[Senate Hearing 114-190]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 114-190

              SAFEGUARDING THE INTEGRITY OF INDIAN GAMING

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

                                HEARING

                               before the

                      COMMITTEE ON INDIAN AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 22, 2015

                               __________

         Printed for the use of the Committee on Indian Affairs


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                      COMMITTEE ON INDIAN AFFAIRS

                    JOHN BARRASSO, Wyoming, Chairman
                   JON TESTER, Montana, Vice Chairman
JOHN McCAIN, Arizona                 MARIA CANTWELL, Washington
LISA MURKOWSKI, Alaska               TOM UDALL, New Mexico
JOHN HOEVEN, North Dakota            AL FRANKEN, Minnesota
JAMES LANKFORD, Oklahoma             BRIAN SCHATZ, Hawaii
STEVE DAINES, Montana                HEIDI HEITKAMP, North Dakota
MIKE CRAPO, Idaho
JERRY MORAN, Kansas
     T. Michael Andrews, Majority Staff Director and Chief Counsel
       Anthony Walters, Minority Staff Director and Chief Counsel
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
                            C O N T E N T S

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                                                                   Page
Hearing held on July 22, 2015....................................     1
Statement of Senator Barrasso....................................     1
Statement of Senator Franken.....................................    36
Statement of Senator Heitkamp....................................    41
Statement of Senator Hoeven......................................    38
Statement of Senator Lankford....................................    34
Statement of Senator McCain......................................    42
Statement of Senator Tester......................................     2

                               Witnesses

Chaudhuri, Jonodev Osceola, Chairman, National Indian Gaming 
  Commission.....................................................     2
    Prepared statement...........................................     4
Fennell, Anne-Marie, Director, Natural Resources and Environment, 
  U.S. Government Accountability Office..........................     7
    Prepared statement...........................................     8
Hummingbird, Jamie, Chairman, National Tribal Gaming 
  Commissioners and Regulators Association.......................    17
    Prepared statement...........................................    19
Stevens, Jr., Ernest L., Chairman, National Indian Gaming 
  Association, prepared statement................................    25
    Prepared statement...........................................    27
Trujillo, David, Director, Washington State Gambling Commission..    22
    Prepared statement...........................................    23

                                Appendix

Response to written questions submitted by Hon. James Lankford to 
  Jonodev Osceola Chaudhuri......................................    51

 
              SAFEGUARDING THE INTEGRITY OF INDIAN GAMING

                              ----------                              


                        WEDNESDAY, JULY 22, 2015


                                       U.S. Senate,
                               Committee on Indian Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:15 p.m. in room 
216, Hart Senate Office Building, Hon. John Barrasso, 
Chairman of the Committee, presiding.

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

    The Chairman. Good afternoon. I call to order the hearing.
    Today the Committee will examine the status of Indian 
gaming regulation. It has been over 27 years since the 
enactment of the Indian Gaming Recovery Act. The industry has 
grown quickly. While once a $3 billion a year industry in 1995, 
Indian gaming now hovers around $28 billion a year. Money made 
from Indian gaming can have a significant impact on tribal 
communities. Revenues from Indian gaming often pay for schools, 
for roads, for health care and other governmental services that 
benefit tribal members.
    To safeguard the integrity of that industry, in 2013 
Senators Cantwell, McCain, Tester and I requested the 
Government Accountability Office review Indian gaming 
regulation. The Committee received testimony regarding the 
preliminary findings of the Government Accountability Office 
during our hearing on July 23rd of 2014. The final report was 
issued June 3rd of 2015. The report states that the Commission 
is not effectively promoting voluntary compliance with Federal 
guidelines related to gaming regulatory standards.
    Furthermore, the report indicates that the current 
performance measures for training and technical assistance are 
not outcome-oriented. In fact, some of those measures do not 
even comply with the Office of Management and Budget guidance 
to agencies for measuring progress toward achieving intended 
results.
    Also troubling is that there is only one member of the 
Commission, the Chairman, Chairman Chaudhuri. Congress 
established a three-member Commission under the Indian Gaming 
Act. The Chairman has two associate members. Without the full 
membership, it is questionable how effectively the Commission 
may fulfill its statutory duties, such as adopting regulations, 
collecting civil fines, establishing rate fees and addressing 
temporary orders closing a gaming facility.
    Earlier this week, Senator McCain and I sent a letter to 
the Secretary of Interior, Secretary Jewel, urging her to 
appropriately and expeditiously appoint those remaining 
Commission members. With such much at stake, we need to fully 
ensure that the integrity of Indian gaming remains strong for 
future generations.
    Before we hear from the witnesses, I want to turn to 
Senator Tester for an opening statement.

                 STATEMENT OF HON. JON TESTER, 
                   U.S. SENATOR FROM MONTANA

    Senator Tester. Thank you, Mr. Chairman. I am going to 
apologize, I have to depart. We have a stacked hearing today 
and there are some other bills I have up in another hearing 
that I have to get to.
    I do want to welcome Jonodev back to the Committee, and 
Anne-Marie Fennell, thank you for being here. Jamie 
Hummingbird, David Trujillo and Ernest Stevens, thank you all 
for being here today.
    Indian gaming is very, very important in Indian Country. 
This is a very important issue. The hearing room we are having 
this in isn't our regular hearing room, because there are a lot 
more people who show up for these. Why? Because it is important 
for Indian Country. And it is important that we know what is 
going on in Indian Country. It is important we empower folks 
like Jonodev to do their job and tribes also.
    So although I won't be here to hear your testimony, I will 
read your testimony. We will be presenting questions for the 
record, written questions. I want to thank you all again for 
being here. This is a very important hearing. Thank you.
    Senator Cantwell. Mr. Chairman, my colleague Senator 
Heitkamp and I were in the anteroom as you were finishing the 
markup. Can we be counted as present?
    The Chairman. Absolutely. Would you like to make opening 
statements regarding this, either Senator Heitkamp or Senator 
Cantwell?
    Senator Cantwell. No, thank you.
    The Chairman. Thank you.
    We will now hear from our witnesses. We can start with the 
Honorable Jonodev Chaudhuri, Chairman of the National Indian 
Gaming Commission. Welcome back to the Committee.

STATEMENT OF HON. JONODEV OSCEOLA CHAUDHURI, CHAIRMAN, NATIONAL 
                    INDIAN GAMING COMMISSION

    Mr. Chaudhuri. Thank you, Chairman.
    Chairman Barrasso, Vice Chairman Tester, and members of the 
Committee, good afternoon, Henci. Thank you for the opportunity 
to share the National Indian Gaming Commission's perspective on 
safeguarding the integrity of Indian gaming.
    I am honored to appear before you today in my new role as 
the newly-confirmed chairman of the National Indian Gaming 
Commission. I thank you for your support in that regard.
    Sound regulation as contemplated by the Indian Gaming 
Regulatory Act is critical to both the stability and integrity 
of Indian gaming. Sound regulation preserves public confidence, 
supports tribal self-sufficiency and self-determination, 
protects tribal assets and promotes a safe and fair environment 
for all people who interact with the industry.
    Tomorrow we will have finalized the 2014 Indian gross 
gaming revenue numbers. We will announce those numbers in 
detail during a public press call that we hold annually. As a 
preview, those numbers will indicate a fifth consecutive year 
of modest but stable growth in the industry.
    Similarly, the Government Accountability Office's recent 
report reflected the overall health of the Indian gaming 
industry and the fact that IGRA's three-tiered regulatory 
structure has protected its integrity overall. We at the NIGC 
are mindful of the importance of sound regulation to the 
predictability and stability of the industry. We are proud of 
the role that we have played in conjunction with our regulatory 
partners to help bring the industry to the impactful place that 
it is today.
    We recognize that any regulatory structure can always be 
refined and strengthened. To this end, we at the NIGC very much 
appreciated the report's technical recommendations. Certainly 
in my role as the newly-confirmed chairman, I am focused on 
looking forward to building on our commitment to sound 
regulation by making improvements where appropriate while not 
discarding things that work.
    In terms of things that work, I believe the bedrock of our 
success is and must continue to be intelligent and respectful 
coordination with tribes who, under the law, must remain the 
primary beneficiaries of Indian gaming, and tribal regulators, 
who are, under the law, the primary day to day regulators of 
the industry. With that in mind, we view the GAO report and its 
recommendations as a helpful tool that we will use in our 
ongoing efforts to refine our work.
    To me, the striking aspect of the report is not in any of 
the areas it flagged for potential improvement, but instead, 
the extent to which it is consistent with the priorities and 
principles we began implementing well before the report.
    During my confirmation proceedings, I outlined specific 
agency priorities that are well-targeted to advancing the sound 
regulation of Indian gaming. Just to recap, they include active 
performance of oversight duties, engaging in our ongoing 
commitment to training, technical assistance and meaningful 
tribal consultation, staying ahead of the technology curve, 
supporting a strong regulatory workforce both in-house and 
among our partners, and strengthening dialogue and 
relationships with all relevant stakeholders.
    To implement these priorities, the NIGC is focusing on the 
following specific guiding principles. Act with appropriate 
agency authority to address and mitigate any activity that 
jeopardizes the integrity of Indian gaming and by extension, 
the important and valuable self-determination tool that it 
represents. Swiftly act on anything that jeopardizes the health 
and safety of the public at gaming establishments, including 
employees and patrons. Engage in sound regulation without 
unnecessarily stymying the entrepreneurial spirit of tribes. 
And finally, protect against anything that amounts to 
gamesmanship on the backs of tribes.
    Application of these priorities and principles in areas 
such as our efforts to ramp up our technological capabilities 
and do more to ensure that tribes are the primary beneficiaries 
of their operations has already seen positive results and has 
taken the agency beyond the GAO's recommendations. Maintaining 
positive relationships with our regulating partners, especially 
front line tribal regulators, is not only a matter of good 
policy and consistent with executive orders, it is also a 
matter of good fiscal management.
    We do this through open and frank dialogue, meaningful and 
active consultation and by the delivery of quality training and 
technical assistance. We were pleased that the report 
recognized the importance of strong relationships between the 
NIGC, tribes and States. As the report details, tribes 
dedicated $422 million to the regulation of Indian gaming and 
thousands of regulators. While it is true that the report 
referenced certain high-risk assessments, even those numbers, 
when looked at closely and in context, represent a positive 
trend in overall industry risks.
    There are countless success stories in Indian Country of 
ways in which tribal nations have used gaming revenue to 
provide employment opportunities for themselves and surrounding 
communities, strengthened their governments, improved their 
infrastructure, invested in education, health care and culture 
and language preservation and provided much-needed social 
services to their people. The NIGC was pleased that the GAO 
generally highlighted the ways tribes have used gaming revenue 
to safeguard their people's future and pursue self-
determination.
    I believe that the efforts we are pursuing with our 
priorities and principles, drawn directly from IGRA and 
consistent with the GAO's recommendations, will continue to 
enhance the regulation of the industry. I look forward to their 
continuing implementation.
    Thank you for your time today. I am happy to answer any 
questions you may have for me.
    [The prepared statement of Mr. Chaudhuri follows:]

  Prepared Statement of Jonodev Osceola Chaudhuri, Chairman, National 
                        Indian Gaming Commission
    Chairman Barraso, Vice Chairman Tester, and members of the 
committee, good afternoon, and thank you for the opportunity to appear 
before you today to share my perspective on safeguarding the integrity 
of Indian gaming.
    The National Indian Gaming Commission (NIGC) is firmly committed to 
fulfilling its responsibilities under the Indian Gaming Regulatory Act 
(IGRA) to ensure not only the integrity of Indian gaming is protected, 
but that tribes remain the primary beneficiaries of their gaming 
operations.
    Over the course of eighteen months, the NIGC worked closely with 
the General Accounting Office (GAO) in its efforts to provide an 
overview of the Indian gaming industry. We are grateful for the GAO's 
report titled Indian Gaming: Regulation and oversight by the Federal 
Government, States, and Tribes and generally agree with its findings. I 
view the report as a tool the agency will use to refine its procedures 
to more fully address regulatory priorities while adhering to certain 
principles.
    During my confirmation proceedings, I outlined specific agency 
priorities that are well-targeted to advancing the sound regulation of 
Indian gaming. These priorities include:

        1) Active performance of regulatory duties;
        2) Engaging in ongoing meaningful tribal consultation;
        3) Staying ahead of the technology curve;
        4) Supporting a strong workforce both in-house and among our 
        regulatory partners; and
        5) Strengthening dialogue and relationships with all relevant 
        stakeholders.

    To implement these priorities, NIGC is focusing on the following 
specific guiding principles to administer our statutory 
responsibilities:

        a. Act within appropriate agency authority to address and 
        mitigate activity that jeopardizes the integrity of Indian 
        gaming and, by extension, the valuable self-determination tool 
        that it represents;

        b. Swiftly act on anything that jeopardizes the health and 
        safety of the public at gaming establishments, including 
        employees and patrons;

        c. Engage in sound regulation without unnecessarily stymieing 
        lawful economic development activities; and

        d. Protect against anything that amounts to gamesmanship on the 
        backs of tribes.

    Application of these priorities and principles has already seen 
positive results and is taking the agency beyond the GAO's 
recommendations.
    Consistent in these priorities and principles is the recognition of 
the value and efficiency of leveraging our relationships with our 
regulatory partners to meet our shared goal of compliance with IGRA. We 
recognize that in addition to being a matter of good policy and 
consistency with executive orders, it is also a matter of agency 
economy and good fiscal management to maintain positive relationships 
with our regulatory partners. We do this through open and frank 
dialogue, meaningful and active consultation, and by the delivery of 
quality training and technical assistance.
    We were pleased that the report recognized the important and strong 
relationships between the NIGC, tribes, and states. As the report 
details, tribes dedicated $422 million to the regulation of the Indian 
gaming industry in 2013. This includes the costs tribes bear for 
federal and state regulation of their gaming activity. The resources 
devoted to effective regulation, especially the thousands of tribal 
regulators, are a testament to the importance of gaming to tribal 
economic development and self-determination.
    Sound regulation preserves public confidence, supports tribal self-
sufficiency and self-determination, protects tribal assets, and 
promotes a safe and fair environment for all people who interact with 
the industry. We recognize there are still opportunities for 
improvement as we continue to advance the goals of IGRA, but it is 
appropriate to highlight the work we have done to address the GAO's 
recommendations.
    The GAO recommended that in order to make an informed decision, the 
NIGC should seek input from states on its proposal to draft updated 
guidance on class III minimum internal control standards and withdraw 
its 2005 regulations. It has always been our intent to seek guidance 
from all of the parties involved in the regulation of Indian gaming. To 
assist in this goal, the NIGC added a new position: Legislative and 
Intergovernmental Affairs Coordinator. This addition to our staff will 
strengthen our communications and outreach efforts to all stakeholders.
    Earlier this year, the NIGC invited tribal leaders to participate 
in consultations on the issuance of guidance on class III minimum 
internal control standards that regulators may use in developing their 
own class III internal controls. The purpose of these consultations was 
to receive tribal views on the process to be used by the NIGC in 
providing guidance on class III minimum internal control standards. 
These discussions did not involve any substantive discussions of 
individual controls. For example, during the consultations, tribes 
expressed concern over the withdrawal of the 2005 regulations and the 
possible void that may be left for tribes whose compacts reference or 
incorporate those standards. These types of issues must be addressed 
before we undertake drafting substantive guidance.
    The NIGC recognizes and respects the sovereignty of Indian tribes 
and the government-to-government relationship that exists between the 
United States and tribal governments. The Commission is committed to 
implementing the President's November 5, 2009 Executive Memorandum on 
Tribal Consultation with Indian tribes and Executive Order 13175. This 
is why it is so important for the NIGC to reach out to tribes before it 
takes any substantive action. Once the process to be used is determined 
by the NIGC, it will then begin work on substantive internal control 
guidance.
    Once drafted, the guidance will be published for comments from 
industry stakeholders including states. I am mindful of the fact that 
class III gaming is framed by the terms of compacts negotiated between 
tribes and states. The NIGC does not want to interfere or hinder 
compact negotiations or the relationships between tribes and states.
    The GAO also recommended that to improve its ability to assess the 
effectiveness of its training and technical assistance efforts, the 
NIGC should review and revise, as needed, its performance measures to 
include additional outcome-oriented measures. The NIGC began efforts to 
assess the effectiveness of its training and technical assistance 
efforts during GAO's review. To assist in these assessments, and to 
contribute to the overall performance of the agency, the NIGC has 
established a Division of Technology. Among its responsibilities will 
be to capture, track, and analyze data from all of our compliance 
efforts.
    Congress, through IGRA, mandated that the NIGC provide tribes with 
training and technical assistance. Our focus has been to incorporate 
this Congressional mandate into overall compliance efforts rather than 
something that is done simply as a service. The NIGC is committed to 
measuring the efficacy of its training and technical assistance and 
making adjustments, where necessary. The NIGC is actively working to 
develop outcome-focused assessments of its effectiveness. In 
recognition of the value of accurate performance measurements to 
continued improvement of operational management, the NIGC has actively 
explored a variety tools to measure the effectiveness of the 
initiative.
    One of the tools it has been using is an analysis of data contained 
in Agreed Upon Procedures (AUP) reports that tribes are required to 
submit to the Agency. A comparison of AUP findings from before the NIGC 
began emphasizing training and technical assistance with findings after 
implementation of this approach show a 34 percent decline in high risk 
findings and a 36 percent decline in overall findings. The Agency is 
mindful, however, of narrow reliance on any one data source in 
assessing its ongoing training and technical assistance. In addition to 
a review of data collected by existing means, the NIGC has recently 
developed additional tools to track its operations. These include 
voluntary internal control assessments and IT threat assessments.
    Further, the NIGC is considering developing knowledge reviews that 
will be conducted during training sessions. The report recommends that 
the NIGC apply the recommendations found in the GAO report titled Human 
Capital: A Guide for Assessing Strategic Training and Development 
Efforts in the Federal Government, GAO-04-546G (Washington, D.C.: March 
2004). The NIGC is currently reviewing this report to ascertain whether 
it is practical to track and apply individual training results to 
improvements in IGRA compliance. The NIGC anticipates coordinating the 
development of performance measures with the regulated industry.
    Finally, the GAO recommended, to help ensure letters of concern are 
more consistently prepared and responses tracked, that the NIGC develop 
documented procedures and guidance to (1) clearly identify letters of 
concern as such and to specify the type of information to be contained 
in them, such as time periods for a response; and (2) maintain and 
track tribes' responses to the NIGC on potential compliance issues. 
Since the NIGC began utilizing letters of concern it has been examining 
and refining their use.
    The NIGC's regulations related to letters of concern were first 
promulgated on August 9, 2012, and established a system of graduated 
enforcement. The NIGC recognized that there was a lack of clarity in 
these letters and that action timetables were needed. A standardized 
format for these letters has been developed that include deadlines for 
tribes. Further, the NIGC is refining its procedures for tracking 
responses to these letters.
    The NIGC was pleased that the GAO report highlighted many of the 
success stories in Indian gaming; including the manifold ways tribes 
have used gaming revenue to safeguard their peoples' futures and pursue 
self-determination. We were also pleased that the report's technical 
recommendations were consistent with many of the positive efforts we 
have actively pursued in recent months to support tribal economic 
development by strengthening the regulatory structure of the Indian 
gaming industry. I believe that all of the NIGC's responses to the 
issues raised by the GAO will only enhance the regulation of the 
industry and I look forward to their continuing implementation.
    Thank you for your time today. I am happy to answer any questions 
you may have.

    The Chairman. Thank you very much, Mr. Chairman. We 
appreciate your comments.
    Next I would like to call on Anne-Marie Fennell, the 
Director of Natural Resources and Environment, Government 
Accountability Office. Thank you for joining us.

