For the past several years, the Class II or "bingo" slot machine has been at the heart of a controversy that has developed between various gaming jurisdictions and tribal gaming operators.
The problem arises in how the Class II slot should be classified, in terms of the jurisdiction’s definition of gaming devices.
California, for instance, did not provide for Class II slots when it created laws governing the type and amount of machines a tribal casino could operate.
The result has been a "gray area" which some tribes have seized upon in order to increase slot levels beyond what their respective compacts with the state allow.
In fact, two of California’s largest tribal casinos have defied a state demand that they remove hundreds of Class II gaming machines, which are not permitted under their compacts.
California allows tribes to operate up to 2,000 Class III or Nevada-style slot machines in their casinos.
Class II machines are not authorized under California law.
The two tribes — the Pechanga band of Temecula and Morongo band of Cabazon, both in Riverside County — contend that the machines are not subject to limits and fees imposed by the state because they are not Class III machines.
If the tribes are correct, they could operate as many of the Class II machines as they want without paying any extra taxes to the state. Existing California law imposes fees of up to 13 percent on slot machines’ gross revenue.
The tribes are betting, in part, on a U.S. Supreme Court decision rendered last year. That decision refused to overturn a lower court’s ruling that Class II games were not the same as Class III slots, and therefore don’t fall under the jurisdiction of state regulators.
In its appeal to overturn the lower court’s ruling, the federal government argued that a machine qualifies as a gambling device when it "looks like a slot machine, sounds like a slot machine and plays like a slot machine."
Indeed, many Class II machines are virtually indistinguishable from Class III slots. Some even incorporate wildly popular slot themes such as Wheel of Fortune, Cleopatra and Little Green Men.
But, game themes notwithstanding, Class II slots "play differently" than standard slots, according to slot manufacturers.
"Class II machines are inherently different from Class III devices in that the terminal is a technological aid to the playing of bingo," stated a report from IGT. "Players compete against each other in a bingo game, as opposed to playing against the machine in Class III slots."
An official at IGT explained that the "bingo game" is obviously not a live, bingo ball bouncing game, but a computerized, electronic bingo game that is linked among the Class II machines.
The Class II machine may have a game that looks and plays like a standard Class III slot, but after that game is run by the player, the outcome is "passed through" the bingo program, which determines the final outcome. Of course, this all occurs within the blink of an eye.
Most Class II machines have a small screen, separate from the main slot screen, which shows the instantaneous outcome of the bingo game. But some of the newest machines may not have such a bingo screen at all, making those Class II slots virtually indistinguishable from their Class III cousins.
The Pechanga and Morongo casinos have nearly 1,000 Class II machines on their casino floors, and about 3,000 additional Class II machines in warehouses waiting to be installed.
"The band’s operation of these devices constitutes a material breach of its compact with the state," the state charged in letters to the tribes. The state asked the tribes to remove the machines from their casinos and ship them back to the manufacturer, Multimedia Games, within 60 days.
If the tribes fail to comply — as they have vowed to do — the "state reserves the right to take appropriate action under the terms of the compact," an allusion to a lawsuit the state could file in federal court.
At the same time the state was demanding tribes remove the Class II machines, it sent a demand to Multimedia Games that it remove its machines from the tribal casinos or face repercussions that could limit its ability to sell gaming devices in the state of California. Multimedia executives were reportedly weighing the state’s demand.