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May 30, 2017

The Honorable Jonodev Chaudhuri

Chairman, National Indian Gaming Commission

1849 C Street N.W.

Mail Stop #1621

Washington, D.C. 20240

Re: 25 C.F.R. Part 547 – Grandfathered Class II Gaming Systems

Dear Chairman Chaudhuri:

On behalf of the National Indian Gaming Association (NIGA), we offer the following comments 

on the “grandfathering” provision in the National Indian Gaming Commission’s (NIGC) Class II 

Technical Standards, 25 C.F.R. Part 547. In particular, we wish to comment on the “sunset clause” 

within the grandfathering provision, which provides that certain Class II gaming systems 

manufactured before November 10, 2008, must either be brought into compliance with the 

requirements of 25 C.FR. Part 547 or removed from play. 

As an initial matter, we would like to express our appreciation and support for the NIGC’s efforts 

to reach out and consult with tribal governments on this issue, which has long been a source of 

concern for both tribal governments and the NIGC alike. As acknowledged by the NIGC, the issue 

of grandfathered Class II gaming systems, “more than any other topic, has been the subject of long 

deliberation and analysis within the Commission.”i Tribal governments have similarly invested 

significant time and effort to better understand the impact of the sunset clause on tribal gaming 

operations. 

In fact, earlier this year, NIGA commissioned a Class II Gaming Sub-Committee (Class II SubCommittee) consisting of tribal regulators and other Class II gaming experts. The Class II SubCommittee’s initial project was to collect data concerning the technical performance of

grandfathered Class II gaming systems. With the assistance of the research firm KlasRobinson

Q.E.D., a survey was conducted across Indian Country to determine the quantitative impact of the 

sunset clause and the level of risk, if any, posed by grandfathered systems on the integrity and 

security of Class II gaming. 

The survey included the participation of 32 tribal governments representing 117 tribal casinos in 

12 different states. Of the participants, 18 tribes operating approximately 16,040 grandfathered 

Class II gaming systems in 93 casinos across 7 states, provided input on the integrity, safety, and 

security of their grandfathered games. Approximately 15,750 of the 16,040 grandfathered gaming 

systems surveyed were operated by Oklahoma tribes. 

As discussed below, the survey found no evidence whatsoever to indicate or even suggest that 

grandfathered Class II gaming systems are any less secure or more susceptible to a breach than 
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their fully compliant counterparts. We believe the survey results and findings provide the 

evidentiary basis needed to show that the sunset clause is neither appropriate nor justified and 

should be withdrawn from 25 C.F.R. Part 547. We hope that the NIGC will take the survey results 

and our comments below into due consideration and work to resolve this long-standing issue in a 

manner that will ensure the preservation and continued growth of the Class II gaming industry.

1. GRANDFATHERED CLASS II GAMING SYSTEMS DO NOT POSE ANY RISK 

TO GAMING OPERATIONS OR PATRONS AND ARE NO LESS SECURE THAN 

FULLY COMPLIANT CLASS II GAMING SYSTEMS. 

It has been nearly a decade since the grandfathering provision was first introduced by the NIGC 

for the purpose of “avoid[ing] any potentially significant economic and practical consequences of 

requiring immediate compliance”ii with the then-new Technical Standards. During the rulemaking 

preceding the 2008 final rule of 25 C.F.R. Part 547, one commenter suggested exempting all 

existing Class II gaming technology from the Technical Standards, to which the NIGC replied:

Perpetually grandfathering existing hardware will create a permanent class of 

non-compliant equipment. That is not consistent with the regulatory purpose 

of the technical standards, namely to ensure the integrity and security of Class 

II gaming systems and the accountability of Class II gaming revenue.iii

No further analysis or discussion was or has since been provided to support the NIGC’s conclusion 

that a permanent exemption of grandfathered games would somehow be inconsistent with the 

regulatory purpose of 25 C.F.R. Part 547. But an extreme measure such as the wholesale removal 

of a gaming product from the marketplace demands a compelling justification based on adequate 

facts and information. With less than two years remaining until the sunset deadline, the need to 

establish a rational connection between the regulatory purpose of the sunset clause and 

grandfathered gaming systems is more pressing now than ever before. 

The first step in establishing this connection is to determine the regulatory benefits, if any, in 

bringing all gaming systems into full compliance with 25 C.F.R Part 547. Or, put conversely, 

identifying the regulatory detriments that would result from the continued operation of 

grandfathered games past the sunset deadline. Before the sunset clause takes effect, it should be 

undeniably clear that the mandatory retirement of grandfathered gaming systems will make Class 

II gaming safer and more secure. The non-compliant status of grandfathered systems, standing 

alone, is not a sufficient basis upon which to mandate a recall of lawful gaming equipment. 

