[Federal Register Volume 67, Number 134 (Friday, July 12, 2002)]
[Proposed Rules]
[Pages 46134-46136]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-17152]


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NATIONAL INDIAN GAMING COMMISSION

25 CFR Part 504

RIN 3141-AA04


Classification of Games

AGENCY: National Indian Gaming Commission.

ACTION: Proposed rule withdrawal.

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SUMMARY: The National Indian Gaming Commission hereby gives notice that 
the proposed regulations establishing a formal process for the 
classification of games published in the Federal Register on November 
10, 1999, 64 FR 61234, are withdrawn.

DATES: The proposed rule published on November 10, 1999, at 64 FR 61234 
is withdrawn as of July 12, 2002.

FOR FURTHER INFORMATION CONTACT: Penny J. Coleman, Deputy General 
Counsel, NIGC, Suite 9100, 1441 L St. NW., Washington, DC 20005. 
Telephone: 202-632-7003; and fax, 202-632-7066 (these are not toll-free 
numbers).

SUPPLEMENTARY INFORMATION:

Background

    On October 17, 1988, Congress enacted the Indian Gaming Regulatory 
Act, 25 U.S.C. 2701-21 (IGRA or Act), creating the National Indian 
Gaming Commission (NIGC or Commission) and developing a comprehensive 
framework for the regulation of gaming on Indian lands. The Act 
establishes three classes of Indian gaming.
    ``Class I gaming'' means social games played solely for prizes of 
minimal

[[Page 46135]]

