
simulcast race signals from tracks

outside the state, whether or not betting
is allowed on those simulcast races?"
See answer given above.
"Could specific kinds of gambling, e.g.,
casino gambling, sports book, betting on
simulcast races, etc., be prohibited for
all persons by statute as a means of
limiting types of gambling allowed by a
compact between the state and a tribe,
notwithstanding existing constitutional
provisions? That is, would such a
prohibition need to be constitutional, or
is a statutory prohibition sufficient?"
The IGRA does not specify how the state may prohibit or
permit certain class III games. In other words, the federal
law does not require the prohibition or permission of games be
by constitutional provisions. Thus, in our opinion,
statutorily prohibiting certain specific class III games, if
across the board (i.e. no one, including the state, may
conduct or participate in it), would foreclose the ability to
include those specific games in a compact. Lac Du
Flambeau Band of Lake Superior Chippewa Indians, supra
at 20. ("[T]he state is required to negotiate with [tribes]
over the inclusion in a tribal-state compact of any activity
that includes the elements of prize, chance and consideration
and that is not prohibited expressly by the Wisconsin
constitution or state law). (Emphasis added).
"Finally, in regard to enforcement of
existing, nongambling related laws on
American Indian reservations: Would such
gambling establishments have a
responsibility to the state or to the
federal Internal Revenue Service to report
individuals' winnings in order to ensure
those winnings are taxed? If not, how
could the state ensure that winners pay
applicable income tax on their winnings?"
25 U.S.C. § 2719(d) specifically makes provisions of the
Internal Revenue Code concerning the reporting and withholding
of taxes on winnings applicable to Indian gaming operations.

"What types of arrangements with regard to
video lottery machines satisfy the
constitutional requirement that the Kansas
lottery be state-owned and operated?
"Presumably the requirement would be met
if the Kansas Lottery owned or leased the
machines and either placed and maintained
the machines, or contracted with a private
entity to place and maintain them.
However, can the Kansas Lottery:
"-- contract with private entities to
place and maintain privately-owned video
lottery machines;
"-- issue licenses or certificates
authorizing private entities to place and
maintain privately-owned video lottery
machines; and
"-- receive a set percentage of the
income from privately owned, placed, and
maintained video lottery machines, with
the remainder of the income going to the
private entity or entities owning,
placing, and maintaining those machines?"
Article 15, § 3c of the Kansas constitution authorizes the
legislature to "provide for a state-owned and operated
lottery. . . ." This office has previously stated that this
provision "does not necessarily require that the state own the
actual structure in which the lottery is conducted, or the
equipment which is used in the operation. [A]s long as the
state owns the business and has ultimate and complete control
of the operation, it is not necessary that the state actually
own the building or the equipment used in the operation."
Letter to Senator Edward Reilly, dated February 15, 1991.
It is our understanding that under the scenario you present,
the state will, through legislation, rule and regulation and
contract terms, determine and actively control the types of
games to be allowed, the odds of winning, the stakes to be
won, the amount of consideration required to play and the
percentage of take for the state and others. The state will
also determine where the machines will be placed as well as
certifying such locations. These factors evidence state
control.

Clearly, the more control the state retains, the easier it
will be to determine that the operation is state-owned and
operated. On the other hand, the fewer hands-on roles the
state takes, the closer it comes to being state-regulated
rather than state-owned and operated. In the example you
present, if our understanding is correct, the state retains
sufficient control and ownership to be constitutionally sound.
Very truly yours,
ROBERT T. STEPHAN
Attorney General of Kansas
JuleneL.Miller
Deputy Attorney General
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