[Federal Register Volume 87, Number 218 (Monday, November 14, 2022)]
[Rules and Regulations]
[Pages 68046-68048]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-24135]


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DEPARTMENT OF THE INTERIOR

National Indian Gaming Commission

25 CFR Part 537

RIN 3141-AA58


Management Contracts

AGENCY: National Indian Gaming Commission.

ACTION: Final rule.

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SUMMARY: The National Indian Gaming Commission (NIGC or Commission) 
issued a proposed rule revising its management contract regulations. 
The Indian Gaming Regulatory Act (IGRA) provides that an Indian tribe 
may enter into a management contract for the operation of Class II or 
Class III gaming activity if such contract has been submitted to and 
approved by the NIGC Chairman. Collateral agreements to a management 
contract are also subject to the Chairman's approval. This final rule 
makes background investigations required of all persons who have 10 
percent or more direct or indirect financial interest in a management 
contract, of all entities with 10 percent or more financial interest in 
a management contract, of any other person or entity with a direct or 
indirect financial interest in a management contract otherwise 
designated by the Commission, and authorizes the Chairman, either by 
request or unilaterally, to exercise discretion to reduce the scope of 
the information to be furnished and background investigation to be 
conducted for certain entities.

DATES: This rule is effective December 14, 2022.

FOR FURTHER INFORMATION CONTACT: Michael Hoenig, 1849 C Street NW, Mail 
Stop #1621, Washington, DC 20240. Telephone: 202-632-7003.

SUPPLEMENTARY INFORMATION:

I. Background

    The Indian Gaming Regulatory Act (IGRA or Act), Public Law 100-497, 
25 U.S.C. 2701 et seq., was signed into law on October 17, 1988. The 
Act establishes the NIGC and sets out a comprehensive framework for the 
regulation of gaming on Indian lands. On January 22, 1993, the NIGC 
published a final rule in the Federal Register called Background 
Investigations for Person or Entities with a Financial Interest in a 
Management Contract (58 FR 5831). The rule added a new part to the 
Commission's regulations implementing the mandates of the Indian Gaming 
Regulatory Act of 1988 by establishing the requirements and procedures 
for the approval of management contracts concerning Indian gaming 
operations and the conduct of related background investigations. The 
Commission has substantively amended them numerous times, most recently 
in 2012 (August 9, 2012; 77 FR 47514). On December 2, 2021, the NIGC 
published a notice of proposed rulemaking in the Federal Register 
called Background Investigations for Persons or Entities With a 
Financial Interest in or Having a Management Responsibility for a 
Management Contract (86 FR 68446).

II. Development of the Rule

    On June 9, 2021, the Commission issued a Dear Tribal Leader Letter 
announcing the beginning of tribal consultations on 25 CFR 537.1(a)(3), 
among other regulations. On July 12, 2021, the Commission issued a 
second Dear Tribal Leader Letter announcing the dates of virtual 
consultations and seeking written comments on the proposed changes to 
part 537. On July 27, 2021, and July 28, 2021, the Commission held 
virtual consultations and accepted comments from Tribes on those 
changes.
    Upon reviewing the comments received during the consultation period 
from July 12--August 12, 2021, the Commission published a Notice of 
Proposed Rulemaking (NPRM) on December 2, 2021 (86 FR 68446). The NPRM 
invited interested parties to participate in the rulemaking process by 
submitting comments and any supporting data to the NIGC by January 3, 
2022. The consultation and the written comments have proven invaluable 
to the Commission in making amendments to the Management Contract 
regulations.

III. Review of Public Comments

    Comment: One commenter suggested that the term ``Chairman'' be 
changed to ``Chair'' throughout the regulation.
    Response: The Commission agrees with the recommendation and has 
made that change.
    Comment: One commenter suggested that the term ``indirect financial 
interest'' was too vague and possibly too broad and should be deleted 
or defined.
    Response: Under IGRA, the NIGC has broad authority to ensure 
compliance with IGRA. Individuals or entities can have an ``indirect 
financial interest'' in innumerable ways. Any effort to define this 
term to specific types of relationships would improperly and 
unnecessarily limit the Commission's authority to regulate financial 
interests in Indian gaming.
    Comment: Several commenters suggest that the NIGC include 
information as to how and when the Commission will notify a TGRA of a 
unilateral decision by the Chair to reduce the scope of required 
information or, alternatively, what would need to be included in a 
request submitted by TGRAs for the same.
    Response: The Commission appreciates the comments and clarifies 
that background investigations and suitability determinations discussed 
in this part pertain to management companies wishing to enter into an 
agreement with a tribe, not the tribe itself. As such, a request for a 
reduced scope background investigation would typically be made by, and 
granted to, a management company, individual or entity with management 
responsibility for the contract, or individual or entity with a direct 
or indirect financial interest. If a tribe or wholly owned tribal 
entity is proposing to manage another Tribe's gaming operation, they 
may request a reduced background investigation or the Chair may elect 
to perform one unilaterally. In either case, the NIGC will notify the 
requester of a decision. As to how to make a request, the Commission 
responds that it will set forth any process in a bulletin. If a 
potential management company has questions as to how to request a 
reduced scope background investigation prior to the issuance of that 
bulletin, the Commission invites them to contact the NIGC for further 
information.
    Comment: Another commenter supports the change to clarify the 
reduced scope background investigation, but suggests the NIGC add 
examples of ``approaches the Chair may take to reduce the scope of 
information to be furnished. The commenter included suggested language 
to include

