Changes to Class II definitions and regulations could cost tribes $1 billion annually

Proposed regulations on Class II, electronic bingo games may cost American Indian tribes with government casinos $1.2 billion a year in gaming revenues, according to a study commissioned for federal regulators.

The study by Los Angeles-based Analysis Group estimates the economic impact of the regulations range from $575.9 million to $1.8 billion, with $1.2 billion being the mid- point, according to the National Indian Gaming Commission.

“Even though the Indian gaming industry generates over $26 billion annual, these are significant impacts, and of course not all gaming tribes will be impacted evenly,” NIGC Chairman Phil Hogen said.

The proposed regulations more clearly distinguish the “electronic and technological aids” Indian tribes may use to make Class II machines resemble Class III, Las Vegas-style devices. Class III gaming requires tribes to enter into compacts with the states where they are located; Class II gaming does not.

Because of the current lack of clarity between “technological aids” and “electronic facsimiles,” the commission is concerned that much of the equipment now used to electronically connect bingo players may actually qualify as Class III gaming and be unlawful.

Most tribal leaders are opposed to the proposed regulations, which they contend are unnecessary, an intrusion on tribal sovereignty and were arrived at without adequate consultation with the tribes.

The proposed regulations are intended to more clearly define how electronic technology may aid bingo players before crossing into the areas constituting electronic facsimiles. The proposals would set game, technical and internal control standards that equipment must meet before qualifying for play without tribal-state compacts.

Compliance would be determined by tribal gaming regulatory authorities after examination by testing laboratories.

The commission’s proposal includes a five-year grandfather provision during which tribes can continue to use nonconforming equipment. Grandfathered equipment is freely transferable to other tribal gaming operations.

Discounting revenue generated by equipment that may actually qualify as Class III gaming cuts the loss by more than half, to $481.9 million, the mid-point in a range from $235.5 million to $728.6 million. The study notes as well that the $347.9 million in compliance costs is spread over the five-year grandfather period.

The comment period for the proposed regulations ended March 9, 2008, resulting in a 137 day-comment period since the proposed regulations were published in the Federal Register on Oct. 24, 2007.

The commission has created tribal advisory committees to assist it in drafting these proposals, and those committees were scheduled to meet with the commission again in late-February in Washington, D.C. to review comments received by that date and to further advise the commission.

Copies of the economic impact report can be viewed

-Staff Reports