 STATEMENT OF ANNE-MARIE FENNELL, DIRECTOR, NATURAL RESOURCES 
               AND ENVIRONMENT, U.S. GOVERNMENT 
                     ACCOUNTABILITY OFFICE

    Ms. Fennell. Thank you. Mr. Chairman, Vice Chairman Tester 
and members of the Committee, I am pleased to be here today to 
discuss our June 2015 report on the Regulation and Oversight of 
Indian Gaming.
    Over the past 25 years, Indian gaming has grown and now 
includes more than 400 gaming operations in 28 States with 
revenues totaling $28 billion in fiscal year 2013. IGRA was 
enacted in 1988 to provide a statutory basis for the regulation 
of gaming on Indian lands.
    My testimony today highlights the key findings from our 
June 2015 report. Specifically, I will discuss (1) Interior's 
review process to help ensure the tribal-State compacts comply 
with IGRA; (2) how States and selected tribes regulate Indian 
gaming; (3) the Commission's authority to regulate Indian 
gaming; and (4) the Commission's efforts to ensure tribes' 
compliance with IGRA and its regulations.
    First, we found that Interior uses a multi-step review 
process to help ensure that tribal-State compacts comply with 
IGRA. From 1998 through 2014, Interior reviewed and approved 
most of the 516 compacts the States and tribes submitted.
    Second, the roles of States and tribes in regulating Indian 
gaming are established in compacts for Class III gaming and 
tribal gaming ordinances for Class II and III gaming. For 
States, we found that the regulatory roles vary among the 24 
States that had Class III gaming, ranging from active 
monitoring to limited monitoring. For the 12 tribes we visited, 
each had established regulatory agencies responsible for day to 
day operations.
    Third, we found that IGRA authorizes the Commission to 
issue and enforce minimum internal control standards for Class 
II gaming, but not for Class III gaming. The Commission 
proposes issuing guidance with updated standards for Class III 
gaming to be voluntarily used by the tribes and has consulted 
with the tribes on this.
    However, we found that the Commission does not have a clear 
plan for conducting outreach to affected States. Along with 
tribes, States' input could aid the Commission in making an 
informed decision. We recommended that the Commission obtain 
input from the States and the Commission agreed.
    Fourth, we found that the Commission helps ensure the 
tribes comply with IGRA through various activities, including 
reviewing independent audit reports. Under the ACE initiative 
implemented in 2011, the Commission has emphasized working 
collaboratively with tribes to encourage voluntary compliance 
with IGRA. The Commission chair may also take enforcement 
actions when violations occur, and has taken a small number of 
actions in recent years.
    As part of the ACE initiative, the Commission uses several 
approaches, including providing training and technical 
assistance and sending letters of concern to help tribes 
voluntarily comply with IGRA. However, the effectiveness of 
these two approaches is unclear.
    We found that the Commission had a limited number of 
performance measures that assess outcomes achieved from its 
training and technical assistance efforts. We recommended that 
the Commission review and revise its performance measures to 
better assess these efforts. The Commission agreed.
    We also found that the Commission does not have documented 
procedures consistent with Federal internal control standards 
about how to complete or track letters of concerns to help 
ensure tribal actions to address identified potential 
compliance issues. We recommended that the Commission develop 
procedures to help ensure the consistency and the effectiveness 
of the letters sent to tribes. The Commission agreed.
    In conclusion, Indian gaming has grown and evolved since 
the enactment of IGRA. Our recommendations are intended to help 
the Commission make informed decisions and improve efforts to 
help ensure the integrity of the Indian gaming industry.
    Mr. Chairman, Vice Chairman Tester and members of the 
Committee, this concludes my prepared statement. I am happy to 
respond to any questions.
    [The prepared statement of Ms. Fennell follows:]

 Prepared Statement of Anne-Marie Fennell, Director, Natural Resources 
         and Environment, U.S. Government Accountability Office
INDIAN GAMING--Regulation and Oversight by the Federal Government, 
        States, and Tribes
Why GAO Did This Study
    Over the past 25 years, Indian gaming has become a significant 
source of revenue for many tribes, reaching $28 billion in fiscal year 
2013. IGRA, the primary federal statute governing Indian gaming, 
provides a statutory basis for the regulation of Indian gaming. Tribes, 
states, Interior, and the Commission have varying roles in Indian 
gaming.
    This testimony highlights the key findings of GAO's June 2015 
report (GAO-15-355). Accordingly, it addresses (1) Interior's review 
process to help ensure that tribal-state compacts comply with IGRA; (2) 
how states and selected tribes regulate Indian gaming; (3) the 
Commission's authority to regulate Indian gaming; and (4) the 
Commission's efforts to ensure tribes' compliance with IGRA and 
Commission regulations. For the June 2015 report, GAO analyzed compacts 
and Commission data on training, compliance, and enforcement; and 
interviewed officials from Interior, the Commission, states with Indian 
gaming, and 12 tribes in six states GAO visited based on geography and 
gaming revenues generated.
What GAO Recommends
    In its June 2015 report, GAO recommended that the Commission: (1) 
obtain input from states on its plans to issue guidance on class III 
minimum internal control standards; (2) review and revise, as needed, 
its performance measures to better assess its training and technical 
assistance efforts; and (3) develop documented procedures and guidance 
to improve the use of letters of concern. The Commission generally 
agreed with GAO's recommendations.
What GAO Found
    In its June 2015 report, GAO found that the Department of the 
Interior (Interior) has a multistep review process to help ensure that 
compacts--agreements between a tribe and state that govern the conduct 
of the tribe's class III (or casino) gaming--comply with the Indian 
Gaming Regulatory Act (IGRA). From 1998 through fiscal year 2014, 
Interior approved 78 percent of compacts; Interior did not act to 
approve or disapprove 12 percent; and the other 10 percent were 
disapproved, withdrawn, or returned.
    GAO also found that states and selected tribes regulate Indian 
gaming in accordance with their roles and responsibilities established 
in tribal-state compacts for class III gaming, and tribal gaming 
ordinances, which provide the general framework for day-to-day 
regulation of class II (or bingo) and class III gaming. In addition, 
the 24 states with class III Indian gaming operations vary in their 
approaches for regulating Indian gaming, from active (e.g., daily or 
weekly on-site monitoring) to limited (e.g., no regular monitoring). 
Further, all 12 selected tribes GAO visited had regulatory agencies 
responsible for the day-to-day operation of their gaming operations.
    In GAO's June 2015 report, GAO found that the National Indian 
Gaming Commission (Commission)-an independent agency within Interior 
created by IGRA-has authority to regulate class II gaming, but not 
class III gaming, by issuing and enforcing gaming standards. The 
Commission is considering issuing guidance with class III standards 
that may be used voluntarily by tribes and has held consultation 
meetings to obtain tribal input. However, in June 2015, GAO found the 
Commission does not have a clear plan for conducting outreach to 
affected states on its proposal. Federal internal control standards 
call for managers to obtain information from external stakeholders that 
may have a significant impact on the agency achieving its goas. Along 
with tribes, state input could aid the Commission in making an informed 
decision.
    Even with differences in its authority for class II and class III 
gaming, GAO found that the Commission helps ensure that tribes comply 
with IGRA and applicable federal and tribal regulations through various 
activities, including monitoring gaming operations during site visits 
to Indian gaming operations and Commission-led audits. In addition, 
since 2011, the Commission has emphasized efforts that encourage 
voluntary compliance with regulations, including providing training and 
technical assistance and alerting tribes of potential compliance issues 
using letters of concern. However, the effectiveness of these two 
approaches is unclear. GAO found in June 2015 that the Commission had a 
limited number of performance measures that assess outcomes achieved. 
With such additional measures, the Commission would be better 
positioned to assess the effectiveness of its training and technical 
assistance. Further, GAO found the Commission does not have documented 
procedures, consistent with federal internal control standards, about 
how to complete or track letters of concern to help ensure their 
effectiveness in encouraging tribal actions to address identified 
potential compliance issues. Without documented procedures, the 
Commission cannot ensure consistency or effectiveness of the letters it 
sends.

    Chairman Barrasso, Vice Chairman Tester, and Members of the 
Committee:
    I am pleased to be here today to discuss our June 2015 report on 
the regulation and oversight of Indian gaming. \1\ Over the past 25 
years, Indian gaming has become a significant source of revenue for 
many tribes. In fiscal year 2013, the Indian gaming industry included 
more than 400 gaming operations in 28 states and generated revenues 
totaling $28 billion. The Indian Gaming Regulatory Act (IGRA) was 
enacted in 1988 to provide a statutory basis for the regulation of 
gaming on Indian lands. \2\ IGRA established three classes of gaming 
and outlined regulatory responsibilities for tribes, states, and the 
Federal Government. Class I gaming consists of social games played 
solely for prizes of minimal value and traditional gaming played in 
connection with tribal ceremonies or celebrations. Class I gaming is 
within the exclusive jurisdiction of the tribes. Class II gaming 
includes bingo, games similar to bingo, and certain card games. Class 
III gaming includes all other types of games, including slot machines, 
craps, and roulette. Both tribes and the Federal Government have a role 
in class II and class III gaming. Class III gaming is also subject to 
state regulation to the extent specified in compacts between tribes and 
states that allow such gaming to occur. Compacts are agreements between 
a tribe and state that establish the terms for how a tribe's class III 
gaming activities will be operated and regulated, among other things. 
The Secretary of the Interior (Secretary) approves compacts and must 
publish a notice in the Federal Register before they go into effect. 
IGRA also created the National Indian Gaming Commission (Commission) 
within the Department of the Interior (Interior) to regulate class II 
and oversee class III Indian gaming.
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    \1\ GAO, Indian Gaming: Regulation and Oversight by the Federal 
Government, States, and Tribes, GAO-15-355 (Washington, D.C.: June 3, 
2015).
    \2\ Pub. L. No. 100-497, 102 Stat. 2467 (1988).
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    My testimony today highlights the key findings of our June 2015 
report on Indian gaming. \3\ Specifically, I will discuss (1) the 
review process that Interior uses to help ensure that tribal-state 
compacts comply with IGRA; (2) how states and selected tribes regulate 
Indian gaming; (3) the Commission's authority to regulate Indian 
gaming; and (4) the Commission's efforts to ensure tribes' compliance 
with IGRA and Commission regulations.
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    \3\ GAO-15-355.
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    For our June 2015 report, \4\ we examined IGRA and relevant federal 
regulations and policies, including Interior regulations and 
documentation on its compact review process, as well as Commission 
regulations, policies, and guidance on its regulation of Indian gaming. 
We also analyzed tribal-state compacts in effect through fiscal year 
2014 and various Commission data corresponding to the Commission's 
oversight activities for fiscal years 2005 and 2014 to the extent these 
data were available and reliable based on their sources. \5\ For 
example, for fiscal years 2011 to 2014, we analyzed Commission data on 
site visits and reviewed documentation related to a random, 
nongeneralizable sample of 50 site visits to Indian gaming operations; 
for fiscal years 2005 to 2014, we analyzed publicly available 
information on enforcement actions taken by the Commission Chair. We 
also interviewed Interior and Commission officials about their roles in 
regulating and overseeing Indian gaming. To determine how states and 
selected tribes regulate Indian gaming, we contacted all 24 states that 
have class III gaming operations. \6\ We collected written responses, 
conducted interviews, and obtained additional information about how 
each state oversees Indian gaming, including information on each 
state's regulatory organizations, staffing, funding, and expenditures, 
as well as the types of monitoring and enforcement activities conducted 
by state agencies. \7\ We visited six states-Arizona, California, 
Michigan, New York, Oklahoma, and Washington-selected for geographic 
representation and having the most gaming revenues generated. \8\ For 
each of the six states, we met with at least one federally recognized 
Indian tribe, \9\ interviewing officials from 12 tribes willing and 
available to meet with us. \10\ In addition, we contacted 10 tribal 
gaming associations including the National Indian Gaming Association 
and the National Tribal Gaming Commissioners/Regulators, to obtain 
additional information on tribal perspectives on Indian gaming. See our 
June 2015 report for additional details of the methods used to conduct 
our work. \11\
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    \4\ GAO-15-355.
    \5\ To assess the reliability of these data, we interviewed 
Commission officials and reviewed documentation on the Commission's 
data system. We found the data to be sufficiently reliable for our 
purposes.
    \6\ Twenty-four states have Indian gaming operations with both 
class II and class III gaming, and 4 states have Indian gaming 
operations with class II gaming only.
    \7\ We obtained information from representatives of all state 
agencies with class III gaming except for the state of New Mexico; its 
representative declined participation in an interview with us. 
Information about New Mexico's involvement with class III gaming 
regulation was found in publically available reports from the New 
Mexico Gaming Control Board and the New Mexico Legislative Finance 
Committee.
    \8\ Collectively, the six states we visited (Arizona, California, 
Michigan, New York, Oklahoma, and Washington) accounted for about 60 
percent of all Indian gaming operations and Indian gaming revenue 
generated in 2013.
    \9\ Federally recognized tribes are those recognized by the 
Secretary of the Interior as eligible for the special programs and 
services provided by the United States to Indians because of their 
status as Indians. IGRA authorizes only federally recognized tribes to 
conduct gaming activities.
    \10\ Tribes we interviewed regarding their approaches to regulating 
gaming were: Chickasaw Nation, Oklahoma; Confederated Tribes of the 
Chehalis Reservation; Muscogee (Creek) Nation; Oneida Indian Nation of 
New York; Pokagon Band of Potawatomi Indians of Michigan; Puyallup 
Tribe of the Puyallup Reservation; Salt River Pima Maricopa Indian 
Community; Shingle Springs Band of Miwok Indians; Squaxin Island Tribe; 
Tulalip Tribes of the Tulalip Reservation; United Auburn Indian 
Community of Auburn Rancheria; and Yocha DeHe Wintun Nation, 
California. We also spoke to representatives of six additional tribes-
Colorado River Indian Tribes, Gila River Indian Community, San Carlos 
Apache Reservation, Tohono O'odham Nation, White Mountain Apache Tribe, 
and Yavapai-Apache Nation-as part of an initial scoping visit in 
Arizona to learn more about Indian gaming and tribal perspectives 
generally.
    \11\ GAO-15-355.
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    The work on which this testimony is based was performed in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives.
Interior Uses a Multistep Review Process to Help Ensure that Tribal-
        State Compacts Comply with IGRA and Has Approved Most Compacts
    In our June 2015 report, \12\ we found that Interior uses a 
multistep review process to help ensure that tribal-state compacts, and 
any compact amendments, comply with IGRA, other federal laws not 
related to jurisdiction over gaming on Indian lands, and the trust 
obligation of the United States to Indians. \13\ Interior's Office of 
Indian Gaming is the lead agency responsible for managing the multistep 
process for reviewing compacts submitted by tribes and states. \14\ The 
Office of Indian Gaming coordinates its compact reviews with Interior's 
Office of the Solicitor. The Office of Indian Gaming submits a final 
analysis and recommendation regarding compact approval to the Assistant 
Secretary of Indian Affairs, who makes a final decision on whether to 
approve the compact. Interior has 45 days to approve or disapprove a 
compact once it receives a compact package from a state and tribe. 
Under IGRA, any compacts Interior does not approve or disapprove within 
45 days of submission are considered to have been approved (referred to 
as deemed approved), but only to the extent they are consistent with 
IGRA.
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    \12\ GAO-15-355.
    \13\ The Federal Government has a fiduciary trust relationship to 
federally recognized Indian tribes and their members.
    \14\ Interior regulations require compacts and all compact 
amendments to be submitted for approval. The regulations specify that 
all compact amendments, regardless of whether they are substantive or 
technical, are to be submitted to Interior. 25 C.F.R.  293.4(b). 
However, Interior does not review agreements concerning Indian gaming 
unless submitted by states and tribes. We identified several agreements 
and consent judgments between tribes and states regarding revenue 
sharing from Indian gaming operations that were not submitted to or 
reviewed by Interior. In these cases, the tribe and state did not 
consider the agreements to be compact amendments. Interior officials 
told us that, without examining the agreements, they could not 
determine whether they were compact amendments that needed to be 
submitted for review.
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    From 1998 through fiscal year 2014, Interior reviewed and approved 
most of the 516 compacts and compact amendments that states and tribes 
submitted. Specifically, 78 percent (405) were approved; 12 percent 
(60) were deemed approved; 6 percent (32) were withdrawn or returned; 
and about 4 percent (19) were disapproved.
    In the decision letters we reviewed for the few disapproved 
compacts (19 out of 516), \15\ the most common reason for disapproval 
was that compacts contained revenue sharing provisions Interior found 
to be inconsistent with IGRA. \16\ For example, Interior found the 
revenue sharing payment to the state in some compacts to be a tax, fee, 
charge, or assessment on the tribe, which is prohibited by IGRA. For 
one compact, Interior found the state's offer of support for the 
tribe's application to take land into trust did not provide a 
quantifiable economic benefit that justified the proposed revenue 
sharing payments. Consequently, Interior viewed the payment to the 
state as a tax or other assessment in violation of IGRA. Interior also 
disapproved compacts for other reasons, including that compacts were 
signed by unauthorized state or tribal officials, included lands to be 
used for gaming that were not Indian lands as defined by IGRA, or 
included provisions that were not directly related to gaming.
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    \15\ According to Interior officials, decision letters accompany 
all approved and disapproved compacts. Our discussion of the compacts 
disapproved by Interior is based on a review of 18 out of 19 decision 
letters that Interior was able to locate as of February 2015. One 
letter for a compact between the Coyote Valley Band of Pomo Indians and 
the state of California, submitted to Interior on June 1, 2004, was 
unavailable.
    \16\ These revenue sharing provisions include various payment 
structures that may require, for example, tribes to pay states a fixed 
amount or a flat percentage of all gaming revenues or an increasing 
percentage as gaming revenues rise.
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    Interior did not approve or disapprove 60 of the 516 compacts 
submitted by tribes and states within the 45-day review period. As a 
result, these compacts were deemed approved to the extent that they are 
consistent with IGRA. \17\ According to Interior officials, as a 
general practice, the agency only sends a decision letter to the tribes 
and state for deemed approved compacts to provide guidance on any 
provisions that raised concerns or may have potentially violated IGRA. 
\18\ We reviewed the decision letters for 26 of the 60 deemed approved 
compacts. \19\ In 19 of the 26 letters we reviewed, Interior described 
concerns about the compact's revenue sharing provisions, and most of 
these letters also noted concerns about the inclusion of provisions not 
related to gaming. The remaining 7 letters we reviewed cited other 
concerns, such as ongoing litigation, that could affect the compact.
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    \17\ No court has issued a decision considering the extent to which 
a deemed approved compact is consistent with IGRA. Federal courts have 
generally dismissed lawsuits challenging deemed approved compacts 
because a necessary and indispensable party to the litigation-the 
state, tribe, or both-could not be joined to the lawsuit due to 
sovereign immunity. Friends of Amador County v. Salazar, 554 F. App'x 
562 (9th Cir. 2014); Kickapoo Tribe of Indians of the Kickapoo 
Reservation in Kan. v. Babbitt, 43 F.3d 1491 (D.C. Cir. 1995); Pueblo 
of Sandia v. Babbitt, 47 F. Supp. 2d 49 (D.D.C. 1999); Lac Du Flambeau 
Band of Lake Superior Chippewa Indians v. Norton, 327 F. Supp. 2d 995 
(W.D. Wis. 2004), aff'd on other grounds, 422 F.3d 490 (7th Cir. 2005). 
Currently, a federal district court is hearing a challenge to a deemed 
approved compact that allegedly provides for class III gaming on non-
Indian lands. Amador County, Cal. v. Jewell, 1:05-cv-658 (D.D.C.). 
Neither the relevant state nor the relevant tribe is a party to the 
suit.
    \18\ One federal court expressed the view that the Secretary of the 
Interior was attempting to evade responsibility by allowing compacts to 
be deemed approved because he was aware that such an action would be 
practically unenforceable and unreviewable, leaving the tribes with no 
means of vindicating their rights under IGRA even though he considered 
the revenue sharing and regulatory fee provisions to be illegal. Pueblo 
of Sandia v. Babbitt, 47 F. Supp. 2d 49, 56-57 (D.D.C. 1999).
    \19\ Interior officials told us no decision letters were issued for 
the remaining 34 deemed approved compacts.
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States and Selected Tribes Regulate Indian Gaming Based on Compacts and 
        Tribal Ordinances, Depending on Gaming Class
    As we found in our June 2015 report, \20\ the roles of states and 
tribes in regulating Indian gaming are established in two key 
documents: (1) compacts for class III gaming and (2) tribal gaming 
ordinances for both class II and class III gaming. Compacts lay out the 
responsibilities of both tribes and states for regulating class III 
gaming. For example, compacts may include provisions allowing states to 
conduct inspections of gaming operations, certify employee licenses, 
review surveillance records, and impose assessments on tribes to defray 
the state's costs of regulating Indian gaming. Under IGRA, tribal 
gaming ordinances--which outline the general framework for tribes' 
regulation of class II and class III gaming--must be adopted by a 
tribe's governing body and approved by the Commission's Chair before a 
tribe can conduct class II or class III gaming, as required under IGRA. 
\21\ Tribal ordinances must contain certain required provisions that 
provide, among other things, that the tribe will have sole proprietary 
interest and responsibility for the conduct of gaming activity; \22\ 
that net gaming revenues will only be used for authorized purposes; and 
that annual independent audits of gaming operations will be provided to 
the Commission.
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    \20\ GAO-15-355.
    \21\ Along with the ordinance, a tribe must also submit other 
documentation to the Commission Chair, including copies of all tribal 
gaming regulations.
    \22\ However, IGRA authorizes tribes to adopt gaming ordinances 
that provide for the licensing or regulation of class II or class III 
gaming activities on Indian lands owned by others in certain 
circumstances. 25 U.S.C.  2710(b)(4), (d)(2)(A).
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    IGRA allows states and tribes to agree on how each party will 
regulate class III gaming, and we found that regulatory roles vary 
among the 24 states that have class III Indian gaming operations. We 
identified states as having either an active, moderate, or limited role 
to describe their approaches in regulating class III Indian gaming, 
primarily based on information states provided on the extent and 
frequency of their monitoring activities. Monitoring activities 
conducted by states ranged from basic, informal observation of gaming 
operations to testing of gaming machine computer functions and reviews 
of surveillance systems and financial records. We also considered state 
funding and staff resources allocated for regulation of Indian gaming, 
among other factors, in our identification of a state's role. Based on 
our analysis of states' written responses to questions and interviews 
with states we found the following:

   Seven states have an active regulatory role: Arizona, 
        Connecticut, Kansas, Louisiana, New York, Oregon, and 
        Wisconsin. These states monitor gaming operations at least 
        weekly, with most having a daily on-site presence. Over 17 
        percent (71 of 406) of class III Indian gaming operations are 
        located in these seven states, accounting for about 25 percent 
        of gross gaming revenue in fiscal year 2013. \23\ These states 
        perform the majority of monitoring activities, including formal 
        and informal inspection or observation of gaming operations; 
        review of financial report(s); review of compliance with 
        internal control systems; audit of gaming operation records; 
        verification of gaming machines computer functions; review of 
        gaming operator's surveillance; and observation of money 
        counts.
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    \23\ The gross gaming revenue percentage was calculated using both 
class II and class III gaming revenues.

   Eleven states have a moderate regulatory role: California, 
        Florida, Iowa, Michigan, Minnesota, Nevada, New Mexico, North 
        Dakota, Oklahoma, South Dakota, and Washington. Most of these 
        states monitor operations at least annually, and all collect 
        funds from tribes to support state regulatory activities. About 
        75 percent (303 of 406) of class III Indian gaming operations 
        are located in these states and generated 69 percent of all 
        gross Indian gaming revenue in fiscal year 2013. States with a 
        moderate regulatory role have the broadest range of regulatory 
        approaches. For example, according to Nevada officials, Nevada 
        conducts comprehensive inspections of gaming operations once 
        every 2 to 3 years and performs covert inspections, as needed, 
        based on risk. In contrast, North Dakota officials told us they 
        conduct monthly inspections of gaming operations and an annual 
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        review of financial reports.

   Six states have a limited regulatory role: Colorado, Idaho, 
        Mississippi, Montana, North Carolina, and Wyoming. The role of 
        these states is largely limited to negotiating compacts with 
        tribes, and they do not incur substantial regulatory costs or 
        regularly perform monitoring activities of class III Indian 
        gaming operations. Eight percent (32 of 406) of class III 
        Indian gaming operations are located in these states, and the 
        operations accounted for about 4 percent of gross Indian gaming 
        revenue in fiscal year 2013.

