“morphing”, ultimately this means that when a player pushes a stop button, the reels do
not immediately come to a stop but instead, the reels continue to scroll through the video
window. In those circumstances, the player has no control over the outcome of the game.
The outcome of the game is thus unpredictable. We conclude that when morphing occurs,
there is a substantial element of chance in the play of that game.

3. The machines have fast spinning reels with a large number of icons
that often lack a repeating sequence.

Even without morphing, there is sufficient additional evidence in the record to
indicate that there is a substantial element of chance in the operation of all of the games.
Importantly, one must look at how the game is displayed on the video screen. While a
game may have a small number of icons, for example eight or ten, these symbols are
programmed in such a way that precludes a human from developing the skill of
memorizing or deciphering the pattern of the icons, thus being able to predict the
appropriate time to attempt to “stop” the games by touching the screen. The number and
pattern of icons vary from game to game; however, all of the games had icons arranged in
complicated pattern and were rotated on the video screen extremely quickly. For
example, in Respin 777, the reel strips exceeded 400 symbols most of which did not
follow any discernable sequence. In another example, the game Rainbow Reels had eight
different icons in the reel rotation. In a sequence of over 380 icons, no repeating pattern
could be identified. Chairman’s Exhibit C 4 and C 14; TR 48-53. Such an arrangement
of the icons precludes a person from stopping on the precise icon he or she wants. Some
players may have the illusion that he or she is selecting the icon; however, the player is

left mostly, if not completely to chance.

20


APPLICABLE LAW

1. Statutory framework and applicable case law.

The question raised by the notices of violation and closure orders is whether the
machine games at issue constitute gambling and are thus Class III or whether the games
are skill games and thus amusement devices.

Under the IGRA, Class III gaming is defined as “all forms of gaming that are not
Class I or Class II gaming.” 25 U.S.C. § 2703(8). NIGC regulations define class III
gaming to include, among other things, “any slot machines as defined in [the Johnson Act
at] 15 U.S.C. § 1171(a)(1) and electronic or electromechanical facsimiles of any game of
chance.” 25 C.F.R. § 502.4(b). NIGC regulations further define electronic or
electromechanical facsimiles as “any gambling device as defined in 15 U.S.C. 1171(a)(2)
or (3).” Therefore, the Chairman’s Notice of Violation raises the question of whether the
machine games are a Class III gambling device. To be a Class III gambling device under
the NIGC regulations depends on whether they fit within one of the three categories of
gambling devices identified by the Johnson Act. The definition of a gambling device
televant to this appeal is as follows:

[A]ny other machine [other than a slot machine] or
mechanical device (including, but not limited to,
roulette wheels and similar devices) designed and
manufactured primarily for use in connection with
gambling, and (A) which when operated may deliver, as
the result of an application of an element of chance,

any money or property, or (B) by the operation of which

a person may become entitled to receive, as the result
of the application of an element of chance, any money or

property...

14


games involves a substantial element of chance. Each of these games exhibit
combinations of characteristics that are indicia of chance, including reels that morph,
reels that spin rapidly, reels that contain a large number of icons that tend to blur, games
that are predetermined and contain retention or award ratios, and devices that contain an
all stop button. As a result, these machines cannot be characterized as amusement
devices, but rather as Class III games of chance, prohibited in the absence of an approved

tribal-state compact.

24


MOTION TO DEFER HEARING AND STAY ENFORCEMENT PROCEEDINGS

The Commission first addresses a procedural issue raised during the course of
administrative litigation. In a November 16, 2001, Motion to Defer Hearing and Stay
Enforcement Proceedings, the Tribe citing the inequity wrought by the Supreme Court’s
decision in Seminole Tribe of Florida v. Florida, 116 S.Ct. 1114 (1996), sought a stay of
the hearing and enforcement proceedings one of four events happens: until thirty days
after Congress amends the Act; a Federal appeals court sustains the Secretarial
procedures contained in 25 C.F.R. part 291; the Secretary of the Department of the
Interior “affirms” the availability of the Secretarial procedures®, or the Tribe enters into a
tribal-state gaming compact. By Order dated January 7, 2002, the Presiding Official
denied this request.

In this case, which involves a closure order, the Commission’s regulations
expressly require the Presiding Official to act. Subsection (b) of 25 C.F.R. 577.4
provides that “If the subject of an appeal is whether an order of temporary closure should
be made permanent or be dissolved, the hearing shall be concluded within 30 days after
the Commission receives a timely notice of appeal, unless the respondent waives this
requirement. Notwithstanding any other provision of this part, the presiding official shall
conduct such a hearing in a manner that will enable him or her to conclude the hearing
within the period required by this paragraph, while ensuring due process to all parties.”
Stated otherwise, the presiding official has a responsibility to reach a recommended
decision and the Presiding Official in this case did not err by discharging his

responsibility. We affirm the Presiding Official’s decision on this matter. There is

© We note that the secretarial procedures are final regulations at 25 C.F.R. part
291. As such, they are part of the law of the Department of the Interior and require no
further “affirmation”.


4, The machines have retention ratios — an indicator of chance.

