Notices. Proposed rule

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BILLING CODE 4510-29-P 72 205 Wednesday, October 24, 2007 Proposed Rules Part IV Department of the Interior National Indian Gaming Commission 25 CFR Parts 502, 542, 543, et al. Indian Gaming Regulatory Act: Definitions and Classification Standards; Proposed Rules DEPARTMENT OF THE INTERIOR National Indian Gaming Commission 25 CFR Part 502 RIN 3141-AA31 Definition for Electronic or Electromechanical Facsimile AGENCY: National Indian Gaming Commission (“NIGC” or “Commission”). ACTION:

Proposed rule. SUMMARY: The proposed rule revises the definition of a term Congress used to define Class II gaming. Specifically, the proposed rule revises the definition for “electronic or electromechanical facsimile” that appears in the Commission's regulations. The Commission defined these terms in 1992 and revised the definitions in 2002. The proposed rule offers further revision. DATES: Submit comments on or before December 10, 2007. ADDRESSES: Mail comments to “Comments on Electronic or Electromechanical Facsimile Definition,” National Indian Gaming Commission, Suite 9100, 1441 L Street, NW., Washington, DC 20005, Attn:

Penny Coleman, Acting General Counsel. Comments may be transmitted by facsimile to 202-632-0045, or mailed or submitted to the above address. Comments may also be submitted electronically to *facsimile_definition@nigc.gov* . FOR FURTHER INFORMATION CONTACT: Penny Coleman or John Hay, Office of General Counsel, Telephone 202-632-7003. This is not a toll free call. SUPPLEMENTARY INFORMATION: Background The Indian Gaming Regulatory Act (“IGRA”), 25 U.S.C. 2701-21, enacted by the Congress in 1988, establishes the NIGC and sets out a comprehensive framework for the regulation of gaming on Indian lands.

The Act establishes three classes of Indian gaming. “Class I gaming” means social games played solely for prizes of minimal value or traditional forms of Indian gaming played in connection with tribal ceremonies or celebrations. 25 U.S.C. 2703(6). Indian tribes regulate Class I gaming exclusively. 25 U.S.C. 2710(a)(1). “Class II gaming” means the game of chance commonly known as bingo, whether or not electronic, computer, or other technologic aids are used in connection therewith, including, if played in the same location, pull-tabs, lotto, punch boards, tip jars, instant bingo, and other games similar to bingo, and various card games so long as they are not house banking games. 25 U.S.C. 2703(7)(A).

Specifically excluded from Class II gaming, however, are banking card games such as blackjack and electronic or electromechanical facsimiles of any game of chance or slot machines of any kind. 25 U.S.C. 2703(7)(B). Indian tribes and the NIGC share regulatory authority over Class II gaming. 25 U.S.C. 2710(a)(2). Indian tribes can engage in such gaming without any state involvement. “Class III gaming” includes all forms of gaming that are not Class I gaming or Class II gaming. 25 U.S.C. 2703(8).

Class III gaming thus includes all other games of chance, including most forms of casino-type gaming such as slot machines of any kind, electronic or electromechanical facsimiles of any game of chance, roulette, banking card games such as blackjack, and pari-mutuel wagering. Class III gaming may be conducted lawfully only if the state in which the tribe is located and the tribe reach an agreement called a tribal-state compact. Alternatively, a tribe may operate Class III gaming under gaming procedures issued by the Secretary of the Interior if the tribe and the state have not reached agreement or if the state has refused to negotiate in good faith toward an agreement.

The tribal-state compact or Secretarial procedures may contain provisions for concurrent state and tribal regulation of Class III gaming. In addition, the United States Department of Justice possesses exclusive criminal jurisdiction over Class III gaming on Indian lands and also possesses certain civil jurisdiction over such gaming. As a legal matter, Congress defined the parameters for game classification when it enacted IGRA. As a practical matter, however, the congressional definitions were general in nature and specific terms within the broad gaming classifications were not explicitly defined.

The Commission adopted regulations in 1992 that included definitions for many terms used in the statutory classification scheme, including “electronic or electromechanical facsimile,” 25 CFR 502.7, and “electronic computer or other technologic aid,” 25 CFR 502.8. The Commission revised the definitions in 2002. See 67 FR 41166 (Jun. 17, 2002) for an extensive discussion of the reasons for the Commission's decision to revise these key terms. A recurring question as to the proper scope of Class II gaming involves the use of electronics and other technology in conjunction with bingo and lotto as well as pull tabs, instant bingo, and other games similar to bingo that may be Class II if played in a location where Class II bingo is played.

In IGRA, Congress recognized the right of tribes to use “electronic, computer or other technologic aids” in connection with these forms of Class II gaming. Congress provided, however, that “electronic or electromechanical facsimiles of any game of chance or slot machines of any kind” constitute Class III gaming. Because a tribe wishing to conduct Class III gaming may do so only in accordance with an approved tribal-state compact, it is important to distinguish the two classes.

As the Commission worked through a process to develop classification standards, it became apparent that the revised definitions issued by a divided Commission in June 2002, See 67 FR 41166 (Jun. 17, 2002), did not provide the clarity that had been a goal in that rulemaking. Accordingly, the Commission proposes to revise the definition of the term “electronic or electromechanical facsimile.” Purpose and Scope The definition for “electronic or electromechanical facsimile” has been misconstrued by some as allowing for bingo facsimiles.

The Commission is convinced that there needs to be a distinction with a difference between Class II and Class III gaming. Under IGRA, a facsimile is Class III. Courts have taken a plain meaning approach to defining facsimile finding that facsimiles are exact copies or duplicates. *Sycuan Band of Mission Indians* v. *Roach* , 54 F.3d 535 (9th Cir. 1995); *U.S.* v. *162 Megamania Gambling Devices* , 231 F.3d 713, 724 (10th Cir. 2000). It has also been recognized that facsimiles of Class II games would be considered a Class III game under IGRA. *Diamond Game* v. *Reno* , 230 F.3d 365, 366 (D.C.

Cir 2000). It has likewise been affirmed that facsimiles of games of chance including bingo would be violations of IGRA. *U.S.* v. *103 Electronic Gambling Devices* , 223 F.3d 1091, 1102 (9th Cir. 2000). Finally, it has been determined that even if a player is playing against another player and not simply the machine that the game may nonetheless be a facsimile. *Sycuan Band* , 54 F.3d at 542-43 (concluding that an electronic pull-tab game in which one player played with a machine, though not against it, was a class III electronic facsimile thereof).

The proposed change to the definition for the term “electronic or electromechanical facsimile” will clarify that facsimiles of bingo are not permissible Class II games under IGRA. Changes to the Definition of “Electronic or Electromechanical Facsimile” in Part 502 a. “Electronic or electromechanical facsimile” The Commission proposes to revise the definition for “electronic or electromechanical facsimile” contained in § 502.8. Some have misinterpreted the 2002 revision and argued that facsimiles of bingo were properly classified as Class II.

The revision makes clear that all games including bingo, lotto and “other games similar to bingo,” when played in an electronic medium, are facsimiles when they incorporate all of the fundamental characteristics of the game. In making this change, the Commission also wishes to emphasize that even bingo, lotto, and “other games similar to bingo” are “electronic or electromechanical facsimiles” of a game of chance when the format for the game either has players playing against a machine rather than broadening participation among multiple players, or fully incorporates all of the fundamental characteristics of these games electronically and requires no competitive action or decision making.

Regulatory Matters Regulatory Flexibility Act This proposed rule will not have a significant economic effect on a substantial number of small entities as defined under the Regulatory Flexibility Act, 5 U.S.C. 601, *et seq.* Indian tribes are not considered to be small entities for the purposes of the Regulatory Flexibility Act. Unfunded Mandates Reform Act The Commission, as an independent regulatory agency within the Department of the Interior, is exempt from compliance with the Unfunded Mandates Reform Act. 2 U.S.C. 1502(1); 2 U.S.C. 658(1).

Small Business Regulatory Enforcement Fairness Act This proposed rule is not a major rule under 5 U.S.C. 804(2), the Small Business Regulatory Enforcement Fairness Act. This rule does not have an annual effect on the economy of $100 million or more. This rule will not cause a major increase in costs or prices for consumers, individual industries, federal, state or local government agencies or geographic regions and does not have a significant adverse effect on competition, employment, investment, productivity, innovation, or the ability of U.S. based enterprises to compete with foreign-based enterprises.

Takings In accordance with Executive Order 12630, the Commission has determined that this proposed rule does not have significant takings implications. A takings implication assessment is not required. Civil Justice Reform In accordance with Executive Order 12988, the Office of General Counsel has determined that the proposed rule does not unduly burden the judicial system and meets the requirements of sections 3(a) and 3(b)(2) of the Executive Order. Paperwork Reduction Act This proposed rule does not require information collection under the Paperwork Reduction Act of 1995, 44 U.S.C. 3501, *et seq.* , and is therefore not subject to review by the Office of Management and Budget.

National Environmental Policy Act The Commission has determined that this proposed rule does not constitute a major federal action significantly affecting the quality of the human environment and that no detailed statement is required pursuant to the National Environmental Policy Act of 1969, 42 U.S.C. 4321, *et seq.* List of Subjects in 25 CFR Part 502 Gambling, Indian—lands, Indian—tribal government, Reporting and recordkeeping requirements. Accordingly, for the reasons described in the preamble, the Commission proposes to amend its regulations in 25 CFR part 502 as follows:

PART 502—DEFINITIONS OF THIS CHAPTER 1. The authority citation for part 502 continues to read as follows: Authority: 25 U.S.C. 2071, *et seq.* 2. Revise § 502.8 to read as follows: § 502.8 Electronic or electromechanical facsimile.

(a)Electronic or electromechanical facsimile means a game played in an electronic or electromechanical format that replicates a game of chance by incorporating all the fundamental characteristics of the game.

(b)Bingo, lotto, other games similar to bingo, pull-tabs, and instant bingo games that comply with part 546 of this chapter are not electronic or electromechanical facsimiles of any games of chance. Dated: October 17, 2007. Philip N. Hogen, Chairman. Norman H. DesRosiers, Commissioner. Cloyce V. Choney, Commissioner. [FR Doc. E7-20781 Filed 10-23-07; 8:45 am] BILLING CODE 7565-01-P DEPARTMENT OF THE INTERIOR National Indian Gaming Commission 25 CFR Parts 502 and 546 RIN 3141-AA31 Classification Standards for Bingo, Lotto, Other Games Similar to Bingo, Pull Tabs and Instant Bingo as Class II Gaming When Played Through an Electronic Medium Using “Electronic, Computer, or Other Technologic Aids” AGENCY: National Indian Gaming Commission (“NIGC” or “Commission”). ACTION: Proposed rule. SUMMARY: The proposed rule clarifies the terms Congress used to define Class II gaming. First, the proposed rule further revises the definitions for “electronic or electromechanical facsimile” and “other games similar to bingo.” The Commission defined these terms in 1992, revised the definitions in 2002, and proposed further revisions to the term “electronic or electromechanical facsimile” separate from this proposed revision. The Commission adds a new Part to its regulations that explains the basis for determining whether a game of bingo or lotto, “other game similar to bingo,” or a game of pull-tabs or “instant bingo,” meets the IGRA statutory requirements for Class II gaming, when such games are played electronically, primarily through an “electronic, computer or other technologic aid,” while distinguishing them from Class III “electronic or electromechanical facsimiles.” This new part also establishes a process for assuring that such games are Class II before placement of the games in a Class II tribal gaming operation. This process contains information collection requirements. The Commission has submitted the information collection request to OMB for approval. DATES: Submit comments on or before December 10, 2007. ADDRESSES: Mail comments to “Comments on Class II Classification Standards” National Indian Gaming Commission, Suite 9100, 1441 L Street, NW., Washington, DC 20005, Attn: Penny Coleman, Acting General Counsel. Comments may be transmitted by facsimile to 202-632-7066, or mailed or submitted to the above address. Comments may also be submitted electronically to *classification_standards@nigc.gov* . FOR FURTHER INFORMATION CONTACT: Penny Coleman or John Hay, Office of General Counsel, Telephone 202-632-7003. This is not a toll free call. SUPPLEMENTARY INFORMATION: Preamble Table of Contents I. Introduction II. Background III. Development IV. New Proposal V. Changes I. Introduction In writing and proposing this rule, the Commission has attempted to be mindful of the language of IGRA, Congress's intent, IGRA's legislative history, relevant court cases, and the essential need of the tribes for a broad, flexible and legally sustainable scope of Class II gaming. Class II was the basis on which Indian gaming was built. Since the enactment of IGRA in 1988, Indian gaming has grown into a $26 billion business, perhaps far eclipsing any limits which Congress may have envisioned. Although an estimated 90% of this gross gaming revenue is generated by compacted Class III gaming, Class II remains significant to tribes throughout the country. For some tribes with Class III gaming compacts, Class II is a vital supplement, long patronized and preferred by some clientele. In other cases, sadly, some states fail and refuse to compact with their tribes for Class III play, notwithstanding their legal sanction of Class III gaming activities elsewhere within those states or their tolerance of widespread unsanctioned Class III activities. Tribes in that situation are left to make the most of Class II gaming and have operations that are, or were, places where the distinction between Class II and Class III has become the most blurred and where clarity is most needed. Further, as tribes negotiate with states for Class III compacts, they and the states need to know that there are viable Class II games that tribes may utilize if no agreement is reached. As observed below, the statutory language of IGRA lacks clarity when it makes “computer and electronic and technologic aids” Class II but places “electronic facsimiles of games of chance” in Class III. However, some of the Act's legislative history sheds light upon Congress's intended goal. In the House and Senate floor debates on IGRA, several proponents of the legislation described the distinction as that between “bingo” (Class II) and “casino gaming” (Class III). *See* 134 Cong. Rec. H8157. While “casino gaming” likewise lacks a crystal-clear definition, those who spoke associated the term with gambling halls filled with slot machines, venues separate and distinct from the bingo halls of the 1980's. It further appears from the debates that a basis for making this the dividing line between Class II and Class III was the complexity and regulatory difficulties associated with slot machines and casino gaming. *See* 134 Cong. Rec. H8157, 134 Cong. Rec. S12643. Some argued that only states—then the only governments experienced with the conduct and regulation of such activity—were up to the task of regulating casino gaming, and thus casino gaming needed to be compacted. Much has changed, of course, since those debates in 1988, not the least of which is the sophistication and excellence of the tribes' own gaming regulation. Tribes spend hundreds of millions of dollars annually regulating their gaming, both directly, through their own commissions, and indirectly, by funding the regulation done by states and the NIGC. Nonetheless, the distinctions and classifications established in IGRA in 1988 still bind the Commission, and the proposed rule seeks to identify and clarify the place at which Congress intended to separate Class II from Class III. What is abundantly clear from a study of the Act's language and the Act's legislative history is that Congress intended to distinguish between uncompacted and compacted gaming. If that separating line is not clear and identifiable, Congress's intention will not be fulfilled. Since the Act's adoption in 1988, the world has changed, and computerization has transformed whole sectors of our economy and society, including gaming. Those advances challenge the legislative language that pre-dates them. Nevertheless, that language continues to govern these distinctions. Unless or until that language or the mission of the NIGC—in part to promulgate Federal standards for Indian gaming—is changed, the Commission's interpretations must be based on them. The other legislation, of course, which applies to the use of gambling equipment on Indian lands is the Johnson Act. *See* 15 U.S.C. 1171. Since it was enacted in 1953, the Johnson Act has provided that there could be no “gambling devices” in Indian Country, and the term “gambling devices” was thereafter broadly interpreted. The passage of IGRA in 1988 changed this in two ways. “Gambling devices” could be used on Indian lands if they were used pursuant to Class III tribal-state compacts, and tribes could use computers and electronic and technologic aids in the play of Class II bingo and similar games. As Indian gaming grew and the Indian gaming industry developed under IGRA's framework, tribes increasingly turned to technology. When electronic and technologic features were introduced in the absence of a tribal-state compact, some were viewed by Federal investigators and prosecutors as “gambling devices.” The Ninth Circuit held that an all-electronic form of pull tabs to be an electronic facsimile game of chance, notwithstanding the argument that players were playing against other players and not against the machine they were using. The electronic replication of the traditional Class II pull tab game was deemed a Class III electronic facsimile and hence prohibited on Indian lands in the absence of a compact. *See Sycuan Band of Mission Indians* v. *Roach* , 54 F.3d 535 (9th Cir. 1995). By contrast, in a series of decisions involving an electronic bingo game called MegaMania, courts considered electronic, computerized player stations, which interconnected a minimum of 12 players and displayed bingo cards and bingo balls to them. Each game took from two to three minutes to play. Again, those responsible for enforcement of the Johnson Act challenged the player stations as “gambling devices” requiring a compact for play. These challenges failed. Accordingly, the player stations were indeed only “aids” to the play of bingo, which Congress provided for in IGRA as Class II, and not electronic facsimiles of a game of chance. Those courts, however, were careful to note that their conclusions were limited to the facts of the cases presented. *See U.S.* v. *162 Megamania Gambling Devices* , 231 F.3d 713, 725 (10th Cir. 2000), *U.S.* v. *103 Electronic Gambling Devices* , 223 F.3d 1091 (9th Cir. 2000). Similarly, in a series of cases dealing with dispensers of paper pull tabs known as Lucky Tab II and Magical Irish, the enforcers of the Johnson Act became concerned when the manufacturers of these machines added video displays to the machines. The video displayed winning and losing pull tabs by depicting slot machine-type reels and showing winning and losing combinations. These dispensers, it was said, were “gambling devices” and could only be played in a compacted Class III arrangement. The courts disagreed. Notwithstanding the use of the entertaining displays to show slot machine-like results, those displays were not essential to the game. The play of the game was “in the paper”—it was the pull tabs themselves, and only the pull tabs, that determined the outcome of the game. Thus, these courts concluded, the electronic dispensers were only aids to the play of the game of pull tabs and permissible without a Class III compact. Again, the courts limited their holdings to circumstances before them. *See Diamond Game Enterprises* v. *Reno* , 230 F.3d 365 (DC Cir. 2000), *Seneca-Cayuga Tribe of Okla* . v. *NIGC* , 327 F.3d 1019, 1031 (10th Cir. 2003). Thereafter, these technologies—interconnected bingo player stations and slot machine-type video displays (not determinative of results)—were coupled, and currently most electronic bingo systems employ such technology. Most such systems display the results of the bingo game in an electronic bingo card on the equipment's video display. Such technological advances have greatly increased the speed with which bingo is played and have made the experience of playing very similar to the experience of playing conventional slot machines. In adopting IGRA, Congress observed that while computers, electronic and technologic aids may assist the play of Class II games, a Class III facsimile results if those electronic aids incorporate all of “the fundamental characteristics” of the Class II games. *See* S. Rep. No. 100-466, at 8 (1988). This, the Commission believes, is precisely the issue raised by the proliferation of so-called “one touch games”—inter-connected electronic bingo player stations with which players initiate and complete play of a bingo game with the single touch of the screen or a button. In such instances, the equipment has ceased to be an “aid” to the play of the game, and has become one of those “electronic facsimiles of games of chance” which Congress placed in Class III. When the equipment automatically, electronically automates the play of the game and the players' participation in the game, the Commission believes that the play is no longer “outside” the equipment and that the electronic equipment can no longer be characterized as merely an aid. All player attention, discretion, and interface has been automated by the equipment. Beyond this, the full electronic automation of bingo creates distortions in the way bingo is played. There is considerable significance to being the first player to “win” the bingo game by getting a “bingo” or the game-ending pattern. Many current, fully electronic games, however, often place minimum significance on this important characteristic of bingo and rather award the principal prizes to interim or consolation patterns and winners. There is less competition among players—a fundamental characteristic of bingo—for these interim prizes than there is for the game-ending prize. If multiple players hit the game-ending prize simultaneously, the common practice is to split the prize among them. By contrast, it is often the case that players who hit interim prizes are awarded the full prize, without regard to the number of other players who have also hit it. II. Background The Indian Gaming Regulatory Act, 25 U.S.C. 2701-21 (“IGRA” or “Act”), enacted by the Congress in 1988, establishes the NIGC and sets out a comprehensive framework for the regulation of gaming on Indian lands. The Act establishes three classes of Indian gaming. “Class I gaming” means social games played solely for prizes of minimal value or traditional forms of Indian gaming played in connection with tribal ceremonies or celebrations. 25 U.S.C. 2703(6). Indian tribes are the exclusive regulators of Class I gaming. 25 U.S.C. 2710(a)(1). “Class II gaming” means the game of chance commonly known as bingo, whether or not electronic, computer, or other technologic aids are used in connection therewith, including, if played in the same location, pull-tabs, lotto, punch boards, tip jars, instant bingo, and other games similar to bingo, and various card games so long as they are not house banking games. 25 U.S.C. 2703(7)(A). Specifically excluded from Class II gaming, however, are banking card games such as blackjack, electronic or electromechanical facsimiles of any game of chance, and slot machines of any kind. 25 U.S.C. 2703(7)(B). Indian tribes and the NIGC share regulatory authority over Class II gaming. 25 U.S.C. 2710(a)(2). Indian tribes can engage in such gaming without any state involvement. “Class III gaming” includes all forms of gaming that are not Class I gaming or Class II gaming. 25 U.S.C. 2703(8). Class III gaming thus includes all other games of chance, including most forms of casino-type gaming such as slot machines of any kind, electronic or electromechanical facsimiles of any game of chance, roulette, banking card games such as blackjack, and pari-mutuel wagering. Class III gaming may be conducted lawfully only if the state in which the tribe is located and the tribe reach an agreement called a tribal-state compact. Alternatively, a tribe may operate Class III gaming under gaming procedures issued by the Secretary of the Interior if the tribe and the state have not reached agreement or if the state has refused to negotiate in good faith toward an agreement. The tribal-state compact or Secretarial procedures may contain provisions for concurrent state and tribal regulations of Class III gaming. In addition, the United States Department of Justice possesses exclusive criminal and certain civil jurisdiction over Class III gaming on Indian lands. As a legal matter, Congress defined the parameters for game classification when it enacted IGRA. As a practical matter, however, the Congressional definitions were general in nature and specific terms within the broad gaming classifications were not explicitly defined. The Commission adopted regulations in 1992 that included definitions for many terms used in the statutory classification scheme, including “electronic or electromechanical facsimile” (25 CFR 502.7), “electronic computer or other technologic aid” (25 CFR 502.8), and “other game similar to bingo” (25 CFR 502.9). The Commission revised the definitions in 2002. *See* 67 FR 41166, Jun. 17, 2002, for an extensive discussion of the reasons for the Commission's decision to revise these key terms. However, the Commission did not define the many other terms used in conjunction with the various Class II games. A recurring question as to the proper scope of Class II gaming involves the use of electronics and other technology in conjunction with bingo and lotto as well as pull tabs, instant bingo, and other games similar to bingo that may be Class II if played in a location where Class II bingo is played. In IGRA, Congress recognized the right of tribes to use “electronic, computer or other technologic aids” in connection with these forms of Class II gaming. Congress provided, however, that “electronic or electromechanical facsimiles of any game of chance or slot machines of any kind” constitute Class III gaming. Because a tribe wishing to conduct Class III gaming may do so only in accordance with an approved tribal-state compact, it is important to distinguish the two classes. Currently, the distinction between an electronic “aid” to a Class II game and an “electronic facsimile” of a game of chance, and therefore a Class III game, is often unclear. With advances in technology, the line between the two has blurred. When in IGRA, Congress defined “the game of chance commonly known as bingo,” 25 U.S.C. 2703(7)(A), it could not have foreseen the technological changes that would affect all games of chance. Likewise, by allowing electronic aids to the game of bingo, Congress could not have foreseen that some vendors and gaming operators would be unable or unwilling to distinguish between Class II games, which tribes regulate, and Class III facsimiles, which require compacts between tribes and states. The Commission is concerned that the industry is dangerously close to obscuring the line between Class II and Class III. It believes that the future success of Indian gaming under IGRA depends upon tribes, states, and manufacturers being able to recognize when games fall within the ambit of tribal-state compacts and when they do not. Against this backdrop, the Commission has determined that it is in the best long term interest of Indian gaming to issue classification standards clarifying the distinction between “electronic, computer, and other technologic aids” used in the play of Class II games and other technologic devices that are “electronic or electromechanical facsimiles of a game of chance” or slot machines. As the Commission worked through a process to develop these classification standards, it became apparent that the revised definitions issued by a divided Commission in June 2002, *See* 67 FR 41166, Jun. 17, 2002, did not provide the clarity that had been a goal in that rulemaking. Accordingly, the Commission proposes further revisions to the definitions for the terms “electronic or electromechanical facsimile” in a separate rulemaking. III. Development On May 25, 2006, the NIGC published two Notices of Proposed Rulemaking in the **Federal Register** . The goal of these proposed rules was to clearly distinguish technologically-aided Class II games from Class III “electronic or electromechanical facsimiles of any game of chance” or “slot machines of any kind.” The first notice, 71 FR 30232, May 25, 2006, detailed a proposed change to the definition for “electronic or electromechanical facsimile” that is contained in 25 CFR 502.8. The proposed change to the definition clarified that facsimiles of bingo are not permissible Class II games under the IGRA. The second notice, 71 FR 30238, May 25, 2006, likewise further revised the definitions for “electronic or electromechanical facsimile” and “other games similar to bingo.” The proposed revision to the definition for “electronic or electromechanical facsimile” clarified that games under this section that comply with 25 CFR 546 would not be electronic or electromechanical facsimiles of any game of chance. The proposed revision to the definition for “other games similar to bingo” shifted the focus for the classification determination from whether the game is house-banked to whether the game had players competing against other players for the prizes. The proposed revision removed the requirement, not present in IGRA, that these games not be house-banked. The proposed revision also strengthened the requirement that the games involve players competing against other players for a common prize or prizes. Additionally, the proposed rule defined other terms used in Class II games that had not been previously defined. The proposed rule defined the following terms: Game, lotto, bonus prize, progressive prize, sleep, game of pull-tabs, electronic pull-tab, and instant bingo. The second notice also added a new part to the Commission's regulations (25 CFR 546) that explained the basis for determining whether a game of bingo or lotto, and “other game similar to bingo,” or a game of pull-tabs or “instant bingo,” meets the IGRA statutory requirements for Class II gaming, when these games are played electronically, primarily through an “electronic, computer or other technologic aid,” while distinguishing them from Class III “electronic or electromechanical facsimiles.” Consultation/Comments The development of the proposed rule began formally with the March 31, 2004, appointment of an advisory committee comprised of tribal government representatives with substantial experience in gaming regulation and operations. A detailed history of the advisory committee's work to that point is published in the preamble to the original proposed rule. 71 FR 30232, May 25, 2006. After publishing these notices the Commission embarked on an extensive consultation schedule, meeting with over 69 tribes in individual meetings. Additionally, the Commission held a day-long hearing and heard testimony from tribes, manufacturers, test labs, and state regulators. IV. New Proposal Despite the withdrawal of the regulations the Commission still believed that regulations distinguishing technologically-aided Class II games from Class III “electronic or electromechanical facsimiles of any game of chance” or “slot machines of any kind” were still needed. The Commission gave much thought to the direction it needed to take and is now proposing regulations that take into account many of the concerns voiced during the previous consultation and comment period. V. Changes from Original Proposal The new proposed regulations differ in some significant ways from the original proposal. When these regulations were first proposed there was considerable criticism that the proposed rules would result in great economic hardship to tribes and manufacturers. The economic impact study commissioned by the NIGC supported this proposition. The Commission withdrew the proposed regulations and after careful examination decided to make several changes. These changes, described below, have the added benefit of reducing the economic impact of compliance with the regulations. Player Interaction/Speed of Game One of the defining characteristics of the game of bingo is that the winner is the first person to cover a previously designated arrangement of numbers or patterns. Implicit in this requirement is the notion that a player must make some overt action to win the game. It is for this reason that the Commission has required that players cover/daub after the numbers or patterns have been released. Originally, the Commission felt it was necessary to have at least two releases of numbers or patterns to ensure that there was truly a competition among the players to be the first to cover. Further, the Commission felt that the release of numbers should be over a period of two seconds to ensure that players were fully engaged in the game. The Commission has given this great thought and has tentatively concluded that this goal may be achieved by requiring only that players press a button to start the game and then press at least one more time to cover and claim their prize. Therefore, the new proposed regulations eliminate a required daub as well as the required time period for the release of objects. Patterns As stated above, essential to the play of bingo is that individuals are competing against each other to be the first to obtain a previously designated arrangement of numbers or designations. The original proposal placed a restriction on the use of different patterns reasoning that players must be competing for the same winning pattern. The Commission extended this reasoning to include not only the game-winning prize but also any prizes offered. Upon further consideration the Commission felt it could be less restrictive by allowing bonus patterns to differ and still achieve the goal that players play against each other for the game-winning pattern. Therefore the use of different patterns for bonus prizes is now permitted under the proposed regulations. Appearance One of the primary goals of these classification standards is to enable tribes and regulators to distinguish Class II and Class III. The original proposal required that each machine display the message “This is a Game of Bingo” or “This is a Game of Pull-Tabs” in two inch letters. The Commission still believes that it is important to identify the game clearly but felt that a less intrusive method for doing so could accomplish this goal. The current proposed rule requires only that this message be prominently displayed giving manufacturers and tribal regulators more flexibility. Lab Certification For these regulations to be effective there must be a method for determining compliance with them before technologic aids are placed on the gaming floors. The easiest way to accomplish this goal is to have certified testing laboratories test the devices and certify that they comply with the criteria established by these standards. In the Commission's original proposal it was the responsibility of the NIGC to determine which labs were suitable to conduct this testing. However, after further consideration the Commission has determined that tribal gaming regulatory authorities are better suited to this task and in many instances are already certifying labs as being suitable to conduct testing. These regulations place the responsibility for approving gaming laboratories on the tribal gaming regulatory authority with certain minimum criteria for determining suitability. Grandfather Provision Absent from the original proposal were any provisions allowing for the continued use of games that were currently in operation. During consultations great concern was expressed that the immediate compliance with the proposed regulations would cause economic devastation to some tribes as well as to some manufacturers. The present proposal includes a grandfather provision that allows for the continued use of currently existing Class II games for a period of five years. Within a period of 120 days after this rule is final each tribal gaming regulatory authority will submit a list to the Commission of the Class II game interfaces currently in use. These are the only game interfaces that will qualify under the grandfather provision. This requirement effectively freezes the number of grandfathered interfaces in use. This provision also allows for software changes that ensure the proper functioning, security, or integrity of the game. It also allows for changes to the software that do not detract from compliance with this part such as changes to pay tables or to game themes. The inclusion of a grandfather provision greatly mitigates the economic impact of these regulations. However, the proposed regulations make clear that this grandfather provision will not provide a safe harbor to those machines which could be considered Class III under any standards. To the extent that provisions are identical to the first proposed regulations, the Commission's thinking has not changed. Under the proposed rules, the following steps describe the play of bingo, lotto, or “other games similar to bingo” in an electronic medium as Class II gaming. First, there is a request for entry into the game. The game can proceed when there are six players or a minimum of two players after two seconds have elapsed. There is a release of a group of numbers, one at a time. Then there is a cover opportunity for all competing players. Permissible Class II game play for bingo, lotto, or other games similar to bingo utilizing linked player stations as “electronic, computer or other technologic aids” will proceed as follows: To enter and begin the game, each player selects the cards to be used by that player and requests entry into the game by selecting an amount to wager and touching a button. After the game begins, numbers must be randomly drawn or electronically determined. Numbers must be released one at a time and used immediately in real time by the competing players in the game. Selected numbers must be used in the sequence in which they are drawn in separate multiple rounds. Players may cover each card they have in play by touching the video screen at the player station or a button showing the word “cover” or other similar designation. A minimum time of two seconds, or a lesser time if all players have covered, must be available for each player to accomplish the cover action. Players must be notified that they should cover their cards when the numbers are revealed. For each cover opportunity, the game must wait until at least one player covers. A player wins the game by being the first player(s) in the game to cover a pre-designated game-winning pattern and claiming the win by touching the screen or a button within the time allowed by the rules of the game, which must be at least two seconds. A player who “sleeps” a potentially winning pattern forfeits the win based on that pattern. A player who fails to cover the numbers drawn within the time allowed may not later use those numbers in a prize-winning pattern other than the game-winning pattern. A bingo game cannot end until a player in the game wins the game-winning prize. The game may end at this point or other additional criteria for the end of the game may apply, such as the additional release(s) of numbers for a consolation prize(s). Each player in a game must take overt action to cover the player's card(s) during play of the game by touching the screen or a designated button one time after each set of numbers is released. Each released number does not have to be covered individually by the player, *i.e.* , the player need not touch each specific space on the electronic bingo card where the called number or designation is located, but the player must overtly touch the screen or a designated button at least one time to cover the numbers. The proposed regulations will also impact how these games are viewed by the player. First, the proposed rules require a notice to appear on the game cabinet informing the player that they are playing the game of bingo or a game similar to bingo. Second, a two inch by two inch card must be displayed at all times. Economic Impact It is likely that the proposed rule, considered separately and apart from the Commission's proposed 25 CFR part 547, “Technical Standards for Electronic, Computer, or Other Technologic Aids used in the Play of Class II Games,” is a major rule under 5 U.S.C. 804.2, the Small Business Regulatory Enforcement Fairness Act. In any event, the NIGC has commissioned an economic impact study of the two proposals taken together. The study makes clear that the cost to the Indian gaming industry of complying with the two proposed rules will have an annual effect on the economy of $100 million or more, at least for the first five years after adoption. Accordingly, the Commission treats the proposed rule as a major rule. The economic impact study is available for review at the Commission's Web site, *http://www.nigc.gov,* or by request using the addresses or telephone numbers above. Regulatory Matters Regulatory Flexibility Act This proposed rule will not have a significant economic effect on a substantial number of small entities as defined under the Regulatory Flexibility Act, 5 U.S.C. 601 *et seq.* Indian tribes are not considered to be small entities for the purposes of the Regulatory Flexibility Act. Small Business Regulatory Enforcement Fairness Act It is likely that the proposed rule is a major rule under 5 U.S.C. 804.2, the Small Business Regulatory Enforcement Fairness Act. The NIGC has commissioned an economic impact study of this proposed rule as well as a proposed rule for Technical Standards taken together. The study makes clear that the cost to the Indian gaming industry of complying with the two proposed rules will have an annual effect on the economy of $100 million or more, at least for the first 5 years after adoption. Accordingly, the Commission treats the proposed rule as a major rule. Paperwork Reduction Act This proposed rule requires information collection under the Paperwork Reduction Act of 1995, 44 U.S.C. 3501, *et seq.* , and is subject to review by the Office of Management and Budget. The title, description, and respondent categories are discussed below, together with an estimate of the annual information collection burden. With respect to the following collection of information, the Commission invites comments on:

