When California voters overwhelmingly approved an initiative to expand legalized gambling on Indian reservations last year, the Native American tribes here felt like they were holding a royal flush.

But now they're feeling busted, after the state Supreme Court today struck down Proposition 5, ruling that the California Constitution bans Vegas-style casino gambling, even on Indian reservations.

For the Indians, the stakes could not be higher--and they have vowed to ask voters to amend the state constitution next year to allow their bingo games and slot poker to continue. There is also a chance of some political compromise with Gov. Gray Davis (D), but any agreement almost certainly would not allow as many types of lucrative games as are offered now.

In the last few years, the relatively small and scattered California tribes, some consisting of a few hundred members, have erected about 40 poker palaces and bingo halls--and they have raked in the take, using the cash to diversify their once meager portfolios with resort properties, golf courses, banks, factory outlets, gas stations and restaurants.

Many tribal members are now millionaires--and they have gone on a building spree on their reservations, erecting new homes, schools, gyms and retirement centers. So flush are the California Indians, that they now must carefully screen applicants who apply to be recognized as a tribal members based on claims that their great-great grandparents had Indian blood.

In the elections last November, California voters sided with the Indians, who argued that all they wanted was a chance to be self-sufficient and not rely on handouts from the federal government.

Many voters felt, according to polls and interviews, that the Indians were perennial underdogs who deserved a break--and that if rubes wanted to feed money into their digital poker machines, well, why not? The measure passed with 63 percent of the vote.

The fight over Proposition 5 broke all records for spending on a ballot measure. All told, the Indians and their opponents from the Nevada gambling industry poured $100 million into TV ads, mailers and phone banks. About two-thirds of the money was spent by the Indians.

The Indian gambling question has been playing out in California for the last decade. At first the California tribes operated small-time bingo games on their reservations, but over time, they began to run all-out casinos, which offered blackjack and computerized slot machines (but with slight variations to keep them, technically, within the law).

Gov. Pete Wilson (R) fought the tribes over the casinos, refusing to allow them to expand their gaming. Federal prosecutors also charged that the California Indians were using thousands of illegal slot machines.

Prosecution and negotiation with the state were put on hold while the legality of Proposition 5 was being argued before the California Supreme Court.

The Indians now are prepared to ask voters to change the state constitution. Also, the tribes and governor could enter into "compacts" that would allow some, but probably not all, of the games to continue.

But the gambling issue is highly controversial in California, where voters are alternatively ready to see casinos closer to home or fear the state could become Vegas-by-the-Sea.

The lawsuit against Indian gambling was brought by a coterie of homeowners who live near the casinos, and it was paid for by the Nevada gambling industry. Another suit, which was heard by the state Supreme Court along with the one filed by the homeowners, was filed by the Hotel Employees and Restaurant Employees Union International.

Penny LeDoux, one of the homeowners in the lawsuit, said, "In my mind, gambling is not the issue." The issue is land use--and the ability of state and local governments to oversee and control the location and operation of the casinos, she said.

"It's very laudable to have them be self-sufficient," LeDoux said. "But they can't play on voters' sympathy anymore. Tribes who can put up $90 million can't be all that impoverished."

The lawsuit by the hotel and restaurant workers was filed for a different reason. The union feared the 15,000 workers at the casinos who are not members of the tribes would not have adequate job protections and rights, because they were working in casinos on Indian reservations, which have their own courts and laws.

"We felt we had no other option," said Jack Gribbon, political director of the union's California office. "This would have allowed our members to work in a setting that was forever devoid of any enforceable worker rights. We couldn't accept that."