    Tribes take on the primary day-to-day role of regulating Indian 
gaming. For example, each of the 12 tribes that we visited had 
established tribal gaming regulatory agencies that perform various 
regulatory functions to ensure that their gaming facilities are 
operated in accordance with tribal laws and regulations and, for class 
III operations, compacts. \24\ The tribes' regulatory agencies were 
similar in their approaches to regulating their gaming operations. For 
example, all of the tribes' regulatory agencies had established 
procedures for developing licensing procedures for employees, obtaining 
annual independent outside audits, and establishing and monitoring 
gaming activities to ensure compliance with tribal laws and 
regulations. Among other things, representatives from tribal 
associations we contacted emphasized that tribal governments have 
worked diligently to develop regulatory systems to protect the 
integrity of Indian gaming and have dedicated significant resources to 
meet their regulatory responsibilities. For example, according to 
representatives of the National Indian Gaming Association, in 2013, 
tribal governments dedicated $422 million to regulate Indian gaming, 
including funding for tribal government gaming regulatory agencies, 
state gaming regulation, and Commission regulation and oversight of 
Indian gaming collected through fees required by IGRA. \25\
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    \24\ Each of the 12 tribes we visited had gaming ordinances for 
class II and class III gaming that had been approved by the Commission 
Chair and had negotiated tribal-state compacts for class III gaming 
that had been approved by the Secretary of the Interior as required by 
IGRA.
    \25\ Specifically, the Commission is funded by fees on gross gaming 
revenues from both class II and class III gaming. The Commission, as 
required by IGRA, establishes a fee schedule but the law caps the rate 
of fees based on the amount of gaming revenues, as well as the total 
amount of all fees imposed during a fiscal year (at 0.08 percent of 
gross gaming revenues of all gaming operations subject to IGRA).
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The Commission Has Limited Authority for Class III Gaming, but It 
        Provides Some Services, as Requested, Using Standards Last 
        Updated in 2006
    In our June 2015 report, \26\ a key difference we found between 
class II and class III gaming is that IGRA authorizes the Commission to 
issue and enforce minimum internal controls standards for class II 
gaming but not for class III gaming. \27\ Commission regulations 
require tribes to establish and implement internal control standards 
for class II gaming activities--such as requirements for surveillance 
and handling money--that provide a level of control that equals or 
exceeds the Commission's minimum internal control standards. But, in 
2006, a federal court ruled that IGRA did not authorize the Commission 
to issue and enforce regulations establishing minimum internal control 
standards for class III gaming. \28\ However, Commission regulations 
establishing minimum internal control standards, including standards 
for class III gaming, that were issued before the ruling were not 
struck down by the court or withdrawn by the Commission. The Commission 
issued these regulations in 1999 and last updated the standards in 
2006, which we refer to as the 2006 regulations. \29\ Since the court 
decision, for operations with class III gaming, the Commission 
continues to (1) conduct audits using the 2006 regulations at the 
request of tribes and (2) provide monitoring and enforcement of these 
regulations for 15 tribes in California with approved tribal gaming 
ordinances that call for the Commission to have such a role. \30\
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    \26\ GAO-15-355.
    \27\ The minimum internal control standards for gaming are specific 
to the gaming industry, and they are the primary management procedures 
used to protect the operational integrity of gambling games, account 
for and protect gaming assets and revenue, and assure the reliability 
of the financial statements for class II and class III gaming 
operations. These standards govern the gaming enterprise's governing 
board, management, and other personnel and include procedures relevant 
to the play of, cash management, and surveillance for specific types of 
games.
    \28\ Colorado River Indian Tribes v. Nat'l Indian Gaming Comm'n, 
466 F.3d 134 (D.C. Cir. 2006).
    \29\ 25 C.F.R. Part 542. These regulations were issued in 1999 and 
updated in 2002, 2005, and 2006.
    \30\ State regulations issued pursuant to the tribal-state gaming 
compacts in California allow tribes to adopt tribal gaming ordinances 
that provide for Commission monitoring and enforcement of 25 C.F.R. 
Part 542 instead of tribal and state monitoring and enforcement of 
tribal minimum internal control standards.
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    The Commission plans to issue guidance with updated minimum 
internal control standards for class III gaming and withdraw its 2006 
regulations. Commission officials told us they have authority to issue 
such guidance, and tribes could voluntarily adopt them as best 
practices. According to Commission officials, issuing such guidance 
would be helpful because updated standards could be changed to reflect 
technology introduced since the standards were last updated. Commission 
officials told us that before the agency can make a decision on how to 
proceed with issuing guidance for class III minimum internal control 
standards, it first needs to consult with tribes. In February 2015, the 
Commission notified tribes of plans to seek comments on its proposal to 
draft guidance for updated class III minimum internal control standards 
during meetings in April and May 2015.
    States involved in the regulation of Indian gaming are also 
impacted by the Commission's proposal to draft updated guidance and 
withdraw its 2006 regulations; however, the Commission's plans for 
obtaining state input on this proposal are unclear. We found that many 
tribal-state compacts incorporate by reference the Commission's 2006 
regulations establishing minimum internal control standards. For 
example, three states have tribal-state compacts that require tribes to 
comply with the Commission's 2006 regulations. \31\ If the Commission 
withdraws its 2006 regulations, it is not clear what minimum internal 
control standards the compacts would require tribes to meet. In 
addition, nine states have tribal-state compacts that require tribal 
internal control standards to be at least as stringent as the 
Commission's 2006 regulations. \32\ If the Commission withdraws its 
2006 regulations, these states and tribes would no longer have a 
benchmark against which to measure the stringency of tribal internal 
control standards. Standards for Internal Control in the Federal 
Government call for management to ensure that there are adequate means 
of communicating with, and obtaining information from, external 
stakeholders that may have a significant impact on the agency achieving 
its goals. \33\ According to a Commission official, the Commission is 
considering conducting outreach to the states on its proposal but did 
not have any specific plan for doing so. Consistent with federal 
internal control standards, seeking state input is important, as it 
could aid the Commission in making an informed decision on how to 
proceed with issuing such guidance and whether withdrawal of its 2006 
regulations would cause complications or uncertainty under existing 
tribal-state compacts. As a result of this finding, we recommended that 
the Commission seek input from states regarding its proposal to draft 
updated guidance on class III minimum internal control standards and 
withdraw its 2006 regulations. In its comments on our draft report, the 
Commission concurred with this recommendation.
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    \31\ These three states are Iowa, Montana, and North Dakota.
    \32\ These nine states are California, Florida, Louisiana, 
Massachusetts, Minnesota, North Carolina, Oklahoma, Wisconsin, and 
Wyoming.
    \33\ GAO, Standards for Internal Control in the Federal Government, 
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999). The Standards for 
Internal Controls in the Federal Government differ from the minimum 
internal control standards for gaming. Federal internal control 
standards provide a framework for identifying and addressing major 
performance and management challenges to help federal agencies achieve 
their mission and results and improve accountability. The minimum 
internal control standards for gaming are specific to the gaming 
industry and are the primary management procedures used to protect the 
operational integrity of gambling games, account for and protect gaming 
assets and revenue, and assure the reliability of the financial 
statements for class II and class III gaming operations.
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The Commission Performs Various Activities to Help Ensure Tribes' 
        Compliance with IGRA and Commission Regulations, but the 
        Effectiveness of Some Activities Is Unclear
    In our June 2015 report, \34\ we found that the Commission helps 
ensure that tribes comply with IGRA and applicable federal and tribal 
regulations through various activities, including monitoring gaming 
operations during site visits to Indian gaming operations and 
Commission-led audits. Under the Commission's Assistance, Compliance, 
and Enforcement (ACE) Initiative implemented in 2011, the Commission 
places an emphasis on working collaboratively with tribes to encourage 
voluntary compliance with IGRA and Commission regulations. As part of 
the initiative, the Commission uses several approaches, including 
providing training and technical assistance and sending letters of 
concern to help tribes comply early and voluntarily with IGRA and 
applicable regulations. The Commission Chair may also take enforcement 
actions when violations occur and has taken a small number of actions 
in recent years.
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    \34\ GAO-15-355.
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Commission's Monitoring Activities
    To help ensure compliance with IGRA and Commission regulations, the 
Commission conducts a broad array of monitoring activities--such as 
reviewing independent audit reports submitted annually by tribes, 
conducting site visits to tribal gaming operations to examine 
compliance with applicable Commission regulations, and assessing 
tribes' compliance with minimum internal control standards as part of 
Commission-led audits. In addition, as required by IGRA, the 
Commission's Chair reviews and approves various documents related to 
both class II and class III gaming operations, including tribal gaming 
ordinances or resolutions adopted by a tribe's governing body.
Training and Technical Assistance
    Under its ACE initiative, the Commission has emphasized providing 
tribes with training and technical assistance as a means to build and 
sustain their ability to prevent, respond to, and recover from 
weaknesses in internal controls and violations of IGRA and Commission 
regulations. For instance, the Commission hosts two regular training 
events in each region. Commission staff also provide one-on-one 
training on specific topics, as needed, during site visits and offer 
technical assistance in the form of guidance and advice to tribes on 
compliance with IGRA; Commission regulations; and day-to-day regulation 
of Indian gaming operations through written advisory opinions and 
bulletins. Commission staff also respond to questions by phone and e-
mail, among other activities.
    However, the effectiveness of the Commission's training and 
technical assistance efforts remains unclear. The Commission's 
strategic plan for fiscal years 2014 through 2018 includes two goals 
corresponding to its focus on training and technical assistance to 
achieve compliance with IGRA and Commission regulations: one for 
continuing its ACE initiative; and another for improving its technical 
assistance and training to tribes. \35\ Yet, the Commission's 
performance measures for tracking progress toward achieving these two 
goals are largely output-oriented rather than outcome-oriented, and 
overall do not demonstrate the effectiveness of the Commission's 
training and technical assistance efforts. Specifically, 12 of the 18 
performance measures for these two goals include output-oriented 
measures describing the types of products or services delivered by the 
Commission. For example, they include the number of audits and site 
visits conducted and the number of training events and participants 
attending these training events. In prior work, we found that these 
types of measures do not fully provide agencies with the kind of 
information they need to determine how training and development efforts 
contribute to improved performance, reduced costs, or a greater 
capacity to meet new and emerging transformation challenges. \36\ In 
that work, we concluded that it is important for agencies to develop 
and use outcome-oriented performance measures to ensure accountability 
and assess progress toward achieving results aligned with the agency's 
mission and goals. This is consistent with Office of Management and 
Budget guidance, which encourages agencies to use outcome performance 
measures--those that indicate progress toward achieving the intended 
result of a program--where feasible. \37\
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    \35\ In May 2006, the Native American Technical Corrections Act of 
2006 made the Commission subject to the Government Performance and 
Results Act of 1993 (GPRA) and mandated the Commission to submit a plan 
to provide technical assistance to tribal gaming operations in 
accordance with GPRA. Subsequently, as required by GPRA, the Commission 
published a strategic plan for fiscal years 2009 through 2014 and 
replaced it with a strategic plan covering fiscal years 2014 through 
2018.
    \36\ GAO, Human Capital: A Guide for Assessing Strategic Training 
and Development Efforts in the Federal Government, GAO-04-546G 
(Washington, D.C.: March 2004).
    \37\ Office of Management and Budget, Circular A-11: Preparation, 
Submission, and Execution of the Budget, November 2014.
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    The Commission's remaining 6 measures include outcome-oriented 
measures that track tribes' compliance with specific requirements, 
including the percentage of gaming operations that submit audit reports 
on time and have a Chair-approved tribal gaming ordinance. They do not, 
however, indicate the extent to which minimum internal control 
standards are implemented or reflect improvements in the overall 
management of Indian gaming operations. In addition, they do not 
correlate such compliance with the Commission's training and technical 
assistance efforts. Additional outcome-oriented performance measures 
would enable the Commission to better assess the effectiveness of its 
training and technical assistance efforts and its ACE initiative. 
Commission officials told us that they recognize they have more work to 
do on performance measures and are interested in taking steps to ensure 
that their ACE initiative is meeting its intended goals. In our June 
2015 report, \38\ we recommended that the Commission review and revise, 
as needed, its performance measures to include additional outcome-
oriented measures. In its comments on our draft report, the Commission 
concurred with our recommendation.
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    \38\ GAO-15-355.
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Letters of Concern
    The Commission amended its regulations in August 2012 to formalize 
an existing practice of sending letters of concern to prompt tribes to 
voluntarily resolve potential compliance issues. \39\ A letter of 
concern outlines Commission concerns about a potential compliance issue 
and, according to Commission regulations, is not a prerequisite to an 
enforcement action. \40\ Commission regulations require that letters of 
concern specify a time period by which a recipient must respond but do 
not address which compliance issues merit a letter of concern or 
indicate when a letter should be sent once a potential compliance issue 
is discovered. The Commission also has not issued guidance or 
documented procedures on how to implement its regulation regarding 
letters of concern. In our review of letters of concern sent by the 
Commission in fiscal years 2013 and 2014, we found that the Commission 
sent 16 letters of concern to 14 tribes. Six of the 16 letters of 
concern did not include a time period by which the recipient was to 
respond, as required by Commission regulations. In addition, 12 letters 
did not specify in the subject line, or elsewhere in the letter, that 
they were letters of concern. By not including a time period for a 
response as required by Commission regulations and not consistently 
identifying its correspondence as a letter of concern, the Commission 
may not be able to ensure timely responses, and tribes may find it 
difficult to discern the significance of these letters. In addition, 
the Commission provided us with documentation to demonstrate whether a 
tribe took action to address the issues described in 8 letters of 
concern, but it did not provide documentation for the remaining 8 
letters. Under federal internal control standards, federal agencies are 
to clearly document transactions and other significant events, and that 
documentation should be readily available for examination. \41\ Without 
guidance or documented procedures to inform its staff about how to 
complete letters of concern or maintain documentation tracking tribal 
actions, the Commission cannot ensure consistency in the letters that 
it sends to tribes, and it may be difficult to measure the 
effectiveness of the letters in encouraging tribal actions to address 
potential issues. As a result of these findings, we recommended in our 
June 2015 report, \42\ and in its comment letter the Commission 
generally agreed, that the Commission should develop documented 
procedures and guidance for letters of concern to (1) clearly identify 
letters of concern as such and to specify the type of information to be 
contained in them, such as time periods for a response; and (2) 
maintain and track tribes' responses to the Commission on potential 
compliance issues.
---------------------------------------------------------------------------
    \39\ 25 C.F.R.  573.2.
    \40\ The Chair of the Commission is not obligated to wait for 
Commission staff to attempt to resolve potential compliance issues with 
letters of concern. If the Chair takes enforcement action before 
Commission staff send a letter of concern, Commission regulations 
require the Chair to state the reasons for moving directly to 
enforcement in the enforcement action.
    \41\ GAO/AIMD-00-21.3.1.
    \42\ GAO-15-355.
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Enforcement Actions
    IGRA authorizes the Commission Chair to take enforcement actions 
for violations of IGRA and applicable Commission regulations for both 
class II and class III gaming. \43\ Specifically, the Commission Chair 
may issue a notice of violation or a civil fine assessment for 
violations of IGRA, Commission regulations, or tribal ordinances and, 
for a substantial violation, a temporary closure order. \44\ The most 
common enforcement action taken by the Commission Chair in fiscal years 
2005 through 2014 was a notice of violation. The Chair issued 107 
notices of violations that cited 119 violations during this period. 
\45\ We found that the Chair issued 100 out of 107 notices of violation 
prior to fiscal year 2010. Since fiscal year 2010, fewer enforcement 
actions may have been taken because recent Commission chairs have 
emphasized seeking voluntary compliance with IGRA. \46\
---------------------------------------------------------------------------
    \43\ The Commission refers matters that it does not have 
jurisdiction over to other federal agencies and states. For example, 
the Commission does not have the authority to enforce IGRA's criminal 
provisions. IGRA requires the Commission to provide information to the 
appropriate law enforcement officials when it has information that 
indicates a violation of federal, state, or tribal laws or ordinances. 
In 2013, the Commission referred eight matters to other federal 
agencies and states, including six matters to federal law enforcement 
agencies and two matters to the Internal Revenue Service. The 
Commission also notified a state about one of the eight matters.
    \44\ In lieu of taking an enforcement action, the Chair may enter 
into a settlement agreement with an Indian tribe concerning the 
potential compliance issue.
    \45\ According to Commission officials, from fiscal year 2005 to 
fiscal year 2014, the Commission was without a Chair or Acting Chair 
for approximately 4 months, so no enforcement actions could be taken. 
Specifically, the Commission was without a Chair or Acting Chair from 
September 27, 2013, to October 29, 2013, and April 26, 2014, to July 
23, 2014.
    \46\ The Commission Chair has discretion in determining when to 
pursue an enforcement action. In addition, the Commission modified its 
regulations in 2012 so that quarterly statements or fees submitted up 
to 90 days late are now subject to a fine rather than a notice of 
violation. Almost half of the notices of violations issued between 
fiscal years 2005 and 2011 were for failure to submit or untimely 
submission of quarterly statements or fees.
---------------------------------------------------------------------------
    Chairman Barrasso, Vice Chairman Tester, and Members of the 
Committee, this completes my prepared statement. I would be pleased to 
answer any questions that you may have at this time.

    The Chairman. Thank you very much, Director Fennell. Thank 
you for your presentation and for being here.
    Next we will hear from Mr. Jamie Hummingbird, the Chairman 
of the National Tribal Gaming Commissioners and Regulators 
Association. Thanks for being with us.

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

    Mr. Hummingbird. Thank you, Mr. Chair.
    Good afternoon, Chairman Barrasso, Vice Chairman Tester and 
members of the Committee. My name is Jamie Hummingbird and I am 
a citizen of the Cherokee Nation and Director of the Cherokee 
Nation Gaming Commission.
    I am also a Chairman of the National Tribal Gaming 
Commissioners and Regulators Association, an organization 
comprised of 64 federally-recognized tribes, formed for the 
purpose of promoting the exchange of best practices, 
information and ideas in the pursuit of consistent, stable and 
fair regulatory practices.
    I thank the Committee for the opportunity to address an 
issue that is at the heart of the mission of the NTGCR, 
safeguarding the integrity of Indian gaming, and to comment on 
the current state of gaming regulation throughout Indian 
Country and the recent Government Accountability Office report, 
Indian Gaming Regulation: an Oversight by the Federal 
Government, States and Tribes.
    I appear before you today as one of several thousand tribal 
gaming regulators that have dedicated their professional lives 
to ensuring the integrity of Indian gaming so that the benefits 
derived from gaming reach the intended recipients: our tribal 
citizens. The fiscal success of Indian gaming did not happen 
overnight, but was steadily built over decades. It took 
foresight and courage in tribal leadership to put economic 
development plans in motion that have made Indian gaming the 
$28 billion industry it is today. That industry benefits not 
only tribes and their citizens but it also impacts the broader 
local and State economies.
    To encapsulate tribal gaming regulation in a single report 
is a daunting task. The GAO is to be commended for their 
efforts. The report can be a useful tool, as gaming regulators 
always seek to ensure gaming is conducted fairly and honestly.
    The path to implementing IGRA has not been a smooth one. 
However, all parties involved in Indian gaming, the State, 
tribal and Federal governments, have helped ensure the Act's 
success. True, there have been milestones along the way, but it 
is the culmination of a number of small victories achieved over 
time that are the true measure of the Act's success.
    I am reminded of a quote that I once heard: ``The small 
daily improvements are the key to staggering long-term 
results.'' It is this attitude that guides tribal gaming 
regulators each and every day.
    Like you, I have read the GAO report and understand the 
advice being offered. I understand that there is concern about 
the level of voluntary compliance achieved by tribes and the 
NIGC's ability to measure the effectiveness of their efforts 
through its ACE initiative.
    Through its ACE initiative, the NIGC has set out a plan to 
provide training and technical assistance to equip tribal 
gaming regulators with the knowledge necessary to do their 
jobs. The NTGCR can identify with this initiative, as it shares 
the same goal, to see Indian gaming effectively regulated by 
tribes. The NIGC's renewed commitment to seeking tribal input 
through consultation process has ensured that those who are 
regulating on the ground have the ability to affect policy in a 
meaningful way.
    While the NIGC recognizes the need to bolster their 
administrative metrics, let us not forget that it was tribes 
that developed the first set of internal controls for use in 
tribal gaming facilities. These were later adapted by the NIGC 
and published as the minimum internal control standards in 
1999.
    Tribes have also led in technological advances which have 
succeeded outside of Indian Country. Tribes continue to lend 
their expertise to the NIGC through tribal advisory committees, 
providing the benefit of our practical hands-on experience, to 
keep regulations current and relevant to today's tribal gaming 
enterprises.
    Adherence to strong regulatory structure, one that balances 
the goals of gaming regulatory laws and controls without 
needlessly hindering economic viability, is not only a legal 
obligation that tribal gaming regulators must meet, but it is 
also a moral obligation that we owe to our tribal citizens.
    The NTGCR is dedicated to continuing to be the front line 
regulators in a complex industry. It is important to remember 
that tribes and the regulators they entrust have the most at 
stake in ensuring the integrity of tribal gaming.
    Should our regulations fail to protect tribal citizens and 
patrons, as daunting as it may be to appear before a Senate 
committee, it pales in comparison to facing our elders who rely 
on our gaming revenues for health service or our youth who need 
school supplies that are supplemented by those revenues.
    Gaming regulators and their tribes stand ready to work in 
partnership with the States, the NIGC and the Senate to ensure 
that the benefits derived from gaming continue long into the 
future.
    As I conclude today, I want to leave you with one more 
quote that I believe captures the spirit of tribal gaming 
regulators: ``Success depends on previous preparation, and 
without such preparation, there is sure to be failure.''
    Tribal gaming regulators are prepared to meet the 
challenges of today and those that we will face in the years to 
come.
    Thank you again, Chairman Barrasso and members of the 
Committee, for the opportunity to appear and provide testimony 
today. I stand ready to answer any questions you may have.
    [The prepared statement of Mr. Hummingbird follows:]