(1)Whether the proposed collection of information is necessary for proper performance of its functions, including whether the information would have practical utility;

(2)the accuracy of the Commission's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;

(3)ways to enhance the quality, utility, and clarity of the information to be collected; and

(1)directly to the Office of Information and Regulatory Affairs, OMB, Attention: Desk Officer for National Indian Gaming Commission, 725 17th St., NW., Washington DC, 20503, and

(2)to Penny J. Coleman, Acting General Counsel, National Indian Gaming Commission, 1441 L. Street, NW., Washington DC 20005. Comments must be provided by November 23, 2007. Unfunded Mandates Reform Act The Commission, as an independent regulatory agency within the Department of the Interior, is exempt from compliance with the Unfunded Mandates Reform Act. 2 U.S.C. 1502(1); 2 U.S.C. 658(1). Takings In accordance with Executive Order 12630, the Commission has determined that this proposed rule does not have significant takings implications. A takings implication assessment is not required. Civil Justice Reform In accordance with Executive Order 12988, the Office of General Counsel has determined that the proposed rule does not unduly burden the judicial system and meets the requirements of sections 3(a) and 3(b)(2) of the Order. List of Subjects in 25 CFR Parts 502 and 546 Gambling, Indian lands, Indian tribal government, Reporting and recordkeeping requirements. Accordingly, for the reasons described in the preamble, the Commission proposes to amend its regulations in 25 CFR 502 and add a new Part 546 as follows: PART 502—DEFINITIONS OF THIS CHAPTER 1. The authority citation for this for part 502 continues to read as follows: Authority: 25 U.S.C. 2701 *et seq.* 2. Revise § 502.9 to read as follows: § 502.9 Other games similar to bingo. Other games similar to bingo means any game played in the same location as bingo (as defined in 25 U.S.C. 2703(7)

(A)(i)) that constitutes a variant on the game of bingo, provided that such game requires players to compete against each other for a common prize or prizes. 3. Add a new part 546 to read as follows: PART 546—CLASSIFICATION STANDARDS FOR BINGO, LOTTO, OTHER GAMES SIMILAR TO BINGO, PULL-TABS AND INSTANT BINGO AS CLASS II GAMING WHEN PLAYED THROUGH AN ELECTRONIC MEDIUM USING ELECTRONIC, COMPUTER, OR OTHER TECHNOLOGIC AIDS Sec. 546.1 What is the purpose of this part? 546.2 What is the scope of this part? 546.3 What are the definitions for this part? 546.4 What are the criteria for meeting the first statutory requirement that the game of bingo, lotto, or other games similar to bingo be played for prizes, including monetary prizes, with cards bearing numbers or other designations? 546.5 What are the criteria for meeting the second statutory requirement that bingo, lotto, or other games similar to bingo be games in which the holder of the card covers such numbers or other designations when objects similarly numbered or designated are drawn or electronically determined? 546.6 What are the criteria for meeting the third statutory requirement that bingo, lotto, or other games similar to bingo be won by the first person covering a previously designated arrangement of numbers or designations on such cards? 546.7 What are the criteria for meeting the statutory requirement that Class II pull-tabs or instant bingo not be electronic or electromechanical facsimiles? 546.8 What is the process for approval, introduction, and verification of electronic, computer, or other technologic aids under the classification standards established by this part? 546.9 What are the steps for a compliance program administered by a tribal gaming regulatory authority to ensure that electronic, computer, or other technologic aids in play in tribal gaming facilities meet the Class II certification requirements? 546.10 When must a tribe comply with this part? 546.11 What is the effect on this part if a section is declared invalid? Authority: 25 U.S.C. 2701 *et seq.* § 546.1 What is the purpose of this part? This part clarifies the terms Congress used to define Class II gaming under the Indian Gaming Regulatory Act, 25 U.S.C. 2701, *et seq.* (“IGRA” or “Act”). Specifically, this part explains the criteria for determining whether a game of bingo or lotto, another game similar to bingo, or a game of pull-tabs or instant bingo, meets the statutory requirements when these games are played primarily through an electronic, computer or other technologic aid. This part also establishes a process for establishing Class II certification of electronic, computer, or other technologic aids and the games they facilitate. These standards for classification are intended to ensure that Class II gaming using electronic, computer, or other technologic aids can be distinguished from Class III electronic or electromechanical facsimiles. If the technologic aid meets the requirements of this part, then the fundamental characteristics of the game have not been incorporated and the aid is not an electronic or electromechanical facsimile. § 546.2 What is the scope of this part? This part is intended to address only games played solely with electronic, computer, or other technologic aids as defined in part 502.7 of this chapter. § 546.3 What are the definitions for this part?

(a)What is a game of bingo or other game similar to bingo? A game of the game of chance commonly known as bingo or another game similar to bingo consists of the random draw or electronic determination and release or announcement of numbers or other designations necessary to form the pre-designated game-winning pattern on a card held by the winning player and the participation of competing players to cover

(daub)the numbers or other designations which appear on their card(s) when the selected numbers or other designations are released for play. A game ends when a participating player(s) claims the win after obtaining and covering (daubing) the pre-designated game-winning pattern and consolation prizes, if any, are awarded in the game.

(b)What is lotto? The term lotto means a game of chance played in the same manner as the game of chance commonly known as bingo.

(c)What is a bonus prize in the game commonly known as bingo or other game similar to bingo? A bonus prize is a prize awarded in a game in addition to the game-winning prize. The prize may be based on different pre-designated and pre-announced patterns from the game-winning pattern, may be based on achieving a winning pattern in a specified quantity of numbers or designations drawn or electronically determined and released, or a combination of these conditions. A bonus prize may be awarded as an interim prize while players are competing for the game-winning prize or as a consolation prize after a player has won the game-winning prize.

(d)What is a progressive prize in the game commonly known as bingo? A progressive prize is an established prize for a game, funded by a percentage of each player's purchase or wager, that is awarded to a player for obtaining a specified pre-designated and pre-announced pattern within a specified quantity of numbers or designations randomly drawn and released or electronically determined, or randomly drawn and released or electronically determined in a specified sequence. If the progressive prize is not won in a particular game, the prize must be rolled over to each subsequent game until it is won. The progressive prize is thus increased from one game to the next based on player buy-in or wager contributions from each qualifying game played in which the prize is not won. All contributions to the progressive prize must be awarded to the players. A winning pattern for a progressive prize is not necessarily the same as the game-winning prize pattern.

(e)What does it mean to sleep in the game of bingo or another game similar to bingo? To sleep or to sleep a bingo means that a player fails, within the time allowed by the game:

(1)To cover

(daub)the previously released numbers or other designations on that player's card(s) constituting a game-winning pattern or other pre-designated winning pattern; and

(2)To claim any prize to which the player is entitled, having covered (daubed) a previously designated winning pattern, thereby resulting in the forfeiture of the prize to which the player would otherwise be entitled.

(f)What is the game of pull-tabs? In the game of pull-tabs, players purchase cards from a set of cards known as the deal. Each deal contains a finite number of pull-tab cards that includes a pre-determined number of winning cards. Each individual pull-tab within a deal is a paper or other tangible card with hidden or covered symbols. When those symbols are revealed, there is an arrangement of numbers or symbols indicating whether the player has won a prize. Winning cards with pre-established prizes are randomly spaced within the pre-arranged deal. One deal consists of all of the pull-tabs in a given game that could be purchased.

(g)What is an electronic pull-tab? An electronic pull-tab is an electronic facsimile of a pull-tab that is displayed on a video screen.

(h)What is instant bingo? In instant bingo, a player purchases a card containing a pre-selected group of numbers or designations; the winning cards are those in which the pre-selected group of numbers or designations on the card matches the preprinted winning arrangement indicated elsewhere on the card. The game is functionally the same as pull-tabs. § 546.4 What are the criteria for meeting the first statutory requirement that the game of bingo, lotto, or other games similar to bingo be played for prizes, including monetary prizes, with cards bearing numbers or other designations?

(a)Each player in the game must play with one or more cards. Each player in the game must obtain the card or cards to be used by that player in the game before numbers or other designations for the game are randomly drawn or electronically determined. Players cannot change cards once play of a particular bingo game has commenced. Electronic cards are permissible.

(b)Electronic cards in use by a player must be displayed prominently and must be clearly visible to that player during game play. If multiple electronic cards are used by a player, the game must offer the player the capability of seeing each one of his or her cards. At the conclusion of the game, each player must see his or her card with the highest value prize or, if no prize was won, the card closest to a bingo win. At no time shall an electronic card measure less than two inches by two inches or four square inches if other than a square card is used.

(c)For a game of bingo, each card must contain a five by five grid of spaces. Each space will contain a unique number or other designation which may not appear twice on the same card. The card may contain one free space without a specified number or other designation, provided the free space is in the same location on every card in play or available to be played in the game.

(d)Each game shall prominently display the following message: “THIS IS A GAME OF BINGO” or “THIS IS A GAME SIMILAR TO BINGO.”

(e)As a variant of bingo, in another game similar to bingo, each card must contain at least three equally sized spaces. Each space will contain a unique number or other designation which may not appear twice on the same card. One space may be designated a free space provided the card has at least three other spaces.

(f)When a number or other designation is covered, the covering must be indicated on the card by a change in the color of the space, a strike-out through the space, or some other readily apparent visual means.

(g)All prizes in the game, except for progressive prizes, must be fixed in amount or established by formula and disclosed to all participating players in the game. Random or unpredictable prizes are not permitted.

(h)Each game must have a winning player and a game-winning prize must be awarded in every game. The pattern designated as the game-winning pattern does not need to pay the highest prize available in the game. A game-winning prize may be less than the amount wagered, provided that the prize is no less than one cent.

(i)Other patterns may be designated for the award of bonus prizes in addition to the prize to be awarded based on the game-winning pattern. Each such designated pattern or arrangement must also be disclosed to the players upon request before the game begins.

(j)The designated winning patterns and the prizes available must be explained in the rules of the game, which must be made available to the players upon request.

(k)A bonus prize in a game that is designated as an interim prize must be awarded in a random draw or electronic determination and release of numbers or other designations that is no more than the exact quantity of numbers or designations that are needed for the game-winning player to achieve the game-winning pattern.

(l)A bonus prize in a game that is designated as a consolation prize may be awarded after the game-winning pattern is achieved and claimed by a player but only after a subsequent release of randomly drawn or electronically determined numbers or other designations has been made.

(m)A progressive prize may be awarded only if the game also provides a game-winning prize as described elsewhere in this part.

(n)All prizes in a game, including progressive prizes, must be awarded based on the outcome of the game of bingo and may not be based on events outside the selection and covering of numbers or other designations used to determine the winner in the game and the action of the competing players to cover the pre-designated winning patterns. The prize structure must not rely on an additional element of chance other than the play of bingo.

(o)Bingo and other games similar to bingo may offer an alternative display of the results of the game in addition to the display of the game results on the electronic bingo card, provided that the player has the option to disable the alternative display and play using only the electronic card display. An alternative display may include game theme graphics, spinning reels, or other imagery. The results may also be displayed on mechanical reels. § 546.5 What are the criteria for meeting the second statutory requirement that bingo, lotto, or other games similar to bingo be one in which the holder of the card covers such numbers or other designations when objects similarly numbered or designated are drawn or electronically determined?

(a)In a game of bingo, the numbers or other designations used in the game must be randomly drawn or determined electronically from a non-replaceable pool containing 75 such numbers or other designations and used in the sequence in which they are drawn. Each game will permit the random draw and release or electronic determination of all numbers or designations in the pool. A common draw or electronic determination of numbers or designations may be utilized for separate games that are played simultaneously.

(b)As a variant of bingo, in another game similar to bingo, the numbers or other designations used in the game must be randomly drawn or determined electronically from a non-replaceable pool of such numbers or other designations greater in number than the number of spaces on the card used in the game.

(c)All numbers or other designations used in the game must be randomly drawn or electronically determined after the cards to be used in the game have been assigned to or selected by the players in the game. The cards cannot have pre-covered numbers or other designations.

(d)The numbers or other designations randomly drawn or electronically determined must be used in real time and not stored for later use. The numbers or other designations must be used in the sequence in which they are drawn.

(e)To cover (daub), a player in a game must take overt action after numbers or designations are released by touching the screen or a designated button. A player must cover

(daub)at least one time after a set of numbers or other designations are released. The overt action of covering (daubing) may be done simultaneously with claiming.

(f)Each released number or designation does not have to be covered (daubed) individually by the player, i.e., the player need not touch each specific space on the electronic bingo card where the called number or designation is located. However, the player must have the opportunity to cover

(daub)by touching the screen or a designated button at least one time when those numbers or other designations are released, if those numbers or other designations appear on the player's card. Following this action by a player, the video screen at that player interface will display a different color on the number or designation on that player's card, a strike-out through the space, or some other readily apparent visible characteristic if that number or designation has been properly covered (daubed) by the player. Players must be notified that they should cover

(daub)their cards and claim their prize when the numbers or designations are revealed.

(g)Games may not include a feature whereby covering (daubing) after a release occurs automatically or without overt action taken by the player following the release.

(h)All players in a game, and not just a winning player, must be required by the rules of the game to cover

(daub)the selected numbers or other designations that appear on their card when those numbers or other designations are released as an indication of their participation in a common game.

(i)Players must cover

(daub)after numbers or designations are released in order to achieve any winning pattern. In the event of multiple releases of numbers, a player may later cover

(daub)numbers or designations slept following a previous release (catch up) for use in obtaining the game-winning pattern. Failure to cover

(daub)after each release results in the player forfeiting use of those numbers or other designations in any other pattern in the game. For bonus prizes and progressive prizes, if a player fails to cover

(daub)one or more numbers or other designations, that player cannot be awarded such prize based on a winning pattern which contains one or more of the numbers or other designations not covered (daubed) by the player. For game-winning prizes, if a player fails to cover the player may later cover

(daub)the number(s) or other designations and win such prize if that player is the first player to cover all other numbers or designations making up the game-winning pattern and claim the prize.

(j)If a player sleeps the game-winning pattern, the game must continue until a player subsequently obtains and covers (daubs) and claims the game-winning pattern.

(k)All numbers or other designations not covered (daubed) by a player must be clearly and uniquely identified as such by displaying them in a unique color, by drawing a strikeout through them, or by other readily visible means. A player who sleeps a winning pattern or a pattern yielding bonus or progressive prizes must be notified by visible message on the video screen that the pattern was slept.

(l)After all available numbers or designations that could lead to a game-winning prize have been randomly drawn or electronically determined and released (i.e. no more objects could be drawn that would assist in the formation of a game-winning prize), the game may allow an unlimited length of time to complete the last required cover

(daub)and claim of the prize, or it may be declared void and wagers returned to players and prizes canceled.

(m)The gaming operation or its employees may not play as a substitute for a player. § 546.6 What are the criteria for meeting the third statutory requirement that bingo, lotto, or other games similar to bingo be won by the first person covering a previously designated arrangement of numbers or designations on such cards?

(a)Because the game must be won by the first person, each game must be played by multiple players. Players in an electronic game must be linked through a networked system. The system must require a minimum of two players for each game, but not limit participation to two players, and must be designed to broaden participation in each common game by providing reasonable and sufficient opportunity for at least six players to enter the game. Games cannot begin until two seconds have elapsed from the time that the first player elects to play, unless six players enter. Nothing in this section is intended to limit games to six players.