Moreover, if the regulatory objective of 25 C.F.R. Part 547 is to ensure the integrity and security 

of Class II gaming systems, there must be some evidence to support the NIGC’s position that 

maintaining grandfathered games past the sunset deadline will somehow impede achievement of 

this objective. Since even the most highly regulated gaming activity is subject to some degree of 

risk, the evidence must show that grandfathered gaming systems are subject to increased risks 

relative to their fully compliant counterparts. 

The survey commissioned by the Class II Sub-Committee was focused on gathering information 

on the above issues, relying on the experiences and knowledge acquired by Class II gaming tribes. 

Of the 93 casinos with grandfathered systems that were surveyed, not one reported any breaches 
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of safety, security, or integrity during operation, or believed that grandfathered systems were 

susceptible to cheating or manipulation by patrons. Survey participants did, however, report a 

few, albeit very minimal, compliance issues with fully compliant systems. Though few in number, 

they nonetheless exceed the number of compliance issues reported with respect to grandfathered 

systems. Based on their experiences, all 93 casinos unanimously agreed that there are no technical 

or commercial reasons why grandfathered systems could not be offered after the sunset deadline 

of November 10, 2018. 

In the nearly ten years since the promulgation of the grandfathering provision, we have not been 

made aware of any documented instances where a grandfathered system posed a greater risk to 

patrons or the tribal gaming operation than a fully compliant gaming system. As confirmed by the 

survey results, there is simply no basis for concluding that the removal of grandfathered Class II 

gaming systems will make Class II gaming any safer or more secure. The mere fact that a system 

is fully compliant with 25 C.F.R. Part 547 does not seem to bear any regulatory benefits with 

respect to the safety, security, or integrity of Class II gaming. Therefore, full compliance with the 

Technical Standards, while important, is not a necessary condition to achieving the NIGC’s stated 

regulatory objectives. 

Moreover, experience has shown that grandfathered gaming systems are no less technically 

advanced or secure than fully compliant systems. In fact, some game manufacturers provide

grandfathered systems that are more advanced and secure than what is required by 25 C.F.R. Part 

547 and tribal regulators. It should also be noted that TGRAs have been exercising their authority 

as the primary regulators of Class II gaming to evaluate and approve modifications that have 

improved the overall performance and compliance of grandfathered Class II gaming systems. 

In the absence of any identified risks or threats, a rational connection cannot be drawn between 

the sunset clause and the regulatory purpose of 25 C.F.R. Part 547. There are no facts or evidence 

to support a hard sunset deadline, nor does the historical record of Class II gaming support the 

NIGC’s proposition that the operation of grandfathered games will compromise the safety, 

security, or integrity of Class II gaming. 

Given that grandfathered systems have been operating for over a decade without any safety or

integrity issues, a blanket recall of such products from the market would constitute an arbitrary 

and capricious act. 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 to human 

life or safety. The survey findings did not reveal any defects, flaws, or threats – technical or 

otherwise –in relation to grandfathered systems that would warrant a product recall. 

However, even assuming, arguendo, that grandfathered gaming systems did somehow pose a 

higher risk to patrons or the gaming operation than fully complaint systems, such risks would be 

continuously mitigated and avoided through the monitoring and enforcement functions of tribal 

gaming regulatory authorities. The day-to-day, frontline regulation of tribal gaming is performed 

by tribal gaming regulatory authorities, who possess both the knowledge and technical expertise 

to immediately identify, assess, and mitigate any potential or actual threats and risks to the gaming 

operation. As the primary regulators of Class II gaming, tribal gaming regulatory authorities 
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should be fully accorded that role in the NIGC’s regulations, especially those governing Class II 

gaming activities such as 25 C.F.R. Part 547. 

2. IMPLEMENTATION OF THE SUNSET CLAUSE WILL CAUSE SIGNIFICANT 

ECONOMIC HARM TO THE CLASS II GAMING INDUSTRY AND THE TRIBAL 

GOVERNMENTS WHO RELY ON CLASS II GAMING REVENUE AS AN 

IMPORTANT ECONOMIC BASE. 

In the consultation briefing materials provided to us earlier this year, the NIGC included a 

background discussion of the grandfathering provision, which noted the “particular concern” at 

the time the regulation was promulgated of “the potential financial burden on bringing gaming 

systems that had already been manufactured and/or put into play . . . into compliance with the new 

2008 rule.”iv As explained by the NIGC, the grandfathering provision was enacted to “reduce that 

cost”v to tribal governments. 