Additional evidence that proves a game is one of chance is whether that game has
“retention ratios” or “award ratios’. These ratios indicate that the game has a
predetermined outcome. If the games have a predetermined outcome, the machine is
determining the outcome of the game, not the player. When “Tetention ratios” are being
utilized, the player pressing the stop button for the reels is just telling the machine to
display the result that it has already selected. TR 293-294. The game’s computer, not the
player determines the result of the game. The evidence reflects that the following games
have retention ratios: Lucky Cherries (Pirate’s Gold, Klondike, Funny Fruit, and Reel
Fortune) and Rainbow Reels. TR 51-52, 284-309; Chairman’s Exhibits C 16, 17, 18 and
19.

5. The machines have “all-stop” buttons.

Another factor indicating that a game has substantial elements of chance is the
presence of an “all-stop” button that brings all the reels to a stop with one push of a
button. As in “Reels of Skill”, the “all-stop” button allows a player to stop one of the
spinning reels but has no control over the other reels. This feature indicates that the
player can play the machine without the application of any “skill” and have the result
determined solely by the game itself. There remains an element of chance in when and
how a player might win an individual game. The evidence reflects that Spin Ball Bonus,
Triple Sevens, and four out of five of the games within Pot O Gold have “all stop”
buttons. (TR 274, 275)

6. The Tribe fails to contradict the expert testimony.

21


strong evidence as to how random number generation is manifested in each of the devices
and knowledge of such may supplement an expert’s opinion that the play of the games
exhibits a substantial element of chance, the unavailability of the source code is not fatal,
provided there is other evidence sufficient to establish by a preponderance that a
particular device constitutes a game of chance. In fact, many other jurisdictions have
relied on expert witness evaluation of game features in establishing that slot-machines-
like devices were gambling devices under federal or state law without using source codes
as evidence.!®
CONCLUSION

Consistent with the traditional standard of proof in administrative adjudications,
the Chairman must prove his case by a “preponderance of the evidence”. See In the
Matter of JPW Consultants, Inc., Docket Nos. NIGC 97-4, 98-8. The Chairman met this
burden with respect to the Infinity group games because both the initial spin and the
respin are the products of random generation or “chance,” and the game’s payoff can
only be delivered “as the result of the application of the element of chance.” Likewise,
we conclude that the Chairman met his burden as to the Non-Infinity Group games. Not

only do the games look and act like classic slot machines, the successful play of the

” See U. S. v 108 Electronic Gambling Devices (U.S. D.C. W.D. of WA)(Case # 098-
05321R) (Order directing seizure of 108 gaming devices from an Indian gaming facility).
See also the following state court cases: Cowboy's Lounge v James Hayes, Circuit Court
of Etowah County, Alabama (Case # CV-01-1142) Order dated March 22, 2002, finding
various video slot machines to be gambling devices under Alabama law based on
testimony of expert who had not evaluated source code; State of Alabama v. $1895 U.S.
Currency and 32 Video Gambling Devices, Circuit Court of Jefferson County, Alabama
(Case # CV. 1999-7032) Order dated July 6, 2001, finding various video slot machines to
be gambling devices under Alabama law; Broward Vending v. State of Florida, Florida
Seventeenth Judicial Dist. (Case # 96-02816(13)); State of Florida v. Slichter, Florida
Seventeenth Judicial Dist. (Case # 001797CF-10A).

23


spinning until the player pushes a button. On the left side of the screen is a menu
indicating how the player may obtain “bonus” play on the machine. The player may
wager on multiple lines (from 1 to 8 lines, including 3 horizontal, 3 vertical and 2
diagonal lines) and receives credits for lining up winning patterns of symbols on these
lines an loses credits when the winning symbols do not line up in a winning pattern. The
device also has a hold feature which can be utilized to “hold” two similar symbols in one
line for replay during the next spin.

In the Reels of Skill decision, the Commission found that because the game
exhibited features which were deemed indicia of an intent to design and manufacture a
machine primarily intended for use in connection with gambling and that the game had an
“anomaly”"® found to exist in the Reels of Skill machines operated in Oklahoma, the
machine was a game of chance. Based upon the physical evidence and the expert
testimony, the Commission found that in the Reels of Skill machine, there is a substantial
element of chance involved in the operation of the game even when played by the most
skilled and experienced players.

ANALYSIS — REEL GAMES INVOLVE A SUBSTANTIAL
ELEMENT OF CHANCE

We see no principled difference between the games at issue and the “Reels of
Skill” game subject to an earlier Commission decision. The instant games involve icons
spinning at a fast rate of speed and a player relying on chance rather than “skill” to obtain

a winning combination.

'8 The feature described as “anomaly” in the Reels of Skill game is referred to as
“morphing” in the games at issue.

18


have stopped and a winning combination is not obtained, the player has an option to
select one of the nine reels to respin. TR 220-221; also Exhibit C 12 p. 2. “The players’
stopping the spinning reels has no effect on the icon that is going to appear.” TR 447.