(b)To establish the game as a contest in which players play against one another, the game must provide for one or more releases of selected numbers or other designations. Each release will provide one or more numbers or other designations randomly selected or electronically determined. The game may end after the first release or after subsequent releases, when the game-winning pattern is covered (daubed) and claimed. After the game-winning pattern is covered and claimed, there may be additional releases of randomly drawn or electronically determined numbers or other designations for a consolation prize(s).

(c)Each game must have one game-winning pattern or arrangement, which must be common to all players and may be won by multiple players simultaneously. Each game-winning pattern or arrangement must consist of at least three spaces, not counting any free spaces used. The game-winning pattern or arrangement must be available to players before the game begins.

(d)Other patterns or arrangements consisting of at least two spaces each, not counting free spaces, may be used for the award of bonus or progressive prizes, if the patterns or arrangements are designated and made available to players before the game begins.

(e)Events outside the play of bingo may not be used to determine the eligibility for a prize award or the value of a prize.

(f)The set of selected numbers or other designations in the first release may contain all of the numbers or other designations necessary to form the game-winning pattern on a card in play in the game. The set may contain the numbers or other designations necessary to form other winning patterns for bonus or progressive prizes. The quantity of numbers or designations in the second or subsequent releases may not extend beyond the quantity of numbers or other designations necessary to form the first available eligible game-winning pattern on a card in play in the game. There may be additional releases to allow for additional bonus prizes.

(g)Prizes can be claimed simultaneously when a player covers (daubs) to end the game.

(h)Bonus or progressive prizes may be awarded based on pre-designated patterns provided that the award of these prizes is based on the play of bingo in the same manner as for the game-winning prize. Bonus or progressive prizes may be based on different pre-designated and pre-announced patterns, on achieving a winning pattern in a specified quantity of numbers or other designations drawn or electronically determined and released, on the order in which numbers or other designations are drawn or electronically determined and released, or on a combination of these criteria. Bonus or progressive prizes may be awarded as interim prizes, before or as the game-winning prize is awarded, or as consolation prizes after the game-winning prize is awarded.

(i)In order for players to participate in a common game, the probability of achieving the game-winning prize pattern or progressive prize pattern, if any, may not vary.

(j)Prizes in a common game may be increased, or progressive prizes offered, based upon different entry wagers.

(k)The use of a pay table is permitted. The order of, or quantity of, numbers or other designations randomly drawn or electronically determined may affect the prize awarded for completing any pre-designated winning pattern in a game. A multiplier to the prize based on a winning pattern containing a specified number or other designation is permitted.

(l)A game-winning prize must be awarded in every game. If the first player or a subsequent player obtaining the pre-designated game-winning prize pattern sleeps that pattern, the game must continue until a player achieves the game-winning pattern. The same value prize must be awarded to a subsequent game-winning player in the game.

(m)Alternative result display options may only be utilized for entertainment or amusement purposes and may not be used independently to determine a winner of the game or the prizes awarded or change the results of the bingo game in any way.

(n)An ante-up format, in which a player is required to wager before each release as a condition of remaining in the game, is permissible, provided the game maintains at least two participating players. If only one player remains after one or more releases, that player will be declared the winner of the game-winning prize, and the game will end, provided that player obtains, covers (daubs), and claims the game-winning pattern. If all players leave the game before a game-winning pattern is obtained, covered (daubed), and claimed by a player, the game will be declared void and wagers returned to players. § 546.7 What are the criteria for meeting the statutory requirement that pull-tabs or instant bingo not be an electronic or electromechanical facsimile?

(a)Every pull-tab card or instant bingo ticket must exist in a tangible medium such as paper. Hereafter, the term pull-tabs also includes the term instant bingo. A pre-printed pull-tab must be distributed to the player as paper, plastic, or other tangible medium at the time the pull-tab is purchased. The pull-tab presented to the player must contain the information necessary for the player to determine if that player has won a prize in the game. The information must be presented to the player in a readable format.

(b)A pull-tab card may contain more than one arrangement of numbers or symbols, but each arrangement must comport with the requirements of this section. The player must pay for all of the arrangements on that pull-tab card in advance of dispensing it.

(c)Pull-tabs that exist in a tangible medium may also be sold to players with assistance of a technologic aid that assists in the sale. The technologic aid may also read and display the contents of the pull-tab as it is distributed to the player. The results of the pull-tab may be shown on a video screen that is part of or adjacent to the technologic aid assisting in the sale of the pull-tab.

(d)The player may also purchase a pull-tab from a person or from a vending unit and place the pull-tab in a separate technologic aid that reads and displays the contents of the pull-tab.

(e)If pull-tabs contain multiple arrangements of numbers or symbols, the rules for game play must indicate the disposition of a pull-tab in a technologic aid that is only partially played, i.e. all arrangements have not been viewed in the technologic aid.

(f)A technologic aid may also show pull-tab results on a video screen using alternative displays, including game-theme graphics, spinning reels, or other imagery. The results may also be displayed on mechanical reels. Options for players found in this alternative display may not determine a winner of the game or the prizes awarded or change the results of the pull-tab game in any way.

(g)If the pull-tab is a winning card, it must be redeemable for a prize when presented at the location in the gaming facility designated by the gaming operator.

(h)A pull-tab may not be generated or printed at the player station.

(i)For technologic aids that are larger than the pull-tab, the machine shall prominently display the following message: “THIS IS THE GAME OF PULL-TABS.”

(j)The results on the pull-tab shall be no smaller than an eight point font.

(k)A pull-tab game is an electronic facsimile if the pull-tab does not exist in paper, plastic, or other tangible medium at the point of sale and is displayed only electronically.

(l)Pull-tabs that exist in a tangible medium but that are electronically or optically read and transformed into an electronic medium and made available to the player only as depictions on a video screen (and not presented directly to the player in the tangible medium) are electronic facsimiles. § 546.8 What is the process for approval, introduction, and verification of electronic, computer, or other technologic aids under the classification standards established by this part?

(a)An Indian tribe or a supplier, manufacturer, or game developer sponsored by a tribe (hereafter, the “requesting party”) wishing to have games and associated electronic, computer, or other technologic aids certified as meeting the classification standards established by this part must submit the games and equipment to a testing laboratory recognized by the tribal gaming regulatory authority under this part. The requesting party must support the submission with materials and software sufficient to establish that the game and equipment meets classification standards, any other applicable regulations of the Commission, and provide any other information requested by the testing laboratory.

(b)For an electronic, computer, or other technologic aid to be certified as meeting the classification standards under this part, the tribe shall require the following:

(1)The testing laboratory will evaluate and test the submission to the standards established by this part and any other applicable regulations of the Commission. Issues that concern an interpretation of the standards or the certification procedure identified during the evaluation or testing process, if any, will initially be discussed between the testing laboratory and the requesting party. In the event of impasse, the requesting party and the testing laboratory may jointly submit questions concerning the issue to the Chairman, who may decide the issue. Questions regarding additional tribal standards will be addressed to the appropriate tribal gaming regulatory authority.

(2)At the completion of the evaluation and testing process, the testing laboratory will provide a formal written report to the requesting party setting forth its findings and conclusions. The testing laboratory will also forward a copy of its report to the Commission. The report may be made available upon request to any interested tribal gaming regulatory authority by the requesting party or by the testing laboratory. Each testing laboratory will maintain a detailed listing of the electronic, computer or other technologic aids it certifies.

(3)Each report from a testing laboratory must state the name of the requesting party; the type of game evaluated; name(s) and version(s) of the game played with the electronic, computer, or other technologic aid being evaluated; all associated game themes under which the game will be played on the technologic aid being evaluated; findings regarding game features and manner of play; a checklist of the standards established by this part and any other applicable regulations of the Commission together with an indication of the results of testing and evaluation to each particular standard; and, a summary conclusion as to whether the gaming conducted with the aid meets the requirements of this part and any other applicable regulations of the Commission. A supplemental report addressing additional game themes or other non-play features may follow as necessary, and will contain a statement verifying that gaming conducted with the aid continues to meet the requirements of this part and any other applicable regulations of the Commission.

(4)Each report will also include one or more unique signatures or checksum values for the operating programs used with the electronic, computer, or other technologic aid.

(5)In certifying a game or an electronic, computer, or other technologic aid for Class II play, a requesting party or a tribe may not rely on a report from a testing laboratory owned or operated by that requesting party or that tribe.

(c)The Commission will maintain a generalized listing of games and electronic, computer, or other technologic aids certified by recognized testing laboratories as meeting the classification standards established by this part and any other applicable regulations of the Commission. The Commission will make its listing available to the public. The Commission will only make available for public review records or portions of records subject to release under the Freedom of Information Act, 5 U.S.C. 552; the Privacy Act of 1974, 5 U.S.C. 552a; or the Indian Gaming Regulatory Act, 25 U.S.C. 2716(a).

(d)Additional requirements established by a tribal gaming regulatory authority.

(1)A tribal gaming regulatory authority may establish additional classification standards that extend and exceed the standards established by this part and any other applicable regulations of the Commission. It may require additional testing and certification to its own extended standards as a condition to operation of the game and associated electronic, computer, or other technologic aid in a gaming facility it regulates.

(2)A tribal gaming regulatory authority may elect to provide its extended testing standards to the testing laboratories and require additional tests and certification reports applicable to its own certification of a game or electronic, computer or other technologic aid. A requesting party wishing to meet the specific tribal requirements will submit additional supporting materials and documentation to the testing laboratory as may be necessary to meet the specific tribal requirements. A testing laboratory evaluating a game and associated equipment will include in its report to the requesting party information relevant to the specific additional tribal requirements and provide a copy of the report to that tribal gaming regulatory authority and the Commission.

(e)Objections to a testing laboratory certification.

(i)Within 30 days of receipt of the certification, a tribe may object to the certification by submitting a notice of objection to the Chairman. The objection shall specify the reasons why the certification is erroneous and shall include supporting documentation, if any. If a tribe timely objects, the Chairman or his or her designee shall have 60 days from receipt of the objection to concur with the tribe's objection. The Chairman or his or her designee will notify the testing laboratory, the requesting party and the sponsoring tribe of his concurrence or objection.

(ii)If no objection is submitted by a tribe, the Chairman or his or her designee will review the certifications and accompanying reports received from testing laboratories and may object to any certification issued by a testing laboratory by notification to the testing laboratory, the requesting party, and the sponsoring tribe within 60 days of receipt of the certification and report.

(iii)If the Chairman receives no objection and does not object on his or her own, the requesting party or sponsoring tribe may assume the Chairman does not object to the certification. The Chairman may object to a testing laboratory certification subsequent to the 60-day period upon good cause shown. If the Chairman finds good cause to object to the certification subsequent to the 60-day period, he or she shall do so only after providing notice to the testing laboratory, the requesting party, and the sponsoring tribe and an opportunity for a hearing.

(2)The Chairman or his or her designee will conduct additional discussions with the testing laboratory, the requesting party, and the sponsoring tribe on any game or electronic, computer, or other technologic aid to which the Chairman has objection and attempt to resolve the dispute within 30 days after receiving notice of the Chairman's objection. The Chairman and the requesting party and sponsoring tribe may agree to the appointment of a mediator or other third party to review the laboratory's certification and the Chairman's objection and provide a recommendation on the matter within this 30-day period. Following the discussions and receipt of the recommendation of the mediator or other third party, if any, the Chairman will decide the issue and inform the testing laboratory, the requesting party, and the sponsoring tribe of his or her determination.

(3)Within 30 days after receiving notice of the Chairman's determination, the requesting party or the sponsoring tribe may appeal the Chairman's determination to the full Commission by providing written notice of appeal along with documents and other information in support of the appeal. The appeal will be decided by the Commission based on the record developed by the Chairman or his or her designee and on written submissions by the testing laboratory, the requesting party, and the sponsoring tribe, unless the Commission requests additional information. The appeal will not include a hearing under Part 577 of this chapter unless directed by the Commission.

(4)If the requesting party or the sponsoring tribe does not appeal the Chairman's determination, or if the objection is upheld after review by the Commission following an appeal, the testing laboratory and the requesting party will notify any tribal gaming regulatory authority to which it has provided a certification and report on the game and associated equipment that the Chairman has objected to the certification and that the certification is no longer valid.

(5)An objection by the Chairman or his or her designee, upheld after review by the Commission, will be a final agency action for purposes of suit by the requesting party under the Administrative Procedures Act.

(f)Recognition of Testing Laboratories.

(1)A testing laboratory may provide the examination, testing, evaluating and reporting functions required by this section provided that:

(i)The testing laboratory demonstrates its integrity, independence and financial stability to the tribal gaming regulatory authority;

(ii)The testing laboratory demonstrates its relevant technical skill and capability to the tribal gaming regulatory authority;

(iii)The testing laboratory is not owned or operated by the tribe or tribal gaming regulatory authority; and

(iv)The tribal gaming regulatory authority:

(A)Makes a suitability determination of the testing laboratory based on requirements no less stringent than required by § 533.6(b)(1)(ii)—(v) and § 533.6(c) of this chapter and based upon no less information than that required by § 537.1 of this chapter, or

(B)Accepts, in its discretion, a determination of suitability for the testing laboratory made by any other gaming regulatory jurisdiction in the United States.

(v)After reviewing the information provided by the testing laboratory, the tribal gaming regulatory authority may, in its discretion, determine that the testing laboratory is qualified to perform testing and evaluation for games played using electronic, computer, or other technologic aids that are offered for use in Class II gaming.

(2)The tribal gaming regulatory authority shall:

(i)Maintain a record of all determinations made pursuant to paragraphs (f)(1)(iv) and (f)(1)(v) of this section for a minimum of three years and shall make the records available to the Commission upon request. The Commission will only make available for public review records or portions of records subject to release under the Freedom of Information Act, 5 U.S.C. 552; the Privacy Act of 1974, 5 U.S.C. 552a; or the Indian Gaming Regulatory Act, 25 U.S.C. 2716(a).

(ii)Place the testing laboratory under a continuing obligation to notify it of any adverse regulatory action in any jurisdiction where the testing laboratory conducts business.

(ii)Require the testing laboratory to provide notice of any material changes to the information provided to the tribal gaming regulatory authority. § 546.9 What are the steps for a compliance program administered by a tribal gaming regulatory authority to ensure that electronic, computer, or other technologic aids in play in tribal gaming facilities meet Class II certification requirements?

(a)In regulating Class II gaming, a tribal gaming regulatory authority will institute a compliance program that ensures bingo, lotto, and other games similar to bingo and pull-tabs and instant bingo in use in its gaming facilities, which are operated and played with electronic, computer, or other technologic aids required to be certified by this part, meet the requirements of this part, any other applicable regulations of the Commission, and any additional tribal standards adopted by the tribal gaming regulatory authority. The program must include the following elements:

(1)Determination by the tribal gaming regulatory authority that electronic, computer, or other technologic aids, along with the games played thereon, required to be certified as meeting the standards established by this part, have been tested and certified by a laboratory recognized under § 546.8(f) of this part as meeting all applicable Class II standards before the equipment is placed for use in the gaming operation.

(2)Internal controls that prevent unauthorized access to game control software to preclude modifications that would cause the electronic, computer, or other technologic aid and the games played therewith to potentially fail to meet the required standards.

(3)Periodic testing of all of the servers and a random sample of the electronic components and software to validate that the equipment and software continue to meet the required standards and are identical to that tested and certified by the testing laboratories.

(b)In authorizing particular Class II gaming within a gaming facility it licenses, a tribal gaming regulatory authority shall, at a minimum, require a finding and certification by an independent gaming testing laboratory, recognized by the tribal gaming regulatory authority under this part, that each electronic, computer, or other technologic aid used in connection with such gaming meets the standards of this part. If the tribe's gaming regulatory authority has established classification standards that apply additional criteria, the tribe shall require additional findings consistent with the additional standards as a condition to authorizing a technologic aid for use and play in the gaming facilities it regulates.

(c)The tribal gaming regulatory authority shall maintain a current listing of each electronic, computer, or other technologic aid including servers, player interfaces, and each game program it has authorized for play under the classification standards governed by this part, indicating that all such games meet the classification standards established by this part and any additional standards established by the tribe. The listing will show the asset identification number(s) of each electronic, computer, or other technologic aid including servers and player interfaces and the manufacturer's name; version number(s), game theme titles and other unique identifier(s), of the game operating software, for the games authorized for play as documented in a certification report(s) issued by a testing laboratory. § 546.10 When must a tribe comply with this part?

(a)Tribes must comply with this part when placing Class II electronic, computer, or other technologic aids governed by this part in operation after [Insert 120 days after effective date].

(b)Tribes using Class II technologic aids governed by this part on or before [Insert 120 days from the effective date], may continue to operate those electronic, computer or other technologic aids for a period of five years from the same date. During this period technologic aids may be sold, leased, or otherwise transferred to another tribe.

(c)Individual hardware components of technologic aids governed by this part and in use on or before [Insert 120 days from effective date] may be repaired or replaced to ensure the proper functioning, security, or integrity of the game. All new software versions must be certified under this part except for changes made to ensure the proper functioning, security, or integrity of the game and changes that will not detract from the games overall compliance with the requirements of this part.

(d)On or before [Insert 120 days from the effective date], each tribal gaming regulatory authority shall submit to the Commission the list required by § 546.9(c) of this part.

