In 1968 Congress passed the Indian Civil Rights Act (ICRA) which applied many of the provisions of the Bill of Rights and the Fourteenth Amendment to Indian tribes. But rights under the Indian Civil Rights Act differ in several respects from constitutional rights of citizens outside of Indian country. The 1968 act, for example, does not prohibit the establishment of religion. Indian tribes, therefore, are the only governments in the United States that can legally operate as theocracies. Several Pueblos in the Southwest are just that, while other tribes across the country combine republican and theocratic forms of government by having some tribal council members chosen by election and some seats on their councils filled by hereditary chiefs (p. 115)The second passage is even more interesting:
Yet these Indian governments, whose leaders are elected by a racially-defined electorate, are outside of the system of constitutional restraints. This race-based governmental system has been upheld by the Supreme Court, which has gone to considerable lengths to find that tribal governments are not in fact race-based. The Court has concluded that political ties were established, by treaty or treaty substitutes, between the United States and tribal governments. This government-to-government relationship means that Indian tribes are recognized under federal law as political and governmental, not racial, entities and that there is no equal protection violation. There is another context in which Indian law and policy energizes analysis of civil liberties issues. In 1954, Brown v. Board of Education rejected the "separate but equal" doctrine and struck down racial segregation in public schools. But Indian reservations are plainly racial enclaves where separatism prevails. On many reservations even the schools are effectively segregated.
This gives us a deeper insight into the antidiscrimination principle of the Constitution. Separatism for blacks was outlawed because it was forced upon them and because it demonstrably operated to their disadvantage. Indian separatism is allowable because Indians are separatists by choice, because most Indian leaders have voluntarily selected a measured separatism as the single best hope for the future of the Indian people. Without the Indian experience, we are led to believe that our Constitution outlaws separatism; with it, we learn that the essential prohibition is against a forced policy that wounds minorities. Numerous aspects of federal policy have wounded Indians, but separatism is not one of them; thus it does not offend the Constitution
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The legality of the preferences was taken to court recently (possibly all the way to the Supreme court). I'm not sure what the outcome was.