  Prepared Statement of Jamie Hummingbird, Chairman, National Tribal 
            Gaming Commissioners and Regulators Association
    Good afternoon Chairman Barrasso, Vice Chairman Tester, and Members 
of the Committee. My name is Jamie Hummingbird. I am a citizen of the 
Cherokee Nation and Director of the Cherokee Nation Gaming Commission. 
I am also the Chairman of the National Tribal Gaming Commissioners and 
Regulators Association (NTGCR), an organization comprised of 64 
federally recognized tribes formed for the purpose of promoting the 
exchange of thoughts, information and ideas in the pursuit of 
consistent, stable, and fair regulatory practices.
    I thank the Committee for the opportunity to address an issue that 
is at the heart of the mission of the NTGCR, ``Safeguarding the 
Integrity of Indian Gaming,'' and to comment on the Government 
Accountability Office's report ``INDIAN GAMING: Regulation and 
Oversight by the Federal Government, States, and Tribes'' (GAO Report).
Background
    The seeds of Indian gaming were sewn over 40 years ago when tribes 
opened the first bingo halls on their reservations and tribal lands as 
a means of economic development. The revenues produced by these 
operations were intended to fill the gaps left by limited federal 
assistance in meeting the basic needs of tribal citizens and, to the 
extent possible, provide adequate funding for tribal governmental 
programs and thereby reducing tribal dependence on federal funding.
    Though the beginnings of Indian gaming were humble, the 
introduction of the latest technologies of the day allowed tribes to 
attract wider audiences and achieve an unforeseen level of success. 
Such success, coupled with a growing divide in Tribal-State relations, 
ultimately led to legal conflicts culminating in the landmark Supreme 
Court case of California v. Cabazon Band of Mission Indians of 1987.
    In Cabazon, the Supreme Court recognized the importance of gaming 
to tribal economic development efforts and in providing for stable 
tribal economies. The Court also recognized that tribes, not the 
states, were responsible for regulating gaming conducted on tribal 
lands.
    Although the Cabazon case affirmed the right of tribes to conduct 
gaming on tribal lands and acknowledged that gaming was being regulated 
by the tribes, the feeling of unease amongst the states was growing. 
Citing fears that organized crime would infiltrate and consume Indian 
gaming--even though there had never been a proven case of organized 
criminal activity to have taken place at an Indian gaming facility--
states called for regulation over Indian gaming by either the states or 
the federal government.
    In 1988, Congress used its plenary power over Indian affairs to 
adopt the Indian Gaming Regulatory Act (IGRA, the Act) in an effort to 
formulate a system for regulating gaming on Indian lands and to find 
balance between the political and economic interests of the state, 
federal, and tribal governments.
Regulating Indian Gaming
    The success of Indian gaming is due in large part to the 
development and implementation of strong regulatory systems. IGRA 
sought to establish a regulatory framework under which the tribal 
governments are recognized as the primary regulators of Indian gaming 
with the federal and state governments fulfilling defined roles.
    To this end, the Act provided for three (3) classifications of 
gaming and outlined the roles, responsibilities and authorities of the 
state, federal, and tribal governments respective to each class of 
gaming. Under IGRA, Class I gaming, which is characterized as 
traditional, ceremonial tribal games, was under the exclusive 
jurisdiction of tribes while regulatory responsibility for Class II 
gaming, consisting of bingo, pull tabs, and other similar games, was to 
be shared between tribes and the NIGC, with tribes being the primary 
regulatory authority. Class III gaming, which consists of any game not 
considered as either Class I or Class II, could only be conducted under 
the terms of a compact negotiated between a tribe and the respective 
state in which it resides.
    Through IGRA, Congress called upon tribal governments to establish 
their own gaming laws and regulations. Through tribal gaming ordinances 
approved by the NIGC Chair, tribes have constructed their own 
regulatory frameworks and established tribal gaming regulatory 
authorities (TGRA) to carry out tribal responsibilities under IGRA. 
Among those responsibilities, TGRAs conduct background investigations 
on and issue licenses to gaming facility employees and vendors; review 
and approve all games offered by a gaming facility; perform 
environmental, public health and safety inspections; review management 
and loan agreements; and, conduct audits of gaming facility activities 
and financials to ensure proper accountability.
    In addition to the TGRAs, other tribal governmental departments and 
agencies, such as risk management, environmental health, environmental 
protection, tax commission, and law enforcement may also be involved in 
overseeing activities at tribal gaming facilities. TGRAs have reporting 
responsibilities to their respective tribal governments, as well.
    TGRAs routinely communicate and coordinate regulatory efforts to 
federal agencies other than the NIGC. Information and reports on 
financial matters are provided to the Internal Revenue Service (IRS), 
the Financial Crimes Enforcement Network (FinCEN), and the Secret 
Service. In addition, the assistance of the Federal Bureau of 
Investigation and Department of Justice is sought for the prosecution 
of violations of criminal statutes, when appropriate.
    Tribal commitment to providing strong regulation over Indian gaming 
is evident when considering the investment made by tribal governments 
in their TGRAs. Collectively, tribes across 28 states employ nearly 
4,000 tribal gaming regulators and spend over $320 million in tribal 
resources annually to oversee the 484 gaming facilities noted in the 
GAO Report. These figures do not include compliance staff employed by 
the gaming operations.
    With the wide range of responsibilities placed on TGRAs, the skill 
sets of TGRA staff must be equally diverse. Many tribal gaming 
regulators possess law enforcement experience while others maintain 
professional certifications such as Certified Fraud Examiner, Certified 
Public Accountant, Certified Internal Auditor, and Certified 
Information Technology Professional. As technologies change and the 
gaming and regulatory environments evolve, so must tribal regulatory 
staff. It is for this reason that many tribal gaming ordinances and 
some tribal-state compacts require regular training for regulatory 
staff.
    The IGRA established the National Indian Gaming Commission (NIGC) 
and instituted a federal regulatory structure applicable to all tribes 
regardless of their state of residence. IGRA focuses the NIGC's 
regulatory authority largely on monitoring Class II gaming with limited 
authority over Class III activities. The NIGC has an operating budget 
of approximately $20 million and employs 100 staff across seven (7) 
regional offices and two (2) satellite offices to carry out its 
responsibilities under IGRA.
    A majority of tribes have entered into compacts with their 
respective states for Class III gaming. In general, the compacts 
contain requirements similar to those found in IGRA and NIGC 
regulations with respect to licensing, internal control standards, and 
financial accountability. The aspects that vary the most depending on 
the jurisdiction are the types of games allowed for play and the 
regulatory structure and authorities of the state. The regulatory roles 
and responsibilities are negotiated as a part of the compacting process 
and vary by state; the lead regulatory role belonging predominately to 
tribes.
    The GAO Report identifies the different approaches taken by the 
states and acknowledges the state regulatory structures and activities 
are influenced by the regulatory systems used by TGRAs and the level of 
resources dedicated to those efforts. According to the GAO Report, 
states employ 444 regulators whose combined budgets exceed $52 million 
per year. Other estimates place the state budget total closer to $83 
million per year. In recognition of the capabilities of TGRAs, many 
states have refrained from unnecessarily recreating a regulatory system 
as extensive as that which tribes collectively operate. By relying on 
the tribal regulators, states are able to conserve funds for use in 
other areas.
    It is clear that, with over 4,000 full-time regulators on staff and 
a combined annual investment of over $400 million by state, federal, 
and tribal governments, Indian gaming is being afforded a level of 
protection higher than almost any other industry in the United States.
GAO Report Scope and Results
    The Government Accounting Office was asked to review the current 
state of Indian gaming and undertook a twenty-month study as a result. 
Particular emphasis was given to the state of regulation in the 
industry. The GAO was asked to review: (1) the Department of the 
Interior's (Interior) review process that ensures tribal-state compacts 
comply with IGRA; (2) how states and selected tribes regulate Indian 
gaming; (3) the NIGCs authority to regulate Indian gaming; and, (4) the 
NIGCs efforts to ensure tribal compliance with IGRA and NIGC 
regulations.
    The GAO Report provided insight into the extensive process followed 
by Interior in reviewing and acting on tribal-state compacts. The 
review of Interior's past 17 years worth of compact reviews showed that 
tribal interests have been protected through Interior's two-pronged 
analysis with less than four percent of 516 submitted compacts being 
disapproved.
    The regulatory structures contained in those 516 compacts, as 
agreed to by the tribes and states, vary as previously stated. The GAO 
classified the varying approaches taken by states into one of three 
categories--active, moderate, or limited--to describe the depth and 
frequency of activity performed by each state.
    Regardless of the jurisdiction, regulators share common goals: to 
ensure the integrity of their respective gaming operations, to protect 
the operation from any corrupting influences, to ensure financial 
accountability, and to ensure gaming is conducted fairly and honestly 
by the patrons and the gaming operation. Under this mutual bond, tribes 
across the country enjoy healthy working relationships with their state 
and federal colleagues. Through regular interaction, tribes have been 
able to demonstrate their ability to effectively regulate tribal gaming 
facilities.
    TGRAs go to great lengths to make sure that they and their gaming 
operations achieve the highest levels of compliance and dedicate a 
sizeable amount of human and financial resources to these efforts. 
TGRAs regularly provide reports on the compliance status of their 
respective gaming facilities to tribal leadership as well as any state 
and federal gaming authorities. In the event the desired compliance 
level is not achieved, however, TGRAs have it within their authority to 
ensure any departure from regulation is corrected using methods 
outlined in either compact provisions or TGRA regulations. IGRA 
contemplated a tribal-federal relationship with respect to Class II 
gaming and a tribal-state relationship for Class III gaming. State and 
federal regulators are also able to address issues they feel are not in 
line with prescribed regulation directly with the TGRA. Upon receiving 
notice, TGRAs are able to investigate the issue and respond with 
additional details and, if appropriate, any corrective measures taken 
to rectify the issue. These cooperative relationships indicate the goal 
of IGRA to ensure the sound enforcement of gaming laws and regulations 
is being met.
    In recent years, the NIGC introduced the Assistance, Compliance, 
and Enforcement (ACE) initiative in further support of this goal. 
Training and technical assistance provided under ACE has allowed tribes 
with limited resources to access training and services at no cost. I 
applaud the NIGCs efforts and commend them for designing a program that 
respects the principal goal of federal Indian policy towards promoting 
tribal self-sufficiency and self-determination.
    The breadth and scope of the NIGC training catalog has been 
revamped and modernized to include an Information Technology component, 
inclusive of technology and security assessments. The NIGC has enhanced 
the ACE initiative and its value to tribes by incorporating training 
and technical assistance that is relevant to today's gaming landscape.
    This same approach has been used in recent years in drafting the 
minimum internal control standards (MICS) for Class II gaming. The 
Class II MICS have allowed the NIGC to remain a viable part of the 
regulatory landscape while respecting the role of TGRAs to design 
control systems that meet their unique needs.
    The MICS covering Class III gaming, however, have not been updated 
since 2006, as a result of a court decision in which it was concluded 
that the NIGC did not have authority over Class III gaming. In light of 
this decision, the NIGC stated it was considering withdrawing the Class 
III MICS and republishing the standards in non-mandatory guidance form. 
This section of NIGC regulations has been included in a number of 
tribal-state compacts. Removing the standards from the current 
regulatory systems would create a void within the compacts and existing 
regulatory systems.
    The GAO recommends the NIGC seek input from state governments as it 
contemplates changes to the Class III MICS. The means by which the NIGC 
would accomplish this are unknown; however, states have participated in 
developing the NIGC Class III internal controls in prior years by 
submitting comments on proposed rules and attending the public meetings 
and consultations held during the rulemaking process.
    Any process in which Class III internal controls are addressed must 
be respectful of each stakeholder's interests. Only through a 
collaborative effort can the desired result of ensuring the integrity 
of Indian gaming be achieved.
The Future of Indian Gaming Regulation
    Tribes and their respective gaming regulatory authorities remain 
steadfast in their commitment to protect the single-most effective 
economic development tool available to tribes today--Indian gaming. The 
regulatory efforts put forth by tribes and TGRAs will remain and 
continue to evolve to an ever-changing industry.
    It is essential to the continued success of Indian gaming for all 
gaming regulators to maintain a balanced approach towards regulation 
and compliance with the various rules, regulations, and statutes. This 
task is best achieved by working together with our state and federal 
colleagues. Most importantly, however, it is an obligation owed to our 
tribal citizens. Tribal gaming regulators work tirelessly to ensure the 
integrity of Indian gaming so that our tribal citizens may reap the 
benefits from this vital industry.
    Thank you, again, Chairman Barrasso and Members of the Committee 
for the opportunity to appear and provide testimony today. I stand 
ready to answer any questions you may have.

    The Chairman. Thank you very much, Mr. Hummingbird.
    Next we will hear from Director David Trujillo, who is the 
Director of the Washington State Gambling Commission. Thank you 
for joining us.

    STATEMENT OF DAVID TRUJILLO, DIRECTOR, WASHINGTON STATE 
                      GAMBLING COMMISSION

    Mr. Trujillo. Thank you, Chairman Barrasso, members of the 
Committee.
    For the record, as Chairman Barrasso said, my name is David 
Trujillo. I am accompanied today by Washington State Gambling 
Commission Chairman Christopher Sterns. He is in the audience 
over my right shoulder.
    The Chairman. Welcome, Mr. Sterns.
    Mr. Trujillo. I have spent 23 years in one form or another 
involved in implementing gambling laws and policy in the State 
of Washington, as directed by the Governor, the State 
legislatures or the State Gambling Commission.
    Class III gaming regulation and oversight, the relationship 
is grounded in law. It is formalized in compact. It is 
government-to-government based. It is respectful and it is 
professional. Each compact is brought to life by people doing 
their very best to implement the terms and conditions of the 
compact.
    As I have spent time with my agency, my role there is not 
unique. I started out as a special agent, special agent 
supervisor, administrator, assistant director and deputy 
director of operations, and now I am the director. To get where 
we are today and the communication that we have with tribes in 
Washington, we had to evolve. I will provide a little bit of 
historical perspective.
    In years past, my own State Gambling Commission operated a 
uniform tribal regulatory approach that really did not respect 
the uniqueness of the tribes or the different tribal gaming 
operations. That approach was reactive and really did not 
encourage a lot of collaborative regulatory efforts.
    We changed. We knew we had to change. It took several years 
but now we have adjusted our own regulatory processes within 
the State to work with each tribe, each tribal gaming 
commission, each tribal gaming agency and their processes and 
our processes, so they complement one another. This approach 
now is proactive and it encourages dialogue. It does respect 
the uniqueness of each tribe.
    For us, we no longer operate a one size fits all model. So 
what we lost with that approach was cost benefit savings to us. 
However, we now benefit from open dialogue and a dialogue that 
encourages a deliberate, methodical approach that is respectful 
of the tribes and their uniqueness.
    The tribal gaming compacting process is complex. There are 
no easy changes. It is by this way that the Governor, the State 
legislature and the State Gambling Commission and the tribal 
leaders can be assured that public policy continues to be met 
when it concerns Class III gaming.
    With the GAO report, I was happy to see the recommendation 
was to work with the States. Washington has maintained some 
Class III minimum internal control standards since the first 
compact was enacted in 1992.
    In closing, I would like to say that Class III gaming 
oversight is a shared responsibility in Washington. The bond is 
very strong. It is very healthy.
    I am proud of the relationship that my staff has with the 
staff of each tribe, whether that be the Gaming Commission, the 
tribe itself or the tribal gaming agency. The State and tribe 
together do an excellent job of regulating Class III gaming. If 
Washington is reflective of the bond that exists between the 
tribes and other State agencies, then I would submit that 
integrity is high when it comes to Class III gaming regulation 
and oversight.
    Mr. Chairman, that would conclude my testimony today, and I 
stand ready to answer any questions.
    [The prepared statement of Mr. Trujillo follows:]

   Prepared Statement of David Trujillo, Director, Washington State 
                          Gambling Commission
    Good Afternoon Chairman Barrasso, Vice-Chairman Tester and Members 
of the Committee. Thank you for inviting me to testify before you 
today. My name is David Trujillo and I am the Director of the 
Washington State Gambling Commission. As Director of the Gambling 
Commission I am responsible for implementing statewide gambling policy 
as directed by the Washington State Legislature and the members of the 
Washington State Gambling Commission. Our regulatory framework extends 
to charitable and nonprofit organizations and commercial businesses 
that are authorized certain gambling activities. We work in regulatory 
partnership with Washington Tribes in their operation of Class III 
gaming activities. We enforce criminal law concerning illegal gambling 
and related crimes statewide. I am proud to say that the Commission 
enjoys a strong and mutually respectful relationship with the twenty 
nine Tribes in Washington.
    I'd like to share some background information with you so that you 
can place my testimony in context with my experience. I hold a Bachelor 
of Arts degree and a Bachelor of Science degree. I am a Certified 
Public Accountant licensed by the Washington State Board of Accountancy 
and a long serving ethics committee member of the Washington's Society 
of Certified Public Accountants. I am a graduate of the Washington 
State Criminal Justice Training Commission and hold various law 
enforcement credentials from that same agency.
    Last year, I led my agency through Washington Association of 
Sheriffs and Police Chiefs third party accreditation process. In 
November 2014, the Commission received Accreditation demonstrating to 
the public that we are dedicated to operating under industry best 
practices and standards. Prior to my appointment as agency Director, I 
served in various positions throughout the agency including a Special 
Agent in Field Operations, Financial Investigations and Tribal Gaming 
Unit, Supervisor of our Criminal Intelligence unit, and Deputy Director 
in charge of Operations.
    Of great significance to this hearing is that I have had the 
opportunity to work with Washington Tribal representatives for over two 
decades and can speak with experience to the current relationship we 
enjoy with Washington Tribes and how it has evolved to its present 
state.
    The point of my testimony today is to comment on the June 2015 GAO 
on Indian Gaming Regulation and Oversight by the Federal Government, 
States, and Tribes.
    Specifically, I will briefly discuss:

        1) The cooperative regulatory partnership Washington State 
        shares with Tribes; and

        2) Washington's State--Tribal Gaming Compact process; and

        3) GAO's recommendation that the National Indian Gaming 
        Commission obtain input from states on its plans to issue 
        guidance on Class III minimum internal controls standards.

The Cooperative Regulatory Partnership Washington State Shares With 
        Tribes
    The present relationship between the Tribes of Washington and the 
Washington State Gambling Commission enjoys is one that is grounded in 
Compact and is formal in nature. Specifically, the Tribe and State 
mutually agree that the conduct of Class III gaming under certain terms 
and conditions benefit the Tribe, and protect the citizens of the Tribe 
and State. In addition, both parties deem it in their respective best 
interests to enter into a compact. That agreement is, of course, 
between the highest official of the Tribal Council and the Governor of 
Washington State. Under certain terms and conditions, regulatory staffs 
of both governments do their best to implement that broad policy 
statement.
    Our relationship has positively evolved over the years. Simply, in 
the early to late 1990s, our model was to apply our licensing/
certification and regulatory programs in a uniform approach across the 
spectrum of Tribes, regardless of the various strengths of their 
regulatory staff, their regulatory approach, or the specific nuances of 
each Tribal Gaming Operation. This made it very easy for us to apply 
our program consistently statewide and was very cost beneficial for us.
    The problem with that approach was that it was somewhat 
paternalistic in nature, did not encourage a coordinated regulatory 
approach and did little to respect the individual uniqueness of each 
Tribe. In the late 90s, we altered our licensing/certification program 
to incorporate the differences of each Tribal licensing process. No 
longer did we apply our licensing/certification process uniformly. 
Respectively, we created as many licensing/certification processes as 
we had compacted gaming Tribes as each Tribe had a hand in what was 
submitted to us. We discovered that instead of a cost savings benefit, 
we benefited from open discussion and dialogue and our approaches 
complement one another.
    By 2005, we shifted our onsite regulatory processes similarly. We 
discontinued our singular onsite regulatory process to a process that 
also encourages open discussion and dialogue. At the beginning of each 
year, our regulatory staff meets with Tribal regulatory staff. Together 
both Compact enforcement teams discuss upcoming changes respective to 
that Tribe's gaming operations. Examples include specific types of 
gaming, risks associated with personnel changes, high risk areas may 
very year to year, changes in electronic applications, etc.
    We are still working through areas but I submit that public trust 
in Class III gaming in Washington State is stronger than it has ever 
been. This is directly reflective of the strong bond between the State 
and Tribes in the operation of Class III gaming.
Washington's State--Tribal Gaming Compact Process
    In Washington State, authorization for gambling activities is found 
in the Revised Code of Washington. Specifically, the law requires that 
the Washington State Gambling Commission through the Director will 
negotiate Compacts on behalf of the State. Once a tentative agreement 
is reached, the Director will immediately transmit the proposed compact 
or amendment to all voting members of the Gambling Commission. Gambling 
Commissioners are appointed by the Governor for a term of six years. 
The law only allows Commissioners to be removed for inefficiency, 
malfeasance, or misfeasance in office, upon specific written charges 
filed by the Governor with the Chief Justice of the Supreme Court. For 
Tribal matters, voting members includes the Gambling Commission's ex-
officio members. Two ex-officio members are from the Senate, one from 
the majority party and one from the minority party, both to be 
appointed by the president of the Senate. Two ex-officio members are 
from the House of Representatives, one from the majority political 
party and one from the minority political party, both appointed by the 
speaker of the House of Representatives.
    Generally speaking, within thirty days of receiving a proposed 
compact or compact amendment, one standing committee from each house of 
the legislature shall hold a public hearing on the proposed compact and 
forward its respective comments to the Gambling Commission.
    The Gambling Commission may hold public hearings on the proposed 
compact anytime after receiving a copy of the proposed compact or 
compact amendment. Within forty-five days, the Gambling Commission, 
including ex-officio members will vote on whether to return proposal 
for further negotiation or to forward the proposed compact to the 
Governor for review and final execution.
    Through this complex process can the Governor, Legislators, 
Gambling Commissioners, and Tribes Leaders be assured that public 
policy is met, Class III gaming continues in a manner beneficial to all 
parties within the state, and citizens of Washington are protected.
The GAO's Recommendation That the National Indian Gaming Commission 
        Obtain Input From States on Its Plans to Issue Guidance on 
        Class III Minimum Internal Controls Standards
    In reviewing the GAO report, I was very pleased to see the number 
one recommendation was for the National Indian Gaming Commission to 
obtain input from state on its plans to issue guidance on Class III 
minimum internal control standards.
    Washington State has had regulatory authorized gambling activities 
since 1973. We are the second oldest state gambling regulatory agency; 
only Nevada is older. We are very good at what we do, we have our 
finger on the pulse of gaming within the state and we have much to 
offer. We have established performance measures and we consistently 
challenged ourselves to be more effective, more efficient, and a better 
regulatory partner. Consulting with Tribes is part of the solution but 
I submit to you that consulting with state agencies is important also. 
We are all in this together so it stands to reason we should all be 
part of an all-inclusive solution when it comes to Class III gaming. 
Just as each Tribe is unique, so are the capabilities of state 
regulatory partners. The GAO report illustrates gaming compliance 
visits were scaled back in fiscal years 2013 and 2014 due to 
sequestration. The report does not indicate any consultation with State 
officials as a reason for or for not conducting an onsite visit.
    In conclusion, I can say without a doubt that the Tribes and State 
successfully monitor the terms and conditions of the Tribal-State 
compacts and the integrity of the Class III gaming in Washington is 
stronger today than in years past. In my estimation, the Tribes of 
Washington do an excellent and outstanding job of regulating gaming as 
required under the Indian Gaming Regulatory Act.
    Thank you Mr. Chairman, Vice Chairman, and Committee members for 
the opportunity to appear before you today. I stand ready to answer any 
questions you might have.

    The Chairman. Thank you very much for your testimony, 
Director Trujillo. Thank you. We appreciate your being here.
    Next we will hear from Mr. Ernest Stevens, Chairman of the 
National Indian Gaming Association. Mr. Stevens, welcome back.

