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‘Panoply of concerns’ raised over the latest NIGC regulations

WASHINGTON – National Indian Gaming Commission regulations on technical standards for gaming machines and minimum internal control standards at casinos have generated some of the same concerns that attend NIGC’s every regulatory move in the $26 billion industry.

Especially in the technical standards, NIGC continues to seek a “bright line” between Class II gaming machines that offer bingo, and Class III slot machines. The Class III machines are more lucrative and require a tribal-state compact under the guiding law, the Indian Gaming Regulatory Act. IGRA permits Class II bingo without a compact, but NIGC Chairman Phil Hogen argues that the so-called one-touch bingo machines have evolved into Class III games of chance – illegal without a compact.

The concerns of his critics are that NIGC is rigging the regulatory system in the interest of its own desired outcomes, flouting federal rules of fair process and procedure as it goes. Hogen has consistently denied the charges. He could not be reached by press time, and lately stated that he doesn’t intend to dispute issues through the media.

Ernest L. Stevens Jr., chairman of the National Indian Gaming Association, implied that disputes remain between Hogen’s NIGC, a federal agency, and tribal governments that authorize gaming.

“On its own initiative, the NIGC was pushing for increased regulation of Class II technologic aids and tribal governments unanimously rejected that effort,” he said. “The NIGC continues to try to make the case that it was ‘helping’ Indian tribes by adding more bureaucracy to Class II technologic aids. But if tribal governments agreed to more intrusive bureaucracy every time that the federal government wanted to ‘help,’ there would be no room left for tribal self-government. Like other governments, Indian tribes must reject unwarranted intrusion on tribal self-government.”

Hogen’s former chief of staff at NIGC, Joe Valandra, spelled out a “panoply of concerns” about the latest regulations after discussions at a National Indian Gaming Association conference.

The cost-benefit analysis connected with the new regulations, Valandra said, arrived at an estimated $98 million economic impact – a mere $2 million beneath the threshold that would have triggered congressional review of the regulations as major rules. Not only was the figure close enough to the threshold to raise questions, he said, but it also derived from factual errors and false assumptions. “Anyone knowledgeable about Class II [gaming] would recognize ... significant errors.”

Though the regulations became final upon their publication in the Federal Register, Valandra said a court challenge or congressional action could still be brought to bear on them, along with a number of other responses.

More urgently, he said Class II tribes are scrambling to comply with three technical standards that their gaming machines must meet within 30 days of the final regulations Other technical machine standards can be achieved over time for existing, operational machines to be “grandfathered in” as Class II, but the three standards in question concern independent laboratory testing, random ball drops and probabilities on the odds.

Valandra agrees with the need for compliance with the first two, though not the third – the regularity of a winner is a part of bingo culture, driving out the long odds against winning the regulations mean to oppose.

But in any case, machines that are noncompliant on any of the three points could be defined as offering Class III games, he warned. “That would be the argument.”

NIGC could respond with fines or enforcement actions, as Hogen has warned it will in unspecified settings. Worse yet, he said, the Department of Justice could prosecute, ruling the machines outlawed “gambling devices” under the Johnson Act. IGRA exempts Class III machines from the Johnson Act, but only under terms of a tribal-state compact. Machines that don’t comply timely with the three “grandfathering” standards of the new regulations risk being defined as Class III machines operated outside a compact, Valandra said, and therefore subject to legal jeopardy in a worst-case scenario.