[Senate Hearing 112-706]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 112-706
 
   REGULATION OF TRIBAL GAMING: FROM BRICK AND MORTAR TO THE INTERNET

=======================================================================




                                HEARING

                               before the

                      COMMITTEE ON INDIAN AFFAIRS

                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 26, 2012

                               __________

         Printed for the use of the Committee on Indian Affairs




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                      COMMITTEE ON INDIAN AFFAIRS

                   DANIEL K. AKAKA, Hawaii, Chairman
                 JOHN BARRASSO, Wyoming, Vice Chairman
DANIEL K. INOUYE, Hawaii             JOHN McCAIN, Arizona
KENT CONRAD, North Dakota            LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota            JOHN HOEVEN, North Dakota
MARIA CANTWELL, Washington           MIKE CRAPO, Idaho
JON TESTER, Montana                  MIKE JOHANNS, Nebraska
TOM UDALL, New Mexico
AL FRANKEN, Minnesota
      Loretta A. Tuell, Majority Staff Director and Chief Counsel
     David A. Mullon Jr., Minority Staff Director and Chief Counsel



                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 26, 2012....................................     1
Statement of Senator Akaka.......................................     1
Statement of Senator Barrasso....................................     2
Statement of Senator Franken.....................................     2
Statement of Senator Udall.......................................     8

                               Witnesses

Bozsum, Hon. Bruce ``Two Dogs'', Chairman, the Mohegan Tribe.....    14
    Prepared statement...........................................    16
Gobin, Glen, Secretary, Tulalip Tribes of Washington.............    18
    Prepared statement...........................................    19
Hummingbird, Jamie, Chairman, National Tribal Gaming 
  Commissioners/Regulators Association...........................    26
    Prepared statement...........................................    28
Homer, Elizabeth Lohah, Attorney, Homer Law......................    31
    Prepared statement...........................................    33
Johnson, Gene, Senior Vice President, Market Research and Online 
  Studies, Spectrum Gaming Group.................................    40
    Prepared statement...........................................    41
Porter, Hon. Jon C., Former Congressman; President, Porter Gordon 
  Silver Communications..........................................    35
    Prepared statement...........................................    37
Stevens, Hon. Tracie, Chairwoman, National Indian Gaming 
  Commission.....................................................     4
    Prepared statement...........................................     5

                                Appendix

Eve, Grant W., CPA, CFE, Partner, JOSEPH EVE, prepared statement.    49
Porter, Hon. Robert Odawi, President, Seneca Nation of Indians, 
  prepared statement.............................................    53
Rand, Kathryn R.L., J.D. and Steven Andrew Light, Ph.D., Co-
  Directors, Institute for the Study of Tribal Gaming Law and 
  Policy, joint prepared statement...............................    50


   REGULATION OF TRIBAL GAMING: FROM BRICK AND MORTAR TO THE INTERNET

                              ----------                              


                        THURSDAY, JULY 26, 2012


                                       U.S. Senate,
                               Committee on Indian Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:30 p.m. in room 
628, Dirksen Senate Office Building, Hon. Daniel K. Akaka, 
Chairman of the Committee, presiding.

          OPENING STATEMENT OF HON. DANIEL K. AKAKA, 
                    U.S. SENATOR FROM HAWAII

    The Chairman. I call this hearing on the Committee of 
Indian Affairs to order.
    Aloha and welcome to all of you here. Welcome to the 
Committee's oversight hearing on the Regulation of Tribal 
Gaming: From Brick and Mortar to the Internet.
    Today we are here to discuss the regulation of Tribal 
gaming. Tribal gaming is now a $27 billion industry. In total, 
the Tribal gaming makes up approximately 40 percent of the 
commercial gaming industry in the United States. Gaming, like 
many industries, does not remain stagnant. That is why today we 
will discuss the current regulatory structure of Indian gaming 
under the Indian Gaming Regulatory Act, as well as examine 
regulation of online gaming should Federal legislation be 
enacted.
    Gaming has been the single most effective of economic 
development for Indian Country. Revenues from gaming provide 
essential services to Tribal members, including education, 
health care, and housing. Indian gaming also provides jobs to 
members of the surrounding communities. In many counties across 
the Nation, Tribes are the largest employer, with nearly 75 
percent of those jobs going to non-Indians.
    With these types of economic tools comes great 
responsibility. Tribes are the first line regulators for Tribal 
gaming. We, in Congress, and especially on this Committee, also 
have a responsibility to ensure that Tribal views and 
priorities are part of any legislation that could impact Tribal 
gaming.
    That is why I have developed a draft online gaming bill, 
the Tribal Online Gaming Act of 2012. This bill is intended to 
further the dialogue with Tribes, my colleagues here in the 
Senate, and other affected stakeholders as well. I encourage 
all of you to review the bill and provide any comments.
    In any expansion of gaming we must make sure that the 
unique circumstances surrounding Tribal sovereignty are 
maintained in any legislation and we must also enable Tribes to 
participate fully, should any legislation be considered, so 
Tribes are on equal footing with their counterparts in the 
commercial gaming industry.
    I look forward to hearing from all of our witnesses on how 
we can ensure that Tribal gaming is properly regulated and it 
exists now and into the future.
    Today we have the Chair of the NIGC, who will update the 
Committee on that agency's regulatory efforts over the years. 
We also have Tribal leaders from the Mohegan and Tulalip 
Tribes. Both these gentlemen have testified on the online 
gaming issue in the past and will update us on their Tribe's 
activities on this issue.
    Finally, we will hear from experts in the field of gaming. 
I am sure all of you will provide valuable insights today.
    Let me now call on our Vice Chairman, Senator Barrasso, for 
his opening statement.

               STATEMENT OF HON. JOHN BARRASSO, 
                   U.S. SENATOR FROM WYOMING

    Senator Barrasso. Mr. Chairman, thank you very much for 
holding this hearing.
    Last November, this Committee held an oversight hearing on 
the future of Internet gaming in Indian Country. Early this 
year we held an oversight hearing on the Department of 
Justice's opinion regarding Internet gaming and its 
implications for Indian Country.
    While there are many unanswered questions regarding 
Internet gaming in the United States, one thing is clear: the 
regulation of Internet gaming must be sufficient and effective. 
We are going to hear today how Tribes are preparing for such 
regulation. We will also hear from the National Indian Gaming 
Commission about developments since our hearing about a year 
ago.
    As you mentioned, Mr. Chairman, according to the 
Commission, gross revenues for Indian gaming in 2011 were over 
$27 billion and, as you said, that is a significant amount of 
money. Again, though, as we discussed a year ago, the annual 
compliance reports do not effectively assess how theft and 
crime at gaming facilities are being addressed. So I am looking 
forward to hearing what, if any, progress on this issue and 
other issues raised last year has been made.
    So thank you, Mr. Chairman, for your leadership on this 
important matter. I look forward to the witnesses' testimony 
and welcome them here.
    The Chairman. Thank you very much, Senator Barrasso.
    Let me now call on Senator Franken for any comments he may 
have.

                 STATEMENT OF HON. AL FRANKEN, 
                  U.S. SENATOR FROM MINNESOTA

    Senator Franken. Thank you, Mr. Chairman.
    As we all know, gaming has been an incredibly powerful 
economic development tool for Tribes. Gaming enterprises have 
brought much needed revenue and jobs to Indian Country. Tribes 
have used gaming revenue to become self-sufficient to invest in 
their communities and to provide basic services its members.
    The Mille Lacs Band of Ojibwe in Central Minnesota uses 
revenue from its two casinos to fund health clinics, an 
impressive assisted living facility, a police department, 
wastewater treatment facility, and schools. Mille Lacs is 
committed to providing affordable, safe, and comfortable 
housing to all of its members. Since 1991, the Band has built 
more than 200 new homes and renovated many existing homes. 
Mille Lacs has also been able to invest in a number of non-
gaming businesses and runs a small business development program 
to support members who want to start their own businesses.
    Indian gaming has also had a much broader economic impact. 
The Shakopee Mdewakanton Sioux Community, southwest of the Twin 
Cities, about 45 minutes southwest, is a great example of how 
gaming revenue can transform an entire community. Shakopee 
employs over 4,000 individuals, both gaming and non-gaming 
enterprises. They are the largest employer in Scott County, 
providing one in every ten jobs. In 2011, the Shakopee gaming 
enterprise was named one of the Minneapolis Star Tribune's top 
workplaces in the State based on a survey of employees.
    Shakopee has also had an impressive charitable giving 
program. Just over the past four years, the Tribe has donated 
nearly $128 million. Of that amount, over $115 million went to 
other Indian Tribes for economic development and community 
improvements.
    Without the revenue and opportunities that Indian gaming 
provides, none of this would be possible. Gaming is far from a 
perfect solution. Many Tribes are not able to take advantage of 
gaming opportunities because of their location, and much more 
needs to be done to diversify the economies of all Tribes. But 
gaming has provided an opportunity for so many Tribes. It has 
strengthened Tribal sovereignty and allowed Tribes to take hold 
of their own future. It is a tool that, if used well, can make 
a huge difference. This is something worth protecting.
    Any changes, any changes to current gaming laws must take 
into account the special place that Tribes hold in the gaming 
industry, both to respect Tribal sovereignty and out of 
economic fairness. If Congress considers legislation to 
legalize Internet gaming, it is vitally important that Tribes 
be consulted at every step of the process.
    I want to thank you, Chairman Akaka, for continuing to hold 
hearings on this important subject. I would like to thank the 
Vice Chairman as well. I hope we can all work together to make 
sure that the rights of gaming Tribes are protected. Thank you.
    The Chairman. Thank you very much, Senator Franken.
    As Chairman, it is my goal to ensure that we hear from all, 
all who want to contribute to the discussion. The hearing 
record is open for two weeks from today and I encourage 
everyone to submit your comments through written testimony.
    I want to remind the witnesses to please limit your oral 
testimony to 5 minutes today.
    So I would like to say Aloha and welcome our first 
panelists, Ms. Tracie Stevens, Chairwoman of the National 
Indian Gaming Commission. Would you please proceed with your 
testimony?

 STATEMENT OF HON. TRACIE STEVENS, CHAIRWOMAN, NATIONAL INDIAN 
                       GAMING COMMISSION

    Ms. Stevens. Thank you, Chairman Akaka, Vice Chairman 
Barrasso, and members of the Committee for inviting me to 
testify today. It is an honor to appear before this Committee 
as the Chairwoman of the National Indian Gaming Commission. I 
am a member of the Tulalip Tribes of Washington State.
    With me today are Vice Chair Stephanie Cochran and 
Commissioner Dan Little. Additionally, I would like to 
recognize members of my own council who are here today, Dawn 
Hatch and Glen Gobin.
    As a Commission, we have established four major priorities: 
consultation and relationship building, training and technical 
assistance, regulatory review, and agency operations. Today I 
will discuss the status of Tribal gaming and provide an update 
on these four priorities.
    Over the past few years, gaming revenue has remained 
stable, generating approximately $27.2 billion in gross revenue 
for Tribes. In 2011, 237 Tribes engaged in gaming, with 421 
gaming operations.
    There are over 6,500 Tribal, State, and Federal regulators 
working together to maintain the integrity of Indian gaming. 
NIGC is the Federal civil regulatory agency primarily 
responsible, along with Tribal and State regulators, for 
regulation of Indian gaming on Indian lands. Tribal Governments 
employ approximately 5,900 gaming regulators and States employ 
approximately 570 regulators. In addition to working with 
Tribal and State regulators, at the Federal level, NIGC works 
with Federal agencies such as the Federal Bureau of 
Investigation, the Department of Interior, and the Department 
of Treasury and Justice to promote compliance with all Federal 
laws.
    NIGC has worked to successfully implement a regulatory 
approach we refer to ACE, assistance, compliance, and 
enforcement, in that order. The approach has effectively 
reduced the number of notices of violation by proactively 
addressing potential issues and proceeding with enforcement 
action only for issues that could not be resolved.
    As I have discussed previously, Class III MICS are 
essential to protect the integrity and security of gaming 
operations. All Tribes engaged in Class III gaming pursuant to 
a Tribal-State compact have systems of internal controls that 
govern procedures for Class III operations.
    Although we do not have independent authority to promulgate 
or enforce Class III MICS, it has always been the practice of 
the NIGC to work with Tribes to strengthen the effectiveness of 
their Class III MICS, and we continue that practice today.
    Meaningful and transparent Tribal consultation is one of 
our four priorities. We transformed our consultation process to 
make it inclusive, meaningful, and transparent. In the past 
year, we have conducted 19 consultations as part of our 
regulatory review. Approximately 345 Tribal leaders or their 
representatives from approximately 179 Tribes attended these 
consultations.
    The Commission also views training and technical assistance 
as a critical tool in maintaining the integrity of Indian 
gaming. In 2011, the NIGC provided 83 trainings, totaling 659 
training hours. In 2011, over 2300 individuals attended 
training sessions, and so far this year 1,069 individuals from 
132 Tribes have attended trainings.
    We have also worked to improve the internal function of the 
agency by streamlining our internal operations. Tribal revenues 
are the sole funding source for the NIGC, and it is imperative 
that NIGC utilize these revenues efficiently and effectively. 
This means a smarter, better equipped agency that is more 
responsive and better adapts to its regulatory responsibilities 
and the needs of the Tribal gaming industry.
    Review of our regulations is another critical focus for the 
agency. We are committed to maintaining a regulatory framework 
that is efficient and effective. Over the past year, we have 
examined 20 regulations or potential regulations and circulated 
13 discussion drafts. Since July 2011, we have published 10 
proposed rules and 2 final rules. The Commission is working 
diligently to complete these rulemakings.
    A focus of our rulemaking is on the Class II MICS and 
technical standards. These regulations provide minimum 
standards designed to protect the security and integrity of 
Class II gaming operations and equipment used to play Class II 
games. Updating the MICS and technical standards for Class II 
gaming are integral to protecting the industry and patrons 
alike.
    This concludes my testimony, and I hope this summary of 
activities and initiatives provides the Committee with valuable 
information regarding the regulatory role and the goals of the 
NIGC. Thank you, Chairman Akaka, Vice Chairman Barrasso, and 
members of the Committee for your time and attention today. I 
am available to answer any questions that you may have.
    [The prepared statement of Ms. Stevens follows:]

Prepared Statement of Hon. Tracie Stevens, Chairwoman, National Indian 
                           Gaming Commission
    Thank you, Chairman Akaka, Vice Chairman Barrasso, and members of 
the Committee for inviting me to testify today. It is an honor to 
appear before you in my capacity as Chairwoman for the National Indian 
Gaming Commission (NIGC or Commission).
    During our tenure with the Commission, the Commissioners have 
established four major priorities: consultation and relationship 
building; training and technical assistance; regulatory review; and 
agency operations. We have made significant progress on each of these 
four priorities since I was sworn into office in June 2010. Meaningful 
consultation and relationship building are paramount in maintaining 
strong regulation of the industry by Federal, tribal and state 
regulators. NIGC-sponsored training opportunities and technical 
assistance provide early resources to address potential regulatory 
issues, thereby maintaining the integrity of Indian gaming. Regulatory 
review improves the industry by establishing clear, effective 
standards. Finally, review of our internal operations promotes 
efficient and effective regulation by eliminating redundancies, work 
silos, and unnecessary processes.
    Each of the four priorities aids NIGC's administration of its 
statutory responsibilities as set forth in the Indian Gaming Regulatory 
Act (IGRA). As I have discussed in prior testimony, this Commission has 
established the ``ACE'' approach to enforcement consistent with the 
four priorities: assistance, compliance, and enforcement. This approach 
prevents foreseeable problems through effective communication, training 
and technical assistance, and compliance efforts. When necessary, the 
Commission takes enforcement action to ensure compliance and protect 
the integrity of Indian gaming.
    Today I will discuss the status of tribal gaming and provide an 
update on the Commission's progress in achieving its four priorities.
The Current Status of Indian Gaming and Regulatory Oversight
    Gaming revenue provides resources for many tribal services as well 
as thousands of jobs for tribal members and surrounding communities. 
Currently, gaming operations employ tens of thousands of individuals 
across the United States, mostly in areas that, historically, suffer 
from high unemployment. Over the past few years, gaming revenue has 
remained roughly stable, collectively generating approximately $27.2 
billion in gross revenue for tribes. In 2011, 237 tribes engaged in 
gaming as a means of tribal economic development, with 421 active 
gaming operations.
    There are over 6,500 tribal, state, and Federal regulators working 
together to maintain the integrity of Indian gaming. NIGC is the 
Federal civil regulatory agency primarily responsible--along with 
tribal and state regulators--for regulation of Indian gaming on Indian 
lands. Tribal governments employ approximately 5,900 gaming regulators 
and states employ approximately 570 regulators. In addition to working 
with tribal and state regulators, at the Federal level, NIGC works with 
Federal agencies such as the Federal Bureau of Investigation, the 
Department of the Interior, the Department of Treasury and the 
Department of Justice, to promote compliance with all Federal laws.
    During the last 12 months, the NIGC has successfully implemented 
the ACE approach. In addition to providing informal day-to-day 
technical assistance, our auditors, compliance officers and attorneys 
work closely with tribes to resolve compliance issues in a manner that 
takes into account unique aspects of a particular gaming operation. If 
compliance steps are unsuccessful, we take enforcement action. ACE has 
effectively reduced the number of notices of violations (NOVs) by 
proactively addressing potential compliance issues and proceeding with 
enforcement action only for substantial regulatory violations that were 
not, or could not, be corrected through technical assistance and 
compliance efforts.
    As the Committee is aware, six years ago the D.C. Circuit held that 
the NIGC does not possess authority to promulgate regulations 
establishing Minimum Internal Controls (MICS) for Class III gaming. As 
I have discussed in my previous testimony, Class III MICS are essential 
to protect the integrity and security of gaming operations. During my 
tenure as Chairwoman, we have examined the real world impact of the 
court's decision on the regulation of Indian gaming.
    Through research and working with tribes and tribal regulators, we 
have learned that all tribes engaged in Class III gaming pursuant to a 
tribal-state compact have Class III MICS. Of the 24 states that allow 
Class III gaming, 15 require stringent MICS specifically in their 
compacts, and the other nine states require tribes to develop 
comprehensive MICS of their own. Therefore, every such tribe has a 
system of internal controls that governs procedures for Class III 
operations.
    The Commission has never taken an enforcement action for failure to 
comply with MICS. Prior to the decision in Colorado River Indian Tribes 
v. National Indian Gaming Commission, 466 F.3d 134 (D.C. Cir. 2006), 
(CRIT) if NIGC identified an issue with a particular tribe's Class III 
MICS, the agency worked with the tribe to achieve compliance. Although 
we do not have independent authority to promulgate or enforce Class III 
MICS, tribes continue to request our assistance and we continue to work 
with them to strengthen the effectiveness of their Class III MICS.
    We have also consulted with tribes regarding how the Commission 
should address the D.C. Circuit's decision. While there does not appear 
to be a tribal consensus, many tribes support publication of Class III 
MICS as guidance for their own regulations and compacts. We continue to 
utilize the MICS to provide technical assistance and training, and many 
tribes utilize NIGC's Class III MICS as part of their own regulatory 
schemes or as part of their tribal-state compacts.
Consultation and Relationship Building
    Meaningful and transparent consultation with tribes is integral to 
the success of NIGC's mission. As the primary Federal civil regulatory 
agency, the Commission conducts government-to-government consultations 
regarding changes to its regulations. This government-to-government 
dialogue is crucial in maintaining the integrity of the industry given 
the tribal, state and federal regulatory roles under IGRA.
    We make every effort to consult throughout Indian country and bring 
NIGC to tribal communities and widely-attended gatherings, in an effort 
to be mindful of both tribal and NIGC resources. In the past 12 months, 
we have conducted 19 consultations in every region of the United States 
regarding regulatory review. Tribal leaders and representatives from 
approximately 179 tribes attended, totaling approximately 345 
individuals.
    We have also been working collaboratively with Federal, tribal and 
state officials to ensure roles under IGRA are coordinated. This 
promotes effective inter-governmental communications regarding gaming 
issues and helps ensure that the appropriate agency has the information 
and support needed to perform its duties. As such, the Commission has 
reached out to the Federal Bureau of Investigation, the Department of 
Justice, Financial Crimes Enforcement Network, and other agencies, to 
develop inter-agency practices and to participate in inter-agency work 
groups.
Technical Assistance and Training
    The Commission views training and technical assistance as a 
critical tool in bolstering industry security and maintaining 
compliance with regulatory and statutory requirements. Therefore, 
consistent with express mandates contained in IGRA and the goals of the 
Commission, the NIGC offers training and technical assistance to tribal 
governments, tribal regulators and gaming operations personnel. 
Successful regulation depends on a well-trained workforce and well-
targeted training to ensure compliance with Federal regulations. Our 
goal is to achieve compliance with IGRA before issues arise, which will 
serve to preserve the integrity of tribal gaming and preempt the need 
for enforcement actions.
    Last year, we conducted a survey of our program, which helped 
inform our review and revisions to our course catalog. As a result, 
requests for training and technical assistance, as well as 
participation in trainings, have risen.
    In 2011, the NIGC provided 83 training programs, totaling 659 
training hours. Over 2,300 individuals attended training sessions, 
representing 209 (87 percent) of all gaming tribes. So far this year, 
1069 individuals from 132 tribes have attended our training programs. 
The NIGC has offered 51 different types of training. As more tribes 
learn about training opportunities, we expect trainings and attendance 
to continue to increase.
    Training and technical assistance will be an on-going initiative in 
our mission to achieve full compliance and serve the needs of the 
industry.
Internal Agency Operations
    As part of our effort to optimize regulation of tribal gaming, we 
have removed work flow silos, eliminated redundant functions, 
streamlined and implemented better processes to improve the functioning 
of the Agency. Further, in accordance with requirements of the 
Government Performance and Results Modernization Act of 2010, P.L. 111-
352, we are in the process of drafting a strategic plan, which will 
outline the NIGC's priorities over the next several years. The plan 
also will detail processes and methods by which the NIGC will achieve 
its goals, including performance measurements to assess the success of 
each initiative. In addition, consistent with Executive Order 13589, 
``Promoting Efficient Spending,'' we are continuously examining how to 
promote the cost-effective use of resources, including the hiring of 
staff to build upon NIGC's capabilities to perform mission-critical 
functions efficiently.
    To maximize efficiency within the Agency, we have adopted or 
revised internal policies to provide clarity to our employees. We are 
fully utilizing existing contracts with other agencies, which are cost 
effective. Tribal revenues are the sole funding source for the NIGC, 
and it is imperative that NIGC utilize these revenues efficiently and 
effectively. This means a smarter, better-equipped Agency that is more 
responsive and better adapts to its regulatory responsibilities and 
needs of the tribal gaming industry.
    In addition to its efforts to increase internal efficiency, the 
NIGC has continued its commitment to transparency by holding public 
meetings on the state of the Agency and important issues. Our most 
recent public meeting was held on May 23, 2012 in Prior Lake, 
Minnesota. These meetings provide tribes, as well as the public, an 
opportunity to learn about Commission business and to address the 
Commission. We will continue to hold public meetings to inform the 
community of the NIGC's progress toward achievement of its four 
priorities and other operational issues.
Regulatory Review
    We embarked on this important initiative in November 2010. Review 
of our regulations focused on maintaining a regulatory framework that 
is efficient and effective. Through internal deliberation, tribal 
consultation, and public comment, we are promulgating improvements that 
streamline processes while maximizing the NIGC's ability to regulate 
the industry effectively.
    After consulting with tribes and considering public comment in 
response to a Notice of Intent, the Commission established a Regulatory 
Review priority list and consultation schedule. This initiative has 
been conducted in accordance with Executive Order 13563, ``Improving 
Regulations and Regulatory Review,'' issued on Jan 18, 2011. Over the 
past year, we have discussed 20 regulations or potential regulations, 
and circulated 13 discussion drafts to date. Since I appeared before 
you in 2011, the Commission has published 10 Notices of Proposed Rule, 
two Notices of No Action and two Final Rules. Of the 10 Notices of 
Proposed Rule, the Commission is working diligently to conclude those 
rulemakings by issuing final rules in the Federal Register.
    This Commission is dedicated to strong and efficient regulation of 
Indian gaming. Therefore, a large portion of our effort has been 
focused on reviewing and updating the Class II Minimum Internal Control 
Standards (MICS) and Technical Standards for Gaming Equipment Used With 
the Play of Class II Games, 25 C.F.R. Parts 543 and 547. These 
regulations outline minimum standards designed to protect the security 
and integrity of Class II gaming operations, as well as minimum 
standards for equipment used to play Class II games. Through internal 
deliberations and consultation with tribes, we are reviewing the 
current regulations to ensure that they provide for advances in 
technology and continue to be relevant to current state of the 
industry. Updating the MICS and Technical Standards for Class II gaming 
are integral to protecting the industry and patrons alike.
    As part of the review process for Parts 543 and 547, we developed a 
Tribal Advisory Committee (TAC) to advise and make recommendations to 
the Commission regarding the Class II MICS and Technical Standards. The 
TAC is comprised of diverse group of tribal government representatives 
whose expertise assisted the Commission in its review of Parts 543 and 
547, and aided in the development of a discussion draft, which was 
published on March 16, 2012.
    We consulted with tribes in nearly all regions of the United States 
and reviewed over 50 written public comments to the discussion drafts. 
Although many tribes expressed opposition to potential changes to 
current regulations, the Commission's regulatory role is to take a hard 
look at the issues and make well informed decisions, even if those 
decisions ultimately are unpopular with the regulated community. The 
Commission is dedicated to promulgating strong regulations that 
maintain the integrity of Indian gaming.
    The Commission's proposed rules, which were published on June 1, 
2012, are based on careful consideration of comments received on 
discussion drafts. Since the proposed rules were published, we have 
conducted five consultations in various regions of the country and 
continue to receive written comments. The comment period for the 
proposed rules will close on August 15, 2012, after which we will 
review all public comments, allowing the NIGC to make a well informed 
and fully considered decision regarding final regulations.
Conclusion
    This concludes my testimony. I hope this summary of activities and 
initiatives provides the Committee with valuable information regarding 
the regulatory role and goals of the NIGC.
    Thank you, Chairman Akaka, Vice-Chairman Barrasso, and members of 
the Committee for your time and attention today. I am available to 
answer any questions you might have for me.

