[Federal Register Volume 63, Number 151 (Thursday, August 6, 1998)]
[Rules and Regulations]
[Pages 41960-41972]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20723]


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NATIONAL INDIAN GAMING COMMISSION

25 CFR Part 518

RIN 3141-AA04


Issuance of Certificates of Self Regulation to Tribes for Class 
II Gaming

AGENCY: National Indian Gaming Commission.

ACTION: Final rule.

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SUMMARY: The National Indian Gaming Commission issues this rule which 
provides a process for the review and approval of petitions for tribal 
self-regulation of Class II gaming. This rule implements the Class II 
self-regulatory provisions of the Indian Gaming Regulatory Act and will 
provide both a financial benefit and reduction in Federal regulations 
for tribes that obtain certificates under this rule.

EFFECTIVE DATE: September 8, 1998.

FOR FURTHER INFORMATION CONTACT: Maria Getoff, National Indian Gaming 
Commission, 1441 L Street, NW, Suite 9100, Washington, DC 20036; 
telephone: 202-632-7003.

SUPPLEMENTARY INFORMATION: The Indian Gaming Regulatory Act (IGRA, or 
the Act), enacted on October 17, 1988, established the National Indian 
Gaming Commission (Commission). Under the Act, the Commission is 
charged with regulating class II gaming and certain aspects of class 
III gaming on Indian lands. On March 12, 1998, the Commission proposed 
regulations for the issuance of certificates of self-regulation for 
class II gaming to Tribes. 63 FR 12319-12323. The Commission requested 
comments on those proposed regulations. On April 1, 1998, the 
Commission held a public hearing in Portland, Oregon, on the proposed 
regulations. Below is the Commission's analysis of the comments 
received both in writing during the comment period, and at the public 
hearing. In addition, prior to the drafting of the proposed rules, all 
gaming tribes were asked to provide comments on the meaning of the 
term, ``self-regulating'', which the Commission has also considered. 
Below is the Commission's analysis of the comments received during the 
comment period and the text of the final regulations.

General Comments

    One commenter advocated for negotiated rule making in the 
promulgation of these regulations. The Commission concluded that 
negotiated rule making would not allow the Commission to issue these 
regulations in a timely manner. However, the regulated community was 
provided several opportunities to comment on both the concept of self-
regulation generally and the proposed regulations specifically. On 
November 13, 1997, the Commission sent a ``Notice to Interested 
Parties'' to all gaming tribes requesting comments on the meaning of 
the term, ``self-regulation.'' In addition, on November 18, 1997, NIGC 
Chairman Tadd Johnson addressed a gathering of tribes in Santa Fe, New 
Mexico, where he discussed self regulation. Further, on January 27, 
1998, members of the Commission staff met with tribal representatives 
in Washington, D.C. to discuss the concept of self-regulation. In early 
February 1998, Commission staff held an open meeting at the Gila River 
reservation in Arizona for the purpose of discussing self-regulation 
and other regulations. Then, on April 1, 1998, the Commission held a 
public hearing on self-regulation in Portland, Oregon. Seven witnesses 
testified, representing tribes with both large and small gaming 
operations.
    Another commenter stated that ``IGRA prohibits the NIGC from 
regulating Class II gaming by Tribes with certificates,

[[Page 41961]]

and regulations that provide for continued NIGC regulation of Class II 
gaming by certified tribes violate IGRA.'' This and other commenters 
believe that, at a minimum, the regulations should spell out the powers 
of the Commission that are not enforceable against certified tribes.
    The IGRA does not provide for a blanket prohibition on the 
regulatory power of the Commission with respect to a self regulated 
tribe. The Commission will continue to maintain oversight, 
investigative, and enforcement responsibilities with respect to tribes 
that hold certificates of self-regulation. The IGRA does limit the 
powers of the Commission with respect to self-regulating tribes, but 
does so in very specific terms. It states that ``During any year in 
which a tribe has a certificate for self-regulation, the tribe shall 
not be subject to the provisions of paragraphs (1), (2), (3), and (4) 
of section 2706(b) of IGRA.'' 25 U.S.C. 2710(c)(5)(A). Those sections 
direct the Commission to monitor class II gaming on a continuing basis; 
inspect and examine class II gaming premises; conduct or cause to be 
conducted background investigations; and permit the Commission to 
demand access to and inspect, examine, photocopy and audit all papers, 
books, and records regarding revenues of class II gaming. Therefore, 
while the IGRA exempts certain self regulated tribes from these 
provisions, other requirements of IGRA and NIGC regulations still 
apply. The Commission has added the following language to Sec. 518.9 , 
which provides that the Commission retains investigative and 
enforcement authority over self regulated tribes: ``Subject to the 
provisions of 25 U.S.C. 2710(c)(5)(A).''
    One commenter suggested that regulations are not required to 
implement IGRA's certificate of self-regulation provision. This 
commenter expressed the opinion that the statute is sufficient, wherein 
Congress set forth the requirements for certificates, and gave the 
Commission the power to hear and adjudicate petitions.
    The Commission disagrees. Section 2706(b)(10) of IGRA grants the 
Commission the power to ``promulgate such regulations and guidelines as 
it deems appropriate to implement the provisions of the IGRA.'' While 
the statutory language in IGRA provides some guidance on Congress's 
intent with respect to self-regulation, the Commission must promulgate 
these rules in order to establish a system by which the Commission may 
evaluate whether a tribe has met the statutory criteria for the 
issuance of a certificate of self-regulation.
    Several commenters suggested that the Commission should ensure that 
tribes with certificates pay less fees than tribes without 
certificates, and that the regulations should reflect this. These 
commenters believe that because the fee rate for all class II gaming 
tribes is currently set at .08%, well below the .25% maximum allowed 
for a self-regulated tribe, there is no incentive to become self-
regulated.
    The Commission agrees, as a general matter, that tribes with 
certificates should pay a lower fee than tribes without certificates. 
The IGRA provides that the Commission may not assess a fee on the class 
II gaming activity of a tribe with a certificate in excess of 0.25 
percent. 25 U.S.C. 2710(c)(5)(C). Therefore, the Commission plans to 
establish fee rates for self-regulated tribes through the annual fee 
notice which will recognize and reward self regulated status.
    Another commenter suggested that the following language in the 
preamble to the proposed regulations is too restrictive: ``The 
regulatory entity should have no involvement in the operational or 
managerial decisions of a gaming facility, except to the extent that 
the regulatory body identifies violations of federal or tribal law.'' 
63 FR 12319, March 12, 1998.
    Although this language may be broader than intended, the Commission 
wanted to clarify that the tribal regulatory body should not operate or 
manage the gaming facility. The tribal regulatory body should be an arm 
of the tribal government, established for the exclusive purpose of 
regulating and monitoring gaming on behalf of the tribe. Effective 
regulatory oversight requires that there be a separation between the 
regulation and operation of the tribal gaming activities. The tribal 
regulatory body may monitor all operating and management functions, 
consistent with its regulatory responsibilities.

Section 518.1 What Does This Part Cover?

    A commenter suggested that a certificate should be issued to each 
separate operation, not to the tribe as a whole. The rationale behind 
this suggestion is that one tribe may have several operations which 
could cause the delay of certification for all operations due to 
problems with just one.
    The Commission disagrees. A certificate of self-regulation issues 
to the tribe, in recognition of their ability to regulate effectively. 
If a tribe cannot effectively regulate some portion of its gaming 
operation, it has not demonstrated that it is able to effectively 
regulate all gaming operations.

Section 518.2 Who May Petition for a Certificate of Self-Regulation?

    Two commenters suggested that Sec. 518.2(a) would restrict self-
regulation status to only those specific class II games actually played 
by the tribe for three years prior to its petition, and would 
effectively place a ban on new games.
    The Commission does not intend this language to limit the 
introduction of new games. The language in Sec. 518.2(a) mirrors the 
language in IGRA, which provides, in relevant part, that ``Any Indian 
tribe which operates a class II gaming activity and which has 
continuously conducted such activity for a period of not less than 
three years * * *'' may petition for a certificate of self-regulation. 
25 U.S.C. 2710(c)(3)(A). Therefore, the petitioning tribe must have 
operated some type of class II gaming activity for the three year 
period immediately preceding the date of the petition. To interpret the 
statute to mean that a self-regulating tribe could not introduce new 
games that were not offered during that three year period would, as 
noted by the commenter, be so impractical as to render certificates of 
self-regulation useless. The Commission does not believe that Congress 
intended such a result. The Commission does not believe that this 
section requires any change.
    One commenter stated that the word ``continuously'' in 
Sec. 518.2(a) needs clarification. This paragraph requires that, in 
order to petition for a certificate, the tribe has continuously 
conducted the gaming activity for which it seeks self-regulation. The 
commenter stated that some tribes may temporarily shut down their 
gaming operations due to construction or to the seasonal nature of 
their business.
    The term ``continuously'' is taken directly from IGRA at 25 U.S.C. 
2710(c)(3)(A). The Commission will implement the common sense 
definition of the term ``continuous''. Webster's Ninth New Collegiate 
Dictionary defines continuous as ``marked by uninterrupted extension in 
space, time, or sequence''. The Commission does not believe that 
Congress intended to mean that if a gaming operation closed for one day 
or one week, that the tribe would be precluded from obtaining a 
certificate of self regulation. A tribe would, however, be precluded if 
the operation had closed for one year. The Commission intends to look 
at each situation on a case-by-case basis.