STATEMENT OF ERNEST L. STEVENS, JR., CHAIRMAN, NATIONAL INDIAN 
                       GAMING ASSOCIATION

    Mr. Stevens. Thank you, and good afternoon, Mr. Chairman 
and members of the Committee. Thank you for this opportunity to 
testify today.
    With me today are several of the National Indian Gaming 
Association board members, our staff, our tribal officials and 
professionals are joining us here today.
    I want to start by saying, Mr. Chairman, that Indian gaming 
is the Native American success story. Today more than 240 
tribes are following the Indian Gaming Regulatory Act and we 
are making the best of this Act work for our communities.
    In 2014, Indian gaming generated more than $32 billion in 
gaming and gaming-related revenue. These funds are beginning to 
rebuild reservations throughout this Country. At the Oneida 
Nation in Wisconsin, where I am from, Indian gaming is helping 
replenish our homelands, foster traditions through education 
and provide for the health and welfare of our community.
    Past Federal policy sought to destroy native language and 
religion. But today, Indian gaming is helping to preserve our 
culture.
    I just came from a rally on Capitol Hill to protective 
Native scared sites. It was an honor to see so many people, 
young and old, united to protect our way of life. They 
presented me with these gifts and this feather today.
    Mr. Chairman, my father, Ernie Stevens, Sr., was a staff 
sergeant in combat in the Korean Conflict. He is also the 
former staff director of this Committee. For a good part of the 
past 18 years, he has lived at the Oneida Nation's Anna John 
Nursing Home. The care provided at that facility to my dad and 
all the other Oneida elders was long overdue respect that they 
have earned. All of this funding is supplemented by Indian 
gaming revenues.
    Indian gaming is also putting American families to work. 
Last year, tribal gaming delivered more than 310,000 direct 
American jobs. With indirect impacts, that number of jobs grows 
to 684,000, many of which are non-Indians from surrounding 
communities. Without question, Indian gaming is helping to fuel 
an American economic recovery.
    Has Indian gaming solved all our problems? Not even close. 
Many Native American communities continue to struggle with 
failed Federal polices of the past. But we are making our way 
back. Indian gaming is tribal government self-determination 
that is improving the lives and providing opportunities across 
all of Indian Country.
    Tribal leaders know that these benefits wouldn't be 
possible without a strong regulatory system. In 2014, tribes 
spent more than $426 million on regulation. This investment 
includes hiring more than 6,500 tribal, Federal and State 
regulators, all working in cooperation to protect Indian gaming 
revenues and the integrity of our operations. The funding and 
personnel dedicated to Indian gaming regulation far outpace 
State and commercial gaming regulators. I challenge anyone to 
compare these numbers or resources to any form of gaming 
worldwide.
    My tribe, the Oneida Nation of Wisconsin, has 40 years of 
experience regulating Indian gaming. In that time, our tribal 
regulators have gained significant expertise. Early on, we 
hired a lot of outside folks, whether it was for law 
enforcement, military, financial institutions. That helped us 
to grow our industry. But today, Mr. Chairman, tribal 
regulators from throughout Indian Country are the experts. Many 
come to us with questions and ask to learn about our state of 
the art regulation. We are very proud of that.
    The Oneida Nation regulators also participate in the tribal 
gaming protection network and other associations. Through these 
organizations we share information on threats to our 
operations, best practices on what is working to protect Indian 
gaming assets. Throughout Indian Country, tribal regulators are 
stopping crime and individuals that threaten our operations.
    Just last week, Mr. Chairman, the tribal regulators are 
Shakopee Mdewakanton Sioux Community and the Hoopa Valley Tribe 
worked with local police to arrest individuals who had robbed 
banks and committed other Federal and State crimes, only to be 
caught by tribal regulators.
    Despite all this work, experience and dedication of 
resources, we continue to hear the tired comparison of Indian 
gaming regulation as the fox watching the henhouse. These 
claims absolutely disrespect the hard work that tribal, Federal 
and State regulators conduct day in and day out to protect the 
integrity of Indian gaming. The bottom line is this: the system 
of regulation that oversees Indian gaming is working. We are 
not perfect, but we have a better system than any form of 
regulation in this Nation.
    In closing, Mr. Chairman, Indian gaming is the most highly 
funded and staffed system of regulation in this Nation. The 
credit in the system goes to the tribal leaders who make the 
decision to fund the system and to the thousands of men and 
women who have dedicated their lives to protecting tribal 
assets and the integrity of operations. Tribal governments have 
made Indian gaming an American success story.
    Thank you for your time. I am happy to answer any 
questions, Mr. Chairman and members of the Committee.
    [The prepared statement of Mr. Stevens follows:]

Prepared Statement of Ernest L. Stevens, Jr., Chairman, National Indian 
                           Gaming Association
Introduction
    Good afternoon Chairman Barrasso, Vice Chairman Tester, and Members 
of the Committee. My name is Ernest Stevens, Jr. I am a member of the 
Oneida Nation of Wisconsin and Chairman of the National Indian Gaming 
Association (NIGA). NIGA is an association of 184 federally recognized 
Indian tribes united behind the mission of protecting tribal 
sovereignty and preserving the ability of tribes to attain economic 
self-sufficiency through gaming. I thank the Committee for this 
opportunity to provide testimony on ``Safeguarding the Integrity of 
Indian Gaming'' and to comment on the Government Accountability 
Office's June 2015 Report on ``INDIAN GAMING: Regulation and Oversight 
by the Federal Government, States, and Tribes.'' (GAO Report).
    As I have stated in the past, the Indian Gaming Regulatory Act 
(IGRA) is far from perfect. However, over 240 tribal governments are 
making the Act work for our communities. IGRA established a solid 
foundation to protect the integrity of Indian gaming. Over the past 27 
years, tribes have dedicated billions of dollars of tribal government 
revenues (+$426 million in 2014 alone) to uphold the highest regulatory 
standards of any form of gaming in the United States.
Native Nations Pre-Dating Formation of the United States
    I testified in July of 2014 before this Committee about the state 
of Indian gaming after 25 years under IGRA. As I did then, I would like 
to again place Indian gaming in proper context that includes the 
historic background of Native Nations pre-dating the formation of the 
United States and the adoption of the U.S. Constitution.
    Before contact with European Nations, Indian tribes were 
independent self-governing entities vested with full authority and 
control over their lands, citizens, and visitors to Indian lands. The 
Nations of England, France, and Spain all acknowledged tribes as 
sovereigns and entered into treaties to establish commerce and trade 
agreements, form alliances, and preserve the peace.
    Upon its formation, the United States also acknowledged the 
sovereign authority of Indian tribes. The U.S. Constitution, in the 
Commerce Clause, acknowledges the separate distinct governmental status 
of Indian tribes, on par with the foreign nations, and among the 
several states. In addition, through more than 300 treaties, Indian 
tribes ceded hundreds of millions of acres of tribal homelands to help 
build this great Nation. In return, the United States made many 
promises to provide for the education, health, public safety and 
general welfare of Indian people. The U.S. Constitution specifically 
acknowledges these treaties as the supreme law of the land.
    Over the past two centuries, the federal government has fallen far 
short of meeting these solemn obligations. The late 1800's federal 
policy of forced Assimilation authorized the taking of Indian children 
from their homes and sending them to boarding schools where they were 
forbidden from speaking their language or practicing Native religions. 
The concurrent policy of Allotment sought to destroy tribal governing 
structures, sold off treaty-protected Indian lands, eroded remaining 
tribal land bases, and devastated our economies. Finally, the 
Termination policy of the 1950's again sought to put an end to tribal 
governing structures, eliminate remaining tribal land bases, and 
attempted to relocate individual Indians from tribal lands.
    These policies resulted in the death of hundreds of thousands of 
our ancestors, the taking of hundreds of millions of acres of tribal 
homelands, the suppression of tribal religion and culture, and the 
destruction of tribal economies. The aftermath of these policies 
continues to plague Indian Country to this day. Despite these policies, 
tribal governments and individual Indians persevered.
Indian Gaming Is Tribal Government Self-Determination
    The United States acknowledged these policies as failures. For 45 
years now, the U.S. has fostered an Indian affairs policy that supports 
Indian self-determination and economic selfsufficiency. See Nixon 
Special Message to Congress, July 8, 1970; See also, The Indian Self-
Determination and Education Assistance Act of 1975 (Public Law 93-638). 
Every President since 1970 has reaffirmed the self-determination policy 
and has acknowledged that the federal government's solemn treaty and 
trust obligations remain fully in force.
    In the late 1960s and early 1970s, a handful of tribal governments 
embraced self-determination and took measures to rebuild their 
communities by opening the first modern Indian gaming operations. These 
tribes used the revenue generated from early Indian bingo operations to 
fund essential tribal government programs and services to meet the 
basic needs of their communities.
    These acts of Indian self-determination were met with legal and 
legislative challenges by state governments and commercial gaming 
operations in the federal courts and in Congress. The legal challenges 
to the exercise of tribal governmental gaming culminated in the Supreme 
Court's California v. Cabazon Band of Mission Indians decision issued 
in February of 1987.
    The Cabazon Court upheld the right of Indian tribes, as 
governments, to conduct gaming on their lands free from state 
interference. The Court reasoned that Indian gaming is crucial to 
Indian self-determination, noting that gaming provides the sole source 
of governmental revenue and is the major source of employment for many 
tribes. The Cabazon Court acknowledged that state governments--even 
those subject to the Termination Era Public Law 83-280--have no role to 
play in regulating Indian gaming as long as they do not criminally 
prohibit all forms of gaming in the state. The Cabazon Court also 
acknowledged that Indian tribes had enacted their own regulations to 
monitor the integrity of Indian gaming--at times in cooperation with 
the U.S. Department of the Interior.
    After Cabazon, states and commercial gaming interests increased 
their legislative efforts, urging Congress to reverse the decision. 
Their primary rationale for opposing Indian gaming was the threat of 
organized crime. However, this Committee found that after approximately 
fifteen years of gaming activity on Indian reservations there had never 
been one proven case of organized criminal activity. Senate Report No. 
100-446 at 5 (Aug. 3, 1988). The Committee acknowledged that ``the 
interests of the states and of the gaming industry extended far beyond 
their expressed concern about organized crime. Their true interest was 
protection of their own games from a new source of economic 
competition.. [T]he State and gaming industry have always come to the 
table with the position that what is theirs is theirs and what the 
Tribe have is negotiable.'' Id. at 33.
    Many tribal leaders opposed the legislative proposals that became 
IGRA, in large part because of the requirement that tribal governments 
enter into compacts with the states in order to conduct class III 
gaming. These leaders reasoned that Indian tribes entered into solemn 
treaties with the United States, not the several states. In addition to 
opposing Indian gaming, states had generally opposed tribal 
sovereignty, seeking to regulate, tax, and impose jurisdiction over 
Indian lands.
    However, on October 17, 1988, approximately 18 months after the 
Cabazon decision, Congress enacted IGRA. The stated goals of IGRA are: 
promoting tribal economic development and selfsufficiency; 
strengthening tribal governments; and establishing a federal framework 
to regulate Indian gaming. The Act established the National Indian 
Gaming Commission (NIGC). While there are dozens of forms of gaming in 
the United States, the NIGC--which is dedicated to the oversight of 
Indian gaming--is the only federal agency to regulate gaming in the 
U.S.
    IGRA is a compromise that balances the interests of tribal, 
federal, and state governments. Nevertheless, the Act is grounded in 
the fundamental principle of law that ``by virtue of their original 
tribal sovereignty, tribes reserved certain rights by entering into 
treaties with the United States, and that today, tribal governments 
retain all rights that were not expressly relinquished.'' Senate Report 
No. 100-446, at 5 (Aug. 3, 1988) (``Statement of Policy''). This 
principle guides determinations regarding the scope of tribal 
regulatory authority under IGRA.
The State of Indian Gaming Today
    Before moving on to discuss Indian gaming regulation, it is also 
important to first discuss the benefits of Indian gaming to again 
provide proper context. In 2014, 245 tribal governments operated 445 
gaming facilities in 28 states, generating $28.5 billion in direct 
revenues and $3.8 billion in gaming-related ancillary revenues 
(including hotels, food and beverage, entertainment) for a total of 
$32.3 billion in total revenues. Without question, Indian gaming is the 
most successful economic development tool for many Indian tribes.
    Indian gaming revenues are helping meet significant shortfalls in 
basic needs. Tribes use Indian gaming revenues to improve basic health, 
education, and public safety services on Indian lands. Tribes are also 
using gaming dollars to improve tribal infrastructure, including the 
construction of roads, hospitals, schools, police buildings, water 
projects, and many others.
    For many tribes, Indian gaming is first and foremost about jobs. In 
2014 alone, Indian gaming operations and regulation delivered 310,438 
direct American jobs. When indirect jobs are added to the mix, Indian 
gaming generated over 684,000 jobs in 2014 alone. These American jobs 
go to both Indians and non-Indians alike. Indian gaming resources are 
making our reservation homelands livable once again as promised in 
hundreds of treaties.
    In addition to revitalizing tribal communities, Indian gaming is 
benefitting our nearby local government neighbors. In 2014, Indian 
gaming generated over $13.9 billion for federal, state and local 
government budgets through compact and service agreements, indirect 
payment of employment, income, sales and other state taxes, and reduced 
general welfare payments.
    Finally, it is with pride that we report that Indian tribes made 
more than $100 million in charitable contributions to other tribes, 
nearby state and local governments, and non-profit and private 
organizations. This statistic is unique to Indian gaming and not 
surprising given Indian Country's cultural history of sharing and 
caring for our neighbors. Through the Great Recession, tribal 
contributions helped prevent layoffs of local government public safety 
offices, teachers, health care workers, fire fighters, and many other 
local officials that provide essential services.
    Of course, far too many Native communities continue to struggle 
with poverty and related social ills. Unemployment on Indian 
reservations nationwide averages 50 percent. Indian health care remains 
substandard. Violent crime is multiple times the national average. Our 
Native youth are the most at-risk population in the United States, 
confronting disparities in education, health, and safety. Thirty-seven 
percent of Native youth live in poverty. Native youth suffer suicide at 
a rate 2.5 times the national average. Fifty-eight percent of 3- and 4-
year-old Native children do not attend any form of preschool. The 
graduation rate for Native high school students is 50 percent.
    I applaud this Committee for its work in recent hearings to shine 
light on the struggles facing Native American youth. Indian gaming is 
part of the answer, but all of us--tribal leaders, parents, mentors, 
federal agencies, and Congress--can and must do more to provide 
opportunities for Native youth and for all citizens of Indian Country.
Regulation: Continuing To Safeguard the Integrity of Indian Gaming
    Tribal governments realize that none of the benefits of Indian 
gaming would be possible without a strong regulatory system to protect 
revenue and preserve the integrity of our operations. For many tribes, 
Indian gaming is the sole non-federal source of revenue to fund the 
basic needs of our communities. As a result, no one has a greater 
interest in protecting the integrity of Indian gaming than tribal 
governments.
    To provide Congress with an update on the state of Indian gaming 
regulation, the Government Accountability Office (GAO) in June of this 
year issued a report on ``Indian Gaming: Regulation and Oversight by 
the Federal Government, States, and Tribes.'' The stated objectives of 
the Report were to examine: (1) tribal and state government regulation 
of Indian gaming; (2) the NIGC's regulation of Indian gaming; and (3) 
the Interior Department's compliance with IGRA under the tribal-state 
compact review process. (GAO Report at 57).
Tribal and State Government Regulation of Indian Gaming
    As noted above, many tribal leaders raised concerns and opposition 
to IGRA prior to enactment. The primary reason that many Indian tribes 
opposed the legislation was IGRA's requirement that tribal governments 
enter into compacts with state governments for class III Indian gaming. 
When Congress debated IGRA in the mid-1980s, tribal-state relations 
were not only contentious--in many cases they were hostile and 
combative. This Committee, through its Report on the bill that became 
IGRA, sought to put many of these concerns to rest:

        It is a long and well-established principle of Federal Indian 
        law as expressed in the United States Constitution, reflected 
        in Federal statutes, and articulated in decisions of the 
        Supreme Court, that unless authorized by an act of Congress, 
        the jurisdiction of State governments and the application of 
        state laws do not extend to Indian lands. . .

        In determining what patterns of jurisdiction and regulation 
        should govern the conduct of gaming activities on Indian lands, 
        the Committee has sought to preserve the principles which have 
        guided the evolution of Federal-Indian law for over 150 years. 
        In so doing, the Committee has attempted to balance the need 
        for sound enforcement of gaming laws and regulations, with the 
        strong Federal interest in preserving the sovereign rights of 
        tribal governments to regulate activities and enforce laws on 
        Indian land.

        Senate Report 100-446, at 5 (Aug. 3, 1988) (``Statement of 
        Policy'').

    The text of IGRA provides for exclusive tribal government 
jurisdiction over class I gaming. It acknowledges primary tribal 
government regulatory authority over class II gaming. The NIGC has 
direct authority to monitor class II gaming on Indian lands on a 
continuing basis. The Act leaves the bulk of the details for the 
regulation of class III gaming to be determined by compact negotiations 
between tribes and states. However, the Act acknowledges that the NIGC 
will maintain a secondary oversight with regard to class III 
regulation. While tribes take on the primary regulatory role, IGRA 
requires coordination and cooperation with the federal and state 
governments to make this comprehensive system work.
    Vesting local tribal government regulators with the primary day-to-
day responsibility for regulating Indian gaming operations stands in 
stark contrast to the failed policy that generally continues to plague 
criminal jurisdiction in Indian country. Regarding criminal 
jurisdiction, tribes are forced to rely on federal officials to 
investigate and prosecute most major crimes that occur on Indian lands 
often from offices and courtrooms that are located hundreds of miles 
from Indian Country. Despite recent reforms, the system of criminal 
justice in Indian Country is a proven failure. Washington, D.C. is 
simply not equipped to police--or in the case of Indian gaming, 
regulate--Indian lands or make local decisions for tribal communities.
    With specific regard to tribal and state government regulation of 
Indian gaming, the June 2015 GAO Report indicates a varying levels of 
state regulatory involvement. The GAO reports that: in 75 percent of 
class III Indian gaming operations--states have a moderate regulatory 
role (11 states); seven states have an active regulatory role in 17 
percent of class III Indian gaming operations; and states hold a 
limited regulatory role in 8 percent of class III operations. (GAO 
Report at 27-29).
    These differing levels of state regulatory involvement are not 
surprising. This Committee expected as much when developing the Act, 
noting that ``The terms of each compact may vary extensively depending 
on the type of gaming, the location, the previous relationship of the 
tribe and state, etc. . . . The Committee recognizes the subparts of 
each of the broad areas [subjects for compact negotiations] may be more 
inclusive.'' Sen. Rept. No. 100-466 at 14.
    While many tribes initially opposed IGRA for its tribal-state 
compacting requirement, over the past twenty-seven years, many tribal 
and state governments have worked to forge relationships many thought 
unheard of in 1988. In some cases, compact negotiations have been 
exhaustive, time consuming and costly to both parties. In other cases, 
they have gone smoothly. In a few unfortunate cases, states have 
refused to negotiate compacts in good faith pursuant to IGRA as 
intended by Congress. (This significant flaw in the Act is discussed in 
more detail below).
    Over the past several decades overseeing gaming activities on 
Indian lands, tribal governments and tribal regulators have gained 
significant expertise in the field of gaming regulation. Early on, many 
tribal regulators came directly from federal and state gaming 
regulatory bodies, law enforcement, and judicial systems. Many others 
had backgrounds in commercial gaming regulation, banking, and 
accounting. However, today, many tribal regulators are homegrown, 
learning directly from these experts--exactly as IGRA intended. State 
governments have acknowledged this expertise, and rather than take on 
duplicative regulatory costs, some states--through compact negotiation 
process--have chosen to defer to tribal government expertise.
    In addition to meeting and exceeding the regulatory requirements of 
IGRA and the NIGC's regulations, tribal regulators have formed 
associations such as the National Tribal Gaming Commissioners and 
Regulators, the Tribal Gaming Protection Network, the Wisconsin Indian 
Gaming Regulators Association and many others. These organizations have 
taken an innovative approach to regulation by sharing vital information 
on individuals and threats to gaming operations as well as best 
practices of what is working to better protect tribal resources.
    Grounded in the policy fostering Indian self-determination, this 
tripartite system of regulation was revolutionary at the time of its 
implementation. Over the past twenty-seven years, the system has proven 
to be incredibly successful in providing first class regulation and in 
balancing the interests of separate sovereigns in a financially 
responsible manner.
The NIGC'S Role In Regulating Indian Gaming
    As noted above, while there are dozens of forms of gaming in the 
United States, the NIGC is the only federal agency that directly 
regulates any form gambling. While IGRA provides that tribal--state 
compacts will primarily govern the regulation of class III Indian 
gaming, the Act authorizes the NIGC to monitor class II gaming on a 
continuous basis. IGRA also acknowledged that the NIGC would maintain a 
role in regulating class III gaming.
    The GAO Report notes that ``[a] key difference between class II and 
class III gaming is that IGRA authorizes the Commission to issue and 
enforce minimum internal controls standards (MICS) for class II gaming 
but not for class III gaming.'' (GAO Report at 32). However, the Report 
also indicates that tribal-state class III gaming compacts include 
requirements for MICS.
    Tribal governments have understood the importance of MICS for 
decades. It is for this reason that the NIGA-National Congress of 
American Indians Gaming Task Force established model tribal MICS for 
tribal regulators prior to the NIGC adopting is own federal MICS.
    The MICS enable tribal regulators to protect our resources, and to 
protect the integrity of our games. The MICS generally prescribe 
methods for removing money from games and counting it so as best to 
prevent theft; methods for the storage and use of playing cards so as 
best to prevent fraud and cheating; standards for maintaining security 
of electronic games access and requiring investigations under certain 
circumstances; and minimum resolutions and floor area coverage for 
casino surveillance cameras, among other areas.
    The GAO Report also acknowledges that the NIGC conducts regular 
site visits to both class II and class III Indian gaming operations. 
During these visits, the NIGC provides training and technical 
assistance, reviews class II MICS compliance and--with the consent of 
tribal regulators--reviews class III tribal internal controls; reviews 
of background checks for key employees, conducts surveillance reviews, 
conducts facility license compliance for public health and safety, 
conducts internal audit reviews, conducts gaming ordinance reviews and 
conducts other regulatory compliance reviews. (GAO Report at 40-43).
    With regard to audit reviews, the NIGC requires all tribal gaming 
facilities to have an annual financial statement audit pursuant to NIGC 
Regulation Part 571.12 and IGRA. This requires all tribal casinos to 
have a their financial statements audited by a certified public 
accounting firm, which require the financial statements to conform with 
generally accepted accounting principles (GAAP) and that the audit is 
completed in accordance with generally accepted auditing standards. 
These audited financial statements, agreed upon procedure (AUP) 
reports, and other documented communication are submitted within 120 
days of the facility's fiscal year-end. In addition, the NIGC issues an 
annual compliance report to the Secretary of the Interior that lists 
every tribal casino and their compliance related to audits and other 
compliance related regulations. The majority of the CPA firms that 
audit tribal casinos specialize in that niche or have an industry 
specific team that are experts in Indian gaming. Grant Eve, the gaming 
partner of the accomplished accounting firm Joseph Eve, CPA, has worked 
with commercial casino in Las Vegas and with gaming operations 
throughout Indian Country. Mr. Eve has repeatedly testified that Indian 
gaming operations meet or exceed the standards of commercial casinos.
    In addition to these activities, the NIGC's class III regulatory 
powers also include: reviewing for approval class III tribal gaming 
regulations and ordinances, reviewing all tribal management contracts, 
and monitoring the implementation and enforcement of class III tribal 
gaming ordinances and provisions of tribal-state compacts. Congress 
also vested the NIGC with broad authority to issue regulations in 
furtherance of the purposes of IGRA. Along with the NIGC, a number of 
other federal officials help regulate and protect Indian gaming 
operations. Tribes work with the FBI and U.S. Attorneys offices to 
investigate and prosecute anyone who would cheat, embezzle, or defraud 
an Indian gaming facility--this applies to management, employees, and 
patrons. 18 U.S.C.  1163. Tribal regulators also work with the 
Treasury Department's Internal Revenues Service to ensure federal tax 
compliance and the Financial Crimes Enforcement Network (FinCEN) to 
prevent money laundering. Finally, tribes work with the Secret Service 
to prevent counterfeiting.
    This comprehensive system of regulation is expensive and time 
consuming, but tribal leaders know what is at stake and know that 
strong regulation is the cost of a successful operation. Through the 
Recession, tribal governments continued to dedicate tremendous 
resources to the regulation of Indian gaming. In 2014, tribes spent 
$426.4 million on tribal, state, and federal regulation:

   $320.2 million to fund tribal government gaming regulatory 
        agencies;

   $85.6 million to reimburse states for state regulatory 
        activities negotiated and agreed to pursuant to approved 
        tribal-state class III gaming compacts; and

   $20.6 million to fully fund the operations and activities of 
        the National Indian Gaming Commission.

