In 1988, Congress passed the Indian Gaming Regulatory Act which recognized the right of Indian tribes in the United States to establish gambling and gaming facilities on their reservations as long as the states in which they are located have some form of legalized gambling. Two cases in the 1980's led up to this act: Seminole Tribe of Florida v. Butterworth and California v. Cabazon Band of Mission Indians.

The Seminole case opened the doors to high-stakes bingo on reservations all over the country. Florida tried to close the Seminole tribe's high-stakes bingo parlor (opened in 1979), but the court ruled that bingo fell under statutes classed as regulatory rather than prohibitory.

The Cabazon case established that once a state has legalized any form of gambling, Indian tribes within that state can offer the same game on trust land without any state interference or restrictions. [Trust land is reserved for and owned by Indians but held "in trust" by federal government for the benefit of the Indian owners.] This case brought up concerns about tribal regulation of Indian gaming among many groups (i.e. Nevada and New Jersey where gambling is legal, the National Association of Attorney Generals, the National Sheriffs' Association).  

In response to the concerns arising, Congress passed the Indian Gaming Regulatory Act (IGRA). This act went into effect on October 17, 1988:  

The act is intended to 1) promote tribal economic development, self-sufficiency, and strong tribal government; 2) provide for a regulatory base to protect Indian gaming from organized crime; and 3) establish the National Indian Gaming Commission.

The act defines three classes of gambling and gaming: Class I: Social games solely for prizes of minimal value or traditional forms of Indian gaming engages in by individuals as a part of, or in connection with, tribal ceremonies or celebrations. Class II: All forms of bingo, and other games similar to bingo such as pull tabs, lotto, etc. and card games that are explicitly authorized by state law, not including blackjack, baccarat, or chemin de fer. Class III: All forms of gaming that are not Class I gaming or Class II gaming.  

Class I gaming is within the jurisdiction of the tribe. Class II gaming is allowed if the state within which the tribe is located allows the gaming to anyone or under any conditions. A tribe is allowed to license and regulate Class II gaming on Indian lands. Class III gaming requires a tribe-state compact. The National Indian Gaming Commission (NIGC) was established to approve the compacts and prevent abuses.

The IGRA is having a major impact on intergovernmental relationships among Indian tribes, states, and the federal government. First, the revenues generated have helped spur economic development in Indian country (which, too, supports the goals of tribal sovereignty and economic self-sufficiency). Second, intergovernmental conflicts have started between the tribes and the states over issues involving state sovereignty, criminal jurisdiction, and gambling revenues. Third, the IGRA ensures that the federal government maintains its position of supremacy over tribes and tribe/state relations.

For more information see:

http://www2.sims.berkeley.edu/academics/courses/is190-1/s96/abaurrea/assign5.htm