tribal government’s primary regulatory authority is recognized. We ask that the NIGC
make this recognition in all 16 sections of the regulations and remove the sunset
provision to clearly and unequivocally state that tribal governments are the primary
regulators of their gaming operations consistent with IGRA and the functions of the
TGRA.

Impact on Federal Court Decisions

An additional impact of the “sunset” provision is the nullification of federal court
decisions upholding the grandfathered gaming systems as Class II games within the
definition of the IGRA. The NIGC lacks the authority to overrule Congressional
legislation and federal court decisions through its rule-making powers. The IGRA
specifically defines Class II games, and federal courts have been tasked with applying
the IGRA definition of Class II games to specific games at tribal gaming facilities.”!°
The grandfathered systems that will be phased out from Class II gaming comply with the
Congressional definition of Class II games and have been judicially determined to be
Class II games under the IGRA. The perpetuation of the “sunset” provision is thus an
example of executive overreach through rule-making.

Grandfathered Gaming Systems Do Not Threaten the Integrity of Class Il Gaming

In addition to the absence of clear authority to promulgate Technical standards, it appears
that most, if not all, grandfathered Class II gaming systems have been operating without
any safety or integrity issues for many years. Therefore, it seems arbitrary and capricious
for the NIGC to recall such products from the market. Such recall does not appear to be
based on reasoned explanations. In general, a recall of products in operation before the

§ See 25 U.S.C. § 2703(7):

(A) The term “class II gaming” means—

(i) the game of chance commonly known as bingo (whether or not electronic, computer, or other
technologic aids are used in connection therewith)—

(J) which is played for prizes, including monetary prizes, with cards bearing numbers or other designations,
(ID) in which the holder of the card covers such numbers or designations when objects, similarly numbered
or designated, are drawn or electronically determined, and

(IID in which the game is won by the first person covering a previously designated arrangement of numbers
or designations on such cards, including (if played in the same location) pull-tabs, lotto, punch boards, tip
jars, instant bingo, and other games similar to bingo. . .

° US. v. 103 Electronic Gambling Devices, 223 F.3d 1091 (9" Cir. 2000). In this case, the 9" Circuit
rejected the federal government’s arguments that MegaMania, an electronic game, was an illegal gambling
device under the Johnson Act. The government focused on the game’s ante-up feature, the fact that
earnings were not contingent on other players, and that the manic pace and high stakes of the game were
not associated with traditional bingo games. The Court found that MegaMania was a valid class II gaming
machine under IGRA, and that the government’s attempts to re-define bingo based on traditional
characteristics of the game undermined the definition of bingo drafted by Congress.

1° U.S. vy. 162 MegaMania Gambling Devices, 231 F.3d 713 (10% Cir. 2000). In this action, the 10" Circuit
was faced with addressing MegaMania’s status as a class II game. The federal government once again
made the argument that MegaMania was banned under the Johnson Act. Like the 9" Circuit, the 10
Circuit rejected the government’s arguments, finding that because MegaMania linked up players across
multiple terminals and allowed for competition amongst the players rather than “the house,” MegaMania
should be designated as a technologic aid for use in bingo.


Indian lands and inspecting Indian lands on which Class II gaming is conducted. The
IGRA’s grant of rulemaking authority is limited to regulations necessary to implement
the express provisions of IGRA. The Technical Standards, in effect, create new product
standards, which is an exercise of authority beyond what is expressly conferred upon the
NIGC by the IGRA.

The NIGC previously relied on the statement of purpose included in the IGRA, which
stated that the purpose of the Act was to ensure that tribal gaming be “conducted fairly
and honestly by both operator and players” and “to ensure that the Indian tribe is the
primary beneficiary of the gaming operation.”> This general policy statement should not
be construed broadly to authorize the Commission’s enactment of regulations that create
product standards for Class II gaming systems. While federal courts are highly
deferential to administrative agency interpretations under the Chevron’ decision, they are
not bound by agency interpretations of federal statutes when the statute is not ambiguous.
There is no ambiguity in the IGRA provisions that specify the NIGC’s enumerated
regulatory powers, which are primarily investigative.

