Regulatory Updates

Class II Rules Promulgation: A Peek at the Process

Knute Knudson
Knute Knudson

by Knute Knudson, VP of Native American Development for IGT

We've all heard the phrase “how a bill becomes a law” to describe the process involved in attempting to pass legislation. Lately, the NIGC's efforts to amend federal regulations regarding technologic aids to the play of Class II games have provided an interesting look into the process of promulgating federal regulations.

Last year the NIGC proposed regulations for the Classification Standards and Technical Standards to be used for electronic aids to Class II games. NIGC also proposed a definition for an Electronic or Electromechanical Facsimile. Despite the dry nature of what was proposed, there was a very dynamic process involved in attempting to shape or defeat the regulations.

For the record, IGT consistently opposed the regulations as proposed for a wide variety of reasons. But today, rather than focus on the myriad problems with the proposed regulations, let’s take a look at the process from the manufacturer's perspective - a window into the work that was done.

The latest chapter started in September of last year with a conversation between Ron Harris of Rocket Bingo and NIGC Chairman Phil Hogen during the NIGC's September 19th public hearing on the proposed regulations. That discussion led to a meeting in Billings in November between a group of Class II manufacturers and the NIGC to discuss the problems with the proposed regulations from a manufacturing perspective. The Billings meeting centered on a list of questions the NIGC had asked of manufacturers. At that meeting manufacturers addressed the NIGC's questions and expressed their opposition to the proposed regulations.

Following the Billings meeting NIGC held a meeting of the Class II Tribal Advisory Committee in Washington, D.C. on December 5th to get input from the Advisory Committee on issues relating to the proposed rules and definition. That meeting included Advisory Committee members Charlie Lombardo, Jamie Hummingbird, Kenneth Ermatinger, and Norm DeRosiers. The committee carried on a day-long dialogue with the NIGC on many aspects of all three proposals.

That December 5th meeting began with opening statements. Dialogue and discussion followed. After the Commission and staff completed their exchanges with the Advisory Committee, members of the audience were allowed to comment. Tribal government representatives, lawyers, consultants, and representatives of the various manufacturers commented. Significant and strong disagreement developed at several stages of the discussion, particularly on the issue of the Class II Classification Standards. Chairman Hogen would end these periods of deep differences of opinion by acknowledging that he would take opposing views under consideration. The discussions were taxing and tense at times.

During the discussion on technical standards the manufacturers present at the meeting offered their respective technical expertise to assist the NIGC in modifying this proposed rule with a caveat - the manufacturers made it clear that such assistance should be provided only at the direction of tribal governments or with tribal representation guiding the discussions. Chairman Hogen reminded the group that the comment period was closing just ten days later on December 15th and that any effort would have to take the limited time into consideration. The group recessed and tribal representatives and vendors held a hastily arranged luncheon meeting at a nearby hotel restaurant.

That lunch meeting was a wild scene with people attempting to get the floor and state their views while the restaurant staff frantically explained to diners that they didn't have enough food to feed everybody who had crowded into the small restaurant. No one was really there to eat anyway. All came to figure out whether and how a meeting could be put together in the little time remaining before the comment deadline.

The group shared an initial concern that there was no way we could assemble in this short time period, make meaningful revisions, and submit those to the NIGC. But, after discussion, the group agreed to meet in Las Vegas six days later. Work was done to secure meeting room space, hotel rooms, and to make the necessary changes to personal and professional holiday schedules. Many made the dread calls to spouses to explain they would be gone yet another three days during the holiday season.

The Advisory Committee meeting reconvened after lunch with continued dialogue and questions regarding the proposed rules. All members of the Advisory group are to be complimented for their willingness to sit at the table exchanging views with the commission and staff. Several exchanges were frank, tense, and quite taxing for all participants.

So, the Technical Standards Working Group was formed. The following Monday, just six days later, the Working Group convened for its inaugural meeting - over 50 people showed up at Green Valley Ranch in Las Vegas to work together on a response to the proposed regulations. Seating for 35 had been arranged and was quickly expanded to accommodate the participants. Representatives of tribes from California, Florida, Oklahoma, and Montana were present. Vendor representation included Multimedia Games, Bally, Rocket, Nova, VGT, AGS, and IGT. There were lawyers and technology consultants representing tribes and vendors. NIGC sent Chief of Staff Joe Valandra and Senior Attorney Michael Gross as observers. Two computers and projection screens had been set up with presentations involving the proposed technical standards. The stage was set for three days of continuous work.