[[Page 41962]]

    Several commenters stated that Sec. 518.2(b) and Sec. 518.2(d), 
which require all gaming engaged in by the tribe to be legal under 
IGRA, unnecessarily place a tribe's class III gaming operation under 
scrutiny.
    The Commission disagrees. The language of Sec. 518.2(d) is taken 
verbatim from IGRA, which requires, in relevant part, that a tribe may 
petition the Commission for a certificate of self-regulation if it 
``has otherwise complied with the provision of this section.'' 25 
U.S.C. 2710(c)(3)(B). The statutory language is clear. If Congress had 
intended for a tribe to be able to petition for a class II self-
regulation certificate regardless of whether it had complied with the 
law with respect to its class III gaming, it would have said so.

Section 518.3 What Must a Tribe Submit to the Commission as Part of its 
Petition?

    One commenter suggested that the petition should be approved by the 
tribal regulatory body, not the governing body of the tribe as required 
by Sec. 518.3(a)(1), because the regulatory functions of the tribal 
regulatory body must be independent from the influences of the tribal 
government.
    The Commission agrees that the tribal regulatory body must be 
independent from the tribal government. However, the tribal regulatory 
body is an arm of the tribal government. The final authority and 
responsibility over gaming and its tribal regulation is vested with the 
tribe. The authority to establish a regulatory structure or tribal 
regulatory body comes from the sovereign powers of tribal governments. 
Furthermore, a tribe's qualification for certification is dependent in 
part upon whether it follows procedures which are beyond the scope of 
the tribal regulatory body. Therefore, the Commission does not believe, 
as suggested by the commenter, that the decision to submit a petition 
for a certificate of self-regulation is a decision that should be made 
by the tribal regulatory body. The decision to petition for self-
regulation status is a decision to be made by the tribe. The tribe may, 
however, delegate such authority to the tribal regulatory body.
    One commenter stated that it was unclear whether 
Sec. 518.3(a)(1)(iii), which requires a description of the process by 
which positions on the tribal regulatory body are filled, applies to 
positions for Gaming Commissioners and Attorneys. Another commenter 
recommended that this paragraph be expanded to require job descriptions 
and qualifications, as well as any disqualifying criteria.
    This paragraph requires a description of the manner in which all 
positions on the tribal regulatory body are filled, including staff and 
higher level regulators. Therefore, this provision applies both to 
those who actually sit on the regulatory body, such as the Chairman, 
Gaming Commissioners or the Executive Director, and to all staff level 
employees, including investigators, auditors, attorneys, etc. In order 
to clarify this requirement, the Commission has revised 
Sec. 518.3(a)(1)(iii) to read as follows: ``a description of the 
process by which all employee and regulator positions at the 
independent tribal regulatory body are filled, including qualifying and 
disqualifying criteria.'' During its investigation, the Commission may 
request job descriptions, but that information is not required to be 
provided with the petition.
    The Commission has added the following language to 
Sec. 518.3(a)(1)(v): ``and, if serving limited terms, the expiration 
date of such terms.''
    One commenter questioned why the Commission requires a list of 
current gaming operation division heads to be submitted with the 
petition under Sec. 518.3(a)(1)(vi). This information will identify for 
the Commission who is in charge of each division so that the Commission 
will know who to contact for information during the course of the 
investigation. In addition, the Commission may check this against the 
information the Commission has previously received from the tribe.
    One commenter noted that several paragraphs of Sec. 518.3 require 
the tribe to include in its petition, or make available to the 
Commission, information dating back three years from the date of the 
petition. This commenter suggested that the IGRA only requires that 
certificates be based on ``available information'', not new special 
information designed solely for certificates of self-regulation. This 
commenter raised specific concerns with respect to Sec. 518.3(a)(2)(v). 
Another commenter stated that to require tribes to have reports on 
internal controls is overburdensome and not required by IGRA. Both 
commenters noted that the three year requirement is retroactive and 
therefore places an undue burden on tribes because they will be denied 
self regulation status if they are unable to produce the reports. 
Another commenter stated that Sec. 518.3(a)(2)(v) should be clarified 
to indicate what constitutes a ``report on internal controls based on 
audits of the financial statements.'' This commenter questioned whether 
this refers to compliance reviews by the tribal regulatory body, or to 
responses by the operator to the annual financial audits.
    The Commission believes that generally, the information required by 
Sec. 518.3 is not ``new special information designed solely for 
certificates'', but is information that should already be maintained in 
the ordinary course of business by a ``self-regulating'' class II 
gaming tribe. For instance, if a tribe does not ordinarily maintain 
information on allegations of criminal activity and information on 
investigation and enforcement of tribal gaming ordinance violations, 
the Commission believes that such tribe is not maintaining the type of 
system of records that would allow the Commission to make a 
determination that such tribe is self-regulating. The Commission agrees 
that tribes may not receive or produce reports on internal controls in 
the ordinary course of business, and that it would be unfair to make 
the existence of such reports a prerequisite to self regulation. 
However, the Commission believes that if such reports do exist, they 
would provide an indication that the tribe meets the criteria for self 
regulation. Therefore, the Commission has removed this as a requirement 
under Sec. 518.3, and has added a new section (9) to Sec. 518.4(b). 
This new section provides that the Commission will consider whether 
reports are received or produced by the tribe, the tribal regulatory 
body, or the gaming operation based on an evaluation of the internal 
controls of the gaming operation during the three (3) year period 
immediately preceding the date of the petition. If such reports exist, 
the Commission will review those reports in the course of its 
investigation. This new language should help to clarify what 
constitutes a ``report on internal controls''.
    Several commenters questioned whether the language in 
Sec. 518.3(a)(2) requires the tribe to list the documents in the 
petition that would then be available to the Commission to inspect or 
whether those documents were to be submitted to the Commission.
    The Commission intends only for the petition to include a 
descriptive list of the documents or record keeping systems described 
in Secs. 518.3(a)(2)(i)-518.3(a)(4) and an assurance that the listed 
documents and records are available for the Commission's review. (The 
documents mentioned in Secs. 518.3(a)(1)(i)-(vii), however, must be 
included with the petition.) Therefore, the Commission revises this 
section to add ``descriptive'' before ``list'' and to replace, ``to 
which the Commission shall have access'' with ``together with an 
assurance that the listed documents

[[Page 41963]]

