[Poshua]

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Good question.
Also, even if the state does have an essential say in whether the casino gets a license or not, I would like to know how they can deny the casino a license just because they are mad at them. Isn't this why we have courts? I am sure the state can make it hard for them to get a license, but eventually the casino (I would think) would prevail.

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This depends a lot on the state. However, Indian casinos have a much freer hand than other casinos. Generally, a state has to permit Indian gaming so long as there is any other legal gambling in the state. (States with no legal gambling, which I believe are down to just Utah and Hawaii, do not have to permit Indian gaming.) The state will negotiate a compact that sets certain regulations-- for example, Connecticut requires a last-call time for alcohol, and California prohibits table games that don't use playing cards-- but ultimately the state has to allow gaming on Indian reservations.

In states that have non-Indian casino gambling, the state will generally have a licensing commission with broad discretion to issue licenses or not. This is somewhat similar to liquor licensing in cities-- while a restaurant or bar can appeal the denial of a license, the licensing authority has great leeway to issue licenses or not as it chooses.