(e)Nothing in this section is intended to authorize the continued operation of uncompacted Class III machines that allow a player to play against the machine. § 546.11 What is the effect on this part if a section is declared invalid? If any provision of this part be declared invalid by a court of competent jurisdiction, such decision shall not affect the remainder of this part. Dated: October 17, 2007. Philip N. Hogen, Chairman. Cloyce V. Choney, Commissioner. Norman H. DesRosiers, Commissioner. [FR Doc. E7-20776 Filed 10-23-07; 8:45 am] BILLING CODE 7565-01-P DEPARTMENT OF THE INTERIOR National Indian Gaming Commission 25 CFR Parts 542 and 543 RIN 3141-AA37 Minimum Internal Control Standards for Class II Gaming AGENCY: National Indian Gaming Commission (“NIGC” or “Commission”), Interior. ACTION: Proposed rule. SUMMARY: In response to the inherent risks and the need for effective controls in tribal gaming, the Commission, in January 1999, developed minimum internal control standards (MICS). Since their original implementation, it has become obvious that the MICS require technical adjustments and revisions so that they continue to be effective in protecting tribal assets, while still allowing tribes to utilize technological advances in the gaming industry. The current MICS are specific to the conduct of a wagering game without regards to whether the game is classified as a Class II or Class III game. This proposed rule is intended to supersede certain specified sections of the current MICS and replace them with a new part titled Minimum Internal Control Standards for Class II Gaming. DATES: Submit comments on or before December 10, 2007. ADDRESSES: Mail Comments to “Comments on Class II MICS” National Indian Gaming Commission, Suite 9100, 1441 L Street, NW., Washington, DC 20005. Comments may be transmitted by facsimile to 202-632-7066, or mailed or submitted to the above address. Comments may also be submitted electronically to *bingo_mics@nigc.gov* . FOR FURTHER INFORMATION CONTACT: Joe H. Smith, Director of Audits, telephone 202-632-7003. This is not a toll free call. SUPPLEMENTARY INFORMATION: Preamble Table of Contents I. Development of the Proposed Rule II. MICS Structure III. Tier Structure IV. Small and Charitable Gaming Operations V. Tribal Internal Control Standards VI. Alternative Procedures VII. Agents VIII. Smart Cards IX. Manual Payouts X. Promotional Prize Payouts XI. Patron Account Transaction Record XII. Audit Tasks To Be Performed at Relevant Periods XIII. Inter-tribal Prize Pools XIV. Information Technology I. Development of the Proposed Rule On February 22, 2007, the Commission held a meeting of its Classification Standards Advisory Committee. At this meeting the tribal representatives on the committee presented to the Commission a final draft of descriptive technical standards for Class II gaming. As the technical standards were being developed the Commission realized that many of the provisions considered for inclusion were not technical standards but rather internal controls. After reviewing the final technical standards draft, the Commission decided, that for the technical standards to be effective, it would have to make changes to its existing minimum internal control standards (MICS). The updating of MICS will be done in phases with the first phase limited to those areas that had a direct impact on the technical standards, specifically, bingo and other games similar to bingo. To complete this task, the Commission requested that its standing MICS Advisory Committee embark on an aggressive schedule to complete revisions to MICS to be published concurrently with the publishing of technical standards. Additionally, the Commission requested that members of the Classification Standards Advisory Committee assist in drafting MICS revisions to ensure that any changes were consistent with the draft technical standards. During a MICS Advisory Committee meeting held on June 25, 2007, in Dallas, Texas, tribal representatives on the MICS Committee urged the Commission to adopt a format for the new MICS regulations different than the one originally proposed by the Commission. This alternative format focused on functions within a gaming facility rather than game type. Following this meeting the Commission decided to go forward with the suggested alternative format. The tribal representatives of the MICS Committee formed a working group, referred to by them as the Tribal Gaming Working Group (TGWG), to solicit information from tribal regulators, operators, and manufacturers. Tribal representatives requested that they be allowed time to consult with this group before providing advice to the Commission. The Commission agreed and between June and September 2007, the TGWG met several times in person and conducted numerous conference calls. The Commission did not participate in the establishment of this working group. However, Commission staff were invited to attend all of the meetings and participate in some of the conference calls. The Commission felt it was important to make staff available to this working group to answer questions about the goals of the Commission in drafting regulation revisions. Commission staff participated in this capacity during in-person meetings on July 15, 2007, in Seattle, Washington, on July 24, 2007, in Arlington, Virginia, and on August 13 and 27, 2007 in Las Vegas, Nevada. The Commission is grateful to the tribal representatives on the MICS Advisory Committee and to those who assisted the tribal representatives for all of their hard work and for the high quality draft minimum internal control regulations that resulted from their efforts. The proposed rule is largely adopted from the final draft MICS, delivered to the Commission by the tribal representatives of the Advisory Committee on September 4, 2007. The full committee including the Commission, met to discuss the draft on September 12, 2007, in Arlington, Virginia. During this meeting the Commission raised questions about the draft regulations and received responses from the tribal representatives. The Commission also allowed members of the audience to make comments on the draft MICS as well as the process for developing them. There are places, of course, where the Commission felt it could not accept the MICS Committee's recommendations. As such, the Commission has proposed rules more stringent than the tribal representatives to the Advisory Committee would have preferred. Highlights of the new part, as well as a discussion of Advisory Committee recommendations the Commission did not accept are included below. II. MICS Structure Currently, MICS for Class II and Class III gaming are contained in 25 CFR 542. As there are some essential differences between Class II and Class III gaming, the Commission decided that there should be separate MICS for Class II and Class III gaming. Therefore, the Commission is proposing a new part 543 that would be limited to Class II gaming. The Commission had originally planned on mimicking the structure of part 542 in the drafting of new part 543. The controls in part 542 are segregated by the type of Class II game they apply to or by an area within the gaming operation. During the drafting process the MICS Advisory Committee recommended that the Commission adopt an alternative structure for the new part. The Commission has accepted the Advisory Committee's recommendation to structure the proposed rule based on the conceptual proposition that one set of controls can be made applicable to all types and forms of the game of bingo and other games similar to bingo whether the game is played manually or electronically. While it will eventually be necessary to bring many of the controls currently contained in part 542 into new part 543, in order to have separate and independent MICS for Class II and Class III gaming, the Commission felt it was necessary to structure this migration in phases. The most immediate concern was the controls related to bingo and other games similar to bingo. These controls were addressed first so that the current MICS would not conflict with the new proposed technical standards. Accordingly, the proposed rule addresses only the game of bingo, other games similar to bingo, and directly related information technology controls. Many of the provisions of part 542 will remain effective and applicable to class II games until such time as replacement regulations are enacted by the Commission. The second phase of this process of developing a comprehensive set of Class II MICS will address forms of Class II gaming other than bingo and games similar to bingo, such as pull-tabs and poker, and will codify the rules governing the processes that support the games, such as drop and count, cage, credit and internal audit. Furthermore, just as with part 542, the concept of tier classification will be preserved, so that smaller gaming operations will be held to a set of MICS better tailored to the risks found in small gaming operations and the resources available for addressing them. III. Tier Structure The proposed rule allows an exemption, commonly referred to as the small and charitable exemption, for gaming operations earning less than $1 million in gross gaming revenue. A proposal was made to increase the threshold from $1 million to $3 million. The basis for the proposal was the premise that the higher threshold would be more consistent with other gaming jurisdictions, would acknowledge that smaller gaming operations may not have the resources to invest in the specified controls and, in all likelihood, the inherent risk associated with their games do not justify them. The Commission appreciates that the burden of compliance may be heavier on smaller gaming operations than larger ones that may have greater resources to allocate to internal controls. The Commission has concluded that the tier structure mitigates impact on small operations. Therefore, the Commission has decided to keep the $1 million dollar ceiling for the small and charitable gaming exemption. IV. Small and Charitable Gaming Operations Small and charitable operations are required to adopt tribal internal controls that, at a minimum, protect the integrity of the games offered and safeguard the assets used in connection with the operation. The Commission has added a requirement that the gaming operations must create, prepare and maintain records in accordance with Generally Accepted Accounting Principles. V. Tribal Internal Control Standards The tribal representatives on the Advisory Committee proposed that a regulation be included stipulating that only applicable standards shall apply to the tribe's gaming operation(s). The Commission disagrees. The proposed new section 543.3(c) addresses the issue by requiring that the tribe's gaming regulatory body adopt tribal internal control standards that equal or exceed those set forth in the proposed rule. Furthermore, within the preamble to part 542 final rule, published June 2002, the question was addressed as follows, “Indian gaming is and always will be very diverse. The Commission therefore recognizes that developing one set of MICS to address all situations in every tribal gaming operation is not possible. It is not intended for Tribes to simply adopt these MICS verbatim as tribal internal control standards. Instead, Tribal gaming regulatory authorities should utilize the following to develop their own internal control standards as provided for in section 542.3(c) of this part.” VI. Alternative Procedures The tribal representatives on the Advisory Committee proposed that a regulation be adopted that would authorize the tribal gaming regulatory authorities to approve without federal concurrence, alternative procedures to those required by the new part. The Commission is not prepared to adopt such a procedure at this time. Consequently, the Commission continues to rely on the variance process contained in 25 CFR 542.18. VII. Agents The proposed rule utilizes the term “agent” in many places throughout part 543. In today's complex gaming environment it is not uncommon for support functions such as an internal audit to be outsourced, and vendors to actively participate in the maintenance of gaming related equipment and software programs. MICS, therefore, need to account for such variables. This definition is not intended, however, to allow persons to circumvent the management contract approval process or the need for licenses and background investigations for primary management officials and key employees. VIII. Smart Cards The present definition of smart cards contained in part 542.13 is unclear. Essentially, all smart cards are not prohibited by the MICS; only those that possess the sole source of the patron account data. If the card is accessing the account data within the cashless gaming system or the system maintains a redundant record or the card has a specified value that cannot change, used merely to transfer wagering credits to a device, the smart card is not prohibited. Accordingly, the Commission has specified which smart cards are prohibited. IX. Manual Payouts Proposed section 543.7(c) identifies controls applicable to manual payouts and short pays. Prize payouts over a predetermined amount, not to exceed $50,000 dollars, would require the signatures of two authorized individuals, one of whom must be a supervisor. The Commission has determined that it is an adequate control for the associated risk. X. Promotional Prize Payouts Proposed section 543.7(c) also provides standards applicable to promotional prize payouts. The Commission considers these types of payouts to be of a high risk. Accordingly, the signatures of two persons are required to authorize payouts exceeding $599 dollars. XI. Patron Account Transaction Record Proposed section 543.7(g) requires gaming operations to make available to the patron or tribal gaming regulatory authority, upon request of either, a record of the transactions occurring within a patron's wagering account. XII. Audit Tasks to be performed at Relevant Periods Proposed section 543.7(i) includes standards pertaining to the accounting and auditing function associated with the game of bingo and other games similar to bingo. The auditing tasks represent procedures deemed by the MICS Advisory Committee to be necessary to effectively account for and detect anomalies in server-based games' performance data. The established gaming jurisdictions provide little guidance on what minimum controls should be required by a gaming oversight body. The MICS Advisory Committee recognized that the accepted industry practice of comparing the actual performance of a gaming machine to a predetermined criterion, theoretical hold, has an awkward, if not meaningless, application to the server-based game of bingo or other games similar to bingo. The conclusion is based upon the greater volatility of a bingo game, as compared to a random number generator possessing a predetermined cycle, even if the game is affected by skill. Consequently, to mitigate the risk of foregoing the typical analysis process, alternative auditing tasks were identified and are recommended. XIII. Inter-tribal Prize Pools Proposed section 543.7(i) contains standards pertaining to the accounting and auditing function associated with the game of bingo and games similar to bingo. Included are controls specific to the data that a vendor would provide to a tribe relevant to the operation and maintenance of a linked prize pool. Although the proposed controls are more abbreviated than the corresponding standards in existing part 542 pertaining to linked electronic games and host and remote host locations, the proposal appears to satisfy the overall regulatory objectives of requiring the vendor to share game performance data with the participating individual locations. XIV. Information Technology The standards proposed at new § 543.16 reflect only those controls directly related to and deemed necessary to augment the controls pertaining to the game of bingo and other games similar to bingo. During the second phase of this overall process of enacting MICS for class II gaming, it is anticipated that additional standards will be added. Regulatory Matters Regulatory Flexibility Act This proposed rule will not have a significant economic effect on a substantial number of small entities as defined under the Regulatory Flexibility Act, 5 U.S.C. 601 *et seq.* Indian tribes are not considered to be small entities for the purposes of the Regulatory Flexibility Act. Small Business Regulatory Enforcement Fairness Act This proposed rule is not a major rule under 5 U.S.C. 804(2), the Small Business Regulatory Enforcement Fairness Act. This rule does not have an annual effect on the economy of $100 million dollars or more. This rule will not cause a major increase in costs or prices for consumers, individual industries, federal, state or local government agencies or geographic regions and does not have a significant adverse effect on competition, employment, investment, productivity, innovation, or the ability of U.S. based enterprises to compete with foreign-based enterprises. The Commission has determined that the cost of compliance with this regulation shall be minimal for several reasons. First, part 542 has been in effect since 1999 and requires that all Indian gaming operations be in compliance with the MICS. Second, considering that the Indian gaming industry spent approximately $419 million in 2006 on regulation and given the testimony of various tribal and industry leaders, it can be assumed that all gaming operations are compliant with part 542 or more stringent tribal internal control standards. Finally, given the widespread compliance with part 542, the cost of complying with new part 543 should be minimal. Paperwork Reduction Act This proposed regulation requires an information collection under the Paperwork Reduction Act, 44 U.S.C. 3501 *et seq.* , as did the regulation it replaces. There is no change to the paperwork requirements created by this rule. Unfunded Mandates Reform Act The Commission, as an independent regulatory agency within the Department of the Interior, is exempt from compliance with the Unfunded Mandates Reform Act, 2 U.S.C. 1502(1); 2 U.S.C. 658(1). Takings In accordance with Executive Order 12630, the Commission has determined that this proposed rule does not have significant takings implications. A takings implication assessment is not required. Civil Justice Reform In accordance with Executive Order 12988, the Office of General Counsel has determined that the proposed rule does not unduly burden the judicial system and meets the requirements of sections 3(a) and 3(b)(2) of the Order. National Environmental Policy Act The Commission has determined that this proposed rule does not constitute a major federal action significantly affecting the quality of the human environment and that no detailed statement is required pursuant to the National Environmental Policy Act of 1969, 42 U.S.C. 4321 *et seq.* List of Subjects in 25 CFR Parts 542 and 543 Accounting, Auditing, Gambling, Indian-lands, Indian-tribal government, Reporting and recordkeeping requirements. Accordingly, for the reasons described in the preamble, the Commission proposes to amend its regulations at 25 CFR chapter III as follows: PART 542—MINIMUM INTERNAL CONTROL STANDARDS 1. The authority citation for part 542 continues to read as follows: Authority: 25 U.S.C. 2702(c), 2706(b)(10). § 542.7 [Removed and Reserved] 2. Section 542.7 is removed and reserved effective [INSERT DATE ONE YEAR FROM DATE OF PUBLICATION OF THE FINAL RULE IN THE FEDERAL REGISTER]. § 542.16 [Removed and Reserved] 3. Section 542.16 is removed and reserved effective [INSERT DATE ONE YEAR FROM DATE OF PUBLICATION OF THE FINAL RULE IN THE FEDERAL REGISTER]. 4. Add new part 543 to read as follows: PART 543—MINIMUM INTERNAL CONTROL STANDARDS FOR CLASS II GAMING Sec. 543.1 What does this part cover?, 543.2 What are the definitions for this part? 543.3 How do I comply with this part? 543.4-543.5 [RESERVED] 543.6 Does this part apply to small and charitable gaming operations? 543.7 What are the minimum internal control standards for bingo? 543.8-543.15 [RESERVED] 543.16 What are the minimum internal controls for information technology? Authority: 25 U.S.C. 2701 *et seq.* § 543.1 What does this part cover? This part, along with §§ 542.14 through 542.15, 542.17 through 542.23, 542.30 through 542.33, and 542.40 through 542.43 of this chapter establishes the minimum internal control standards for the conduct of Class II bingo and other games similar to bingo on Indian lands as described in 25 U.S.C. 2701 *et seq.* Throughout this part the term bingo includes other games similar to bingo. § 543.2 What are the definitions for this part? The definitions in this section shall apply to all sections of this part unless otherwise noted. *Account access component* , A component within a Class II gaming system that reads or recognizes account access media and gives a patron the ability to interact with their account. *Account access medium* , A magnetic stripe card or any other medium inserted into, or otherwise made to interact with, an account access component in order to give a patron the ability to interact with an account. *Accountability* , All financial instruments, receivables, and patron deposits constituting the total amount for which the bankroll custodian is responsible at a given time. *Actual bingo win percentage* , The percentage calculated by dividing the bingo win by the bingo sales. Can be calculated for individual prize schedules or type of player interfaces on a per-day or cumulative basis. *Agent* , An employee or licensed person authorized by the gaming operation, as approved by the tribal gaming regulatory authority, designated for certain authorizations, decisions, tasks and actions in the gaming operation. This definition is not intended to eliminate nor suggests that appropriate management contracts are not required, where applicable, as referenced in 25 U.S.C. 2711. *Amount in* , The total value of all financial instruments and cashless transactions accepted by the Class II gaming system. *Amount out* , The total value of all financial instruments and cashless transactions paid by the Class II gaming system, plus the total value of manual payments. *Bingo paper* , A consumable physical object that has one or more bingo cards on its face. *Bingo sales* , The value of purchases made by players to participate in bingo. *Bingo win* , The result of bingo sales minus prize payouts. *Cage* , A secure work area within the gaming operation for cashiers which may include a storage area for the gaming operation bankroll. *Cash equivalents* , The monetary value that a gaming operation may assign to a document, financial instrument, or anything else of representative value other than cash. A cash equivalent includes, but is not limited to, tokens, chips, coupons, vouchers, payout slips and tickets, and other items to which a gaming operation has assigned an exchange value. *Cashless system* , A system that performs cashless transactions and maintains records of those cashless transactions. *Cashless transaction* , A movement of funds electronically from one component to another, often to or from a patron deposit account. *Class II game* , A game as described in 25 U.S.C. 2703(7)(A). *Class II Gaming System* , All components, whether or not technologic aids in electronic, computer, mechanical, or other technologic form, that function together to aid the play of one or more Class II games including accounting functions mandated by part 547 of this chapter. *Commission* , The National Indian Gaming Commission. *Count* , The act of counting and recording the drop and/or other funds. *Count room* , A secured room where the count is performed. *Count team* , Agents who perform the count. *Coupon* , A financial instrument of fixed wagering value, usually paper, that can only be used to acquire non-cashable credits through interaction with a voucher system. This does not include instruments such as printed advertising material that cannot be validated directly by a voucher system. *Drop* , The total amount of financial instruments removed from financial instrument storage components in Class II gaming systems. *Drop period* , The period of time that occurs between sequential drops. *Electronic funds transfer* , A transfer of funds to or from a Class II gaming system through the use of a cashless system, which are transfers from an external financial institution. *Financial instrument* , Any tangible item of value tendered in Class II game play including but not limited to bills, coins, vouchers, and coupons. *Financial instrument acceptor* , Any component that accepts financial instruments. *Financial instrument storage component* , Any component that stores financial instruments. *Game software* , The operational program or programs that govern the play, display of results, and/or awarding of prizes or credits for Class II games. *Gaming Equipment* , All electronic, electro-mechanical, mechanical or other physical components utilized in the play of Class II games. *Independent* , The separation of functions so that the person or process monitoring, reviewing or authorizing the controlled transaction(s) is separate from the persons or process performing the controlled transaction(s). *Inter-tribal prize pool* , A fund to which multiple tribes contribute from which prizes are paid to winning players at a participating tribal gaming facility and which is administered by one of the participating tribes or a third party, (e.g. progressive prize pools, shared prize pools, etc.). *Internal audit* , means persons who perform an audit function of a gaming operation that are independent of the department subject to audit. Independence is obtained through the organizational reporting relationship, as the internal audit department shall not report to management of the gaming operation. Internal audit activities should be conducted in a manner that permits objective evaluation of areas examined. Internal audit personnel may provide audit coverage to more than one operation within a tribe's gaming operation holdings. *Kiosk* , A self serve point of sale or other component capable of accepting or dispensing financial instruments and may also be capable of initiating cashless transactions of values to or from a patron deposit account or promotional account. *Manual payout* , The payment to a player of some or all of a player's accumulated credits (e.g. short pays, cancelled credits, etc.) or an amount owed as a result of a winning event by an agent of the gaming operation. *MICS* , Minimum internal control standards in this part. *Non-cashable credit* , Credits given by an operator to a patron; placed on a Class II gaming system through a coupon, cashless transaction, or other approved means; and capable of activating play but not being converted to cash. *Patron deposit account* , An account maintained on behalf of a patron, for the purpose of depositing and withdrawing cashable funds for the primary purpose of interacting with a gaming activity. *Patron deposits* , The funds placed with a designated cashier by patrons for the patrons' use at a future time. *Player interface* , Any component(s) of a Class II gaming system, including an electronic or technological aid (not limited to terminals, player stations, handhelds, fixed units, etc.) that directly enable(s) player interaction in a Class II game. *Player tracking system* , A system typically used by a gaming operation to record the amount of play of an individual patron. *Prize payout* , A transaction associated with a winning event. *Prize schedule* , A set of prizes available to players for achieving pre-designated patterns in Class II game(s). *Program Storage Media* , An electronic data storage component, such as a CD-ROM, EPROM, hard disk, or flash memory on which software is stored and from which software is read. *Progressive prize* , A prize that increases by a selectable or predefined amount based on play of a Class II game. *Promotional account* , A file, record, or other data structure that records transactions involving a patron or patrons that are not otherwise recorded in a patron deposit account. *Promotional prize payout* , Merchandise or awards given to players by the gaming operation which is based on gaming activity. *Random number generator (RNG)* , A software module, hardware component or combination of these designed to produce outputs that are effectively random. *Server* , A computer which controls one or more applications or environments. *Shift* , An eight-hour period, unless otherwise approved by the tribal gaming regulatory authority, not to exceed 24 hours. *Short pay* , The payment of the unpaid balance of an incomplete payout by a player interface. *Tier A* , Gaming operations with annual gross gaming revenues of more than $1 million but not more than $5 million. *Tier B* , Gaming operations with annual gross gaming revenues of more than $5 million but not more than $15 million. *Tier C* , Gaming operations with annual gross gaming revenues of more than $15 million. *Tribal Gaming Regulatory Authority,* The entity authorized by tribal law to regulate gaming conducted pursuant to the Indian Gaming Regulatory Act. *Voucher,* A financial instrument of fixed value that can only be used to acquire an equivalent value of cashable credits or cash through interaction with a voucher system. *Voucher System,* A component of the Class II gaming system or an external system that securely maintains records of vouchers and coupons; validates payment of vouchers; records successful or failed payments of vouchers and coupons; and controls the purging of expired vouchers and coupons. § 543.3 How do I comply with this part?

(a)*Compliance based upon tier.* [Reserved]

(b)*Determination of tier.* [Reserved]

(c)*Tribal internal control standards.* Within six months of [INSERT DATE OF PUBLICATION OF THE FINAL RULE IN THE FEDERAL REGISTER], each tribal gaming regulatory authority shall, in accordance with the tribal gaming ordinance, establish or ensure that tribal internal control standards are established and implemented that shall:

(1)Provide a level of control that equals or exceeds those set forth in this part;

(2)Contain standards for currency transaction reporting that comply with 31 CFR part 103; and

(3)Establish a deadline, which shall not exceed six months from the date the tribal gaming regulatory authority establishes internal controls by which a gaming operation must come into compliance with the tribal internal control standards. However, the tribal gaming regulatory authority may extend the deadline by an additional six months if written notice citing justification is provided to the Commission no later than two weeks before the expiration of the nine month period.

(d)*Gaming operations.* Each gaming operation shall develop and implement an internal control system that, at a minimum, complies with the tribal internal control standards.

(1)*Existing gaming operations.* All gaming operations that are operating on or before [INSERT DATE ONE YEAR FROM DATE OF PUBLICATION OF THE FINAL RULE IN THE FEDERAL REGISTER], shall comply with this part within the time requirements established in paragraph

(c)of this section. In the interim, such operations shall continue to comply with existing tribal internal control standards.

(2)*New gaming operations.* All gaming operations that commence operations after [INSERT DATE SIX MONTHS FROM DATE OF PUBICATION OF THE FINAL RULE IN THE FEDERAL REGISTER], shall comply with this part before commencement of operations.

(e)*Submission to Commission.* Tribal regulations promulgated pursuant to this part shall not be required to be submitted to the Commission pursuant to § 522.3(b) of this chapter.

(f)*CPA testing.*

(1)An independent certified public accountant

(CPA)shall be engaged to perform “Agreed-Upon Procedures” to verify that the gaming operation is in compliance with the minimum internal control standards

(MICS)set forth in this part or a tribally approved variance thereto that has received Commission concurrence. The CPA shall report each event and procedure discovered by or brought to the CPA's attention that the CPA believes does not satisfy the minimum standards or tribally approved variance that has received Commission concurrence. The “Agreed-Upon Procedures” may be performed in conjunction with the annual audit. The CPA shall report his or her findings to the tribe, tribal gaming regulatory authority, and management. The tribe shall submit two copies of the report to the Commission within 120 days of the gaming operation's fiscal year end. This regulation is intended to communicate the Commission's position on the minimum Agreed-Upon Procedures to be performed by the CPA. Throughout these regulations, the CPA's engagement and reporting are based on Statements on Standards for Attestation Engagements (SSAE's) in effect as of December 31, 2003, specifically SSAE 10 (“Revision and Recodification Agreed-Upon Procedures Engagements”). If future revisions are made to the SSAE's or new SSAE's are adopted that are applicable to this type of engagement, the CPA is to comply with any new or revised professional standards in conducting engagements pursuant to these regulations and the issuance of the agreed-upon procedures report. The CPA shall perform the “Agreed-Upon Procedures” in accordance with the following:

(i)As a prerequisite to the evaluation of the gaming operation's internal control systems, it is recommended that the CPA obtain and review an organization chart depicting segregation of functions and responsibilities, a description of the duties and responsibilities of each position shown on the organization chart, and an accurate, detailed narrative description of the gaming operation's procedures in effect that demonstrate compliance.

(ii)Complete the CPA NIGC MICS Compliance checklists or other comparable testing procedures. The checklists should measure compliance on a sampling basis by performing inspections, observations and substantive testing. The CPA shall complete separate checklists for bingo and information technology. All questions on each applicable checklist should be completed. Work-paper references are suggested for all “no” responses for the results obtained during testing (unless a note in the “W/P Ref” can explain the exception).

(iii)The CPA shall perform, at a minimum, the following procedures in conjunction with the completion of the checklists:

(A)At least one unannounced observation of each of the following: financial instrument acceptor drop and count. The AICPA's “Audits of Casinos” Audit and Accounting Guide provides that observations in the casino cage and count room should be unannounced. For purposes of these procedures, “unannounced” means that no officers, directors, or employees are given advance information regarding the dates or times of such observations. The independent accountant should make arrangements with the gaming operation and tribal gaming regulatory authority to ensure proper identification of the CPA's personnel and to provide for their prompt access to the count rooms. The checklists should provide for drop and count observations. The count room should not be entered until the count is in process and the CPA should not leave the room until the monies have been counted and verified to the count sheet by the CPA and accepted into accountability.

(B)Observations of the gaming operation's agents as they perform their duties.

(C)Interviews with the gaming operation's agents who perform the relevant procedures.

(D)Compliance testing of various documents relevant to the procedures. The scope of such testing should be indicated on the checklist where applicable.

(E)For new gaming operations that have been in operation for three months or less at the end of their business year, performance of this regulation, this section, is not required for the partial period.

(2)Alternatively, at the discretion of the tribe, the tribe may engage an independent CPA to perform the testing, observations and procedures reflected in paragraphs (f)(1)(i), (ii), and

(iii)of this section utilizing the tribal internal control standards adopted by the tribal gaming regulatory authority or tribally approved variance that has received Commission concurrence. Accordingly, the CPA will verify compliance by the gaming operation with the tribal internal control standards. Should the tribe elect this alternative, as a prerequisite, the CPA will perform the following:

(i)The CPA shall compare the tribal internal control standards to the MICS to ascertain whether the criteria set forth in the MICS or Commission approved variances are adequately addressed.

(ii)The CPA may utilize personnel of the tribal gaming regulatory authority to cross-reference the tribal internal control standards to the MICS, provided the CPA performs a review of the tribal gaming regulatory authority personnel's work and assumes complete responsibility for the proper completion of the work product.

(iii)The CPA shall report each procedure discovered by or brought to the CPA's attention that the CPA believes does not satisfy paragraph (f)(2)(i) of this section.

(3)*Reliance on Internal Auditors.*

(i)The CPA may rely on the work of an internal auditor, to the extent allowed by the professional standards, for the performance of the recommended procedures specified in paragraphs (f)(1)(iii)(B), (C), and

(D)of this section, and for the completion of the checklists as they relate to the procedures covered therein.

(ii)Agreed-upon procedures are to be performed by the CPA to determine that the internal audit procedures performed for a past 12-month period (includes two six month periods) encompassing a portion or all of the most recent business year have been properly completed. The CPA will apply the following agreed-upon procedures to the gaming operation's written assertion:

(A)Obtain internal audit department work-papers completed for a 12-month period (includes two six month periods) encompassing a portion or all of the most recent business year and determine whether the CPA NIGC MICS Compliance Checklists or other comparable testing procedures were included in the internal audit work-papers and all steps described in the checklists were initialed or signed by an internal audit representative.

(B)For the internal audit work-papers obtained in paragraph (f)(3)(ii)(A) of this section, on a sample basis, re-perform the procedures included in CPA NIGC MICS Compliance Checklists or other comparable testing procedures prepared by internal audit and determine if all instances of noncompliance noted in the sample were documented as such by internal audit. The CPA NIGC MICS Compliance Checklists or other comparable testing procedures for the applicable Drop and Count procedures are not included in the sample re-performance of procedures because the CPA is required to perform the drop and count observations as required under paragraph (f)(1)(iii)(A) of this section of the agreed-upon procedures. The CPA's sample should comprise a minimum of three percent of the procedures required in each CPA NIGC MICS Compliance Checklist or other comparable testing procedures for the bingo department and five percent for the other departments completed by internal audit in compliance with the internal audit MICS. The re-performance of procedures is performed as follows:

(1)For inquiries, the CPA should either speak with the same individual or an individual of the same job position as the internal auditor did for the procedure indicated in the CPA checklist.

(2)For observations, the CPA should observe the same process as the internal auditor did for the procedure as indicated in their checklist.

(3)For document testing, the CPA should look at the same original document as tested by the internal auditor for the procedure as indicated in their checklist. The CPA need only retest the minimum sample size required in the checklist.

(C)The CPA is to investigate and document any differences between their re-performance results and the internal audit results.

(D)Documentation shall be maintained for five years by the CPA indicating the procedures re-performed along with the results.

(E)When performing the procedures for paragraph (f)(3)(ii)(B) of this section in subsequent years, the CPA must select a different sample so that the CPA will re-perform substantially all of the procedures after several years.

(F)Additional procedures performed at the request of the Commission, the tribal gaming regulatory authority or management should be included in the Agreed-Upon Procedures report transmitted to the Commission.

(4)*Report Format.* The NIGC has concluded that the performance of these procedures is an attestation engagement in which the CPA applies such Agreed-Upon Procedures to the gaming operation's assertion that it is in compliance with the MICS and, if applicable under paragraph (f)(2) of this section, the tribal internal control standards and approved variances, provide a level of control that equals or exceeds that of the MICS. Accordingly, the Statements on Standards for Attestation Engagements (SSAE's), specifically SSAE 10, issued by the Auditing Standards Board is applicable. SSAE 10 provides current, pertinent guidance regarding agreed-upon procedure engagements, and the sample report formats included within those standards should be used, as appropriate, in the preparation of the CPA's agreed-upon procedures report. If future revisions are made to this standard or new SSAE's are adopted that are applicable to this type of engagement, the CPA is to comply with any revised professional standards in issuing their agreed upon procedures report. The Commission will provide an example report and letter formats upon request that may be used and contain all of the information discussed below. The report must describe all instances of procedural noncompliance (regardless of materiality) with the MICS or approved variations, and all instances where the tribal gaming regulatory authority's regulations do not comply with the MICS. When describing the agreed-upon procedures performed, the CPA should also indicate whether procedures performed by other individuals were utilized to substitute for the procedures required to be performed by the CPA. For each instance of noncompliance noted in the CPA's agreed-upon procedures report, the following information must be included: The citation of the applicable MICS for which the instance of noncompliance was noted; a narrative description of the noncompliance, including the number of exceptions and sample size tested.

(5)*Report Submission Requirements.*

(i)The CPA shall prepare a report of the findings for the tribe and management. The tribe shall submit two copies of the report to the Commission no later than 120 days after the gaming operation's business year end. This report should be provided in addition to any other reports required to be submitted to the Commission.