The copy of the U.S. Patent indicates that “one or more random numbers are
generated in the slot machine’s microprocessor...” on both the initial spin and on the
respin, (Exhibit C 22, p. 1, pp. 2-3 items 1 and 14, p. 5 “Summary”, p. 8 3" paragraph).
Mr. Dietz, the patent holder and designer of the Infinity games, corroborated that “[T]he
appearance of an icon in each of the nine windows on the initial phase is controlled by a
random number generator . . .” TR 442, also TR 445, 447, Likewise, the respin is the
“product of random generation.” TR 454, 463.

The Presiding Official recommended that the violations cited in NOV 00-06 and
CO-00-06, which pertain to all the games in this group be sustained by the Commission
and that the Respondent be ordered to cease and desist the operation of these games.

2. The Non-Infinity Group Machines’?

Although there are a number of different machines in this group, they are all the
same reel type of gambling machines as the Infinity machines. Source codes were not
provided for any of these machines to the Chairman’s experts or to the Tribe’s expert,

Mr. Snyder. TR 193-195; Exhibit 23. Therefore, no source codes were used to analyze

'2 These machines include: Rainbow Reels; Fantasy Fives; Pot of Gold - a multi
game device offering Triple Sevens, Gold Row Bonus, Spinball Bonus, and Respin
Seven; and, Lucky Cherries - another multi game device offering Pirate’s Gold, Klondike
5, Funny Fruit, and Reel of Fortune. The record is not always clear as to the identity of
the manufacturer/distributor; but for purposes of this decision it excludes the Infinity
Group, Inc.

10


(D) a statement by the Party’s agent or servant concerning a matter
made within the scope of agency or employment, made during the
existence of the relationship[.]
If the statement is hearsay, and Federal Rule of Evidence 802 excluding hearsay is
applied, the document is still admissible as an exception to the Rule. Rule 803, Hearsay

Exceptions; Availability of Declarant Immaterial, states:

The following are not excluded by the hearsay rule, even though

the declarant is available as a witness:
RK

(6) A memorandum, report, record, or data compilation, in any

form, of acts, events, conditions, opinions, or diagnoses, made at or near

the time by, or from information transmitted by, a person with knowledge,

if kept in the course of a regularly run business activity, and if it was the

regular practice of that business activity to make the memorandum, report,

record, or data compilation...

Mr. Snyder prepared a report in the normal course of that business for
Respondent, providing facts and an opinion that results from games played on each of the
machines he evaluated were determined by an element of chance. Respondent produced
this report during the discovery phase of this case. Even if the Federal Rule of Evidence
802 were applied, Mr. Snyder’s report is admissible either as a document that was not
hearsay (as an admission by a party-opponent, made by the party’s servant) or because it
falls within a recognized exception to the Hearsay Rule (reporting facts and an opinion
made in the regular course of business, etc.). The report also meets a trustworthiness
standard were that to be part of the admissibility decision. Mr. Snyder’s report is
consistent with the findings and conclusions of Mr. Sertell and Mr. Farley who evaluated

the gaming devices at issue in the case, and thus the report can be considered

trustworthy.®

5 There was no challenge to the authenticity of the Snyder Report.


simply no authority, implied or explicit, in the appeal regulations suggesting that the

Presiding Official is authorized to truncate an enforcement action by staying a decision.”

While the presiding official is given authority to “[rjegulate the course of the hearing”

and to “[d]ispose of procedural requests or similar matters,” there is no apparent authority

to simply place the hearing on hold for an undetermined period. 25 C.F.R. § 577(b)(5).
EXHIBIT 23

In an August 15, 2001, Order, the Tribe was required to submit a report of its
expert witness (Exhibit 23). The Tribe’s report authored by Mr. Snyder, dated October 3,
2001, reviews eight games: Re-Spin 777; Triple Sevens; Gold Row Bonus; Spinball
Bonus; Reel of Fortune Pirates Gold; Funny Fruit; and Klondike. The Presiding Official
excluded that report apparently on the basis that the report was hearsay and the Tribe’s
counsel did not have the opportunity to cross-examine the expert.

The general rule is that hearsay is admissible in administrative hearings. We find
that the document should not have been excluded under that general rule. The test for
admission should be whether the report is relevant and not cumulative with other
evidence in the case.

The document is not necessarily hearsay under the Federal Rules. Federal Rule of

Evidence 801(d), Statements which are not hearsay, states:

A statement is not hearsay if —

RK

(2) Admission by a party-opponent. “The statement is offered
against a party and is ...

7 See 25 C.F.R. § 577.7(a). Once designated by the Commission, the presiding
official shall set the case for hearing.


1. The machines resemble gambling devices.

First, the devices look and act like classic slot machines. The devices are housed
in cabinets that are the same size as slot machines or other video gambling devices. The
devices accept paper money. Further, the video screens on the devices have icons on the
reels that rotate extremely quickly through the video window. Finally, if a player wins,
he or she can redeem money.

The outward appearance of a device, though relevant, is not necessarily
dispositive of the issue of whether it may be properly characterized as a gambling device.
Further inquiry is needed to determine whether or not the successful play of such device
involves a substantial element of chance.

2. The machines exhibit “morphing” — an indicator of chance.

Machine games of chance possess certain characteristics that when taken together
with the outward appearance of the device will inevitably lead to a conclusion that a
substantial element of chance is involved in order for a player to win the game. In this
case, the machine games at issue possess a combination of characteristics that foreclose a
determination that skill is a meaningful component in a win.