Primary Regulatory Authority of Tribal Governments

While it is questionable whether the IGRA provides the NIGC with a statutory basis for
the promulgation and enforcement of Technical Standards, it is unquestionably clear that
the Act recognizes significant tribal regulatory authority over gaming operations.
Specifically, the IGRA’s express language vests tribal governments with primary
regulatory authority over their gaming operations, subject only to the NIGC’s oversight
responsibilities as specified in the Act.” We note that the weight of the regulatory
responsibility falls most heavily on TGRAs that are responsible for carrying out the day-
to-day activities essential to the effective regulation of gaming. In the Nation’s view, this
is precisely as it should be given that the highest governmental interest in the regulation
of gaming belongs to tribal governments. In fifteen of the sixteen sections of Part 547,

(4) may demand access to and inspect, examine, photocopy, and audit all papers, books, and records
respecting gross revenues of class II gaming conducted on Indian lands and any other matters necessary to
carry out the duties of the Commission under this chapter;

(5) may use the United States mail in the same manner and under the same conditions as any department or
agency of the United States;

(6) may procure supplies, services, and property by contract in accordance with applicable Federal laws and
regulations;

(7) may enter into contracts with Federal, State, tribal and private entities for activities necessary to the
discharge of the duties of the Commission and, to the extent feasible, contract the enforcement of the
Commission’s regulations with the Indian tribes;

(8) may hold such hearings, sit and act at such times and places, take such testimony, and receive such
evidence as the Commission deems appropriate;

(9) may administer oaths or affirmations to witnesses appearing before the Commission; and

(10) shall promulgate such regulations and guidelines as it deems appropriate to implement the provisions
of this chapter.

5 25 U.S.C. § 2702(2).

© Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), in which the
Supreme Court held that courts must defer to agency interpretations of organic statutes where
Congressional intent is ambiguous and the agency interpretation is reasonable.

725 U.S.C. § 2710(a)(2).


regulation is usually triggered by a defect or flaw that poses an imminent threat to human
life. The Nation is unaware of any defects, flaws, or threats in relation to grandfathered
Class II gaming systems that would warrant a product recall.

The prior NIGC administration acknowledged the absence of evidence of defects in these
gaming systems; justification for implementation of the sunset provision relied solely on
the basis of a perceived risk of harm. In response to the numerous comments and
challenges to the regulation, the former Commission stated that “grandfathered machines
have, for the most part, continued to operate with relatively few problems to the patron or
the gaming operations. Nevertheless, lack of a major incident in the past does not mean
that the grandfathered Class II gaming systems pose no risk to patrons and the gaming
operation.”!! As of this date the concerns of the prior NIGC administration have not
materialized. The Nation requests that the current NIGC administration revisit the
rationale proffered by the previous Commission and find that it is an insufficient basis to
support the wholesale removal of Class II gaming systems from operation.

Conclusion

In closing, we again urge the NIGC to reconsider its approach to the grandfather
provisions and implement changes that will preserve the honesty and integrity of tribal
gaming without destroying its economic stability and future viability. We also ask that
you give careful consideration of our comments in your deliberations as you consider
revisions that will improve the overall regulatory environment within which Class II
gaming is conducted.

For the reasons identified above, we ask the NIGC to consider removing the sunset clause
and adding language that will authorize the continued use of any Class II gaming
component that was previously certified under current or any pre-existing Technical
Standards or approved by judicial ruling. Doing so will recognize the primary regulatory
authority that tribal governments have over gaming in their respective jurisdictions,
which is what the IGRA intended.

177 Fed, Reg, 58473, 58475.


OFFICE OF THE GOVERNOR
The Chickasaw Nation
Post Office Box 1548 ¢ Ada, Oklahoma 74821
(580) 436-2603 * Fax (580) 436-4287

BILL ANOATUBBY http: //www.chickasaw.net

GOVERNOR

Mr. Jonodev Chaudhuri, Chairman
National Indian Gaming Commission
1849 C Street NW

Mail Stop #1621

Washington, DC 20240

Dear Chairman Chaudhuri:

Included with this letter are the Chickasaw Nation’s comments regarding the
National Indian Gaming Commission’s 2017 Tribal Consultation relating to
grandfathered Class II gaming systems. We respectfully urge the Commission to
consider our request for the withdrawal of the sunset provision-for grandfathered Class II
gaming systems under 25 CFR § 547.5(b)(1).

Thank you for your consideration of our comments.

Sincerely,

Bill Anoatubby, Governor
The Chickasaw Nation



Comments from the Chickasaw Nation
Regarding 25 CFR § 547.5(b)(1).

The Chickasaw Nation (“Nation”) welcomes the opportunity to provide its comments to
the National Indian Gaming Commission pertaining to the sunset provision of the
grandfathering clause found in 25 C.F.R. Part 547 — Minimum Technical Standards for
Gaming Equipment Used With the Play of Class II Games (Class II Technical
Standards). The National Indian Gaming Commission (NIGC) has earned high marks for
its continuous efforts to reach out to tribal governments and solicit tribal input during this
important regulatory review process. We applaud the NIGC for engaging with tribal
governments during the early planning stages of the rulemaking process. Early tribal
involvement is a key step towards developing a final rule that will be at least minimally
acceptable to tribal governments. We continue to be encouraged by the NIGC’s
commitment to accommodate tribal concerns and propose revisions that will bring the
regulations closest to the purposes and goals of the Indian Gaming Regulatory Act
(IGRA).