[[Page 68047]]

in the regulation, including accepting ``substantively current 
background information submitted previously to the Commission or other 
jurisdictions and providing reciprocity for background investigation 
results to reduce the burden of submitting duplicative information and 
reduce delay in background investigations.''
    Response: The Commission appreciates the commenter's support for 
the changes to clarify the reduced scope background investigation, and 
agrees that the examples suggested are a reasonable and sensible way to 
reduce the scope of the investigation. Ultimately, though, the 
Commission declines to include the suggested language. The scope of the 
background investigation, though reduced, is still at the discretion of 
the Chair, who must ultimately make the suitability determination for 
all entities and individuals backgrounded. The Commission does not 
intend through this amendment to prescribe what information the Chair 
must or may require as part of a reduced scope investigation.
    Comment: One commenter suggested that the NIGC consider adding a 
standard for when the Chair exercises his or her discretion to approve 
a request for a reduced background investigation, e.g. what constitutes 
a ``national bank'' and to provide additional detail regarding what 
supporting documents tribes would be required to submit as well as 
timelines associated with such requests. Response: The Commission 
declines to define ``National Bank'' or ``institutional investor'' in 
its regulations, as these are terms commonly understood in the Banking 
and Finance industries. A National Bank is widely understood to mean a 
Commercial Bank formed under the National Bank Act, 12 U.S.C. 38, 
chartered by the Comptroller of the Currency, and a member of the 
Federal Deposit Insurance Company. The term ``institutional investor'' 
is defined by and must be registered with, the Securities and Exchange 
Commission.
    Comment: One commenter objected to the NIGC changing its regulation 
to initially require background checks and suitability determination on 
entities and individuals that have 10 percent or more direct or 
indirect financial interest in a management contract. The Commenter 
believes that imposing a 10 percent interest threshold is ``an 
arbitrary approach that will encourage `bad actors' to structure their 
deals below the 10 percent threshold to avoid NIGC scrutiny. The 
Commenter further asserts that the change will improve efficiency at 
``the expense of tribes who rely on the NIGC to keep `bad actors' out 
of Indian gaming and that the amendment ``conflicts with the 
requirements of the IGRA.''
    Response: The Commission thanks the Commenter for its input on this 
topic. It has determined to finalize the Change, however, and responds 
that the change will not negatively impact the agency's ability to 
protect the interests of Tribes. At the outset, it is important to note 
that the NIGC is not changing the requirement to submit any individual 
or entity that has management responsibility for the contract. 
Accordingly, the NIGC will still require background investigations and 
suitability determinations for all individuals and entities that may 
have any decision-making authority or influence over the contract or 
the Tribe's gaming operation.
    Rather, the purpose of the change is to reduce the time and expense 
of background investigations by no longer requiring the initial 
submission of those with minor financial interests in, but no control 
over, the management contract or the gaming operation. Moreover, the 
regulation includes a provision requiring a background investigation 
and suitability determination for ``any other person or entity with a 
direct or indirect financial interest in a management contract 
otherwise designated by the Commission.'' When a management contract is 
submitted, the NIGC's background investigators ensure that the list 
that was submitted is accurate. As part of that review, they will ask 
for a full list of all the entities and individuals involved in, and 
with a financial interest in, the contract, even if not all of those 
entities and individuals will be subject to a background investigation. 
If, however, investigators identify an entity or individual that should 
be subject to further review, the Commission may order such pursuant to 
Sec.  537.1(a)(3). For these reasons, the Commission does not believe 
the amendment creates any additional risk to Tribes, does not permit a 
bad actor to structure its management contract in a way that allows 
them to escape review from the NIGC, and meets IGRA's purpose of 
``shielding tribes from organized crime and other corrupting 
influences.''