After reviewing the machines at issue in this case, Mr. Farley, the Chairman’s
expert, noted that when a player “stops” the reels after either the initial spin or the respin,
the reels do not follow the ongoing sequence of icons. Instead, there is a jump out of
sequence. In other words, the icons can randomly change. Mr. Farley testified that this
phenomenon that he called “morphing” can occur in two ways: a random number
generator or a “lookup” table, where stop values were stored in memory and then

recalled, producing the result. (TR 226-227, 289-291). Regardless of the source of the

19


DESCRIPTION OF THE GAMES

There are a number of machines subject to the two notices of violation and
closure orders. They are most easily divided into two groups. The first group consists of
a series of games manufactured by Infinity. The second group consists of games very
similar to the first but is manufactured by other companies.

1. The Infinity Group Machines”.

While the Infinity Group machines differ in graphics, themes, and cabinetry, they
use essentially the same software’. TR 215. The games are video reel games that are
graphically represented by 9 independent reels, arranged in “tic-tac-toe” fashion, which
permit a maximum bet of 32 credits on 8 lines. TR 216-224. There are 6 symbols or
icons which follow a repeating pattern of 26 icons on each of the 9 reel strip and that are
unique to each game. Exhibit C 12 and C 13 Appendices A. The player initiates the
game by inserting paper currency'! and either playing the maximum bet or pushing a
button or a video touch screen to start an initial spin of all 9 reels. The reels may be

stopped individually by touching the screen or by pushing a button. When all nine reels

9 Lucky Break, Red Hot and Blue, Sovereign Sevens, Red Hot Respin, and
Buffalo Nickels are reported in Exhibits C12 and C 13 and corresponding Appendices.
Cf. TR 202, 215-216.

10 Noting some differences in software the Chairman’s expert, Mr. Farley,
testified: “It seemed that the software used in the Red Hot and Blue, Sovereign Sevens,
Lucky Break and Red Hot Respin [Skill Stop Version 4.41] was an updated version of the
software utilized in Buffalo Nickels [Version 4.38]. It was just a progression. It seemed
like the only difference between the two versions was the 9 of a Kind jackpot, from what
Icould see.” TR 217. Respecting Red Hot Respin report [Exhibit C 12] there are
different functions, such as the absence of a Set Up Menu [Exhibit C12 p.4], and in
addition there are some questions as to the source code [Exhibit C 12 p. 11] since it was
not the same source code as the one presented on the video tapes [Exhibit C 12 p. 14].

" Red Hot Respin report suggests that there is programming in that particular
game for “Coins In, Coins Out”. Exhibit C 12 p.4


NOTICE AND ORDER

Please take notice that it is the decision of the National Indian Gaming
Commission, by unanimous vote, that the games described herein are Class II] gambling
machines and that operation of the games constitute Class III gaming activity. Class III
gaming activity on Indian lands is not lawful under 25 U.S.C. 2710(d) unless conducted
in conformance with a tribal-state compact. Inasmuch that Appellant tribe does not have
a compact with the State of Oklahoma that would permit operation of such gaming, such
operation constitutes a violation of the Indian Gaming Regulatory Act.
Now, therefore, the National Indian Gaming Commission orders:
That Appellant shall cease and desist from operation of the games described herein, and
the following orders of temporary closure issued by the Chairman of the National Indian
Gaming Commission shall become permanent as of the date hereof:
CO-00-06 (Seminole Nation of Oklahoma)
CO-00-10 (Seminole Nation of Oklahoma)
FOR THE NATIONAL INDIAN GAMING COMMISSION

Date: May 7, 2002

Teresa Poust
Commissioner

Montie Deer
Chairman

25


‘ev

National Indian Gaming Commission

NOTICE OF DECISION AND ORDER
In the Matter of the Seminole Nation of Oklahoma
NOV-00-06, CO-00-06
NOV-00-10, CO-00-10
Docket Nos. NIGC 2000-6 AND 2000-1
Seminole Nation — Appellant

INTRODUCTION

The question before the National Indian Gaming Commission is whether the
games at issue in this case may be properly characterized as amusement devices, and thus
not within the ambit of the Indian Gaming Regulatory Act, or gambling devices, the play
of which is prohibited unless authorized by a valid tribal-state compact. Having
considered the record and all of the facts in evidence in light of applicable case law and
precedent, the Commission concludes that the subject devices may not be properly
characterized as amusement devices, but instead constitute gambling devices subject to
all the conditions and prohibitions set forth in the Indian Gaming Regulatory Act. In
light of this determination and given the fact that no tribal-state compact is in place
authorizing the play of these games, the National Indian Gaming Commission therefore
affirms the recommended decision of the Presiding Official on NOV-00-06; CO-00-06;
overrules the decision of the Presiding Official on NOV-0010; and CO-00-10; affirms the
decision of the Presiding Official denying Appellant’s Motion to Defer Hearing and Stay

Proceedings; and, reverses the decision of the Presiding Official to exclude Exhibit 23.


