News > NIGC resolves status of company's casino machine

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NIGC resolves status of company's casino machine
Wednesday, September 24, 2003

The National Indian Gaming Commission (NIGC) on Tuesday cleared the way for tribes to offer a casino machine whose status has been in legal limbo for more than a year.

In an advisory opinion, NIGC found that Reel Time Bingo, a product of Multimedia Games Inc. (NASDAQ: MGAM), qualifies as bingo. The decision means that tribes in Oklahoma, who are MGAM's largest customers, can run the machine without fear of violating federal law.

But the opinion, by NIGC's acting general counsel Penny J. Coleman, only applies to a modified version of the game that is currently not in play at any Oklahoma casinos. According to separate statements by NIGC and MGAM, the classification of the machine as Class II is dependent on the changes.

MGAM chief executive officer Clifton Lind said the modifications should not have a significant impact on how customers view the game. The changes slow down the machine and require additional player activity, he said.

NIGC iterated that the changes are "critical" to Coleman's opinion, which seeks to clear up an admittedly fuzzy area of the Indian Gaming Regulatory Act (IGRA) of 1988. "We are . . . aware that the lines between what constitute class II and class III games are being blurred by technological advances that Congress could not have foreseen and did not explicitly address in 1988 when it enacted IGRA," Coleman wrote.

The distinction between the two classes of games is critical for many tribes who operate casinos. Class III games, which include slot machines and card games, are not legal in Oklahoma and can only be operated pursuant to a state-tribal agreement.

Several tribes, notably the Chickasaw, Cherokee and Choctaw nations, were offering an MGAM product called MegaNanza when Coleman in April 2002 declared it was Class III. Former NIGC chairman Montie Deer, a Clinton appointee, ordered all Oklahoma tribes to remove the machine, and imposed a notice of violation (NOV) against the Chickasaw Nation, MGAM's largest customer. The move sent the company's stock in a downward spiral.

The three tribes and MGAM went to court to challenge the NIGC's actions but the suit was dismissed for lack of standing by the company. By that time, however, MGAM replaced MegaNanza with Reel Time Bingo.

In January of this year, NIGC chairman Phil Hogen, a Bush appointee, quietly entered into a settlement with the Chickasaw Nation over the NOV. Hogen forgave any fines he could have imposed on the tribe at the time, and the tribe was cleared of any violations of IGRA.

Hogen then settled with MGAM and promised to make a ruling on Reel Time Bingo. The decision was delayed while the company made changes to how it operates.

This summer, Indianz.Com played a version of the game at a casino in California, where some tribes have installed it because compacts there limit the number of slot machines each casino can have. At that time, the game looked like a video slot machine whose "wheels" were determined by the numbers on a bingo card.

The player can choose to hide the card, giving off the feel of a slot machine. By "spinning" the wheels, the machine draws new bingo numbers. A winning combination corresponds to a particular covering of the bingo card numbers. For example, three sevens could correspond to an "X" on a bingo card.

NIGC yesterday issued a bulletin to clarify this particular aspect of casino games. According to the bulletin, machines with pre-drawn numbers are not Class II.

"Specifically, we find that having numbers drawn after game play commences is so critical to the character of bingo that games with pre-drawn numbers cannot be said to be games similar to bingo," the bulletin states.

NIGC's advisory came out yesterday afternoon. MGAM stock closed at $29.95, up 55 cents from the day prior.

Relevant Documents:
Classification Letter | Bulletin on Games

Relevant Links:
National Indian Gaming Commission - http://www.nigc.gov
Multimedia Games - http://www.multimediagames.com