    This funding employs over 6,500 tribal, state, and federal 
regulators working together to maintain the integrity of Indian gaming. 
\1\ This includes approximately 5,900 tribal government gaming 
regulators, and approximately 570 states regulators. At the federal 
level, the NIGC employs more than 100 regulators and staff.
---------------------------------------------------------------------------
    \1\ Testimony of Tracie Stevens, Chairwoman, NIGC, before the 
Senate Committee on Indian Affairs (July 26, 2012).
---------------------------------------------------------------------------
    Against this backdrop of comprehensive regulation, the FBI and the 
Justice Department have repeatedly testified that there has been no 
substantial infiltration of organized crime on Indian gaming.
    NIGA applauds the work of the current Administration's Department 
of Justice for its increased cooperation and coordination of FBI agents 
and U.S. Attorneys with tribal gaming regulators, tribal police, and 
tribal justice officials. In past years, tribal governments raised a 
number of concerns that U.S. Attorneys refused to prosecute cases that 
fell below a certain dollar threshold. This Administration has 
generally removed those arbitrary thresholds and is working with tribal 
justice officials to investigate and prosecute all crimes against 
Indian gaming operations. More generally, this Administration has made 
it a priority to investigate and prosecute all crimes on Indian lands, 
which has been a welcome change to the far too many victims of violence 
in Indian Country. This sends a strong message that any crimes in 
Indian Country or against Indian gaming operations will be prosecuted 
to the fullest extent of the law, and has proven a strong deterrent.
    NIGA also appreciates the increased consultation, training and 
technical assistance that the NIGC is providing to tribal government 
regulators, as well as the related NIGC Assistance, Compliance and 
Enforcement (ACE) Initiative. Increased consultation has begun to 
repair frayed relationships with tribal governments, and has led to 
increased coordination, and further improvements to Indian gaming 
regulation. While IGRA acknowledges tribal regulators as the primary 
day-to-day watchdogs of Indian gaming, tribal regulators and the NIGC 
share a common goal of ensuring the integrity of Indian gaming and 
protecting tribal governmental gaming revenue. Many tribal regulatory 
agencies have the resources and ability to stay informed about the 
latest technology in gaming regulation, access to information about 
individuals that have cheated at gaming or pose a danger to tribal 
operations, and the ability to gain needed training. However, some 
tribal regulators without resources benefit greatly from expertise that 
can be offered by NIGC field agents. These tribal regulators suffered 
under the punitive approach that ignored the need for training and 
technical assistance.
    The GAO acknowledged and summarized this system of regulation and 
could not point to any significant gaps or weaknesses in the regulation 
of Indian gaming. As detailed by the GAO in their visits to tribal 
gaming operations, Indian Country is proud of the job they have been 
doing on regulation. There is no need for major changes in the current 
regulatory system.
Tribal--State Compacting Process
    The June 2015 GAO Report also examined the role of the Interior 
Department to uphold the integrity of IGRA through the compact approval 
process. While IGRA sought to protect and safeguard Indian gaming 
operations through comprehensive regulation, it also sought to ensure 
that tribal governments are the primary beneficiaries of gaming to 
strengthen tribal governments and to help tribes achieve economic self-
sufficiency.
    Again, many prominent tribal leaders opposed IGRA because of the 
class III compacting process. These leaders did not trust that state 
governments would respect their obligations to negotiate in good faith, 
or more fundamentally--negotiate at all. The text of IGRA, this 
Committee's Report on the Act, and other related legislative history of 
IGRA, repeatedly sought to alleviate tribal concerns. Congress clearly 
balanced tribal and state interests, and expressly prohibited states 
from using the compact process to protect existing markets or as a 
means of taxing tribal governments:

        A tribe's governmental interests include raising revenues to 
        provide governmental services for the benefit of the tribal 
        community and reservation residents, promoting public safety as 
        well as law and order on tribal lands, realizing the objectives 
        of economic self-sufficiency and Indian self-determination, and 
        regulating activities of persons within its jurisdictional 
        borders. A State's governmental interests with respect to class 
        III gaming on Indian lands include the interplay of such gaming 
        with the State's public policy, safety, law and other 
        interests, as well as impacts on the State's regulatory system, 
        including its economic interest in raising revenue for its 
        citizens. It is the Committee's intent that the compact 
        requirement for class III not be used as a justification by a 
        State for excluding Indian tribes from such gaming or for the 
        protection of other State-licensed gaming enterprises from free 
        market competition with Indian tribes.

        Sen. Rept. 100-446, at 13. The text of IGRA makes clear that 
        the tribal-state compact negotiation process must be limited to 
        activities directly related to Indian gaming. The Act provides 
        that states may negotiate for assessments necessary to defray 
        the costs of regulating gaming-related activity. However, the 
        Act expressly prohibits states from refusing to enter into 
        compact ``negotiations. . .based upon a lack of authority to 
        impose such a tax, fee, charge, or other assessment.'' 25 
        U.S.C. Sec. 2710(d)(4).

    Congress and this Committee acknowledged the unique nature of the 
compact process and the concessions that tribes would be required to 
make in negotiating gaming compacts with states. However, it balanced 
these concessions by requiring state governments to negotiate in good 
faith, and by providing tribal governments the right to sue states in 
federal court to enforce this obligation:

        In contrast, States are not required to forgo any State 
        governmental rights to engage in or regulate class III gaming 
        except whatever they may voluntarily cede to a tribe under a 
        compact. Thus, given this unequal balance, the issue before the 
        Committee was how to best encourage States to deal fairly with 
        tribes as sovereign governments. The Committee elected, as the 
        least offensive option, to grant tribes the right to sue a 
        State if a compact is not negotiated and chose to apply the 
        good faith standard as the legal barometer for the State's 
        dealing with tribes in class III gaming negotiations. . .. The 
        Committee recognizes that this may include issues of a very 
        general nature and, and course, trusts that courts will 
        interpret any ambiguities on these issues in a manner that will 
        be most favorable to tribal interests consistent with the legal 
        standard used by courts for over 150 years in deciding cases 
        involving Indian tribes.''

        Id. at 14-15.

    This compromise and the balance that it struck were short-lived. 
Eight years after enactment, the United States Supreme Court destroyed 
the delicate balance to the IGRA compacting process in its 1996 
decision in Seminole Tribe of Florida v. Florida. Overruling its own 
precedent, the Court reasoned that, ``Even when the Constitution vests 
in Congress complete lawmaking authority over a particular area [such 
as Indian affairs], the Eleventh Amendment prevents congressional 
authorization of suits by private parties against unconsenting States. 
The Eleventh Amendment restricts the judicial power under Article III, 
and Article I cannot be used to circumvent the constitutional 
limitations placed upon federal jurisdiction.'' Seminole Tribe of 
Florida v. Florida, 517 U.S. 44, 72 (1996). The Court thus held that 
Congress did not have the authority to permit tribal governments to 
bring suit against state governments in federal court to enforce IGRA's 
good faith compact negotiation obligation. The case effectively 
shattered the delicate balance in the tribal-state compacting process.
    For nearly twenty years now, the Supreme Court's Seminole Tribe 
decision has left tribal governments without a method to enforce the 
state's obligation to negotiate or renegotiate class III gaming 
compacts in good faith. While a number of tribes have continued to make 
IGRA work despite the imbalance, some tribes forced to work with 
intractable state administrations face the no-win proposition of either 
not moving forward on a project that could be its only source of 
governmental revenue or succumbing to what could be viewed as a direct 
violation of the Act.
    While we are pleased that the GAO took a long needed overview of 
IGRA's tribal-state compacting process, the Report lacks a true 
examination of the integrity of that process. The Report also fails to 
provide recommendations to improve the current process.
    Since the Court's 1996 decision, Indian Country has consistently 
urged Congress to restore balance to IGRA's tribal-state compact 
process. Restoring balance to this process is the only way to ensure 
the integrity and the goals of IGRA are met.
    NIGA applauds the Obama Administration's efforts to renew diligent 
review of tribal-state compact provisions and compliance with IGRA, 
particularly its focus on revenue sharing provisions. The GAO Report 
confirmed this fact by noting that Interior officials ``pay close 
attention to provisions that dictate terms for revenue sharing between 
tribes and states to ensure that state are not imposing taxes or fees 
on Indian gaming revenues prohibited by IGRA.'' (GAO Report at 18). 
Prior to the current scrutiny, NIGA and our Member Tribes raised 
significant concerns that the Interior Department ignored its trust 
obligations to tribes and its legal obligations to ensure that Indian 
tribes are the primary beneficiaries of Indian gaming activities under 
IGRA.
    Finally, while the subject of Internet gaming is beyond the scope 
of this hearing, provisions in bills that propose to authorize the 
activity in the United States could impact existing tribal-state 
compacts and the future of the compact process. A common example of 
these provisions is Section 111(e) of H.R. 2888, the Internet Poker 
Freedom Act. This provision, titled ``No impact on the Indian Gaming 
Regulatory Act'', could be read to permit state governments to 
authorize Internet gaming within state borders in direct conflict with 
existing tribal-state exclusivity provisions. Tribal governments have 
invested significant time and resources into the already difficult 
compacting negotiation process. Congress should not consider 
legislation that interferes with these agreements. We urge the 
Committee to work with the Committees of jurisdiction to ensure respect 
for existing tribal-state gaming compacts and ensure the any federal 
Internet gaming legislation adheres to the principles outlined in my 
testimony before this Committee in July of 2014.
Conclusion
    Indian gaming revenues enable more than 240 tribal governments the 
ability to provide basic services to our people and rebuild our 
communities. Tribal governments acknowledge the great importance of 
what is at stake, and have committed significant resources to protect 
these gains by maintaining a strong, seamless, and comprehensive system 
of regulation. Much of the credit for this success goes to the tribal 
leaders who make the decision each year to spend more than $426 million 
to regulate their operations, and to the thousands of men and women who 
are dayto-day front line regulators of Indian gaming. For twenty-seven 
years, tribal regulators have worked closely with federal and state 
regulatory partners to provide for the safety of visitors to Indian 
Country, the integrity of Indian gaming operations, and the security of 
the vital resources that Indian gaming provides to tribal communities 
nationwide.
    Chairman Barrasso and Members of the Committee I again thank you 
for this opportunity to testify today. I am prepared to answer any 
questions you have.

    The Chairman. Thank you, Mr. Stevens. Thanks to all of you 
who are here and shared your thoughts. I want to thank all the 
witnesses for your testimony.
    I am now going to turn to members of the Committee for 
questions. We will start with Senator Lankford.

               STATEMENT OF HON. JAMES LANKFORD, 
                   U.S. SENATOR FROM OKLAHOMA

    Senator Lankford. Thank you, Mr. Chairman.
    Mr. Chairman, I would like to ask unanimous consent to make 
a quick comment related to the markup as well, the SURVIVE Act. 
One of the unfinished pieces of business there is that 
obviously 20 percent setaside already for the crime victims 
fund going to tribe and other areas in the Department of 
Justice, that has not been capably run by the Department of 
Justice. That is still sitting out there. We are talking about 
an additional 5 percent to try to get that through the BIA.
    I would like to recommend a couple of things. Once this is 
done and we deal with the other 20 percent and try to find out 
why that is not being capably run. We are dealing with the 
duplication aspect of it. Or then just ask BIA to be a better 
advocate for the tribes in that particular area and those 
particular sets of grants.
    But I don't want to just start a new system and leave 
unworking systems still sitting there unresolved. So in the 
days ahead, I would like for us to be able to continue to 
address that.
    Thank you for allowing me to make that mention.
    Welcome to you all. Thank you for being here and being a 
part of this conversation. Mr. Commissioner, I want to get a 
chance to chat with you. It is good to see you. I know you are 
just getting started on this.
    But the statement was made dealing with the Class III 
gaming that Ms. Fennell made the comment on, that there needs 
to be guidance for Class III gaming. Currently it is non-
existent and the tribes, the States and the Commission are 
working together to establish that.
    Tell me where we are in the process. Do you agree or 
disagree with that statement, that it is not there yet but can 
be?
    Mr. Chaudhuri. Thank you, Senator. I want to take the 
opportunity to thank you again for the courtesy meeting we had 
a while back.
    So keeping in mind our primary goal is the implementation 
of IGRA, we have recognized for some time that there may be a 
potential opportunity to provide guidance in the arena of Class 
III gaming. However, we are mindful of case law that exists 
that limits our authority to issue binding minimum internal 
controls.
    It is not something, frankly, that NIGC has tackled in 
recent years. I personally would like to commend our incredible 
team as well as our partners in Indian Country in taking a look 
at whether or not there is an opportunity to move the needle in 
terms of providing guidance for Class III gaming.
    Senator Lankford. Tell us what you would need from us in 
that. Is there some kind of clarification that we can provide 
that you need in the process?
    Mr. Chaudhuri. I don't think so, not at this time in the 
sense that we always appreciate your support. However, to the 
extent that we are looking at anything right now, we are in the 
very early initial stages of looking at potential voluntary 
guidelines that we may consider issuing as a commission. No pen 
has been put to paper on that at this point.
    We have held some initial tribal consultations on the 
mater. We look forward to hearing from other partners in the 
regulated community. Specifically since these matters implicate 
State interests, we welcome and hope to receive comments and 
suggestions from affected States. But we are very early in the 
process.
    Senator Lankford. Let me ask you a question that is 
technically related. The technology, obviously, we have all 
seen, has dramatically increased everywhere, including in the 
gaming area. An electronic game in the past was considered a 
Class II game on the whole. Now several electronic games, 
actually you are competing with someone in another location, 
physically. That can stretch, now, over thousands of miles at 
this point, that you can stand in one location and actually 
compete with someone at another location.
    How is that being handled in the regulatory scheme and the 
conversation at this point, Class II, Class III, legal, not 
legal when you open it up to competing from one machine to 
someone standing physically in another building, perhaps even 
in another State?
    Mr. Chaudhuri. Thank you, Senator. In one sense, our job is 
very easy, in another sense it is very hard. It is easy in the 
sense that as regulators, our role is to implement IGRA. We 
start there and we end there. So when any question of a given 
game, whether it is Class II or Class III, is presented to us, 
we apply the tenets of IGRA to any situation.
    It is difficult in the sense that IGRA is a very powerful 
statute. However, the industry as a whole is very nuanced. When 
you talk about technology, it is ever-changing. So as an 
agency, we are ramping up our internal capabilities, and this 
is one of our priorities, when I mentioned priorities and 
principles, by developing a division of technology to track 
those changes.
    But to answer your question, I know what you are asking in 
terms of the different types of games that are out there. It is 
hard to speak in general without looking at the actual guts of 
a given game and applying it to IGRA.
    Senator Lankford. If there was a game where they are 
competing with someone who is another State, is that legal at 
this point, or not legal at this point? How is that regulated?
    Mr. Chaudhuri. There are different types of open networks 
and closed networks.
    Senator Lankford. But obviously in the gaming area, they 
need clear definitions on that, as the technology begins to 
move. Do you feel like the Commission is at a point to give 
rapid responses to hard questions like that? Because there are 
a lot of hard questions. Are there concerns about that that 
anyone else might have as far as bringing clarity to some of 
these issues?
    Mr. Chaudhuri. Thank you, Senator. We strive to give rapid 
responses, but our responses are based on IGRA. We stay in our 
lane. So I don't want to weigh in on any potential legislation 
without being asked specifically about any legislation. We 
stand ready, willing and able to provide additional perspective 
on any of those discussions.
    But given the nature of IGRA right now, our role is to 
regulate activity on Indian lands. That is where we focus our 
attention and regulatory jurisdiction.
    Senator Lankford. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Lankford.
    Senator Franken?

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

    Senator Franken. Thank you, Mr. Chairman
    I talk a lot in this Committee about how the Federal 
Government is falling short in its commitment to Indian 
Country. Congress routinely fails to adequately fund Indian 
programs, whether we are talking about health or education, 
housing or transportation. Indian gaming provides tribes what 
the Federal Government so often fails to provide, which is 
resources, resources that serve the needs of their members.
    Gaming is an important source of revenue for every tribe in 
Minnesota and for hundreds of tribes around the Country. Gaming 
is also a source of jobs and economic development. In fact, 
tribal casinos are the largest employers in some Minnesota 
counties. That is why proper oversight of gaming and gaming 
regulators is so important.
    The National Indian Gaming Commission is the key Federal 
regulator overseeing tribal gaming. However, NIGC hasn't had a 
full Commission in over two years. The Senate confirmed Mr. 
Chaudhuri as chairman earlier this year, and Chairman 
Chaudhuri, I congratulate you on your confirmation, which I 
voted for.
    However, the other two positions on the Commission remain 
unfilled. Unlike the chairman, who requires Senate 
confirmation, these positions are approved by the Secretary of 
the Interior. Chairman Chaudhuri, how are the functions of the 
Commission limited as long as it lacks a quorum?
    Mr. Chaudhuri. Thank you, Senator, and thank you for your 
support through the confirmation process.
    The optimum and best scenario is to have a full Commission. 
IGRA contemplates a full Commission. And that is important, 
because having at least a quorum of commissioners, at least 
two, is necessary to do certain specific things. Those duties 
or those functions are clearly spelled out in IGRA. Those 
includes weighing in on appeals of chairman decisions, making 
changes to fee rates, issuing certain types of subpoenas, 
issuing subpoenas.
    So there is importance, especially when it comes to passing 
new regulations. There is importance in having at least a 
quorum of commissioners. I am personally committed to working 
with whomever gets appointed onto the Commission.
    But in terms of day to day activities, IGRA does vest day 
to day authority within the chair. And the chair, in working 
with the extremely skilled and highly qualified staff that we 
have, does move day to day operations along. Overall, day to 
day, there is not a hiccup. We have been able to maintain our 
direction.
    Senator Franken. Mr. Stevens, does lack of quorum affect 
tribes? What does it mean for the tribes?
    Mr. Stevens. Well, I think it does. I think that we 
continue to advocate that those positions are filled. But as I 
think the record reflects, Senator, that we don't have time to 
wait. We have to look out for our shop and our operations. We 
continue to be fluid. Our commissioners are on duty. Our tribal 
governments are making sure that the regulation is fluid in 
Indian Country.
    Senator Franken. I encourage the Interior Department to get 
on that.
    Mr. Stevens. Yes, sir.
    Mr. Chaudhuri. Thank you, Senator. It is my understanding 
they are actively working on it.
    Senator Franken. Good. The National Indian Gaming 
Commission has been working on guidance for minimum internal 
control standards which deal with how gaming is monitored and 
how cash is handled. While a Federal court struck down the 
Commission's 2006 standards, nine States, including mine, 
Minnesota, have compacts requiring tribes to meet the 2006 
standards.
    So one of the open questions now is whether the Commission 
would withdraw its 2006 rules if it put out new guidance. Ms. 
Fennell, what would it mean for States like Minnesota that 
refer to the 2006 rules if the Commission withdrew those rules?
    Ms. Fennell. Senator, in our report we noted that this is 
an important topic and issue. Therefore, we recommended that 
the Commission outreach to the States to get their input. 
Decisions moving forward on the internal control standards will 
have an impact not only on tribes, but on States. And in 
particular, in terms of States, there are many tribal compacts 
that make reference to the regulations and the minimum internal 
control standards.
    In addition, there are three States that have compacts that 
require tribes to comply with the 2006 regulations. And then as 
you mentioned, there are nine States, including the State of 
Minnesota, that have tribal-State compacts that require that 
internal control standards be at least as stringent as the 2006 
regulations.
    So the decisions going forward are very critical, because 
it does have a direct impact on those States in terms of their 
tribal-State compacts. We look forward to hearing how the 
Commission will proceed in terms of outreach with the States in 
light of our recommendation.
    Senator Franken. Thank you. I am out of time, so I would, 
unless anyone has anything to add to that. It sounds like it 
would create some uncertainty.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Franken.
    Senator Hoeven?

