The panelists on Tuesday’s seminar at the Indian Gaming Association Conference and Tradeshow in San Diego about the limits of Class II were all in agreement. Class II is restricted to the boundaries of Native American casino properties. Period. But within those boundaries, much can be done with the emerging technology to improve these products.
In case you’re not up to speed on the difference between these “classes” of gaming, they all originated with the passage of the Indian Gaming Regulatory Act by Congress in 1988. This legislation defined three distinct categories of Native American gaming. Class I was only for historical Indian games, largely based on ancient contests that used sticks and balls. This C1 group is only for tribal members and is neither regulated nor taxed.
Class III was largely the same as casino gaming practiced worldwide. Depending on the compact a tribe signed with their individual state, this form of gaming (mainly slot machines) was regulated and taxed.
Since almost all Native American gaming prior to IGRA was in the form of bingo, Class II was created to legalize those bingo-hall operations. C2 was lightly regulated and, most importantly, exempted from taxation by the states or federal government. However, using technology, tribes and vendors (mainly in Oklahoma, Florida, and California) worked to develop slot machines based on bingo. Various court and regulatory approvals supported this technology. However, the earliest version of these machines were slow, confusing and largely unpopular compared to “normal” slots. Technology improved and today’s C2 machines are virtually indistinguishable from any other machine. Importantly, they are not taxed, but standard C3 machines are!
Marcus Yoder, the chief commercial officer at Innovation Capital, urged the audience to “treat Class II as a business, not just a way around regulations.” His point was that today’s C2 games have improved to the extent that they can perform as well, or better, than traditional C3 machines.
Oklahoma is a perfect laboratory to test that premise. For years, the tribes there were restricted to C2 slots only. Players became used to C2 and when C3 games were eventually allowed in the state (2004), many players still preferred the older C2 games. Today, of the top-ten performing games in the state, about half of them are Class II.
Thomas McDonald, Sr. Director of Cage, Credit & Digital at Choctaw Nation of Oklahoma, said, “In the last seven years, the quality of the content that’s out there is incredible and the Neptune’s Gold theme is a great example. These games have improved so much that they’re virtually indistinguishable from Class III.”
The Choctaw tribe operates eight different casinos anchored by their flagship location in Durant, OK, the second largest slot operation in the country (their nearby Oklahoma neighbor, WinStar, is the largest).
James Acres, president of Acres Bonusing, has been pushing the limits of Class II technology for years. He speculated, “Where is Class II going? It is up to the tribes.” He asked, “Are you happy where you are? If so, don’t push. If you’re not happy, explore Class II options. The future can be where we take it. But it will take a fight.”
Panel moderator Gene Johnson, executive VP at Victor Strategies, asked about the potential of Class II games online. Yoder noted that this may be one area where Class II can expand. “Please create more Class II mobile games to get them out there. The second point, what I thought was very interesting and brave from the Muskogee (a large tribe from Eastern Oklahoma), is that when they launched, they went ahead and made their geo fence include one quarter of the city of Tulsa, Oklahoma, which is their tribal land. So that’s one approach.”
Another controversial approach came from Acres who is pushing technology that can turn standard Class III games into legal Class II games. However, there are some concerns with this approach. McDonald said, “We’ve debated it. We’ve talked about the legalese of it. I understand the concept James has created, but as an operator that has to deal with my (Choctaw) gaming commission with NIGC, it’s hard for me to say to them, ‘Okay, yes, you win every single time, and then you get to spin a Class III game, and now it’s Class II.’”
But the one point that everyone at the session echoed was that Class II is getting better every day and they all urged more tribes to consider what a strong C2 future could mean for them.