or records are available for the Commission's review.''
    One commenter was concerned about Sec. 518.3(a)(2)(ii), and 
indicated that tribal regulatory bodies are not ordinarily involved in 
any way with a tribe's revenue allocation plan, and it is not apparent 
how a tribe's revenue allocation plan bears on the Commission's 
evaluation of a tribal regulatory body's qualification for 
certification.
    It is the tribe, not the tribal regulatory body, that is the 
petitioner and the intended recipient of a certificate. For the 
Commission to determine adequately whether the gaming activity has been 
conducted in full compliance with IGRA, as required by 
Sec. 518.4(a)(4), the Commission must be able to evaluate whether 
gaming revenues are allocated in accordance with the law.
    One commenter questioned whether Sec. 518.3(a)(2)(iii) requires a 
description of the accounting system from the operation, the tribal 
government, or both if two separate accounting systems exist.
    This provision refers to the accounting systems of both the gaming 
operation and the tribe. The latter is necessary to understand how the 
tribe uses and accounts for the revenues received from the gaming 
operation in accordance with the purposes allowed under IGRA. Because 
the proposed rule may be confusing, the Commission revises the language 
to read, ``A description of the accounting system(s) at both the gaming 
operation and the tribe that account for the flow of gaming revenues 
from receipt to their ultimate use, consistent with IGRA.''
    One commenter stated that a definition of ``records'' is needed. 
This commenter questioned whether, under Sec. 518.3(a)(2)(vii), a 
summary of the investigation/enforcement action would be sufficient. 
This and other commenters indicated that some allegations are made 
outside tribal jurisdiction, and that it would be burdensome to require 
the tribal regulatory body to assemble documents from third parties. A 
commenter also questioned the meaning of ``records'' under 
Sec. 518.3(a)(2)(vii).
    The Commission recognizes that several paragraphs of 
Sec. 518.3(a)(2) are confusing in terms of what information should be 
provided to the Commission. First of all, the tribe is not required to 
submit the actual documents, nor does the Commission intend by this 
rule to require a tribe to gather records from other jurisdictions or 
parties. The rule states that the documents that are to be made 
available to the Commission are documents that are maintained by the 
tribe. With respect to the ``records'' language, the Commission made 
the following changes: to Sec. 518.3(a)(2)(vi), delete ``records of'' 
and add, ``a description of the record keeping system for'' before the 
word ``all'; to Sec. 518.3(a)(2)(vii), delete ``records of'' and add, 
``a description of the record keeping system for'' before the word 
``all''; and to Sec. 518.3(a)(2)(viii) delete ``records'' and add, ``a 
description of the personnel record keeping system'' before the word 
``of''. Section 518.3(a)(2)(vii) includes all records maintained by the 
tribe, not just by the tribal regulatory body. This would include 
records maintained by the tribal prosecutor and tribal court.
    To further clarify that the information required under 
Sec. 518.3(a)(2) is to be provided by way of a list instead of the 
actual documents, the Commission has removed, ``including the name, 
title, and licensing status of each employee'' from 
Sec. 518.3(a)(2)(viii). The tribe is required, under this paragraph, to 
provide a description of its personnel record keeping system, and is 
not required to specifically provide the names, titles, and licensing 
status of each employee. This is information that the Commission will 
gather when it visits the tribe to conduct its investigation, or will 
request at a later date.
    Additional clarification was made to Sec. 518.3(a)(2)(vi) and 
Sec. 518.3(a)(2)(vii). In Sec. 518.3(a)(2)(vi), the language ``for the 
three (3)-year period immediately preceding the date of the petition'' 
was removed from the beginning of the paragraph and inserted after the 
word, ``activity''. In Sec. 518.3(a)(2)(vii), the language ``for the 
three (3)-year period immediately preceding the date of the petition'' 
was removed from the beginning of the paragraph and inserted after the 
word ``regulations.'' These changes were made to clarify that the three 
year period refers to the records that the Commission will have access 
to, and not to the description of the record keeping system.
    With respect to Sec. 518.3(a)(2)(viii) one commenter noted that 
while the IGRA requires a tribe to license certain key employees there 
is no requirement that it maintain records of all employees as required 
by Sec. 518.3(a)(2)(viii). This commenter believes that to require a 
tribal regulatory body to gather this information if it does not have 
it distorts the Commission's evaluation, in that the Commission will 
not know if this information is normally known to the tribal regulatory 
body, as it should be, or whether it was gathered in preparation for 
the petition.
    The purpose of this rule is to allow the Commission to evaluate 
whether the tribal gaming operation maintains an adequate personnel 
system with records of all employees, as well as whether the tribe has 
complied with IGRA and NIGC regulations which require the tribe to 
submit to the Commission employee applications and background 
investigation reports for all key employees and primary management 
officials. The Commission must be able to check the records of all 
current employees against the employee applications and background 
investigation reports submitted to the Commission to determine whether 
the tribe has complied with IGRA. Although only key employees and 
primary management officials must be investigated and licensed under 
IGRA, the Commission believes the tribal gaming operation should 
maintain an adequate system of records for all employees, and the tribe 
may license other employees not specifically required to be licensed 
under IGRA.
    One commenter pointed out that Sec. 518.3(a)(3), which requires the 
tribe to submit a copy of the public notice references an incorrect 
citation to the provision which requires the public notice.
    The Commission agrees. The reference to the public notice 
requirement should read ``25 CFR 518.5(d)'' instead of ``25 CFR 
518.5(e).'' The Commission will make this change. In addition, the 
Commission has removed the requirement that the tribe, upon publication 
of the notice, submit a copy of the notice. The final regulation has 
been revised to require the tribe to submit an affidavit of publication 
in lieu of a copy of the publication.
    One commenter stated, in regard to Sec. 518.3(a)(4), that federal 
regulations governing the audit of tribal general funds and federal 
funds do not require the auditor to express an opinion on compliance 
with 25 U.S.C. 2710(b)(2)(B), and the proposed rule does not expressly 
contain a new substantive requirement for tribal audits. In addition, 
such a requirement could only be imposed prospectively.
    The Commission agrees, and has removed this paragraph from 
Sec. 518.3(a)(4). However, 25 U.S.C. 2710(b)(2)(B) requires that tribal 
gaming revenues be put to specific purposes. Therefore, the Commission 
adds a new paragraph to the section which describes the documents that 
should accompany the petition. The new paragraph is 
Sec. 518.3(a)(1)(vii), and states ``A report, with supporting 
documentation, including a sworn statement signed by an authorized 
tribal official, which explains how tribal net gaming revenues were 
used in

[[Page 41964]]

accordance with the requirements of 25 U.S.C. 2710(b)(2)(B).'' 
Supporting documentation would include copies of pages from tribal 
accounting books which record the flow of money from the gaming 
operation to its ultimate use. One commenter questioned why the 
Commission would need to have access to the tribal audit under 
Sec. 518.3(a)(2)(xi) in order to evaluate a tribe's qualification for 
certification. Because the new paragraph at Sec. 518.3(a)(1)(vii) 
serves to inform the Commission of information it intended to glean 
from the tribal government audits, and because the Commission does not 
believe it necessary to review audits prepared of the tribal regulatory 
body, the Commission has removed Sec. 518.3(a)(2)(xi) in its entirety.

Section 518.4 What Criteria Must a Tribe Meet To Be Issued a 
Certificate of Self-Regulation?

    Several commenters pointed out that the proposed regulations state 
that the Commission ``may issue a certificate of self-regulation * * * 
.'' whereas IGRA provides that the Commission ``shall issue a 
certificate if the petitioning tribe meets the requirements.
    The Commission recognizes this error and has changed the language 
in Sec. 518.4(a) from ``may issue'' to ``shall issue''.
    One commenter questioned the use of the words ``honest'' and 
``dishonest'' in Secs. 518.4(a)(1)(i)-(iii), and stated that, by this 
language, the Commission was creating a subjective criteria. This 
commenter questioned whether the Commission would look at actual 
criminal charges, or rely on mere word of mouth.
    The language of this paragraph was taken verbatim from IGRA at 25 
U.S.C. 2710(c)(4)(A). The Commission has created, by these regulations, 
a system for the evaluation of these and other statutory criteria. 
Section 518.4(b) provides several methods for establishing, by 
supporting documentation, that a tribe operates its gaming in a manner 
that satisfies the statutory criteria, including the ``honesty'' 
requirement mentioned in the statute.
    One commenter recommended that the language of Sec. 518.4(a)(2) be 
changed from ``Adopted and is implementing adequate systems'' to 
``Adopted and has implemented adequate systems * * *'' This commenter 
believes that a gaming operation that has been in operation for three 
years should be required to have implemented the adequate systems, not 
be in the process of doing so.
    The language the Commission used in Sec. 518.4(a)(2) was taken 
directly from IGRA at 25 U.S.C. 2710(c)(4)(B). IGRA requires that the 
tribe has conducted its gaming for at least three years, and further 
requires that the tribe has adopted and is implementing adequate 
systems for accounting of revenues, investigation of violations, etc. 
Therefore, it only makes sense that those systems must have been in 
operation for at least three years, and that the tribe continues to 
implement those systems. The Commission does not read the language of 
the statute to mean that the tribe can qualify for a certificate if it 
is merely in the process of developing and implementing adequate 
control systems.
    One commenter suggested that Sec. 518.4(a)(4) could be construed to 
suggest that a tribe may not qualify as a result of a single minor 
violation, even if tribal authorities took prompt remedial action.
    The Commission agrees that the language of proposed 
Sec. 518.4(a)(4) creates an unreasonably high standard. Therefore, 
``full'' has been deleted from this paragraph to allow the Commission 
the authority to determine whether or not violations are sufficiently 
serious to prevent a determination that a tribe is self-regulating.
    One commenter suggested that the language of Sec. 518.4(b)(1) 
should be read to mean that the tribally adopted minimum internal 
control standards do not necessarily have to be at least as stringent 
as Commission standards, or those of Nevada or New Jersey. This 
commenter believes that the test for receiving a class II certificate 
focuses on whether a tribe has achieved substantive compliance with 
IGRA, not on whether the Tribe's internal controls are at least as 
stringent as an externally promulgated standard adopted by the 
Commission. This commenter further believes that interim reliance on 
New Jersey or Nevada standards is flawed because those states did not 
adopt their minimum internal control standards based on IGRA's 
requirements for self-regulation.
    The Commission disagrees with the commenter and believes that 
uniform standards are necessary for the industry. Minimum internal 
control standards commonly address categories of games and specific 
operational functions of gaming operations. Therefore, there is no 
immediate requirement for MICS based on standards that are specifically 
designed with IGRA in mind. The Commission has chosen the Nevada and 
New Jersey MICS as interim MICS because both have been in existence for 
a number of years and are regarded as comprehensive and effective 
standards. We note, however, that the State of Nevada is exempt from 
the currency transaction reporting required by the Bank Secrecy Act. 
Therefore, if Tribes adopt the Nevada MICS, they must modify them to 
comply with that Act. Furthermore, Commission regulations adopting MICS 
are currently being developed and promulgated by the Commission.
    Another commenter suggested that the NIGC should include the 
minimum internal control standards provided to the NIGC by the National 
Indian Gaming Association (NIGA) as standards that a tribe may use 
until the Commission promulgates its own standards.
    NIGA and the National Congress of American Indians have certainly 
set the standard for promoting the concept of internal controls and 
uniform MICS. The Commission commends them on the work done thus far in 
drafting uniform MICS. Those MICS, however, are still evolving and have 
not been adopted in final form. Therefore, the Commission believes it 
would be inappropriate to rely on those MICS at this time.
    One commenter suggested that while several paragraphs of 
Sec. 518.4(b)(3) indicate that the tribal regulatory body should be 
adopting and establishing a variety of standards for the operation of 
the gaming activity, some tribal regulatory bodies do not adopt these 
types of standards, but that such responsibility lies with the tribal 
council. This commenter suggested adding the language, ``if it does not 
already exist in the tribe's gaming ordinance'' to each subsection of 
Sec. 518.4(b)(3) that indicates that the tribal regulatory body would 
be the entity to adopt or establish standards.
    The Commission generally believes that the responsibility for the 
adoption and establishment of rules and standards for the operation of 
the gaming activity should be a function of the tribal regulatory body. 
Such responsibility would be evidence that the tribal regulatory body 
was functioning independently of the tribal council. In most 
governmental systems, regulatory agencies promulgate their own rules. 
However, the Commission will not deny a petition solely because a 
tribal council is responsible for the adoption of gaming rules, so long 
as there is evidence that the tribal regulatory body is nonetheless 
functioning independently. Because this paragraph deals with 
``indicators'' that a tribe has met the self-regulation criteria, and 
not requirements, the Commission believes that revision is unnecessary.
    One commenter noted that while Sec. 518.4(b)(3)(iv) suggests that 
the tribal regulatory body performs routine audits

