The owners blame the recession. I suspect it's more the fact that it's a weak casino in a bad location, particularly in light of the fact that it's the only indian casino to close during the recession. When it opened, it was slot machines only. When I checked it out in 2006, they had slots, blackjack, pai gow, and 3 card poker. They didn't open a poker room until mid-2007, and although I've stopped in a few times since then, I've never seen a game actually being played. The last time I was there, I looked for the poker room, but I think it'd been replaced with pool tables.
Beyond that, Little Creek Casino has more games, is more luxurious, and is only 16 minutes away. It's like comparing Happy Days to Emerald Queen. I get the distinct impression that the people who live near the Lucky Dog don't mind a few minutes of driving. If I lived in the area, I'd drive past the Lucky Dog every time, unless they had better promotions or poker tournaments. I don't recall that being the case.
Also interesting in the article: the Seattle Times is quoted as saying that statewide tribal casinos netted $2.11 billion in 2008, up from $1.96 billion in 2007, but that Snoqualmie Casino's revenue is currently only a quarter of what they expected.