                STATEMENT OF HON. JOHN HOEVEN, 
                 U.S. SENATOR FROM NORTH DAKOTA

    Senator Hoeven. Thank you, Mr. Chairman. I want to thank 
all of our witnesses for coming today. Let me start out with 
Mr. Stevens. I want to know if you have been keeping your 
horseback riding skills up to snuff.
    Mr. Stevens. I just saw Earl Pomeroy the other day and we 
talked about our skills. I am still a couple steps up in 
comparison. My cowboy hat is shaped, but my horseman skills are 
still a little bit lacking.
    Senator Hoeven. Your horseman skills are great. Not many 
get to say they got to ride horseback down the Capitol Mall.
    Mr. Stevens. That was awesome.
    Senator Hoeven. It was a great day and we had a great time.
    Mr. Stevens. Yes, sir.
    Senator Hoeven. For someone who hadn't been around horses a 
lot, I thought your skills were fantastic.
    Mr. Stevens. Thank you. I asked them to get a very gentle 
horse. The one they got me was a little bit short, but it was 
gentle.
    [Laughter.]
    Senator Hoeven. Again, thanks to all of you. The question I 
have for each one of you is, are there changes that you feel 
should be made in terms of how we handle Indian gaming? If so, 
what are those changes? Why are you recommending them? Are 
there any changes you feel that you would advocate at this 
point?
    I will start with you, Ernie, and just work our way right 
up to the commissioner.
    Mr. Stevens. I think the respect for tribal sovereignty and 
tribal governments and our form of regulation, the impact that 
we are making in protecting our industry, I think that is the 
most important aspect here. I think that Mr. Lankford talks 
about, I think I interpret that as an online or internet 
question. Matter of fact, we just met two weeks ago regarding 
this with national tribal regulators. We talked with NIGC about 
this. We continue to assert the roles of these parties.
    We see that more as proactive. Because we don't have 
anything that is active, that is a law. That is not actually 
happening. But we want to be proactive in our ability to be 
able to regulate that industry. So we have talked about it, 
even though it is not actually happening, quite extensively so.
    Again, our energy is working together and understanding and 
appreciating the regulatory responsibility that tribal 
governments serve in Indian Country.
    Senator Hoeven. And you are a strong advocate of the State-
tribal compacts and would continue to support those compacts?
    Mr. Stevens. I am a strong advocate of the compliance to 
those compacts, to the work that we do to ensure the integrity 
of the operations. The Indian Gaming Regulatory Act is a law 
written that the tribes generally, in my late uncle's day, when 
he was vice chair of this organization, did not support and 
vehemently opposed. But when the law was passed, the tribes 
grasped that and championed that and we have done a great job 
with the Indian Gaming Regulatory Act.
    So to say that we support that is one thing. But 
championing the compliance to that law, I think Indian gaming 
has an excellent record in doing so. I think that reflects our 
integrity.
    Senator Hoeven. You have been tremendous in working with 
the States on those compacts. I appreciate it very much.
    Mr. Stevens. Yes, sir.
    Senator Hoeven. Mr. Trujillo?
    Mr. Trujillo. Yes, thank you for the opportunity to weigh 
in on that question. I don't know if I have any changes, so to 
speak. But I would just ask that all present be mindful of the 
State regulatory partners in this process. Washington has 
enacted compacts since 1992. We have worked with tribes since 
that time. We have had machines in place for many, many years. 
We have had our own lab.
    So some of the questions, when it comes to what are some of 
the best standards or best practices, when it comes to that, we 
have been through that. We have been through that before.
    Prior to Indian gaming beginning in Washington, my agency 
operated for 20 years and licensed activities, licensed 
gambling activities. So we brought that expertise with us into 
the tribal gaming world. As I testified earlier, it did take us 
a little bit to get to speed, where we recognized that the 
tribal partners are not licensees, so to speak. They are 
regulatory partners.
    Now that we are up to speed and we are operating that way, 
I would just say again I am proud of the relationship that we 
have. Any time that we can be a resource to whomever, I would 
offer that up as well.
    Senator Hoeven. Thank you. Jamie, are there any changes you 
would like to see or feel need to be provided for Indian 
gaming?
    Mr. Hummingbird. Thank you, Senator. At this point, I 
believe over the last 27 years that tribes and States and the 
Federal Government have made the Indian Gaming Regulatory Act a 
living success. It has not been easy. We have had our 
difficulties, as we began implementing the Act and as 
technology came along, more difficulties came along.
    But we addressed those. We worked in partnership with our 
counterparts on the State and Federal side to address those 
issues. I think what we have today is a workable document.
    As far as anything with respect to IGRA, I would say that 
the process is working. But I would caution and request that 
any other legislation that may be impactful to Indian gaming be 
respectful of the successes that we have achieved over these 
last 27 years.
    Senator Hoeven. Ms. Fennell?
    Ms. Fennell. In our report, Senator, we identified some 
opportunities for the Commission to act upon in order to better 
determine how effective its various efforts and actions are. So 
we will look forward to seeing how those recommendations are 
ultimately implemented.
    In terms of some other issues to consider going forward, 
regarding IGRA, IGRA has certainly sought to balance State and 
tribal government interest by including some different 
provisions limiting both State and tribal sovereign immunity. 
The courts have weighed in, limiting some of the effects of 
these provisions. So it will be important to consider how to 
resolve disputes between these two sovereigns going forward.
    And as was previously mentioned, it will be also important 
to consider the challenges that are faced when commissioner 
vacancies exist.
    Senator Hoeven. Commissioner? And I am now over my time, 
so, briefly.
    Mr. Chaudhuri. Thank you, Senator Hoeven. And thank you for 
this opportunity for me to clarify my answer to Senator 
Lankford. I am not sure if I was direct enough.
    In regard to internet gaming, you asked about any potential 
legislative tweaks that could be made. I would again suggest 
that if there are any specific recommendations you would like 
our input on, we would be happy to provide that specific 
language.
    Generally, though, when Chairman Stevens talks about the 
successes of Indian Country, those lessons and any lessons 
regarding implementation of IGRA should help inform any 
potential legislative tweaks that may come down the pike 
regarding IGRA or internet gaming or what have you.
    Ms. Fennell mentioned the balance of various interests. One 
thing that is always helpful for us in terms of guiding 
principles is the underlying policy purpose of IGRA in terms of 
supporting strong tribal governance, self-determination, self-
sufficiency, tribal economic development.
    So recognizing the longstanding leadership and vision of 
Indian Country as any legislative tweaks are formulated would 
benefit the legislative process, I would think. Certainly when 
it comes to NIGC, I think I have been on record as stating that 
as the only Federal agency that regulates any type of gaming we 
certainly have in-house specialized skill sets and expertise 
that we would be happy to bring to bear in whatever capacity 
Congress so chooses.
    Thank you, Senator.
    Senator Hoeven. Thanks for your indulgence, Mr. Chairman. I 
appreciate it.
    The Chairman. Thank you, Senator.
    Senator Heitkamp?

               STATEMENT OF HON. HEIDI HEITKAMP, 
                 U.S. SENATOR FROM NORTH DAKOTA

    Senator Heitkamp. Thank you, Mr. Chairman.
    Mr. Stevens, saying that you are a better horseman than 
Congressman Pomeroy is not exactly a ringing endorsement of 
your skills.
    [Laughter.]
    Senator Hoeven. He definitely is.
    Senator Heitkamp. That isn't telling me much, is it, John? 
We have to tell him we had a little fun at his expense.
    I always have to start these discussions with kind of a 
little history lesson which goes back to the history of Indian 
gaming. I think a lot of people think that is a gift that the 
United States Congress gave to the tribes, when in reality it 
is a restriction on the sovereign rights of tribes as outlined 
by the Cabazon case.
    So I think when we talk about Indian gaming, it is 
critically important that we put it in that context, that we 
not start from the standpoint of this is an authorization we 
gave you and we want to know how you are doing with it. We have 
to start in a government-to-government respectful relationship.
    Now, one of the advantages of the Indian Gaming Regulatory 
Act is there has to be some assurances to the gaming public 
that when they walk into a casino, no matter where it is, that 
the game isn't rigged, that they actually have a chance of 
winning, that all of the games are monitored in such a way and 
personnel is monitored in such a way that it is safe. I speak 
with some amount of expertise, because I used to be the entity 
in North Dakota that was responsible for actually regulating 
Indian gaming.
    So I want to start out, Mr. Stevens, maybe talking about 
the dual role that we have, which is, we have the Federal 
regulating agency, we have many States who in their compacts 
have negotiated a regulatory responsibility, and as the GAO 
report outlines, that is a sliding scale, some which simply 
check the box and some like Washington that have a full-on, 
regulatory responsibility at the State level. Then obviously, 
Mr. Hummingbird, you are here representing those entities 
within tribal governments that are working.
    Senator Lankford and I have been spending a lot of time 
talking about regulatory burdens and talking about inconsistent 
regulation across layers of sovereign entities. So Mr. Stevens, 
I am curious about whether you think we do enough to harmonize 
all those layers of regulation and whether we work 
collaboratively enough among all three layers to come up with a 
plan that really represents best practices, that can be used 
then in training personnel that can be used to continue to 
expand and build on the safety for the gaming public.
    Mr. Stevens. Yes, Senator, I think that the best practices, 
the bottom line is that we are responsible to our communities 
and to the next seven generations. So it is imperative that our 
regulators continue to uphold the integrity of our operations. 
So as primary regulators of our industry, that is ultimately 
who we are responsible to. That is why we are so passionate 
that we protect our industry.
    Senator Heitkamp. Wouldn't you say that there is a varying 
degree of participation in the various tribal regulatory 
authorities in terms of how they look at their responsibility 
under gaming? Couldn't they learn from those of you who are 
seasoned and experienced?
    Mr. Stevens. Yes. In my testimony, Senator, a lot of times 
now they are coming to us to learn about our seasoned 
experience because of the priority we have and the money, the 
input we have into this industry to regulate it. We are now the 
experts. We have people who have come through college, some 
have 10 and 20 years' experience. We have 40 years of 
regulating Indian gaming.
    Senator Heitkamp. One of the comments from GAO is really 
inconsistency at the level of regulation. So how do we in 
tribal-to-tribal relationships and certainly within the 
regulatory authority and probably within the association, how 
do we encourage and build on your experience and expand that 
expertise?
    Mr. Stevens. As I understand it, I don't agree with that. I 
think that the consistency is there. I think that through the 
tribal-State compact process that they have access. I don't 
know the number, I might have it in my testimony here, but the 
extensive audit process that our tribes have to adhere to. And 
that is independent of our tribal regulators.
    So I think that check and balance is there.
    Senator Heitkamp. So there are parts of the GAO report that 
you would not necessarily agree with?
    Mr. Stevens. Not particularly, no. I think that the GAO 
report was a good report, because I think it reflects good on 
Indian Country when you have that much extensive review. Any 
time you take a look at our industry in any way, shape or form, 
it is another check and balance. And I think that is a good 
thing.
    Senator Heitkamp. I think this certainly has been a success 
story over the last 27 years. I think it has been not because 
it has been led by Congress or led by the States, it is because 
it has been led by a maturing industry within Indian Country. I 
really do applaud all of you. I think you are doing a great 
job. But there is always more that can be done. Protecting the 
integrity of the game is absolutely essential to the economic 
benefits that you can receive. Because when people don't trust 
when they walk through your door, you lose a customer, you lose 
an opportunity to actually raise more revenue.
    Thanks so much, Mr. Chairman.
    The Chairman. Thank you, Senator Heitkamp.
    Senator McCain?

                STATEMENT OF HON. JOHN McCAIN, 
                   U.S. SENATOR FROM ARIZONA

    Senator McCain. Thank you, Mr. Chairman. I thank the 
witnesses. As you know, Mr. Chairman, I had the honor of 
working with the late Senator Dan Inouye and offering the 
Indian Gaming Regulatory Act of 1986. The law complied with the 
Supreme Court's landmark Cabazon decision, which held that 
tribes have sovereign rights to conduct gaming in States that 
also allow gaming. We also know that today, the $28 billion 
industry, we have come a long way since we passed that law in 
1986.
    Ms. Fennell, I want to thank you for your GAO report. It is 
very comprehensive. I believe that it can get the attention of 
all of us. One of the areas that concerns me about your report 
is that roughly 25 percent of all Indian gaming operations 
remain at high audit risk. That represents a decrease from 38 
percent in 2009, but I would ask Mr. Chaudhuri, isn't that 
rather high, 25 percent?
    Mr. Chaudhuri. Thank you, Senator McCain. It is always good 
to see a fellow Arizonan, even though I have one foot in 
Oklahoma as well. Any risk is high. But one thing I do want to 
point out is that we have a shared interest as regulators with 
the tribal regulatory community because sound regulation 
prevents loss of resources and nobody has a stronger interest 
than the tribes to prevent loss.
    Senator McCain. Let me ask you if you think that that is 
very high.
    Mr. Chaudhuri. It is better than 38 percent, where it was 
in 2009.
    Senator McCain. I am sure it is better than 90. I am not 
questioning that. Is it too high?
    Mr. Chaudhuri. The number itself is an internal 
administrative tool that we use. In a vacuum, it is hard to 
answer, without proper context.
    Senator McCain. I am asking you a question whether you 
think that is too high or not. I guess you could tell me yes or 
no and why.
    Mr. Chaudhuri. We would like it to be lower.
    Senator McCain. And I will ask for the final time. Is it 
too high?
    Mr. Chaudhuri. Compared to, I mean -
    Senator McCain. Obviously you are not going to answer the 
question.
    Mr. Chaudhuri. No, I appreciate that. We would like it to 
be lower.
    Senator McCain. I will move on, Mr. Chaudhuri. Because you 
are obviously not going to answer the question.
    How effective, Ms. Fennell, do you think that letters of 
concern are as opposed to the other enforcement tools that are 
available to the Commission?
    Ms. Fennell. Letters of concern are a practice that was 
then implemented into Commission regulations. It serves as an 
approach or opportunity for the Commission to work with the 
tribes in pointing out issues of concern and then helping to 
work with the tribes in terms of ensuring that actions could be 
taken to address potential compliance issues.
    We identified that there were some opportunities for 
improvement in in using this particular approach and tool and 
made specific recommendations as to how the Commission could 
improve it, so that it could serve as a tool that is in 
compliance with Federal internal control standards and can be 
more effective than it currently is.
    Senator McCain. Thank you. As one of the authors, one of 
the two authors of the legislation, I am sometimes amused when 
people tell me what the intent of Congress was. I can tell the 
Commission that the intent of Congress was not for parachuting 
into metropolitan areas without the agreement of the local 
authorities and citizens. What we are seeing in Glendale, 
Arizona is a very serious situation. It is a complicated, to 
some degree, issue.
    But it was certainly was not the intent of Senator Inouye 
and me to see a situation such as evolved there. So in the 
future, there may be other attempts to move into the center of 
metropolitan areas. I believe that it is wrong and I believe 
that it is contrary to the intent of the law that we passed. 
The only reason why we got it passed was because we assured 
governors, attorneys general and others that that wouldn't 
happen, that it would be contiguous lands or lands that had the 
approval of all of the local people for the expansion of Indian 
gaming.
    So I hope we don't have to see a situation arise again such 
as I just saw in Glendale, Arizona. Because I can assure you, 
as the author of the bill, that that is not what was envisioned 
by Senator Inouye and me when we wrote the legislation and got 
the agreement of the National Governors Association and the 
National Attorneys General Association. So I hope that the 
Committee will take that for what it is worth, and that is, the 
intent of Congress by the author.
    I thank you, Mr. Chairman.
    The Chairman. Thank you, Senator McCain.
    Ms. Fennell, your written testimony noted that the National 
Indian Gaming Commission's efforts to encourage voluntary 
compliance by tribal gaming facilities with its regulations 
basically used two primary approaches, training and technical 
assistance and letters of concern to alert tribes of potential 
compliance issues. Your testimony further states that the 
effectiveness of these two approaches is still unclear.
    I think without an effective approach to monitoring and 
compliance, how can Congress and the tribes be assured that the 
tribal gaming facilities are adequately protected from internal 
control weaknesses and from revenue losses due to crime?
    Ms. Fennell. Mr. Chairman, we will be very interested to 
see how the Commission plans to implement our recommendations. 
We are encouraged that they agreed with our recommendations, 
which indicated that they could benefit from having measures in 
place to determine how effective their efforts are. We will 
continue to monitor that, and I think it will be very important 
to see how those recommendations ultimately get implemented.
    The Chairman. Senator McCain just spoke as one of the 
original authors of the Indian Gaming Regulatory Act. Do you 
believe that that Act should be amended to provide more 
guidance to or more extensive role for the Commission in Class 
III casino style gaming to ensure regulatory compliance?
    Ms. Fennell. Our recommendations were focused on the 
Commission itself. We didn't have any particular matters for 
consideration for the Congress at this time. But we are 
certainly happy to work with your staff in terms of any 
suggestions or language that you might be entertaining as a 
Committee, and work with you on that.
    The Chairman. Thank you, Ms. Fennell.
    Chairman Chaudhuri, the GAO has provided several 
recommendations to improve the National Indian Gaming 
Commission's efforts to help tribes achieve regulatory 
compliance. Your written testimony doesn't really provide a 
clear time frame to fully implement these recommendations or 
the other improvements, such as updating the Class III minimum 
internal control standards from 2006, upon which many tribes 
rely. I know you have only been fully confirmed for a 
relatively short period of time.
    Could you provide this Committee with a date certain that 
we can expect the implementation of the Government 
Accountability Office recommendations?
    Mr. Chaudhuri. Thank you, Chairman. As I mentioned in my 
opening statement, we are very appreciative of the GAO's 
technical recommendations. Certainly our first order of 
business since I have been there is to look at everything that 
we do that targets compliance and see if we can do it better.
    So the GAO recommendations fall in line with that. Frankly, 
they fall in line with Indian Country's interest in 
safeguarding its important economic development tool.
    But in terms of a date certain for all the recommendations, 
the recommendations are consistent with a lot of positives that 
we are already doing. It is consistent with the technology 
division that we are creating. It is consistent with us ramping 
up on our efforts to ensure tribes are primary beneficiaries. 
So it is hard to put time frames on everything.
    But we could go over a few examples. In terms of the 
Technology Division, that will help us track data, capture data 
and analyze data. We just created the division, we have an 
acting director who is newly-named and we will be publicizing 
very shortly, a technology manager. We are going to be moving 
very quickly as time goes on, so that we have internal 
capabilities to track and analyze data. That is hugely 
important when it comes to outcome measures.
    Similarly, when it comes to outreach with States, we are in 
the early stages of considering possible routes for voluntary 
guidance regarding Class III. We are actively considering 
having a special comment period that is targeted at States that 
are maybe affected by Class III guidelines so that we can 
review input directly from States.
    So in the near future, but we want to be thorough rather 
than rigid regarding time frames.
    The Chairman. Mr. Hummingbird, the GAO recommends that the 
National Indian Gaming Commission include outcome-oriented 
metrics as part of its performance measures for its training 
and technical assistance efforts. This training and technical 
assistance is intended to help prevent internal control 
weaknesses at tribal gaming facilities which need to keep pace 
with an evolving industry.
    Can you tell me how tribes measure the effectiveness of 
their own tribal gaming structure, including regulatory staff, 
enforcement efforts? How do you look at that?
    Mr. Hummingbird. Thank you, Mr. Chairman. For the outcome 
measures, I would first look to a number, actually, there are a 
number of things to look at. First of all, are the audits that 
are conducted by our tribal gaming regulators on a regular 
basis. Depending on the types of facilities that we have, we 
have anywhere between six to nine audits that we have to 
perform at least annually. For us at Cherokee Nation, we 
perform close to 63 audits on all of our gaming facilities on 
an annual basis.
    You couple that with the reporting that we have placed upon 
our operations for financial reporting for financial 
accountability, as well as in instances of environmental public 
health and safety issues. We also take into account any other 
financial reporting or any other type of reporting that we are 
obligated to do to other agencies besides the NIGC.
    So we take all these pieces and look at them in context to 
see exactly where our gaming facilities are in relation to the 
level of compliance we want them to achieve. So we look at the 
instances that we have on our radar every month. We also look 
at all of our internal compliance that is formed within our 
gaming facilities as well.
    So in addition to the tribal regulators on the governmental 
side, we also have internal compliance people who assist us in 
those efforts as well.
    The Chairman. Thank you. Mr. Trujillo, your written 
testimony highlights the experience of the Washington State 
Gambling Commission in regulating gaming activities. You state 
that the State Commission has established performance measures 
and you challenge yourselves to be more effective and more 
efficient. You have a long history of this.
    Can you describe some of those performance measures which 
help ensure that the Indian gaming establishments are protected 
from the loss of revenues due to criminal activity?
    Mr. Trujillo. Yes, thank you for that question. We have 
some measures. We report to our own office of financial 
management. You could consider that an activity measure. That 
activity measure would be, how often are we, as State 
regulators onsite, working with the tribes. That way we can 
demonstrate to the citizens of Washington that we are working 
together. That is an activity measure.
    We do have performance measures based upon how often do we 
work on case reports or investigations with tribal gaming 
regulatory agents. We strive to do all together.
    There are other activity measures we have when it comes to 
receiving submissions from tribes that we review. That could be 
internal control modifications, it could be new game 
submissions, it could be new electronic submissions, what have 
you.
    Those particular metrics that we use are two-fold. One 
would be, do we just get those in. And then others are, how 
fast can we process those and if we are processing those fast 
enough, are we working with the tribal gaming regulatory agency 
that is responsible for submitting those.
    Those are just a few of those measures. Another way that 
you can look at how effective a regulatory framework is, the 
amount of trust the public places in that activity. In 
Washington, tribal gaming has enjoyed continual increase, 
albeit modest these past few years, for annual gaming receipts.
    It is a little bit different than in the materials 
presented by the GAO where actually, overall, there was a 
slight decrease. But I would just submit that all of that 
together demonstrates that the tribe and the State and the 
National Indian Gaming Commission are all in this together. 
That is how it was designed.
    I keep talking about Washington, but that is my experience. 
And that is, I believe, the regulatory framework has created 
the relationship that we have and that was envisioned by the 
Indian Gaming Regulatory Act when it comes to whether or not 
there is a mechanism for continual Class III enforcement or 
what have you. The States are there. States do a good job, I 
believe.
    So working through that is primarily why I am here today, 
which is to underscore that number one recommendation in the 
GAO report.
    The Chairman. Thank you, Mr. Trujillo.
    Mr. Stevens, in your written testimony it talked about in 
2014, I think the tribes spent over $426 million on tribal, 
State and Federal regulations, including over $320 million for 
tribal gaming regulatory agencies and employing about 5,900 
regulators, according to your written testimony.
    Mr. Stevens. Yes, sir.
    The Chairman. It further stated that the Department of 
Justice has repeatedly testified there has been no substantial 
infiltration of organized crime on Indian gaming. I am just 
wondering, organized crime is not the only criminal threat to 
Indian gaming. So can you talk about what performance measures 
exist to ensure that these 5,900 regulators, that they can 
effectively detect and prevent other types of crimes, including 
embezzlement?
    Mr. Stevens. Yes, sir. I don't want to say much about 
organized crime. I think that is a little bit rhetorical, but 
not out of the question. That is what we set out to do 30 years 
ago. So it is still a high priority.
    But like you say, we are watching for cheats and scams and 
different things. They float all over this Country. There are 
several associations and regional associations that deal with 
these issues. But the tribal gaming protection network was 
established at the National Indian Gaming Association. A couple 
of years ago I had the chairman of that body with me to 
testify. That is what we are trying to do, trying to 
immediately, as soon as something hits the fan, immediately we 
are talking.
    That is why I mentioned the arrests having to do with the 
bank robbery and things like that. These things are happening 
immediately, and we are helpful to law enforcement throughout 
this Country that goes far beyond even just gaming regulation 
because of our technology and our folks working together.
    So I think it is more serious about the potential scams and 
cheats that are working in our industry. But I think that our 
guys are on top of it. That is what our priority is, to protect 
our industry. I think that we are doing a good job of that.
    But in this world, you never know. They could do anything. 
Some people are straightforward bold and some people are very 
sophisticated with the outside building of computers and 
technology. We have to be on top of it. That is where we credit 
several other bodies, including working with the national 
tribal regulators. Our tribal gaming protection network was set 
up specifically to network all these, the brainchild of this 
regulation, for us to work together and try to head off these, 
or when they start to happen, we talk to people throughout the 
Country, we put the red alert out there.
    The Chairman. Thank you, Mr. Stevens.
    Does anyone have anything else they want to add on these 
points? Mr. Hummingbird.
    Mr. Hummingbird. Thank you, Mr. Chairman.
    To supplement Chairman Stevens' comments just now, one of 
the things that we look at on a day to day basis, in addition 
to looking at the system generated reports, whether it is the 
gaming system, the financial accounting system, those types of 
reports are reviewed daily, weekly, monthly.
    We also have invested millions and millions of dollars in 
surveillance and other computer systems that are designed to 
help catch the cheaters and scammers that Chairman Stevens 
referred to. One thing that I think you will see today and 
probably more so in the future is a great amount of attention 
being paid to cybersecurity. Because as we know, the backbone 
of any modern gaming facility out there is computer networks. 
So it is a very important piece for us to keep a watchful eye, 
not just on what is going on inside the facility on the gaming 
floor, but in the back of house and on our computer networks as 
well.
    The Chairman. Yes, Mr. Chaudhuri.
    Mr. Chaudhuri. Chairman, I would just like to add to that. 
In a supporting role, we are mindful of cyber threats and IT 
vulnerability. I do want to highlight that Division of 
Technology in reference to some of the recommendations. I think 
there is absolute consistency.
    One of the services that we provide is IT vulnerability 
assessments, free of charge to Indian Country partners. That is 
a new offering that has been presented in recent months. We 
will go in free of charge and look at any potential 
vulnerabilities that we see and provide a report with written 
recommendations.
    So we are trying to do what we can, similar to internal 
control assessments that we have been doing for some time. We 
are doing what we can to support that end of the equation.
    The Chairman. Thank you. Seeing no further questions, no 
further comments, other members will be able to submit written 
questions.
    Mr. Stevens. Mr. Chairman, if I could just quickly add 
something. On the GAO report, we are hoping, with all due 
respect, that in the future those evaluations could include 
more about site visits with tribes and review and our gaming 
commissions and our proven track record of regulation. Again, 
as I told the Senator from North Dakota, we think that adding 
more checks and balances is a good thing.
    And regarding that 25 percent, I think Chairman Chaudhuri 
agrees that 25 percent is too high. I don't know that we agree 
with that number. But that number is not acceptable to the 
communities we represent. I just wanted to add that today, Mr. 
Chairman.
    The Chairman. Thank you.
    The hearing record will be open for two weeks. I want to 
thank all of you for being here today, for your time and for 
your testimony.
    The hearing is adjourned.
    [Whereupon, at 3:44 p.m., the hearing was adjourned.]

