In 1988 the Michigan tribes operating casinos began negotiations with the governor's office to draft the compact required by the IGRA. The negotiations quickly came stalled, however, on the issue of video gambling. The state was strongly opposed to video gambling devices while the tribal governments were equally adamant in demanding the devices. For several years negotiations all but ceased. Indian casinos, however, continued to operate despite the lack of a compact. This continued operation was made legal by a United States Department of Justice ruling that allowed existing casinos to operate while compact negotiations were "underway" but which did not establish any milestones to judge the progress of "underway" negotiations nor create a date by which "underway" negotiations were to be completed.

In April 1993 a Michigan appellate court decision made clear that the state courts were unlikely to uphold the state's longstanding opposition to video games of chance on Indian reservations. Given this turn of events negotiations over the long delayed compact soon resumed in earnest. The thirteen page compact was agreed to relatively quickly and won legislative approval in late summer 1993.

As part of the compact, the signatory tribal governments were given exclusive rights to operate casinos in the state, both on and off reservations, and allowed the privilege of using video gambling devices. In return the tribes agreed to pay ten percent of all profits from those machines to government. Eight of the ten percent went to the state's "Michigan Strategic Fund." The remaining two percent was reserved for the local governments in the communities where the casinos operated. The compact further stated that should the state allow non-Indian owned casinos to operate, the tribes would no longer be obligated to make payments into the Strategic Fund.

The possibility that the tribes might be allowed to operate casinos in places other than federally defined reservations created considerable opposition to the agreement within the legislature. In particular some Detroit area legislators who opposed casino gambling in that city attempted, but failed, to block the compact. This opposition was grounded in Detroit voters' repeated rejection in prior years of referendums to allow casino gambling in their city as well as a 1988 city ordinance banning casinos in Detroit should the state authorize them. In 1994, however, Detroit voters demonstrated a sea change of public sentiment by passing a referendum authorizing the establishment of Indian owned and operated casinos.