Travel Plaza, Seminole Nation of Oklahoma, September 5, 2000, Item 7 of the Agency
Record, NOV-00-10, CO-00-10, TR 259.

There are five games played on the Pot O Gold machines, the Respin 777, Spin
Ball Bonus, Triple Sevens and Gold Row Bonus. TR 270, C 15. The Respin 777
contained 16 different icons but after viewing 150 of the icons pass through the video
window, no repeating sequence could be identified. TR 273. The Spin Ball Bonus used
14 different icons with not detectable repeating sequence. TR 276. Triple Sevens
played 12 different icons with no apparent repeating sequence after viewing 150 icons.
TR 278. The Gold Row Bonus used 13 different icons and no repeating sequence was
discernible after viewing 150 icons. TR 281.

The games have buttons on the cabinets that allow the player to stop each reel
individually. TR 261. Touching the reel can also stop some of the games. C 271- 272, C
15. The first four games have a button on the cabinet that is an all stop feature that stops
all of the video reels at the same time. TR 263, 274, 277 - 278, 292. These games have
preset retention ratios — the percentage amount of win established and kept by the house.
TR 293, 295. Further, when a player pushes a stop button, the reels do not immediately
come to a stop; they continue to scroll through the video window. TR 282.

There are four games played on the Lucky Cherries machines, the Pirate’s Gold,
Klondike, Funny Fruit, and Reel Fortune. On Pirate’s Gold, there were 8 different icons
with a repeating sequence of 101 icons. TR 297. On Klondike 5, there was a repeating
series in 100 icons. TR 297. On Funny Fruit there were 8 different icons and a repeating
series in 100 icons. TR 302. On Reel Fortune, there were 8 icons in a repeating sequence

of 100 icons. TR 307. In all of the games, when the player pressed the stop button, the

12


these latter machines.'? However, while the source code would have had some
evidentiary weight, its absence is not dispositive as to the central question of whether the
game is a gambling game. The important element to prove in this case is not the location
of a random number generator in the source code for the machine. The important
element to prove is whether by application of an element of chance, a player becomes
entitled to the reward when she operates the machine.

The games in this group range from 3 reel-3 line nickel machines with maximum
bet of 15 credits (Gold Row Bonus) to 9 reel-8 line nickel machines with respin features
and a maximum bet of 40 credits (Triple Sevens) comparable to the Infinity Group
machines. TR 258-308. Most of the games were the common 5 reel-5 line. TR 259.
Likewise, the icons varied in number and the reel strips in some games exceeded 400
symbols (Respin 777) most of which did not follow any discernable sequence. TR 273,
283. To play the game, the player inserts money into a bill acceptor on the machine. C
14-19, page 1 on each exhibit. The player receives credits that can be wagered to buy
pay lines. C 14-19, page 1 on each exhibit. The icons on the reels rotate extremely

quickly through the video window. Video Recordings at Rivermist Gaming Center and

"3 The Chairman’s First Request for Discovery, dated February 16, 2001,
requested the source codes, as well as outlines and annotations describing the location of
the software and execution and locations of various routines in the source code. In an
April 4, 2001, letter, Chairman’s counsel indicated that the Tribe had still not provided
the requested source codes. In July 24, 2001, the Tribe filed Respondent Seminole
Nation of Oklahoma’s Brief in Opposition to the Chairman’s Motion to Compel
Discovery that indicated that the Tribe that it could not provide all of the requested
information but also indicated that it provided a source code. Apparently, despite the
Tribe’s assertions of compliance with the discovery requests, as reflected in the Presiding
Official’s, April 8, 2002, recommended decision, the Tribe failed to provide all of the
requested source codes.

11


The report was the Tribe’s; the Tribe included the expert on its witness list and
the Tribe could have cross-examined the expert or submitted a different report if it was
not of acceptable quality. Consequently, we conclude that the report should be included
in the administrative record as relevant evidence.

ENFORCEMENT AUTHORITY AFTER THE ELEVENTH CIRCUIT’S
ELEVENTH AMENDMENT DECISION

The Tribe’s argument that the NIGC lacks enforcement authority after Seminole
fails. (See Seminole Tribe of Florida v. Florida, 116 S.Ct. 1114 (1996). The Eleventh
Amendment prohibits Congress from making the states capable of being sued in federal
court.)

We find that the Commission lacks authority to enter the decision the
Tribe seeks; i.e., to conclude either that IGRA is no longer functional or to
sever any portion of it that has not specifically been held unconstitutional.
As part of the Executive Branch of government, the Commission’s
responsibility is to uphold and enforce the laws passed by Congress unless
and until it is informed by the Federal courts that a particular law is
invalid, or that specific provisions of the law cannot be enforced. Thus,
unless and until the Federal courts define the parameters of what is left of
IGRA after Seminole, or Congress amends the act to take that holding into
account, the Commission must enforce all of the act except the Federal
court enforcement provisions—a part of the act which did not fall under
the Commission’s jurisdiction in the first instance. Therefore, for
Commission purposes, only the Federal court enforcement provisions of
IGRA, 25 U.S.C. 2710(d)(7)(A)(d) and parts of 25 U.S.C. 2710(d)(7)(B),
are unconstitutional. All other provisions, including the compacting
process set out in 25 U.S.C. 2710(d)(3), remain in full force and effect.