    The Chairman. Thank you very much.
    Now I would like to, before we ask you any questions, I 
would like to call on Senator Udall for any comments or opening 
statement he may have.

                 STATEMENT OF HON. TOM UDALL, 
                  U.S. SENATOR FROM NEW MEXICO

    Senator Udall. Let me just be very brief, because I think 
we are at the witness stage and I would like to go directly to 
the witnesses and the questioning here.
    First of all, Chairman Akaka, I want to thank you for 
holding this important hearing on Tribal gaming and for 
remaining engaged in this issue as the talk of legalized 
Internet gaming continues. Gaming is an issue with significant 
impact on Indian Country, and the Committee and Tribal leaders 
need to be an active part of the debate over any possible 
legislation relating to gaming in our Nation, and the Tribes 
need to have a seat at the table.
    Beyond this hearing, it is my hope that my colleagues in 
Congress will engage Tribes in development of any legislative 
proposals related to gaming, especially in relation to Internet 
gaming. As Tribal Nations grapple to develop strong economies 
and healthy communities, gaming will continue to be a 
significant factor.
    With that, Chairman Akaka, I would yield back and look 
forward to the questioning period that we are about ready to 
undergo. Thank you.
    The Chairman. Thank you very much, Senator Udall.
    Ms. Stevens, the NIGC's current fee structure allows for a 
total budget of $18 million per year. Is that amount sufficient 
for the NIGC to carry out its regulatory function for the 240 
Tribes who conduct gaming?
    Ms. Stevens. Thank you, Chairman Akaka, for that question. 
I believe that the current fee structure is sufficient to fund 
the NIGC's operations at this time. Also, as I said, in our 
initiatives we are working to maximize the resources that we 
have at the agency, and we continue to do so. So based on our 
current budget forecast, I believe the current structure is 
sufficient.
    The Chairman. Thank you.
    Ms. Stevens, Tribal gaming revenues for 2011 show an 
increase for the first time since 2008. Given this trend in the 
industry, do you anticipate that jobs in the industry will also 
increase?
    Ms. Stevens. Thank you, Chairman. While we don't have that 
information available to us, I would imagine that higher 
revenues may result in additional jobs either at Tribal gaming 
operations or Tribal Governments and their businesses.
    The Chairman. Thank you.
    Now let me call on the Vice Chair for any questions he may 
have. Senator Barrasso.
    Senator Barrasso. Thank you, Mr. Chairman.
    As you know, some States have now begun the process of 
legalizing some forms of online gaming in their jurisdictions, 
and the role of the Federal Government and Tribal Governments 
in Internet gaming is being discussed, but it really still 
remains up in the air for now. What regulatory changes should 
Congress or Tribes consider if Tribes were able to engage in 
Internet gaming?
    Ms. Stevens. Thank you, Vice Chairman. Without legislation, 
I couldn't speak directly to what our regulatory role would be. 
In terms of what implications the States might consider, or the 
Federal Government, regarding the Tribes or the opportunities 
for the Tribes, I would leave that to the Tribes to discuss. As 
a Federal regulator, we are focused on our position with 
regulating, and we would be happy to work with the Committee in 
the future should legislation be dropped.
    Senator Barrasso. Last year you testified that the 
Commission was examining approaches for ensuring that the 
minimum internal control standards for Tribal gaming would be 
implemented, and your testimony now indicates that every Tribe 
has a system of internal controls. In 9 of the 24 States 
allowing gaming, Tribes develop their own standards. The 
question I would have is how does the National Indian Gaming 
Commission ensure that Tribal minimum internal control 
standards at all Tribal operations are sufficient to protect 
the integrity of the games?
    Ms. Stevens. Thank you, Vice Chairman. Just to get some 
context, Indian gaming takes place in 28 States. In 24 States 
Tribes participate in Class III gaming pursuant to a Class III 
gaming compact, which is the agreement between the Tribes and 
the States, and, as you said, there are 9 that the compact 
directs the Tribe to have comprehensive MICS.
    And what we do, we work with Tribal regulators and 
operators to provide training and technical assistance but, 
more importantly, our staff reviews agreed upon procedures, 
which are audits that are on operations that are performed by 
independent audit firms, and in those States those audits 
confirm that each of those States and those Tribes have 
comprehensive MICS. So we have what we call AUPs, they are 
called agreed upon procedures. Those are audits by independent 
firms and they confirm the existence of comprehensive minimal 
internal control standards.
    Senator Barrasso. Following up on that, your written 
testimony says that successful regulation depends upon a well 
trained workforce, and you say several training sessions are 
offered by your agency. Do you have some way to measure the 
effectiveness of this training, and could you please explain 
how you measure that effectiveness?
    Ms. Stevens. Thank you, Vice Chairman. Evaluating 
effectiveness has multiple layers. We get feedback from Tribal 
employees and the regulators and operators. We also, more 
importantly, get feedback from our regional staff. We have 
seven regional offices and three satellite offices. They are on 
the ground every day, out working with Tribes, so we get 
feedback; they do site visits, they also look at these AUPs, 
and we evaluate compliance reports that we get from our staff 
when they do these site visits.
    As my written testimony says, training is really important; 
it helps keep Tribes in compliance and it prevents violations. 
So those are the ways that we measure effectiveness. And 
something to note, our training requests and the voluntary just 
general requests that we get from Tribes for help has increased 
substantially since we started these initiatives.
    Senator Barrasso. Last August, the Committee sent several 
questions to you from the July 2011 oversight hearing, and I 
know our Committee clerks' records show that we haven't yet 
received responses to the questions. I understand that perhaps 
your staff hadn't submitted the questions to you.
    We are likely to submit some more questions to you. I would 
ask that in two weeks or maybe next week, you actually look to 
see that you have received the questions and in a very timely 
way get backto us. I was looking for answers to questions from 
a year ago and we still don't have those in writing, and there 
may have been some lost in the communication. But I would ask 
you to actively look for the questions because they are going 
to be coming after this hearing, so thank you very much.
    Ms. Stevens. Vice Chairman, I apologize for that. I recall 
drafting those answers and authorizing them, and at this time 
it was sort of a surprise to us last night, when we were 
checking with staff, that you had not received them, and I 
apologize for that. We will work to get you a copy of that.
    Senator Barrasso. Thank you. Thank you very much.
    Thank you, Mr. Chairman
    The Chairman. Thank you very much, Senator Barrasso.
    Senator Franken, your questions, please.
    Senator Franken. Yes, thank you, Mr. Chairman
    Ms. Stevens, you are Chairwoman of the National Indian 
Gaming Commission. The Commission has almost 25 years of 
experience regulating Indian gaming. You currently oversee 422 
gaming facilities in 28 States.
    The legalization of Internet gaming is controversial in and 
of itself for many reasons. Gaming and Indian gaming is 
something that, I imagine, if you are like and my job, you 
think about a good 12, 14 hours a day. So I would just like to 
ask you what do you are the issues that we should be thinking 
about when we are talking about the impact on Indian Tribes, on 
Indian gaming, when we talk about the legalization of Internet 
gaming? Very general question, obviously.
    Ms. Stevens. Well, thank you, Senator Franken. You know, as 
a regulatory body, we focus on regulation and what we are 
currently authorized to regulate, so in the abstract it is 
difficult to answer that question. I think that, as a Federal 
regulator, I would defer to the Tribes to talk about that.
    Senator Franken. I am not asking necessarily for your 
opinions about what is good, what is the best way to do things, 
et cetera, et cetera. Just delineate if you could, as I said, 
this is something you must think about a lot, you must give 
thought to. What are the issues that we should be thinking 
about? What are the areas? I am asking you because you are 
Chairwoman of the National Indian Gaming Commission. What 
aspects of this should we be thinking about in terms of the 
impacts on Indian gaming, in terms of the impact on Indian 
Tribes?
    Ms. Stevens. Well, again, I think as a regulator, and not 
necessarily from the Tribal perspective, and I would be 
interested in what Tribes have to say, but what I do think 
about is because IGRA has a three-tiered, from a regulatory 
standpoint, three-tiered regulatory system, there is NIGC, 
there are the States, and there are the Tribes. In addition to 
that, because we don't have criminal authority, as I said, we 
have the Department of Justice, FBI, IRS, Treasury, all these 
other agencies.
    So I would say those are things that I think about. It is 
sort of the who is on first, who is going to do what? And it is 
hard for me to give any recommendation about that, but that is 
what I am thinking about, is the jurisdiction because it is 
divided up by the Act.
    Senator Franken. So what you are thinking most about is the 
regulatory regime.
    Ms. Stevens. Yes. I wonder what that is going to look like.
    Senator Franken. Okay, so that is what you think about 12 
to 14 hours a day.
    Ms. Stevens. I am a regulator.
    Senator Franken. Okay.
    Ms. Stevens. That is what I do.
    Senator Franken. I apologize. That is your job, is 
regulating, so that is what you think about and that is proper. 
In your testimony you state that meaningful consultation and 
relationship building are paramount to maintaining regulation 
of the industry. Can you elaborate on the importance of 
consultation for effective regulation and how do you do that?
    Ms. Stevens. Well, thank you, Senator Franken. Because it 
is a three-tiered system and because Tribes and their 
regulators are on the ground 24 hours a day, 7 days a week, 
they are the day-to-day regulators. In addition to that, and 
more importantly, as has been made clear by the President's 
memo in November 2009, we take consultation in our government-
to-government relationship with Tribes very seriously. Because 
there are so many different roles for different agencies, for 
Tribes, States, and Federal bodies, we have to collaborate, and 
in keeping with the spirit of government-to-government 
relationship and respecting the spirit of self-determination 
and sovereignty with Tribes, we have to talk to them, 
especially with regard to regulations that they will also be 
implementing.
    It is not just NIGC who is making sure that we are in 
compliance; the Tribes are using these regulations. And in 
talking to Tribes in this past 18 months about the regulations 
that we have been reviewing, we have talked to them before we 
started making changes so that we get a better sense from a 
practical standpoint how any changes might affect their ability 
to regulate, their ability to operate.
    So it is very important for us to do that, and it also 
keeps the communication channels open. If a Tribe needs help, 
if they need technical assistance or training, we want them to 
come to us; we don't want them to be in fear of us. And the 
only way we get that is if we have open communications and we 
are consulting with them.
    Senator Franken. My time is up. I probably will submit some 
questions for you also, so look for those. One is if Internet 
gaming were legalized tomorrow, which regulators would be 
overseeing that, but that will be a written question you can 
look for.
    Ms. Stevens. Thank you, Senator.
    Senator Franken. Thank you.
    The Chairman. Thank you very much, Senator Franken.
    Senator Udall, your questions.
    Senator Udall. Thank you, Chairman Akaka.
    Ms. Stevens, what do you believe are the biggest issues 
that are facing you as Chairman of the National Indian Gaming 
Commission? What are the challenges that you are facing in your 
current regulatory capacity, you and the other commissioners?
    Senator Udall. I am not sure that they are challenges, 
necessarily, as much as the areas in which we focus, which I 
explained in my testimony. We want to make sure that Tribes are 
staying compliant. I think that is what my primary 
responsibility is and what, as Senator Franken said, I think 
about 12 to 14 hours a day, and sometimes longer and sometimes 
in the middle of the night, keeping Tribes in compliance and 
how do we do that.
    Following up on what I was saying to Senator Franken, 
keeping those communication lines open, because we do have to 
work with the Tribes. So I wouldn't say necessarily that it is 
a challenge, but more of a focus of making sure that we are in 
compliance.
    Senator Udall. How are we doing on compliance, in your 
judgment and in the judgment of the Commission and the folks 
that are out there working on compliance?
    Ms. Stevens. As I said, there are a number of ways that we 
measure the effectiveness of what we do, and I think we are 
doing fairly well. Tribes are coming to us when they have 
issues, when they need technical assistance and training. We 
have audit staff on the ground who are always willing to help. 
We are working with Tribes on regulations to make sure that the 
regulations are relevant for today and to provide Tribal 
regulators with the tools they need to regulate.
    Senator Udall. What are the measures you use on compliance? 
You mentioned a couple of measures that you look at.
    Ms. Stevens. Well, as I said, we have what we call AUPs, 
which are the agreed upon procedure audits. Every year the 
Tribes are required to submit their financial statements to us. 
Those are indicators. We also, like I said, we have site 
visits, and those site visits provide us with compliance 
reports, and we act accordingly with regard to any issues that 
come up with those visits.
    Senator Udall. What percentage of Tribes are out of 
compliance on the AUPs or in the other measures that you use?
    Ms. Stevens. I would have to check with our staff to see 
exactly what that number is, and we would be happy to report 
back to you.
    Senator Udall. That would be great, if you could submit 
that for the record.
    What do you see as the future of Tribal gaming? Do you 
expect an expansion of Tribal gaming or do you expect it to 
stay about where it is right now?
    Ms. Stevens. Well, again, as a regulator, I concern myself 
primarily with regulating. However it might expand, whether by 
more facilities or more Tribes partaking in what is currently 
authorized, or if Congress authorizes additional opportunities, 
we will follow through with what Congress enacts.
    Senator Udall. And then this question goes to that. You 
know, I know this is a big if and you are trying to not get 
into this, but this is something that, as Senator Franken 
points out, we need to think about. If Internet gaming were 
legalized, would the NIGC have the capacity to regulate such 
gaming through Indian Country? And what would it take to ramp 
up personnel and technology to ensure that NIGC could regulate 
Tribal Internet gaming?
    Ms. Stevens. Well, without legislation, it is hard to say, 
but I will say that we are the only Federal agency who is 
solely dedicated to regulating Indian gaming. We have a well 
trained staff, experienced professionals who are well versed in 
Indian gaming. In the abstract, I couldn't say how much more 
money; it would depend on what roles or responsibilities are 
authorized in any piece of legislation or law that is passed by 
Congress. In the beginning of the agency it did take a while 
because it was a new agency, and we are not a new agency, so I 
imagine it wouldn't take as long as it did when the agency was 
first developed. But in the abstract I couldn't say; we would 
have to evaluate what the roles and responsibilities are in any 
law that is passed and evaluate our resources.
    Senator Udall. I appreciate very much those answers. As 
part of your report back to the Committee on compliance and how 
we are doing, if you could give me in your answer some kind of 
historical perspective: where we started out on compliance, how 
you have been doing; are the numbers going up, going down; are 
we having increasing problems. I think that would be really 
helpful to me, I know, and it might be helpful to other 
Committee members. Thank you for your testimony today and for 
your service. Thank you.
    Ms. Stevens. Thank you, Senator.
    The Chairman. Thank you very much, Senator Udall, for your 
questions.
    I want to thank Chairwoman Stevens very much for being here 
and for your responses to the Committee. We look forward to 
continuing to work with you. So thank you very much.
    Ms. Stevens. Thank you, Chairman Akaka, Vice Chairman 
Barrasso, and members of the Committee.
    Now I would like to invite the second panel to the witness 
table.
    Serving on our second panel is the Honorable Bruce ``Two 
Dogs'' Bozsum, Chairman of the Mohegan Tribe in Uncasville, 
Connecticut; Mr. Glen Gobin, Secretary of the Tulalip Tribes of 
Washington in Tulalip, Washington. Welcome to our panel and 
thank you very much for being here.
    Chairman Bozsum, would you please proceed with your 
testimony?

