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New proposed regulations roil Class II gaming

Analysis

WASHINGTON - Though circuit boards now do the cranking, the image persists of gaming patrons pulling the ''one-armed bandit'' of a slot machine, feeding it coins as fast as the machine can spin up results.

One reason that slot machines deliver a lion's share of profit at Class III gaming facilities is that gamers don't have to pause to make competitive decisions or develop winning strategies. They simply feed in coins at the rate they choose and wait for the machine to deliver a verdict. The game is actually played ''inside the machine,'' in industry parlance. The faster the rate of play, the greater the profit; slowing the rate of the play, as in the competitive setting of Class II games such as bingo, is one sure way to reduce profit.

Another reason for the profitability of slots is that they're pretty cheerful ''bandits.'' Something in human nature seems to like the steady action, the noise and lights, the prospect of a big payoff, or even just enough winnings now and then to keep playing. Again in industry parlance, all this comes under the heading of entertainment value.

The National Indian Gaming Commission is trying to gather it all under the heading of Class III gaming. As reviewed in a quartet of proposed new regulations, the manufacturers of Class II gaming machines, along with tribes that want to boost the value of their Class II gaming operations to Class III levels, have seized on new technologies to produce machines that blur the line between games of chance played ''inside the machine'' (Class III) and other games that don't rely entirely on computer-generated chance - i.e., bingo, with its emphasis on decision-making participants playing against other players ''outside the machine'' (Class II).

Because of the new boundary-jumping technologies, electronic bingo machines at many tribal casinos have brought the entertainment value and profitability of Class III games of chance to Class II gaming, according to the NIGC. ''When the equipment automatically, electronically automates the play of the game and the players' participation in the game, the Commission believes that the play is no longer 'outside' the equipment and that the electronic equipment can no longer be characterized as merely an aid. All player attention, discretion and interface has been automated by the equipment'' - placing the game itself among the ''electronic facsimiles of games of chance.'' And that has got to stop in Class II casinos, the commission maintains, because Congress categorized ''electronic facsimiles of games of chance'' as Class III gaming when it passed the Indian Gaming Regulatory Act in 1988.

The commission's previous stab at new Class II regulations had to be withdrawn over tribal objections and the assurance of gaming machine manufacturers that they were unworkable, said an Indian gaming partisan in Washington who spoke on condition of anonymity out of deference to National Indian Gaming Association President Ernie Stevens Jr.

The commission went back to the drawing board, consulting extensively with gaming machine manufacturers and (from numerous references in the proposed new regulations) tribal representatives. According to the narrative that emerges from the new version of Class II regulations, NIGC has revised its thinking on a number of contentious issues.

One of the most important of these changes could reduce the economic impact of compliance, the commission contends. ''Originally, the Commission felt it was necessary to have at least two releases of [bingo] numbers or patterns to ensure that there was truly a competition among the players to be the first to cover. Further, the Commission felt that the release of numbers should be over a period of two seconds to ensure that players were fully engaged in the game.'' But on second thought, NIGC has decided the Class II characteristics of competition and player engagement will be met if players press a button to get the game going, and press it at least once again to cover a pattern and claim a prize. The two-second time period between machine release of numbers and the mandatory release of multiple numbers or patterns has been eliminated from the latest regulations.

But tribal concern that regulation will enforce a slower rate of play, thereby curtailing casino profits, has not been similarly eliminated. Stevens, the NIGA president, described the newly proposed regulations as ''structurally different'' than the 2006 version, but still sure to ''devastate and cripple the Class II industry and hurt the tribes that rely on Class II revenue just to provide minimal government services.''

Class II gaming is regulated by tribes, in contrast to the Class III requirement of a compact between tribes and states. Class III brings in approximately 90 percent of the $25 billion to $26 billion annual tribal gaming revenue, the commission estimates. But as acknowledged by the commission in its write-ups of the proposed regulations, some tribes are limited to Class II activities because the state will not negotiate a compact with them in good faith. In addition, a Supreme Court interpretation of the Constitution prevents tribes from suing states that will not negotiate a gaming compact with them.

In such states, Stevens said, ''Class II gaming is the economic lifeblood for tribes.''

Current Class II gaming devices would be ''grandfathered in'' for up to five years under the proposed regulations, meaning many current machines would not have to be immediately replaced.

NIGA member tribes also oppose the proposed regulations because they were not consulted, government-to-government, in their development, Stevens added.

Formal comments on the regulations are due to NIGC by Dec. 10.