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August 01, 2014

July 31, 2014

National Indian Gaming Commission (NIGC) Reverses Stance On One-Touch Bingo Classification

The National Indian Gaming Commission (NIGC) has proposed a rule that will classify one-touch bingo as Class II gaming, reversing its previous position. One-touch bingo is a networked electronic game in which the player must only press one button to wager and play. This rule confirms that Class II Indian gaming facilities, which do not require a tribal-state gaming compact, will be able to offer machines that more closely resemble slot machines. NIGC will accept comments for 60 days before promulgating a final rule.

The Indian Gaming Regulatory Act (IGRA) defines Class II bingo as a game, played electronically or otherwise, (1) for prizes, including money prizes, (2) in which the player “covers” numbers to match numbers “drawn” by the system, and (3) in which the game is won by the first person to cover an arrangement of numbers. Existing Class II electronic bingo machines require two button presses: one to “cover” the numbers and another to wager and play. In 2008, NIGC disapproved a tribal gaming ordinance incorporating one-touch bingo into its definition of Class II gaming. The disapproval concluded that because players did not participate and compete with each other in the game by taking a separate step to “cover” the numbers on virtual bingo cards, the game was a Class III electronic facsimile of a game of chance.

The newly proposed rule “reinterprets” IGRA to state that one-touch bingo satisfies IGRA’s definition of Class II bingo, even though the “covering” and drawing happen virtually simultaneously and more than one player can win: “Whether a player presses a button one time or two, the player is engaging with the machine, participating in the bingo game, and competing with fellow players on the electronically linked bingo system.” The proposal emphasizes that one-touch bingo incorporates the “fundamental aspect” of bingo: competing with other bingo players for a prize. Because one-touch gaming requires only one button press, the experience of electronic bingo will be closer to Class III electronic gaming devices, in which players need only press one button to place a wager and set the electronic reels spinning.

While Class II gaming is not as profitable as Class III gaming, it can generate significant revenue for Indian tribes operating without compacts. For example, the Seminole Tribe of Florida operated only Class II gaming until 2010, but it generated enough revenue to purchase the Hard Rock brand and properties for $965 million in 2006. Alabama prohibits Class III gaming, yet the Poarch Band of Creek Indians’ Class II casinos generated enough revenue to allow a reported tribal distribution of $18,000 to each of the Tribe’s roughly 2,500 members this year – a total of $45 million.

According to Dr. Alan Meister’s “2013 Indian Gaming Industry Report,” Indian gaming revenue in Class II-only states accounted for $531 million of the $27.4 billion total Indian gaming revenue in 2011.

However, compact tribes often add Class II machines to their gaming floors to supplement Class III gaming revenue without violating their compacts, so the total revenue generated by Class II machines is probably much higher. For example, the California compacts specify that tribes with less than 350 Class III machines qualify as non-gaming tribes and receive payments from the Revenue Sharing Trust Fund, which is funded by larger gaming tribes. It is significant to note that non-gaming tribes may add Class II machines to their limited inventory of Class III machines and continue to receive those payments.

Class II gaming on Indian land is exempt from state regulation, may not be limited through gaming compacts, and is not subject to the financial concessions demanded by states to operate slot machines. Because it provides an alternative to compacting and the revenue-sharing deals that frequently go with it, the Class II option also gives tribes leverage in compact negotiations. With the increasing technological and legal convergence of Class II and Class III gaming, the future will likely see further expansion of Class II machines on the casino floor.

© Copyright 2014 Dickinson Wright PLLC

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About this Author

Patrick Sullivan, Attorney, Litigation, Dickinson Wright Law Firm
Associate

Mr. Sullivan represents clients in tribal, state and federal litigation, regulatory matters before various government agencies and negotiation of intergovernmental agreements between Indian tribes and state and local municipalities. He holds an M.B.A from Portland State University and helped build several successful software companies. Mr. Sullivan’s popular articles in the Gaming Legal News are frequently republished in high-profile law blogs and online publications.

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