Could cannabis be the new gambling for Native Americans? So far, tribes are being shut out

At the end of a road off scenic Highway 79, in rural San Diego County, a building that once let visitors try their hand at slot machines and poker tables is now a shop that sells cannabis flower and marijuana-infused truffles.

The Iipay Nation of Santa Ysabel opened the Mountain Source cannabis store about two weeks ago, in the front part of a failed casino that tribal leaders abandoned in 2014. The back part of the casino, overlooking Lake Henshaw, will be used for marijuana testing and to bake cannabis edibles. And the surrounding land, a hilly stretch covering more than two acres, is dotted by white-walled marijuana greenhouses, with more cultivation space under construction.

The tribe got into the cannabis business as a way to stay “economically alive,” said Dave Vialpando, who heads up the Santa Ysabel Tribal Cannabis Regulatory Agency. But, while Santa Ysabel is developing a marijuana campus that could very well pull the tribe out of poverty, a major obstacle remains:

It’s unclear if they’ll ever be able to legally sell their products off the reservation.

While tribes are free to grow and sell cannabis on their sovereign land now that recreational marijuana is legal in California, there’s no path in state law for Native Americans to join the regulated market. That means tribes are cut off from the much larger nascent industry that’s open to every sanctioned marijuana farmer not in Indian County.

“It’s a long pattern in this state,” Vialpando said. “There’s a history of marginalizing tribes. There’s a history of not wanting to engage with tribes.”

So far, all proposed compromises have fallen flat.

Many tribal leaders aren’t willing to waive their nation’s hard-won rights to self governance — and, some would argue, their identity — by agreeing to be treated like businesses instead of governments.

But even when tribes try to get state licenses on tribal lands, their efforts, so far, aren’t working. California law requires local jurisdictions to approve cannabis businesses before the state will issue its approval, and cities and counties near tribal lands insist — correctly — that they have no authority over tribal land.  To date, none of the three agencies that license cannabis businesses in California have issued permits for projects in Indian Country, though they said they’re reviewing applications.

Meanwhile, non-tribal cannabis business owners push back against carving out any exceptions that, in their eyes, might give Native Americans an unfair advantage in the market.

Supporters are counting on help from newly seated Gov. Gavin Newsom, who supported legalized marijuana as a tool for social justice. And they’re hoping the fourth time might be the charm when it comes to a legislative fix, with a goal to reintroduce a thrice-failed bill that would let tribes formalize their own marijuana regulatory system.

“We should have solved this by now,” said Assemblyman Rob Bonta, D-Oakland, who authored beleaguered Assembly Bill 924. “Our tribes absolutely deserve a right to participate in the same legal cannabis market as other stakeholders.”

A need for opportunity

California is home to 109 federally recognized Native American tribes, with the most populous in Los Angeles, San Diego, San Bernardino, Orange and Riverside counties.

Two centuries of slaughter, land theft and discrimination have left California’s Native Americans with lower median incomes and education levels coupled with higher rates of poverty and unemployment than the general population.

Tribes saw opportunities for jobs and long-term revenue in 1987, when the Supreme Court ruled in favor of the Riverside County-based Cabazon and Morongo Indians, who sued for the right to continue high-stakes bingo and poker games on their reservations. That ruling gave birth to Indian gaming, which is now a $7 billion annual industry in California.

Just over half of the state’s tribes operate casinos, but only 16 are full Vegas-style resorts. And 47 of the state’s 109 tribes have no casinos at all, with some reservations still struggling to provide running water and electricity.

“Not all tribes are rich from gaming,” Vialpando said.

His Santa Ysabel tribe has hustled for years to find a steady revenue stream that might sustain the community. A symbol of that struggle greets everyone who enters the reservation; one of the first things a visitor sees is a once-important tribal hall and gym that, today, is caving in on itself.

Pinning their hopes on gaming, the tribe in 2007 broke ground on the Santa Ysabel Resort and Casino. That’s also when the recession hit, and leaders couldn’t get funding to add lodging. In February 2014, with the project $50 million in debt, leaders made the difficult choice to shutter the casino.

Santa Ysabel found itself back among the ranks of the state’s rural tribes who have land, skills and ambition, but no clear way to put them to use in a way that might provide for the community.

Then came marijuana.

Federal change sets the stage

With a growing number of states legalizing cannabis, tribes took notice a few years ago ago when federal regulators paved the way for marijuana projects in Indian Country.

The Cole Memo, issued by Deputy Attorney General James Cole in August 2013, stopped officials from enforcing federal laws on cannabis businesses operating in states where marijuana was legal as long as those businesses were taking steps to keep their product from getting to kids and the black market. In October 2014, Monty Wilkinson, director of the United States Attorneys, issued a memo that extended those protections to Native American nations.