  STATEMENT OF HON. BRUCE ``TWO DOGS'' BOZSUM, CHAIRMAN, THE 
                         MOHEGAN TRIBE

    Mr. Bozsum. Thank you. Good afternoon, Chairman Akaka, 
Ranking Member Barrasso, and members of the Committee. My name 
is Bruce ``Two Dogs'' Bozsum. I am the Chairman of the Mohegan 
Tribe and also a ceremonial pipe carrier. It is a great honor 
to once again be here to present testimony to the Committee on 
the important subject of the regulation of Internet gambling.
    Mr. Chairman, as you know, the Mohegan Tribe has been 
closely monitoring developments on the Internet gaming for the 
past several years. We have testified in both the Senate and 
the House, and engaged lawmakers developing Internet gaming 
policy. We also participated with our fellow Tribes in the 
National Indian Gaming Association and the National Congress of 
American Indians to develop a position for Indian Country.
    Back home, our Tribe has a tradition of world-class 
regulation of our brick and mortar gaming facilities. We have 
invested a great deal of time to develop regulations for 
Internet gaming and these regulations now stand ready to be 
implemented and will meet or exceed the toughest regulations 
found anywhere in the world, including the new standards 
recently established in Nevada.
    Internet gaming is a reality in today's digital world. Our 
Tribe is doing everything in our power to prepare for it. We 
also will never forget that our sovereignty is not negotiable. 
As a Tribal Chairman, I am informed by the ways of our people 
to first look to our past and traditions in order to see what 
lessons can be learned.
    Applying this approach, it is clear that the current 
situation closely resembles the aftermath of the 1987 Cabazon 
Supreme Court decision. And just as the Cabazon case stopped 
Tribal opponents from claiming our gaming operations operated 
in a gray area, so has the December 23rd DOJ opinion now 
removed the uncertainty about whether the Wire Act prohibits 
Internet gaming, and it doesn't.
    However, the DOJ opinion does not settle the details of the 
issue, just as the Cabazon case did not specifically address 
all of the details on how Indian gaming would actually operate. 
It fell upon Tribal leaders and Federal policymakers to decide 
how to move forward and fill in those details. Congress decided 
simply forging ahead after the Cabazon decision may have 
resulted in a patchwork of different systems. Key issues would 
have been unsettled for years and Tribes would have been left 
vulnerable to ongoing litigation.
    Rather than settle for this haphazard patchwork of systems, 
some chose, instead, to establish a single coherent Federal 
policy for Tribal gaming in the Indian Gaming Regulatory Act, 
and while certainly not perfect and initially opposed by some 
Tribal leaders as an attack on sovereignty, IGRA has provided a 
framework for Tribal gaming which has become the biggest Tribal 
economic success story in our history.
    I believe that in the wake of the game-changing DOJ opinion 
on Internet gaming, Tribal leaders and Federal legislators 
should work together to establish a single coherent Federal 
policy and I believe this to be a far superior approach to 
allowing a patchwork system with no guarantees that Tribal 
sovereignty and our hard-won gains would be protected. As a 
father of eight, I understand all too well the need for one set 
of rules.
    Tribes should be extremely hesitant to entrust their 
economic futures to the 50 States, many of whom are in a 
financial crisis. Already everyone from commercial gaming 
interests to State lotteries are quickly maneuvering to 
establish Internet gaming systems in their State for their own 
advantage, and most of them are certain to give little, if any, 
consideration for the existing gaming compacts or the sovereign 
rights of the Tribes and their calculations, not to mention the 
thousands that depend on our Tribes for employment.
    This chaotic approach is also not good for protecting 
consumers or preventing problems or underage gambling, either. 
We believe that the same high standard of consumer protections 
We have for our land-based gaming must be present for Internet 
gaming. While the intentions of those who advocate for a State-
by-State approach to regulation are good, I simply believe the 
patchwork system without national standards would let too many 
minors, problem gamblers, and others fall through the cracks.
    As I have said before, the Internet is national in its very 
nature. A Federal system developed with significant input from 
Tribes would be the most effective way to safeguard Tribal 
sovereignty and ensure that exclusive Tribal gaming rights are 
not violated. A Federal system would provide the best 
protection for consumers, the best safeguards against underage 
and problem gambling, and the strongest law enforcement 
protections against potential criminal activities. From a 
Tribal perspective, a good start would be to adhere to the 
principles unanimously adopted by NIGA regarding Internet 
gaming.
    In conclusion, Mr. Chairman, starting with you, and members 
of the House and Senate have worked to explore many complex 
issues surrounding Internet gaming. Numerous hearings have been 
held, legislation has been proposed by you and others, and 
Tribal input has been sought. This good work has created a 
solid foundation and an environment where I believe a serious 
and well-informed effort to enact legislation this year can now 
take place. With a Federal system we will have friends such as 
yourself and the members of this Committee to fight to protect 
our rights.
    We greatly appreciate your interest in this issue and look 
forward to working with you closely now and in the future.
    [The prepared statement of Mr. Bozsum follows:]

  Prepared Statement of Hon. Bruce ``Two Dogs'' Bozsum, Chairman, the 
                             Mohegan Tribe
    Good afternoon Chairman Akaka, Vice Chairman Barrasso, and Members 
of the Committee. My name is Bruce ``Two Dogs'' Bozsum, and I am the 
Chairman of the Mohegan Tribe and also a Pipe Carrier. It is a great 
honor to once again be with you here today to present testimony on the 
important subject of Internet gaming and its regulation by the federal 
and tribal governments.
    Mr. Chairman, as you know, the Mohegan Tribe has been closely 
monitoring developments on Internet gaming for the past several years. 
We have testified in both the Senate and the House, engaged lawmakers 
developing Internet gaming policy and participated with our fellow 
Tribes in the National Indian Gaming Association and the National 
Congress of American Indians to develop a position for Indian Country.
    Back home, our Tribe has a tradition of requiring world-class 
regulation of our brick-and-mortar gaming facilities. We have invested 
a great deal of time to develop regulations for Internet gaming should 
they be necessary. These regulations now stand ready to be implemented, 
and will meet or exceed the toughest regulations found anywhere in the 
world, including the new standards recently established in Nevada.
    Internet gaming is a reality in today's digital world. Our Tribe is 
doing everything in our power to prepare for it, and to look out for 
the best interests of Tribal governments and the commerce our Tribal 
nations depend upon. We will never forget that our sovereignty is not 
negotiable.
    As a Tribal Chairman confronting the situations we face today, I am 
guided, by the ways of our Mohegan people, to first look to our past 
and traditions in order to see what lessons can be learned and applied 
to the present.
    Applying this Mohegan approach to Internet gaming, it is clear that 
the current situation closely resembles the aftermath of the 1987 
decision by the U.S. Supreme Court in the Cabazon case, which affirmed 
our rights as sovereign Tribal governments to authorize and regulate 
gaming. I believe we can learn much from studying this history and 
using it to guide our decisions today.
    Just as the Cabazon case stopped tribal opponents from claiming our 
gaming operations operated in a ``gray area'' of the law, so has the 
December 23rd DOJ opinion now removed the ``gray area'' of uncertainty 
about whether the Wire Act prohibits Internet gaming. It doesn't.
    However, the DOJ opinion does not settle all the details of the 
issue, just as the Cabazon case did not specifically address all of the 
details or significant questions of how Indian gaming would actually 
operate. As in the aftermath of Cabazon, it now falls upon Tribal 
leaders and federal policymakers to decide how to move forward and fill 
in those details.
    After Cabazon, Congress in its wisdom believed that simply allowing 
the framework for Tribal gaming to evolve over time might result in a 
patchwork of different systems throughout the country. Key issues would 
have been unsettled for years, and Tribes would have been left 
vulnerable to ongoing litigation and the changing whims of political 
leadership.
    Rather than settle for this haphazard patchwork of systems, federal 
legislators and some Tribal leaders chose instead to establish a 
single, coherent federal policy for Tribal gaming in the wake of the 
Cabazon decision. This policy is well-known to all of us now as the 
Indian Gaming Regulatory Act (IGRA). While certainly not perfect and 
initially opposed by several Tribal leaders as an attack on 
sovereignty, there is widespread agreement today that IGRA as enacted 
has provided a predictable and stable framework for Tribal gaming, 
which has become the biggest Tribal economic success story in our 
history.
    I believe that in the wake of the game-changing DOJ opinion on 
Internet gaming, Tribal leaders and federal legislators should follow 
the same approach many did after Cabazon, and work together to 
establish a single, coherent federal policy to govern, with stability 
and predictability, what kinds of Internet gaming might be permitted 
and how Internet gaming should best be regulated. This would be far 
better than allowing a patchwork system to develop over the next two 
decades, state-by-state, lawsuit-by-lawsuit, and with no guarantees 
that Tribal sovereignty and our hard-won gains would be protected. 
Tribes should be extremely hesitant to entrust their economic futures 
to the tender mercies of the 50 states, many of whom are still in 
financial crises and looking for new sources of revenue. Already, 
everyone from commercial gaming interests to state lotteries is quickly 
maneuvering to establish Internet gaming systems in their state in 
order to make them work for their own advantage. Most of them are 
certain to give little, if any consideration for the existing gaming 
compacts or the sovereign rights of Tribes in their calculations. Not 
to mention the tens of thousands of American workers who depend on 
Tribes for employment.
    This chaotic approach is not good for protecting consumers, or for 
preventing problem or underage gambling. I am proud that the Mohegan 
Tribe is a global leader in regulation to protect our customers and to 
prevent problem and underage gaming at our facilities. We believe that 
the same high standard of consumer protections we have for our land 
based gaming must control Internet gaming. While the intentions of 
those who advocate a state-by-state approach to regulation are good, I 
simply believe a patchwork system without national standards would let 
too many minors, problem gamblers, and others fall through the cracks.
    The Internet is national in its very nature, and policy questions 
for gaming on the Internet are best addressed on a national level. A 
federal system, developed with consultation and significant input from 
Tribes, will be the most effective way to safeguard Tribal sovereignty 
and ensure that exclusive Tribal gaming rights are not violated by 
states and commercial gaming operators anxious to cash in on an 
Internet gaming boom. A federal system would provide the best 
protection for consumers, the best safeguards against underage and 
problem gambling, and the strongest law enforcement protections against 
potential criminal activities by those who choose to try to operate 
outside of the system that is lawfully established.
    The creation of any federal system must be done in a fair and 
evenhanded way. From a Tribal perspective, a good start would be to 
adhere to the principles unanimously adopted by NIGA regarding Internet 
gaming. In addition, the Mohegan Tribe believes that any federal 
legislation must:

   Guarantee to Tribes the ability to accept, on Tribal lands, 
        otherwise legal wagers from persons who are not themselves 
        located on Tribal lands.

   Respect existing Tribal-state gaming compacts, including any 
        rights of exclusivity.

   Recognize the difference between revenue sharing agreements 
        and taxation, and ensure that Tribal sovereigns are not subject 
        to taxation.

   Utilize existing Tribal government regulatory structures, 
        which are working well and have an outstanding 25-plus year 
        track record.

   Strictly enforce against unlicensed sites in order to 
        protect players and the investment of Tribal and commercial 
        gaming entities in legal, regulated sites.

   Be limited to poker-only.

   Facilitate the formation of Tribal Internet gaming 
        coalitions across the country to better enable us to compete 
        against large corporate commercial gaming concerns.

    Mr. Chairman, you have been a leader among the many Members of the 
House and Senate who are working diligently to explore the many complex 
issues surrounding Internet gaming. Numerous hearings have been held, 
legislation has been proposed, and tribal input has been sought. This 
good work has created a solid foundation for understanding the key 
issues, and an environment where I believe a serious and well-informed 
effort to enact legislation this year in Washington can now take place. 
Given the new environment created by the DOJ opinion, I believe it is 
important that this federal action takes place soon. Tribes cannot risk 
the hazards of a patchwork system defined by the best interests of the 
states, lotteries, and commercial gaming. With a federal system, we 
will have friends such as yourself and the Members of this Committee to 
fight to protect our Tribal rights throughout the process.
    We greatly appreciate your interest on this issue, and look forward 
to working with you closely now and in the future.

    The Chairman. Thank you very much, Chairman, for your 
testimony.
    I would like to call on the Secretary for your testimony. 
Would you please proceed, Mr. Gobin?

     STATEMENT OF GLEN GOBIN, SECRETARY, TULALIP TRIBES OF 
                           WASHINGTON

    Mr. Gobin. Good afternoon, Chairman Akaka, Ranking Member 
Barrasso, and Committee members. My name is TE CHUHT, Glen 
Gobin, Secretary on the Tulalip Tribal Council. I would like to 
thank you for this opportunity to testify regarding regulation 
of gaming, from bricks and mortars to the Internet, and working 
to keep this issue at the forefront, recognizing the changes as 
a result of the DOJ opinion and the potential impacts in Indian 
Country.
    I would like to say on a personal note, Chairman Akaka, I 
want to thank you for your leadership. I want to thank you for 
your leadership, in particular of this Committee, continuing to 
always bring issues like this that Tribes face in trying to 
bring resolution and understanding through the many years, and 
I thank you for your leadership.
    On November 17, 2011, I testified before this Committee on 
Tulalip Tribe's position not supporting legalization of 
Internet gambling. That position was based on the potential 
negative impacts to existing Tribal gaming establishments and 
local economies, as well as the existing DOJ interpretation of 
the Wire Act prohibiting all forms of Internet gambling.
    On December 23rd, 2011, the DOJ released a new 
interpretation of the Wire Act, reversing its long-held 
opinion, opening the door for States to move forward with 
Internet lottery sales within their respective States and with 
agreement between States and/or foreign nations. This new DOJ 
opinion clearly provides the opportunity for States to 
participate in Internet gambling activities within their States 
if they so choose. Some States have already begun to move 
forward and many more are actively working on setting up and 
establishing online systems.
    Tribes have the ability to participate in the same 
activity, even though some may feel that Tribal participation 
is not yet fully defined. IGRA anticipated future gaming 
advancements and recognizes and allows for electronic, 
computer, and other technological aids, although the ability to 
fully access the Internet gaming market may be subject to 
interpretation.
    Clarifying legislation will minimize conflict and 
litigation, which often puts Tribes and States at odds. It is 
for this reason that the six principles put forth by NIGA are 
critical for Indian Country. These principles represent core 
values that respect Tribal sovereignty.
    Once more, we must emphasize that Tribes must be at the 
table to protect and promote these principles in any Federal 
legislation that might come forward. With Indian gaming 
representing over 40 percent of the gaming market, generating 
over $27.2 billion annually to this Nation's economy, not to 
mention the jobs and economic benefits Indian gaming brings to 
some of the most impoverished areas in the Country, it is 
inconceivable, given the recent DOJ opinion and with such 
sweeping changes in gaming being contemplated, that Tribes are 
not being consulted.
    There is no pending legislation on Internet gambling at 
this time. However, past proposals created an Office of 
Internet Poker Oversight or designated the Secretary of 
Commerce with regulatory authority and oversight over Internet 
gaming. Tulalip feels, as do other Tribes in Indian Country, 
that there is only one Federal agency that has had any history 
of regulatory oversight of gaming, and that agency is the 
National Indian Gaming Commission.
    The NIGC has over 20 years of extensive regulatory 
experience in gaming and it is the only Federal agency with 
that type of experience. The NIGC is an independent agency able 
to review, amend, and can promulgate regulations in an 
effective and timely manner. The NIGC has a long established 
history with Tribes and has continued to evolve and adapt to 
the changes within the gaming industry, transitioning from more 
traditional forms of gaming and mechanical slot machines to 
highly advanced server-based gaming systems, while ensuring 
compliance with all applicable Tribal, State, and Federal 
gaming standards.
    The NIGC is well suited, more than any other Federal 
agency, to transition into Internet gaming. There is no other 
Federal agency that has any gaming or gaming-related 
experience, let alone Internet gaming experience. The NIGC 
understands and respects the government-to-government 
relationship with Tribal leadership and Tribal gaming 
regulators who have primary oversight of the day-to-day gaming 
activities. Creating a new agency will limit Tribes' 
opportunity and ability to compete, with their lack of 
understanding of Indian Tribes and Indian gaming. Creating any 
new agency or assigning Internet regulation to any existing 
agency would be burdensome and duplicative.
    At this time, Tribes are still speculating and anticipating 
legislation that may be considered. However, since the new DOJ 
opinion, there is clearly a path defined for States to 
participate in Internet gaming, if they choose. Tribes must 
have equal footing to participate. By being inclusive of all 
affected stakeholders, we can preempt issues that are already 
foreseen in this arena and bring forward Internet gaming 
legislation to an open and collaborative process that protects 
the customer and the integrity of the games, ensuring that 
Tribes have equal opportunity to participate and compete, while 
protecting and respecting Tribal sovereignty.
    Again, on behalf of the Tulalip Tribes, I thank the 
Committee for hearing some of the concerns from Tulalip Indian 
Country on the issues surrounding Internet gambling.
    [The prepared statement of Mr. Gobin follows:]

    Prepared Statement of Glen Gobin, Secretary, Tulalip Tribes of 
                               Washington
    Good afternoon Chairman Akaka, Ranking Member Barrasso and 
Committee Members, my name is, TE CHUHT, Glen Gobin, Secretary on the 
Tulalip Tribal Council. I would like to thank you for this opportunity 
to testify today regarding regulation of gaming, from bricks and mortar 
to the Internet, and working to keep this issue at the forefront, 
recognizing the changes as a result of the DOJ opinion and the 
potential impacts in Indian Country.
    On November 17, 2011, I testified before this Committee on Tulalip 
Tribes position not supporting legalization of Internet Gambling. That 
position was based on the potential negative impacts to existing tribal 
gaming establishments and local economies, as well as the existing DOJ 
interpretation of the WIRE Act prohibiting of all forms of Internet 
gambling. On December 23, 2011, the DOJ released a new interpretation 
of the WIRE Act, reversing its long held opinion, opening the door for 
States to move forward with Internet lottery sales within their 
respective states, and with agreement between states and foreign 
nations. This new DOJ opinion clearly provides the opportunity for 
states to participate in Internet gambling activities within their 
states, if they choose. Some states have already begun to move forward 
and many more are actively working on setting up and establishing on-
line systems.
    Tribes have the ability to participate in this same activity; even 
though some may feel that tribal participation is not yet fully 
defined. IGRA anticipated future gaming advancements, and recognizes 
and allows for electronic, computer and other technological aids, 
although, the ability to fully access the Internet gaming market may be 
subject to interpretation. Clarifying legislation will minimize 
conflict and litigation, which often puts Tribes and states at odds. It 
is for this reason that the six principles put forth by NIGA are 
critical for Indian Country. These principles represent core values 
that respect tribal sovereignty by ensuring an Indian Tribes right to 
operate, regulate, tax, and license Internet gaming and these rights 
must not be subordinate to any non-federal authority; legislation must 
not open up IGRA for amendments; legislation must respect existing 
Tribal-State Compacts; legislation must ensure positive economic 
benefits to Indian Country; and legislation must ensure that Internet 
gambling authorized by Indian Tribes is available to customers in any 
locale where Internet gambling is not criminally prohibited.
    Once more we emphasize that Tribes must be at the table to protect 
and promote these principles in any federal legislation that might come 
forward. With Indian gaming representing over 40 percent of the gaming 
market, generating over $27.2 billion annually to this nation's 
economy, not to mention the jobs and economic benefits Indian gaming 
brings to some of the most impoverished areas in the Country, it is 
inconceivable, given the recent change in the DOJ opinion, and with 
such sweeping changes in gaming being contemplated, that Tribes are not 
being consulted.
    There is no pending legislation on Internet gambling at this time; 
however, past proposals created an Office of Internet Poker Oversight 
or designated the Secretary of Commerce with regulatory authority and 
oversight over Internet gaming. Tulalip feels, as do other tribes in 
Indian country, that there is only one federal agency that has any 
history of regulatory oversight of gaming, that agency is the National 
Indian Gaming Commission.
    The NIGC has over 20 years of extensive regulatory experience in 
gaming, and it is the only federal agency with that experience. The 
NIGC is an independent agency, able to review, amend, and can 
promulgate regulations in an effective and timely manner. The NIGC has 
a long established history with Tribes, and has continued to evolve and 
adapt to the changes within the gaming industry, transitioning from 
more traditional forms of gaming and mechanical slot machines to highly 
advanced server based gaming systems while ensuring compliance with all 
applicable tribal, state, and federal gaming standards.
    As an example, when IGRA became law in 1988, extensive controversy 
ensued as to whether the National Indian Gaming Commission would be 
effective in the regulation of Indian gaming. Many were concerned that 
organized crime and other corrupting influences would infiltrate Indian 
gaming. The NIGC, working in conjunction with Tribes, has proven to be 
fully capable of effective regulation of Indian gaming, dispelling 
these perceptions and fears.
    The NIGC is well suited, more so than any other federal agency, to 
transition into Internet gaming. There is no other federal agency that 
has any gaming or gaming related experience, let alone Internet gaming 
experience. The NIGC understands and respects the government-to-
government relationship with tribal leadership and tribal gaming 
regulators, who have primary oversight of day-to-day gaming activities. 
Creating a new agency will limit Tribes' opportunity and ability to 
compete, with their lack of understanding of Indian Tribes and Indian 
gaming. Creating any new agency or assigning Internet regulation to any 
existing agency would be burdensome and duplicative.
    At this time, Tribes are still speculating and anticipating 
legislation that may be considered, however, since the new DOJ opinion, 
there is clearly a path defined for states to participate in Internet 
gaming if they choose. Tribes must have equal footing to participate. 
By being inclusive of all affected stakeholders we can preempt issues 
that are already foreseen in this arena, and bring forward Internet 
gaming legislation through an open and collaborative process that 
protects the customer and the integrity of the games; ensuring that 
Tribes have equal opportunity to participate and compete while 
protecting and respecting tribal sovereignty.
    Again, on behalf of the Tulalip Tribes, I thank the committee for 
hearing some of the concerns from Tulalip and Indian Country on the 
issues surrounding Internet gambling.

