The Indiana Constitution of 1851 included a ban on lotteries, which was broadly construed by courts as a prohibition on gambling in general. In 1988, state voters approved a constitutional amendment lifting the lottery ban. Critics said the measure would lead to casino gambling, while legislators said there would be little support for casinos.
Within months of the amendment's passage, Gary mayor Thomas Barnes proposed opening up the economically depressed city to high-rise resort casinos. The Indiana General Assembly rejected a Gary casino bill in 1989, but did assent to a non-binding referendum, which city voters approved by 60 percent. The city began talks to acquire 350 acres of land at the Gary Works for as many as five casinos.
Gaming companies from Nevada and Atlantic City flocked to join in lobbying efforts to support a second attempt in the 1990 legislative session, but it was blocked by Senate Republican leaders. In the 1991 session, state Rep. Charlie Brown of Gary introduced an expanded bill authorizing riverboat casinos on the Ohio River and a casino in the resort area of French Lick and West Baden Springs, to attract broader support. The mayor of Hammond floated the idea of converting the SS Clipper into a casino, but it was not included in the bill. The proposal passed the House but was rejected by a Senate committee.
Brown introduced a Gary casino bill in the 1992 session, but it drew little support due to legislators' aversion to controversy in an election year. Southern Indiana legislators introduced a bill to allow riverboat casinos on the Ohio River, which passed the House, and was then expanded, with support from Gary lawmakers, to include boats on Lake Michigan, which were seen as less controversial than land-based casinos. The bill was rejected by the Senate.
With new backing from Republican entrepreneur Dean White, Brown reintroduced his bill in the 1993 session, with land-based casinos in Gary and French Lick, and riverboats on the Ohio River, and it passed the House, but was again voted down in Senate committee. A measure was introduced later in the session to allow four riverboats each on Lake Michigan and the Ohio, but it was killed by Senate leaders.
Because it failed to approve a budget, the Assembly convened for a special session in June 1993. After weeks of wrangling, a compromise was reached on a Republican budget with no tax increases, with a few side issues to appease Democrats, including authorization of riverboat casinos. The law allowed up to five sites on the shore of Lake Michigan (including two in Gary), five on the Ohio River, and one on Patoka Lake, near French Lick. Casinos were expected to raise at least $100 million in taxes per year.
February 2, 1994 was the application deadline for licenses in the communities where referendums had passed; by that day, the number of applications had risen to 50. Officials in some cities conducted extensive hearings to decide which applicants to endorse, though the final decisions were in the hands of the Gaming Commission. City leaders examined 25 proposals in Gary, 6 in Evansville, and 8 in Lawrenceburg.
After the Porter County referendum failed, several businessmen from Portage had sued the state, arguing that the riverboat law violated the state constitution's ban on special treatment for particular cities, because it called for citywide votes in Hammond and East Chicago, but countywide votes in all other localities. A judge agreed with them in May 1994, enjoining the Gaming Commission from issuing licenses. The Indiana Supreme Court overturned that ruling six months later, but some developers had already withdrawn their proposals because of the stalled process.
Development of the Gary boats was delayed by disputes over the acquisition of land at Buffington Harbor and the withdrawal of President Casinos from its partnership with Barden. As a result, Casino Aztar Evansville was the first riverboat to open, on December 7, 1995.
The two Gary riverboats, Trump Casino and Barden's Majestic Star, opened on June 11, 1996, and the Empress Casino in Hammond followed weeks later. They were initially prevented from leaving dock by the Johnson Act, a federal law prohibiting gambling on U.S. territorial waters such as the Great Lakes. The boats ran "phantom cruises", allowing gamblers to board only at scheduled cruise times. Congress amended the Johnson Act in October, allowing the boats to cruise as required by Indiana law.
With three Ohio River casinos set to open, the Gaming Commission postponed a decision on granting the fifth Ohio River license to Crawford or Switzerland County, deciding to wait to observe the results of the other casinos. Hyatt opened its Grand Victoria II casino in Rising Sun in October 1996, and the Argosy Casino in nearby Lawrenceburg followed in December. The Caesars project, meanwhile, was continually delayed by environmental concerns and archaeological work.
By May 1998, the two Cincinnati-area casinos were reporting strong results, so the commission decided to lift its unofficial moratorium on issuing a fifth license.Casino America, the sole applicant for Crawford County, dropped its bid, leaving just one proposal for the commission to consider, a joint venture of Hollywood Park and Boomtown in Vevay, which it approved in September.
The Patoka Lake license went unused because the Army Corps of Engineers, which claims ownership of the reservoir, had a regulation against gambling on its property. Legislators in 2003 authorized an eleventh casino to instead be built in a man-made lake in the area of French Lick and West Baden Springs. The casino's conversion to a land-based facility was retroactively authorized in 2010.
The Pokagon Band of Potawatomi Indians, a tribe historically located in the St. Joseph River Valley of northern Indiana and southwestern Michigan, regained federal recognition in 1994, and its members soon voted to pursue casino gaming as an economic development measure. Discussions focused on sites in Michigan because state officials were more friendly to tribal gaming than those in Indiana, and the tribe had deeper ties to the state. A site in New Buffalo, Michigan, near the Indiana border, was selected in May 1996, but reports that the tribe was considering a casino in South Bend or Elkhart continued to surface. By 2001, the tribe said it had no plans for a casino in Indiana. After years of legal battles, the tribe's Four Winds Casino in New Buffalo opened in 2007. The tribe announced new plans in 2012 for a 164-acre "tribal village" in South Bend, including a casino.