California wins battle over ‘illegal’ slots

Jan 11, 2005 5:18 AM

The state of California has effectively put down a tribal uprising over the use of what it considers illegal slot machines in Native American casinos.

On Friday, the Pechanga tribal casino in Riverside, the largest gaming facility in the state, agreed to shut down about 1,600 machines that look and play like standard Class 3 slot machines.

A week earlier, the Morongo casino near San Diego agreed to stop using about 1,000 machines and convert them to Class 2 bingo slot machines, which are permitted under federal law.

For five weeks, the state has maintained using the machines was in violation of the tribes’ compacts with the state.

Both casinos operate about 2,000 Las Vegas-style slot machines, the maximum permitted under California law. But late last year, they added nearly that many video lottery terminals that are similar to slot machines but are illegal, according to Vince Sollitto, a spokesman for Gov. Arnold Schwarzenegger.

"The state has maintained all along that these machines violate the tribes’ compact by exceeding their allowed number of slots, and the state is pleased that the tribes have agreed or indicated they intend to comply," Sollitto said.

A highly-placed California attorney, Howard Dickstein, who represents the California Tribal Business Alliance and frequently negotiates compacts with the state, said ending the stand-off was a "face-saving venture" for the tribes, and will probably benefit them in the long run.

"They’d shoot themselves in the foot economically because the state lottery would be able to put video lottery terminals on every corner of every street," Dickstein said.

Dickstein added that Morongo’s conversion of machines to real time Class 2 bingo machines was basically their right from the start. "What they agreed to is what they’ve had a right to do since 1988 — put in bingo machines."

The outcome of the dispute between California and the two tribal casinos have helped underscore the differences between Class 2 and Class 3 gaming machines, and could stimulate sales of the former.

According to slot machine experts, Class 2 machines must be configured so that players are competing against other players on the casino floor. If they are competing against the house, then the machine is a Class 3 slot.

Another criterion is that the outcome of the game must be decided by a bingo-like game, which must occur in real time, that is, as the players are playing the machines. Some Class 3 look-alikes have a bingo game chip that contains an already-played game, which is not allowable under Class 2 guidelines.

Physically, the Class 2 machine will have a tiny screen that contains a bingo card. The results of the bingo game, which is often conducted at warp speed on central computers, are transformed into slot machine-like icons on the large video terminal, much like a standard video slot.

In essence, the video slot graphic is just an output device for the outcome of the bingo game. And those graphics often include the same slot themes and symbols found on traditional slot machines.

Dickstein said some Class 2 manufacturers "pushed the envelope" of what constitutes a bingo slot by making the machines nearly indistinguishable from Class 3 slots.

That doesn’t mean that the market for Class 2 slots will dry up. In fact, insiders believe that, with more clearly-defined ground rules, Class 2 slots could become more prevalent, even though they return only a fourth to a third of what Class 3 slot machines earn in revenue.

In fact, Alliance Gaming announced last week that it had accelerated its purchase of Sierra Design Group, a firm that manufactures Class 2 machines.

As a wholly-owned subsidiary, Sierra Design Group, as well as IGT’s Sodak company, are expected to be the leaders in manufacturing Class 2 bingo slots in the state of Nevada.