But with the Senate focused on passing milestone energy and Medicare bills, Kyl has realized there is not enough time to pass his bill in 2003, sources said.
Calls to Kyl on Thursday were not returned.
"I'm not so sure he has given up. We're assuming he will go forward," said Frank Fahrenkopf, president of the American Gaming Association.
The AGA opposes Kyl's bill because of concerns that it would put mainstream casinos at a competitive disadvantage with Indian gaming and the pari-mutuel industry.
Negotiations between AGA and Kyl have not been successful.
"The problem is that our terms are not acceptable to Native Americans," Fahrenkopf said.
John Harte, general counsel of the National Indian Gaming Association, said tribes are not necessarily opposed to AGA's demands.