iGaming tribes, particularly tribes conducting only Class II gaming, should take notice of the publication by the National Indian Gaming Commission (“NIGC”) of a revised final rule for Self-Regulation of Class II Gaming earlier last month.
For Las Vegas style Class III gaming, the Indian Gaming Regulatory Act (“IGRA”) divides regulatory authority between state and tribal governments. But for Class II gaming, which includes bingo, electronic bingo gaming devices, and non-house banked card games, the NIGC is the primary regulator. In January 2012, the NIGC issued a Notice of Proposed Rulemaking regarding tribal self-regulation under IGRA, and after extensive consultation, it released a final rule on April 4 to be published at 25 CFR Part 518.
IGRA’s “self-regulation” provisions at 25 U.S.C. § 2710(c) allow qualifying tribal gaming regulatory bodies to obtain a certification allowing them to take over day-to-day oversight of Class II gaming operations from NIGC and reduce their fees paid to NIGC. The seldom-discussed self-regulation provisions in IGRA are written broadly, but Indian tribes have complained that the NIGC regulations are not faithful to the statute. Many tribes voiced the same complaints in consultation: (1) the self-regulation certificate was too difficult to attain; (2) the compliance costs of self-regulation outweighed the benefits; and (3) the previous NIGC regulations clawed back the investigative power that Congress intended to return to qualifying tribes. As of today, only two Indian tribes have attained the certificate – Grand Ronde in Oregon and Menominee in Wisconsin.
IGRA Section 2710(c) allows tribes that conduct Class II gaming for three years to petition for a certificate of self-regulation. The Commission shall issue a certificate if the tribe meets a set of criteria that indicates it has operated without evidence of criminal or dishonest activity, accounted for all revenues, and has adequate systems for accounting, licensing of employees, and enforcement of tribal gaming regulators.
IGRA requires that self-regulating tribes to submit resumes for every employee “hired and licensed by the tribe.” The new regulations properly limit this requirement to the members of the tribal regulatory body. This clarification saves tribes and NIGC a huge amount of paperwork, but it does not exempt tribes from notifying NIGC of licenses issued to key employees and primary management officials as required by IGRA. Self-regulating tribes must continue to provide an annual independent audit and resumes of all employees of the tribal regulatory body.
The new regulations no longer claw back NIGC inspection powers that IGRA withdrew. Self-regulation limits the Commission’s enumerated powers to (a) monitor Class II gaming, (b) inspect gaming premises, (c) conduct background investigations, and (d) inspect tribal gaming books and accounting records. This is a substantial limitation of key NIGC functions, some of which appear to be at odds with other regulations describing investigation requirements. These ambiguities could lead to disputes between NIGC and self-regulating tribes about the remaining scope of NIGC authority.
In practice, the new regulation means that Class II gaming tribes that are able to obtain the certification can exercise more sovereignty over their gaming operations and reduce their NIGC regulation costs. Many tribal casinos have generated consistent revenue from Class II machines alone, without the burdens of state compacts and revenue sharing. As technology improves, Class II machines are becoming more profitable and less distinguishable from Class III machines. The new regulations, paired with the technological developments, may make Class II gaming more attractive than ever.
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