[[Page 41965]]

of the gaming operation, some tribal regulatory bodies may not perform 
financial audits independently of the annual audit required by IGRA, 
but may perform operational audits on a periodic basis. This commenter 
suggested adding ``operation or other'' after the word ``routine''.
    The Commission agrees, and made the following change: The 
Commission has added ``operational or other'' after ``routine''.
    One commenter suggested that some tribes do not require non-gaming 
employees to be licensed, and that the use in Sec. 518.4(b)(3)(ix) of 
the language, ``all employees of the gaming activity'', suggests that 
all employees must be licensed, regardless of whether they work 
directly with the gaming activity. This commenter suggested that the 
language be amended to reflect that only those employees required to be 
licensed under IGRA or tribal law should be required by the tribal 
regulatory body to be licensed.
    The Commission disagrees. Section 518.4(b) makes clear that the 
paragraphs that follow describe ``indicators'' that the Commission may 
evaluate to determine whether a tribe has met the criteria for self-
regulation. These are not requirements that must be met in every 
instance. That said, the Commission would prefer that a tribal 
regulatory body, of its own accord, require licenses for all employees 
involved in the gaming activity, not just the key employees and primary 
management officials required by IGRA.

Vendor Licenses

    A commenter suggested that Sec. 518.4(b)(3)(xii) could be read to 
mean that the Commission would consider whether the tribal regulatory 
body issues licenses to all vendors that it deals with, including 
vendors of non-gaming related services, equipment and supplies. This 
commenter proposed amending this paragraph to add, ``on matters that 
may affect the honesty and integrity of the gaming activity'' after the 
word, ``operation.''
    The Commission disagrees. Corrupting influences, which the IGRA was 
designed to prevent from infiltrating Indian gaming, and which can 
negatively affect the honesty and integrity of the gaming activity, can 
get a foothold through various vendor/vendee relationships. The 
Commission will consider, therefore, the extent to which the tribe 
investigates and issues licenses or permits to the people or 
organizations it does business with. This should not be read to mean 
that the tribe must be in the practice of issuing licenses to each and 
every entity it deals with, such as utility companies, but should have 
reasonable vendor licensing standards in place.

Posting of Rules of Games

    A commenter stated that Sec. 518.4(b)(3)(xiii), which provides that 
the Commission will consider whether the independent tribal regulatory 
body establishes or approves, and posts, rules of games, it too 
stringent. First, it does not recognize that some tribes require the 
gaming operation, not the regulatory body, to post rules, and second, 
that some game rules are too lengthy to post, but may be made available 
upon demand.
    The Commission agrees with the first comment, and has revised the 
language to read, ``establishes or approves, and requires the posting 
of, rules of games.'' With respect to the second comment, the 
Commission believes that all rules should be posted, regardless of 
their length. However, because the posting of rules of the game is an 
indicator of self regulation, and not a requirement, the fact that a 
tribe does not post all rules, but makes some lengthy rules available 
upon demand, will not necessarily result in the denial of a 
certificate.

Video Surveillance

    A commenter stated that with respect to Sec. 518.4(b)(3)(xvi) some 
small operations may not require video surveillance, and that this 
paragraph should be amended to read, ``where video surveillance is 
required.''
    As indicated earlier Sec. 518.4(b) sets forth indicators that the 
Commission will consider when evaluating a petition. The Commission 
recognizes that operations vary in type and size, and a rigid set of 
rules would be unworkable. While the Commission favors the use of video 
surveillance, the small size of an operation, and its ability to 
otherwise effectively regulate the gaming activity, may mitigate 
against its use of video surveillance. The Commission will evaluate the 
need for video surveillance on a case-by-case basis.

Dispute Resolution Procedures

    One commenter suggested that Sec. 518.4(b)(3)(xviii), which 
provides that the Commission will consider whether adequate dispute 
resolution procedures exist, would require a tribe to waive its 
sovereign immunity. Another commenter suggested that a regulation 
requiring dispute resolution is not appropriate at this time.
    The Commission disagrees. The Commission is not requiring that a 
tribe consent to be sued in order to obtain a certificate. The 
Commission will, however, consider whether there is an adequate system 
of dispute resolution. This could involve mediation or arbitration, in 
addition to a process for hearings before the tribal regulatory body, 
and a process for appeals to tribal court. Tribes are already required 
by 25 CFR 522.2(f) to have a description of procedures for resolving 
disputes between the gaming public and the tribe or the management 
contractor. Disputes between gaming employees and tribes has been an on 
going concern in Congress and in the public. This provision will 
enhance the perception that the gaming operation is run fairly and 
honestly. A dispute resolution process in no way imperils the sovereign 
immunity status of a tribe. Furthermore, there are certain times when a 
waiver of sovereign immunity may be warranted. For example, the United 
States has waived its immunity from suit under the Federal Tort Claims 
Act for suits against tortious acts of federal employees and tribal 
employees employed under the Indian Self-Determination Act.

Financial Stability

    A commenter stated that Sec. 518.4(b)(6), which provides that the 
Commission will consider the financial stability of the operation, is 
unworkable. This commenter believes that financial stability is not a 
useful measure of a tribe's ability to self-regulate because it may 
reflect only fluctuations in the market or changes in tribal policy to 
achieve legitimate governmental objectives, such as providing jobs for 
the community.
    The financial stability of the operation is one of several 
indicators the Commission will evaluate. The Commission recognizes that 
the economic impact of tribal gaming operations can accrue to a tribe 
in various ways. While in many cases the primary economic benefit may 
be profits generated for the support of the tribal purposes specified 
in IGRA (25 U.S.C. 2710(b)(2)(B)), such as further economic development 
or the general welfare of the tribe, in other instances employment 
generated for tribal members by the gaming operation may be the primary 
economic benefit. Notwithstanding the extent of the operation's 
profitability, the operation must be adequately funded, by gaming 
revenues or other infusions the tribe may elect to provide, so that all 
required safeguards are maintained and standards are met. While the 
temporary fluctuation of some market conditions will be taken into 
consideration, in instances where financial instability poses a long-
term threat to compliance with required

[[Page 41966]]

standards, self regulation certification will be withheld.

Clarification of Sec. 518.4(d)

    The Commission has added the language, ``During the review of the 
petition, `` to the beginning of Sec. 518.4(d) to clarify when the 
provisions of this paragraph apply.

Section 518.5 What process will the Commission use to review petitions?

    One commenter suggested a peer review process for the evaluation of 
petitions, with a team of people including those with Indian gaming 
regulatory experience, Commission staff, and outside auditors and 
consultants.
    A peer review process may be an appropriate mechanism for 
evaluating petitions. The regulations do not have to mandate such a 
process, however, before the Commission can implement it. Furthermore, 
The Commission anticipates that it can, with the expansion of staff in 
the near future, adequately evaluate petitions for self-regulation. If 
the Commission finds it necessary and economical to contract for 
outside assistance or expertise to assist the Commission, it will do 
so.
    A commenter stated that the NIGC should provide consultation and 
technical assistance to tribes to help them through the process.
    The Commission intends to assist tribes in understanding and 
complying with all Commission regulations.

Establishment of Office of Self Regulation

    To stream line the review process, the Commission has created an 
``Office of Self Regulation'' (OSR). The Chairman of the Commission 
shall appoint one Commissioner to administer this office. The OSR will 
be responsible for the review and investigation process and will issue 
a report of its findings to the tribe. It will also issue certificates 
of self regulation, conduct hearings and issue decisions following 
those hearings. Those decisions will then be appealable to the full 
Commission, which shall decide the appeal based on the record. The 
tribe may request reconsideration by the full Commission of a denial of 
a petition. This process differs somewhat from the process described in 
the proposed rule. However, it provides an additional opportunity for 
tribes to challenge adverse decisions. The proposed rule provided for 
all determinations to be made by the Commission after an opportunity 
for a hearing, with the full Commission issuing a final decision on the 
petition. That decision was then subject to reconsideration. The 
process in these final regulations provides for initial decisions to be 
made by the Office of Self Regulation, after the opportunity for a 
hearing. Those decisions are then appealable to the full Commission, 
whose decision is then subject to reconsideration. Therefore, the tribe 
has the benefit of three levels of scrutiny of their petition instead 
of two.

