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NIGC drops controversial parts of Class II proposed regulations

WASHINGTON - The National Indian Gaming Commission has dropped two controversial portions of a four-part package of proposed Class II gaming regulations that tribal leaders and gaming experts said would have virtually ended Class II gaming.

Speaking at the Oklahoma Sovereignty Symposium June 5, NIGC Chairman Philip N. Hogen announced that the classification standards and definitions parts of the Class II gaming regulations proposed last October have been set aside.

The news was welcomed in Indian country where tribal leaders and others involved in Class II gaming almost universally and vocally opposed the proposed changes.

Hogen said that the new regulations were intended to draw a ;'bright line'' between equipment tribes may use for un-compacted Class II gaming, such as bingo, and equipment used for Class III gaming, such as slot machines, which require tribal-state compacts.

But tribal leaders and gaming industry experts said the proposals would have modified the definition of ''facsimiles of any game of chance'' in a way that would have categorized all electronic versions of Class II games - bingo, lotto, pull tabs and others - as Class III facsimiles, destroying the economic viability of tribes without Class III gaming compacts, especially in states that refuse to enter compacts.

The NIGC is an independent regulatory agency within the Department of the Interior that was established by the Indian Gaming Regulatory Act of 1988.

The commission will now consider only the proposed regulations for Technical Standards and Minimum Internal Control Standards for Class II gaming.

Hogen said that the proposed regulations are considered ''major rules,'' because of their potential economic impact, and as such, the commission is required to conduct a cost-benefit study. A study under way on the four originally proposed regulations is expected to be completed next month. At that point, the commission may take action to finalize the proposals regarding the technical and minimum internal control standards, Hogen said.

According to a study already conducted by Dr. Alan Meister of the independent Analysis Group of Los Angeles, if the classifications and definitions rules were enacted, tribal casinos could lose up to $2.8 billion in revenues and face expenses of almost $350 million in redeveloping Class II machines. The tribes would lose thousands of jobs, face investment losses, increased transition costs, reduced spending in local economies, and other direct and indirect negative economic impacts. Meister conducted the study at the commission's request.

Tribal nations almost universally denounced the proposed changes to the Class II definitions and classifications, because at the heart of the controversy is the issue of control over tribal economic development. Class II regulations as they stand - and as they have been sustained in a number of federal court cases - allow tribes to retain their authority to conduct, license and regulate Class II gaming with federal government oversight, and without the need for tribal-state compacts or profit sharing with the states. Class III gaming requires a tribal-state compact and, although IGRA does not mandate payments to the state in Class III compacts, a cut of the tribe's profits has become part of the deal.

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In a press release issued soon after Hogen's announcement, the National Indian Gaming Association said that the withdrawal of the two proposals ''is an important development for Indian country.''

The commission had extensive consultation with tribes and gaming experts in developing the proposals for technical and minimum control standards, but not for the classification and definitions. Tribal leaders had long requested that the NIGC pull these regulations from consideration until they engaged in meaningful government-to-government consultation, the association said.

''Our thanks go out to tribal government leaders and tribal gaming commissioners for their hard work in staying active and engaged with the NIGC and requesting consultation with tribes prior to the development of such sweeping regulations,'' association Chairman Ernie Stevens Jr. said.

Stevens said NIGA and Indian country will work with the NIGC on the remaining portions of the Class II regulations.

''Working together with Indian country, there is an opportunity to develop acceptable Class II MICS and classification standards that the Tribes and industry can implement without severe economic hardship.''

NIGA is a nonprofit trade association comprised of 184 American Indian nations and other nonvoting associate members. The mission of NIGA is to advance the lives of Indian people economically, socially and politically. NIGA operates as a clearinghouse and educational, legislative and public policy resource for tribes, policymakers and the public on Indian gaming issues, sovereignty and tribal community development.

Hogen's announcement was met with warm approval, said attorney Judy Shapiro, who attended the Oklahoma Sovereignty Symposium.

''After years urging the NIGC not to promulgate restrictive Class II regulations, those assembled in Oklahoma City applauded the chairman's announcement that the commission has chosen to modify its approach,'' Shapiro said.

Shapiro, an Indian law attorney with particular expertise in Class II gaming, worked with committees appointed by NIGC to provide input into the formulation of the new rules.

''I am hopeful that the technical standards and minimum internal control standards can be finalized in a form that can add to the tribes' tools for Class II regulation. Ultimately, I expect that a federal court, consistent with the statute and existing precedent, will uphold the tribes' right to conduct the full range of Class II gaming authorized by Congress. That range includes technologic aids that broaden participation and assist play of a game whose [criteria under the Indian Gaming Regulatory Act] cannot be expanded by the NIGC.''