Tracy Burris from Oklahoma opened the meeting. He provided excellent leadership throughout the entire three days and subsequent meetings. Initial discussion focused on our goals. At first the group considered producing an alternative draft of the proposed technical standards. After two hours of trying to agree on specific alternative language on a number of points it was obvious it would not be possible to produce an alternative draft during this meeting. Consensus was reached that each section of the proposed technical standards document would be discussed and comments on each section would be recorded. It was agreed that each section's comments would include the entire range of views expressed by the divergent group.

Vendor groups set up around tables with notebooks and documents. Lawyers around the room interjected as needed. Attorneys Jess Green and Dan Decker set up in the back of the room like lawyers in a court room. They pulled tables together enabling them to lay out a considerable number of notebooks and documents. They looked as though they were arguing cases on behalf of tribal clients. They represented tribal interests across the board in an effective and successful manner. The NIGC representatives moved around the room and made themselves available for questions and comments. They stayed for all the proceedings.

The NIGC proposal received the attention of some of the most capable minds in Indian Country and gaming manufacturing for those three days. Much of the discussion focused on the proposed rule's similarity to a slot machine regulation where the game is played within a single, stand-alone machine. It unnecessarily drove game functionality to the player station and away from the central bingo system. Bingo systems operating in Indian gaming have the functionality located in the system as they are bingo games connecting players to compete against each other. That is the inherent nature of Class II bingo systems. (Chairman Hogen made positive note of this aspect on receipt of the final proposal.)

Spirited discussions also occurred on the issues of security, server location, small locations vs. large locations, and testing lab involvement. The discussions were serious frank, informed, and resulted in a healthy exchange of views. They never became unprofessional. The meetings were completed on Wednesday. The entire document had been reviewed and extensive comments prepared.

Following everyone's return to normal work routines, news came from Washington that the NIGC had extended the comment period for the proposed Technical Standards regulation until January 31st. Consequently the manufacturer's group held additional phone conferences and met in Dallas and at the Western Indian Gaming Show at Pechanga in January.

At the meeting in Dallas, the group considered a draft alternative from representatives of Nova Gaming. There were outstanding issues remaining to be resolved including proposals for a grandfather clause and a variance procedure. It was at this meeting that the single alternative draft to the NIGC proposal became a reality.

At the Pechanga meeting, considerable progress was made on the document. Additionally, an informal meeting between Chairman Hogen and the group occurred. The weekend after the Pechanga meeting was consumed by another series of 8-9 hour phone conferences working on additional edits.

The group then met in Washington, D.C. to present its alternative Technical Standards regulation to a joint NIGC/Tribal Advisory Committee meeting. The final product was a substantial change from the Technical Standards rule that was originally suggested. The language was trimmed considerably (80 pages were distilled down to 20 pages) and changed the focus from the machine to the system used in the game.

Many tribal leaders testified at that meeting. Vendor representatives and tribal lawyers also made comments. All expressed their appreciation for the group's efforts. Special thanks were expressed for the guidance and patience of Joe Valandra and Michael Gross, who acted as NIGC observers during the entire process.

Several themes were expressed during all the presentations. First, all were enormously appreciative of the leadership and technical skills demonstrated by Ron Harris of Rocket Gaming during this process. Second, the group expressed a desire to have the Technical Standards republished for comment should there be changes to the existing document as a result of these efforts. Third, and most importantly, the speakers continually expressed the point that a rule based in the group's proposal represents all the legal clarification necessary between Class II and Class III games therefore making a separate Classification Standards regulation unnecessary.

The commitment by the members of, and contributors to, the Technical Standards Working Group was substantial: Combined expenses for the group are estimated at $1.5 million; the group met in Washington, Dallas and Las Vegas; and innumerable conference calls were conducted - lasting hours and sometimes occurring on Saturdays and Sundays.

At least part of the group's request was met - the NIGC withdrew their three proposed rules in February and announced their intention to reconsider and possibly publish amended rules for Class II gaming. If the NIGC proposes alternative rules and what such rules might include is anyone's guess. But whatever the Commission's next move, they now have a blueprint for a regulation on technical specifications that the Technical Standards Working Group believes is the right model for all involved.

In a unique and positive alliance, tribal representatives, vendors, and their many lawyers and technology consultants worked diligently to improve the proposed technical specifications rule. There is much at stake. Today there are 50,000 Class II player stations communicating with bingo systems in at least thirteen tribal markets. The economic viability of these bingo systems could be dramatically affected by future NIGC regulatory decisions. It is thus essential that those involved in the rules promulgation process get it right.

Knute Knudson is Vice President of Native American Development for IGT. He can be reached by calling (775) 448-1528 or email knute.knudson@igt.com