    The Chairman. Thank you very much, Mr. Secretary.
    Chairman Bozsum, your Tribe, the Mohegan Tribe, has 
regulations that are more stringent than those established in 
Nevada. Do your regulations envision Tribes engaging in online 
gaming at the same level as other commercial gaming providers? 
Do you think that Tribes have the capacity to both participate 
in and regulate their online gaming operations?
    Mr. Bozsum. Thank you, Senator, Mr. Chairman. Great 
question. I believe we can. I know we can. I think we do a far 
better job than most commercial businesses out there. We take a 
lot of pride in our businesses and we make sure that the 
facility is safe, it is running, it is compliant. We have so 
much honor and pride with our own facilities that we want 
people to come there and feel safe, and you can't have that if 
you have a bad record or you don't think you can comply to the 
rules and regulations that gaming facilities should follow.
    I think Tribes that are looking to get into the business of 
Internet gaming, there are good models out there right now that 
they could reach out to, as I have done, across the Country, 
meeting with other Tribes and other gaming facilities to get a 
feel of their regulations, their policies, and traveling 
overseas to meet with all of the biggest Internet companies 
that are out there to compare regulations and to talk about 
policies, and we have taken all that and pretty much have 
written a policy that we have that we are getting ready to 
actually share with you at some point soon. As soon as the rest 
of my board is available to go over it one more time with me, 
we will share that with you.
    The Chairman. Thank you very much. We will look forward to 
that. Thank you.
    Secretary Gobin, now that the Department of Justice opinion 
has impacted the Tribes' view on online gaming, what steps has 
Tulalip taken to be able to be ful participants in online 
gaming?
    Mr. Gobin. Thank you, Mr. Chairman. Since the last hearing 
that was held, Tulalip has been actively researching our access 
to the Internet, how we might partake in this and how it might 
be utilized not only in the gaming aspect, but how it might 
become a marketing tool or another way to bring customers in to 
a bricks and mortar facility.
    Currently, within Washington State there is an RCW in place 
that prohibits Internet gambling in Washington State, so for us 
to implement the provision of the DOJ opinion, there would have 
to be an RCW change within Washington State. So we are not 
actively seeking any participation in that right now until that 
RCW changes.
    The Chairman. Thank you very much.
    Chairman Bozsum, should a Tribal Government's participation 
in online gaming be dependent on whether the State they reside 
in has opted in or opted out of participation in online gaming?
    Mr. Bozsum. Well, I will use myself as an example. I am the 
chief elected official for our Tribe in Connecticut, and if the 
governor decides to opt out, he has to meet with me, as one 
leader to another, as the head of the State there, and discuss 
what we can do on our reservation. It is my job as the elected 
official, and the rest of my board, to make those decisions on 
our reservation to uphold our sovereign rights.
    The Chairman. Thank you very much for your response.
    Vice Chairman Barrasso, do you have questions?
    Senator Barrasso. Thank you, Mr. Chairman. I just have one 
for both of the members of this panel.
    Internet gaming is not an activity that can be confined 
within strict borders, and depending on what the future holds 
for Internet gaming, there may be instances where it might even 
cross Tribal boundaries, even if a Tribe doesn't participate in 
Internet gaming. I am curious if any of the Tribes represented 
on this panel have taken steps in anticipation of the 
possibility of regulating Internet gaming.
    I think, Mr. Chairman, you had mentioned taking steps to 
prepare, and I am just interested in terms of what each of you 
are doing or have done in the possibility of regulating 
Internet gaming and what steps you have taken.
    Mr. Bozsum. Thank you. Like I mentioned, we have some great 
standards right now and some minimum control standards, and we 
have met with other Tribes and our goal is to form with the 
coalition, get Tribes together. Like the Senator mentioned 
earlier, Senator Franken, about the Tribes that don't have an 
opportunity right now, because of their location, to 
participate in any gaming, I look at it as an opportunity to 
bring those Tribes in. It is the Internet; you don't have to 
build a facility.
    If we create with our coalition a hub, at some point we 
offer that to other Tribes to tap into to create the revenues 
and the income for them through us, with our regulations that 
we have in place right now, and I look at it as an opportunity 
for everybody in Indian Country to have that opportunity. It 
gives them the freedom to support their health, their education 
benefits, stand alone and take care of those issues on their 
own, and free up some money back in Federal grants, back to 
other needy issues or other needy Tribes, whoever may need that 
money. It is better to stand up on your own feet and take care 
of your own.
    Senator Barrasso. Mr. Secretary?
    Mr. Gobin. Thank you. I think back 24 years, and Tribes 
started 24 years with the requirement for gaming to be in place 
and you had Indian gaming, IGRA in place, and it set up a 
regulatory process. Tribes have developed a very highly 
effective and highly technical regulatory process through our 
Tribal gaming agencies, in conjunction with the State and in 
conjunction with the NIGC over the last 24 years to protect and 
ensure and safeguard the games that are in place. There was a 
system established; there were games that were developed; there 
were games that were put in place, and every time there was a 
change, there was a new procedure put in place, a new control 
that was put in place, and it always had constant oversight 
from those three agencies.
    I see no difference, as we move forward into the future, 
for Internet gaming. We are going to evolve as we always have 
done, and we are going to move forward in a positive manner and 
protect those games, because those revenues drive our 
government services and fund our governmental operations. It is 
hard to imagine not having those systems in place as we move 
into Internet gaming. But yet that process is not defined. We 
are not sure as to how that is, so my Tribe is not prepared yet 
with any regulations because we are unsure of what the 
parameters are going to be, how we are going to access that 
market for sure. So to say that we are prepared with full 
regulatory aspect, we are not, but I have full confidence that 
we have the capability to do it.
    Senator Barrasso. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much, Senator Barrasso.
    Senator Franken?
    Senator Franken. Thank you. I am sorry I had to step out 
for your testimony, but I have a few questions. This is for 
both witnesses.
    As I said in my opening statement, I have seen firsthand 
the positive impacts of Indian gaming, both in my home State 
and across the Country. Can you each talk about the state of 
your communities before and after your Tribes started gaming 
operations?
    Mr. Bozsum. Thank you, Senator. Our Tribe back in 
Uncasville, Connecticut, we were pretty spread out. Everything 
was taken from us; we were down to half an acre of land with a 
church on it, so we were spread out throughout the community. 
And when the State, when things moved forward and we had the 
opportunity to start gaming in Connecticut, we were able to 
stop receiving any Federal grants or funds to support our 
Tribal members, so we took our funding from the casino or any 
extra money we had and supported our Tribal members with health 
and education benefits.
    Those were two of the most important things that we look at 
in our Tribe. The casino may not be there forever, but a great 
education can go a long way, and the health of our Tribal 
members and our elders, that is where we like to invest the 
bulk of our finances. I look at doctors, lawyers; we have 
everything covered that you can imagine out there with all of 
our children and some of our adults who went back to school. So 
our reinvestment is back into our Tribal members.
    And then the community that we live in, with our fire 
department that we have, we help, we respond to all the 
community needs that they have; we support a lot of charities.
    Senator Franken. I am sorry to interrupt. I really wanted a 
sort of, and, Mr. Gobin, you can talk to this, or you can 
continue, just the contrast from before and after.
    Mr. Bozsum. We are very healthy. I mean healthy like I am 
living proof of what Indian gaming can do. I was diagnosed with 
something long ago and the Tribe stepped up and took care of 
me, so here is living proof of what Indian gaming can do right 
here. I should have been dead. I am not.
    Senator Franken. You look great.
    Mr. Bozsum. Thank you.
    [Laughter.]
    Mr. Bozsum. So do you.
    [Laughter.]
    Senator Franken. Thank you.
    Mr. Gobin, you look great too.
    Mr. Gobin. Thank you.
    [Laughter.]
    Mr. Gobin. Thank you for the question, as well.
    [Laughter.]
    Mr. Gobin. I think back in my lifetime. I was born in 1956. 
And the changes from my reservation, my memories go back to 
growing up in the 1960s, there were no jobs, there were no 
economic activities. Our Tribal Government had a small leasing 
program where we took the prime property around Tulalip Bay, 
waterfront property, and we leased it to non-Indians to come 
out, and it drove our revenue stream that funded our 
government. Very small, very minimal, but it provided a 
governmental revenue stream that came in.
    As things evolved, our leadership continued to struggle and 
tried to find ways to generate more money, but the day-to-day 
lives of the people were making a living off of fishing or 
working in the woods, logging or cutting shake boards, if that 
was the case. I remember many meals. We ate deer meat until 
summertime came, and then we ate fish, and that was our cycle. 
And as gaming came on, it created a revenue stream for the 
Tribes to now start to control their own destiny. As the 
revenues came in, it was reinvested back in funding 
governmental programs that were short-funded or developing new 
governmental programs, providing services to the people.
    I graduated high school in 1975, not with the best GPA, so 
I was not the highest qualified to go to college, but my Tribe 
had no means to do that. Today, all four of my kids have gone 
to college, the last one will graduate this year, and the Tribe 
has paid for that with these gaming revenues through this whole 
process. They provide for elders, they provide homes, they 
build infrastructure, we help fund I-5 interchange projects, we 
help fund roads, we do business development all with the 
revenues that come from gaming; they go back into the 
community, they go back into the surrounding communities, and 
the prosperity on the reservation has changed. But not for all. 
There are still issues that are out there. As every government 
will know, there is not always enough money to go around to 
meet all the needs of the people.
    Senator Franken. Thank you, gentlemen.
    The Chairman. Thank you, Senator Franken. Senator Udall?
    Senator Udall. Thank you, Chairman Akaka.
    I know this hearing isn't about the draft legislation that 
was put out there. The Chairman has put out a draft piece of 
legislation on online gaming. I believe it has been given to 
the NIGC; it is on the website of this Committee. I believe it 
is out front and available. Any thoughts that you all have on 
it?
    Mr. Bozsum. I haven't had a chance to review it with my 
staff yet, but I am looking forward to it and I would love to 
comment on it as soon as we get that opportunity back home.
    Senator Udall. And we would love to hear your comments.
    Secretary Gobin?
    Mr. Gobin. Unfortunately, I didn't fly in until late last 
night, and I have not had a chance to see it or review it. I 
did pick up a copy here this afternoon, so I will be looking 
forward to going through and providing comment as well.
    Senator Udall. Okay. In case you had anything to say, I 
just wanted to give you an opportunity.
    You know, we have had a little bit of a discussion on the 
positive effects of gaming, and I would say that almost all of 
the Tribes in New Mexico that game feel that it has been very 
positive for their Tribes, and I am reminded of an old time 
Pueblo leader that had seen his Tribe for over 80 years, and he 
related to me some of the things that he thought were very 
positive.
    He said in all the years up until gaming came, he had 50 
percent unemployment at the Pueblo, and he said today, after we 
have opened our gaming establishment, we are down to zero. And 
not only have we provided jobs for every able-bodied person, we 
are able to give employment to non-Indians. So he felt very 
good about that. There is always, he said, talk about lack of 
educational opportunities, just as the Chairman said. Now this 
Pueblo, he said, is able to give college scholarships to every 
young person that wants to go to college, that can get in. Same 
with health care facilities, putting health care facilities as 
a result of the income; paving roads.
    So I think there have been some very positive developments 
as a result of Tribes engaging in gaming, and I don't blame the 
Tribes for wanting to look at each development that comes along 
and see how that is going to impact their investment in gaming. 
So that is important to meet to hear from Tribes as to what 
their reaction is to this draft legislation and any other 
things that they see that is out there.
    So, with that, Chairman Akaka, I know we have a vote on, 
and I am happy to help out in terms of keeping the hearing 
going, or however you want to do it. Thank you. I am going to 
yield back at this point.
    The Chairman. Thank you very much, Senator Udall.
    I want to thank this panel very much for your responses and 
your testimony as well.
    I am going to ask for a recess at this moment, and whoever 
comes back first will take the third panel at that time.
    But, again, I want to say thank you for sharing with us 
what you have been doing with your Tribes. It is very, very 
helpful and it is good to know that these gaming programs are 
really helping the Tribes as well. So I thank you very much for 
being here and at this time call for a brief recess. Thank you.
    [Recess.]
    The Chairman. I want to welcome our third panel here.
    We have Mr. Jamie Hummingbird, who is the Chairperson of 
the National Tribal Gaming Commissioners and Regulators in 
Tahlequah, Oklahoma; also, Ms. Elizabeth Homer, attorney at 
Homer Law in Washington, D.C.; the Honorable Jon Potter, former 
Congressman and President of Porter Gordon Silver 
Communications in Las Vegas, Nevada; and Mr. Eugene Johnson, 
Senior Vice President for Marketing and Online Studies for the 
Spectrum Gaming Group in Linwood, New Jersey.
    I want to welcome all of you here today.
    Mr. Hummingbird, Chairman Hummingbird, would you please 
proceed with your statement and your testimony?

           STATEMENT OF JAMIE HUMMINGBIRD, CHAIRMAN, 
  NATIONAL TRIBAL GAMING COMMISSIONERS/REGULATORS ASSOCIATION

    Mr. Hummingbird. Thank you, Chairman Akaka, members of the 
Committee. My name is Jamie Hummingbird and I am the Director 
of the Gaming Commission for Cherokee Nation. I also serve as 
the Chairman of the National Tribal Gaming Commissioners and 
Regulators Association. Please accept my most sincere 
appreciation on behalf of the National Tribal Gaming 
Commissioners and Regulators for allowing testimony before the 
Committee regarding the state of gaming regulation in Indian 
Country today and how it may change in the future.
    The National Tribal Gaming Commissioners and Regulators is 
an organization devoted to the education and advancement of 
gaming regulation within Tribal gaming facilities. Comprised of 
Tribal gaming regulators across the Country, the organization 
serves as a center for training of regulatory professionals and 
the free exchange of regulatory best practices.
    Nearly a quarter century ago, Congress passed the Indian 
Gaming Regulatory Act, and Tribes and Tribal gaming regulators 
have progressed along with the gaming industry, often setting 
the pace in regulation development.
    IGRA incorporated many of the principles of regulation that 
Tribes followed at the time, which continue to shape the face 
of gaming regulation in Indian Country today. This success was 
made possible by following the core values at the heart of 
every Tribal gaming regulatory authority: protecting Tribal 
assets, ensuring the integrity of the gaming requirement, and 
requiring accountability of the gaming operations. As gaming 
technology has evolved in brick and mortar, these values held 
firm and will continue to guide us as we look to the next phase 
of evolution in Internet gaming.
    Today there are approximately 85 countries that have 
legalized some form of Internet gaming, whether in the form of 
Internet cafes as part of a brick and mortar facility, or 
through a mobile device, which represents an estimated $30 
billion industry. Jurisdictions such as Alderney and British 
Columbia have chosen to establish iGaming laws and favor strict 
regulatory controls that govern Internet gaming activities.
    Internet gaming has drawn proponents and opponents from 
State and Tribal Governments, as well as various Federal 
departments and members of Congress. While some States have 
taken steps toward authorizing Internet gaming, there is an 
increasing louder call for a Federal solution.
    In the years since 2006 and the passage of the Unlawful 
Internet Gaming Enforcement Act, the American Internet gaming 
landscape at the Federal level has undergone a paradigm shift 
from being considered criminal-prohibitory, to being civil-
regulatory in nature. Members of the Congress who initially 
opposed iGaming now support Internet gaming under certain 
conditions.
    Any legislation considered at the Federal level must 
provide parity to Tribes by providing Tribes and States equal 
treatment under any law that is enacted.
    Tribal gaming regulatory authorities, or TGRAs, jealously 
protect the integrity of any and all gams offered by the Tribal 
gaming facilities. This would be no less true should Internet 
gaming become a viable option for Tribes.
    Many existing regulations already employed by TGRAs will 
lend themselves to be used in the digital realm. TGRAs can 
learn from jurisdictions where Internet gaming is in operation 
to develop a set of requirements that will fit their unique 
environment. Game protection and the security of personal and 
financial information is paramount for TGRAs, and the ability 
of games to be certified legal and secure is essential.
    The regulations governing the activity of brick and mortar 
facilities can be adapted to fit Internet gaming operations, 
particularly the regulations that ensure the financial 
accountability of the gaming operation and demonstrate the 
ability of gaming operations to meet all financial obligations.
    Under legislation enacted, whether at the State or Federal 
level, TGRAs will be asked to ensure that only those persons 
within their authorized jurisdiction may participate in Tribal 
gaming sites. TGRAs will require the verification of a player's 
location through the process of geo-location to determine 
whether or not that person is able to legally participate in 
the Tribe's Internet gaming site. Geo-location will also play 
an instrumental role in verifying the location of authorized 
players using mobile devices.
    The societal issues of underage gambling and problem 
gambling are matters that TGRAs will be required to address, 
much as they do in Tribal brick and mortar facilities. These 
concerns are best addressed by the regulations TGRAs will 
require in establishing Internet gaming accounts and the 
process by which gaming activity will be monitored to identify 
any potential patterns indicative of problem gambling.
    Tribal investments in technology, infrastructure, and 
operating capital must be made. Additionally, investment in 
human capital will also be necessary. The need for qualified 
and experienced staff is of vital importance to the success of 
any Internet gaming venture.
    The success of any business venture lies in preparation, 
and in the case of Internet gaming, preparation includes 
formulating the proper regulatory model to complement the 
legislative side of the equation. Tribes have been responding 
to a changing gaming market since the enactment of IGRA, and 
our Tribal Governments and regulators often set the standard 
for new gaming technologies and regulations. We are prepared to 
do so again should Internet gaming become legalized.
    Indian gaming success is due in part to the presence of 
strong regulatory bodies. Through the years of practical 
application, Tribes have garnered the necessary expertise and 
experience to overcome the challenges that will be presented 
with the passage of Internet gaming legislation. The success we 
have collectively achieved since the passage of IGRA clearly 
shows that Tribes are more than capable of being strong 
participants and regulators in the Internet gaming industry.
    On behalf of the national Tribal Gaming Commissioners and 
Regulators, I thank you for the opportunity to present this 
testimony and am open to any questions you may have.
    [The prepared statement of Mr. Hummingbird follows:]

  Prepared Statement of Jamie Hummingbird, Chairman, National Tribal 
              Gaming Commissioners/Regulators Association
    Chairman Akaka, Vice-Chairman Barrasso, members of the Committee, 
my name is Jamie Hummingbird. I am the Director of the Cherokee Nation 
Gaming Commission. I also serve as Chairman of the National Tribal 
Gaming Commissioners/Regulators Association. It is in this capacity in 
which I address you today.
    Please accept my most sincere appreciation on behalf of the 
National Tribal Gaming Commissioners/Regulators Association for 
allowing testimony before the Committee regarding the state of gaming 
regulation in Indian Country today and how it may change in the future.
    The National Tribal Gaming Commissioners/Regulators is an 
organization devoted to the education and advancement of gaming 
regulation within tribal gaming facilities. Comprised of tribal gaming 
regulators across the country, the organization serves as a center for 
the training of regulatory professionals and the free exchange of 
regulatory best practices. As the gaming industry has evolved, 
incorporating the latest in technology for game play as well as the 
associated systems that complete the gaming experience, so too have 
tribal gaming regulators grown in their capacity to successfully 
regulate tribal gaming.
Brief History of Indian Gaming Regulation
    In the late 1970s and early 1980s, Indian tribes across the country 
began operating bingo facilities as a means of providing funds for 
tribal assistance programs. The success of these facilities quickly 
drew the attention and ire of local and state government officials who 
sought to enforce state laws on Indian land.
    Tribes, believing their decision to operate gaming facilities was 
an exercise in tribal sovereignty, resisted state incursions of tribal 
gaming facilities. The debate regarding the legality of tribes offering 
gaming on tribal lands culminated in the 1987 Supreme Court decision in 
California v. Cabazon Band of Mission Indians wherein the Court held 
that tribes could operate and regulate gaming on tribal lands.
    As a result of this landmark decision, the Congress passed the 
Indian Gaming Regulatory Act (IGRA) in an attempt to balance state and 
tribal gaming interests. In its drafting of IGRA, the Select Committee 
on Indian Affairs set out to ``preserve the right of tribes to self-
government'' by recognizing tribes' sovereign rights to determine the 
course of their own affairs, including the means by which they would 
regulate their respective gaming operations.
    IGRA required tribes to adopt gaming ordinances to provide the 
regulatory structure that would govern tribal gaming facilities. In 
order to achieve this task, tribes and tribal gaming regulatory 
authorities (TGRA) assessed their particular gaming environment and 
formulated regulations that provided for the licensing of gaming 
facilities, employees and vendors, approval of games, surveillance, 
security, and auditing of gaming operation financials. In addition, 
tribes and TGRAs were called upon to ensure the protection of the 
environmental, public health and safety of the gaming facility 
employees and patrons.
    The IGRA incorporated many of the principles of regulation that 
tribes followed at the time, which continue to shape the face of gaming 
regulation in Indian Country today. Every TGRA, at its heart, contains 
the core values of protecting tribal assets, ensuring the integrity of 
the gaming environment, and requiring accountability of the gaming 
operations.
    Over the years, the success of tribal gaming prompted more tribes 
to engage in gaming. Realizing the need for consistency and in an 
effort to assist those tribes that were new to the industry, a task 
force of tribal regulators within the National Indian Gaming 
Association and the National Congress of American Indians developed a 
model set of internal controls that provided base operating standards 
by which any gaming operation could be effectively regulated. The 
choice to adopt these standards and the language that would be 
contained in a tribal set of internal controls was left to each tribe 
to determine. However, In 1999, these standards were adapted by the 
National Indian Gaming Commission (NIGC) to become the Minimum Internal 
Control Standards (MICS) that all tribes were required to abide by.
    In addition to the MICS, TGRAs utilize several other methods to 
ensure compliance of tribal gaming facilities, few of which match the 
importance of the employment of qualified personnel. Tribes invest 
heavily in the training of regulatory staff and highly value those with 
experience in law enforcement, accounting, and information technology.
    By remaining at the forefront of innovation in gaming and gaming 
regulation, tribal gaming operations have become as sophisticated as 
any non-Indian gaming jurisdiction, if not more so. It is in this 
tradition of innovation and regulation that tribes will enter the 
digital realm of Internet gaming.
History of Internet Gaming
    Although the subject of iGaming, also called online gaming or 
Internet gaming, has seen increased debate in numerous circles over the 
last few years, the industry has its origins in the mid-1990s when the 
government of Antigua and Barbuda passed laws allowing online casinos 
to offer the first gambling games on the Internet. Shortly thereafter, 
the Kahanawake Gaming Commission in Canada was established, controling 
and regulating online gaming activity from the Mohawk Territory of 
Kahnawake.
    Today, there are approximately eighty-five (85) countries that have 
legalized some form of iGaming, whether in the form of Internet cafes, 
as part of a brick-and-mortar facility, or through a mobile device 
(e.g. smartphone/tablet), representing an estimated $30 billion 
industry. Jurisdictions such as Malta, the Isle of Man, the U.K., 
Italy, Germany, Alderney, and British Columbia have chosen to establish 
iGaming laws and favor strict regulatory controls to govern iGaming 
activities.
    Seeing the ``new'' communication medium called the Internet was 
going to be used not only for commerce but also for gambling, some 
states enacted anti-gaming laws prohibiting iGaming in the late 1990's 
and early 2000's. One state--Nevada--staying true to its gaming roots, 
enacted legislation legalizing Internet gaming in 2001 and empowered 
the Nevada Gaming Control Board to enact regulations to pave the way 
for iGaming commerce to begin.
    In 2003, Antigua lodged a complaint with the World Trade 
Organization (WTO) stating that, although American policy did not 
prohibit iGaming, the American government refused to allow foreign 
casinos to accept wagers from U.S. players. In a first-of-its-kind 
ruling, the WTO stated that the United States laws prohibiting iGaming 
violated international trade laws. The Bush Administration condemned 
the ruling over a concern that American social policy would be dictated 
by foreign powers.
    Despite this activity, nothing happened on the U.S. iGaming scene 
until 2006 when the Unlawful Internet Gaming Enforcement Act (UIGEA) 
was passed, being attached to a must-pass port security act literally 
at the midnight hour. Although the name suggests the act of iGaming was 
made illegal by this piece of federal legislation, in actuality the 
practice of allowing financial transactions at iGaming sites by 
financial institutions was the center of the legislation; the 
legislation also did not pertain to intra-state transactions.
    On April 15, 2011, the U.S. Department of Justice (DOJ) seized the 
Internet domain names of five of the largest online gaming operators, a 
day that has become know as ``Black Friday''. A month later, on May 
23rd, a Maryland grand jury ordered the seizure of approximately a 
dozen more Internet domain names of other companies offering iGaming, a 
day that has been labeled ``Blue Monday.'' These actions marked the 
first significant action taken against iGaming since the passage of the 
UIGEA.
    In spite of the activity earlier in the year, iGaming interests 
continued to pursue avenues to legalize iGaming. A major obstacle in 
the way of the legalization of iGaming was the applicability of the 
1961 Wire Act. It was long thought that the Wire Act prohibited the 
transmission of wagers across state lines. However, the DOJ changed 
this mindset with the issuance of a legal opinion on 23 December 2011 
wherein the agency reversed its long-held position stating the Wire Act 
only applied to sports wagering and did not cover iGaming, particularly 
on-line poker, casino games and lotteries.
    Throughout this time, iGaming has drawn proponents and opponents 
from state and tribal governments as well as various federal 
departments and members of Congress. Some states, besides Nevada, have 
taken firm steps towards authorizing iGaming (some with the active 
participation of tribal governments) and there is an increasingly 
louder call from all areas of the gaming industry for a federal 
solution to be enacted.
Federal and State Legislation
    In the years since 2006 and the UIGEA, the American iGaming 
landscape at the federal level has undergone a paradigm shift from 
iGaming being considered criminal-prohibitory to being civil-regulatory 
in nature. Members of Congress who initially opposed iGaming now 
support allowing iGaming under certain conditions.
    At the same time, commercial casinos in New Jersey and Nevada, as 
well as advocacy groups such as the American Gaming Association, have 
switched to supporting iGaming--again, under certain conditions.
    Various bills have been introduced in the House of Representatives 
and in the Senate that would essentially undo the effects of the UIGEA. 
Some bills contained provisions that provided a basis for tribes to 
build on while others contained language that either put tribes at a 
disadvantage to commercial casinos or were outright contrary to tribes 
and tribal sovereignty. In 2010, Representatives Barney Frank, John 
Campbell, and Senator Robert Menendez each offered bills to regulate 
iGaming, which finally provided tribes with a place at the table.
    Any legislation considered at the federal level must provide parity 
to tribes by providing tribes and states equal treatment under any law 
that is enacted.
    The majority of states are forecasting budget shortfalls in the 
coming years and are looking for ways to add to state coffers. This has 
led to a trend amongst states to consider authorizing iGaming as a 
means to that end.
    The following are examples of some of the steps taken by the 
various states:

   Nevada--The State legislature authorized iGaming in 2001; 
        enacted iGaming regulations in 2011; began accepting 
        applications for online operator gaming licenses in February 
        2012 and have begun issuing licenses to iGaming operators.