If the intent of the grandfathering provision is to mitigate the costs of compliance to tribal 

governments, it is unclear why it still includes a sunset requirement that is certain to cause 

significant economic harm without generating any appreciable regulatory benefits. The financial 

hardship on tribes should not be any less of a concern today than it was when the grandfathering 

provision was first enacted in 2008. 

The negative economic impact of the sunset clause will be immense and jeopardize the economic 

viability of the Class II gaming industry, which is of vital importance to tribal governments not 

just financially, but also as an aspect of tribal sovereignty and economic development. 

Grandfathered Class II gaming systems represent a large percentage of the total Class II gaming 

systems in play nationally. To provide a sense of scale, in Oklahoma alone, there are 

approximately 24,000 grandfathered Class II gaming systems, which constitute roughly 41% of all 

Class II gaming systems in operation nationwide. Implementation of the sunset clause would wipe

out nearly half of the Class II gaming systems across Indian Country. 

When calculating the compliance costs associated with the sunset clause, it is important to bear in 

mind that the economic costs to tribal governments will go beyond the direct costs of replacing 

grandfathered equipment. First, there is the loss of the tens of millions of dollars that have been 

invested by tribal governments in purchasing and maintaining grandfathered gaming equipment

and technology. There are also the costs associated with the downtime required to upgrade or 

replace grandfathered systems, which could take up to 30 days or longer. The loss of play and 

visitation by patrons who prefer the retired grandfathered games would also cause serious 

economic harm to those tribal governments who rely on grandfathered games as a major source of 

tribal revenue. 

We note that at the time the grandfathering provision was enacted, the NIGC’s belief was “that 

natural market forces” would phase out existing Class II gaming technology, and that the “looming 

sunset of the grandfather period would otherwise incentivize the industry’s transition to fully 

compliant systems.”

vi It appears the NIGC predicted that these events would help mitigate the 

costs associated with replacing grandfathering equipment. However, this has not proven to be the 

case; in fact, the opposite result has occurred, as confirmed by the survey results. 
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Survey participants with grandfathered games unanimously reported that their grandfathered Class 

II gaming systems are still profitable for their casinos, and that none of their patrons are demanding 

that they be replaced with more modern machines. One participant commented that “some of the 

grandfathered games have the highest following among any of the offered games.” For one tribe, 

the “Class 2 grandfathered games earn the most revenue per day per device.” As expected, the 

survey confirmed that grandfathered gaming systems not only have a loyal customer base, but are 

in some instances preferred over newer games that lack the familiar look and feel that patrons 

expect. 

Thus, none of the predicted cost-mitigating events appear to have occurred. Contrary to the 

NIGC’s predictions, market forces have actually supported rather than stymied the continued 

operation and economic viability of grandfathered Class II gaming systems. Given their popularity

and profitability, there is no real incentive – financial or otherwise – for tribal gaming operations 

to even begin considering the replacement of grandfathered gaming systems for fully compliant 

ones. The financial burden that was of “particular concern” in 2008 has not lessened, but rather 

increased exponentially and should be at the forefront of the NIGC’s deliberations. 

3. CONCLUSION

In closing, we wish to thank the NIGC for this opportunity to share our views and concerns 

regarding the grandfathering provision in 25 C.F.R. Part 547. We again urge the NIGC to 

reconsider its approach to the sunset clause, which will have serious consequences on the economic 

well-being of tribes and their interdependent industries. The goal should be to reduce or avoid 

unnecessary compliance costs, without sacrificing the benefits of regulation. Where, as here, there 

are no demonstrable benefits of regulation associated with the sunset clause, there is simply no 

basis or justification for mandating the retirement of lawful, profitable, and secure gaming systems. 

We hope these comments prove helpful to the NIGC, and we would be pleased to provide any 

additional information or assistance you may require.

Sincerely,

Ernest L. Stevens

Chairman 

i

Minimum Technical Standards for Class II Gaming Systems and Equipment, 77 Fed. Reg. 58475 (Sept. 21, 2012). 

ii Technical Standards for Electronic, Computer, or Other Technologic Aides Used in the Play of Class II Games, 73 

Fed. Reg. 60,508, 60,521 (Oct. 10, 2008) (to be codified at 25 C.F.R. pt. 547). iii Id. at 60,521.

iv NIGC Consultation Briefing 2017, pg. 7, available at https://www.nigc.gov/images/uploads/2016-12-

12%20Consultation%20Briefing%20clean.pdf. v Id. vi Id.