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NIGC announces year long delay for Class II MICS

WASHINGTON – The National Indian Gaming Commission has announced a one-year extension for tribal gaming authorities on implementing new Class II gaming regulations.

The announcement, published in a press release Oct. 7, delays compliance with new Minimum Internal Control Standards for Class II gaming machines. The new regulations were published last October and codified in federal law. Tribal gaming regulatory agencies were supposed to comply with the new standards by Oct. 13, 2009; the extension provides a new deadline of Oct. 13, 2010.

The new deadline will allow NIGC to complete additional work on the proposed MICS regulations and will give tribal gaming authorities more time to come into compliance with regard to operating systems and certification of Class II gaming machines.

What’s new about the regulations?

“Everything, when it comes to Class II regulations in general, is pretty new in that the NIGC up until about a year ago didn’t have any regulations regarding Class II per se,” said Joe Valandra, a former NIGC chief of staff and current consultant to tribal gaming commissions and tribal governments primarily on Indian gaming regulations.

“What they did was apply the MICS that were related to Class III, but they found that wasn’t working and that’s when they decided they needed to come up with regulations specific to Class II.”

In the process of establishing separate regulations for Class II gaming machines that offer bingo and similar games, and Class III slot machines, the NIGC has set up a new section in the statutes. Currently, MICS for Class II and Class III are included in Part 542 of the gaming statutes. The commission last year created a new section – Part 543 – specifically for Class II gaming regulations.

The commission was concerned about continuity, the press release said.

“The most immediate concern was the controls related to bingo and other games similar to bingo. The plan was to continue work on the other Class II controls and have them in place before Part 543 became effective. Unfortunately, work on the remaining Class II controls has not yet been completed. Therefore, to avoid confusion as well as gaps in regulation, the commission decided to extend the effective date for the new Part 543 as well as the date for the removal of sections from Part 542,” the commission said.

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The new Class II MICS were part of an effort by NIGC over the past few years to establish a four-part package of Class II gaming regulations that included MICS, technical standards, classifications and definitions.

Former NIGC Chairman Phil Hogen, who retired in early October, said he wanted to draw “a bright line” between Class II and Class III gaming machines.

Class II machines, which are used for bingo, lotto, pull tabs and other such games, don’t require a tribal-state compact or sharing the tribe’s gaming revenues with the state. Class II gaming is particularly useful to tribes in states that refuse to negotiate gaming compacts.

Class III slot machines are more lucrative and require a tribal-state compact under the guiding law, the Indian Gaming Regulatory Act.

Hogen argued that the evolved technology of the so-called one-touch bingo machines has made them indistinguishable from slot machines.

But tribal leaders and gaming industry experts objected vociferously that the proposed regulations for classifications and definitions would have categorized all electronic versions of Class II games – bingo, lotto, pull tabs and others – as Class III facsimiles, effectively destroying the economic viability of tribes without Class III gaming compacts with states. After a tidal wave of opposition and controversy, NIGC dropped the proposed classifications and definitions in the fall of 2008.

The MICS and technical standards regulations were published last fall; the technical standards are in effect.

The MICS regulations address the physical and communications security of the Class II gaming machines’ inter-connected equipment and the control of the money and operational systems – or how the systems operate. The technical standards relate to the certification of the equipment and ensure the games and systems operate properly and are resistant to tampering – or how the equipment and systems are built.

George Skibine, who serves permanently as director of the Office of Indian Gaming Management, has been appointed by President Barack Obama to serve as interim NIGC chairman until a permanent replacement is found.

At the Florida Gaming Symposium during the week of Oct. 19, Skibine said he has no intention of being a seat warmer during his temporary tenure at NIGC. Skibine intends to review Class II gaming regulations with an awareness that Class II gaming is the only leverage tribes have in states that refuse to negotiate tribal-state gaming compacts in good faith.