Kansas City, Kan. ? A federal judge has dismissed a state lawsuit challenging the legality of a casino in downtown Kansas City, Kan., opening the door for the Wyandotte Nation to upgrade and possibly expand the operation.

In a decision made public late last week, U.S. District Judge Richard D. Rogers called the state’s case moot based on the federal government’s sovereign immunity from lawsuits brought against it.

Kansas claims the Oklahoma-based Wyandotte Nation bought the old Masonic temple and land for the 7th Street Casino with federal funds that were not allowed for such purposes.

Last fall, a federal appellate court panel dismissed the state’s case on technical grounds, but two of the three judges urged the case to be restarted because of judicial mistakes that had been made over the years.

Rogers agreed and reopened the case in April. But the money issue was never resolved.

When the U.S. Department of the Interior claimed the government’s sovereign immunity in the case, Rogers tossed it out.

Barring an appeal by state officials and three of four competing tribes that have casinos, the case could be over.

Once the issue is clear of the federal courts, the Wyandotte Nation plans to seek a formal compact with the state under federal law to upgrade its gambling at the casino. That would allow the operation – which has 500 Class II bingo-based slot machines – to upgrade to table games and full-scale Class III slot machines.

“That’s always been the ultimate goal, just as the four other tribes have,” said tribal Second Chief Billy Friend. “We’ve stayed in touch with the governor’s office, and we’re ready to put the contentions of the past behind us and work toward a compact.”

A spokesman for Gov. Kathleen Sebelius said the governor would have no comment because of a possible appeal.

The tribe spent $20 million to remodel the old temple across the street from City Hall and open it in January as a casino. It is estimated that the operation will gross between $15 million and $20 million a year

In 2004, the tribe opened a gambling parlor at the site inside mobile building units. But state and local law enforcement officials raided the parlor and shut it down. A judge ruled later that the raid had breached tribal sovereignty.

“The court has still not ruled on the merits of our claim,” said Mike Leitch, civil litigation chief for Kansas Attorney Steve Six. “We’re obviously disappointed by that.”

He said the state is considering an appeal.

In 1988, the government paid the tribe $100,000 as compensation for land in Ohio the tribe ceded to the U.S. in the 1800s. Under federal law, if that money – and no other tribal funds – is used to buy other land, the secretary of the interior would be obligated to place the land into trust for the tribe.

That status has qualified Indian lands for federally chartered casinos since 1988.

But if other tribal funds were used to make the purchase, the trust status was not automatic and could be subject to other state challenges.

The state says that because part of the $100,000 was used to buy different property and because the tribe spent tens of thousands of dollars in tribal money for the Kansas City property, it was not qualified for automatic trust status.

When the Department of the Interior placed the land in trust in 2002, it acknowledged that the $100,000 had been partially drawn down and commingled with other tribal funds.

U.S. District Court Judge Julie Robinson ruled in 2006 that federal law regarding tribal land purchases was ambiguous and that a different law requires such ambiguity to be resolved in favor of the tribe.