   New Jersey--The State legislature authorized iGaming in 
        2010, but the bill was vetoed by Governor Christie; a new bill 
        has unanimously passed the state senate Budget and 
        Appropriations Committee with a vote expected in the Fall of 
        2012.

   Iowa--A study was conducted and a report issued on the 
        possible regulation of iGaming in Iowa, with the recommendation 
        for approval; the Iowa Senate passed a bill on 13 March 2012 
        authorizing iGaming; the Iowa House voted against the bill 
        three days later on 16 March 2012.

   California--The current form of California's iGaming bill 
        (S. 1463), which would authorize Internet poker, was referred 
        to committee at the end of March and is currently pending.

   Delaware--In June, the Governor has signed House Bill 333 
        into law allowing for all forms of gaming--poker, blackjack, 
        slot machines, and lottery tickets--to be offered online to 
        Delaware citizens.

    Tribes across the country have debated whether the introduction of 
iGaming into tribal jurisdictions will be a detriment to current brick-
and-mortar facilities or if it is a new segment of the market that, if 
left untouched, could be a competitive disadvantage and/or result in 
lost revenue to the tribe.
    At the heart of the controversy--besides the overall issues 
surrounding tribal sovereignty--is the concern regarding the potential 
impact any legislation may have on tribal exclusivity as contained in 
tribal-state compacts. Despite this concern--or perhaps because of it--
many tribes are carefully assessing their options in the instance 
iGaming is authorized, whether at the state or federal level.
    State operated lotteries are another side of the iGaming issue. 
Several state lotteries have looked to the Internet to boost sales and 
have begun offering scratch-off tickets and other lottery tickets 
online. Seven (7) other states and the District of Columbia are also 
pursuing Internet lottery games.
Regulation of iGaming
    As stated earlier, TGRAs jealously protect the integrity of any and 
all games offered by the tribal gaming facilities. This would be no 
less true should iGaming become a viable option for tribes.
    In order to ensure the integrity of iGaming, TGRAs will be called 
upon to introduce new regulations over aspects of iGaming beyond those 
relating to game play.
    Under any legislation that is enacted, whether at the state or 
federal level, TGRAs will be tasked with ensuring that only those 
persons within their authorized jurisdiction are able to conduct gaming 
transactions in tribal iGaming sites. Depending on the legal parameters 
defined in the legislation, this may be accomplished in one or two 
ways: residency verification and/or geo-location. Should the 
legislation prescribe a limited coverage area, say a reservation, state 
borders, or countries in which iGaming is not permitted, TGRAs will 
require a prospective player to attest to his/her residence and then, 
through the process of geo-location, the process of verifying a 
person's physical location, determine whether or not that person is 
able to legally access the tribe's iGaming site. Geo-location will also 
play an instrumental role in verifying the location of authorized 
players utilizing mobile devices such as smartphone or tablet 
computers.
    The societal issues of underage gambling and problem gambling are 
issues that TGRAs will be required to address. These concerns are best 
addressed by the regulations TGRAs will require to establish iGaming 
accounts and the process by which gaming activity will be monitored to 
identify any potential patterns indicative of problem gambling. TGRAs 
may require additional information and/or documentation from 
prospective players to verify not only their identity but their ability 
to legally engage in iGaming.
    Many other tools that will be needed by TGRAs to effectively 
regulate iGaming currently exist. TGRAs have methods to thoroughly 
investigate gaming and gaming related vendors. However, these methods 
may require slight modifications depending on the path taken by the 
tribal gaming operations, particularly if partnerships with overseas 
vendors are pursued.
    The technical standards and game testing requirements employed by 
TGRAs will also lend themselves to being used in the digital arena. Far 
from having to reinvent the wheel, TGRAs can learn from jurisdictions 
where iGaming is in operation to develop a set of requirements that 
will fit their unique environment. Game protection is paramount to 
TGRAs and the ability of games to be certified as legal and secure is 
essential.
    These standards will also provide the first line of defense in 
protecting information obtained from prospective players. The 
confidentiality of personal and financial information provided by 
prospective players as they establish iGaming accounts cannot be 
compromised.
    The rules and regulations and internal controls used to govern the 
activity of the brick-and-mortar facilities can be adapted to fit 
iGaming operations. The regulations that ensure the financial 
accountability of the gaming operation and demonstrate the ability of 
the iGaming operation to meet all financial obligations.
    Each of these aspects will require an investment on behalf of any 
tribe electing to offer iGaming. Investments in technology, 
infrastructure, and operating capital must be made. Yet that is not the 
extent to which tribes will need to invest; investment in human capital 
will also be necessary. The need for qualified and experienced staff is 
of vital importance to the success of an iGaming venture.
Conclusion
    The success of any business venture lies in preparation. In the 
case of iGaming, preparation includes formulating the proper regulatory 
model to complement the legislative side of the equation. Tribes have 
been responding to a changing gaming market since the enactment of 
IGRA. Our tribal governments and regulators often set the standard for 
new gaming technologies and regulations. We are prepared to do so again 
should iGaming expansion occur.
    The success of Indian gaming operations is due, in part, to the 
presence of strong regulatory bodies. Through years of practical 
application, tribes have garnered the necessary expertise and 
experience to overcome the challenges that will be presented with the 
passage of iGaming legislation. The success we have collectively 
achieved since the passage of IGRA clearly shows that tribes are more 
than capable of being strong participants and regulators in the gaming 
industry.
    On behalf of the National Tribal Gaming Commissioners and 
Regulators, I thank you for the opportunity to present this testimony, 
and am open to any questions you may have.

    The Chairman. Thank you very much, Chairman Hummingbird, 
for your testimony.
    Ms. Homer, will you please proceed with your testimony?

    STATEMENT OF ELIZABETH LOHAH HOMER, ATTORNEY, HOMER LAW

    Ms. Homer. Thank you for inviting me to testify today about 
these issues. My name is Elizabeth Lohah Homer. I am a member 
of the Osage Nation of Oklahoma and a practicing attorney who 
once served as a special attorney at the Criminal Division of 
the Department of Justice, the Office of American Indian Trust 
at the Interior Department, and, finally, as the Vice Chair of 
the National Indian Gaming Commission.
    For nearly a decade now, I have served Tribal clients in 
the gaming law arena, with a particular focus on gaming 
regulatory matters. My clients include Tribal councils, Tribal 
regulatory agencies, Tribal gaming enterprises, and Tribal 
organizations such as the National Indian Gaming Association.
    Although I draw heavily on this experience in my testimony 
today, the views I express today are my own and are not 
attributable to anybody else.
    In much of Indian Country, though not all, the advent of 
gaming has meant the difference between a future of seemingly 
hopeless poverty, depression, and despair, and a future of 
growth, hope, and opportunity. Tribal gaming revenues have 
translated into increased Tribal Governmental capacity, new and 
expanded Tribal Governmental services, and an enhanced quality 
of life in many parts of Indian Country.
    This Committee deserves credit for making this change 
possible, but I would add that where the success truly lies is 
in the responsible manner in which Tribal Governments have 
undertaken their gaming activities and the wise choices and 
investments that they have made.
    Today we stand at a crossroads. The technological 
revolution, the advent of the Internet and broad public access 
to the information highway compel us to consider the future of 
Tribal gaming. As the Committee deliberates the ramifications 
of Internet gaming and considers legislation related to it, 
please bear in mind that while the means may be new, may be 
novel, the Internet, the legal, regulatory, and policy issues 
underlying Internet gaming are quite familiar. We have been 
dealing with those same issues for a very long time now.
    In IGRA, Congress established a unique system of shared 
regulatory responsibilities among the Federal Government, the 
States, and Tribal Governments. To carry out the Tribal 
interests, Tribal Governments have established Tribal gaming 
regulatory agencies. To carry out the Federal interest, 
Congress created the National Indian Gaming Commission. 
Together the NIGC and Tribal gaming regulatory agencies provide 
a two-tiered framework for the regulation of Tribal gaming in a 
structure that is consistent with core principles of Federal 
Indian policy.
    Any bifurcation of the Federal regulatory oversight 
responsibilities between the NIGC and another Federal agencies 
would be imprudent. Under current law, the respective roles of 
the NIGC and Tribal Governments are clearly established and 
defined. Communication systems are in place, administrative 
processes and enforcement mechanisms are established, and 
basically this is a system that works.
    Assigning the administration of a statute or statutory 
provisions peculiar to Tribal gaming to multiple Federal 
agencies will inevitably create a host of problems and 
uncertainties. It would also increase the potential for 
interagency conflict and subject Tribal Governments to 
oversight by Federal agency personnel inexperienced not only in 
relation to Indian affairs, Indian law and policy and the 
Federal-Indian relationship, but in the regulation of gaming.
    The NIGC has nearly two decades of gaming regulatory 
experience, and its members and staff understand the unique 
constitutional status of Indian Tribes as sovereigns, as well 
as the special political relationship between Tribal 
Governments and the United States. No other Federal agency 
possesses comparable experience or expertise in the context of 
Tribal gaming. Unquestionably, the NIGC is the ideal Federal 
agency candidate to administer any Tribal Internet gaming 
legislation. It is the only Federal agency that possesses the 
regulatory infrastructure to quickly and efficiently assume a 
gaming regulatory oversight role in relation to Tribal Internet 
gaming.
    Practically speaking, it takes years, sometimes decades, to 
establish a functioning Federal agency. A new agency must 
assemble a competent staff, promulgate rules and regulations, 
meet all regulatory requirements applicable to every Federal 
agency, and commence operation. For example, it took nearly 
five years following the enactment of IGRA for the NIGC to 
actually commence operations. A similar delay in staffing a new 
agency and gearing up that agency to begin regulating Tribal 
Internet gaming could prove economically disastrous for Tribal 
Governments that are intended to benefit by such law. The NIGC 
would not be hindered by a long start-up time or the kinds of 
delays involved in the formation of new agencies.
    Finally, and I see that my time is up, if I might just add, 
a key difference between the NIGC and other Federal agencies is 
the NIGC status as an independent regulatory agency of the 
United States. This cloaks the NIGC with the necessary 
independence and flexibility to carry out its Federal oversight 
functions in a stable and consistent manner, not subject to 
abrupt shifts in leadership, policy, resources, and 
organization.
    Thank you very much. Thank you for your patience.
    [The prepared statement of Ms. Homer follows:]

    Prepared Statement of Elizabeth Lohah Homer, Attorney, Homer Law
    Chairman Akaka, Vice-Chairman Barrasso, and Members of the 
Committee:
    Thank you for inviting me to testify this afternoon with regard to 
regulatory issues that arise in the context of tribal Internet gaming. 
My name is Elizabeth Lohah Homer. I am a member of the Osage Nation and 
a practicing attorney. I founded Homer Law shortly after leaving 
federal service, where I served as a special attorney with the Criminal 
Division at the U.S. Department of Justice, Director of the Office of 
American Indian Trust with the U.S. Department of the Interior, and 
finally, a three-year term appointment to the National Indian Gaming 
Commission (NIGC), where I served as the Vice-chair from July 1999 to 
July 2002.
    During my tenure with the NIGC, the Commission undertook several 
important regulatory initiatives, including the revision of regulatory 
definitions for gaming activities; revision of the minimum internal 
control standards; and the development of an interpretive rule 
concerning environment, public health, and safety standards for tribal 
gaming operations. We also oversaw the expansion of the NIGC to include 
a field office structure and an increase in the agency's staffing 
level.
    For nearly a decade now, I have primarily served tribal clients in 
the gaming law arena, with a particular focus on regulatory matters. My 
clients include tribal councils, tribal regulatory agencies, tribal 
gaming enterprises, and tribal organizations such as the National 
Indian Gaming Association. Although I draw heavily on this experience 
in my testimony today, the views I express this afternoon are mine 
alone and should not be attributed in any way to anyone other than me.
    In much of Indian Country, though not all, the advent of gaming has 
meant the difference between a future of seemingly hopeless poverty, 
depression, and despair and one of growth, advancement, and promise. 
Tribal gaming revenues have provided tribal governments the means to 
make investments that could hardly be imagined when I graduated from 
college and began my first job with the Osage Nation in 1979. These 
revenues translate directly into increased tribal governmental capacity 
and new and expanded tribal governmental programs and services that 
range from law enforcement to fire and emergency services to health 
care, education, roads, clean water, sanitation facilities, and the 
list goes on and on and on. This Committee deserves a lot of credit for 
what has and continues to happen throughout Indian Country, but it is 
the responsible manner in which the tribal leadership has undertaken 
gaming and the wise investments that have been made with the revenue 
that has made tribal gaming successful and beneficial.
    Today, we stand at a crossroads similar in many ways to the one 
confronted in the mid-1980s just prior to the enactment of the Indian 
Gaming Regulatory Act (IGRA) in 1988, where important decisions must be 
made and time is of the essence. The technological revolution, the 
advent of the Internet and broad public access to the information 
highway--these things are changing the world. It is an exciting time, 
but it is a challenging one as well. As the Committee deliberates the 
ramifications of Internet gaming and considers legislation related to 
it, I urge you to take into consideration foremost that although the 
technology behind Internet gaming is relatively new, the legal and 
policy issues underlying this important discussion are familiar ones. 
The fact is that there is a mature, effective gaming regulatory 
structure already in place and functioning. It is a structure that is 
consistent with core principles of federal Indian policy and one that 
recognizes the political status of tribal governments within the 
Constitutional framework of our Nation.
    In IGRA, Congress established a unique system of shared regulatory 
responsibilities among the Federal Government, the states, and tribal 
governments, but designated tribal governments as the primary 
regulators of tribal gaming on Indian lands. To carry out the Federal 
Government's responsibilities in this structure, Congress created the 
NIGC, an independent federal regulatory agency within the Department of 
the Interior.
    The NIGC's core mission is to provide federal civil regulatory 
oversight in order to shield Indian tribes from organized crime and 
other corrupting influences; ensure that Indian tribes are the primary 
beneficiaries of gaming revenue; and assure that gaming is conducted 
fairly and honestly by both operators and players. To that end, the 
NIGC has been vested with specific oversight powers and 
responsibilities under IGRA, including the authority to promulgate 
regulations and take enforcement actions.
    Under current law, the respective roles of the NIGC and tribal 
governments are thus clearly defined and, as noted, consistent with 
well-established principles of federal Indian policy. It is a system 
that works and should be reflected in any new legislation pertaining to 
Internet gaming by tribal governments. Any legislation that would 
operate to bifurcate federal regulatory oversight responsibilities 
between the NIGC and another federal agency should be avoided as it 
would create uncertainties; increase the potential for inter-agency 
conflict; and subject tribal governments to oversight by federal agency 
personnel inexperienced in Indian Affairs, Indian law and policy, the 
federal-Indian relationship, and the regulation of gaming. Having two 
regulatory agencies regulating essentially the same functions would be 
redundant and problematic.
    The NIGC, on the other hand, has nearly two decades of gaming 
regulatory experience, and its members and the staff understand the 
unique constitutional status of Indian tribes as sovereigns as well as 
the responsibilities associated with the special government-to-
government relationship between tribal governments and the United 
States. Since the appointment of its first Chairman in 1993, the NIGC 
has grown considerably in size, scope, and sophistication. In October 
1993, the NIGC had a staff of 27 and was responsible for overseeing 200 
gaming operations operated by an estimated 175 tribal governments. The 
NIGC's staff now consists of over 120 employees who oversee an industry 
comprised of approximately 240 tribal governments operating over 420 
tribal gaming operations in 28 states. The NIGC currently has field 
investigators operating out of seven regional offices and three 
satellite offices who work in conjunction with tribal gaming regulatory 
agencies in rendering technical assistance to tribal gaming operators. 
As a result, no other federal agency has achieved a comparable level of 
understanding in the tribal gaming context or possesses such 
experience.
    There is no question that the NIGC is the ideal federal agency 
candidate to be assigned administrative jurisdiction over and 
implementation of any new legislation related to tribal Internet 
gaming. Besides its experience and longstanding relationships with 
tribal governments, particularly tribal gaming regulatory agencies, it 
is the only federal agency that possesses the regulatory infrastructure 
and tools to quickly and efficiently assume a gaming regulatory 
oversight role in relation to tribal Internet gaming.
    The fact is that it takes years if not decades to establish a well-
functioning regulatory agency. A new agency must assemble a capable 
staff, promulgate rules and regulations, meet all legal requirements 
applicable to all federal agencies, and commence operation. The NIGC's 
experiences during the first years of its formation are instructive in 
this regard. From the time the NIGC was first established by IGRA in 
1988, it took nearly three years to appoint the first Chairman and 
assemble a skeleton staff, and another two years after that for the 
first set of regulations to become effective. Thus, it took nearly five 
years for the NIGC to actually begin carrying out its regulatory 
responsibilities. A similar delay in staffing an entire agency and 
``gearing up'' the agency to begin regulating could prove disastrous 
for tribal governments and place them at a competitive disadvantage 
relative to non-tribal operators who are forging ahead under new state 
laws.
    Although the regulation of Internet gaming will inevitably raise 
new regulatory and enforcement concerns, the NIGC possesses the 
necessary procedures and tools for monitoring and enforcing compliance 
with applicable gaming laws and regulations. The NIGC has already 
developed the institutional infrastructure for carrying out 
investigations, initiating enforcement actions, conducting hearings, 
and adjudicating appeals. It would be a relatively simple matter for 
the NIGC to add the technical expertise required to oversee the 
implementation of a tribal Internet gaming statute. Hence, the NIGC 
would not be hindered by a long start-up time or the kinds of delays 
involved in the formation of new agencies.
    In addition, a key difference between the NIGC and other federal 
agencies is the NIGC's status as an independent regulatory agency. 
Independent regulatory agencies are generally charged with 
``independence'' from other parts of the Executive Branch and are 
designed to enhance balance, provider greater stability, and mitigate 
the potential for sudden changes or reversals in agency policy likely 
to produce unnecessary or exceptionally severe economic harm to the 
regulated industry.
    In establishing the NIGC as an independent regulatory agency, 
Congress intended to cloak the NIGC with the necessary independence and 
flexibility to work closely and freely with tribal governments in 
assuring the proper regulation of tribal gaming. Congress understood 
that insulation from external political influences would be critical to 
the successful implementation of the NIGC's regulatory oversight 
program. Any legislation that assigns regulatory oversight of tribal 
Internet gaming to a federal agency other than the NIGC would deprive 
tribal governments of the intended benefits of regulatory continuity 
and stability, and subject tribal governments to oversight by a federal 
agency that may be particularly vulnerable to abrupt changes in 
leadership, policy, resources, and organization.
    In closing, I would note that what is most important is ensuring 
that the successes and investments that tribal governments have made in 
the gaming arena are not compromised. Nor should the Congress enact 
legislation that would place tribal governments at a competitive 
disadvantage by delaying tribal entry into the Internet gaming market. 
Sound regulatory institutions are well-established at both the federal 
and tribal levels of government and capable of performing regulatory 
functions in relation to Internet gaming. It would be neither cost-
effective nor practical to re-invent new agencies when there are 
experienced and capable institutions currently in place to carry out 
important regulatory functions.
    Thank you again for the opportunity to participate in this hearing. 
I am happy to answer any questions that you may have for me.

    The Chairman. Thank you very much, Ms. Homer.
    Mr. Porter, would you please proceed with your statement?