(ii)The CPA should maintain the work-papers supporting the report for a minimum of five years. Digital storage is acceptable. The Commission may request access to these work-papers, through the tribe.

(6)*CPA NIGC MICS Compliance Checklists.* In connection with the CPA testing pursuant to this section and as referenced therein, the Commission will provide CPA MICS Compliance Checklists upon request.

(g)*Enforcement of Commission Minimum Internal Control Standards.*

(1)Each tribal gaming regulatory authority is required to establish and implement internal control standards pursuant to paragraph

(c)of this section. Each gaming operation is then required, pursuant to paragraph

(d)of this section, to develop and implement an internal control system that complies with the tribal internal control standards. Failure to do so may subject the tribal operator of the gaming operation, or the management contractor, to penalties under 25 U.S.C. 2713.

(2)Recognizing that tribes are the primary regulator of their gaming operation(s), enforcement action by the Commission will not be initiated under this part without first informing the tribe and tribal gaming regulatory authority of deficiencies in the internal controls of its gaming operation and allowing a reasonable period of time to address such deficiencies. Such prior notice and opportunity for corrective action is not required where the threat to the integrity of the gaming operation is immediate and severe. §§ 543.4-543.5 [Reserved] § 543.6 Does this part apply to small and charitable gaming operations?

(a)*Small gaming operations.* This part shall not apply to small gaming operations provided that:

(1)The tribal gaming regulatory authority permits the operation to be exempt from this part;

(2)The annual gross gaming revenue of the operation does not exceed $1 million; and

(3)The tribal gaming regulatory authority develops and the operation complies with alternate procedures that:

(i)Protect the integrity of games offered;

(ii)Safeguard the assets used in connection with the operation; and

(iii)Create, prepare and maintain records in accordance with Generally Accepted Accounting Principles.

(b)*Charitable gaming operations.* This part shall not apply to charitable gaming operations provided that:

(1)All proceeds are for the benefit of a charitable organization;

(2)The tribal gaming regulatory authority permits the charitable organization to be exempt from this part;

(3)The charitable gaming operation is operated wholly by the charitable organization's agents;

(4)The annual gross gaming revenue of the charitable operation does not exceed $1 million; and

(5)The tribal gaming regulatory authority develops and the charitable gaming operation complies with alternate procedures that:

(i)Protect the integrity of the games offered;

(ii)Safeguard the assets used in connection with the gaming operation; and

(iii)Create, prepare and maintain records in accordance with Generally Accepted Accounting Principles.

(c)*Independent operators.* Nothing in this section shall exempt gaming operations conducted by independent operators for the benefit of a charitable organization. § 543.7 What are the minimum internal control standards for bingo?

(a)*Bingo Cards* —(1) *Inventory of bingo paper.*

(i)The bingo paper inventory shall be controlled so as to assure the integrity of the bingo paper being used as follows:

(A)When received, bingo paper shall be inventoried and secured by an authorized agent(s) independent of bingo sales;

(B)The issue of bingo paper to the cashiers shall be documented and signed for by the authorized agent(s) responsible for inventory control and a cashier. The bingo control log shall include the series number of the bingo paper;

(C)The bingo control log shall be utilized by the gaming operation to verify the integrity of the bingo paper being used; and

(D)Once each month, an authorized agent(s) independent of both bingo paper sales and bingo paper inventory control shall verify the accuracy of the ending balance in the bingo control log by reconciling it with the bingo paper inventory.

(ii)Paragraph (a)(1) of this section does not apply where no physical inventory is applicable.

(2)*Bingo Sales.*

(i)There shall be an accurate accounting of all bingo sales.

(ii)All bingo sales records shall include the following information:

(A)Date;

(B)Time;

(C)Shift or session;

(D)Sales transaction identifiers, which may be the unique card identifier(s) sold or when electronic bingo card faces are sold, the unique identifiers of the card faces sold;

(E)Quantity of bingo cards sold;

(F)Dollar amount of bingo sales;

(G)Signature, initials, or identification of the agent or device who conducted the bingo sales; and

(H)When bingo sales are recorded manually, total sales are verified by an authorized agent independent of the bingo sales being verified and the signature, initials, or identification of the authorized agent who verified the bingo sales is recorded.

(iii)No person shall have unrestricted access to modify bingo sales records.

(iv)An authorized agent independent of the seller shall perform the following standards for each seller at the end of each session:

(A)Reconcile the documented total dollar amount of cards sold to the documented quantity of cards sold;

(B)Note any variances; and

(C)Appropriately investigate any noted variances with the results of the follow-up documented.

(3)*Voiding bingo cards.*

(i)Procedures shall be established and implemented to prevent the voiding of card sales after the start of the calling of the game for which the bingo card was sold. Cards may not be voided after the start of a game for which the card was sold.

(ii)When a bingo card must be voided the following controls shall apply as relevant:

(A)A non-electronic bingo card shall be marked void; and

(B)The authorization of the void, by an authorized agent independent of the original sale transaction (supervisor recommended), shall be recorded either by signature on the bingo card or by electronically associating the void authorization to the sale transaction of the voided bingo card.

(4)*Re-issue of previously sold bingo cards.* When one or more previously sold bingo cards need to be reissued, the following controls shall apply: the original sale of the bingo cards must be verified; and the reissue of the bingo cards must be documented, including the identity of the agent authorizing re-issuance.

(b)Draw—(1) *Verification and display.*

(i)Procedures shall be established and implemented to ensure the identity of each object drawn is accurately recorded and transmitted to the participants. The procedures must identify the method used to ensure the identity of each object drawn.

(ii)For all games offering a prize payout of $1,200 or more, as the objects are drawn the identity of the objects shall be immediately recorded and maintained for a minimum of 24 hours.

(iii)Controls shall be present to assure that all objects eligible for the draw are available to be drawn prior to the next draw.

(c)*Manual Payouts and Short Pays.*

(1)Procedures shall be established and implemented to prevent unauthorized access or fraudulent transactions using manual payout documents, including:

(i)Payout documents shall be controlled and completed in a manner that is intended to prevent a custodian of funds from altering the dollar amount on all parts of the payout document subsequent to the manual payout and misappropriating the funds.

(ii)Payout documents shall be controlled and completed in a manner that deters any one individual from initiating and producing a fraudulent payout document, obtaining the funds, forging signatures on the payout document, routing all parts of the document, and misappropriating the funds. Recommended procedures of this standard include but are not limited to the following:

(A)Funds are issued either to a second verifier of the manual payout (i.e., someone other than the agents who generated/requested the payout) or to two agents concurrently (i.e., the generator/requestor of the document and the verifier of the manual payout). Both witness the manual payout; or

(B)The routing of one part of the completed document is under the physical control (e.g., dropped in a locked box) of an agent other than the agent that obtained/issued the funds and the agent that obtained/issued the funds must not be able to place the document in the locked box.

(iii)*Segregation of responsibilities.* The functions of sales and prize payout verification shall be segregated, if performed manually. Agents who sell bingo cards on the floor shall not verify bingo cards for prize payouts with bingo cards in their possession of the same type as the bingo card being verified for the game. Floor clerks who sell bingo cards on the floor are permitted to announce the identifiers of winning bingo cards.

(iv)*Validation.* Procedures shall be established and implemented to determine the validity of the claim prior to the payment of a prize (i.e., bingo card was sold for the game played, not voided, etc.) by at least two persons.

(v)*Verification.* Procedures shall be established and implemented to ensure that at least two persons verify the winning pattern has been achieved on the winning card prior to the payment of a prize.

(vi)*Authorization and Signatures.*

(A)A Class II gaming system may substitute as one authorization/signature verifying, validating or authorizing a winning card of less than $1,200 or other manual payout. Where a Class II gaming system substitutes as an authorization/signature, the manual payout is subject to the limitations provided in this section.

(B)For manual prize payouts of $1,200 or more and less than a predetermined amount not to exceed $50,000, at least two agents must authorize, sign and witness the manual prize payout. *(1)* Manual prize payouts over a predetermined amount not to exceed $50,000 shall require one of the two signatures and verifications to be a supervisory or management employee independent of the operation of bingo. *(2)* This predetermined amount, not to exceed $50,000, shall be authorized by management, approved by the tribal gaming regulatory authority, documented, and maintained.

(2)Documentation, including;

(i)Manual payouts and short-pays exceeding $10 shall be documented on a two-part form, of which a restricted system record can be considered one part of the form, and documentation shall include the following information:

(A)Date and time;

(B)Player interface identifier or game identifier;

(C)Dollar amount paid (both alpha and numeric) or description of personal property awarded, including fair market value. Alpha is optional if another unalterable method is used for evidencing the amount paid;

(D)Type of manual payout (e.g., Prize payout, external bonus payout, short pay, etc.);

(E)Game outcome (e.g., patterns, symbols, bingo card identifier/description, etc.) for manual prize payouts, external bonus description, reason for short pay, etc.;

(F)Preprinted or concurrently printed sequential manual payout identifier; and

(G)Signatures or other authorizations, as required by this part.

(ii)For short-pays of $10 or less, the documentation (single-part form or log is acceptable) shall include the following information:

(A)Date and time;

(B)Player interface number;

(C)Dollar amount paid (both alpha and numeric). Alpha is optional if another unalterable method is used for evidencing the amount paid;

(D)The signature of at least one agent verifying and witnessing the short pay; and

(E)Reason for short pay.

(iii)In other situations that allow an agent to input a prize payout or change the dollar amount of the prize payout by more than $1 in a Class II gaming system that has an automated prize payout component, two agents, one of which is a supervisory employee, must be physically involved in verifying and witnessing the prize payout.

(iv)For manually paid promotional prize payouts, as a result of the play of a game and where the amount paid is not included in the prize schedule, the documentation (single-part form or log is acceptable) shall include the following information:

(A)Date and time;

(B)Player interface number;

(C)Dollar amount paid (both alpha and numeric). Alpha is optional if another unalterable method is used for evidencing the amount paid;

(D)The signature of at least one agent verifying and witnessing the manual promotional prize payout of $599 or less and two agents verifying and witnessing the manual promotional prize payout exceeding $599;

(E)Description or name of the promotion; and

(F)Total amount of manual promotional prize payouts shall be recorded by shift, session or other relevant time period.

(v)When a controlled manual payout document is voided, the agent completing the void shall clearly mark “void” across the face of the document, sign across the face of the document and all parts of the document shall be retained for accountability.

(d)*Operational controls.*

(1)Procedures shall be established and implemented with the intent to prevent unauthorized access to or fraudulent transactions involving cash or cash equivalents.

(2)Cash or cash equivalents exchanged between two persons shall be counted independently by at least two persons and reconciled to the recorded amounts at the end of each shift or if applicable each session. Unexplained variances shall be documented and maintained. Unverified transfers of cash or cash equivalents are prohibited.

(3)Procedures shall be established and implemented to control cash or cash equivalents in accordance with this section and based on the amount of the transaction. These procedures include but are not limited to, counting and recording on an accountability form by shift, session or relevant time period the following:

(i)Inventory, including any increases or decreases;

(ii)Transfers;

(iii)Exchanges, including acknowledging signatures or initials; and

(iv)Resulting variances.

(4)Any change of control of accountability, exchange or transfer shall require the cash or cash equivalents be counted and recorded independently by at least two persons and reconciled to the recorded amount.

(e)*Gaming equipment.*

(1)Procedures shall be established and implemented with the intention to restrict access to agents for the following:

(i)Controlled gaming equipment/components (e.g., draw objects, and back-up draw objects); and

(ii)Random number generator software. (Additional information technology security standards can be found in § 543.16 of this part)

(2)The critical proprietary software components of a Class II gaming system will be identified in the test laboratory report. When initially received, the software shall be verified to be authentic copies, as certified by the independent testing laboratory.

(3)Procedures shall be established relating to the periodic inspection, maintenance, testing, and documentation of a random sampling of gaming equipment/components, including but not limited to:

(i)Software related to game outcome shall be authenticated semi-annually by an agent independent of bingo operations by comparing signatures against the test laboratory letter on file with the tribal gaming regulatory authority for that version.

(ii)Class II gaming system interfaces to external systems shall be tested annually for accurate communications and appropriate logging of events.

(4)Records shall be maintained for each player interface that indicate the date the player interface was placed into service or made available for play, the date the player interface was removed from service and not available for play, and any changes in player interface identifiers.

(f)*Voucher systems.*

(1)The voucher system shall be utilized to verify the authenticity of each voucher or coupon redeemed.

(2)If the voucher is valid, the patron is paid the appropriate amount.

(3)Procedures shall be established and implemented to document the payment of a claim on a voucher that is not physically available or a voucher that cannot be validated (e.g., mutilated, expired, lost, stolen, etc.).

(i)If paid, appropriate documentation is retained for reconciliation purposes.

(ii)Payment of a voucher for $50 or more, a supervisory employee shall review the applicable voucher system, player interface or other transaction history records to verify the validity of the voucher and initial the voucher or documentation prior to payment.

(4)Vouchers redeemed shall remain in the cashier's accountability for reconciliation purposes. The voucher redemption system reports shall be used to ensure all paid vouchers have been validated.

(5)Vouchers paid during a period while the voucher system is temporarily out of operation shall be marked “paid”, initialed and dated by the cashier. If the voucher is greater than a predetermined amount approved (not to exceed $500), a supervisory employee shall approve the payment and evidence that approval by initialing the voucher prior to payment.

(6)Paid vouchers are maintained in the cashier's accountability for reconciliation purposes.

(7)Upon restored operation of the voucher system, vouchers redeemed while the voucher system was temporarily out of operation shall be validated as expeditiously as possible.

(8)Unredeemed vouchers can only be voided in the voucher system by supervisory employees. The supervisory employee completing the void shall clearly mark “void” across the face of the voucher and sign across the face of the voucher, if available. The accounting department will maintain the voided voucher, if available.

(g)*Patron accounts and cashless systems.*

(1)All smart cards (i.e., cards that possess the means to electronically store or retrieve data) that maintain the only source of account data are prohibited.

(2)For patron deposit accounts the following standards shall apply:

(i)For each patron deposit account, an agent shall:

(A)Require the patron to personally appear at the gaming operation;

(B)Record the type of identification credential examined, the credential number, the expiration date of credential, and the date credential was examined. (Note: A patron's driver's license is the preferred method for verifying the patron's identity. A passport, non-resident alien identification card, other government issued identification credential or another picture identification credential normally acceptable as a means of identification when cashing checks, may also be used.);

(C)Record the patron's name and may include another identifier (e.g., nickname, title, etc.) of the patron, if requested by patron;

(D)Record a unique identity for each patron deposit account;

(E)Record the date the account was opened; and

(F)Provide the account holder with a secure method of access to the account.

(ii)Patron deposit accounts shall be established for patrons at designated areas of accountability and the creation of the account must meet all the controls of paragraph (g)(2)(i) of this section when the patron makes an initial deposit of cash or cash equivalents.

(iii)If patron deposit account adjustments may be made by the operation, the operation must be authorized by the account holder to make necessary adjustments. This requirement can be met through the collection of a single authorization that covers the life of the patron deposit account.

(iv)*Patron deposits & withdrawals.*

(A)Prior to the patron making a withdrawal from a patron deposit account, the cashier shall verify the identity of the patron and availability of funds. Reliance on a secured Personal Identification Number

(PIN)entered by the patron is an acceptable method of verifying patron identity.

(B)A multi-part deposit/withdrawal record shall be created when the transaction is processed by a cashier, including; *(1)* Same document number on all copies; *(2)* Type of transaction, deposit or withdrawal; *(3)* Name or other identifier of the patron; *(4)* At least the last four digits of the account identifier; *(5)* Patron signature for withdrawals, unless a secured PIN is utilized by the patron; *(6)* Date of transaction; *(7)* Dollar amount of transaction; *(8)* Nature of deposit or withdrawal (e.g., cash, check, chips); and *(9)* Signature of the cashier processing the transaction.

(C)A copy of the transaction record shall be secured for reconciliation of the cashier's bank for each shift. All transactions involving patron deposit accounts shall be accurately tracked.

(D)The copy of the transaction record shall be forwarded to the accounting department at the end of the gaming day.

(E)When a cashier is not involved in the deposit/withdrawal of funds, procedures shall be established that safeguard the integrity of the process used.

(v)*Patron Deposit Account Adjustments.*

(A)Adjustments to the patron deposit accounts shall be performed by an agent.

(B)A record shall be created when the transaction is processed, including; *(1)* Unique transaction identifier; *(2)* Type of transaction, adjustment; *(3)* Name or other identifier of the patron; *(4)* At least the last four digits of the account identifier; *(5)* Date of transaction; *(6)* Dollar amount of transaction; *(7)* Reason for the adjustment; and *(8)* Signature or unique identifier for the agent who made the adjustment.

(C)The transaction record shall be forwarded to the accounting department at the end of the gaming day.

(vi)Where available, systems reports that indicate the dollar amount of transactions for patron deposit accounts (e.g., deposits, withdrawals, account adjustments, etc.) that should be reflected in each cashier's accountability shall be utilized at the conclusion of each shift in the reconciling of funds.

(vii)Cashless transactions and electronic funds transfers to and from patron deposit accounts shall be recorded and maintained at the end of the gaming operations specified 24-hour accounting period.

(viii)Procedures shall be established to maintain a detailed record for each patron deposit account that includes the dollar amount of all funds deposited and withdrawn, account adjustments made, and the transfers to or from player interfaces.

(ix)Detailed patron deposit account transaction records shall be available to the patron upon reasonable request and to the tribal gaming regulatory authority upon request.

(x)Only dedicated gaming operation bank accounts shall be used to record electronic funds transfers to or from the patron deposit accounts. Gaming operation bank accounts dedicated to electronic funds transfers to or from the patron deposit accounts shall not be used for any other types of transactions.

(3)For promotional and other accounts the following standards shall apply:

(i)Changes to promotional and other accounts shall be performed by an agent.

(ii)The following standards apply if a player tracking system is utilized:

(A)In the absence of the patron, modifications to balances on a promotional or other account must be made under the authorization of supervisory employees and shall be sufficiently documented (including substantiation of reasons for modification). Modifications are randomly verified by independent agents on a quarterly basis. This standard does not apply to the deletion of balances related to inactive or closed accounts through an automated process.

(B)Access to inactive or closed accounts is restricted to supervisory employees.

(C)Patron identification is required when redeeming values. Reliance on a secured Personal Identification Number

(PIN)by the patron is an acceptable method of verifying patron identification.

(h)*Promotions.*

(1)The conditions for participating in promotional programs, including drawings and giveaway programs shall be approved and available for patron review at the gaming operation.

(2)Changes to the player tracking systems, promotional accounts, promotion and external bonusing system parameters which control features such as the awarding of bonuses, the issuance of cashable credits, non-cashable credits, coupons and vouchers, shall be performed under the authority of supervisory employees, independent of the department initiating the change. Alternatively, the changes may be performed by supervisory employees of the department initiating the change if sufficient documentation is generated and the propriety of the changes are randomly verified by supervisory employees independent of the department initiating the change on a monthly basis.

(3)All other changes to the player tracking system shall be appropriately documented.

(4)All relevant controls from § 543.16 of this part will apply.

(i)*Accounting.*

(1)*Accounting/audit standards.*

(i)Accounting/auditing procedures shall be performed by agents who are independent of the persons who performed the transactions being reviewed.

(ii)All accounting/audit procedures and actions shall be documented (e.g., log, checklist, investigations and notation on reports), maintained for inspection and provided to the tribal gaming regulatory authority upon request.

(ii)Accounting/audit procedures shall be performed reviewing transactions for relevant accounting periods, including a 24-hour accounting period and reconciled in total for those time periods.

(iv)Accounting/audit procedures shall be performed within seven days of the transaction's occurrence date being reviewed.

(v)Accounting/audit procedures shall be in place to review variances related to bingo accounting data, which shall include at a minimum any variance noted by the Class II gaming system for cashless transactions in and out, electronic funds transfer in and out, external bonus payouts, vouchers out and coupon promotion out.

(vi)At least monthly, an accounting/audit agent shall confirm that the appropriate investigation has been completed for the review of variances.

(2)Audit tasks to be performed for each day's business.

(i)Records of bingo card sales shall be reviewed for proper authorization, completion and accurate calculations.

(ii)Manual payout summary report, if applicable, shall be reviewed for proper authorizations, completion, accurate calculations, and authorization confirming manual payout summary report totals.

(iii)A random sampling of records of manual payouts shall be reviewed for proper authorizations and completion for manual payouts less than $1,200.

(iv)Records of all manual prize payouts of $1,200 or more shall be reviewed for proper authorizations and completion.

(v)Where manual payout information is available per player interface, records of manual payouts shall be reviewed against the recorded manual payout amounts per player interface.

(vi)Manual payout forms shall be reconciled to each cashier's accountability documents and in total for each relevant period (e.g., session, shift, day, etc.).

(vii)Records of voided manual payouts shall be reviewed for proper authorization and completion.

(viii)Records of voided bingo cards shall be reviewed for proper authorization and completion.

(ix)Use of controlled forms shall be reviewed to ensure each form is accounted for.

(x)Where bingo sales are available per player interface, bingo sales shall be reviewed for reasonableness.

(xi)Amount of financial instruments accepted per financial instrument type and per financial instrument acceptor shall be reviewed for reasonableness, to include but not limited to zero amounts.

(xii)Where total prize payouts are available per player interface, total prize payouts shall be reviewed for reasonableness.

(xiii)Amount of financial instruments dispensed per financial instrument type and per financial instrument dispenser shall be reviewed for reasonableness, to include but not limited to zero amounts.

(xiv)For a random sampling, foot the vouchers redeemed and trace the totals to the totals recorded in the voucher system and to the amount recorded in the applicable cashier's accountability document.

(xv)Daily exception information provided by systems used in the operation of bingo shall be reviewed for propriety of transactions and unusual occurrences.

(xvi)Ensure promotional coupons which are not financial instruments are properly cancelled to prevent improper recirculation.

(xvii)Reconcile all parts of the form used to document transfers that increase/decrease the inventory of an accountability (includes booths and any other accountability areas). (xviii) Reconcile voucher liability (e.g., issued−voided−redeemed−expired = unpaid) to the voucher system records.

(xix)The total of all patron deposit accounts shall be reconciled, as follows:

(A)A report shall be generated that details each day's beginning and ending balance of patron deposit accounts, adjustments to patron deposit accounts, and all patron deposit account transactions.

(B)Reconcile the beginning and ending balances to the summary of manual deposit/withdrawal and account adjustment documentation to the patron deposit account report.

(xx)Reconcile each day's patron deposit account liability (e.g., deposits +/−adjustments−withdrawals = total account balance) to the system records.

(xxi)Reconcile electronic funds transfers to the cashless system records, the records of the outside entity which processed the transactions and the operations dedicated cashless account bank records.

(xxii)Accounting data used in performance analysis may only be altered to correct amounts that were determined to be in error. When correcting accounting data, the correct amount shall be indicated in any Class II gaming system exception reports generated. (xxiii) Accounting/auditing agents shall reconcile the audited bingo totals report to the audited bingo accounting data for each day.

(xxiv)Accounting/auditing agents shall ensure each day's bingo accounting data used in performance reports has been audited and reconciled.

(xxv)If the Class II gaming system produces exception reports they shall be reviewed on a daily basis for propriety of transactions and unusual occurrences.

(3)Audit tasks to be performed at relevant periods:

(i)Financial instrument acceptor data shall be recorded immediately prior to or subsequent to a financial instrument acceptor drop. The financial instrument acceptor amount-in data must be recorded at least weekly. The time between recordings may extend beyond one week in order for a recording to coincide with the end of an accounting period only if such extension is for no longer than six additional days.

(ii)When a player interface is removed from the floor, the financial instrument acceptor contents shall be protected to prevent the misappropriation of stored funds.

(iii)When a player interface is permanently removed from the floor, the financial instrument acceptor contents shall be counted and recorded.

(iv)For currency interface systems, accounting/auditing agents shall make appropriate comparisons of system generated count as recorded in the statistical report at least one drop period per month. Discrepancies shall be resolved prior to generation/distribution of reports.

(v)For each drop period, accounting/auditing agents shall compare the amount-in per financial instrument accepted by the financial instrument acceptors to the drop amount counted for the period. Discrepancies shall be resolved before the generation/distribution of statistical reports.

(vi)Investigation shall be performed for any one player interface having an unresolved drop variance in excess of an amount that is both more than $25 and at least three percent (3%) of the actual drop. The investigation performed and results of the investigation shall be documented, maintained for inspection, and provided to the tribal gaming regulatory authority upon request.

(vii)The results of variance investigations, including the date and personnel involved in the investigations, will be documented in the appropriate report and retained. The results will also include any corrective action taken (e.g., accounting data storage component replaced, interface component repaired, software debugged, etc.). The investigation will be completed and the results documented within seven days of the day the variance was noted, unless otherwise justified.