Technical Changes

    The Commission has combined the provisions of proposed 
Secs. 518.5(e) and (f) into a new section 518.5 (e)(1) and (2) and 
renumbered the subsequent subsections. In addition, the Commission has 
added language to Sec. 518.5(e)(1) which clarifies that, if the Office 
of Self Regulation determines that the tribe has satisfied the 
criteria, it shall so indicate in its report and shall issue a 
certificate.
    The Commission has also inserted ``from the date of service of the 
report'' into Sec. 518.5(e)(1) after ``the tribe shall have 60 days''. 
This relates to the deadline for submission of the tribe's written 
response, and clarifies when the 60 day time period starts.

Commission Deadlines

    Several commenters requested express deadlines imposed on the 
Commission to complete the certification process. Commenters felt that 
IGRA does not give the Commission unlimited time to act upon a 
petition, and to be consistent with IGRA, regulations should impose 
meaningful restrictions on the time allowed the agency to decide 
petitions. A commenter also feels that the regulations should provide 
for a tribe to request a hearing at the time of the petition. One 
commenter suggested that the hearing should be scheduled for within 30 
days of the request for a hearing, while another commenter suggested 
that the hearing should be held within 60 days of the date the 
Commission acknowledges the request for a hearing. One commenter 
suggested that Sec. 518.5(i) should impose a deadline of 30 days 
following the hearing for the Commission to issue its decision, while 
another commenter suggested a 60 day deadline, and that if the 
Commission does not issue a decision within 60 days, the petition 
should be deemed approved. Without such a provision, the commenter is 
concerned that the Commission will not have incentive to complete its 
review in a timely manner.
    While time frames can sometimes assure a more timely decision, the 
self-regulation process is a new, unique, and very important process. 
Thus, the Commission is not prepared to determine that 30-60 day time 
periods would be reasonable.

Timing of Request for Hearing

    With respect to the right to a hearing, the regulations provide 
that the hearing can be requested at the time of a tribe's submission 
of its response to the Commission's report, instead of at the 
submission of the petition. The Commission designed the process this 
way because if the Commission issues a report that is favorable and 
indicates that it will issue a certificate, a hearing would be 
unnecessary. It is only after the Commission's report is issued that 
the need for a hearing will be evident. In the interest of time and 
expense for both the tribe and the Commission, the Commission will only 
honor a request for a hearing after the issuance of the Commission's 
report.

Information From Interested Parties

    Two commenters suggested that Sec. 518.5(c), which provides that 
the Commission may consider any evidence submitted by interested 
parties, could elicit a variety of inaccurate or incomplete responses 
from third parties. Both commenters further stated that any information 
obtained must be available for review by the Tribe, which should also 
have an opportunity to respond and to correct inaccurate or incomplete 
information before the Commission makes a final decision on the 
petition.
    An important part of the process of determining a tribe's ability 
to self-regulate is the evaluation of information provided by 
individuals and entities in addition to information provided by the 
Tribe. The Commission will fully investigate any negative information, 
and will afford the Tribe a timely opportunity to respond to all such 
information on which it relies in making a determination. Therefore, 
the Commission has added the following language to Sec. 518.5(c), ``The 
Commission shall make all such information on which it relies in making 
its determination available to the Tribe, and shall afford the Tribe an 
opportunity to respond.''

Public Notice Requirement

    One commenter stated that negative backlash could result if the 
Tribe is required to publish the notice required by Sec. 518.5(d) in a 
non-tribal newspaper.
    This paragraph implements 25 U.S.C. 2710(c)(4)(A)(ii), which 
requires the Commission to determine if the Tribe has conducted its 
gaming in a manner which has resulted in a reputation for safe, fair, 
and honest operation of the gaming activity. To determine reputation, 
the Commission must

[[Page 41967]]

consider public opinion. The Commission understands the concern raised 
by this commenter and will give each response to the public notice its 
due weight. Sweeping criticism of Indian gaming will not be considered 
by the Commission in making its determination. The Commission is only 
interested in comment on specific issues relative to the Tribe's 
reputation for providing a safe, fair, and honest gaming environment.
    Another commenter suggested that a better source of information 
would be the local United States Attorney for the district where the 
tribal gaming is operated, the Federal Bureau of Investigation, local 
police and the State's gaming regulatory agency.
    The Commission agrees that these agencies may have information on 
the effectiveness of a particular Tribe's gaming regulation. During the 
course of its investigation of the petition, the Commission may confer 
with these agencies. Nonetheless, it is important for the general 
public to be aware of the Tribe's petition and to afford the public an 
opportunity to comment.

Final Agency Action

    One commenter stated that Sec. 518.5 should state expressly that 
the decision of the Commission to approve or deny a petition is a final 
agency action under 25 U.S.C. 2714.
    The Commission agrees that the decision to approve or deny a 
petition is a final agency action, and that the decision to deny a 
petition is appealable under 25 U.S.C. 2714. The Commission therefore 
adds a new section 518.5(j) which states, ``The decision of the 
Commission to approve or deny a petition shall be a final agency 
action. A denial shall be appealable under 25 U.S.C. 2714, subject to 
the provisions of Sec. 518.12. The Commission decision shall be 
effective when the time for the filing of a request for reconsideration 
pursuant to Sec. 518.12 has expired and no request has been filed.''

Section 518.6 When will a certificate of self-regulation become 
effective?

    Several commenters have argued that to require tribes to wait until 
the beginning of the next year for a certificate is unfair. Several 
commenters have argued that certificates should be made effective 
immediately, and one commenter has suggested a 30 day effective date. 
Another commenter suggested that certificates should become effective 
on the first day of the next quarter following the date the petition is 
granted. Still another commenter suggested that the Tribe should be 
permitted to choose which date their certificate becomes effective. One 
commenter points out that IGRA provides that ``during any year in which 
a Tribe has a certificate of self-regulation'' it is not subject to 25 
U.S.C. 2706(b) and, in addition, the Commission may not assess a fee in 
excess of one quarter of one percent. This commenter believes that the 
proposed regulations directly contravene this language.
    The Commission has concluded that the approach most clearly aligned 
with the statute is to provide for a January 1st effective date, with 
all benefits inuring to the tribe from that date forward. Self 
regulation status confers two types of benefits upon a tribe that holds 
a certificate; financial and a reduced regulatory role for the 
Commission with respect to that tribe. IGRA provides that ``during any 
year in which a tribe has a certificate'' it shall reap those benefits. 
25 U.S.C. 2710 (c)(5). This language is ambiguous, as the reduction in 
the Commission's regulatory role can only apply prospectively, whereas 
the financial benefit is capable of retroactive application. The 
Commission powers apply only prospectively because the Commission will 
have already taken action before the determination on self regulation 
was made. Those actions can not be undone. Although the ``during any 
year'' language can be interpreted to mean ``for the entire year'', 
which would support an argument in favor of retroactive application of 
the financial benefits, it does not make sense to intepret the statute 
one way with respect to regulatory authority and another with respect 
to the financial incentive. Furthermore, the establishment of a January 
1st effective date is consistent with Commission regulations and does 
not create an undue financial burden on tribes. For example, if a tribe 
applies in 1999 and a certificate is issued and made effective January 
1, 2000, fee payments made by the tribe in 1999 would have been based 
on 1998 revenues pursuant to Commission regulations. Current fee 
regulations provide that fees are calculated based on the previous 
year's revenues. See 25 CFR 514.1(c)(5)(ii).
    Furthermore, the establishment of a January 1st effective date is 
the most practical approach for the Commission to take. Fees are paid 
to the Commission quarterly based on the prior year's revenues. It 
would be impractical for the Commission to determine, on a case by case 
basis, what each self regulating tribe owes for the part of the year in 
which it was not self regulating, and how much it owes for the part of 
the year that it is self regulating. In addition, the Commission's 
budget is determined each year based on the amount of fees collected. 
If fees already paid were rebated based on a retroactive application of 
the statute, the budgetary process would be in a constant state of 
flux. This would make it difficult for the Commission to determine the 
amount of money available at any point in time to carry out its 
statutory duties.
    The Commission has established a schedule for the submission of 
petitions that should ease the process and provide guidance to tribes. 
The process is as follows: To be considered for issuance of a 
certificate the following January, complete petitions are due no later 
than June 30 (Pursuant to Sec. 518.5(b), the Commission shall notify a 
tribe, by letter, when it considers a petition to be complete.); 
petitions will be reviewed and investigated in chronological order 
based on the date of receipt of a complete petition; and the Commission 
will announce its determinations on December 1 for all those reviews 
and investigations it completes. This process encourages submission of 
petitions early in the calendar year to afford the Commission enough 
time to review and investigate the petition and to make a determination 
by December 1.
    The Commission recognizes that under this schedule, the earliest a 
certificate will be effective is January 1, 2000. However, the 
Commission will accept petitions for the June 30, 1999 deadline 
starting immediately, and once these regulations become effective, the 
Commission will begin the process of reviewing and investigating 
petitions. Furthermore, it is unlikely, based on the extent and nature 
of these regulations, that the Commission would complete its review and 
investigation of a petition in time for a January 1, 1999, effective 
date. In addition, this schedule does not require tribes to wait an 
extra year for the financial benefit of self regulation because fees 
are calculated each year based on the prior year's revenues. Even 
though tribes must wait until January 1, 2000, for the first 
opportunity to obtain a certificate, any fees paid in 1999 will be 
based on 1998 revenues.