Regulatory Matters

Regulatory Flexibility Act
    The proposed rule will not have a significant impact on a 
substantial number of small entities as defined under the Regulatory 
Flexibility Act, 5 U.S.C. 601, et seq. Moreover, Indian Tribes are not 
considered to be small entities for the purposes of the Regulatory 
Flexibility Act.
Small Business Regulatory Enforcement Fairness Act
    The proposed rule is not a major rule under 5 U.S.C. 804(2), the 
Small Business Regulatory Enforcement Fairness Act. The rule does not 
have an effect on the economy of $100 million or more. The rule will 
not cause a major increase in costs or prices for consumers, individual 
industries, Federal, State, local government agencies, or geographic 
regions, nor will the proposed rule have a significant adverse effect 
on competition, employment, investment, productivity, innovation, or 
the ability of the enterprises, to compete with foreign based 
enterprises.
Unfunded Mandate Reform Act
    The Commission, as an independent regulatory agency, is exempt from 
compliance with the Unfunded Mandates Reform Act, 2 U.S.C. 1502(1); 2 
U.S.C. 658(1).
Takings
    In accordance with Executive Order 12630, the Commission has 
determined that the proposed rule does not have significant takings 
implications. A takings implication assessment is not required.
Civil Justice Reform
    In accordance with Executive Order 12988, the Commission has 
determined that the rule does not unduly burden the judicial system and 
meets the requirements of sections 3(a) and 3(b)(2) of the Order.
National Environmental Policy Act
    The Commission has determined that the rule does not constitute a 
major federal action significantly affecting the quality of the human 
environment and that no detailed statement is required pursuant to the 
National Environmental Policy Act of 1969, 42 U.S.C. 4321, et seq.
Paperwork Reduction Act
    The information collection requirements contained in this rule were 
previously approved by the Office of Management and Budget (OMB) as 
required by 44 U.S.C. 3501 et seq. and assigned OMB Control Number 
3141- 0007.
Tribal Consultation
    The National Indian Gaming Commission is committed to fulfilling 
its tribal consultation obligations--whether directed by statute or

[[Page 68048]]

administrative action such as Executive Order (E.O.) 13175 
(Consultation and Coordination with Indian Tribal Governments)--by 
adhering to the consultation framework described in its Consultation 
Policy published July 15, 2013. The NIGC's consultation policy 
specifies that it will consult with tribes on Commission Action with 
Tribal Implications, which is defined as: Any Commission regulation, 
rulemaking, policy, guidance, legislative proposal, or operational 
activity that may have a substantial direct effect on an Indian tribe 
on matters including, but not limited to, the ability of an Indian 
tribe to regulate its Indian gaming; an Indian Tribe's formal 
relationship with the Commission; or the consideration of the 
Commission's trust responsibilities to Indian tribes.
    Pursuant to this policy, on June 9, 2021, the National Indian 
Gaming Commission sent a Notice of Consultation announcing that the 
Agency intended to consult on a number of topics, including proposed 
changes to the management contract process. On July 27, 2021, and July 
28, 2021, the Commission held two virtual consultations on the proposed 
changes to the management contract process.

List of Subjects in 25 CFR Part 537

    Gambling, Indian--lands, Indian--tribal government, Reporting and 
recordkeeping requirements.

    For the reasons set forth in the preamble, the Commission amends 25 
CFR part 537 as follows:

PART 537--BACKGROUND INVESTIGATIONS FOR PERSONS OR ENTITIES WITH A 
FINANCIAL INTEREST IN, OR HAVING MANAGEMENT RESPONSIBILITY FOR, A 
MANAGEMENT CONTRACT

0
1. The authority citation for part 537 continues to read:

    Authority:  25 U.S.C. 81, 2706(b)(10), 2710(d)(9), 2711.

0
2. Amend Sec.  537.1 by revising paragraphs (a)(1) through (3) and 
adding paragraph (d) to read as follows:


Sec.  537.1   Applications for approval.

    (a) * * *
    (1) All persons who have 10 percent or more or indirect financial 
interest in a management contract;
    (2) All entities with 10 percent or more financial interest in a 
management contract; and
    (3) Any other person or entity with a direct or indirect financial 
interest in a management contract otherwise designated by the 
Commission.
* * * * *
    (d) For any of the following entities, or individuals associated 
with the following entities, the Chair may, upon request or 
unilaterally, exercise discretion to reduce the scope of the 
information to be furnished and background investigation to be 
conducted:
    (1) Tribe as defined at 25 CFR 502.13;
    (2) Wholly owned Tribal entity;
    (3) National bank; or
    (4) Institutional investor that is federally regulated or is 
required to undergo a background investigation and licensure by a State 
or Tribe pursuant to a Tribal-State compact.

Edward Simermeyer,
Chairman.
Jean Hovland,
Vice Chair.
[FR Doc. 2022-24135 Filed 11-10-22; 8:45 am]
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