            STATEMENT OF HON. JON C. PORTER, FORMER 
         CONGRESSMAN; PRESIDENT, PORTER GORDON SILVER 
                         COMMUNICATIONS

    Mr. Porter. Thank you, Mr. Chairman. It is an honor for me 
to be here today. To you and certainly other Senators, my 
former colleague, Senator Udall, it is good to see you today. 
And to all of the Tribal leaders that are here today. I think 
it is an important day for America and for all those especially 
interested in Internet gaming.
    I also want to say thank you to all your friends and family 
from Hawaii that visit Las Vegas. We want to continue that and 
we certainly do appreciate the customers that help support our 
economy.
    Quickly, again, my name is Jon Porter. I served as a city 
councilman, a mayor, a State senator, most recently as an 
honored member of the U.S. Congress. I also had my own business 
for years. But I also believe that those combined give me a 
unique perspective to speak today. And for full disclosure, I 
do officially represent the Poker Players Alliance, 1.2 million 
members across the Country, although I am not speaking today on 
behalf of the PPA. I also represent numerous international 
gaming companies, not on a Federal level, but in a State arena; 
also a number of Tribal nations as well.
    But today I was invited to speak, and I do appreciate that, 
and I want to applaud you and the Committee for addressing a 
very controversial but very important issue, and very timely. 
In essence, it is a game race played in interactive space, and 
I think it is critical for your involvement and your 
leadership.
    I would like to give you a little bit of my Las Vegas 
political perspective. Many times I say I am from the State of 
Las Vegas, because sometimes people understand that better than 
some of the smaller communities. But look back at the history 
of Las Vegas. Just go back 50 years. In the early years we had 
some questionable ownership and minimal regulations and rules, 
and I like to say that our success, not unlike the success of 
the Tribal Nations, have been based upon some of the strongest 
regulatory rules and regulations and enforcement in the world. 
And I will say that again: some of the most difficult and the 
most strict rules and regulations in the world are placed upon 
gaming institutions, from the Tribal to the non-Tribal.
    In fact, this is an exaggeration, but if you were to apply 
for a gaming license, the gaming control board may well go back 
to your grade school. So I suggest, if you are prepared, to 
make sure that you do your homework individually.
    Also, part of Las Vegas' success is that we have been 
highly competitive with each other. Now, we certainly don't 
always agree in Las Vegas, but we are competitors. But we also 
come together when there are key issues, as does the Tribal 
Nation that impact their business.
    So one of our successes has been the ability to work 
together.
    Now, as you know, we have fought Federal regulation for 
years in the community of Las Vegas, in the early 1990s. We 
wanted to make sure that we could, in fact, use our gaming and 
regulatory body to make sure that our industry was certainly 
doing the right thing at the right time with the right people.
    But my experience shows that I think there is a lot of 
parallel today between the Tribal Nations and the non-Tribal 
Nations. In early 2000, I can remember, in the Nevada State 
Senate, when we passed some of the first Internet gaming 
legislation, that was the beginning.
    But over the next 12 years, and 6 years of that as a member 
of Congress, even the Las Vegas community wasn't quite sure 
what it wanted to do. I remember days when different gaming 
institutions would come into my office, and one day they would 
be for Internet gaming and one day they wouldn't be against it 
and they would be supportive. But I will tell you there has 
been a chance. Certainly not every gaming institution in Nevada 
supports Internet gaming, but we have had denial within our 
industry; we have had resistance; we have had acceptance. In 
fact, millions have been spent over the last 12 years.
    Also, let me note a key issue, and my friend, Ms. Homer 
mentioned, acceptance of Internet for business is paramount, 
whether you are in the widget business or you are in the gaming 
business. You can use records and newspapers as an example of 
those that did not rush into the arena.
    But I think what is paramount today is what one of the real 
issues is, and it is not really non-Tribal and Tribal conflict; 
I think the real question you are going to need to address is 
lotteries, eventually. Of course, I support poker only because 
I believe it is a game of skill, not a game of chance. But 
there are other interests besides Tribal and non-Tribal, 
because I believe we are very close in understanding, and we 
have worked together for years. But when we look at the lottery 
interests, many of them want to use a scratch card, which 
enters us into slot machines, and I think that debate should be 
for another day. Also, I believe that that would create an 
unfair competition for the Tribes and the non-Tribal companies.
    So, in essence, I would like to cover, just before I 
conclude, a few constructive suggestions for my friends in the 
Tribal Nation.
    Not unlike the non-Tribal, as you are moving forward into 
the Internet, and I encourage that companies do that and the 
Tribes, the big companies, the larger Tribes will have the 
resources to be engaged. There are hundreds of gaming 
institutions, Tribal and non-Tribal, around the Country; they 
are not all going to be able to be in the business. I encourage 
there be partnering in the Tribal Nation between non-Tribal 
Nation, as it is happening today successfully with Las Vegas 
properties. But also you could, as an industry and as a Nation, 
create a Tribal consortium dot com where a lot of the small 
groups could get together. It is an invaluable tool for 
economic.
    Mr. Chairman, in closing, I think, number one, paramount, 
beyond the Tribes, beyond the non-traditional, and the non-
Tribes, what is paramount is the safety and security of our 
families and kids that have access to the Internet, and I 
believe that the Tribal Nation, I believe that the non-Tribal, 
and certainly the lotteries want to make sure, first and 
foremost, children and families are taken care of.
    We, and I, certainly support strong regulations. But to do 
nothing I think would be condoning the continuing of an abuse 
of the American people. There are 1,700 to 2,000 Internet sites 
around the world. I believe that the U.S. Senate and the U.S. 
House of Representatives must take action based upon the DOJ 
ruling that now everything appears to be legal except for 
sports betting.
    So with that I again thank you very much. I know my time 
has expired. I look forward to working with you, your staff, 
and other members of the Senate, and I am indeed honored to be 
here today. Thank you very much.
    [The prepared statement of Mr. Porter follows:]

     Prepared Statement of Hon. Jon C. Porter, Former Congressman; 
             President, Porter Gordon Silver Communications
    Chairman Akaka and Members of the Committee, I am pleased to have 
this opportunity to testify before you today on the topic of regulation 
of tribal gaming, both on the Internet as well as traditional brick-
and-mortar casinos. My past experience gives me a unique perspective 
due to my time as a mayor from suburban Las Vegas, Nevada State 
Senator, and as a Member of Congress from Nevada's 3rd Congressional 
District. At each level of government, I've either voted on gaming 
regulation or helped implemented it.
    Today, I am the President of Porter Gordon Silver Communications, a 
full-service, bi-partisan government affairs and business consulting 
firm. With offices in Reno, Las Vegas, Carson City, Washington, D.C. 
and Phoenix, we offer advice and representation for our clients at the 
federal, state and local levels of government. We are also affiliated 
with Gordon Silver, one of the largest law firms in Nevada with a 
prominent gaming practice.
    My current work is also relevant to today's discussion. I have 
numerous clients with Internet gaming interests including the Poker 
Players Alliance, an organization of 1.2 million American poker 
players, whom I am registered to represent at federal level, as well as 
multiple Nevada casinos and international online gaming companies, 
which doesn't include federal representation. I also consult on behalf 
of tribal interests outside of the gaming world. However, I would like 
to state that my thoughts today are my own and do not speak on behalf 
of any clients.
    I've often described the Las Vegas of 50 years ago as the Wild 
West. There was little oversight, few regulations or regulatory bodies, 
and questionable casino ownership. Fast forward to today and you now 
see Vegas as the gold standard in gaming regulation. We have some of 
the most stringent licensing standards and toughest enforcement 
mechanisms. Right now, Mr. Chairman, if you were to apply for a gaming 
license in Las Vegas, you would be required to submit detailed personal 
history and financial information and be prepared to deliver five years 
of bank statements, credit card and brokerage statements, copies of 
contracts, deeds and titles to all assets, a list and summary of any 
litigation and such other information as contained in an application 
form. Further, gaming investigators will spend from four to six months 
in their review at a cost that ranges anywhere from $40,000 to over $1 
million, depending upon history of the applicant and the complexity of 
the information provided, all of which is to be paid by the applicant. 
Needless to say, there is a strict application process.
    This Nevada story parallels how Internet poker operates today. With 
the lack of federal regulation, online poker players are forced to play 
on their choice of over 1,700 foreign-based websites with little or no 
consumer protections and no oversight from federal regulators. There is 
no guarantee that the cards you see are truly random, or that multiple 
sites aren't colluding to take advantage of the player, that the person 
``sitting'' next to you is actually a person and not a bot designed to 
win in the long run, or even that you'll have access to your money when 
you choose to cash out. Americans are not going to stop playing poker 
on the Internet, Mr. Chairman, that's the reality, so we need to view 
it as our responsibility to provide them a safe environment to play. We 
need to move from the Wild West of Internet gaming to current Las 
Vegas-style oversight.
    It's clear that any industry which fails to embrace the Internet is 
doomed to failure. Think of the struggles that newspapers have been 
going through, or how long it took the recording industry to 
effectively sell digital music. Gaming is no different. It has already 
become extremely popular as an online activity, yet the Federal 
Government has refused to keep up with the times. It is my opinion that 
the time is now for the Congress and the Administration to bring laws 
and regulations into the 21st century by licensing and regulating 
online poker so those Americans playing today can know that they won't 
be taken advantage of.
    My home state of Nevada is now a great example of how, 
historically, opposition to Internet poker was the knee-jerk reaction, 
yet the current times make it inevitable to embrace the benefits of 
online play. It wasn't long ago when I was taking meetings with brick-
and-mortar Vegas casinos who would tell me that if I voted to regulate 
and license online poker, commercial casinos as we knew them would go 
bankrupt. Fast-forward a few years to where Nevada now has laws that 
allow intrastate Internet poker and already issued the first few 
licenses to accept online wagers, contingent on federal action. My 
point is that through working together and realizing the benefits that 
the Internet brings, operators and consumers will be much better off.
    Now, more to the point of this hearing, how does the regulation of 
Internet gaming intersect with tribal interests. According to 
Wikipedia, there are 555 federally-recognized Indian tribes, and 
according to the NIGC, there are over 200 tribes engaged in some form 
of gaming. Moreover, there are roughly 445 non-tribal land-based or 
riverboat casinos within the US. No one reasonably believes that the 
U.S. market for Internet poker will support hundreds or even dozens of 
free-standing poker sites, and even many existing gaming facilities are 
unlikely to have the resources to launch their own free-standing 
Internet poker site. However, as I will discuss in a minute, there are 
numerous commercial opportunities for tribes and commercial casinos 
that can help them embrace the Internet to market their casinos and 
have a new channel of distribution to their customers without creating 
any cannibalization to their brick-and-mortar businesses. The critical 
ingredient for a successful Internet poker site is liquidity--having 
the critical mass of players such that any player can find the game 
they want, at the stakes they want, and at the time they want.
    While no one can say for sure what the market would look like if 
H.R. 2366 or similar legislation is enacted, from the experience in 
Europe, we can surmise that there will be several ways in which tribes 
could profitably participate in the market other than simply as a free-
standing licensee.
    Many gaming tribes already have an established regional base of 
brick-and-mortar players who frequent their casinos. They could launch 
their own Internet sites and market to their brick-and-mortar players. 
For tribes without brick and mortar facilities, they could possibly 
partner in a consortium relationship with tribes who have casinos to 
increase the market share. Under this scenario, an existing gaming 
tribe could launch a poker site that could be utilized by other tribes 
where one played directly from the site and players would be actually 
playing on the lead tribal casino's software in a poker room where they 
are networked with other players who are also playing on the site. 
Indeed, if all, or a large swath of Indian country got together and 
launched shared sites, it could conceivably dominate the marketplace. 
Each tribe would have a URL of a site under their name, and market it 
to their players, but all those players would be networked with players 
from other tribes' sites across the country. Such an operation could 
dwarf even the large branded Las Vegas companies.
    I feel like there has also been a perception, particularly in 2010 
and 2011, that this was a fight between commercial gaming and tribal 
gaming, and, to be sure, commercial gaming was far more supportive of 
poker licensing legislation than Indian Country was. That was before 
the Department of Justice reversed its position on the application of 
the Wire Act to non-sports betting.
    Since that decision, state lotteries have been increasingly 
aggressive in trying to get onto the Internet, providing traditional 
drawing tickets, but also providing other Internet games, including 
virtual scratch-off tickets that make computers function like slot 
machines. The vast majority of revenue for tribal gaming comes from 
slot machines, and that is because slot machines are relatively scarce 
on non-tribal land. If, however, you have state lotteries effectively 
turning every computer in the state into a potential slot machine, the 
competitive effect on tribal gaming is obvious. States like Delaware, 
Maryland, Illinois, Massachusetts and Georgia are already taking steps 
to take their lotteries online, and if they succeed, then others are 
bound to follow. I don't think tribal or commercial gaming interests 
would object to state lotteries selling their traditional drawing 
tickets on the Internet, but tribal and commercial gaming interests 
have been pretty clear that they do not think online slot machines are 
in the interests of commercial gaming, tribal gaming, or gaming 
consumers, for that matter. Poker is a small part of their brick-and-
mortar business and does not pose a threat. On the other hand, full 
scale casinos create many other economic and policy issues.
    If states seek to expand their lotteries to provide slot machine 
play into everyone's homes, the threat to commercial and tribal gaming 
is obvious. I would expect that this outcome would be unacceptable to 
those concerned about the societal impacts of gaming as well. However, 
in the absence of some federal legislation setting the rules of the 
road for Internet gaming, that outcome is likely in many states. Most 
versions of federal Internet gaming or poker legislation would prevent 
this; H.R. 2366 would only allow Internet poker to be played on the 
Internet, with Internet slots and other games clearly illegal under 
federal law. The emerging fault line isn't commercial vs. tribal 
gaming, but traditional gaming operations versus lotteries.
    In conclusion, the story of brick-and-mortar casino regulation is 
not so different than what we're now doing with Internet gaming. The 
debate we're having may seem arduous and contentious at times, but it 
is a discussion that needs to be happening. My experience in Nevada 
gives me great hope and, if history is any indication, I'm confident we 
will design a strong regulatory structure that protects the consumer, 
respects tribal concerns, and is in the best interests of everyone 
involved.
    Thank you, Mr. Chairman, for allowing me to share my thoughts with 
the Committee today and I look forward to answering any questions you 
may have.

    The Chairman. Thank you. Thank you very much, Mr. Porter, 
for your testimony.
    Mr. Johnson, would you please proceed with your testimony?

   STATEMENT OF GENE JOHNSON, SENIOR VICE PRESIDENT, MARKET 
             RESEARCH AND ONLINE STUDIES, SPECTRUM 
                          GAMING GROUP

    Mr. Johnson. The Honorable Mr. Porter is a tough act to 
follow, but thank you, Chairman and members of the Committee. 
My name is Gene Johnson. I am a representative of Spectrum 
Gaming Group, a gaming industry consultant.
    My first involvement with Internet gambling began more than 
a decade ago, when offshore companies were seeking to better 
understand the U.S. gaming market and little regulation exists. 
Because the question of legality was never settled through 
clear legislation in this Country, the Internet gambling 
industry developed and flourished overseas, in a market where 
originally the majority of players and revenue were American. 
Today this is a $30 billion industry representing almost 9 
percent of all the money spent by gamblers worldwide, and it 
finally appears to be coming back to its country of origin.
    The DOJ opinion of December 23rd, 2011, has opened the door 
for State lotteries to pursue online lotto sales, and it is 
only a matter of time until scratch and social games also 
appear on the Internet. Online scratch games involving a series 
of symbols, where the win outcome is determined by the last 
symbol, will be virtually indistinguishable from a slot machine 
once they are placed on the Internet. And now it becomes 
necessary to examine how online gambling should occur and what 
needs to be done to safeguard players and assure that online 
games are conducted fairly and responsibly.
    Tribal gaming has already developed successful regulatory 
institutions and processes to administer land-based gambling, 
but interactive wagering brings a whole new set of challenges. 
Just as with land-based gambling, regulatory authorities will 
have to put in place responsible gaming protections, which 
include identity and age verification, geo-location, and other 
know your customer, or KYC, measures.
    KYC is usually accomplished through a rigorous registration 
process that requires documentation of age, residence, 
location, credit card, and financial institution information. 
This is supported by employment of specific identity 
verification tools at every logon. In addition, Tribal 
regulators will need to establish anti-fraud procedures to 
prevent collusion and money laundering or chip dumping taking 
place on the games. All of this will require significant 
investment in technology.
    Tribal regulators will need to establish effective 
regulations and enforce penalties for non-compliance. They will 
also need to develop testing procedures for the online games, 
as well as procedures for auditing the payment systems. They 
should be prepared to assess online gaming vendors and, if 
necessary, conduct background checks into the company 
principals. Some of these offshore B2C operators took bets from 
U.S. citizens after UIGEA was passed in 2006 and probably 
should not be allowed to benefit from those actions.
    Most importantly, Tribal regulators and operators will need 
to acquire personnel resources with experience in online 
gambling operations and educate internal staff to build the 
knowledge base required to administer and regulate the new 
online operations.
    Problem gambling will be just as tough an issue as it is 
with land-based gambling today. Increased availability of 
gambling through the Internet opens the potential for greater 
abuse, although research to date shows similar rates of problem 
in pathological gambling between the online and the offline 
channel.
    The good news here is that the Internet offers better tools 
for tracking problem gamblers and even identifying patterns of 
behavior that lead to problem gambling so that early 
intervention can take place. Because online betting provides a 
perfect history of each player's gambling transactions, there 
is ample data available to profile normative gambling behavior, 
as well as abnormal gambling behavior. But the lesson to take 
from Europe is that problem gambling solutions, such as self-
exclusion, need to be approached comprehensively on the 
Internet and not on a site-by-site basis.
    While Internet gambling does present unique challenges, 
essentially it constitutes simply another channel for 
delivering the entertainment experience of responsible gaming. 
European operators have already established strong regulatory 
and KYC procedures that can be used as a model for U.S. 
operators, whether Tribal, commercial, or State lottery based. 
Spectrum believes that Internet gambling will develop in the 
U.S. differently from the European model and will be tied more 
closely to established land-based brands which can offer 
tangible player rewards and amenities.
    Indian gaming is a major part of the land-based gambling 
industry, generating almost as much revenue as all the U.S. 
commercial casinos, and Tribal authorities will be expected to 
regulate online gambling just as effectively as they do bricks 
and mortar casinos.
    That concludes my remarks. Thank you, members of the 
Committee.
    [The prepared statement of Mr. Johnson follows:]

   Prepared Statement of Gene Johnson, Senior Vice President, Market 
           Research and Online Studies, Spectrum Gaming Group
    Thank you for providing this opportunity to address the committee 
on a subject in which I have extensive background.
    My first involvement with Internet gambling was more than a decade 
ago when offshore companies were seeking to better understand the U.S. 
gaming market. Because the question of legality was never settled 
through clear legislation in this country, the Internet gambling 
industry developed and flourished overseas in a market where originally 
the majority of players (and revenue) were American. Today this is a 
$30 billion dollar industry representing almost 9 percent of all the 
money spent by gamblers worldwide last year. \1\ Finally it appears 
that Internet gambling may be returning to its country of origin.
---------------------------------------------------------------------------
    \1\ 2011 data set, H2 Gambling Capital.
---------------------------------------------------------------------------
    The Department of Justice opinion of December 23, 2011 has opened 
the door for state lotteries to pursue online lotto sales and it is 
only a matter of time until scratch and social games also appear on the 
Internet. Online scratch games, involving a series of symbols with the 
win outcome determined by the last symbol, will be virtually 
indistinguishable from a slot machine once placed on the Internet. Now 
that the prospect of legalized Internet gambling returning to the U.S. 
is has grown more probable, it becomes necessary to carefully examine 
how that should occur and what needs to be done to safeguard players 
and assure that online games are conducted fairly and responsibly--in 
short, the regulation of online gambling.
    Tribal gaming has already developed successful regulatory 
institutions and processes to administer land-based gaming but 
interactive wagering brings a new set of challenges which must also be 
addressed. Just as with land-based gaming, regulatory authorities will 
have to put in place responsible gaming protections which include 
identity and age verification, geo-location, and other ``know your 
customer'' (KYC) measures. KYC is usually accomplished through a 
rigorous registration procedure that requires documentation of age, 
residence, location, credit card and financial institution information. 
This is supported by the employment of specific identity verification 
tools at every logon. In addition tribal regulators will need to 
establish anti-fraud procedures to prevent collusion or money 
laundering (chip dumping) taking place on the games. All of this will 
require significant investment in technology.
    Tribal regulators will need to establish effective regulations and 
enforce penalties for non-compliance. They will also need to develop 
testing procedures for the online games, as well as procedures for 
auditing the payment systems for Internet wagering sites. They should 
be prepared to assess online gaming vendors and if necessary conduct 
background checks into the company principals. Some of these offshore 
B2C operators took bets from US citizens after UIGEA was passed in 2006 
and probably should not be allowed to profit from those actions.
    Most importantly, tribal gaming regulators and operators will need 
to acquire resources with experience in current online gambling 
operations and educate internal staff to build the knowledge base 
required to administer and regulate the new online operations.
    Problem gambling will be just as tough an issue as it is with land-
based gaming. Increased availability of gambling through the Internet 
opens the potential for greater abuse, although research to date shows 
similar rates of problem and pathological gambling between the online 
and ``offline'' channels. The good news here is that Internet 
operations offer better tools for tracking problem gamblers, and even 
identifying patterns of behavior that lead to problem gambling so that 
early intervention can take place. Because online betting provides a 
perfect history of each player's gambling history, there is ample data 
available to profile normative gambling as well as abnormal gambling 
behavior. One lesson to take from Europe is that problem gambling 
solutions such as self-exclusion need to be approached comprehensively 
on the Internet and not on a site by site basis.
    While Internet gambling does present unique challenges, essentially 
it constitutes simply another channel for delivering the entertainment 
experience of responsible gaming. European operators have already 
established strong regulatory and KYC procedures which can be used as a 
model for U.S. operations, whether tribal, commercial, or state lottery 
based. Spectrum believes that Internet gambling will develop in the 
U.S. differently from the European model and be tied more closely to 
established land-based brands which can offer tangible player rewards 
and amenities. Indian gaming is a major part of the land-based gambling 
industry, generating almost as much revenue as all U.S. commercial 
casinos, and tribal authorities will be expected to regulate online 
gaming just as effectively as it does bricks and mortar casinos.
    Thank you.