(viii)Procedures shall be established and implemented to perform the following on a regular basis, at a minimum of monthly, and using predetermined thresholds:

(A)Where the Class II gaming system is capable of providing information per player interface, identify and investigate player interfaces with total prize payouts exceeding bingo sales;

(B)Where bingo sales is available per player interface, investigate any percentage of increase/decrease exceeding a predetermined threshold, not to exceed 20%, in total bingo sales as compared to a similar period of time that represents consistency in prior performance.

(C)Investigate any exception noted in paragraphs (i)(3)(viii)(A) and

(B)of this section and document the findings. The investigation may include procedures to review one or more of the following: *(1)* Verify days on floor are comparable. *(2)* Non-prize payouts for authenticity and propriety. *(3)* Player interface out of service periods. *(4)* Unusual fluctuations in manual payouts.

(D)If the investigation does not identify an explanation for exceptions then a physical check procedure shall be performed, as required by paragraph (i)(3)(viii)(E) of this section.

(E)Document any investigation of unresolved exceptions using a predefined player interface physical check procedure and checklist, to include a minimum of the following as applicable: *(1)* Verify game software; *(2)* Verify player interface configurations; *(3)* Test amount in accounting data for accuracy upon insertion of financial instruments into the financial instrument acceptor; *(4)* Test amount out accounting data for accuracy upon dispensing of financial instruments from the financial instrument dispenser; *(5)* Record findings and repairs or modifications made to resolve malfunctions, including date and time, player interface identifier and signature of the agent performing the player interface physical check, and additional signatures as required; and *(6)* Maintain player interface physical check records, either in physical or electronic form, for the period prescribed by the procedure.

(ix)For Class II gaming systems, procedures shall be performed at least monthly to verify that the system accounting data is accurate.

(x)For Tier C, at least weekly:

(A)Financial instruments accepted at a kiosk shall be removed and counted by at least two agents; and

(B)Kiosk transactions shall be reconciled to the beginning and ending balances for each kiosk.

(xi)At the conclusion of a promotion, accounting/audit agents shall perform procedures (e.g., interviews, review of payout documentation, etc.) to ensure that promotional prize payouts, drawings, and giveaway programs are conducted in accordance with the rules provided to the patrons.

(4)*Inter-tribal prize pools.* Procedures shall be established and implemented to govern the participation in inter-tribal prize pools, which at a minimum shall include the review, verification and maintenance of the following records, which shall be made available, within a reasonable time of the request, to the tribal gaming regulatory authority upon request:

(i)Summary of contributions in total made to an inter-tribal prize pool;

(ii)Summary of disbursements in total from an inter-tribal prize pool; and

(iii)Summary of inter-tribal prize pool funds availability.

(5)*Performance Analysis.*

(i)Bingo performance data shall be recorded at the end of the gaming operations specified 24-hour accounting period. Such data shall include:

(A)Amount-in and amount-out for each Class II gaming system.

(B)The total value of all financial instruments accepted by the Class II gaming system by each financial instrument acceptor and by each financial instrument type.

(C)The total value of all financial instruments dispensed by the Class II gaming system and by each financial instrument type.

(D)The total value of all manual payouts by each Class II gaming system.

(E)The total value of bingo purchases for each Class II gaming system.

(F)The total value of prizes paid for each Class II gaming system.

(ii)Procedures shall be established and implemented that ensure the reliability of the performance data.

(iii)Upon receipt of the summary of the data, the accounting department shall review it for reasonableness using pre-established parameters defined by the gaming operation.

(iv)An agent shall record and maintain all required data before and after any maintenance or modifications that involves the clearing of the data (e.g., system software upgrades, data storage media replacement, etc.). The information recorded shall be used when reviewing performance reports to ensure that the maintenance or modifications did not improperly affect the data in the reports.

(6)*Statistical reporting.*

(i)The bingo sales, prize payouts, bingo win, and actual bingo win percentages shall be recorded for:

(A)Each shift or session;

(B)Each day;

(C)Month-to-date; and

(D)Year-to-date or fiscal year-to-date.

(ii)A monthly comparison for reasonableness shall be made of the amount of bingo paper sold from the bingo paper control log to the amount of bingo paper sales revenue recognized.

(iii)Management employees independent of the bingo department shall review bingo statistical information on at least a monthly basis.

(iv)Agents independent of the bingo department shall investigate any large or unusual statistical fluctuations, as defined by the gaming operation.

(v)Such investigations shall be documented, maintained for inspection, and provided to the tribal gaming regulatory authority upon request.

(vi)The actual bingo win percentages used in the statistical reports should not include operating expenses (e.g., a percentage payment to administrators of inter-tribal prize pools), promotional prize payouts or bonus payouts not included in the prize schedule.

(7)*Progressive prize pools.*

(i)A display that shows the amount of the progressive prize shall be conspicuously displayed at or near the player interface(s) to which the prize applies.

(ii)At least once each day, each gaming operation shall record the total amount of each progressive prize pool offered at the gaming operation on the progressive log.

(iii)When a manual payment for a progressive prize is made from a progressive prize pool, the amount shall be recorded on the progressive log.

(iv)Each gaming operation shall record, on the progressive log, the base reset amount of each progressive prize the gaming operation offers.

(v)Procedures shall be established and implemented specific to the transfer of progressive amounts in excess of the base reset amount to other awards or prizes. Such procedures may also include other methods of distribution that accrue to the benefit of the gaming public. §§ 543.8-543.15 [Reserved] § 543.16 What are the minimum internal controls for information technology?

(a)Physical security measures restricting access to agents, including vendors, shall exist over the servers, including computer terminals, storage media, software and data files to prevent unauthorized access and loss of integrity of data and processing.

(b)Unauthorized individuals shall be precluded from having access to the secured computer area(s).

(c)*User controls.*

(1)Computer systems, including application software, shall be secured through the use of passwords or other approved means.

(2)Procedures shall be established and implemented to ensure that management or independent agents assign and control access to computer system functions.

(3)Passwords shall be controlled as follows unless otherwise addressed in the standards in this section.

(i)Each user shall have his or her own individual user identification and password.

(ii)When an individual has multiple user profiles, only one user profile per application may be used at a time.

(iii)Passwords must be changed at least quarterly with changes documented. Documentation is not required if the system prompts users to change passwords and then denies access if the change is not completed.

(iv)The system must be updated to change the status of terminated users from active to inactive status within 72 hours of termination.

(v)At least quarterly, independent agents shall review user access records for appropriate assignment of access and to ensure that terminated users do not have access to system functions.

(vi)Documentation of the quarterly user access review shall be maintained.

(vii)System exception information (e.g., changes to system parameters, corrections, overrides, voids, etc.) must be maintained.

(4)Procedures shall be established and implemented to ensure access listings are maintained which include at a minimum:

(i)User name or identification number (or equivalent); and

(ii)Listing of functions the user can perform or equivalent means of identifying same.

(d)Adequate backup and recovery procedures shall be in place that include:

(1)*Daily backup of data files* —(i) *Backup of all programs.* Backup of programs is not required if the program can be reinstalled.

(ii)Secured storage of all backup data files and programs, or other adequate protection to prevent the permanent loss of any data.

(iii)Backup data files and programs may be stored in a secured manner in another building that is physically separated from the building where the system's hardware and software are located. They may also be stored in the same building as the hardware/software as long as they are secured in a fireproof safe or some other manner that will ensure the safety of the files and programs in the event of a fire or other disaster.

(2)Recovery procedures shall be tested on a sample basis at least annually with documentation of results.

(e)*Access records.*

(1)Procedures must be established to ensure computer access records, if capable of being generated by the computer system, are reviewed for propriety for the following at a minimum:

(i)Class II gaming systems;

(ii)Accounting/auditing systems;

(iii)Cashless systems;

(iv)Voucher systems;

(v)Player tracking systems; and

(vi)External bonusing systems.

(2)If the computer system cannot deny access after a predetermined number of consecutive unsuccessful attempts to log on, the system shall record unsuccessful log on attempts.

(f)*Remote access controls.*

(1)For computer systems that can be accessed remotely, the written system of internal controls must specifically address remote access procedures including, at a minimum:

(i)Record the application remotely accessed, authorized user's name and business address and version number, if applicable;

(ii)Require approved secured connection;

(iii)The procedures used in establishing and using passwords to allow authorized users to access the computer system through remote access;

(iv)The agents involved and procedures performed to enable the physical connection to the computer system when the authorized user requires access to the system through remote access; and

(v)The agents involved and procedures performed to ensure the remote access connection is disconnected when the remote access is no longer required.

(2)In the event of remote access, the information technology employees shall prepare a complete record of the access to include:

(i)Name or identifier of the employee authorizing access;

(ii)Name or identifier of the authorized user accessing system;

(iii)Date, time, and duration of access; and

(iv)Description of work performed in adequate detail to include the old and new version numbers, if applicable of any software that was modified, and details regarding any other changes made to the system. Dated: October 17, 2007. Philip N. Hogen, Chairman. Norman H. DesRosiers, Commissioner. Cloyce V. Choney, Commissioner. [FR Doc. E7-20778 Filed 10-23-07; 8:45 am] BILLING CODE 7565-01-P DEPARTMENT OF THE INTERIOR National Indian Gaming Commission 25 CFR Part 547 RIN 3141-AA29 Technical Standards for Electronic, Computer, or Other Technologic Aids Used in the Play of Class II Games AGENCY: National Indian Gaming Commission, Department of the Interior. ACTION: Proposed rule. SUMMARY: The proposed rule would add a new part to the Commission's regulations establishing technical standards for Class II games—bingo, lotto, other games similar to bingo, pull tabs, or “instant bingo”—that are played using “electronic, computer, or other technologic aids.” The proposed rule would also establish a process for ensuring the integrity of such games and aids before their placement in a Class II tribal gaming operation. No such standards currently exist. The Commission proposes this action in order to assist tribal gaming regulatory authorities and operators in ensuring the integrity and security of Class II games and the accountability of gaming revenue. DATES: Submit comments on or before December 10, 2007. ADDRESSES: Mail comments to “Comments on Technical Standards,” National Indian Gaming Commission, 1441 L Street, NW., Washington, DC 20005, Attn: Michael Gross, Associate General Counsel, General Law. Comments may be transmitted by facsimile to 202-632-7066, but the original also must be mailed or submitted to the above address. Comments may be sent electronically, instead of by mail or fax, to *technical_standards@nigc.gov* . Please indicate “Class II technical regulations” in the subject line. FOR FURTHER INFORMATION CONTACT: Michael Gross, Associate General Counsel, General Law, Office of General Counsel, telephone: 202.632.7003. This is not a toll free call. SUPPLEMENTARY INFORMATION: Background The Indian Gaming Regulatory Act, 25 U.S.C. 2701-21 (“IGRA”), enacted by the Congress in 1988, establishes the National Indian Gaming Commission (“NIGC” or “Commission”) and sets out a comprehensive framework for the regulation of gaming on Indian lands. IGRA establishes three classes of Indian gaming. “Class I gaming” means social games played solely for prizes of minimal value or traditional forms of Indian gaming played in connection with tribal ceremonies or celebrations. 25 U.S.C. 2703(6). Indian tribes regulate Class I gaming exclusively. “Class II gaming” means the game of chance commonly known as bingo, whether or not electronic, computer, or other technologic aids are used in connection therewith, including, if played in the same location, pull-tabs, lotto, punch boards, tip jars, instant bingo, and other games similar to bingo, as well as various non-house-banked card games. 25 U.S.C. 2703(7)(A). Specifically excluded from Class II gaming are banking card games such as blackjack, electronic or electromechanical facsimiles of any game of chance, and slot machines of any kind. 25 U.S.C. 2703(7)(B). Indian tribes and the NIGC share regulatory authority over Class II gaming. Indian tribes can engage in Class II gaming without any state involvement. “Class III gaming” includes all forms of gaming that are not Class I gaming or Class II gaming. 25 U.S.C. 2703(8). Class III gaming thus includes all other games of chance, including lotteries and most forms of casino gaming, such as slot machines, roulette, and banking card games like blackjack. Class III gaming may be conducted lawfully only if the tribe and the state in which the tribe is located enter into a tribal-state compact for such gaming. Alternatively, a tribe may operate Class III gaming under gaming procedures issued by the Secretary of the Interior. Because of the compact requirement, states, Indian tribes, and the NIGC possess regulatory authority over Class III gaming. In addition, the United States Department of Justice possesses exclusive criminal, and certain civil, jurisdiction over Class III gaming on Indian lands. The Commission has determined that it is in the best interests of Indian gaming to adopt technical standards that govern the implementation of electronic, computer, and other technologic aids used in the play of Class II games because no such standards currently exist. The technical standards seek to provide a means for tribal gaming regulatory authorities and tribal operators to ensure that the integrity of Class II games played with the use of electronic, computer, or other technologic aids is maintained; that the games and aids are secure; and that the games and aids are fully auditable, *i.e.* that they provide a means for the gaming authority and gaming operation to account for all gaming revenue. Development of the Proposed Rule The development of the proposed rule began formally with the March 31, 2004, appointment of an advisory committee comprised of tribal government representatives with substantial experience and expertise in gaming regulation and operations, the Commission, and Commission staff. Although the Commission initially intended to develop one set of regulations, this committee's work ultimately resulted in the Commission's publication of a proposed rule for Class II classification standards, 71 FR 30238 (May 25, 2006), and a separate proposed rule for Class II technical standards, 71 FR 46336 (August 11, 2006). A detailed history of the advisory committee's work on the technical standards to that point, its meetings, the Commission's consultations with Indian tribes, and the contributions and participation of the interested general public is published in the preamble to that proposed rule. 71 FR 46336-46337. The ultimate goal of that first set of technical standards was as it is here—to ensure the security and integrity of Class II games played with technologic aids and to ensure the auditability of the gaming revenue that those games earn. It was also the intention of that first set of technical standards to allow for flexibility in the implementation of technology and not to prohibit the use of future technologies unforeseen and as yet undeveloped. Given the importance of the regulations to the industry, the Commission, which had initially set a comment period of 45 days, reopened the comment period for an additional 76 days, from November 15, 2006, through January 31, 2007. 71 FR 71115 (December 8, 2006); 71 FR 76618 (December 21, 2006). Public comments made it clear to the Commission that the first set of proposed technical standards fell short of its goal of technological flexibility. In particular, commenters stated that the first set of proposed technical standards would mandate particular implementations of technology and that some of those were not practical or feasible. Commenters suggested that rather than prescribe particular implementations of technology, the standards should describe the regulatory outcomes that the Commission desires and leave it to the manufacturers to develop ways of meeting those regulatory requirements. At a December 5, 2006, advisory committee meeting in Washington, DC, the tribal representatives to the advisory committee strongly seconded this sentiment. The details of the solution, however, were not immediately apparent. Before providing further advice to the Commission, the tribal representatives wished to consult further with other tribal representatives and regulators, and with industry representatives. They therefore suggested that they assemble a working group made up of representatives from the Class II gaming industry—tribal operators, tribal regulators, and manufacturers alike—to assist it. Accepting the fundamental premise that the technical standards ought to be descriptive rather than prescriptive, the Commission agreed to allow the tribal representatives to work independently of the Commission to redraft the technical standards. Subsequently, the Commission withdrew the first proposed technical standards. 72 FR 7360 (February 15, 2007). The tribal representatives to the advisory committee formed a working group, which met at various times, in person and telephonically, from the end of 2006 through the middle of 2007 to draft this new set of technical standards. The Commission did not participate in the establishment of this working group. On some occasions, the tribal representatives invited the participation of Commission staff members to answer questions and to provide explanation about the Commission's regulatory goals. Commission staff participated in this capacity during in-person meetings on December 11-12, 2006, in Las Vegas, Nevada, and June 5, 2007, in Dallas, Texas. The full advisory committee, including the Commission, met to discuss drafts of proposed technical standards on February 22, 2007, in Albuquerque, New Mexico, April 26, 2007, in Seattle, Washington, and May 22, 2007, in Bloomington, Minnesota. All of these meetings were open to the interested public. The Commission is immensely grateful to the tribal representatives on the advisory committee and to those who assisted the tribal representatives for all of their hard work and for the high-quality draft regulations that resulted from their efforts. The proposed rule is largely adopted from the final draft of descriptive technical standards, which was delivered to the Commission by the tribal representatives to the advisory committee on June 18, 2006. There are places, of course, where the Commission felt it could not accept the draft's recommendations and has proposed rules more stringent than the tribal representatives to the advisory committee would have preferred. One such area of disagreement concerns the recall and tracking of alternative displays. It is a common practice for bingo games played using electronic player stations to provide alternative display of game results above and beyond the numbers marked and patterns obtained on a bingo card. Most frequently, these alternative displays take the form of spinning reels such as one would find on slot machines. A winning bingo pattern, for example, might also be displayed as a winning combination of symbols on the reels. The Commission regards such alternative displays as perfectly permissible, provided that it is the bingo game, and not the spinning reels, that determine the player's results. The technical standards require a last game recall function to be able to display alternative results as well as the actual game results, if a Class II gaming system has a last game recall. The tribal representatives to the advisory committee have said that they regard the requirement as both unnecessary, since the alternative displays do not determine game results, and beyond the scope of the Commission's authority. The Commission, however, regards recall of alternative displays as an important part of safeguarding the integrity of gaming, notwithstanding the fact that alternate displays do not determine, and are not relevant to, the outcome of the game. The fact remains, however, that the alternative displays are the source of many patron disputes, and providing for their automatic recall provides to tribal gaming regulatory authorities information essential to resolving such disputes quickly, completely, and fairly. Over and above this, it is the Commission's understanding that many manufacturers already include alternative displays in their recall functions, or could easily do so. Purpose and Scope The proposed part 547 applies to all Class II games played using electronic, computer, or other technologic aids, or modifications of such games and aids. Class II games played through such technologic aids are widely used in Indian gaming operations, yet no uniform standards exist to govern their implementation. The proposed rule seeks to remedy that absence and create a regulatory structure under which tribal gaming regulatory authorities and tribal operators are able to ensure the integrity and security of Class II games played with the use of electronic, computer, or other technologic aids and the auditability of gaming revenue. There is a great variety in the technologic aids used in the play of Class II games and, therefore, a great variety in the means used to play the games. An operation may, for example, play bingo using no aids at all. A caller may select numbers using ping pong balls taken from a hopper, and players purchase paper cards from an employee of the operation and mark them with an inked dauber. Alternatively, numbers may be selected randomly using an electronic random number generator, which in turn displays the selected number on a display board. Instead of paper, players may use electronic handheld devices to monitor and mark their cards. The handheld devices are purchased and have cards loaded on them at a point-of-sale retail terminal. Still again, bingo may be implemented electronically on client-server architectures. A common arrangement, but by no means the only one possible, is to have client machines on the casino floor as electronic player stations. These display bingo cards, allow the players to cover numbers when drawn, and pay any prizes won. The server, usually located off the floor, draws random numbers and passes them along data communications lines to the client machines for game play. Credits may be placed on the electronic player station by inserting cash or electronically drawing down an account separately established. The challenge, then, for writing technical standards is to address all of the various ways that Class II games can be played. Central to the proposed rule, therefore, is the definition of “Class II gaming system,” which refers to any given collection of components used in the play of a II game: “All components, whether or not technologic aids in electronic, computer, mechanical or other technologic form, that function together to aid the play of one or more Class II games, including accounting functions mandated by these regulations.” The notion of the “gaming system” thus encompasses bingo played in all of the implementations described above. It is the “gaming system” that must meet the technical standards of the proposed part 547. Like the gaming system itself, the standards are conceived generally so that they may be met by a gaming system, regardless of the particular components that may comprise it. For example, the proposed rule does not refer to “bill validators,” an electronic device into which a patron may insert a bill in order to place credits on a gaming machine. Instead, proposed part 547 describes “financial instrument acceptors” and the standards they must meet. “Financial instrument acceptor” is broad enough in meaning to encompass not only “bill validator” but also a cash drawer staffed by an employee of the gaming operation. Proposed part 547 provides minimum standards for the security of the “acceptors” and of the money or vouchers (generally, “financial instruments”) they accept. Further, because of the breadth of possible implementations for Class II gaming systems, proposed part 547 requires that gaming equipment and software used with Class II gaming systems meet the requirements of the part, but only those that are applicable to the system as implemented. This is, in short, a rule of construction of common sense. For example, if a system takes only cash and lacks the ability to print or accept vouchers, then any standards that apply to vouchers do not apply. All of that said, the proposed rule deliberately provides only minimum standards. Tribes and tribal gaming regulatory authorities may add any additional requirements, or more stringent requirements, needed to suit their particular circumstances. In order to ensure compliance with the technical standards, the proposed rule borrows from the established practices of tribal, state, and provincial gaming jurisdictions across North America. The proposed rule establishes, as a necessary prerequisite to a gaming system being offered to the public for play in a Class II gaming operation, review of the system by a qualified, independent testing laboratory and approval by the tribal gaming regulatory authority. Under the proposed rule, a tribe's gaming regulatory authority will require all Class II gaming systems, or modifications thereof, to be submitted to a testing laboratory for review and analysis. That submission includes a working prototype of the gaming system or modification, all pertinent software, and anything else the testing laboratory needs for its complete and thorough review. In turn, the laboratory will review whether the gaming system does or does not meet the requirements of the rule, as well as any additional requirements adopted by the tribe's gaming regulatory authority. The laboratory will provide a written report of its analysis and conclusions to the tribal gaming regulatory authority for approval or disapproval of the gaming system or modification. The tribal gaming regulatory authority will retain the report as long as the gaming system or modification in question remains available to the public for play. The Commission understands that existing Class II gaming systems likely do not meet all of the requirements of the proposed rule. In order to avoid the potentially significant economic and practical consequences of requiring immediate compliance, the proposed rule implements a five-year “grandfather period” for existing gaming systems. Existing gaming systems may be grandfathered and exempt from compliance with all of the requirements of the proposed rule if they are put through a similar review by a qualified independent testing laboratory and approved by a tribal gaming regulatory authority. Specifically, in order to be eligible for grandfathering, a gaming system must be submitted to a testing laboratory within 120 days of the proposed part 547 becoming final. The testing laboratory must review the gaming system for compliance with a specific, minimum set of requirements—random number generation, no reflexive or secondary decision-making after random numbers are drawn, the inability to change bingo cards during the play of a game, and a mechanism for verifying game software. The laboratory must issue a report on these issues to the tribal gaming regulatory authority, which must make a finding that the gaming system qualifies for grandfather status. Once a gaming system is qualified, the manufacturer must label each player interface on the system with its date of manufacture and certify the same to the tribal gaming regulatory authority. This requirement effectively freezes the number of grandfathered interfaces in use. This is not to say, however, that grandfathered gaming systems must remain entirely static. Tribal gaming regulatory authorities may permit modifications to gaming system software or hardware that increases compliance with the requirements of proposed part 547, even if the modifications do not make the system wholly compliant. Tribal gaming regulatory authorities may also authorize modifications to gaming system software that does not detract from, compromise, or prejudice the proper functioning, security or integrity of the Class II gaming system and the system's overall compliance with the requirements of proposed part 547. Changes such as new pay tables, new game themes, and new alternative displays fall within this latter category. Finally, the Commission does not intend for proposed part 547 to stand alone. The advisory committee pointed out, and the Commission agrees, that many of the functions placed in the technical standards proposed on August 11, 2006, and now withdrawn, are more properly characterized as minimum internal control standards for a gaming operation. Accordingly, the Commission is simultaneously publishing, as a separate proposed rule, a set of minimum internal control standards for the play of bingo that is intended to be applied in conjunction with the standards set forth in this proposed rule. In short, game manufacturers and tribal gaming regulators must look to both sets of rules for applicable standards for the construction and operation of Class II gaming systems. The Commission intends as well that these two parts be applied in conjunction with a third proposed rule, also published simultaneously, governing the classification of bingo and pull tabs and distinguishing these Class II games played with technological aids from Class III facsimiles of games of chance. References in the proposed part 547 to “minimum internal control standards” and “classification standards” refer to these two other sets of rules. Regulatory Matters Regulatory Flexibility Act The proposed rule will not have a significant economic effect on a substantial number of small entities as defined under the Regulatory Flexibility Act, 5 U.S.C. 601 *et seq.* Indian tribes are not considered small entities for the purposes of the Regulatory Flexibility Act. Small Business Regulatory Enforcement Fairness Act It is not entirely clear whether the proposed rule, considered separately and apart from the Commission's proposed part 546, “Classification Standards for Bingo * * * Using `Electronic, Computer, or Other Technologic Aids',” is a major rule under 5 U.S.C. 804.2, the Small Business Regulatory Enforcement Fairness Act. The NIGC has commissioned an economic impact study of the two proposals taken together. The study makes clear that the cost to the Indian gaming industry of complying with the two proposed rules will have an annual effect on the economy of $100 million or more, at least for the first 5 years after adoption. Accordingly, the Commission treats the proposed rule as a major rule. The economic impact study is available for review at the Commission's Web site, *http://www.nigc.gov,* or by request using the addresses or telephone numbers, above. Unfunded Mandates Reform Act The Commission, as an independent regulatory agency within the Department of the Interior, is exempt from compliance with the Unfunded Mandates Reform Act. 2 U.S.C. 658(1); 1502(1). Takings In accordance with Executive Order 12630, the Commission has determined that this proposed rule does not have significant takings implications. A takings implication assessment is not required. Civil Justice Reform In accordance with Executive Order 12988, the Commission's Office of General Counsel has determined that the proposed rule does not unduly burden the judicial system and meets the requirements of sections 3(a) and 3(b)(2) of the Order. Paperwork Reduction Act This proposed rule requires information collection under the Paperwork Reduction Act of 1995, 44 U.S.C. 3501, *et seq.* , and is subject to review by the Office of Management and Budget. The title, description, and respondent categories are discussed below, together with an estimate of the annual information collection burden. With respect to the following collections of information, the Commission invites comments on:

(1)Whether the proposed collections of information are necessary for proper performance of its functions, including whether the information would have practical utility;

(2)the accuracy of the Commission's estimate of the burden of the proposed collections of information, including the validity of the methodology and assumptions used;

(3)ways to enhance the quality, utility, and clarity of the information to be collected; and

(4)ways to minimize the burden of the collection of information on respondents, including the use of automated collection techniques, when appropriate, and other forms of information technology. *Title:* Process for Certification of Electronic, Computer, or other Technologic Aids used in the play of Class II games and process for qualification of independent testing laboratories, proposed 25 CFR 547.4. *Summary of information and description of need:* This provision in the proposed rule establishes a process for ensuring that electronic, computer, or other technologic aids used with the play of Class II gaming systems have been reviewed and evaluated by a qualified, independent testing laboratory prior to their approval by a tribal gaming regulatory authority and their placement on the floor in a Class II tribal gaming operation. The process helps to ensure the proper functioning of the equipment and the integrity, fairness, and auditability of games played. The process requires a tribe's gaming regulatory authority to require that all Class II gaming systems, or modifications thereto, be submitted to a qualified, independent testing laboratory for review and analysis. That submission includes a working prototype of the game and aid, all pertinent software, and complete documentation and descriptions of all functions and components. In turn, the laboratory will determine that the gaming system does or does not meet the requirements of the rule and any additional requirements adopted by the tribe's gaming regulatory authority. The laboratory will provide a written report of its analysis and conclusions to the tribal gaming regulatory authority for its approval or disapproval of the gaming system or modification. The tribal gaming regulatory authority will retain the laboratory report as long as the gaming system or modification remains available to the public for play. This process is necessary to ensure the security and integrity of Class II gaming. Technical standards such as those in the proposed rule are a fundamental part of Class III gaming and of non-Indian casino gaming throughout North America. No uniform standards exist for Class II gaming, however. The implementation of such standards will assist tribal gaming regulators in ensuring that games are implemented fairly, that all technologic aids are secure and function properly, and that the games and aids allow the tribe and the operator to properly account for gaming revenue. This provision in the proposed rule also contemplates an analogous process for determining whether a Class II gaming system is eligible for the five-year grandfather period made available by the proposed rule. This process again requires a tribe's gaming regulatory authority to require that a Class II gaming system be submitted, within 120 days after the effective date of part 547, to a qualified, independent testing laboratory for review and analysis. The submission must include a working prototype of the game and aid, all pertinent software, and complete documentation and descriptions of all functions and components. In turn, the laboratory will determine that the gaming system does or does not meet a small set of certain specified requirements of the proposed rule. The laboratory will provide a written report of its analysis and conclusions to the tribal gaming regulatory authority for its finding that the gaming system is or is not eligible for grandfather status. Upon a finding of eligibility, the tribal gaming regulatory authority will issue a certificate to that effect to the gaming system manufacturer and a description of the grandfathered game to the Commission. This process is necessary to ensure a certain minimum integrity and security for games while at the same time avoiding potentially significant economic and practical consequences of requiring immediate and complete compliance with the standards of the proposed rule. Finally, the proposed rule establishes a process for testing laboratories to apply for eligibility to provide testing services under the proposed rule. The testing laboratories must submit to suitability determinations made by the tribes they serve, and these determinations include criminal background checks for the laboratories' principals. These determinations are made according to the same standards used to license the primary management officials and key employees of Indian gaming operations under the Indian Gaming Regulatory Act. All of this requires the submission by the laboratory of corporate financial information; qualifications of the engineering staff; information (and inspections) of the available engineering facilities, and personal information for principals, including tax returns, bankruptcies and law suits, work histories and references. Given the essential role accorded to laboratories in ensuring the integrity, security, and auditability of Class II games, this process is essential to ensuring the competence, integrity, and independence of the testing laboratories and the suitability of their decision makers, *i.e.* to ensure that undesirable elements are kept out of gaming. *Respondents:* The respondents are independent testing laboratories, developers and manufacturers of Class II gaming systems, and Indian tribes. The Commission estimates that there are currently 20 such manufacturers, 5 such laboratories, and 226 gaming tribes. The frequency of responses to the information collection requirement will vary. *Information Collection Burden:* In order to qualify under the grandfather provisions of the proposed rule, a gaming system must be submitted to a testing laboratory for review and analysis during the first 120 days after the effective date of the final rule. The Commission estimates that there are approximately 25 Class II gaming systems in existence and that all will be submitted during this period. Following the initial 120-day period, the frequency of submissions of new gaming systems or of modifications to existing gaming systems will be entirely market driven. The Commission anticipates approximately a 20% turnover each year for the five-year grandfather period. Consequently, there should be approximately five submissions of new gaming systems each year. Submissions of modifications are, as a matter of course, a more common practice. Software in particular commonly goes through many iterations in development and continues to be improved and revised even after sale and placement on a gaming operation's floor. That said, the submission of modifications tends to be sporadic, with less frequent or occasional submissions punctuated by fairly steady periods of submissions when new systems or modifications are introduced. The NIGC anticipates there will be approximately 300 submissions of modifications and thus 300 reports produced by testing laboratories each year following the 120-day period that begins with the effective date of the final rule. The preparation and submission of supporting documentation by manufacturers or a tribal gaming operation (as opposed to gaming system hardware and software per se) is an information collection burden under the Paperwork Reduction Act, as is the preparation of reports by the test laboratories or the preparation of a grandfather certificate and explanation of gaming system by a tribal gaming regulatory authority. It is the existing practice in the gaming industry, both Indian and non-Indian alike, for the game manufacturer to submit a gaming system to a testing laboratory for review and analysis. The proposed rule leaves open the possibility that a tribal gaming regulatory authority may require the management of a gaming operation to make a required submission. The Commission anticipates, however, that it will be the responsibility of the gaming system manufacturers to make the submissions to testing laboratories. The amount of documentation submitted by a manufacturer as part of a submission of a gaming system and the size of a laboratory report is a function of the complexity of the gaming system submitted for review. Submission for minor modifications of software or hardware that a manufacturer has already submitted and that a laboratory has previously examined will be a matter of little time both for manufacturer and laboratory, while the submission and review of an entirely new game platform will be time consuming. The provision of a grandfather certificate and a description of a gaming systems component are small matters as that information can be taken directly from a testing laboratory's report. The practice of submission and review set out in the proposed rule, however, is not new. It is already part of the regulatory requirements in tribal, state, and Canadian provincial gaming jurisdictions throughout North America. Manufacturers already have significant compliance personnel and infrastructure in place, and the very existence of private, independent laboratories is due to these requirements. Accordingly, based upon the discussions with leading testing laboratories and with manufacturers for the Indian gaming and non-Indian gaming markets, the NIGC estimates that gathering and preparing documentation for a submission of a single, complete gaming system will require, on average, 8 hours for manufacturer's employee. Following examination and analysis, NIGC estimates that writing a report for a complete gaming system will require, on average, 10 hours of a laboratory engineer's time. For the submission of modifications to a gaming system, NIGC estimates 4 hours for a manufacturer's employee. For the report on a modification, NIGC estimates 5 hours for a laboratory engineer. Thus, the information collection requirements will be a 200-hour burden on manufacturers industry-wide during the first 120 days after the final rule becomes effective and a 1200-hour burden industry-wide thereafter. The information collection requirements will be a 250-hour burden on laboratories for the grandfather submissions made during the first 120 days and a 1500-hour burden thereafter. Next, the Commission anticipates that tribal gaming regulatory authorities will issue grandfather certificates to manufacturers and send a description of grandfathered systems to the Commission for all of the approximately 25 existing gaming systems. The preparation of these certificates and descriptions will be a small matter as all of the necessary information is contained in the testing laboratory reports and will take no more than 0.5 hours to prepare. Finally, the proposed rule requires tribal gaming regulatory authorities to maintain laboratory reports as long as the game system or modification at issue is available for play. This, however, is a ministerial function that involves little more than filing, and occasionally retrieving, the report. As this is already common practice among tribal gaming regulatory authorities, the Commission estimates that 0.1 hours per report will be dedicated to these tasks. The following table summarizes the annual hour burden: Provision Respondents No. of respondents Collections, 1st 120 days Hours per collection Total annual hours Collections, day 121 forward, per annum Hours per collection Total annual hours 25 CFR 547.4 Laboratories 5 25 10 250 300 5 1500 25 CFR 547.4 Manufacturers 20 25 8 200 300 4 1200 25 CFR 547.4 Tribal Gaming Operations 226 0 0 0 0 0 0 25 CFR Tribal Gaming regulatory Authorities 226 25 .5 12.5 300 0.1 30 The proposed rule also requires a determination of suitability for each of the approximately 5 testing laboratories. The information required can be substantial: Corporate financial information; qualifications of the engineering staff; information (and inspections) of the engineering facilities available, and personal information for principals, including tax returns, bankruptcies and lawsuits, work histories and references. However, the 5 existing testing laboratories have already collected and provided this information—multiple times—in order to be licensed in Tribal and non-Tribal gaming jurisdictions nationwide. The Commission estimates that the re-submission of such information would take the necessary laboratory employees 20 hours to accomplish once. As the gaming tribes typically use only one gaming laboratory, the submission of suitability determinations to 226 tribal gaming regulatory authorities would total 4,520 hours. The Commission believes, however, that the hour burden is not likely to be this high. The proposed rule permits a tribal gaming regulatory authority to rely upon a suitability determination already made by another gaming jurisdiction in the United States, rather than require a new suitability determination for a testing laboratory. The existing testing laboratories are already licensed in numerous jurisdictions throughout the United States, and the Commission believes that approximately 90%—203 of 226—of the tribal gaming authorities will accept existing suitability determinations from other jurisdictions. The submission by a testing lab of an existing suitability determination amounts to the writing of a letter. The NIGC estimates that the submission of such letters will take the necessary laboratory employees 0.5 hours to accomplish once. As each of the gaming tribes typically uses only one gaming laboratory, the submission of suitability determinations of up to 203 tribal gaming authorities would total 101.5 hours. For the remaining 10% or 23 tribal gaming regulatory authorities, the submission burden on laboratories is 20 hours per tribe or 460 hours. If every tribe requires annual re-licensing, the subsequent annual hours burden on the 5 laboratories is 561.5 hours. *Comments:* Pursuant to the Paperwork Reduction Act, 44 U.S.C. 3507(d), the Commission has submitted a copy of this proposed rule to OMB for its review and approval of this information collection. Interested persons are requested to send comments regarding the burden, estimates, or any other aspect of the information collection, including suggestions for reducing the burden

(1)directly to the Office of Information and Regulatory Affairs, OMB, Attention: Desk Officer for National Indian Gaming Commission, 725 17th St., NW., Washington DC, 20503, and

(2)to Michael Gross, Associate General Counsel, General Law, National Indian Gaming Commission, 1441 L Street, NW., Washington DC 20005. National Environmental Policy Act The Commission has determined that this proposed rule does not constitute a major federal action significantly affecting the quality of the human environment and that no detailed statement is required pursuant to the National Environmental Policy Act of 1969 (42 U.S.C. 4321 *et. seq* ). List of Subjects in 25 CFR Part 547 Gambling, Indian-lands, Indian-tribal government, Reporting and recordkeeping requirements. For the reasons set forth in the preamble, the Commission proposes to amend 25 CFR Chapter III by adding part 547 to read as follows: PART 547—MINIMUM TECHNICAL STANDARDS FOR GAMING EQUIPMENT USED WITH THE PLAY OF CLASS II GAMES. Sec. 547.1 What is the purpose of this part? 547.2 How do these regulations affect State jurisdiction? 547.3 What are the definitions for this part? 547.4 How do I comply with this part? 547.5 What are the rules of interpretation and of general application for this part? 547.6 What are the minimum technical standards for enrolling and enabling Class II gaming system components? 547.7 What are the minimum technical hardware standards applicable to Class II gaming systems? 547.8 What are the minimum technical software standards applicable to Class II gaming systems? 547.9 What are the minimum technical standards for Class II gaming system accounting functions? 547.10 What are the minimum standards for Class II gaming system critical events? 547.11 What are the minimum technical standards for money and credit handling? 547.12 What are the minimum technical standards for downloading on a Class II gaming system? 547.13 What are the minimum technical standards for program storage media? 547.14 What are the minimum technical standards for electronic random number generation? 547.15 What are the minimum technical standards for electronic data communications between system components? 547.16 What are the minimum standards for game artwork, glass, and rules? 547.17 How does a gaming operation apply for a variance from these standards? Authority: 25 U.S.C. 2706(b). § 547.1 What is the purpose of this part? The Indian Gaming Regulatory Act, 25 U.S.C. 2703(7)(A)(i), permits the use of electronic, computer, or other technologic aids in connection with the play of Class II games. This part establishes the minimum technical standards governing the use of such aids. § 547.2 How do these regulations affect State jurisdiction? Nothing in this part shall be construed to grant to a State jurisdiction in Class II gaming or to extend a State's jurisdiction in Class III gaming. § 547.3 What are the definitions for this part? For the purposes of this part, the following definitions apply: *Account Access Component* , a component within a Class II gaming system that reads or recognizes account access media and gives a patron the ability to interact with their account. *Account Access Medium* , a magnetic stripe card or any other medium inserted into, or otherwise made to interact with, an account access component in order to give a patron the ability to interact with an account. *Audit Mode* , the mode where it is possible to view Class II gaming system accounting functions, statistics, etc. and perform non-player related functions. *Agent* , an employee or other person authorized by the gaming operation, as approved and licensed by the tribal gaming regulatory authority, designated for certain decisions, tasks and actions in the gaming operation. *Cancel Credit* , an action initiated by the Class II gaming system where some or all of a player's credits are removed by an attendant and paid to the player. *Cashless System* , a system that performs cashless transactions and maintains records of those cashless transactions. *Cashless Transaction* , a movement of funds electronically from one component to another, often to or from a patron deposit account. *CD-ROM* , Compact Disc—Read Only Memory. *Chairman* , the Chairman of the National Indian Gaming Commission established by the Indian Gaming Regulatory Act, 25 U.S.C. 2701 *et seq.* *Class II Game* , the same as “class II gaming” in 25 U.S.C. 2703(7)(A). *Class II Gaming System* , all components, whether or not technologic aids in electronic, computer, mechanical, or other technologic form, that function together to aid the play of one or more Class II games, including accounting functions mandated by these regulations. *Commission* , the National Indian Gaming Commission. *Coupon* , a financial instrument of fixed wagering value, usually paper, that can only be used to acquire non-cashable credits through interaction with a voucher system. This does not include instruments such as printed advertising material that cannot be validated directly by a voucher system. *Critical Memory* , memory locations storing data essential to the functionality of the Class II gaming system. *DLL* , a Dynamic-Link Library file. *Download Package* , approved data sent to a component of a Class II gaming system for such purposes as changing the component software. *DVD* , Digital Video Disk or Digital Versatile Disk. *Electromagnetic Interference* , the physical characteristic of an electronic component to emit electronic noise either into free air, onto the power lines, or onto communication cables. *Electrostatic Discharge* , a single-event, rapid transfer of electrostatic charge between two objects, usually resulting when two objects at different potentials come into direct contact with each other. *EPROM* , Erasable Programmable Read Only Memory—a storage area that may be filled with data and information, that once written is not modifiable, and that is retained even if there is no power applied to the machine. *Fault* , an event that when detected by a Class II gaming system causes a discontinuance of game play or other component functions. *Financial Instrument* , any tangible item of value tendered in Class II game play, including, but not limited to, bills, coins, vouchers and coupons. *Financial Instrument Acceptor* , any component that accepts financial instruments. *Financial Instrument Dispenser* , any component that dispenses financial instruments. *Financial Instrument Storage Component* , any component that stores financial instruments. *Flash Memory* , non-volatile memory that retains its data when the power is turned off and that can be electronically erased and reprogrammed without being removed from the circuit board. *Game Software* , the operational program or programs that govern the play, display of results, and/or awarding of prizes or credits for Class II games. *Gaming Equipment* , all electronic, electro-mechanical, mechanical, or other physical components utilized in the play of Class II games. *Hardware* , gaming equipment. *Interruption* , any form of mis-operation, component failure, or interference to the Class II gaming equipment. *Modification* , a revision to any hardware or software used in a Class II gaming system. *Non-cashable credit* , credits given by an operator to a patron; placed on a Class II gaming system through a coupon, cashless transaction or other approved means; and capable of activating play but not being converted to cash. *Patron Deposit Account* , an account maintained on behalf of a patron, for the purpose of depositing and withdrawing cashable funds for the primary purpose of interacting with a gaming activity. *Player Interface* , any component or components of a Class II gaming system, including an electronic or technologic aid (not limited to terminals, player stations, handhelds, fixed units, etc.), that directly enables player interaction in a Class II game. *Prize Schedule* , the set of prizes available to players for achieving pre-designated patterns in the Class II game. *Program Storage Media* , an electronic data storage component, such as a CD-ROM. EPROM, hard disk, or flash memory on which software is stored and from which software is read. *Progressive Prize* , a prize that increases by a selectable or predefined amount based on play of a Class II game. *Random Number Generator (RNG)* , a software module, hardware component or combination of these designed to produce outputs that are effectively random. *Reflexive Software* , any software that has the ability to manipulate and/or replace a randomly generated outcome for the purpose of changing the results of a Class II game. *Removable/Rewritable storage media* , program or data storage components that can be removed from gaming equipment and be written to, or rewritten by, the gaming equipment or by other equipment designed for that purpose. *Server* , a computer which controls one or more applications or environments within a Class II gaming system. *Test/Diagnostics Mode* , a mode on a component that allows various tests to be performed on the Class II gaming system hardware and software. *Testing Laboratory* , an organization recognized by a tribal gaming regulatory authority pursuant to § 547.4(f). *Tribal Gaming Regulatory Authority* , the entity authorized by tribal law to regulate gaming conducted pursuant to the Indian Gaming Regulatory Act. *Voucher* , a financial instrument of fixed wagering value, usually paper, that can only be used to acquire an equivalent value of cashable credits or cash through interaction with a voucher system. *Voucher System* , a component of the Class II gaming system or an external system that securely maintains records of vouchers and coupons; validates payment of vouchers; records successful or failed payments of vouchers and coupons; and controls the purging of expired vouchers and coupons. § 547.4 How do I comply with this part?

(a)*Limited immediate compliance.* By 120 days after the effective date of this part, a tribal gaming regulatory authority shall:

(1)Require that all Class II gaming system software that affects the play of the Class II game be submitted, together with the signature verification required by § 547.8(f), to a testing laboratory recognized pursuant to paragraph

(f)of this section;

(2)Require that the testing laboratory test the submission to the standards established by § 547.8(b), § 547.14, the minimum probability standards of § 547.5(c), and to any additional standards adopted by the tribal gaming regulatory authority;

(3)Require that the testing laboratory provide the tribal gaming regulatory authority with a formal written report setting forth and certifying to the findings and conclusions of the test;

(4)Make a finding, in the form of a certificate provided to the supplier, that the Class II gaming system qualifies for grandfather status under the provisions of this section, but only upon receipt of a testing laboratory's report that the Class II gaming system is compliant with § 547.8(b), § 547.8(f), the minimum probability standards of § 547.5(c), § 547.14, and any other standards adopted by the tribal gaming regulatory authority. If the tribal gaming regulatory authority does not issue the certificate, or if the testing laboratory finds that the Class II gaming system is not compliant with § 547.8(b), § 547.8(f), the minimum probability standards of § 547.5(c), § 547.14, or any other standards adopted by the tribal gaming regulatory authority, then the gaming system shall immediately be removed from play and not be utilized.

(5)Retain a copy of any testing laboratory's report so long as the Class II gaming system that is the subject of the report remains available to the public for play;

(6)Retain a copy of any certificate of grandfather status so long as the Class II gaming system that is the subject of the certificate remains available to the public for play; and

(7)Require the supplier of any player interface to designate with a permanently affixed label each player interface with an identifying number and the date of manufacture or a statement that the date of manufacture was on or before the effective date of this part. The tribal gaming regulatory authority shall also require the supplier to provide a written declaration or affidavit affirming that the date of manufacture was on or before the effective date of this part.

(b)*Grandfather provisions.* All Class II gaming systems manufactured or placed in a tribal facility on or before the effective date of this part and certified pursuant to paragraph

(a)of this section are grandfathered Class II gaming systems for which the following provisions apply:

(1)Grandfathered Class II gaming systems may continue in operation for a period of five years from the effective date of this part.

(2)Subject to the limitations in any applicable Commission regulations governing the classification of games, any grandfathered Class II gaming system shall be available for use at any tribal gaming facility subject to approval by the tribal gaming regulatory authority which shall transmit its notice of that approval, identifying the grandfathered components, to the NIGC.

(3)As permitted by the tribal gaming regulatory authority, individual hardware or software components may be repaired or replaced to ensure proper functioning, security, or integrity of the grandfathered Class II gaming system.

(4)All modifications that affect the play of a grandfathered Class II gaming system must be approved pursuant to paragraph

(c)of this section, except for the following:

(i)Any software modifications that the tribal gaming regulatory authority finds will maintain or advance the system's overall compliance with this part or applicable provisions of Commission regulations governing minimum internal control standards, after receiving a new testing laboratory report that the modifications are compliant with the standards established by § 547.8(b), the minimum probability requirements of § 547.5(c), § 547.14, and any other standards adopted by the tribal gaming regulatory authority;

(ii)Any hardware modifications that the tribal gaming regulatory authority finds will maintain or advance the system's overall compliance with this part or applicable provisions of Commission regulations governing minimum internal control standards; and

(iii)Any other modification to the software of a grandfathered Class II gaming system that the tribal gaming regulatory authority finds will not detract from, compromise or prejudice:

(A)The proper functioning, security, or integrity of the Class II gaming system, and

(B)The gaming system's overall compliance with the requirements of this part or applicable provisions of Commission regulations governing minimum internal control standards.

(iv)No such modification may be implemented without the approval of the tribal gaming regulatory authority. The tribal gaming regulatory authority shall maintain a record of the modification so long as the Class II gaming system that is the subject of the modification remains available to the public for play and shall make the record available to the Commission upon request. The Commission will only make available for public review records or portions of records subject to release under the Freedom of Information Act, 5 U.S.C. 552; the Privacy Act of 1974, 5 U.S.C. 552a; or the Indian Gaming Regulatory Act, 25 U.S.C. 2716(a).

(c)*Submission, testing, and approval—generally.* Except as provided in paragraphs

(b)and

(d)of this section, no tribal gaming regulatory authority shall permit in a tribal gaming operation the use of any Class II gaming system, or any associated cashless system or voucher system or any modification thereto, unless:

(1)The Class II gaming system, cashless system, voucher payment system, or modification has been submitted to a testing laboratory;

(2)The testing laboratory tests the submission to the standards established by:

(i)This part;

(ii)Applicable provisions of Commission regulations governing the classification of games and minimum internal controls; and

(iii)The tribal gaming regulatory authority; and the testing laboratory provides a formal written report to the party making the submission, setting forth and certifying to its findings and conclusions; and

(3)Following receipt of the testing laboratory's report, the tribal gaming regulatory authority makes a finding that the Class II gaming system, cashless system, or voucher system conforms to the standards established by:

(i)This part;

(ii)Applicable provisions of Commission regulations governing the classification of games and minimum internal controls; and

(iii)The tribal gaming regulatory authority. The tribal gaming regulatory authority shall retain a copy of the testing laboratory's report so long as the Class II gaming system, cashless system, voucher system, or modification thereto that is the subject of the report remains available to the public for play in its gaming operation.

(d)*Emergency hardware and software changes.*

(1)A tribal gaming regulatory authority, in its discretion, may permit modified hardware or game software to be made available for play without prior laboratory review if the modified hardware or game software is:

(i)Necessary to correct a problem affecting the fairness, security, or integrity of a game or accounting system or any cashless system, or voucher system; or

(ii)Unrelated to game play, an accounting system, a cashless system, or a voucher system.

(2)If a tribal gaming regulatory authority authorizes modified game software or hardware to be made available for play or use without prior laboratory review, the tribal gaming regulatory authority shall thereafter require the hardware or software manufacturer to:

(i)Immediately advise other users of the same hardware or software of the importance and availability of the update;

(ii)Immediately submit the new hardware or software to a testing laboratory for testing and verification of compliance with this part and any applicable provisions of Commission regulations governing minimum internal control standards; and

(iii)Immediately provide the tribal gaming regulatory authority with a software signature verification tool meeting the requirements of § 547.8(f) for any new software.

