Class II gaming decimation is feared in wake of Metlakatla decision

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Part one

WASHINGTON - On June 4, only six days after receiving a request to review and approve a game-specific amendment to the Metlakatla Indian Community Tribal Gaming Ordinance, National Indian Gaming Commission Chairman Philip N. Hogen disapproved the amendment because the ''one-touch'' game it describes in detail as Class II bingo is actually a ''facsimile'' game of chance, he stated.

''This game is therefore Class III and cannot be operated without a compact.''

Metlakatla, like any Native government that lacks a compact with its state (in this case, Alaska), is limited to Class II gaming and excluded from offering Class III games of chance by the provisions of the Indian Gaming Regulatory Act of 1988. A game that can be played by only touching one button is nothing like Class II bingo, but an electronic facsimile of a Class III game of chance, Hogen ruled.

The next day, June 5, Hogen announced in Oklahoma City that the commission ''is putting aside'' the most controversial of four sets of Class II regulations - the very set that seeks to ''create a system for game classification as well as modify the definition of 'facsimiles of any game of chance''' (a quotation from the controlling IGRA legislation).

Billions of dollars hinge on the distinction. At an April 17 hearing of the Senate Committee on Indian Affairs, Hogen testified that most Indian gaming machines in operation under Class II compacts actually offer Class III games. Hogen and NIGC have been five years trying to impose a ''bright line'' on the $26 billion Indian and Alaska Native gaming industry, a firm and clear regulatory definition of Class II and Class III games that would clarify the legal standards that apply to each.

At the April 17 hearing, Sen. Byron Dorgan, D-N.D., agreed that a ''bright line'' is needed, but added that tribes should be able to accept it - ''embrace it,'' Dorgan said actually.

David Qualls, chairman of the Oklahoma Indian Gaming Association, said that diligent search has not discovered a single tribe that supports the latest NIGC classification standards. Hogen offered as one possible candidate only the Lytton Band of Pomo Indians at Lytton Rancheria in California, which he said has followed NIGC-approved criteria for its Class II gaming machines.

''They make more money per day per machine than they [slot machines] do on the Las Vegas Strip,'' he said, citing as rough confirmation a newspaper article that NIGC hadn't turned up at press time.

In any case, Hogen readily acknowledged that the Lytton gaming machines probably wouldn't be as profitable if patrons had convenient access to Class III machines instead.

Bingo! as it were. The economic impact of NIGC's sidelined classification standards have been found so extreme that a National Indian Gaming Association resolution has called them a ''takings'' from tribes of billions of dollars. Hogen noted June 5 that their economic impact alone makes them ''major rules,'' requiring yet a second extended cost-benefit analysis.

''In Oklahoma alone, it was a $1 billion negative effect,'' Qualls said, ''not only on the tribes, but on the state's economy. ... So suddenly our congressmen looked up.''

But with the classification standards sidelined for the time being as of June 5, the concern among Class II tribes is that the Metlakatla decision of June 4 will have a similar negative impact. Already, Jeff Houser, chairman of the Fort Sill Apache Tribe of Oklahoma, has been quoted in the Las Cruces (N.M.) Sun-News to the effect that NIGC has thwarted its ability to lease devices and computer systems that activate ''one-touch'' machines because manufacturers fear for their licenses in the aftermath of the decision.

NIGC has denied the allegation. But Qualls and others have raised the prospect that the Indian and Native Class II industry could be decimated by a de facto manufacturer's embargo on one-touch machines and their operational systems. Where Class III options are feasible, Qualls said, customers may gravitate not to Class III games so much as to the entertainment value that Hogen's interpretation may drive out of Class II gaming.

John Tahsuda, formerly with the Senate Committee on Indian Affairs as it grappled with gaming issues, now with Navigators LLC in Washington and lobbying for the OIGA, described entertainment value as a finely detailed decision that gaming customers make. He said it should be left to them rather than imposed by regulation.

(Continued in part two)