    The Chairman. Thank you. Thank you very much, Mr. Johnson, 
for your testimony.
    Mr. Hummingbird, your organization is made up of Tribal 
regulators. Has your organization looked at the Internet game 
issue, or have individual members taken any steps to ensure 
Tribes are ready to participate should Federal legislation be 
enacted?
    Mr. Hummingbird. Thank you, Mr. Chairman. The National 
Tribal Gaming Commissioners and Regulators have itself looked 
into this possibility on the avenue of providing training and 
education to Tribes and Tribal regulators, that is to say, 
getting them informed and getting them prepared for any 
eventuality for Internet gaming. I know that there are Tribes 
out there across the Country that have been proactively 
researching and drafting and looking at ways to take advantage 
of an opportunity should that come their way, but at this point 
I believe everybody is kind of waiting for whatever legislation 
may come down, because that is going to drastically impact the 
regulations and the ordinances that they may draft.
    The Chairman. Ms. Homer, one of the issues that would 
severely limit a Tribe's ability to participate in or regulate 
Internet gaming centers around jurisdictional issues and how 
Indian lands would be treated. The question is what is your 
view on how Tribal lands should be taken into account in any 
Federal legislation?
    Ms. Homer. Well, I think that it is appropriate for there 
to be a strong regulatory presence by the Tribe over any 
Internet gaming that would entail locating the gaming 
equipment, locating the gaming system on the reservation, and 
subject to Federal and Tribal oversight. With regard to the 
market, however, I think that it would prove a terrible 
injustice to the Tribes if they were to be limited to Internet 
gaming that is initiated on the reservation. I think that it is 
only fair to, we are dealing with a borderless situation now, 
to allow Tribes to participate in the marketplace, whether it 
be the U.S. or a larger marketplace. The Tribes should be able 
to do that as long as they have their regulatory controls 
situated where they can actually be in control of it.
    The Chairman. Congressman Porter, can you elaborate further 
on why you believe online gaming should be limited to poker 
only?
    Mr. Porter. Thank you, Mr. Chairman. First, let me highly 
encourage all the Tribal Nations to engage and be prepared, 
because something will be happening, it has to happen.
    To answer your question, without getting into all the 
details of the difference between different types of gaming, 
but with poker, a poker player plays against another or with 
another poker player; whereas, the house in that case, whether 
it be a bricks and mortar, Tribal, non-Tribal, will normally 
receive some type of a fee, but they are not engaged in playing 
as a poker player against the house.
    The advantage to poker only is, from a regulatory 
perspective, I really believe that it is a game of skill, and I 
can assure you, since I never win, I promise you it is a game 
of skill that I don't have; whereas, when you play a slot 
machine or some other form of casino game, you are technically 
playing against the house and the odds of the house, and a lot 
of times the house wins.
    But I firmly believe that with the poker player, and, 
again, I work with close to a million, that it is certainly a 
game of skill; whereas, other games are a game of chance. And 
we want to make sure it is player-to-player and not player to 
some unknown site somewhere in the world, where we can't 
control what is happening within that database.
    The Chairman. Thank you for that response.
    Mr. Johnson, in your testimony you note that Indian gaming 
is a major part of the land-based gambling industry, generating 
nearly as much revenue as all U.S. commercial gaming. Do you 
see any reason why Tribes should be prohibited from entering 
the online gaming market at the same time as those other gaming 
interests?
    Mr. Johnson. That is a great question. No, I do not see any 
reason why the Tribes should be prohibited. And in States where 
there are no commercial or Tribal gaming interests, it is very 
likely that the State lottery will seek to acquire a monopoly 
on online gaming activities. But the Tribes have demonstrated 
the social benefits of land-based Tribal gaming and I think it 
would only help to enhance their operations and their 
charitable operations, what they do to support their own people 
and to make themselves independent of Federal assistance. So by 
all means they deserve an equal place at the table as 
commercial gaming and State lotteries would.
    The Chairman. Thank you very much, Mr. Johnson.
    Mr. Hummingbird and Ms. Homer, this is to both of you. Does 
Congress need to amend IGRA or revise any existing Tribal-State 
compacts for Tribes to participate in online gaming?
    Ms. Homer. Thank you.
    That is a really good question, Senator, and I think that 
it would be very unwise to undo any Tribal gaming compacts. The 
nice thing about Tribal gaming compacts is that they are a 
bargain between the States and the Tribes, and they are subject 
to renegotiation or they are subject to discussion and 
agreement and accord between the parties here. I don't see that 
need to reopen the Indian Gaming Regulatory Act and to amend 
the Indian Gaming Regulatory Act, per se.
    I think that it is quite possible to have an independent 
piece of legislation or to create a new title to the larger 
Internet gaming legislation that is, or any larger Internet 
gaming legislation that is being considered that would be 
specific to Tribal Governments. There is no reason why the NIGC 
couldn't be assigned administrative jurisdiction over two 
separate statutes. Federal agencies are assigned multiple 
statutes to administer all the time. So I don't think we would 
have to disturb IGRA in order to have a viable quality Tribal 
Internet gaming bill.
    The Chairman. Mr. Hummingbird?
    Mr. Hummingbird. Thank you, Mr. Chairman. I would echo 
Elizabeth's comments in the sense that I do not believe it 
would be necessary to amend IGRA. I think any Federal 
legislation that we would be looking at would need to either be 
viewed as diminishing its impact on any Tribal-State impacts 
that are out there, if not protecting their contents outright. 
I think it would be in the best interest of Tribes to provide a 
protection for the existing compacts without having to amend 
IGRA.
    The Chairman. Thank you. Thank you very much.
    Mr. Porter, Congressman Porter, in your testimony you note 
the historic knee jerk reaction against online gaming. In your 
view, can the benefits that Nevada brick and mortar casinos now 
foresee in online play be shared and replicated by Tribal 
gaming operators?
    Mr. Porter. Thank you, Mr. Chairman. I certainly would 
agree, but I also think it is vice versa; I think that we can 
learn from each other. As I mentioned in my testimony, I think 
one of the bigger problems is the bigger picture is extending 
into a scratch card and to slot machines. But I certainly that 
as we have done as a community with the Tribal Nation for the 
last 20 years, we have worked together and, again, have created 
some of the toughest regulations in the world on ourselves.
    So I certainly think we have a lot to offer, but I also 
believe that the non-Tribal, our industry in Nevada, too, has a 
lot to offer. But that is why your conversations today with the 
Committee and other members gives us an opportunity to share 
some ideas. But they are also working together now, quite 
effectively, across the Country. So I think it is a team 
effort. We have a lot to give from both sides.
    The Chairman. Mr. Johnson, do you think Tribes should be 
able to form Tribal consortiums to enhance their ability to 
participate in online gaming should Federal legislation be 
enacted?
    Mr. Johnson. Thank you, Mr. Chairman. Again, I would say, 
without question, they should be. If you look at the history of 
the lottery industry, I believe it was 1962, there were no 
lotteries in the United States, and New Hampshire was the 
first, I believe, and it took years of litigation for lotteries 
to win the rights to have multiple State compacts, to have 
games that had a jackpot you could play across a number of 
States, specifically games like Megamillions and PowerBall.
    When you look at online poker, small States such as 
Delaware, which has legalized Internet gambling, have very 
small populations and very little liquidity. Liquidity is the 
mass effect of having a number of players on the site and the 
ability to find a game within your price point at any time. 
Without liquidity, small States and small Tribes will suffer; 
it will be very difficult for them to gain traction in order to 
compete with commercial casinos and offshore operators. I think 
interTribal or interstate compacts are going to be essential.
    The Chairman. Thank you very much. I want to tell this 
panel your responses have been helpful, coming from the 
experiences and the areas that you come from, and the parts of 
the Country that you come from really makes a difference, and 
we are trying to work together with the Tribes to bring about 
some of the what we might consider necessary values that can 
keep the industry successful and working well. So I want to 
thank you very, very much for your responses. You may receive 
some questions from members of the Committee that they may 
have.
    So I want to thank our witnesses for participating in 
today's hearing. We have heard quite a bit today regarding 
regulation of Tribal gaming as it currently exists. We also 
have a lot to consider should Federal legislation be enacted 
that expands gaming in the United States.
    As always, it is our job on the Committee to make sure 
Tribes achieve parity in any Federal legislation and to bring 
your voice to Congress, so I urge all of you to review the 
Tribal Online Gaming Act, the discussion draft, and provide 
comments so that you can make sure the Tribal voice is heard.
    We will continue the dialogue on this issue and I encourage 
all of you to continue to work with this Committee. Again, 
thank you for being so patient and I want to wish all of you 
well in your endeavors, and we want to do the best we can to 
provide the best operation regulations that we can to all of 
you.
    Before I really call for adjournment, I would ask the panel 
if they have any final comments they would like to make to the 
Committee.
    Ms. Homer?
    Ms. Homer. Senator, I just want to thank you for your 
service to Indian Country during your tenure in the Senate. I 
know that you are looking at retiring, and we are going to miss 
you so very much, and your wisdom and your kindness and your 
compassion. So I just want to say thank you.
    The Chairman. Thank you.
    Congressman Porter?
    Mr. Porter. And I echo the same, Mr. Chairman. We 
appreciate your service.
    But I heard something today quite consistently from some of 
the Tribal Nations, and that is that they are waiting to see 
what is going to happen, and even maybe from the regulatory 
standpoint. I would suggest, as a company that specializes in 
licensing, Porter Gordon Silver, I would highly encourage the 
Tribal Nations and the regulatory bodies get engaged quickly in 
this debate from creating their own regulations and being a 
part of this.
    One thing that Nevada has done, of course, I am most 
slightly biased, coming from Las Vegas, but one thing Nevada 
has done in anticipating that this may happen soon, we have 
passed landmark legislation to prepare our industry for this 
global Internet. And I know other States have and I, of course, 
am not here from the other States, but a lot of States are 
moving and preparing. I would highly encourage, with your 
leadership and the Committee, that the Tribal Nations be 
prepared and not wait, because I feel it is a responsibility of 
Congress to do something and the Senate to protect families, 
and I think they should be prepared or they will miss the 
opportunity.
    So, again, thank you, Mr. Chairman. It is an honor to be 
here.
    The Chairman. Thank you.
    Mr. Johnson?
    Mr. Johnson. I would just like to expand on the earlier 
question you asked about the interTribal networks. I mentioned 
the example of Delaware being a small State. You can be sure 
that the States, the State lotteries, when they go online, they 
will ban together in multi-State networks, it is only a matter 
of time; and the Tribes should look to do that as well.
    And, once again, thank you, sincere thanks for the 
invitation to speak before the Committee.
    The Chairman. Thank you very much for being here.
    Mr. Hummingbird.
    Mr. Hummingbird. Thank you, Mr. Chairman. I too want to 
express my appreciation for your leadership on this Committee. 
I think you have done an honorable job and have represented 
Indian Country and Native peoples very well.
    I do want to dovetail into something that Mr. Porter had 
just spoken of, and it is a message that I have been advocating 
every chance I can get, and I don't think there is a better 
chance I can get than this one today, but that is for Tribes to 
be prepared, to be aware, and to be active; and those three 
simple phrases contain a lot of activity that Tribes will be 
need to be cognizant of. We have to be prepared for what 
eventuality is coming.
    The Tribal Online Gaming Act is something that is going to 
be of much interest to Tribes in the very near future. But we 
also have to be aware of everything surrounding this particular 
issue, and it is something that I have encouraged our Tribal 
leadership and I encourage the elected leadership at the Senate 
and the House side to continue in dialogue such as what we had 
today, bringing those individuals to the table that can provide 
a more round view of the issue at hand, because it is very 
important to get this particular item right the first time out 
from the gate so that we can have something that is going to be 
a viable option and hopefully complement the economic success 
that Tribes have garnered through gaming up to this time.
    So thank you for this hearing. I hope we have the 
opportunity to speak on future occasions and to advance the 
cause of regulation for Indian gaming. Thank you.
    The Chairman. Thank you very much, all of you on this 
panel. I want to say mahalo, thank you very much. Without 
question, let's continue to work together on this.
    This hearing is adjourned.
    [Whereupon, at 4:30 p.m., the Committee was adjourned.]
                            A P P E N D I X

   Prepared Statement of Grant W. Eve, CPA, CFE, Partner, JOSEPH EVE
    Chairman Akaka and Members of the Committee, for the record my name 
is Grant Eve, CPA, a partner with the regional CPA firm of JOSEPH EVE. 
I am writing this to be submitted to the records for the United States 
Senate Committee on Indian Affairs Oversight Hearing on Regulation of 
Tribal Gaming: From Brick and Mortar to the Internet that was held on 
July 26, 2012. This is to add some clarification on the National Indian 
Gaming Commission (Commission) Minimum Internal Control Standards 
Agreed Upon Procedures (NIGC MICS AUP) that was discussed in the 
question and answer section of NIGC Chairwoman Tracie Stevens and 
Senator Barrasso, Senator Franken, and Senator Udall.
    NIGC Minimum Internal Control Standards 542.3(f) (1) states that an 
independent certified public accountant (CPA) shall be engaged to 
perform ``Agreed-Upon-Procedures'' to verify that the gaming operation 
is in compliance with the minimum internal control standards (MICS) set 
forth in this part or a Tribally approved variance thereto that has 
received Commission concurrence. The CPA shall report each event and 
procedure discovered by or brought to the CPA's attention that the CPA 
believes does not satisfy the minimum standards or Tribally approved 
variance that has received Commission concurrence. The ``Agreed-Upon 
Procedures'' may be performed in conjunction with the annual audit. The 
CPA shall report its findings to the Tribe, Tribal gaming regulatory 
authority, and management. The Tribe shall submit two copies of the 
report to the Commission within 120 days of the gaming operation's 
fiscal year end. This regulation is intended to communicate the 
Commission's position on the minimum agreed-upon procedures to be 
performed by the CPA. Throughout these regulations, the CPA's 
engagement and reporting are based on Statements on Standards for 
Attestation Engagements (SSAEs) in effect as of December 31, 2003, 
specifically SSAE 10 (``Revision and Recodification Agreed-Upon 
Procedures Engagements.''). If future revisions are made to the SSAEs 
or new SSAEs are adopted that are applicable to this type of 
engagement, the CPA is to comply with any new or revised professional 
standards in conducting engagements pursuant to these regulations and 
the issuance of the agreed-upon procedures report.
    Our CPA firm, JOSEPH EVE, performs several tribal casino financial 
statement audits and MICS AUP procedures each year. A tribal casino 
could be subject to as many as 15 individual MICS checklists. The 
gaming machine MICS checklist has 192 questions. A casino could be out 
of compliance with a one or two of the 192 questions and a ``finding'' 
is written up for each question where the casino is out of compliance. 
Materiality is not a consideration when performing the NIGC MICS AUP 
procedures as it is in a financial statement audit. It is our 
professional opinion that it is very difficult to state whether a 
casino that is out of compliance with one or two questions subjects 
either the casino or the customers to an undue risk.
    Senator Udall requested to know what percentages of tribes are out 
of compliance with the NIGC MICS AUP. In our opinion, with the NIGC 
MICS AUP, it would be difficult to measure whether the tribe is in or 
out of compliance, as a whole. In our experience, almost all gaming 
operations have some non-compliance issues that are identified in 
conjunction with the NIGC MICS AUP procedures. As the NIGC MICS are 
cumbrous, some internal controls are more stringent that others, so 
therefore, it would be very challenging to say after a certain number 
of findings, a tribe is out of compliance as a whole. The CPA firm that 
is completing AUP procedures must complete the CPA NIGC MICS compliance 
checklists or other comparable testing procedures. The checklists 
measure compliance on a sampling basis by performing walkthroughs, 
observations and substantive testing. The CPA completes separate 
checklists for each gaming revenue center, cage and credit, internal 
audit, surveillance, information technology and complimentary services 
or items.
    In addition to the checklists, the CPA firm must complete one 
unannounced observation of each of the following: gaming machine coin 
drop, gaming machine currency acceptor drop, table games drop, gaming 
machine coin count, gaming machine currency acceptor drop, and table 
games count. For purposes of these procedures, ``unannounced'' means 
that no officers, directors, or employees are given advance information 
regarding the dates and times of such observations. This unannounced 
observation is an integral piece of the NIGC MICS AUP procedures. This 
can difficult to complete as a true unannounced observation if the CPA 
firm does not have tribal gaming experience and understand how the 
casino operates in conjunction with the tribal gaming regulatory 
authority.
    Alternatively, at the discretion of the Tribe, the Tribe may engage 
an independent certified public accountant (CPA) to perform the 
testing, observations and procedures reflected in paragraphs (f)(1)(i), 
(ii), and (iii) of 542.3 utilizing the Tribal internal control 
standards adopted by the Tribal gaming regulatory authority or Tribally 
approved variance that has received Commission concurrence. 
Accordingly, the CPA will verify compliance by the gaming operation 
with the Tribal internal control standards. Should the Tribe elect this 
alternative, as a prerequisite, the CPA will compare the Tribal 
internal control standards to the MICS to ascertain whether the 
criteria set forth in the MICS or Commission approved variances are 
adequately addressed. The CPA may utilize personnel of the Tribal 
gaming regulatory authority to cross-reference the Tribal internal 
control standards to the MICS, provided the CPA performs a review of 
the Tribal gaming regulatory authority personnel's work and assumes 
complete responsibility for the proper completion of the work product. 
If a tribe decides to utilize these alternative procedures, based on 
their tribal internal control standards, it may not be comparing 
``apples to apples.'' The tribe may have more stringent internal 
controls as requested by tribal council, the gaming commission, or 
could be required in the state compact. Therefore, it would not be 
possible to state percentages that are in or out of compliance.
    Other factors to consider while analyzing if a tribe is in or out 
of compliance with the NIGC MICS AUP procedures include:

   Whether the CPA firm relied on the internal auditors of the 
        gaming operation

   When the unannounced observations took place

      If the gaming operations year-end is 12/31 and the 
        unannounced observation took place on 12/30, it would not be a 
        true unannounced observation as management would be able to 
        tell when the procedures were to take place using process of 
        elimination.

   The experience of the CPA firm that conducts the audit and 
        NIGC MICS AUP

   Whether the gaming operation continues to have repeat 
        exceptions year after year

    In closing, we would be happy to answer any questions the Senate 
Committee on Indian Affairs may have regarding this submission, tribal 
casino audit procedures, or procedures related to the NIGC MIC AUP 
engagements.
                                 ______
                                 