Section 518.7 If a tribe holds a certificate of self-regulation, is it 
required to report information to the Commission to maintain its self-
regulatory status?

    One commenter stated that IGRA does not require certified Tribes to 
repeatedly demonstrate that they are self-regulating. This commenter 
believes that such a requirement would be so onerous as to make a 
certificate not worthwhile. Another commenter stated that the report is 
as complex as the

[[Page 41968]]

original petition, and suggested the requirement of an annual report 
that only documents a change in status.
    The Commission agrees that IGRA does not affirmatively require 
certified tribes to repeatedly demonstrate that they are self-
regulating. However, IGRA vests the Commission with the power to remove 
a certificate. 25 U.S.C. 2710(c)(6). This power would be rendered 
meaningless unless the Commission is routinely informed that the tribe 
is continuing to meet the criteria for self regulation, particularly in 
light of the several powers of the Commission which are abrogated by 
the issuance of a certificate. (See 25 U.S.C. 2710(c)(5)(A)). The 
Commission does, however, share the concerns of the commenters that the 
reporting requirement may be unduly onerous and has therefore removed 
the language, ``with supporting documentation'' after ``such report 
shall set forth information''. By removing the requirement that the 
tribe submit supporting documentation with its annual report, the 
Commission intends to make the process of completing and submitting the 
report less onerous. While not requiring that the tribe supplement its 
annual report with documentation supporting each self regulation 
criteria, the Commission may require the tribe to supply supporting 
documentation if necessary. The Commission plans to provide guidance on 
how to prepare the report. In addition, the Commission has added ``and 
shall include an annual report, with supporting documentation, signed 
by an authorized tribal official, which shows that tribal net gaming 
revenues were used in accordance with the requirements of 25 U.S.C. 
2710(b)(2)(B)'' after ``approval requirements of Sec. 518.4''. This is 
the same type of report the Tribe must submit with its petition under 
Sec. 518.3(a)(1)(vii).

Section 518.8. Does a tribe that holds a certificate of self regulation 
have a continuous duty to advise the Commission of any information?

    One commenter stated that the requirement that a tribe advise the 
Commission of circumstances that may negatively impact on the tribe's 
ability to self regulate could be subject to wide-ranging 
interpretation as to what may be a negative impact. This commenter 
suggested that this section require a tribe to advise the Commission of 
any circumstances that may reasonably impact the tribe's ability to 
continue to self regulate.
    The Commission generally agrees with this commenter. Therefore,to 
clarify that the tribe has a continuing duty to advise the Commission 
of circumstances that may cause the Commission to review the tribe's 
certification, and to clean up unnecessary language, the text of 
Sec. 518.8. has been modified slightly. The following changes were 
made: delete ``at all times after the receipt of a certificate of self-
regulation''; delete ``negatively impact on the tribe's ability to 
continue to self-regulate'' after ``may'' and add, ``reasonably cause 
the Commission to review the tribe's certificate of self regulation'; 
and delete ``may undermine a tribe's ability to effectively regulate'' 
after ``factors that'' and add ``are material to the decision to grant 
a certificate of self regulation.'' This change clarifies that the 
Commission expects to be notified of any significant circumstances that 
may affect a tribes certificate of self regulation.

Section 518.9 Are any of the investigative or enforcement powers of the 
Commission limited by the issuance of a certificate of self-regulation?

    One commenter suggested that the language of Sec. 518.9 is 
misleading because it does not take into account the language of IGRA 
at 2710(c)(5)(a) which states that certain provision of IGRA do not 
apply to self-regulated tribes.
    The Commission agrees, and therefore adds the following language to 
the beginning of Sec. 518.9, `` Subject to the provisions of 25 U.S.C. 
2710(c)(5)(A),''

Section 518.10 Under what circumstances may the Commission remove a 
certificate of self-regulation?

    One commenter stated that this paragraph should indicate that a 
decision to remove a certificate is appealable to Federal District 
Court.
    The Commission agrees and adds to Sec. 518.10 the following: ``The 
decision to remove a certificate is appealable to Federal District 
Court pursuant to 25 U.S.C. 2714.''

Section 518.12 May a tribe request reconsideration by the Commission of 
a denial of a petition or a removal of a certificate of self-
regulation?

    One commenter suggested that Sec. 518.12 should state that a 
request for reconsideration reopens the matter before the Commission, 
and that until action on the request is complete, the prior decision of 
the Commission is not a final agency action.
    The Commission has clarified this paragraph by adding Sec. 518.5 
(j) which provides that if a request for reconsideration has been filed 
within 30 days of the denial or removal, the Commission's original 
decision is not final agency action.
    The Commission has further clarified Sec. 518.12 because it was not 
clear whether the Commission would decide within 30 days whether to 
grant the request for reconsideration, or whether the Commission would 
decide the request on its merits. Therefore, the Commission has added 
the word, ``final'' before the word, ``decision and has removed the 
language, ``with regard to any request for reconsideration'' from the 
second to last sentence. The Commission will make its final decision 
within 30 days.
    One commenter stated that the failure of the Commission to issue a 
decision on reconsideration within 30 days should result in the 
automatic approval, not disapproval, of the request. This commenter 
suggests that the automatic disapproval provision discourages the 
timely resolution of requests for reconsideration.
    The Commission disagrees. By allowing for reconsideration of a 
decision to deny a petition or remove a certificate, the Commission is 
affording a Tribe a second opportunity to make its case. There is no 
statutory right to reconsideration, and therefore no prescribed 
deadline for such decision. The Commission has, however, provided for a 
30 day deadline. If no decision issues within 30 days, the Tribe will 
know by the 31st day that the request was not approved. There is, 
therefore, no real threat of continued inaction by the Commission.
    Several grammatical changes were made to the proposed regulations. 
These changes have no substantive effect.

Regulatory Matters

Paperwork Reduction Act

    On May 2, 1998, the Commission received notice that the Office of 
Management and Budget approved its information collection system, and 
assigned it number 3141-0008. This approval expires on May 31, 2001.

Regulatory Flexibility Act

    Pursuant to the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., 
the Commission has determined that this rule will not have a 
significant economic impact on a substantial number of small entities. 
Because this rule is procedural in nature, it will not impose 
substantive requirements that could be deemed impacts within the scope 
of the Act.

National Environmental Policy Act

    The Commission has determined that this rule does not constitute a 
major Federal action significantly affecting the quality of the human 
environment and

[[Page 41969]]

that no detailed statement is required pursuant to the National 
Environmental Policy Act of 1969.

List of Subjects in 25 CFR Part 518

    Administrative practice and procedure, Gambling, Indians--lands, 
Indians--tribal government, Reporting and recordkeeping requirements.
    For the reasons stated in the preamble, the Commission amends 25 
CFR chapter III by adding part 518 to read as follows:

PART 518--SELF REGULATION OF CLASS II GAMING

Sec.
    518.1  What does this part cover?
    518.2  Who may petition for a certificate of self-regulation?
    518.3  What must a tribe submit to the Commission as part of its 
petition?
    518.4  What criteria must a tribe meet to receive a certificate 
of self-regulation?
    518.5  What process will the Commission use to review petitions?
    518.6  When will a certificate of self-regulation become 
effective?
    518.7  If a tribe holds a certificate of self-regulation, is it 
required to report information to the Commission to maintain its 
self-regulatory status?
    518.8  Does a tribe that holds a certificate of self-regulation 
have a continuous duty to advise the Commission of any information?
    518.9  Are any of the investigative or enforcement powers of the 
Commission limited by the issuance of a certificate of self-
regulation?
    518.10  Under what circumstances may the Commission remove a 
certificate of self-regulation?
    518.11  May a tribe request a hearing on the Commission's 
proposal to remove its certificate?
    518.12  May a tribe request reconsideration by the Commission of 
a denial of a petition or a removal of a certificate of self-
regulation?

    Authority: 25 U.S.C. 2706(b)(10), 2710(c)(3)-(6).


Sec. 518.1  What does this part cover?

    This part sets forth requirements for obtaining, and procedures 
governing, the Commission's issuance of certificates of self-regulation 
of class II gaming operations under 25 U.S.C. 2710(c). When the 
Commission issues a certificate of self-regulation, the certificate is 
issued to the tribe, not to a particular gaming operation; the 
certificate will apply to all class II gaming operations operated by 
the tribe that holds the certificate.


Sec. 518.2  Who may petition for a certificate of self-regulation?