                            A P P E N D I X

   Response to Written Questions Submitted by Hon. James Lankford to 
                       Jonodev Osceola Chaudhuri
    Question 1. To what level of detail could a Tribe and state agree 
to a compact on matters not directly related to gaming? For instance, 
could a Tribe and state compact on standards for disability 
accessibility, construction standards, or energy standards?
    Answer. The Indian Gaming Regulatory Act prescribes gaming compacts 
governing the conduct of Class III gaming activities on a tribe's 
Indian lands be negotiated in good faith between tribes and states. \1\ 
IGRA assigns the authority to approve or disapprove any compact entered 
into between a tribe and a state to the Secretary of the Interior. \2\ 
Further, the Office of Indian Gaming, as part of the Bureau of Indian 
Affairs, is responsible for providing assistance to tribes and states 
during the compact negotiation process. Additionally, in 2008 the BIA 
issued regulations governing the Class III compact process at 25 C.F.R. 
part 293.
---------------------------------------------------------------------------
    \1\ 25 U.S.C.  2710(d)(3)(A).
    \2\ 25 U.S.C.  2710(d)(8).
---------------------------------------------------------------------------
    IGRA limits the subjects a tribal-state compact may include to 
provisions related to the following: (1) the application of the 
criminal and civil laws and regulations of the tribe or the State that 
are directly related to, and necessary for, the licensing and 
regulation of gaming activity; (2) the allocation of criminal and civil 
jurisdiction between the state and the tribe necessary for the 
enforcement of gaming laws and regulations; (3) the assessment by the 
state of such activities in such amounts as are necessary to defray the 
costs of regulating gaming activity; (4) taxation by the tribe of 
gaming activity in amounts comparable to amounts assessed by the state 
for comparable activities; (5) remedies for breach of contract 
concerning gaming activity; (6) standards for the operation of gaming 
activity and maintenance of the gaming facility, including licensing; 
and (7) any other subjects that are directly related to the operation 
of gaming activities. \3\
---------------------------------------------------------------------------
    \3\ 25 U.S.C.  2710(d)(3)(C).
---------------------------------------------------------------------------
    The extent to which a tribe and state could potentially agree to a 
compact on matters not directly related to gaming is limited in that 
the Secretary may disapprove a compact if the compact violates any 
provisions of IGRA, any other provision of Federal law not relating to 
jurisdiction over gaming on Indian lands, or the trust obligations of 
the United States to Indians. \4\
---------------------------------------------------------------------------
    \4\ 25 U.S.C.  2710(d)(8)(B).
---------------------------------------------------------------------------
    Finally, on June 15, 2012, the Office of Indian Gaming issued a 
letter to the Pascua Yaqui Tribe, which explains how the Secretary 
reviews compact provisions that may be ``directly related to the 
operation of gaming activities'' \5\ and provides insight into the 
Department of Interior's views on that subject. The letter is attached.

    \5\ 25 U.S.C.  2710(d)(3)(C)(viii).
---------------------------------------------------------------------------
    Question 2. Is it currently legal for a Tribe to operate interstate 
electronic gaming?
    Answer. Yes, under the Indian Gaming Regulatory Act, tribes may 
legally operate interstate electronic gaming, but certain criteria must 
be met. Chiefly, all aspects of the gaming activity--prize, chance, and 
consideration--must occur on Indian lands for the gaming to be 
permitted under IGRA. \6\

    \6\ Brief for the United States as Amicus Curiae Supporting 
Appellee at 12, Coeur d'Alene Tribe v. AT&T Corporation, No. 99-35088 
(9th Cir. July 20, 1999). See also, Fed. Commc'ns Comm'n v. Am. Broad. 
Co., 347 U.S. 284, 290, 74 S. Ct. 593, 598, 98 L. Ed. 699 (1954) and 
United States v. Tomeo, 459 F.2d 445, 447 (10th Cir.), cert. denied, 
409 U.S. 914 (1972), United States v. Calamaro, 354 U.S. 351, 354 
(1957).
---------------------------------------------------------------------------
    Question 2a. What are the rules for electronic machines (class II 
or class III) connected across state lines on either internal or 
external networks?
    Answer. The National Indian Gaming Commission has rulemaking 
authority for Class II games on Indian lands and has exercised that 
authority by promulgating Technical Standards \7\ and Minimum Internal 
Control Standards. \8\ These regulations apply to all Class II gaming 
systems and their electronic aids, regardless of whether they cross 
jurisdictional lines to get from one Indian lands location to another 
Indian lands location. Other federal laws \9\ apply to gaming that 
crosses state lines, but the NIGC has not been charged with 
administering or interpreting those laws.
---------------------------------------------------------------------------
    \7\ 25 C.F.R. part 547.
    \8\ 25 C.F.R. part 543; 25 C.F.R.   543.8 (Bingo) and 543.20 
(Information & Technology) specifically address Class II gaming 
systems, including their electronic aids.
    \9\ Most notable of these are the Unlawful Gambling Enforcement Act 
(31 U.S.C.   5361-5366), the Johnson Act (15 U.S.C.   1171, et 
seq.), and the Federal Wire Act (18 U.S.C.   1081 et seq.).

    Question 2b. In any circumstances could a person sitting at a 
machine in Oklahoma play against a person sitting at a machine in 
California or even another country?
    Answer. Yes, a person sitting at a machine at a tribal gaming 
facility in Oklahoma could play against a person sitting at a machine 
in a tribal gaming facility in another state provided that each machine 
is legal in the jurisdiction(s) in which they are being operated.

    Question 2c. Can electronic machines located in different parts of 
a Tribe's reservation or within their boundaries be connected on the 
same network and play against each other?
    Answer. Yes, electronic machines located in different parts of a 
tribe's reservation or within the reservation boundaries can be 
connected on the same network and play against each other, so long as 
all machines are located on lands eligible for gaming.

    Question 3. May Tribes conduct off-reservation gaming or gaming 
outside of their boundaries? If no, has this ever occurred and was it 
halted? If yes, do Tribes have sole proprietary authority over these 
operations?
    Answer. (a) Tribes gaming under the Indian Gaming Regulatory Act 
may do so only on their Indian lands. \10\ IGRA defines Indian 
lands reservation lands, and also trust lands and lands held 
subject to a restriction against alienation. \11\ IGRA further 
restricts which trust land acquired after the passage of the Act is 
eligible for gaming. \12\
---------------------------------------------------------------------------
    \10\ 25 U.S.C.   2710(b) (``An Indian tribe may engage in, or 
license and regulate, class II gaming on Indian lands within such 
tribe's jurisdiction, if . . .'') and 2710(d) (``Class III gaming 
activities shall be lawful on Indian lands only if . . .'').
    \11\ 25 U.S.C.  2703(4).
    \12\ 25 U.S.C.  2719.
---------------------------------------------------------------------------
    Tribes may own and operate gaming facilities which are not located 
on Indian lands, but they do so under the laws of the jurisdiction in 
which they are operating, \13\ not under IGRA. For example, the 
Greektown Casino in Detroit, Michigan, was, at one time, owned and 
operated by the Sault Ste. Marie Tribe of Chippewa Indians (Sault 
Tribe), subject to Michigan law. Currently, the Mohegan Sun Pocono 
Casino in Plains, Pennsylvania, is owned by the Mohegan Tribe of 
Indians of Connecticut, subject to Pennsylvania law.
---------------------------------------------------------------------------
    \13\ Michigan v. Bay Mills Indian Cmty., 134 S. Ct. 2024, 2034 
(2014) (``Indians going beyond reservation boundaries" are subject to 
any generally applicable state law.'').
---------------------------------------------------------------------------
    Incidentally, if a tribe operates a gaming facility on Indian lands 
ineligible for gaming under IGRA, the NIGC Chairman can order the 
facility to close. \14\ For instance, on July 21, 2009, the Chairman 
issued a notice of violation to the Fort Sill Apache for conducting 
Class II gaming on Indian lands ineligible for gaming at its Akela 
Flats, New Mexico parcel, ordering the immediate cessation of gaming. 
\15\
---------------------------------------------------------------------------
    \14\ 25 U.S.C.  2713(b)(1); 25 C.F.R.  573.4(a)(13).
    \15\ Michigan v. Bay Mills Indian Cmty., 134 S. Ct. 2024, 2034 
(2014)
---------------------------------------------------------------------------
    (b) Where land is not Indian land under IGRA and the generally 
applicable gaming laws are not followed, the entity with jurisdiction 
over the land may exercise its ordinary regulatory or police powers 
over the gaming. \16\ The Department of Justice may also enforce 
applicable federal laws. In a recent notable case, Michigan v. Bay 
Mills Indian Community, the Bay Mills Indian Community began gaming 
operations on fee lands in violation of local law. \17\ Michigan sued 
the Community for compact violations. The U.S. Supreme Court held that 
the state could not sue the Community without a waiver of sovereign 
immunity, but reminded the state that it could exercise many powers 
over the operation. \18\
---------------------------------------------------------------------------
    \16\ Michigan v. Bay Mills Indian Cmty., 134 S. Ct. 2024, 2034 
(2014).
    \17\ Bay Mills, 134 S. Ct. at 2029.
    \18\ Bay Mills, 134 S. Ct. at 2034 (``But a State, on its own 
lands, has many other powers over tribal gaming that it does not 
possess (absent consent) in Indian territory.'').
---------------------------------------------------------------------------
    (c) When gaming under IGRA, Tribes are required to retain the sole 
proprietary interest in their gaming operations. \19\ When gaming off 
Indian lands, the sole proprietary interest requirement in IGRA is not 
applicable.
---------------------------------------------------------------------------
    \19\ 25 U.S.C.  2710(b)(2)(A).
---------------------------------------------------------------------------
    In summary, because IGRA only applies to Indian lands as defined by 
IGRA, in the absence of Indian lands, IGRA grants neither the 
Commission nor the Chair any jurisdiction to exercise regulatory 
authority. State and other applicable federal laws, however, may apply. 
Therefore, a tribe may engage in gaming off of its Indian lands, 
pursuant to state laws, and IGRA would not apply.

    Question 4. May Tribes Conduct Class III gaming without a compact 
with the state government. If no, has this ever occurred, was it 
halted, and what rights do states have in this situation? If yes, in 
what situations would be permissible?
    Answer. Under the Indian Gaming Regulatory Act, Class III gaming 
activities must be conducted pursuant to a tribal-state compact. \20\ 
However, if a tribe and state are unable to reach a compact agreement 
to govern the operation of Class III gaming activities, the Secretary 
of the Interior may issue gaming procedures. \21\ The Northern Arapaho 
Nation, for instance, currently operates under the Third Amended Class 
III Gaming Procedures approved by the Assistant Secretary, Indian 
Affairs on August 2, 2007. Also, the Rincon Band of Mission Indians 
currently operates under Secretarial Procedures, effective February 8, 
2013.
---------------------------------------------------------------------------
    \20\ 25 U.S.C.  2710(d)(1).
    \21\ 25 U.S.C.  2710(d)(7)(B)(vii).
---------------------------------------------------------------------------
    The operation of Class III games in the absence of an effective 
tribal-state compact (or Secretarial Procedures) is a substantial 
violation of IGRA, \22\ which could lead to an enforcement action and 
fine or closure of a facility. For example, in 2004, the Coyote Valley 
Band of Pomo Indians operated Class III gaming devices and table games 
without an approved compact in violation of IGRA. Consequently, the 
NIGC Chairman requested that the Tribe cease such gaming activity. \23\ 
When the Tribe failed to comply with NIGC's request, the NIGC issued a 
closure order. \24\
---------------------------------------------------------------------------
    \22\ 25 U.S.C.  2710(d)(1)(C); 25 C.F.R.  573.4(11).
    \23\ NOV-04-01 (June 4, 2001).
    \24\ CO-04-01 (June 10, 2004).
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    In some instances, circumstances dictate alternative solutions. For 
example, the Pueblo of Pojoaque and the State of New Mexico's Class III 
compact expired on June 30, 2015. The Pueblo and the United States are 
engaged in litigation with New Mexico surrounding the validity of the 
compacting process and the Secretary's authority to issue Class III 
gaming procedures. \25\ During the pendency of litigation, the NIGC has 
exercised its discretion to withhold any enforcement action against the 
Pueblo for the operation of Class III gaming absent an effective 
compact provided certain conditions are met by the Pueblo, as verified 
by the NIGC on a continuing basis.
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    \25\ New Mexico v. Department of the Interior, 1:14-cv-0695 JP/SCY, 
(D.N.M. Sept. 11, 2014) on appeal 14-2222.
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    In another case, the Flandreau Santee Sioux Tribe and State of 
South Dakota failed to reach agreement over the terms of a new compact 
before it expired. The Tribe continued to offer Class III gaming and 
during mediation, the attorney for South Dakota stated that it had no 
plans to take or encourage any action to shut the casino before the 
litigation concluded. \26\ NIGC continued to monitor the case, which 
was ultimately settled without the need for enforcement action.
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    \26\ Flandreau Santee Sioux Tribe v. S. Dakota, No. CIV. 07-4040, 
2011 WL 2551379 (D.S.D. June 27, 2011).

    Question 5. Please clearly define the difference between Class II 
and Class III gaming and explain how you work with both Tribes and 
states to ensure all parties fully understand the differences.
    Answer. Congress defined Class II gaming to include the following 
games: (a) bingo; (b) pull tabs when played in the same location as 
bingo, and (c) non-banked card games authorized or not explicitly 
prohibited by the state in which the tribal operation is located. \27\ 
All other games are Class III, except for certain social or traditional 
forms of gaming. \28\ Class III games include, but are not limited to 
the following: baccarat, chemin de fer, blackjack, slot machines, and 
electronic or electromechanical facsimiles of any game of chance. \29\
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    \27\ 25 U.S.C.  2703(7). IGRA's Class II definition includes other 
games played in the same location as bingo (lotto, punch boards, tip 
jars, instant bingo, other games similar to bingo), but they are so 
rarely encountered that they do not merit discussion here.
    \28\ 25 U.S.C.   2703(8) and (6).
    \29\ 25 U.S.C.  2703(7)(B).
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    (a) In games held out to be bingo, the critical difference between 
Class II and Class III games is that Class II games require the 
participation of more than one player. In a Class II gaming system 
(i.e., bingo played through electronic interface terminals), the 
terminal the player interacts with is essentially an empty box with 
flashing lights and a display. The terminal connects to a server 
network. The server houses the logic for the game (including the random 
number generator) and connects to a network of other player terminals 
in any number of locations. These terminals and the servers they 
connect to are electronic aids, specifically authorized by Congress to 
broaden participation in the game. \30\ The game does not begin until 
at least two players have activated it.
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    \30\ 25 U.S.C.  2703(A)(i)
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    Courts and Congress have been clear that where a device eliminates, 
rather than broadens, the need for competition, a Class III electronic 
or electromechanical facsimile exists. The Senate first identified the 
need for player-to-player competition in its report on IGRA when 
discussing allowable technology to broaden participation:

         [S]uch technology would merely broaden the potential 
        participation levels and is readily distinguishable from the 
        use of electronic facsimiles in which a single participant 
        plays a game with or against a machine rather than with or 
        against other players. \31\
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    \31\ S. Rep. No. 446, 100th Cong., 2d. Sess. 9 (1988).

    Relying upon the Senate's distinction, the Ninth Circuit determined 
that a lotto game played by only one participant and the machine was 
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Class III:

         The player can participate in the game whether or not anyone 
        else is playing at the same time. Rather than broadening 
        potential participation in a bingo-like game, Pick Six is an 
        electronic facsimile in which a single participant plays 
        against the machine. Accordingly, it cannot be classified as a 
        Class II gaming device. \32\
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    \32\ Spokane Indian Tribe v. United States, 972 F.2d 1090, 1093 
(9th Cir.1992).

    Using the same reasoning eight years later, the Ninth Circuit 
contrasted the MultiMania bingo game with the Pick Six game to find 
that MultiMania bingo game was not an electronic facsimile. \33\ The 
court explained that while the game looked like a slot machine, the 
terminal merely allowed the player to connect to a network of other 
players and the game could not be played with fewer than twelve 
players. \34\
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    \33\ United States v. 103 Elec. Gambling Devices, 223 F.3d 1091, 
1099-101 (9th Cir. 2000).
    \34\ Id.
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    (b) Pull tabs are a game, similar to scratch off lottery tickets, 
and are considered Class II when played in the same location as bingo. 
Entertaining displays may also be used for pull tabs, but the outcome 
of the game must be determined by a pre-printed card, independent of 
the display. \35\
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    \35\ Diamond Game Enterprises v. Reno, 230 F.3d 365 (D.C. Cir. 
2000).
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    (c) The classification of card games requires a two-prong analysis. 
The first question is whether the game is banked. \36\ The second is 
whether the game is authorized or not specifically prohibited by state 
law. \37\ If it is allowable by state law, the game must be played in 
conformity with state laws and regulations regarding hours or periods 
of operation of such card games or limitations on wagers or pot sizes 
in such card games. \38\
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    \36\ 25 U.S.C.  2703(7)(B)(i).
    \37\ 25 U.S.C.  2703(7)(A)(ii).
    \38\ 25 U.S.C.  2703(7)(A)(ii).
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    As to the first prong, only non-banked card games are Class II. 
\39\ In non-banked card games, players compete against each other, 
rather than a ``bank'', (typically, the house, but it may also be a 
single player \40\ or pool acting as the bank). \41\ The classic 
example of a non-banked card game is a traditional version of poker, 
\42\ such as Omaha or Texas Hold `Em, in which players compete against 
each other for the better hand. In contrast, traditional blackjack is a 
banked game in which players compete against the dealer's hand.
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    \39\ 25 U.S.C.  2703(7)(B)(i).
    \40\ Chemin de fer is a player-banked version of baccarat 
specifically identified as Class III in IGRA. 25 U.S.C.  
2703(7)(B)(i).
    \41\ 25 C.F.R.  502.3(c).
    \42\ A word of caution, several of the newer variations of poker 
(Caribbean Stud, Pai Gow, and Three-Card, for example) are banked 
games. Regardless of the moniker, the key element is who the players 
compete against.
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    For the second prong, Class II games must be authorized or not 
explicitly prohibited by state law. The Seventh Circuit recently issued 
an opinion regarding Class II poker in Wisconsin that illuminates the 
factors to consider when examining state law. For more detailed 
discussion of the state law analysis, please see Wisconsin v. Ho-Chunk 
Nation, 784 F.3d 1076 (7th Cir.) cert. denied, 136 S. Ct. 231 (2015).
    (d) To ensure states and tribes fully understand the difference 
between Class II and Class III gaming, the NIGC Office of General 
Counsel issues game classification opinions and publishes them on its 
website, conducts regular training courses in regulating gaming 
technology, and publishes guidance in the form of bulletins.
    Attachment
    
    
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