California Tribe Launches Federal Legal Battle Following Sudden Closure of $700 Million Casino Project

A highly anticipated $700 million tribal gaming project in Northern California has abruptly stalled, prompting immediate federal litigation. The Scotts Valley Band of Pomo Indians was forced to shutter its temporary, invite-only “preview casino” in Vallejo on August 1, just seven days after its initial launch. The rapid closure follows a sudden reversal by the U.S. Department of the Interior (DOI), which ruled the tribe’s newly acquired land is ineligible for gaming operations. The decision has ignited a high-stakes legal battle with broad implications for tribal gaming expansion and land-in-trust regulations.

The tribe’s ambitious master plan envisioned a sprawling $700 million casino resort situated near the intersection of State Route 37 and Interstate 80. To generate momentum, the Scotts Valley Band opened a modular, invitation-only preview facility on July 25 on their 160-acre trust parcel – the first time the tribe has held land in decades. However, the DOI pulled its approval, determining that the tribe lacked the significant historical connection to the specific parcel required to qualify under the Indian Gaming Regulatory Act’s “restored lands” exception. The decision directly overrides the department’s previous 2025 ruling that had initially cleared the site for gaming development.

In response to the abrupt regulatory shift, the Scotts Valley Band filed a lawsuit in federal court on August 7 seeking to overturn the DOI’s decision. “The administrative record overwhelmingly supports the Tribe’s gaming eligibility,” stated Shawn Davis, chairman of the Scotts Valley tribe. “We will move quickly to challenge the decision in federal court.”

The ruling also delivers a financial blow to the host city of Vallejo, which had negotiated a memorandum of understanding expected to generate over $400,000 annually from the temporary facility alone, with significantly higher projections for the completed resort. Vallejo Vice Mayor Diosdado “JR” Matulac expressed disappointment over the lost municipal revenue, noting, “We were hopeful this could be an economic benefit to the city. Scotts Valley tribe was willing to provide community benefits and support the city.”

Despite the setback for Scotts Valley and Vallejo, the project has faced fierce headwinds from competing regional operators who supported the DOI’s intervention. Neighboring tribes have actively opposed the Vallejo development for years, arguing that it violates federal tribal gaming regulations and threatens severe market cannibalization. The Lytton Band of Pomo Indians, operators of the nearby San Pablo Lytton Casino, have been vocal critics of the expansion. In a letter to the Vallejo City Council, Lytton Tribe Chairman Andy Mejia argued that the Scotts Valley project would “inflict serious economic harm on nearby tribes, which operate successful gaming enterprises.”