    A tribe may submit to the Commission a petition for self-regulation 
of class II gaming if, for the three (3) year period immediately 
preceding the date of its petition:
    (a) The tribe has continuously conducted the gaming activity for 
which it seeks self-regulation;
    (b) All gaming that the tribe has engaged in, or licensed and 
regulated, on Indian lands within the tribe's jurisdiction, is located 
within a State that permits such gaming for any purpose by any person, 
organization or entity (and such gaming is not otherwise specifically 
prohibited on Indian lands by federal law), in accordance with 25 
U.S.C. 2710(b)(1)(A);
    (c) The governing body of the tribe has adopted an ordinance or 
resolution that the Chairman has approved, in accordance with 25 U.S.C. 
2710(b)(1)(B);
    (d) The tribe has otherwise complied with the provisions of 25 
U.S.C. 2710; and
    (e) The gaming operation and the tribal regulatory body have, for 
the three years immediately preceding the date of the petition, 
maintained all records required to support the petition for self-
regulation.


Sec. 518.3  What must a tribe submit to the Commission as part of its 
petition?

    (a) A petition for a certificate of self-regulation under this part 
shall contain:
    (1) Two copies on 8-1/2'' X 11'' paper of a petition for self-
regulation approved by the governing body of the tribe and certified as 
authentic by an authorized tribal official, which includes:
    (i) A brief history of each gaming operation(s), including the 
opening dates and periods of voluntary or involuntary closure;
    (ii) An organizational chart of the independent tribal regulatory 
body;
    (iii) A description of the process by which all employee and 
regulator positions at the independent tribal regulatory body are 
filled, including qualifying and disqualifying criteria;
    (iv) A description of the process by which the independent tribal 
regulatory body is funded and the funding level for the three years 
immediately preceding the date of the petition;
    (v) A list of the current regulators and employees of the 
independent tribal regulatory body, their titles, the dates they began 
employment, and, if serving limited terms, the expiration date of such 
terms;
    (vi) A list of the current gaming operation division heads; and
    (vii) A report, with supporting documentation, including a sworn 
statement signed by an authorized tribal official, which explains how 
tribal net gaming revenues were used in accordance with the 
requirements of 25 U.S.C. 2710(b)(2)(B);
    (2) A descriptive list of the documents maintained by the tribe, 
together with an assurance that the listed documents or records are 
available for the Commission's review for use in determining whether 
the tribe meets the eligibility criteria of Sec. 518.2 and the approval 
criteria of Sec. 518.4, which shall include but is not limited to:
    (i) The tribe's constitution or other governing documents;
    (ii) If applicable, the tribe's revenue allocation plan pursuant to 
25 U.S.C. 2710(b)(3);
    (iii) A description of the accounting system(s) at both the gaming 
operation and the tribe that account for the flow of the gaming 
revenues from receipt to their ultimate use, consistent with IGRA;
    (iv) Manual(s) of the internal control systems of the gaming 
operation(s);
    (v) A description of the record keeping system for all allegations 
of criminal or dishonest activity for the three (3)-year period 
immediately preceding the date of the petition, and measures taken to 
resolve the allegations;
    (vi) A description of the record keeping system for all 
investigations, enforcement actions, and prosecutions of violations of 
the tribal gaming ordinance or regulations, for the three (3)-year 
period immediately preceding the date of the petition, including 
dispositions thereof;
    (vii) A description of the personnel record keeping system of all 
current employees of the gaming operation(s);
    (viii) The dates of issuance, and criteria for the issuance of 
tribal gaming licenses issued for each place, facility or location at 
which gaming is conducted; and
    (ix) The tribe's current set of gaming regulations; and
    (3) A copy of the public notice required under 25 CFR 518.5(d) and 
a certification, signed by a tribal official, that it has been posted. 
Upon publication of the notice in a local newspaper, the tribe shall 
forward an affidavit of publication to the Commission.


Sec. 518.4  What criteria must a tribe meet to receive a certificate of 
self-regulation?

    (a) The Commission shall issue a certificate of self-regulation if 
it determines that the tribe has, for the three years immediately 
preceding the petition:
    (1) Conducted its gaming activity in a manner that:
    (i) Has resulted in an effective and honest accounting of all 
revenues;
    (ii) Has resulted in a reputation for safe, fair, and honest 
operation of the activity; and

[[Page 41970]]

    (iii) Has been generally free of evidence of criminal or dishonest 
activity;
    (2) Adopted and is implementing adequate systems for:
    (i) Accounting of all revenues from the activity;
    (ii) Investigation, licensing and monitoring of all employees of 
the gaming activity; and
    (iii) Investigation, enforcement and prosecution of violations of 
its gaming ordinance and regulations;
    (3) Conducted the operation on a fiscally and economically sound 
basis; and
    (4) The gaming activity has been conducted in compliance with the 
IGRA, NIGC regulations in this chapter, and the tribe's gaming 
ordinance and gaming regulations.
    (b) Indicators that a tribe has met the criteria set forth in 
paragraph (a) of this section may include, but are not limited to:
    (1) Adoption and implementation of minimum internal control 
standards which are at least as stringent as those promulgated by the 
Commission, or until such standards are promulgated by the Commission, 
minimum internal control standards at least as stringent as those 
required by the State of Nevada or the State of New Jersey;
    (2) Evidence that suitability determinations are made with respect 
to tribal gaming regulators which are at least as stringent as those 
required for key employees and primary management officials of the 
gaming operation(s);
    (3) Evidence of an established independent regulatory body within 
the tribal government which:
    (i) Monitors gaming activities to ensure compliance with federal 
and tribal laws and regulations;
    (ii) Promulgates tribal gaming regulations pursuant to tribal law;
    (iii) Ensures that there is an adequate system for accounting of 
all revenues from the activity and monitors such system for continued 
effectiveness;
    (iv) Performs routine operational or other audits of the gaming 
operation(s);
    (v) Routinely receives and reviews accounting information from the 
gaming operation(s);
    (vi) Has access to and may inspect, examine, photocopy and audit 
all papers, books, and records of the gaming operation(s);
    (vii) Provides ongoing information to the tribe on the status of 
the tribe's gaming operation(s);
    (viii) Monitors compliance with minimum internal control standards 
for the gaming operation;
    (ix) Adopts and implements an adequate system for investigation, 
licensing, and monitoring of all employees of the gaming activity;
    (x) Maintains records on licensees and on persons denied licenses 
including persons otherwise prohibited from engaging in gaming 
activities within the tribe's jurisdiction;
    (xi) Inspects and examines all premises where gaming is conducted;
    (xii) Establishes standards for and issues vendor licenses or 
permits to persons or entities who deal with the gaming operation, such 
as manufacturers and suppliers of services, equipment and supplies;
    (xiii) Establishes or approves, and requires the posting of, rules 
of games;
    (xiv) Inspects games, tables, equipment, cards, and chips or tokens 
used in the gaming operation(s);
    (xv) Establishes standards for technological aids and tests such 
for compliance with standards;
    (xvi) Establishes or approves video surveillance standards;
    (xvii) Adopts and implements an adequate system for the 
investigation of possible violations of the tribal gaming ordinance and 
regulations and takes appropriate enforcement actions;
    (xviii) Determines that there are adequate dispute resolution 
procedures for gaming operation employees and customers, and ensures 
that such system is adequately implemented; and
    (xix) Takes testimony and conducts hearings on regulatory matters, 
including matters related to the revocation of primary management 
officials and key employee licenses;
    (4) Documentation of a sufficient source of permanent and stable 
funding for the independent tribal regulatory body which is allocated 
and appropriated by the tribal governing body;
    (5) Adoption of a conflict of interest policy for the regulators/
regulatory body and their staff;
    (6) Evidence that the operation is financially stable;
    (7) Adoption and implementation of a system for adequate 
prosecution of violations of the tribal gaming ordinance and 
regulations, which may include the existence of a tribal court system 
authorized to hear and decide gaming related cases;
    (8) Evidence that the operation is being conducted in a safe 
manner, which may include, but not be limited to:
    (i) The availability of medical, fire, and emergency services;
    (ii) The existence of an evacuation plan; and
    (iii) Proof of compliance with applicable building, health, and 
safety codes; and
    (9) Evidence that reports are produced or received by the tribe, 
the tribal regulatory body, or the gaming operation based on an 
evaluation of the internal controls of the gaming operation during the 
three (3) year period immediately preceding the date of the petition.
    (c) The burden of establishing self-regulation is upon the tribe 
filing the petition.
    (d) During the review of the petition,--the Commission shall have 
complete access to all areas of and all papers, books, and records of 
the tribal regulatory body, the gaming operation, and any other entity 
involved in the regulation or oversight of the gaming operation. The 
Commission shall be allowed to inspect and photocopy any relevant 
materials. The tribe shall take no action to prohibit the Commission 
from soliciting information from any current or former employees of the 
tribe, the tribal regulatory body, or the gaming operation. Failure to 
adhere to this paragraph may be grounds for denial of a petition for 
self-regulation.


Sec. 518.5  What process will the Commission use to review petitions?