Likewise, the Nation applauds the National Indian Gaming Association’s Class IL
Subcommittee and the work the members have completed relating to this topic. The
Nation has reviewed the subcommittee’s interim report, and believes the report and the
subcommittee’s investigation will be very helpful to the NIGC’s review and
consideration of this important issue.

As we have stated in the past, the Nation is concerned that the NIGC may not fully
appreciate the extent of the harm that is being threatened by the sunset clause of the
grandfather provisions. In short, the clause threatens the continued success and viability
of the Class II gaming industry by requiring the forced removal of certain game products
and systems from the marketplace on an arbitrary date without any evidence of past or
present harm. The economic impact of such removal will be disastrous for the tribal
gaming industry and will have a devastating effect on a vitally important portion of tribal
gaming. Significant human and economic capital has been invested by tribal
governments in constructing gaming systems based on the lawfulness of certain products
and their availability in the marketplace. In addition to creating a substantial hardship on
tribal gaming operations, the enforcement of the “sunset” provisions of the Standards will
invalidate Class II components previously validated by federal court decisions. Many
millions of dollars have been spent by tribal governments in litigation to vindicate the
lawfulness of certain systems. If allowed to stay, the regulation will directly defeat
IGRA’s goal “to promote tribal economic development, tribal self-sufficiency, and strong
tribal governments.”!

The Nation also remains unconvinced that the NIGC has the statutory authority to
promulgate and enforce the grandfather provision of the Part 547 Technical Standards,

125 U.S.C. § 2702(1).


and views attempts to enforce the grandfather provision as a usurpation of the role of
tribal regulatory bodies in overseeing tribal gaming operations.

Finally, it is unclear what enforcement of the sunset provision would accomplish. The
NIGC has stated the purpose for the promulgation and enforcement of the Technical
Standards is to protect the security and integrity of tribal gaming operations. Again, the
NIGC has provided no evidence that grandfathered games pose any such risks.

Economic Impact on Tribal Gaming

Tribal leaders, regulators, attorneys, manufacturers, and other tribal gaming industry
representatives agree virtually unanimously that the sunset clause will cause severe
economic harm to tribal governments. The Nation is disappointed that, despite this
overwhelming opposition, the agency has not adequately addressed the principal
objection that has been raised by the tribal gaming community by requiring the removal
of all grandfathered Class II gaming systems at the end of the sunset period. The
requirement that all previously manufactured products be removed from the marketplace
is notably inconsistent with fundamental principles of administrative law. We can think
of no administrative agency, including those with specific statutory authority to
promulgate product standards that would require a general recall of products in the
marketplace without a showing of a defect or flaw that poses an imminent threat.

The substantial economic harm to Class II gaming if the grandfathered games are
removed has been well documented. An early economic study sponsored by the NIGC
concluded that the economic impact of the regulations would result in a loss of tribal
gaming revenue ranging from $1.4 to $2.2 billion dollars.” Current estimates of lost
revenues appear to be consistent with the earlier projected losses and have not diminished
over time.

NIGC Statutory Authority for Promulgation of Technical Standards

It is questionable whether the NIGC has the appropriate statutory authority to promulgate
the Technical Standards under the Indian Gaming Regulatory Act (“IGRA”); it is a well-
settled tenet of administrative law that an agency may only exercise power pursuant to its
organic statute.? Section 2706(b) of the Act defines the powers of the NIGC relating to
Class II gaming. * Specifically, the NIGC is tasked with monitoring Class IT gaming on

? Alan Meister, The Potential Impacts of the October 2007 Proposed Class II Gaming Regulations (2008).
3 See e.g. BMW of North America, Inc. v. New Motor Vehicle Bd. (1984) 162 Cal.App.3d 980, 994, 209
Cal. Rptr. 50 [“It is fundamental that an administrative agency has only such power as has been
conferred upon it by the constitution or statute and an act in excess of the power conferred upon the
agency is void.”]

4 The NIGC’s powers relating to class II gaming are codified at 25 U.S.C. § 2706:

(b) The Commission—

(J) shall monitor class II gaming conducted on Indian lands on a continuing basis;

(2) shall inspect and examine all premises located on Indian lands on which class II gaming is conducted;
(3) shall conduct or cause to be conducted such background investigations as may be necessary;