In many ways, it’s a marriage that makes sense. Indigenous people have long relied on herbal remedies, and some have used cannabis as a sacrament. Native Americans do struggle with disproportionately high rates of substance abuse, though Vialpando pointed out that legally regulated cannabis has been associated with lowering community-wide rates of alcoholism and opioid addiction.

After the Wilkinson memo, a number of California tribes legalized medical cannabis on their reservations. Some also launched grow and retail operations. But for tribes that dived most aggressively into the cannabis business, the honeymoon was short lived.

In summer 2015, federal authorities raided cannabis operations on land owned by the Pit River and Alturas tribes in Modoc County, seizing more than 10,000 marijuana plants. That fall, Mendocino County Sheriff’s deputies raided a cannabis farm owned by the Pinoleville Pomo Nation.

Authorities argued that those tribes weren’t in line with the state’s medical marijuana laws of that time, which prohibited for-profit operations. With thousands of growers and retailers across the state ignoring that notoriously lax mandate, some tribes felt unfairly targeted.

That same year, Santa Ysabel also opened some of its 15,000 acres to outside cannabis growers. But the tribe proceeded cautiously, said Vialpando, a former police officer, state narcotics supervisor and gaming regulator. Tribal leaders drafted dozens of pages of regulations that mirrored or stepped up rules from other states. They met with county and federal authorities, inviting them to inspect their facilities and offering up access to security tapes.

Three years later, with eight companies now growing cannabis on the reservation, Vialpando said they haven’t had a single call for police services.

Santa Ysabel leaders believed they were well positioned to expand if and when California launched its legal recreational cannabis market. Then voters passed Proposition 64.

Left out in California

The November 2016 measure to legalize cannabis didn’t include a single mention of how Native American tribes fit into the new marketplace.

“When tribes in California, who have used the cannabis plant as a form of medicine for thousands of years, were completely omitted from Prop. 64, it fell in line in large part with how tribes are treated in this state,” said Los Angeles attorney Ariel Clark, who’s half Native American and 10 years ago shifted his specialty from tribal law to cannabis law.

In the final version of the state’s cannabis regulations, which took effect in January, regulators included a section that said tribes could participate in the licensed industry if they agree to “submit a written waiver of sovereign immunity” to the Bureau of Cannabis Control. That includes giving state regulators access to cannabis-oriented property and records on tribal lands. And it still called for approval from the tribe’s neighboring county or city.

For many tribes, who’ve already seen much of their sovereignty stripped away over the years, Clark said the idea that they should waiving immunity is a “non-starter.”

“A tribe can make a choice that will have reverberations in Indian Country across the United States,” Clark said. Besides, she added, “That’s not the only pathway.”

Washington, Oregon and Nevada, for example, all passed bills that allow tribes to negotiate compacts with the state that let them regulate cannabis operations much like they oversee gaming. Tribes typically agree to meet or exceed state safety standards and charge taxes equal to the state rate on outside sales, so they don’t have an unfair price advantage over non-tribal competitors. But those tribes don’t have to waive their rights to self governance, and they get to keep the tax revenue they generate to reinvest in their communities.

Three times, Assemblyman Bonta has proposed a bill to create similar rules in California, and each time he’s run into objections from people on both sides of the political aisle. Barring a compromise, Bonta said he doesn’t plan to reintroduce the bill this legislative session.

Santa Ysabel — along with many of the other 23 tribes who’ve joined the California Native American Cannabis Association — is positioned to sign such a compact if made legal in California.

The tribe has had stringent cannabis testing requirements and a track-and-trace system in place longer than their non-tribal competitors in California, Vialpando explained. An armed guard checks IDs before allowing access to the reservation’s gated campus. The tribe also has carried over checks and balances from the gaming world that aren’t required in the cannabis industry, such as independent financial audits. And they charge a tribal tax for cannabis sales that’s on with most municipal cannabis tax rates, though the tribe remains exempt from state and federal taxes.

The Santa Ysabel Botanical Facility already employs nearly as many people as the casino did, with around 100 workers focused on cannabis. The cannabis grows use only a fifth as much water as the casino once consumed. And leaders partner with a tribal member to turn cannabis waste into nutrient-rich compost that can be sold off reservation.

“Honestly, I feel like they’ve got it more together than anybody else,” said Gem Montes with the Inland Empire chapter of the cannabis advocacy group NORML.

Other tribes have toured Santa Ysabel in hopes of replicating their model.

Vialpando said he hopes that one day state regulators will accept his standing invitation to visit.

“Tribes are willing to work with the state,” he said. “But the message is, ‘You’re not welcome.’”