Native American lands (used to be called "reservations") are Soverign territory acccording to the Fed govt. That means they have their own police forces, courts. laws, govt, etc. Transactions taking place on those lands is not subject to the US Fed rules and laws (hence no taxes on cigarettes where the purchse of them is made on those lands. (i.e. the money changes hands on soverign territory....just as if you purchased something in another country.
However, not all Native American casinos are situated on Native American land. Where is the best place to build a casino? In a population center. You will get more business/customers/gamblers if it is easy for them to come to the casino, than you will if they must travel far out into the "boondocks". Therefore, if you are not building on soverign land, you must then negotiate a "compact" with the state govt to do so.....and the state govt is not going to just allow you to not pay up. As part of negotiating the compact, you negotiate how much you pay the state from your revenues....and that amount becomes your taxes. It is a percentage of your gross revenues and goes to the state. And there is more than enough money to go around because 99.9% of the gamblers lose what they bring to the casino. So even while paying the state taxes, you can make millions per year, as long as you get the traffic to the casino.
Here, for instance, our largest population area is Milwaukee. There is only one casino, and that tribe pays taxes to the state, as negotiated with the state govt. Basically, they have a regional monopoly.
There is another tribe trying to build a casino about 30 miles south, in the 4th largest population area. The tribe in Milwaukee, naturally, is lobbying against this, as they know it will take customers from them (the new casino would be a thirty-mile straight trip south on the interstate) When you have a monoply, you don't want competition. No different (here) than the cable company or electric company. If you want electricity here, there is only one company you can get it from. If you want cable, there is only one company you can get it from.
Personally, I think it hypocritical that we are supposed to be a Free Market economy, yet the state govt allows and encourages such monopolies. Competition may not be good for the monopolies, but it is good for the consumer.