OFFICE OF THE GOVERNOR 

August 26,2013 

Submitted Electronically and by US Mail 

National Indian Gaming Commission 

1441 L Street NW, Suite 9100 

Washington, D.C. 20005 

reg.review~ni~c.gov 

Re: 25 C.P.R. Part 502 (Electronic One Touch Bingo System) 

Response to Request for Public Comment 

Comments due August 26,2013 

The following constitutes the State of California's comments on the National Indian Gaming 

Commission's (NIGC) proposed reinterpretation of its 2008 decision that rejected the Metlakatla 

Indian Community's request for approval of a gaming-ordinance amendment that would have 

classified electronic one touch bingo systems as class I1 gaming under the Indian Gaming 

Regulatory Act, 25 U.S.C. 5 2701 et seq. (IGRA). The NIGC's proposed reinterpretation would 

classify such systems within the definition of class I1 gaming provided by 25 C.F.R. Part 502. 

While the NIGC characterizes its proposed reinterpretation of the classification of one touch 

bingo devices as more in keeping with IGRA and avers that it will bring clarity to the industry, 

the NIGC is in fact stretching the definition of bingo beyond all reasonable limits. This will 

result in the evisceration of the joint federal-skte-tribal regulatory structure contemplated by 

IGRA and undermine the fundamental basis of the 70 California Tribal-State gaming compacts. 

The change will severely threaten the well-being of the vast majority of California tribes, 

because it threatens the long-term viability of the exclusivity for casino gaming currently 

provided to California tribes by the California Constitution, an exclusive avenue of tribaleconomic development that tribes and the State have been careful to preserve. These 

consequences arise because technology has eliminated the functional differences between one 

touch bingo devices and class 111 slot machines, and if one touch devices are given preferential 

treatment as class 11, incentives will exist for tribes to replace existing class 111 machines with 

these new class I1 machines. 

The distinction between class I1 and class 111 gaming is fundamental to the California TribalState compacts and provides the basis for revenue sharing by large-gaming tribes with smallGOVERNOR EDMUND G. BROWN JR.. SACRAMENTO. CALIFORNIA 95814 . (916) 445-2841 
National Indian Gaming Commission 

August 26,2013 

Page 2 

gaming and non-gaming tribes, as well as gaming tribes' mitigation of the off-reservation 

impacts of gaming. The substitution of one touch bingo devices for class 111 slot machines is 

projected to reduce payments into the Revenue Sharing Trust Fund (RSTF), from which 

payments of $1.1 million per year are made to each of California's 72 small and non-gaming 

tribes, by more than 50 percent within the next ten years. If this occurs, it is almost certain that 

revenue sharing payments to those tribes will be curtailed. Further, California's most recent 

compacts have created an additional revenue sharing fund for these tribes, the Tribal Nation 

Grant Fund, which is projected to begin sharing $100 million or more per year commencing 

approximately three years from now. That fund would face budget elimination if this proposal is 

accepted. Most of these tribes are located in areas that are inaccessible, remote, or otherwise 

unsuitable for gaming operations, whether class I1 or 111. The deregulation of one touch bingo 

devices will not provide these tribes with a means to offset reductions in RSTF and Tribal Nation 

Grant Fund payments. The substitution of one touch bingo devices for class 111 slot machines is 

also projected to reduce payments into the Special Distribution Fund, which provides mitigation 

to local governments of off-reservation impacts and pays for state regulation, by 18 to 42 percent 

within the next ten years. 

At the present time, the number of electronic gaming devices in California is constrained by the 

combined regulatory structure of IGRA and the California Tribal-State compacts. If tribes are 

able to offer functionally equivalent one touch bingo devices in place of regulated class I11 

devices, it is projected that the number of electronic gaming devices in California will increase 

dramatically, with accompanying dilution that may reduce average per device net win-whether 

class I1 or class 111-by from 17 to 41 percent over a ten-year period, depending on the degree of 

substitution of one touch bingo devices for class I11 devices that occurs. This and the other 

projections referred to in this letter are conservatively based on a maximum substitution rate of 

only 54 percent over ten years. Because one touch bingo devices are already available that 

provide a gaming experience that is virtually indistinguishable from a class 111 slot machine 

(essentially all slot machine games and themes are currently available in one touch bingo 

format), and that provide casinos with per device returns that equal or exceed class 111 devices, it 

is clearly possible that the substitution of one touch bingo devices for class 111 devices may 

exceed 54 percent and may occur over a shorter time period. Accordingly, the dilution of net 

win may be worse than stated above. A decrease in the profitability of gaming devices will 

offset the benefits received by tribes by avoidance of compact-based fees, and may severely 

stress existing tribal gaming operations with high debt loads. 

Finally, the willingness of the California electorate to facilitate tribal gaming through the 

provision of tribal exclusivity arose at a time when it was assumed that tribal gaming would 

mostly be a small-scale activity conducted at relatively remote locations. Tribal gaming in 

California has already dramatically exceeded that expectation. If electronic gaming devices 

proliferate to the extent that has been projected if one touch bingo devices are deemed class 11, 

the reality of tribal gaming will be very different than was envisioned in 2000, when the 

California Constitution was anended to permit only compact tribes to operate formerly outlawed 

casino-style gaming. The State will have little, if any, ability to mitigate the negative impacts 

from expanded gaming and will experience substantial off-reservation burdens. Most 
National Indian Gaming Commission 

August 26,2013 

Pagc 3 

in~portantly, the opportunity for non-gaming and small-gaming tribes to benefit from shared 

revenues from profitable operations will be severely diminished, thus undermining the purpose 

of tribal gaming to assist all of California's native people. Given these consequences, it is 

reasonable to anticipate that the public's continued willingness to support the exclusivity of tribal 

gaming will decline in favor of opening casino gaming to non-tribal entities that can be regulated 

and taxed. Such a change would be, to say the least, disastrous for California tribes. 

The NIGC's proposed reclassification of one touch bingo devices as class I1 games will certainly 

benefit the gaming-device industry, and may benefit some tribes with favorable market locations 

by allowing them to avoid compact-based revenue sharing and gaming device limitations. These 

benefits, such as they are, will come at the expense of the states, in particular California, and at 

the expense of many differently situated tribes. The reclassification of one touch bingo devices 

as class I1 games will arguably turn the regulatory structure of tribal gaming on its head by 

eviscerating not only the compacting process envisioned by IGRA, but many existing tribal-state 

compacts. The additional clarity the NIGC believes its proposed reclassification may bring to 

the industry will be overshadowed by the uncertainties this change will bring to the entire 

enterprise of tribal gaming. We urge the NIGC to carefully consider the function of the 

distinction between class I1 and class 111 gaming in IGRA and in existing tribal-state compacts, 

and the interests of all stakeholders, including all tribes, the states, and the American people, 

before reclassifying one touch bingo devices as class I1 gaming. 

Thank you for the opportunity to comment on this proposed action. 

' benior Advisor to the Governor 

cc: The Honorable Eric H. Holder Jr., Unites States Attorney General 

Mythlli Raman, Acting Asst. Attorney General, US Department of Justice 

The Honorable Kanala Harris, California State Attorney General 

California Nations Indian Gaming Association 

Tribal Association of Sovereign Indian Nations 

California Association of Tribal Governments