    (a) The Chairman shall appoint one Commissioner to administer the 
Office of Self Regulation. The Office of Self Regulation shall 
undertake an initial review of the petition to determine whether the 
tribe meets all of the eligibility criteria of Sec. 518.2. If the tribe 
fails to meet any of the eligibility criteria, the Office of Self 
Regulation shall deny the petition and so notify the tribe. If the 
tribe meets all of the eligibility criteria, the Office of Self 
Regulation shall review the petition and accompanying documents for 
completeness. If the Office of Self Regulation finds the petition 
incomplete, it shall immediately notify the tribe by letter, certified 
mail, return receipt requested, of any obvious deficiencies or 
significant omissions apparent in the petition and provide the tribe 
with an opportunity to submit additional information and/or 
clarification.
    (b) The Office of Self Regulation shall notify a tribe, by letter, 
when it considers a petition to be complete.
    (c) Upon receipt of a complete petition, the Office of Self 
Regulation shall conduct a review and investigation to determine 
whether the tribe meets the approval criteria under Sec. 518.4. During 
the course of this review, the Office of Self Regulation may request 
from the tribe any additional material it deems necessary to assess 
whether the tribe has met the requirements for self-regulation. The 
tribe shall provide all information

[[Page 41971]]

requested by the Office of Self Regulation in a timely manner. The 
Office of Self Regulation may consider any evidence which may be 
submitted by interested or informed parties. The Office of Self 
Regulation shall make all such information on which it relies in making 
its determination available to the Tribe and shall afford the Tribe an 
opportunity to respond.
    (d) The tribe shall post a notice, contemporaneous with the filing 
of the petition, advising the public that it has petitioned the 
Commission for a certificate of self regulation. Such notice shall be 
posted in conspicuous places in the gaming operation and the tribal 
government offices. Such notice shall remain posted until the 
Commission either issues a certificate or declines to do so. The tribe 
shall also publish such notice, once a week for four weeks, in a local 
newspaper with a broad based circulation. Both notices shall state that 
one of the criteria for the issuance of a certificate is that the tribe 
has a reputation for safe, fair, and honest operation of the gaming 
activity, and shall solicit comments in this regard. The notices shall 
instruct commentors to submit their comments directly to the Office of 
Self Regulation, shall provide the mailing address of the Commission 
and shall request that commentors include their name, address and day 
time telephone number.
    (e) After making an initial determination on the petition, the 
Office of Self Regulation shall issue a report of its findings to the 
tribe.
    (1) If the Office of Self Regulation determines that the tribe has 
satisfied the criteria for a certificate of self regulation, it shall 
so indicate in its report and shall issue a certificate in accordance 
with 25 CFR 518.6.
    (2) If the Office of Self Regulation's initial determination is 
that a tribe has not met the criteria for a certificate of self 
regulation, it shall so advise the tribe in its report and the tribe 
shall have 60 days from the date of service of the report to submit to 
the Office of Self Regulation a written response to the report. This 
response may include additional materials which:
    (i) The tribe deems necessary to adequately respond to the 
findings; and
    (ii) The tribe believes supports its petition.
    (f) At the time of the submission of its response the tribe may 
request a hearing before the Office of Self Regulation. This request 
shall specify the issues to be addressed by the tribe at such hearing, 
and any proposed oral or written testimony the tribe wishes to present. 
The Office of Self Regulation may limit testimony.
    (g) The Office of Self Regulation shall notify the tribe, within 10 
days of receipt of such request, of the date and place of the hearing. 
The Office of Self Regulation shall also set forth the schedule for the 
conduct of the hearing, including the specification of all issues to be 
addressed at the hearing, the identification of any witnesses, the time 
allotted for testimony and oral argument, and the order of the 
presentation.
    (h) Following review of the tribe's response and the conduct of the 
hearing, the Office of Self Regulation shall issue a decision on the 
petition. The decision shall set forth with particularity the findings 
with respect to the tribe's compliance with standards for self-
regulation set forth in this part. If the Office of Self Regulation 
determines that a certificate will issue, it will do so in accordance 
with 25 CFR 518.6.
    (i) The decision to deny a petition shall be appealable to the full 
Commission. Such appeal shall be received by the Commission within 
thirty (30) days of service of the decision and shall include a 
supplemental statement that states with particularity the relief 
desired and the grounds therefor. The full Commission shall decide the 
appeal based only on a review of the record before it. The decision on 
appeal shall require a majority vote of the Commissioners.
    (j) The decision of the Commission to approve or deny a petition 
shall be a final agency action. A denial shall be appealable under 25 
U.S.C. 2714, subject to the provisions of Sec. 518.12. The Commission 
decision shall be effective when the time for the filing of a request 
for reconsideration pursuant to Sec. 518.12 has expired and no request 
has been filed.


Sec. 518.6  When will a certificate of self-regulation become 
effective?

    A certificate of self-regulation shall become effective on January 
1 of the year following the year in which the Commission determines 
that a certificate will issue. Complete petitions are due no later than 
June 30. No petitions will be considered for the following January 1 
effective date that have not been received by June 30 of the previous 
year. Petitions will be reviewed and investigated in chronological 
order based on the date of receipt of a complete petition. The 
Commission will announce its determinations on December 1 for all those 
reviews and investigations it completes.


Sec. 518.7  If a tribe holds a certificate of self-regulation, is it 
required to report information to the Commission to maintain its self-
regulatory status?

    Yes. Each tribe that holds a certificate of self-regulation shall 
be required to submit a self-regulation report annually to the 
Commission in order to maintain its self-regulatory status. Such report 
shall set forth information to establish that the tribe has 
continuously met the eligibility requirements of Sec. 518.2 and the 
approval requirements of Sec. 518.4 and shall include a report, with 
supporting documentation, including a sworn statement signed by an 
authorized tribal official, which explains how tribal net gaming 
revenues were used in accordance with the requirements of 25 U.S.C. 
2710(b)(2)(B)''. The annual report shall be filed with the Commission 
on April 15th of each year following the first year of self-regulation. 
Failure to file such report shall be grounds for the removal of a 
certificate under Sec. 518.8.


Sec. 518.8  Does a tribe that holds a certificate of self-regulation 
have a continuing duty to advise the Commission of any information?

    Yes. A tribe that holds a certificate of self-regulation has a 
continuing duty to advise immediately the Commission of any 
circumstances that may reasonably cause the Commission to review the 
tribe's certificate of self-regulation. Failure to do so is grounds for 
removal of a certificate of self-regulation. Such circumstances may 
include, but are not limited to: a change in management contractor; 
financial instability; or any other factors that are material to the 
decision to grant a certificate of self regulation.


Sec. 518.9  Are any of the investigative or enforcement powers of the 
Commission limited by the issuance of a certificate of self-regulation?

    No. Subject to the provisions of 25 U.S.C. 2710(c)(5)(A) the 
Commission retains its investigative and enforcement powers over all 
class II gaming tribes notwithstanding the issuance of a certificate of 
self-regulation. The Commission shall retain its powers to investigate 
and bring enforcement actions for violations of the Indian Gaming 
Regulatory Act, accompanying regulations, and violations of tribal 
gaming ordinances.


Sec. 518.10  Under what circumstances may the Commission remove a 
certificate of self-regulation?

    The Commission may, after an opportunity for a hearing, remove a 
certificate of self-regulation by a majority vote of its members if it 
determines that the tribe no longer

[[Page 41972]]

meets the eligiblity criteria of Sec. 518.2, the approval criteria of 
Sec. 518.4, the requirements of Sec. 518.7 or the requirements of 
Sec. 518.8. The Commission shall provide the tribe with prompt notice 
of the Commission's intent to remove a certificate of self-regulation 
under this Part. Such notice shall state the reasons for the 
Commission's action and shall advise the tribe of its right to a 
hearing under Sec. 518. 11. The decision to remove a certificate is 
appealable to Federal District Court pursuant to 25 U.S.C. 2714.


Sec. 518.11  May a tribe request a hearing on the Commission's proposal 
to remove its certificate?

    Yes. A tribe may request a hearing regarding the Commission's 
proposal to remove a certificate of self regulation under Sec. 518.10. 
Such a request shall be filed with the Commission within thirty (30) 
days after the tribe receives notice of the Commission's action. 
Failure to request a hearing within the time provided by this section 
shall constitute a waiver of the right to a hearing.


Sec. 518.12  May a tribe request reconsideration by the Commission of a 
denial of a petition or a removal of a certificate of self-regulation?

    Yes. A tribe may file a request for reconsideration of a denial of 
a petition or a removal of a certificate of self-regulation within 30 
days of receipt of the denial or removal. Such request shall set forth 
the basis for the request, specifically identifying those Commission 
findings which the tribe believes to be erroneous. The Commission shall 
issue a final decision within 30 days of receipt of the request. If the 
Commission fails to issue a decision within 30 days, the request shall 
be considered to be disapproved.

Authority and Signature

    This Final Rule was prepared under the direction of Tadd Johnson, 
Chairman, National Indian Gaming Commission, 1441 L. St. N.W., Suite 
9100, Washington, D.C. 20005.

    Signed at Washington, D.C. this 29th day of July, 1998.
Tadd Johnson,
Chairman.
[FR Doc. 98-20723 Filed 8-5-98; 8:45 am]
BILLING CODE 7565-01-P