 Joint Prepared Statement of Kathryn R.L. Rand, J.D. and Steven Andrew 
 Light, Ph.D., Co-Directors, Institute for the Study of Tribal Gaming 
                             Law and Policy
    We thank Chairman Akaka, Vice Chairman Barrasso, and the members of 
the U.S. Senate Committee on Indian Affairs for this opportunity to 
comment on the Discussion Draft of the Tribal Online Gaming Act (TOGA) 
of 2012 following the Committee's July 26, 2012 oversight hearing on 
the regulation of Indian gaming and online gaming. \1\
---------------------------------------------------------------------------
    \1\ The analysis of tribal considerations for online gaming when 
Congress appeared poised to legislate in 2011 has been retained in 
Committee files. See Kathryn R.L. Rand & Steven Andrew Light, Indian 
Gaming on the Internet: How the Indian Gaming Ethic Should Guide 
Tribes' Assessment of the Online Gaming Market, 15 GAMING L. REV. 11 
(2011): 681-691.
---------------------------------------------------------------------------
    We co-direct the Institute for the Study of Tribal Gaming Law and 
Policy at the University of North Dakota, which provides legal and 
policy analysis and advances research and understanding of Indian 
gaming. Our comments and suggestions here are informed by sixteen years 
of research and interaction with those involved with Indian gaming.
    We welcome this opportunity to contribute our views on how best to 
legislate in the area of Tribal Online Gaming in the context of the 
current Indian Gaming industry and the prospects for federal 
legalization of online gaming generally. In this statement, we focus on 
one key question--how best to ensure effective federal oversight and 
regulatory authority of Tribal Online Gaming--and also provide several 
more limited suggestions related to consistency and clarity in the 
TOGA.
1. Tribal Online Gaming Oversight and Regulatory Authority
    The TOGA calls for the U.S. Secretary of Commerce to oversee and 
regulate Tribal Online Gaming, with assistance from a new ``Office of 
Tribal Online Gaming,'' headed by a Director within the Commerce 
Department.
    We believe that assigning primary regulatory authority over Tribal 
Online Gaming to the Secretary of Commerce and a new office within the 
Commerce Department fails to take advantage of existing regulatory 
expertise and experience--namely the National Indian Gaming Commission 
(NIGC)--and creates a heightened risk of interagency inconsistency and 
inefficiency, hindering the TOGA's effectiveness. We therefore 
recommend that the NIGC be delegated primary regulatory authority over 
Tribal Online Gaming through the TOGA. To ensure efficiency and to 
guard against inconsistency among federal agencies charged with 
regulation of state and commercial online gaming, we suggest including 
a liaison mechanism between the NIGC and the Secretary of Commerce.
a. NIGC as Primary Regulator of Tribal Online Gaming
    Since its establishment under the Indian Gaming Regulatory Act 
(IGRA) in 1988 as an independent regulatory agency, the NIGC has 
developed expertise in effective regulation of Indian gaming, including 
approval of tribal gaming ordinances and management contracts, 
oversight of tribal licensing of key employees and management 
officials, investigation and enforcement actions, and promulgation of 
regulations--all duties nearly identical to the regulatory functions 
set forth in the TOGA.
    When Congress legalizes online gaming, it will require implementing 
effective regulation as immediately as possible. Given its current 
regulatory oversight of Indian gaming, the NIGC is uniquely situated to 
provide immediate, effective, and appropriately policy-driven oversight 
of Tribal Online Gaming.
    The NIGC's operations have been informed by IGRA's policy goals of 
promoting tribal economic development, self-sufficiency, and strong 
tribal governments, alongside effective gaming regulation--exactly what 
the TOGA sets out in its policy goals. These policy goals in turn 
reflect the Federal Government's established trust obligation to tribes 
and the body of federal Indian law and policy.
    The NIGC provides technical assistance to tribes in establishing 
and implementing effective tribal gaming commissions. For instance, the 
NIGC has developed a Model Tribal Gaming Ordinance, trained tribal 
regulators, and promulgated Minimum Internal Control Standards--all of 
which are essential for effective regulation and coordinated oversight, 
as well as facilitating strong tribal governments and tribal self-
sufficiency. The NIGC also has worked to develop meaningful government-
to-government relations with tribes and to facilitate effective 
intergovernmental relations among federal, state, and tribal officials. 
The NIGC's experience, expertise, and relationships with tribes have 
been built over more than two decades and reflect the dynamic nature of 
the Indian gaming industry and the obligations inherent in multi-
jurisdictional oversight and regulation.
    Primary regulatory authority over Tribal Online Gaming may be 
delegated to the NIGC through the TOGA, without any need to amend IGRA 
or other existing federal law. The scope of this regulatory authority 
should be clearly and expressly described in the TOGA to avoid any 
confusion about the extent of the NIGC's powers or overlap with 
regulation of Indian gaming under IGRA. See, e.g., Colorado River 
Indian Tribes v. NIGC, 466 F.3d 134 (D.C. Cir. 2006).
    To allow the addition of appropriate regulatory capacity and online 
gaming expertise, the NIGC should receive appropriate additional 
funding, perhaps through the Tribal Online Gaming licensing process.
b. Coordination of Regulation of Tribal and Non-Tribal Online Gaming 
        Through 
        Liaison Mechanism
    If regulation of non-Tribal Online Gaming is delegated to the 
Secretary of Commerce while the NIGC has primary regulatory authority 
over Tribal Online Gaming, it will be essential to appropriately 
coordinate regulation of online gaming generally. To take full 
advantage of the NIGC's existing expertise, coordinate effective 
federal regulation of all online gaming, and avoid interagency 
inconsistency in interpretation and implementation of the TOGA, we 
suggest incorporating a liaison mechanism.
    While the TOGA provides for memoranda of agreement among the 
Secretary of Commerce, the NIGC Chair, and the Attorney General to 
ensure sharing of information, we suggest that more direct coordination 
is necessary. An example in the context of Indian gaming illustrates 
the potential pitfalls.
    Inconsistency in the NIGC's and the Department of Justice's 
interpretations of the Johnson Act in the context of Class II machines 
resulted in extensive litigation and uncertainty. The NIGC classified 
certain machines as Class II devices, allowing tribes to operate them 
in the absence of a tribal-state compact, IGRA's requirement for Class 
III gaming. At the same time, the Justice Department threatened tribes 
with criminal prosecution under the Johnson Act for operating those 
Class II machines without a tribal-state compact. See, e.g., United 
States v. 103 Electronic Gambling Devices, 223 F.3d 1091 (9th Cir. 
2000); Seneca-Cayuga Tribe of Oklahoma v. NIGC, 327 F.3d 1019 (10th 
Cir. 2003); United States v. Santee Sioux Tribe of Nebraska, 324 F.3d 
607 (8th Cir. 2003). This interagency conflict resulted in costs both 
to tribes and the Federal Government and undermined effective and 
efficient regulation of Indian gaming.
    Thus, we suggest a liaison mechanism to ensure effective 
communication among federal agencies and thus effective coordination of 
federal regulation of online gaming generally.
    Such a liaison mechanism could focus mostly on communication, such 
as by convening a ``Tribal Online Gaming Working Group,'' modeled after 
the Indian Gaming Working Group established in 2004 among the NIGC, the 
Federal Bureau of Investigation, the Department of the Interior Office 
of the Inspector General, the Internal Revenue Service Tribal 
Government Section, the Bureau of Indian Affairs Law Enforcement 
Services, the Department of the Treasury Financial Crimes Enforcement 
Network, and the United States Attorneys Subcommittee on Indian 
Matters. The Indian Gaming Working Group is intended to enhance 
cooperation between agencies, obtain commitment to undertake an active 
role in effective regulation, pool federal resources, coordinate 
regulatory roles and functions, and develop investigative strategies. A 
Tribal Online Gaming Working Group might similarly bring together the 
NIGC, the Secretary of Commerce, and the Justice Department.
    Alternatively, a more structured approach that builds coordination 
into the NIGC's regulatory functions could include the appointment via 
the TOGA of additional NIGC Commissioners charged solely with 
participating in regulation of Tribal Online Gaming. For example, two 
Tribal Online Gaming Commissioners could be added to the NIGC, perhaps 
a tribal member with experience in gaming regulation (appointed by the 
Secretary of Commerce in consultation with the Secretary of the 
Interior and the Attorney General), and a member of the Commerce 
Department agency charged with regulation of non-Tribal Online Gaming 
(appointed in the same manner as required for appointment to the 
Commerce Department agency). The authority of these Tribal Online 
Gaming Commissioners would be limited to the regulation of Tribal 
Online Gaming under the TOGA. They would not have regulatory authority 
over Indian gaming under IGRA, and their appointment would not require 
amending IGRA. The NIGC, acting with the additional Tribal Online 
Gaming Commissioners, should have the regulatory powers set forth in 
the TOGA.
    This format, with the addition of the Tribal Online Gaming 
Commissioners coupled with the expertise and experience of the NIGC, 
should result immediately and in the long term in the effective 
regulation of Tribal Online Gaming that is appropriately coordinated 
with the regulation of online gaming generally.
2. Other Suggestions Related to Definitions, Consistency, and Clarity
a. Definition of Tribal Online Gaming
    The legal term ``Tribal Online Gaming,'' should be used 
consistently throughout the bill. For instance, Section 4(1) references 
``Internet gaming'' rather than Tribal Online Gaming. This type of 
inconsistency is more than a stylistic or semantic concern. The same 
way that ``Indian gaming'' is a legal term of art defined by and 
incorporated throughout IGRA, and both reflects and shapes the 
industry's legal, policy, and regulatory environment, Tribal Online 
Gaming should be distinct and used consistently as defined by the TOGA. 
The TOGA's definition of Tribal Online Gaming (Section 3(5)) should 
mirror the definition of state and commercial online gaming in federal 
legislation that authorizes such gaming. We also note that Section 
13(b) purports to automatically amend the statutory definition of 
Tribal Online Gaming when and if states are allowed to conduct online 
gaming beyond poker. We suggest that a cleaner way to achieve this 
might be through a definition that mirrors federal legalization of 
state online gaming. For instance: ``The term `Tribal Online Gaming' 
means gaming conducted over the Internet in accordance with this Act 
and extends to the same specific online games that federal law allows 
states to conduct.''
b. Indian Lands
    Though not included in the definitions section, the TOGA uses the 
term ``tribal land'' (see Section 6(g)(2)). The definition of this term 
is not clear, though we believe the intent is to mirror the ``Indian 
lands'' defined in IGRA as reservation lands or trust and restricted 
lands over which a tribe exercises governmental authority. As IGRA's 
definition of ``Indian lands'' and the Major Crimes Act's definition of 
``Indian country'' are the two most prevalent terms of art in federal 
law, we suggest using the term Indian lands with the same definition as 
appears in IGRA to avoid uncertainty, confusion, and litigation.
c. Inapplicability of IGRA
    Similarly, to avoid litigation and uncertainty arising from 
confusion about how the TOGA and Tribal Online Gaming relate to Class 
II and Class III Indian gaming as defined by IGRA, we suggest 
clarifying that IGRA does not apply to Tribal Online Gaming, other than 
as expressly provided by the TOGA. In Section 12, we suggest adding the 
clear statement that no tribal-state compact is required for a tribe to 
conduct Tribal Online Gaming in compliance with the TOGA to avoid 
confusion with IGRA's requirement for Class III gaming.
d. Tribes as Primary Beneficiaries
    We concur that the TOGA's policy goals, consistent with those of 
IGRA, remain principal goals of federal Indian policy, and align with 
the needs of tribal governments and communities. We therefore suggest 
considering whether tribes should be explicitly designated as the 
primary beneficiaries of Tribal Online Gaming, as required of Indian 
gaming under IGRA.
e. Revenue Sharing
    Section 16 of the TOGA requires tribes participating in online 
gaming to pay one percent of gross gaming revenues (presumably, though 
not expressly, limited to Tribal Online Gaming revenues) into a fund 
that will be disbursed to tribes that choose not to conduct online 
gaming (``Indian tribes that have opted out of participation in tribal 
online lending [sic] . . .''). Though termed ``Revenue Sharing,'' this 
provision is modeled after California's Revenue Sharing Trust Fund (see 
Rincon Band of Luiseno Mission Indians v. Schwarzenegger, 602 F.3d 1019 
(9th Cir. 2010)), rather than the more typical revenue-sharing 
agreements that have sprung from IGRA's tribal-state compact 
requirement for Class III gaming. We suggest that the goals of this 
provision could be achieved in ways that are more appropriately 
tailored to the purpose, and that do not cause further confusion about 
the limitations on revenue-sharing provisions in tribal-state compacts 
under IGRA.
    We thank the Committee for its consideration of this statement at 
an important juncture for Indian gaming as well as for online gaming. 
We would be happy to answer any questions or elaborate on the 
suggestions we offer here, and to address any other issues related to 
Tribal Online Gaming that the Committee deems pertinent.
                                 ______
                                 
   Prepared Statement of Hon. Robert Odawi Porter, President, Seneca 
                           Nation of Indians
Introduction
    Greetings. On behalf of the Seneca Nation of Indians (the 
``Nation''), I submit the following preliminary comments to the 
Committee for its use as it shapes its draft legislation on tribal 
online gaming.
    On-line gaming by off-shore operators is an inevitable and 
competitive participant in the market in which the Nation conducts its 
gaming activities. Some estimates indicate that in 2010, between 10 and 
15 million people in the United States bet billions of dollars online, 
even though it was illegal for companies to offer real-money Internet 
gambling in the U.S. Americans will continue to bet online as long as 
there are sites they can access, and off-shore operators will always 
create sites Americans can access as long as there are billions of 
dollars to be made.
    Indian nations, including the Seneca Nation of Indians, have 
closely monitored the growing competitive threat which Internet 
gambling poses to our brick and mortar casino operations. Yet each 
tribal nation has been relegated to the sidelines as various bills were 
introduced and considered in this and prior sessions of the Congress. 
These bills have thus far not been enacted because of the potentially 
broad impact they would have on Internet providers, states and segments 
of the gaming industry. But as proposed, these bills should not be 
enacted because they would breach treaties and other agreements between 
the United States and Indian nations like the Seneca Nation of Indians. 
Moreover, these bills would limit tribal participation or require 
unfairly restrictive conditions on tribal involvement. In all 
instances, the bills were developed without Indian tribes.
    Our Nation commends the Committee for attempting to involve Indian 
nations in shaping a legislative alternative that responds to tribal 
concerns by drafting, and seeking tribal comment upon, the draft Tribal 
Online Gaming Act of 2012. However, as described more fully below, the 
Committee's draft bill does not adequately ensure that tribal rights 
and interests are protected. Perhaps this is due to the unfortunate 
fact that there was a complete lack of tribal consultation and 
participation in the drafting of the Committee's draft bill. At least 
for our part, the Nation had absolutely no inkling of what was to be in 
the Committee's draft bill until you circulated it. In addition, most 
of the draft bill is very similar, if not identical in several 
respects, to H.R. 2366, the Internet Gambling Prohibition, Poker 
Consumer Protection and Strengthening UIGEA Act of 2011 introduced 
during the 112th Congress.
    What follows are a number of issues we have identified 
preliminarily in the Committee's draft bill which should be 
substantially revised.
    Poker Only. We understand the Committee's apparent effort to 
constrain the proposed new online authority to the scope of gaming--
poker only--currently rumored to be under consideration by the U.S. 
Congress. However, the Committee draft's definition of ``tribal online 
gaming'' is not as expansive as the ``online gaming'' definition found 
in H.R. 2366 and other previous bills which proposed to legalize 
Internet gambling facilities presumably to allow those facilities to 
offer other Class II type games in addition to poker. Indeed, many of 
the Internet gaming sites currently available include computer based 
games that mimic slot machines or video lottery games designated as 
Class II. A broader definition would facilitate a tribal nation's 
ability to adapt its Internet gambling site quickly to accommodate 
future online gaming that may be legalized for others by the Congress.
    The draft legislation authorizes only online poker initially, but 
says that ``[i]f subsequent federal law allows states to conduct online 
gaming in addition to online poker games, Indian tribes shall be 
offered the same right to conduct that online gaming.'' Instead, the 
bill should authorize an Indian nation to conduct all forms of online 
gaming from day one, rather than just poker, and rather than waiting 
for additional federal legislation. On the basis of the USDOJ's recent 
December 2011 Wire Act opinion, federal law does not appear to prohibit 
intrastate online gaming if authorized by state law. If states do 
pursue or allow intrastate online gaming and such gaming proves to be 
lucrative, additional federal legislation may never come and tribal 
nation gaming operators could be placed at a significant competitive 
disadvantage by this initial limitation to only poker.
    As an aside, it should be noted that the draft bill contains one 
reference to the term ``Internet gambling facility'' (See Section 6 (d) 
(E) Safeguards Required of Licensee) and for consistency with the 
balance of the bill should be revised to read ``tribal online gaming'' 
facility, and in the same vein, the draft bill should include 
definitions of ``significant vendor'', ``remote gaming equipment'', 
``controlling interest'' and ``Bots''.
    Federal Oversight. The Committee's draft bill would establish 
federal guidelines to assure that there is consistency in the 
regulation of Internet gaming (online poker) and thereby avoid a 
patchwork of rules and regulations. The Nation believes a single, 
federal-wide regulatory regime may prove to be beneficial not only for 
customers but for law enforcement and the regulators, and help ensure 
fairer competition for tribal nations seeking to engage in online 
gaming.
    Commerce Department. Designating the U.S. Commerce Department as 
the federal regulatory oversight agency for tribal online gaming is 
ill-advised and would be a significant mistake. The Commerce Department 
has only very limited experience working with Indian nations. It has no 
experience with gaming regulatory or enforcement activity or gaming 
policy. Consequently it would start out far behind and never catch up 
to the dynamic, fast-paced, and technologically-driven, world-wide 
competitive market. It will need to develop an infrastructure and 
expertise that will be subject to inherent bureaucratic obstacles 
frequently experienced by federal agencies. All of this federal 
``oversight'' would result in delaying the entry of tribal operators 
into the online gaming market.
    National Indian Gaming Commission. In contrast to the U.S. Commerce 
Department, the National Indian Gaming Commission (NIGC) with its 
existing tribal gaming expertise and experience, would provide a more 
ready and capable regulatory structure with which the United States 
could oversee and regulate tribal online gaming. The NIGC already has 
over twenty years' experience working with gaming tribes, it has 
already developed a data base of gaming sites and the lands that tribal 
nations govern. And it has a regulatory and training program in place, 
not just for the staff but for tribal leaders and employees. Even more 
compelling is the fact that the NIGC already has a system in place to 
conduct background investigations of gaming companies and principals. 
It works closely with the Federal Bureau of Investigations (FBI) to 
assist tribal nations in assessing criminal history information for 
background investigations. As an independent agency, the NIGC is exempt 
from time-consuming personnel policies relating to appointments and 
restrictive compensation requirements. As such, the NIGC is able to 
hire within weeks rather than the months other federal agencies 
normally take. Altogether, the NIGC's experience, expertise in Indian 
gaming regulation and established infrastructure make it the only 
federal agency that can step right in and take charge of tribal online 
gaming regulation and oversight.
    Licensure Requirements. The licensing provisions of the draft bill 
include several scenarios in which tribal nations may conduct lawful 
online gaming, including in consortium with non-tribal entities (see 
below). Otherwise, we find generally acceptable the standards for 
licensure which are fairly restrictive and include safeguards to 
protect the consumer, to prevent minors from gambling, and to prevent 
fraud, money laundering and financing of terrorism.
    Opt-In/Opt-Out. The time limit for a tribal nation to opt in or opt 
out should be revised to be distinct from the time limit for 
publication of the list of participating tribes. As drafted both events 
would occur simultaneously.
    Location of Remote Gaming Equipment. The crucial language in the 
Committee's draft that references the location of remote gaming 
equipment is unclear (e.g., ``if the requirement applies to all 
significant vendors or other entities'').
    Tribal Ordinances and Compliance with Other Federal Law. The 
Committee's draft bill requires a tribal nation seeking to operate an 
online gaming site to adopt a tribal ordinance in accordance with 
federal standards and in compliance with any other federal law. Does 
this mean the Interstate Wire Act of 1961, the Unlawful Internet 
Gambling Enforcement Act of 2006 (UIGEA) and Internet laws that might 
be passed in the future? The inclusion of these Internet laws could be 
problematic given ongoing disagreements within the U.S. Department of 
Justice over whether and what Internet gaming is legal under the Wire 
Act and given the ambiguous language within UIGEA. As to future 
enactments of Internet gaming laws, tribal nations should not be 
required to comply with changing federal laws without their consent or 
meaningful involvement in the drafting of these laws. Even more 
troubling is the requirement that each tribal nation ordinance must be 
accompanied by the previous three years of financial records of the 
tribal nation, information on all organizational and related businesses 
and affiliates of the tribal nation, and a waiver of sovereign immunity 
even if the tribal nation is not intending to operate the online gaming 
itself. These requirements are much more expansive and intrusive than 
IGRA now requires.
    We must object to the peculiar provision in the Committee's draft 
bill that requires federal disapproval of a tribal nation's ordinance 
if the Secretary determines that the ``tribal governing body was 
significantly and unduly influenced by any person in the adoption of 
the ordinance or resolution''. Setting aside the odd nature of this 
standard, how exactly would the Secretary make such a determination? 
And in making such a determination, how would the Committee propose to 
guard against the Secretary him or herself being significantly and 
unduly influenced in making this determination? This is no specious 
concern, given the record of significant and undue influence upon the 
Congress itself in its consideration of online gaming legislation.
    State Jurisdiction. Section 9 is objectionable because it permits 
any State regulatory body that regulates casino gaming to ask the 
Secretary to designate it as a tribal qualified body for purposes of 
regulating tribal online gaming, including the review of applications, 
the issuance of licenses and carrying out other regulatory and 
enforcement functions. This is completely unacceptable. Under current 
IGRA sanctioned tribal-state compacts very few states provide 
regulatory and enforcement services to tribal nations, and then, only 
with the express consent of the tribe involved in exchange for other 
bargained for terms and conditions. In the few states where a state 
does have a role, it is generally limited to a review of tribal 
decisions made by the tribal regulatory agency. This section could 
embolden some states to overreach in negotiations with a tribal nation.
    State Standards. Section 9 also is problematic because it requires 
tribal regulations on minimum requirements to be substantially 
equivalent to a state's regulations. Gaming tribes, including the 
Seneca Nation, have a very strong history of regulatory administration 
and compliance. It would be expected that these tribal nations likely 
would designate their existing tribal regulatory bodies or agencies to 
apply as tribal qualified bodies under the Act. Very few, if any tribes 
would permit a state to be eligible for designation as a qualified 
tribal regulatory body under the Act. Thus this reference to state 
regulations is both unnecessary and offensive.
    The revenue sharing section is worthwhile topic for discussion but 
it will require further refinement in several respects. It should be 
clarified whether the revenue will be shared with all non-gaming Indian 
tribes or just those tribes that have opted out. It also makes sense 
that revenue sharing be regionalized to benefit only those tribes 
within proximity of the gaming tribes. There needs to be some 
flexibility for the contributing tribes to decide the specific criteria 
for the uses set out in section 7. Consideration must be given to the 
fact that gaming tribes in a few States already contribute gaming 
revenue to a revenue sharing account to avoid duplicative requirements. 
And, some thought should be given to the whether it makes sense to 
limit the revenue sharing to non-gaming, small tribes (population under 
3,000) located in remote, isolated areas without any economic 
development opportunities. This issue is not easily resolved and 
requires the thoughtful input and involvement of all the tribes, 
regardless of whether they offer gaming.
    Gaming tribes already have in place social responsibility 
protections that include self-exclusion, compulsive gambling assistance 
and responsible gaming notices. Tribal nations with established 
programs should be allowed to grandfather their existing programs.
    Ambiguous Terms. The draft legislation makes imprecise or 
inconsistent use of key terms such as ``gambling,'' ``gaming,'' 
``Internet gaming,'' ``Internet poker,'' ``online gaming,'' ``tribal 
online gaming,'' ``tribal governing body'' and ``tribal qualified 
body.'' Many key terms are not defined at all. We would hope that 
further revisions of the bill place greater emphasis on definition of 
key terms and consistent use of such concepts throughout.
    Non-Indian Entities in Consortia. The discussion draft appears to 
allow unrestricted participation in tribal online gaming by non-Indian 
entities so long as they are a part of a ``consortium'' that includes a 
tribal nation. Here, we see a risk of non-Indian competitors using 
affiliations with tribal nations to gain entry into the field of online 
gaming, particularly if there is no other legislative avenue available, 
or if the avenues that are available are more burdensome from a 
regulatory or financial perspective. We believe this provision should 
be substantially revised to ensure that the Act cannot be used in a way 
that would facilitate unfair entry into the field of tribal online 
gaming by non-Indian gaming competitors.
    Sovereign Immunity. Provisions of the Act appear to potentially 
impair the sovereign immunity of tribal nations, requiring a tribal 
nation to subject itself to the jurisdiction of the applicable courts 
of the United States and all applicable Federal laws relating to the 
operation of an Internet poker facility and associated activities. We 
object to any statutory abrogation of tribal nation immunity from suit.
    Relation to the Compact and State Involvement. Section 12 of the 
discussion draft provides that ``Nothing in this Act (1) alters, 
diminishes, or otherwise impacts any right or obligation existing under 
a tribal-State compact approved pursuant to IGRA; or (2) requires the 
renegotiation of a compact . . . .'' What this means and who this is 
intended to benefit is ambiguous. Most tribal-state compacts limit the 
tribal nation to conducting only those Class III games specifically 
listed therein. The discussion draft provision could be interpreted to 
place a limitation on a tribal nation's ability to engage in online 
gaming, or at a minimum, create a compact dispute. We believe the 
discussion draft should be clarified to say that ``tribal online 
gaming'' does not require a compact with, or the consent of, any state.
    Conclusion. For all of the foregoing reasons, the discussion draft 
must be substantially overhauled and revised, and that can only happen 
with the active and open participation of tribal nations and their 
representatives. Please let us know how we can join with you in 
rehabilitating this discussion draft.

                                  
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