In the Matter of the Santee Sioux Tribe of Nebraska, NOV-96-01; CO-96-01 (July 31,
1996), pp. 10-11. As the Commission has previously decided, absent a definitive
statement from the courts to the contrary, the remainder of the IGRA is in full force and

effect.


Finally, when reviewing the record as a whole, it is important to point out that the
Tribe offered no evidence that contradicts the testimony of gambling expert Mr. Sertell
who observed each of the games and testified that the result of the games played on each
device was through application of chance. TR 53 as to Rainbow Reels, TR 55-56 as to
Fantasy Five, TR 56-59 as to Lucky Cherries, and TR 60-63 as to Pot O Gold. Further,
no evidence contradicts Mr. Farley’s reports and testimony that establishes that an
application of chance likely controls the result in each game he reviewed and that each of
the devices he evaluated is a gambling device. He testified that he was familiar with play
of Rainbow Reels, Pot O Gold (including the games played thereon), and Lucky Cherries
(including the games played thereon) from his review of videotapes made at the Tribe’s
gaming facilities and concluded that all games were entirely a game of chance, TR 259-
305 and Chairman’s Exhibits 14 — 19.

The Tribe’s own report, dated October 3, 2001, authored by Mr. Snyder who
reviewed the Pot O Gold and Lucky Cherries games which included eight games
including: Re-Spin 777; Triple Sevens; Gold Row Bonus; Spinball Bonus; Reel of
Fortune, Pirates Gold; Funny Fruit; and Klondike states that the outcome of spinning the
wheels is one of “luck” or “hazard.” Further evidencing the element of chance, the report
states that the respin option available on the machines might result in a greater number of '
winning outcomes but that the stopping position of the spinning wheels on the respin is
one of luck. Chairman’s Exhibit C 23.

7. Presiding Official erred in requiring source codes.

The presiding official recommended that absent source codes, the Chairman did

not prove that all of the devices were games of chance. While source codes provide

22


and Class II. Congress defined Class I to include “social games solely for prizes of
minimal value or traditional forms of Indian gaming engaged in by individuals as a part
of, or in connection with, tribal ceremonies or celebrations” 25 U.S.C. § 2703(6). Class
Il is defined to include “the game of chance commonly known as bingo...and other games
similar to bingo, and card games that are explicitly authorized by laws of the State, or are
not explicitly prohibited by laws of the State and are played at any location in the State,”
excluding “any banking card games ... or electronic or electromechanical facsimiles of
any game of chance or slot machines of any kind” 25 U.S.C. §2703(7). Class III is
defined as “‘all forms of gaming that is not Class I or Class Hl gaming.” 25 U.S.C. § 2703
(8).

Indian Tribes have exclusive jurisdiction over Class I gaming and it is not subject
to IGRA. 25 U.S.C. § 2710(a)(1) The Indian Tribes and NIGC have concurrent
jurisdiction to regulate Class II gaming. 25 U.S.C. § 2710 (a)(2), (b). Class III gaming
“is allowed only where a Tribal-State compact is entered...” and requires a Tribal
ordinance approved by the NIGCS By pretrial stipulations, the parties agree that no
Tribal-State compact exists in the State of Oklahoma, other than pari-mutual horse
racing, and that Respondent Tribe did adopt a gaming ordinance by Resolution 94-2,

which was approved by NIGC on May 31, 1994.

5 See United States v. 162 MegaMania Gambling Devices, 231 F. 3d 713 (10"
Cir., 2000); United States v. Absentee Shawnee Tribe of Oklahoma, CIV 01-175-A
(D.C.W._D., Oklahoma, 2001)


15 U.S.C. § 1171(a)(2). Because the games at issue do not dispense money or property,
but dispenses a paper receipt redeemable for a prize, we must analyze the games under
(B) above. These elements of (B) are commonly referred to as consideration, chance, and
reward.'* In re Gaming Devices Seized at American Legion Post No. 109, 176 A.2d 115,
122 (1961). See also 38 Corpus Juris 286, et seq.

There is no dispute between the parties regarding whether the games at issue meet
the consideration and reward elements since the player must pay to use the machines and,
if successful, will redeem a receipt for prize or reward. The Tribe instead argues that the
Johnson Act requires that the result of the game be “totally from chance”. TR 482.

Under controlling case law, there need be only a substantial element of chance
involved in the play of the game on the device to bring the device within the Johnson Act
definition. Tooley v. United States, 134 F. Supp. 162, 167 (D. Nev. 1955); U.S. v. 20
Dealer’s Choice Machines, 483 F.2d 474 (a Cir. 1973).

The degree of chance required under the Johnson Act is:

Where a substantial element of chance is involved, it appears to us that the

fact that skill in operating the particular machine is helpful in attaining the

end sought does not take the machine out of the type defined by the [Johnson

Act]. With regard to the machines herein [so-called “digger” machines] there is

at least an element of chance involved .. .

U.S. v. 24 Digger Merchandising Machines, 202 F.2d 647, 650 (1953).