value or traditional forms of Indian gaming played in connection with 
tribal ceremonies or celebrations, 25 U.S.C. 2703(6). Indian tribes 
regulate Class I gaming exclusively.
    ``Class II gaming'' means the game of chance commonly known as 
bingo, whether or not electronic, computer, or other technologic aids 
are used in connection therewith, including, if played in the same 
location, pull-tabs, lotto, punch boards, tip jars, instant bingo, and 
other games similar to bingo, and various card games, 25 U.S.C. 2703 
(7)(A). Class II gaming, however, does not include any banking card 
games, electronic or electromechanical facsimiles of any game of chance 
or slot machines of any kind, 25 U.S.C. 2703 (7)(B). Tribal governments 
and the NIGC share regulatory authority over Class II gaming without 
the involvement of state government.
    Class III gaming, on the other hand, may be conducted lawfully only 
if the state in which the tribe is located and the tribe reach an 
agreement called a tribal-state compact. For a compact to be effective, 
the approval of the Secretary of the Interior of the compact terms must 
be obtained. ``Class III gaming'' includes all forms of gaming that do 
not constitute Class I or II gaming, 25 U.S.C. 2703 (8). Class III 
gaming thus includes all other games of chance, including most forms of 
casino-type gaming, such as slot machines, roulette and pari-mutuel 
wagering, and banking card games, such as blackjack.
    Game classification is the key feature around which the legal and 
regulatory framework of tribal gaming is centered. Any doubts or 
confusion as to the proper classification of a game, therefore, will 
raise serious questions as to the legality of play of a particular game 
and may subject a gaming operation to an enforcement action. While 
Congress outlined the basic parameters for the classification of games, 
the Commission was left the task of defining certain key terms, see, 25 
U.S.C. 2703(6)-(8), which was completed on April 9, 1992, with the 
publication of a final rule setting forth the operational definitions, 
57 FR 12382.
    Notwithstanding the Commission's best efforts to produce clear, 
comprehensive definitions, issues in relation to the classification of 
games continued to emerge throughout the 1990's, resulting in a series 
of disputes between federal, state, and tribal government. Further 
complicating the situation, these disputes are not readily subject to 
judicial resolution because courts have generally recognized immunities 
among such sovereigns against suits by others, Seminole Tribe v. 
Florida, 517 U.S. 44 (1996); Oklahoma Tax Comm'n v. Citizen Band 
Potawatomi Indian Tribe of Oklahoma, 498 U.S. 505 (1991). Additionally, 
the United States has occasionally taken positions on the 
classification of games that federal courts subsequently deemed 
incorrect, causing substantial consternation among tribes and states 
and subjecting the government to criticism by the courts. See United 
States v. 162 Megamania Gambling Devices, 231 F.3d 713 (10th Cir. 
2000); United States v. 103 Electronic Gambling Devices, 223 F.3d 1091 
(9th Cir. 2000).
    The proposed rule represents the Commission's first attempt to 
confront these difficulties through the establishment of a formal 
process for the classification of games. In large measure this approach 
was in response to increases in the volume of disputes related to the 
classification of games. As this rulemaking effort got underway, 
decisions in the courts began to make it increasingly clear that some 
of the Commission's definitions were out of alignment with judicial 
interpretation of the Act. The definitions pertaining to games 
featuring the use of technological aids were particularly troublesome. 
Advances in technology had produced devices that in the view of the 
Commission blurred the distinction between simple technological aids 
and electromechanical facsimiles of games of chance, the earlier 
permissible without a compact, the latter unlawful without a compact. 
The analytical unanimity of the courts with regard to these cases 
impressed upon the Commission the need to reexamine its definitional 
regulations.
    Early in 2001, the Commission undertook a thorough reexamination of 
its definitional regulations. Due to the interrelationship between the 
definitional rules and the proposed game classification procedural 
regulation, action on the proposed procedural rule was stayed pending a 
final determination with regard to the definitions. Having now issued a 
final rule amending the Commission's definitions for technological 
aids, electromechanical facsimile, and games similar to bingo, the 
Commission is now in a position to address the issue of procedure. 67 
FR 41166, June 17, 2002.
    Currently, there are three methods available to the Commission for 
addressing the classification of games. One is classification through 
formal notice and comment rulemaking. While such method produces 
certainty and finality, the process is slow, cumbersome, and 
insufficiently nimble to be practical for use on a routine basis. 
Another method is through the use of advisory opinions prepared and 
issued by the Commission's Office of General Counsel upon request by an 
interested party. To date, the Office General Counsel has issued more 
than thirty such opinions regarding the classification of individual 
games. These opinions, however, are merely advisory in nature and not 
the result of formal administrative processes. They are not, thus, 
entitled to the level of deference that must be accorded to final 
decisions of the Commission, though the courts have accorded them 
limited deference in certain circumstances. United States v. 162 
Megamania Gambling Devices, 231 F.3d 713, 719, 720, 722-23 (10th Cir. 
2000); see also Diamond Game Enterprises, Inc. v. Reno, 230 F.3d 365 
(D.C. Cir. 2000) (relying on Commission's advisory opinion on the Tab 
Force Validation System).
    The third method is through formal administrative enforcement 
action. These actions may be brought in instances where the Chairman 
determines that the games offered constitute Class III games and no 
compact is in place. While such administrative adjudications can 
provide reliable results, the process is cumbersome, time-consuming and 
resource-intensive for both the Commission and the affected party. A 
single enforcement action may be pending for many months or years 
before the administrative process produces a final agency 
determination, after which, the matter may be subject to another 
lengthy proceeding in the federal courts.
    The Commission is of the view that none of the three methods 
presently available is ideal. As a matter of sound public policy as 
well as in the interest of fairness and due process, a regulated 
industry ought not to be forced to risk enforcement action in order to 
obtain a legally binding and judicially reviewable classification 
opinion from the Commission. Absent a fair, carefully thought-out 
procedure for classifying games, however, the Commission has no 
alternative but to follow the status quo, which has been unsatisfactory 
to all concerned.
    The Commission's proposed rule establishing a classification 
procedure was severely criticized by tribal governments in written 
comments as well as in the testimony at the hearing on the proposal 
held January 24, 2000 in Tulsa, Oklahoma. The most vehement criticism 
was that the rule failed to recognize that the Commission shares 
responsibility for the regulation of Class

[[Page 46136]]

