Tribes fear Class II
regulation overhaul

Oct 24, 2006 7:50 AM

Tribal casinos across the country are lobbying against proposed changes in Class II regulations which, they say, could doom their gaming operations.

The changes where proposed by the National Indian Gaming Commission, which has heard strong messages of dissent as it prepares a final draft of new regulations on Class II gaming.

Tribes and their allies made a last-ditch effort last month to turn back measures they maintain will undermine the profitability of Class II gaming — as well as the many services and opportunities Class II revenues support.

Their protests led commission Chairman Phil Hogen to extend the period for public comment to Nov. 15.

James ”˜’Tim’’ Martin, former executive director of United South and Eastern Tribes and now head of Creek Indian Enterprises for his Poarch Creek Band in Alabama, estimated that 75 to 85 percent of the band’s Class II revenue would be at risk under the NIGC regulations, which would redefine and reclassify Class II and Class III games.

Poarch Creek Chairman Buford Rolin told the NIGC that 500 jobs would be lost at a single venue because the regulations would hamper the band’s ability to compete.

Michael Anderson, an attorney with Monteau & Peebles, added that in addition to the potential devastation of single tribes, ”˜’there’s also going to be an overall impact on reduced income from tribes. ... There is going to be less entertainment value of these new games; there’s going to be slower time for play.’’

Class III gaming, particularly slot machines, blackjack, roulette and other ”˜’house-banked’’ games of chance, remains the primary profit center of most gaming operations. Class III games of chance are subject to state approval through the compacting process established under the Indian Gaming Regulatory Act of 1988.

Class II gaming, such as bingo, pull-tabs, poker and other ”˜’non-banked’’ card games, provides an important subsidiary revenue stream for many tribes. For others, especially those that have not been able to negotiate compacts with states, Class II gaming represents their best opportunity to capitalize on the $23 billion Indian gaming industry.

Class II operations can take place outside of tribe/state compacts. Congress has left Class II regulation to the NIGC.

As the Indian gaming industry has evolved, gaming machines have sped up the pace and allure of Class II games. The NIGC, prodded by the Department of Justice, contends that later generations of Class II machines offer a close approach to Class III gaming.

Specifically, the speed of play made possible by today’s ”˜’multi-touch’’ Class II games approximates that of slot machines, a Class III activity. But tribal leaders and attorneys insist that electronic characteristics do not change the nature of the game being played from Class II to Class III, or to outlawed ”˜’facsimiles’’ of Class III games.

The latest draft of new NIGC Class II definitions would slow play to the pace of eight seconds between moves, initiating an inevitable economic loss in Class II gaming. ”˜’When you only have so many hours in a day, and if it takes twice as long to play the game ... you’re cutting the revenue by that much,’’ said Margie Mejia, chairman of the Lytton Band of Pomo in northern California. Again, the hardest hit tribes would be those that lack tribe/state compacts and their authority for Class III operations.

Her band’s Class II machines would all be illegal under NIGC’s proposed regulations, Mejia said.

”˜’It’s really termination for my people again.’’

Anderson, of Monteau & Peebles, called for more analysis on the economic impact of the regulations, ”˜’particularly with respect to transition time. ... That is going to require a lot of time, both in negotiating contracts and finding out things like royalties to be paid if games are no longer compliant with regulations by the commission, and also as to demand on manufacturers to provide these games. So there is going to be a lot of cost to the transition time that’s going to be needed for these regulations if they are passed. That’s aside from what we think are the substantive, fundamental flaws in the legal analysis and support for these regulations.’’

Anderson took note of recent court decisions to suggest that NIGC hasn’t lived up to legal standards for notification to tribes of the impact of major agency decisions. He called for more time to ”˜’try to get our arms around this and gather more information. ... We haven’t seen the analysis that was promised there, that there would be some type of getting the arms around it, the issue of what the economic impact would be."