14 We note that the Commission has proposed a new definition of the electronic
or electronic mechanical facsimile that eliminates the Johnson Act as part of the
definitions [67 Fed. Reg. 56,13296 (March 22, 2002)] (to be codified at 25 CFR Part
502). Our analysis would not differ however, under the new definition since there is no
question that these machine games are not Class I or II. Rather the distinction between
Class III gaming machines and skill machines remains whether the games constitute
gambling, in other words ie: whether the elements of the game include consideration,
chance, and reward.

15


2. Commission Precedent.

The NIGC was faced with similar issues in administrative litigation pertaining to
a game called “Reels of Skill”. See Notice of Decision and Order in the Matter of:
Choctaw Nation of Oklahoma, et al., NOV-98-09; CO-98-09, NOV-98-08; CO-98-08;
NOV-98-07; CO-98-07; NOV-98-06; CO-98-06; NOV-98-01; CO-98-01 (July 24, 1998).
In Reels of Skill, the Commission found that the game was one of chance and therefore a
class WII gaming device pursuant to NIGC regulations.’”

As the devices subject to this Decision, Reels of Skill is similar in outward
appearance to a traditional slot machine. The machine consists of a white cabinet with a
video screen with nine (9) windows arranged in a 3 X 3 pattern, and has a dollar bill
acceptor and a ticket printer which dispenses credits via a paper receipt. The front of the
machine has a start/play points button and four “skill buttons” which are used to play the
game, including a “hold all stop button,” a “stop left” button, a “stop center” button, and
a “stop right” button. There is a sequence of 27 icons of various shapes and colors qo
symbols, including a gold bell, a purple plum, a red cherry, a green watermelon) which
appear in each of the nine (9) windows and when the game is in play they simulate three
(3) rapidly spinning reels. The rate of simulated rotation is 1.5 seconds for completion of
the 27 icon sequence through the window. The “all stop button” was intended to be used
to stop the movement of the icons in all nine (9) windows simultaneously. Each of the
other three (3) skill buttons was used to stop the icons located in the three window in one

of the three (3) vertical rows or columns. Once the play is started the reels do not stop

"7 The Tribe appealed this decision to the United States District Court for the
District of Columbia but voluntarily dismissed their appeal after the Court denied their
Motion for a Temporary Restraining Order. Choctaw Nation of Oklahoma, et.al. v. Janet
Reno, et.al., Civ No. 98-1862 (D.D.C. 1998).

17


These appeals were duly assigned and Respondent’s Motion to Defer Hearing and
Stay Enforcement Proceedings” was denied by order dated January 7, 2002. Hearing on
the consolidated causes was held before the Presiding Official in Oklahoma City,
Oklahoma, on February 4-5, 2002. Hearing on the proposed civil fine assessment (CFA
00-06; NIGC 2009) was deferred until decision on the merits in the instant cases.

The operative facts are largely undisputed’ and the principal contention concerns
the characterization of the cited games as gambling or skill games. Briefly stated, the
Chairman asserted jurisdiction’ on the grounds that the cited gaming machines are Class
lil gambling devices, not exempted under a Tribal-State Compact. Appellant contends
that these machines are “games of skill”, akin to amusement games, and not “games of
chance”, the latter being Class III gambling and admittedly subject to regulation.

THE INDIAN GAMING REGULATORY ACT

The history of Indian gaming under various States’ regulatory schemes and the
genesis of the Indian Gaming Regulatory Act (IGRA), 25 U.S.C. §§ 2701 et. seq. are
comprehensively and authoritatively set out in California v. Cabazon Band of Mission
Indians, 480 U.S. 202 (1987) and Seminole Tribe of Florida v. Florida, 517 U.S. 44

(1996). In essence, IGRA divides Indian gaming into three categories: Class I, Class II,

? It is noted in this context that a related action for injunctive relief and appeal
therefrom is pending sub. nom. United States v. Seminole Nation of Oklahoma CIV-01-
035-B (B.D. Okla, 2/27/01).

> The testimony and exhibits, detailing the numerous investigations, videotapes,
and preliminary notices of the charged offenses, were unchallenged and admitted without
objection. (Admin Record NOV 00-06 Tabs 1-7, 16; Admin Record NOV 00-10 Tabs 1-
8; Exhibits C 5- C9; Transcript [TR] 124-144, 374-379, Exhibits C 20 and C 21.

4 The Tespective orders cite 25 US.C. §§ 25 U.S.C. 2701 et.seq. and 25 C.F.R.
§§ 573(a) and (b).


BACKGROUND
The Seminole Nation of Oklahoma (Tribe or Appellant) appealed the Notice of
Violation and Closure Order issued May 30, 2000 (NOV 00-06; CO-00-06) involving
operation of electronic video gaming machines, generically referred to as “Red Hot Re-
spin” machines, on Tribal lands in Oklahoma. These machines, manufactured by
Infinity Group, Inc. under U.S. Patent issued 1/6/98 (Exhibit C 22) include: Lucky Break;
Red Hot and Blue; Sovereign Sevens; Red Hot Respin; and, Buffalo Nickels. (Exhibits C

12-C€ 13)!