II gaming with tribal governments. Tribal governments, as the primary 
regulators of Indian gaming, have an important role to play in the 
classification of games. Many felt that the procedure would exacerbate 
rather than reduce conflict because the process minimizes the role of 
tribal gaming commissions in making classification determinations in 
the first instance.
    A second major criticism was that the rule was far too sweeping in 
that no game, even those games unquestionably falling within the Class 
II criteria, could be introduced for play without first receiving a 
classification decision from the Commission. Critics felt that given 
the large number of Class II games, the Commission would not be able to 
produce classification decisions in a reasonable or timely fashion. 
Many felt that the Commission's capacity to produce decisions under the 
rule would be overwhelmed by the sheer volume of the workload. The 
Commission itself has concerns in this regard. Grandfathering those 
games in common play at the time of issuance was considered, but this 
approach also has its faults and the Commission has yet to discern a 
way of effecting a workable solution to the myriad of issues involved 
in resolving this difficulty.
    Commenters raised a number of other significant questions, many of 
which possess great merit. The Commission is particularly sensitive to 
the concern that its workload capacity could be detrimentally affected. 
Indeed, classification decisions often present difficult technical 
issues and the process may be highly time intensive. In some cases, the 
expense may be substantial. On the other hand, the Commission 
recognizes that its lack of a uniform process for making gaming 
classification decisions fosters a climate of uncertainty, exacerbating 
disputes and increasing the likelihood of long, drawn out litigation.
    The Commission recognizes that Congress intended a partnership 
between it and tribal gaming regulators. IGRA clearly anticipates that 
tribal and federal regulators must work collaboratively to insure the 
integrity of Indian gaming. The Commission believes that a middle 
ground can be found with regard to a formal mechanism for game 
classification; however, the current proposal does not satisfy this 
objective.
    It is the Commission's view that the proposed rule would have more 
likely satisfied the concerns of all if there had been greater 
opportunity for tribal input during its development. The Commission has 
utilized collaborative processes in rulemaking for a number of years 
with favorable result. Given the joint system of tribal and federal 
regulation and the on-going relationship between tribal and federal 
regulators, the expertise and experience of tribal regulators would 
have greatly aided the Commission's effort to develop a proposal in 
better alignment with the concerns and needs of tribal governments and 
to assist in resolving the problems that remain outstanding. If, at a 
future time, the Commission reconsiders promulgation of a rule 
establishing a formal procedure for the classification of games, a 
tribal advisory committee should be established to advise the 
Commission as to the nature and content of such rule.

History of the Rulemaking

    A proposed rule establishing a process for classification of games 
was published in the Federal Register on November 10, 1999. 64 FR 
61234.
    Sixty-nine (69) comments were submitted in response to that 
publication. Comments were initially due on January 10, 2000. On 
December 27, 1999, the Commission issued a Notice of Extension of Time 
and Notice of Hearing. Written and oral testimony was submitted to the 
Commission at a public hearing on January 24, 2000, in Tulsa, Oklahoma. 
Following the extension, comments were due February 24, 2000.

Notice

    The National Indian Gaming Commission (Commission) hereby gives 
notice that the proposed regulations establishing a formal process for 
the classification of games published in the Federal Register on 
November 10, 1999, 64 FR 61234, are withdrawn. If, at a future time, 
the Commission elects to proceed with the promulgation of a rule 
establishing a formal procedure for the classification of games, it 
will establish a tribal advisory committee to advise the Commission as 
to the nature and content of such rule.

    Signed this 3rd day of July, 2002.
Elizabeth L. Homer,
Vice-Chair.
Teresa E. Poust,
Commissioner.

Chairman's Dissent

    I respectfully dissent from the Commission's statement that 
attempts to bind a future Commission to establish a formal tribal 
advisory committee for the creation of a gaming classification rule. I 
believe strongly that tribal advisory committees are an effective way 
to obtain tribal input for rulemaking initiatives. Though I would 
prefer a mechanism that encourages even broader tribal participation in 
our rulemaking initiatives, I would encourage future Commissions to use 
tribal advisory committees in rulemaking initiatives. However, I 
believe that the current Commission simply lacks the power to bind 
future Commissions to a particular rulemaking process. Future 
Commissions are free to use the rulemaking approach that allows 
interested parties to participate in the process and that, ultimately, 
will produce the best rule under the circumstances.

Montie R. Deer,

Chairman.

[FR Doc. 02-17152 Filed 7-11-02; 8:45 am]
BILLING CODE 7565-01-P