) Canina Regulars Association
r AVC.
FH ot

NICC

Det: VV annrice Dowlovw
\8H44 C St. NW
Wasiinaton , DC 2OLYO


Chairperson: Kelly Myers Secretary: Traci Atkinson
Vice Chairperson: JeanAnn Blalock Treasurer: Jerrod Chester
Sergeant-at-Arms: Wes Pappan

Jonodev Chaudhuri, Chairman
National Indian Gaming Commission
1849 C Street Northwest
Washington, D.C. 20240

Re: 25 C.F.R. 547.5
Grandfathered Class II Gaming Systems

Dear Chairman Chaudhuri:

The Oklahoma Tribal Gaming Regulators Association (OTGRA) is a professional association of
Tribal Gaming Regulators in the state of Oklahoma. OTGRA’s mission is to support and
promote knowledge and education in tribal gaming regulation, to share information among its
members regarding important regulatory issues, and to provide technical support to its member
regulators to ensure best regulatory practices under the Tribal Gaming Laws, the Indian Gaming
Regulatory Act (IGRA), the National Indian Gaming Commission (NIGC) Regulations, and the
Oklahoma Tribal Compacts. In this capacity, the OTGRA has been closely engaged with its
member regulators and the NIGC regarding the status of Class II gaming systems that were in
operation when the NIGC Technical Standards were implemented and which have been
grandfathered under 25 C.F.R. 547.5 until a sunset of November 10, 2018.

The grandfathering provision was designed to ensure that the Class II gaming systems then
operating in the field met minimum technical requirements, --including game math, random
number generation, signaturability and version control, help screens, game rules, history and
payglass, -- in order to ensure the integrity of operation and, ultimately, fairness to the gaming
public. These critical compliance provisions are covered by the testing requirements of the
grandfather provision and have been overseen and enforced by our member regulators and the
independent testing labs that those regulators use in fulfillment of their primary regulatory
responsibility under IGRA.

You know the history of this issue, but it bears repeating in a summary fashion. The historic
struggle that Oklahoma Tribes endured in developing government gaming in the state led
directly to the development of a robust Class II gaming industry and market. Gaming patrons
have supported these games and, thereby, helped Tribes to generate crucial governmental
revenue, despite the difficulty in engaging the state in Class II] compacts. As a result, the

Page 1 of 3


grandfather provision carries with it an enormous potential impact on tribal gaming operations
across the state and tribal governmental revenue that must be considered when evaluating the
appropriate regulatory action on these games. It is estimated that approximately 24,000 Class II
gaming systems are currently in operation throughout tribal casinos in Oklahoma, comprising an
estimated 41% of total units in play. These gaming systems represent the majority of the most
profitable Class II games in play in the state, and are particularly important to smaller tribal
gaming enterprises, where the percentage in play and the importance of the revenue that they
generate is only magnified.

As indicated, one of OTGRA’s essential functions is as a central clearinghouse for information
about regulatory concerns including, especially, gaming device problems. When problems are
reported the information is shared with member regulators to allow them to determine whether
there are similar experiences in the field so that all our member regulators can work
collaboratively to address those issues. Over the last 8 years since the grandfather provision was
extended to a term of 10 years, there have been no reported compliance issues or incidents.
Moreover, many, if not all of the grandfathered systems in operation today have been subject to
system modifications under the provisions of the Class II technical standards, which allow for
modifications to game software and hardware provided that those modifications maintain or
advance the overall compliance of the gaming systems. So it is fair to say that under the
primary jurisdiction of our member regulators, the grandfathered Class II gaming systems have
improved their performance and compliance over time.

OTGRA respectfully suggests that its member regulators have fully and effectively fulfilled their
responsibilities as the primary regulators of Class II gaming systems in Oklahoma, and that the
grandfather provision should be extended indefinitely, subject to their continued role in ensuring
full compliance with the IGRA and the technical standards and their determination of when such
machines should be removed from play. If the NIGC’s goal is to ensure ongoing compliance of
these gaming systems, a sunset provision is an unnecessary and overbroad approach which really
has nothing to do with actual compliance. Moreover, the economic impact of such an action on
Tribes in Oklahoma will be enormous. It seems that the NIGC and the Tribal regulators’ mutual
desire to ensure a robust, fair and compliant Class II market can be achieved through a tailored
regulatory amendment, which recognizes the Tribes’ primary role in regulating the games,
implements technical standards that ensure ongoing rigorous evaluation of these games, and
avoids traumatic economic impact.

Specifically, OTGRA submits that the following modest amendments can achieve these goals:

1. Grandfathered Class II gaming systems may continue in operation for a period of
ten years from November 10, 2008 or, at the discretion of the Tribal Gaming Regulatory
Authority, for so long as the following provisions are met on at least an annual basis:

a. Tribes operating grandfathered Class II gaming systems manufactured on or
before November 10, 2008 or submitted to a testing laboratory recognized

Page 2 of 3


pursuant to paragraph (f) of this Section within 120 days after October 22, 2012
must perform the following:

i. An audit of the grandfathered Class II gaming system:

Servers;

Management consoles;

Local, multi-Site or Wide Area Progressive controllers.

A minimum of 10% of the electronic player interfaces in operation
at each of the facilities where the Tribe has grandfathered Class II
gaming systems in operation;

Financial instrument acceptors;

Financial instrument dispensers;

Financial storage components; and

Game software

YN

PINAY

ii. Audit findings must be made available to the NIGC upon request along
with approved testing laboratory reports for all Class II gaming system
components in operation at each location the Tribe conducts Class II
gaming.

When the sunset provision was extended for a term of 10 years, the provision was offered as a
“take it or leave it” solution based on the industry’s best guess at the life expectancy of the
games then in the field. Simply put, that estimate missed the mark, and these games have proved
popular, durable, and complaint and Tribes should not be economically penalized because of this
positive track record. Instead, OTGRA suggests that, as regulators, we should be focused on
ensuring that the grandfathered Class II gaming systems continue to be operated in a complaint
manner. OTGRA suggests that the foregoing proposal is a common sense regulatory approach
that ensures compliance and transparency and avoids the unnecessary and traumatic economic
impact of simply allowing an arbitrarily-set sunset provision to take effect.

OTGRA hopes that these comments are helpful to the NIGC in its continued consideration of
this important issue and offers them with all due respect. If you have any questions, please feel
free to contact me at Kelly-Myers@Cherokee.org and/or (918)-207-4914 or OTGRA legal
counsel, Joseph F. Halloran at (651) 644-4710 and/or jhalloran@thejacobsonlawgroup.com.

Respectfully,

Kelly Myers, Chairwoman

ce. OTGRA Board Members & Members
Joseph Halloran

Page 3 of 3