Class II Rule Changes – Is it Bingo or is it Slots?

When the general public thinks of slot machines they picture row upon row of machines where you put money in, push a button or pull a lever and the thing makes some noises and you either win or lose and that is basically what they do. But there is more to the picture than meets the eye, as they say.

Of the people in our valley following Indian gaming issues (which in my opinion, there are probably very few) how many know what kind of slots machines are in the Indian casinos and what the difference is and how they are regulated.

Well, basically there are two kinds… Class II and Class III

What’s the difference between Class II and Class III?

Under the terms of the Indian Gaming Regulatory Act of 1988 the difference is as follows:
Class II machines are tied to a random number generator in a central computer. The machine itself does not determine whether you win or not. Instead, it is part of a networked game where players compete against one another for a central prize. This means the player is not playing against the house but playing against other players. Just like bingo.

Class III slot machines use an internal random number generator to determine wins and losses. Every Class III spin is separate from the other. A player winning on a similar machine adjacent to you does not affect your game. Any outcome is possible. The player is playing against the house and not against opponents.

The other difference between these machines, and the reason for major concern by the gaming tribes, as we will see, is that the Indian Casinos are allowed unlimited Class II machines but to operate Class III slots they need to go through the long drawn out process we just witnessed over the last couple years. That is, they need to negotiate a compact with the state and then have it approved by the Secretary of the Interior. Not an easy thing to do. Especially when special interest groups get involved after all the negotiations and reviews are over and place the deals on ballots for the general public to vote on.

Where states have not negotiated Class III gaming with tribes, or have limited the permissible number of Class III machines, tribes have turned to Class II gaming.

More entertaining new machines have increased the profitability of Class II activity, though Class II still yields only about 10 percent of overall tribal gaming revenue.

Back in May of 2006 National Indian Gaming Commission (NIGC) proposed new rules that would draw a clear line of demarcation between Class II bingo, lotto and other games similar to bingo that use electronic, computer or other technologic aids and Class III slots.

Their belief was that the advancements and improvements in technology have blurred the distinction and made it difficult to classify these games when played electronically, and caused confusion for tribal operations, tribal & Federal regulators, equipment manufacturers, and states.

The Chairman of the NIGC, Phil Hogen said, "The Indian gaming industry is in need of this classification in order to know which games need to be played under compact and which do not."

The NIGC held several tribal consultations over that summer in 2006 to discuss the proposed classification standards and receive further input and observations from the tribes.

Due to an uproar from the Tribes operating casinos and an investigative study that suggested a $1.5 billion negative impact, along with the assurance of gaming industry specialists that the regulations were incompatible with the technology behind gaming machines, the NIGC withdrew their original version of the proposed Class II gaming regulations.

The commission issued revised regulations in the Federal Register on Oct. 24 of last year but due to negative comments from Indian Country created Tribal Advisory Committees to assist it in drafting new proposals. Those committees met with the Commission on February 29, 2008, in Washington, D.C. to review comments received by that date and to further advise the Commission.

The comment period for the proposed regulations was recently extended by the Commission to March 9, 2008, resulting in a 137 day-comment period.

Judith Shapiro, an Indian law attorney who worked with committees appointed by NIGC to provide input into the formulation of the new rules, said the issue is likely to end up in court.

''If they don't change their mind and they go ahead and publish the final rule in the Federal Register without significant changes, at that point there are likely to be major judicial challenges,'' Shapiro said. ''We're hoping not to have to go there. We don't want to spend Indian country's money that way. We think we can probably win, but we'd rather reach an acceptable resolution without litigation. We've said so many times, and have worked hard towards that goal,'' she said.

In my view… just another evolving issue in the complex, complicated phenomena of Indian Gaming.

Sources:
http://www.indiancountry.com/content.cfm?id=1096416581 http://www.indiancountry.com/content.cfm?id=1096416679n
http://turtletalk.wordpress.com/2008/02/04/nigc-releases-economic-study-of-proposed-class-ii-regulations/
http://www.allbusiness.com/government/3774065-1.html