The Tribe additionally appealed the Notice of Violation and Closure Order issued
September 12, 2000 NOV 00-10; CO-00-10), involving not only continued and increased
operation of the Red Hot Re-Spin machines but also newly installed electronic video
gaming machines manufactured and distributed by separate and independent business
entities. These machines include: Rainbow Reels; Fantasy Fives; Pot of Gold - a multi
game device offering Triple Sevens, Gold Row Bonus, Spinbali Bonus, and Respin
Seven; and, Lucky Cherries - another multi game device offering Pirate’s Gold, Klondike
5, Funny Fruit, and Reel of Fortune. The manufacturer/distributors of this group exclude
the Infinity Group. Pretrial stipulation confirms that all machines were operated on

Indian lands during the period covered by the NOV’s and CO’s.

' NOV-00-6 and CO-00-6 were issued on May 30, 2000. Nonetheless, the
Respondent’s Supplemental Statement was not filed until January 31, 2001, in
contravention of the requirement at 25 C.F.R. 577.3 that requires filing of the statement
within 10 days of filing the Notice of Appeal (which was filed in June or July of 2000).


last five symbols did not follow the repeating sequence. TR 307. All of the games also
had a preset retention ratio. TR 299; See also C 16, 17, 18 and 19.

The Tribe’s report, dated October 3, 2001, reviews the Pot O Gold and Lucky
Cherries games. The report describes them as eight games including: Re-Spin 777;
Triple Sevens; Gold Row Bonus; Spinball Bonus; Reel of Fortune, Pirates Gold; Funny
Fruit; and Klondike. It states that the outcome of spinning the wheels is one of “luck” or
“hazard.” It further states that the respin option available on the machines might result in
a greater number of winning outcomes but that the stopping position of the spinning
wheels on the respin is one of luck. C 23.

Rainbow Reels is a five-reel, five-line machine. TR 50. When the player presses
the start button the five video reels begin to rotate. TR 52. The player stops each reel
individually by pressing a button. There are 8 different icons in the reel rotation. In a
sequence of over 380 icons, no repeating pattern could be identified. Furthermore, as the
icons rotate through the video window, individual icons change into other icons, referred
to as “morphing” by the Chairman’s expert. C 4 and C 14; TR 48-53. Finally, the
operator can establish the pay level — the retention ratio. TR 51-52.

Fantasy 5 is also a five-reel, five-line machine manufactured by the same
company as Rainbow Reels, Bestco Games Company. TR 54. It is operated in a similar
manner to Rainbow Reels. TR 54. In addition, it has a graphic on the bottom of the
video screen that is a bonus round. The operator controls the bonus percentages. TR 53

and 55. C 4.

13


In determining if a game has substantial element of chance, we must first
determine whether the device in question is designed and manufactured primarily for use
in connection with gambling. Whether a device is a gambling device may be determined,
first, by examining the objective physical and functional characteristics of the device.
U.S. v. 294 Various Gambling Devices, 718 F. Supp. 1236, 1243-46 (W.D. Pa. 1989).
See also U.S. v. Conley, 859 F.Supp. 864, 875 (W.D. Pa. 1994), Among the
characteristics of a device that federal courts consider to be strong indicia that the device
is designed and manufactured primarily for use in gaming are the following: (1) multiple
coin feature’®; (2) brevity of play of an individual game; and (3) the potential for

inordinate numbers of free games along with the presence of a knock-off meter. 16

15 Federal courts have considered a multiple bill feature as strong evidence that a
machine was designed and intended for gambling, and this seemed the controlling
question. "Multi-coin insertion and wagering allow a machine to make considerably more
money in the same period of time . . . .Such a feature is unusual in amusement devices
and many courts have considered the presence of a multi-coin feature to be strong
evidence that a machine was designed and intended for gambling.” United States v. 294
Gambling Devices 718 F. Supp. at 1244 (citing United States v. 137 Draw Poker-Type
Machines, 606 F. Supp. 747 (N.D. Ohio, 1984) affd’ 765 F.2d 147 (6th Cir. 1985);
United States v. Sixteen Electronic Gambling Devices, 603 F .Supp. 32 (D.C. Hawaii
1984); United States v. Various Gambling Devices, 368 F. Supp. 661 (N.D. Miss. 1973).

16 Unlike most amusement devices that do not involve gambling, the machines at
issue in this case offer the potential to win large numbers of free games, or credits, which
may then be redeemed for cash. In U.S. v. 137 Draw Poker-Type Machines, the court
concluded that machines with some similar features were gambling devices within the
meaning of 15 U. S.C. § 1171 (a). "The great number of free games which can be
achieved by players . . . the facility with which free plays can be eliminated from the free
play register and the ease by which free plays so eliminated can be counted renders these
devices peculiarly and uniquely suited for gambling purposes.” United States v. 137
Draw Poker-Type Machines, 606 F. Supp. at 754 (citing United States v. Two
Coin-Operated Pinball Machines, 241 F. Supp 57 (W.D. Ky. 1965) aff’d sub nom United
States v. M. Branson Distribut. Co., 398 F.2d 929 (6th Cir. 1968)).

16