Controversial Indian Gaming Class II Regulations Withdrawn

Controversial Indian Gaming Class II Regulations Withdrawn

6/11/2008
By: Dennis J. Whittlesey The National Indian Gaming Commission ("NIGC") has pulled back two regulations that would have cost tribal casinos an estimated $1 billion in lost revenues. The withdrawn regulations concerned so-called Class II Gaming (the prime example of which is bingo) and would have affected tribal casinos across the country, as well as the equipment manufacturers and suppliers of Class II gaming machines. At issue were NIGC's classification standards and definitions of Class II games. Had the two regulations been implemented, a number of electronic games currently considered Class II would have been reclassified as Class III and become the regulatory equivalent of slot machines. To offer the reclassified Class III games on the gaming floor, tribal casinos would have to negotiate such provisions in a Tribal-State Gaming Compact with the governors of the states where they are located pursuant to the Indian Gaming Regulatory Act, 25 U.S.C. ? 2701 et seq. ("IGRA"). Conversely, Class II machines are not subject to Compact requirements. The proposed regulations had caused great controversy within the tribal gaming industry, going back to October 2007 when NIGC proposed four changes to the Class II gaming regulations, including the two withdrawn regulations announced on June 5, 2008 by NIGC Chairman Phil Hogen. The rationale for the withdrawal of the two controversial regulations was the need for the NIGC to conduct a cost-benefit analysis, studying the potential economic impacts of the regulations on tribal casinos. The original proposal was designed to strictly separate equipment used in Class II and Class III gaming. If these major rules were to be implemented, tribes would likely face demands by the states to share revenues from the newly classified machines and/or meet other state requirements. But for the present, according to Hogen's announcement, the NIGC will consider only regulations affecting Technical Standards and Minimum Internal Control Standards for Class II gaming that will clarify the definition of facsimiles of any game of chance. In a related issue, Hogen stated that there is still controversy as to what constitutes Class II games, citing the Metlakatla Indian Community of Alaska's proposed amendment to its Tribal Gaming Ordinance which would have authorized one-touch fully electronic bingo as Class II gaming. Hogen disapproved the amendment because a one-touch bingo with no other features can no longer, in his opinion, be constituted as bingo or a similar game according to IGRA's standards. Rather, he stated, it should be considered a Class III electronic facsimile of a game of chance. Hogen stated his hope that focusing on the Metlakatla proposal's technical and minimum internal control standards - along with potential judicial clarification - will help establish which games fall under Class II and Class III gaming under IGRA.
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