(3)If a tribal gaming regulatory authority authorizes software or hardware modification under this paragraph, it shall maintain a record of the modification and a copy of the testing laboratory report so long as the Class II gaming system that is the subject of the modification remains available to the public for play and shall make the record available to the Commission upon request. The Commission will only make available for public review records or portions of records subject to release under the Freedom of Information Act, 5 U.S.C. 552; the Privacy Act of 1974, 5 U.S.C. 552a; or the Indian Gaming Regulatory Act, 25 U.S.C. 2716(a).

(e)*Compliance by charitable gaming operations.* This part shall not apply to charitable gaming operations, provided that:

(1)The tribal government determines that the organization sponsoring the gaming operation is a charitable organization;

(2)All proceeds of the charitable gaming operation are for the benefit of the charitable organization;

(3)The tribal gaming regulatory authority permits the charitable organization to be exempt from this part;

(4)The charitable gaming operation is operated wholly by the charitable organization's employees or volunteers; and

(5)The annual gross gaming revenue of the charitable gaming operation does not exceed $1,000,000.

(f)*Testing laboratories.*

(1)A testing laboratory may provide the examination, testing, evaluating and reporting functions required by this section provided that:

(i)The testing laboratory demonstrates its integrity, independence and financial stability to the tribal gaming regulatory authority.

(ii)The testing laboratory demonstrates its technical skill and capability to the tribal gaming regulatory authority.

(iii)The testing laboratory is not owned or operated by the tribe or tribal gaming regulatory authority.

(iv)The tribal gaming regulatory authority:

(A)Makes a suitability determination of the testing laboratories no less stringent than that required by § 533.6(b)(1)(ii) through

(v)and 533.6(c) of this chapter and based upon no less information than that required by § 537.1 of this chapter, or

(B)Accepts, in its discretion, a determination of suitability for the testing laboratory made by any other gaming regulatory jurisdiction in the United States.

(v)After reviewing the suitability determination and the information provided by the testing laboratory, the tribal gaming regulatory authority determines that the testing laboratory is qualified to test and evaluate Class II gaming systems.

(2)The tribal gaming regulatory authority shall:

(ii)Place the testing laboratory under a continuing obligation to notify it of any adverse regulatory action in any jurisdiction where the testing laboratory conducts business.

(iii)Require the testing laboratory to provide notice of any material changes to the information provided to the tribal gaming regulatory authority. § 547.5 What are the rules of interpretation and of general application for this part?

(a)*Minimum standards.* A tribal gaming regulatory authority may establish and implement additional technical standards that are as stringent as, or more stringent than, those set out in this part.

(b)*Only applicable standards apply.* Gaming equipment and software used with Class II gaming systems shall meet all applicable requirements of this part and applicable requirements of Commission regulations governing the classification of games and minimum internal controls. For example, if a Class II gaming system lacks the ability to print or accept vouchers, then any standards that govern vouchers do not apply.

(c)*Fairness.* No Class II gaming system shall cheat, mislead, or disadvantage users. All prizes advertised shall be available to win. No progressive prize shall have a probability of winning of less than 1 in 50,000,000. No other prize shall have a probability of winning of less than 1 in 25,000,000.

(d)*Approved equipment and software only.* All gaming equipment and software used with Class II gaming systems shall be identical in all respects to a prototype reviewed and tested by a testing laboratory and approved for use by the tribal gaming regulatory authority pursuant to § 547.4(a) through (c). Unapproved software shall not be loaded onto or stored on any program storage medium used in a Class II gaming system, except as provided in § 547.4(d).

(e)*Proper functioning.* All gaming equipment and software used with Class II gaming systems shall perform according to the manufacturer's design and operating specifications.

(f)*No Limitation of Technology.* This part should not be interpreted to limit the use of technology or to preclude the use of technology not specifically referenced.

(g)*Severability.* If any provision of this part is declared invalid by a court of competent jurisdiction, such decision shall not affect the remainder of this part. § 547.6 What are the minimum technical standards for enrolling and enabling Class II gaming system components?

(a)*General requirements.* Class II gaming systems shall provide a method to:

(1)Enroll and unenroll system components;

(2)Enable and disable specific system components.

(b)*Specific requirements.* Class II gaming systems shall:

(1)Ensure that only enrolled and enabled system components participate in gaming; and

(2)Ensure that the default condition for components shall be unenrolled and disabled. § 547.7 What are the minimum technical hardware standards applicable to Class II gaming systems?

(a)*General requirements.*

(1)The Class II gaming system shall operate in compliance with applicable regulations of the Federal Communications Commission.

(2)Prior to approval by the tribal gaming regulatory authority pursuant to § 547.4(d), the Class II gaming system shall have obtained from Underwriters' Laboratories, or its equivalent, relevant certification(s) required for equipment of its type, including but not limited to certifications for liquid spills, electromagnetic interference, etc.

(b)*Printed circuit boards.*

(1)Printed circuit boards that have the potential to affect the outcome or integrity of the game, and are specially manufactured or proprietary and not off-the-shelf, shall display a unique identifier such as a part number and/or revision number, which shall be updated to reflect new revisions or modifications of the board.

(2)Switches or jumpers on all circuit boards that have the potential to affect the outcome or integrity of any game, progressive award, financial instrument, cashless transaction, voucher transaction, or accounting records shall be capable of being sealed.

(c)*Electrostatic discharge.* Class II gaming system components accessible to the public shall be constructed so that they exhibit immunity to human body electrostatic discharges on areas exposed to contact. Static discharges of ±15 kV for air discharges and ±7.5 kV for contact discharges may not cause damage, or inhibit operation or integrity of the Class II gaming system.

(d)*Physical enclosures.* Physical enclosures shall be of a robust construction designed to resist determined illegal entry. All protuberances and attachments such as buttons, identification plates, and labels shall be sufficiently robust to avoid unauthorized removal.

(e)*Player interface.* The player interface shall include a method or means to:

(1)Display information to a player; and

(2)Allow the player to interact with the Class II gaming system.

(f)*Account access components.* A Class II gaming system component that reads account access media shall be located within a secure, locked or tamper-evident area or in a cabinet or housing which is of a robust construction designed to resist determined illegal entry and to protect internal components. In addition, the account access component:

(1)Shall be constructed so that physical tampering leaves evidence of such tampering; and

(2)Shall provide a method to enable the Class II gaming system to interpret and act upon valid or invalid input or error condition.

(g)*Financial instrument storage components.* Any Class II gaming system components that store financial instruments and that are not operated under the direct control of a gaming operation employee or agent shall be located within a secure and locked area or in a locked cabinet or housing which is of a robust construction designed to resist determined illegal entry and to protect internal components.

(h)*Financial instrument acceptors.*

(1)Any Class II gaming system components that handle financial instruments and that are not operated under the direct control of an agent shall:

(i)Be located within a secure, locked and tamper-evident area or in a locked cabinet or housing which is of a robust construction designed to resist determined illegal entry and to protect internal components;

(ii)Be able to detect the entry of valid or invalid financial instruments and to provide a method to enable the Class II gaming system to interpret and act upon valid or invalid input or error condition; and

(iii)Be constructed to permit communication with the Class II gaming system of the accounting information required by § 547.9(a) and by applicable provisions of any Commission and tribal gaming regulatory regulations governing minimum internal control standards.

(2)Prior to completion of a valid financial instrument transaction by the Class II gaming system, no monetary amount related to that instrument shall be available for play. For example, credits shall not be available for play until currency or coupon inserted into an acceptor is secured in the storage component.

(3)The monetary amount related to all valid financial instrument transactions by the Class II gaming system shall be recorded as required by § 547.9(a) and the applicable provisions of any Commission and tribal gaming regulatory authority regulations governing minimum internal control standards.

(i)*Financial instrument dispensers.*

(1)Any Class II gaming system components that dispense financial instruments and that are not designed to be operated under the direct control of a gaming operation employee or agent shall:

(ii)Provide a method to enable the Class II gaming system to interpret and act upon valid or invalid input or error condition; and

(2)The monetary amount related to all valid financial instrument transactions by the Class II gaming system shall be recorded as required by § 547.9(a) and the applicable provisions of any Commission and tribal gaming regulatory authority regulations governing minimum internal control standards.

(j)*Game Outcome Determination Components.* Any Class II gaming system logic components that affect the game outcome and that are not designed to be operated under the direct control of a gaming operation employee or agent shall be located within a secure, locked and tamper-evident area or in a locked cabinet or housing which is of a robust construction designed to resist determined illegal entry and to protect internal components. DIP switches or jumpers that can affect the integrity of the Class II gaming system must be capable of being sealed by the tribal gaming regulatory authority.

(k)*Door access detection.* All components of the Class II gaming system that are locked in order to meet the requirements of this part shall include a sensor or other methods to monitor an open door. In addition:

(1)A door open sensor, and its components or cables, shall be secure against attempts to disable them or interfere with their normal mode of operation; and

(2)It shall not be possible to disable a door open sensor, or access components within, without first properly opening the door.

(l)*Separation of functions/no limitations on technology.* Nothing herein shall prohibit the account access component, financial instrument storage component, financial instrument acceptor, and financial instrument dispenser from being included within the same component, or separated into individual components. § 547.8 What are the minimum technical software standards applicable to Class II gaming systems? This section provides general software standards for Class II gaming systems for the play of Class II games.

(a)*Player interface displays.*

(1)If not otherwise provided to the player, the player interface shall display the following:

(i)The purchase or wager amount;

(ii)Game results; and

(iii)Any player credit balance.

(2)Between plays of any game and until the start of the next play, or until the player selects a new game option such as purchase or wager amount or card selection, whichever is earlier, if not otherwise provided to the player, the player interface shall display:

(i)The total purchase or wager amount and all prizes and total credits won for the last game played;

(ii)The final results for the last game played, including alternate displays of results, if any; and

(iii)Any default purchase or wager amount for the next play.

(b)*Game initiation and play.*

(1)Each game played on the Class II gaming system shall follow and not deviate from a constant set of rules for each game provided to players pursuant to § 547.16. Any change in rules constitutes a different game. There shall be no automatic or undisclosed changes of rules.

(2)For bingo games and games similar to bingo, the Class II gaming system shall not alter or allow to be altered the card permutations or game rules used for play of a Class II game unless specifically chosen by the player prior to commitment to participate in the game. No duplicate cards shall be sold for any common draw.

(3)No game play shall commence and, no financial instrument or credit shall be accepted on the affected player interface, in the presence of any fault condition that affects the outcome of the game, open door, or while in test, audit, or lock-up mode.

(4)The player must choose to participate in the play of a game.

(c)*Audit Mode.*

(1)If an audit mode is provided, the Class II gaming system shall provide, for those components actively involved in the audit:

(i)All accounting functions required by § 547.9, by applicable provisions of any Commission regulations governing minimum internal control standards, and by any internal controls adopted by the tribe or tribal gaming regulatory authority;

(ii)Display player interface identification; and

(iii)Display software version or game identification;

(2)Audit mode shall be accessible by a secure method.

(3)Accounting function data shall be accessible by an authorized person at any time, except during a payout, during a handpay, or during play.

(4)The Class II gaming system shall disable credit acceptance on the affected player interface while in audit mode, except during credit acceptance testing.

(d)*Last game recall.* The last game recall function shall:

(1)Be retrievable at all times, other than when the recall component is involved in the play of a game, upon the operation of an external key-switch, entry of an audit card, or a similar method;

(2)Display the results of recalled games as originally displayed or in text representation, including alternate display results implemented in video, rather than electro-mechanical, form, if any, so as to enable the tribal gaming regulatory authority or operator to clearly identify the game sequences and results that occurred;

(3)Allow the Class II gaming system component providing game recall, upon return to normal game play mode, to restore any affected display to the positions, forms and values displayed before access to the game recall information; and

(4)Provide the following information for the current and previous four games played and shall display:

(i)Game start time, end time, and date;

(ii)The total number of credits at the start of play, less the purchase or wager amount;

(iii)The purchase or wager amount;

(iv)The total number of credits at the end of play; and

(v)The total number of credits won as a result of the game recalled, and the value in dollars and cents for progressive prizes, if different.

(vi)For bingo games and games similar to bingo only, also display:

(A)The card(s) used by the player;

(B)The identifier of the bingo game played;

(C)The numbers or other designations drawn, in the order that they were drawn;

(D)The numbers or other designations and prize patterns covered on each card;

(E)All prizes won by the player, including winning patterns and alternate displays implemented in video, rather than electro-mechanical form, if any; and

(F)The unique identifier of the card on which prizes were won;

(vii)For pull-tab games only, also display:

(A)The result(s) of each pull-tab, displayed in the same pattern as on the tangible pull-tab;

(B)All prizes won by the player;

(C)The unique identifier of each pull tab; and

(D)Any other information necessary to fully reconstruct the current and four previous plays.

(e)*Voucher and credit transfer recall.* Notwithstanding the requirements of any other section in this part, a Class II gaming system shall have the capacity to:

(1)Display the information specified in § 547.11(b)(5)(ii) through

(vi)for the last five vouchers or coupons printed and the last five vouchers or coupons accepted; and

(2)Display a complete transaction history for the last five cashless transactions made and the last five cashless transactions accepted.

(f)*Software signature verification.* The manufacturer or developer of the Class II gaming system must provide to the testing laboratory and to the tribal gaming regulatory authority an industry-standard methodology, acceptable to the tribal gaming regulatory authority, for verifying the Class II gaming system game software. By way of illustration, for game software stored on rewritable media, such methodologies include signature algorithms and hashing formulas such as SHA-1.

(g)*Test, diagnostic, and demonstration modes.* If test, diagnostic, and/or demonstration modes are provided, the Class II gaming system shall, for those components actively involved in the test, diagnostic, or demonstration mode:

(1)Clearly indicate when that component is in the test, diagnostic, or demonstration mode;

(2)Not alter financial data on that component other than temporary data;

(3)Only be available after entering a specific mode;

(4)Disable credit acceptance and payment unless credit acceptance or payment is being tested; and

(5)Terminate all mode-specific functions upon exiting a mode.

(h)*Multi-game.* If multiple games are offered for player selection at the player interface, the player interface shall:

(1)Provide a display of available games;

(2)Provide the means of selecting among them;

(3)Display the full amount of the player's credit balance;

(4)Identify the game selected or being played; and

(5)Not force the play of a game after its selection.

(i)*Program interruption and resumption.* The Class II gaming system software shall be designed so that upon resumption following any interruption, the system:

(1)Is able to return to a known state;

(2)Shall check for any fault condition upon resumption;

(3)Shall verify the integrity of data stored in critical memory;

(4)Shall return the purchase or wager amount to the player in accordance with the rules of the game; and

(5)Shall detect any change or corruption in the Class II gaming system software.

(j)*Class II gaming system components acting as progressive controllers.* This paragraph applies to progressive controllers and components acting as progressive controllers in Class II gaming systems.

(1)Modification of progressive parameters shall be conducted in a secure manner approved by the tribal gaming regulatory authority. Such parameters may include:

(i)Increment value;

(ii)Secondary pool increment(s);

(iii)Reset amount(s);

(iv)Maximum value(s); and

(v)Identity of participating player interfaces.

(2)The Class II gaming system component or other progressive controller shall provide a means of creating a progressive balancing report for each progressive link it controls. At a minimum, that report shall provide balancing of the changes of the progressive amount, including progressive prizes won, for all participating player interfaces versus current progressive amount(s), plus progressive prizes. In addition, the report shall account for, and not be made inaccurate by, unusual events such as:

(i)Class II gaming system critical memory clears;

(ii)Modification, alteration, or deletion of progressive prizes;

(iii)Offline equipment; or

(iv)Multiple site progressive prizes.

(k)*Critical memory.*

(1)Critical memory may be located anywhere within the Class II gaming system. Critical memory is any memory that maintains any of the following data:

(i)Accounting data;

(ii)Current credits;

(iii)Configuration data;

(iv)Last game recall information required by § 547.8(d);

(v)Game recall information for the current game, if incomplete;

(vi)Software state (the last normal state software was in before interruption);

(vii)RNG seed(s), if necessary for maintaining integrity;

(viii)Encryption keys, if necessary for maintaining integrity;

(ix)Progressive prize parameters and current values;

(x)The five most recent financial instruments accepted by type, excluding coins and tokens;

(xi)The five most recent financial instruments dispensed by type, excluding coins and tokens; and

(xii)The five most recent cashless transactions paid and the five most recent cashless transactions accepted.

(2)Critical memory shall be maintained using a methodology that enables errors to be identified and acted upon. All accounting and recall functions shall be verified as necessary to ensure their ongoing integrity.

(3)The validity of affected data stored in critical memory shall be checked after each of the following events:

(i)Every restart;

(ii)Each attendant paid win;

(iii)Each attendant paid progressive win;

(iv)Each sensored door closure; and

(v)Every reconfiguration, download, or change of prize schedule or denomination requiring operator intervention or action.

(l)Secured access. Class II gaming systems that use a logon or other means of secured access shall include a user account lockout after a predetermined number of consecutive failed attempts to access system. § 547.9 What are the minimum technical standards for Class II gaming system accounting functions? This section provides standards for accounting functions used in Class II gaming systems.

(a)*Required accounting data.* The following minimum accounting data, however named, shall be maintained by the Class II gaming system. Title Description

(1)Amount In The total value of all financial instruments and cashless transactions accepted by the Class II gaming system. Each type of financial instrument accepted by the Class II gaming system shall be tracked independently, and as required by applicable requirements of any Commission and tribal gaming regulatory authority regulations governing minimum internal control standards.

(2)Amount Out The total value of all financial instruments and cashless transactions paid by the Class II gaming system, plus the total value of attendant pay. Each type of financial instrument paid by the Class II Gaming System shall be tracked independently, and as required by applicable requirements of any Commission and tribal gaming regulatory authority regulations governing minimum internal control standards.

(b)*Accounting data storage.* If the Class II gaming system electronically maintains accounting data:

(1)Accounting data shall be stored with at least eight decimal digits.

(2)Credit balances shall have sufficient digits to accommodate the design of the game.

(3)Accounting data displayed to the player may be incremented or decremented using visual effects, but the internal storage of this data shall be immediately updated in full.

(4)Accounting data shall be updated upon the occurrence of the relevant accounting event.

(5)Modifications to accounting data shall be recorded, including the identity of the person(s) making the modifications, and be reportable by the Class II gaming system.

(c)*Rollover.* Accounting data that rolls over to zero shall not corrupt data.

(d)*Credit balance display and function.*

(1)Any credit balance maintained at the player interface shall be prominently displayed at all times except:

(i)In audit, configuration, recall and test modes; or

(ii)Temporarily, during alternate displays of game results.

(2)Progressive prizes may be added to the player's credit balance provided:

(i)The player credit balance is maintained in dollars and cents;

(ii)The progressive accounting data is incremented in number of credits; or

(iii)The prize in dollars and cents is converted to player credits or transferred to the player's credit balance in a manner that does not mislead the player or cause accounting imbalances.

(3)If the player credit balance displays in credits, but the actual balance includes fractional credits, the Class II gaming system shall display the fractional credit when the player credit balance drops below one credit. § 547.10 What are the minimum standards for Class II gaming system critical events? This section provides standards for events such as system critical faults, deactivation, door open or other changes of states, and lockup within the Class II gaming system.

(a)*Fault events.*

(1)The following events are to be treated as described below: Events Definition and action to be taken

(i)Component fault Reported when a fault on a component is detected. When possible, this event message should indicate what the nature of the fault is.

(ii)Financial storage component full Reported when a financial instrument acceptor or dispenser includes storage, and it becomes full. This event message should indicate what financial storage component is full.

(iii)Financial output component empty Reported when a financial instrument dispenser is empty. The event message should indicate which financial output component is affected, and whether it is empty.

(iv)Financial component fault Reported when an occurrence on a financial component results in a known fault state.

(v)Critical memory error Some critical memory error has occurred. When a non-correctable critical memory error has occurred, the data on the Class II gaming system component can no longer be considered reliable. Accordingly, any game play on the affected component shall cease immediately, and an appropriate message shall be displayed, if possible.

(vi)Progressive communication fault If applicable; when communications with a progressive controller component is in a known fault state.

(vii)Program storage medium fault The software has failed its own internal security check or the medium itself has some fault. Any game play on the affected component shall cease immediately, and an appropriate message shall be displayed, if possible.

(2)The occurrence of any event identified in paragraph (a)(1) of this section shall be recorded.

(3)Upon clearing any event identified in paragraph (a)(1) of this section, the Class II gaming system shall:

(i)Record that the fault condition has been cleared;

(ii)Ensure the integrity of all related accounting data; and

(iii)In the case of a malfunction, return a player's purchase or wager according to the rules of the game.

(b)*Door open/close events.*

(1)In addition to the requirements of paragraph (a)(1) of this section, the Class II gaming system shall perform the following for any component affected by any sensored door open event:

(i)Indicate that the state of a sensored door changes from closed to open or opened to closed;

(ii)Disable all financial instrument acceptance, unless a test mode is entered;

(iii)Disable game play on the affected player interface;

(iv)Disable player inputs on the affected player interface, unless test mode is entered; and

(v)Disable all financial instrument disbursement, unless a test mode is entered.

(2)The Class II gaming system may return the component to a ready to play state when all sensored doors are closed.

(c)*Non-fault events.* The following non-fault events are to be treated as described below, if applicable: Event Definition and action to be taken

(1)Player interface power off during play This condition is reported by the affected component(s) to indicate power has been lost during game play.

(2)Player interface power on This condition is reported by the affected component(s) to indicate it has been turned on.

(3)Financial instrument storage component container/stacker removed This condition is reported when a financial instrument storage container has been removed. The event message should indicate which storage container was removed. § 547.11 What are the minimum technical standards for money and credit handling? This section provides standards for money and credit handling by a Class II gaming system.

(a)*Credit acceptance, generally.*

(1)Upon any credit acceptance, the Class II gaming system shall register the correct number of credits on the player's credit balance.

(2)The Class II gaming system shall reject financial instruments deemed invalid.

(b)*Credit redemption, generally.*

(1)For cashable credits on a player interface, players shall be allowed to cash out and/or redeem those credits at the player interface except when that player interface is:

(i)Involved in the play of a game;

(ii)In audit mode, recall mode or any test mode;

(iii)Detecting any sensored door open condition;

(iv)Updating the player credit balance or total win accounting data; or

(v)Displaying a fault condition that would prevent cash-out or credit redemption. In this case a fault indication shall be displayed.

(2)For cashable credits not on a player interface, the player shall be allowed to cash out and/or redeem those credits at any time.

(3)A Class II gaming system shall not automatically pay an award subject to mandatory tax reporting or withholding.

(4)Credit redemption by voucher or coupon shall conform to the following:

(i)A Class II gaming system may redeem credits by issuing a voucher or coupon when it communicates with a voucher system that validates the voucher or coupon.

(ii)A Class II gaming system that redeems credits by issuing vouchers and coupons shall either:

(A)Maintain an electronic record of all information required by paragraphs (b)(5)(ii) through

(vi)of this section; or

(B)Generate two identical copies of each voucher or coupon issued, one to be provided to the player and the other to be retained within the machine for audit purposes.

(5)Valid vouchers and coupons shall contain the following:

(i)Gaming operation name and location;

(ii)The identification number of the Class II gaming system component or the player interface number, as applicable;

(iii)Date and time of issuance;

(iv)Alpha and numeric dollar amount;

(v)A sequence number;

(vi)A validation number that:

(A)Is produced by a means specifically designed to prevent repetition of validation numbers; and

(B)Has some form of checkcode or other form of information redundancy to prevent prediction of subsequent validation numbers without knowledge of the checkcode algorithm and parameters;

(vii)For machine-readable vouchers and coupons, a bar code or other form of machine readable representation of the validation number, which shall have enough redundancy and error checking to ensure that 99.9% of all misreads are flagged as errors;

(viii)Transaction type or other method of differentiating voucher and coupon types; and

(ix)Expiration period or date.

(6)Transfers from an account may not exceed the balance of that account.

(7)For Class II gaming systems not using dollars and cents accounting and not having odd cents accounting, the Class II gaming system shall reject any transfers from voucher payment systems or cashless systems that are not even multiples of the Class II gaming system denomination.

(8)Voucher redemption systems shall include the ability to report redemptions per redemption location or user. § 547.12 What are the minimum technical standards for downloading on a Class II gaming system? This section provides standards for downloading on a Class II gaming system.

(a)*Downloads.*

(1)Downloads are an acceptable means of transporting approved content, including but not limited to software, files, data, and prize schedules.

(2)Downloads of software, games, prize schedules, or other download packages shall be conducted only as authorized by the tribal gaming regulatory authority.

(3)Downloads shall use secure methodologies that will deliver the download data without alteration or modification, in accordance with § 547.15(a).

(4)Downloads conducted during operational periods shall be performed in a manner that will not affect game play.

(5)Downloads shall not affect the integrity of accounting data.

(6)The Class II gaming system or the tribal gaming regulatory authority shall log each download of any download package. Each log record shall contain as a minimum:

(i)The time and date of the initiation of the download;

(ii)The time and date of the completion of the download;

(iii)The Class II gaming system components to which software was downloaded;

(iv)The version(s) of download package and any software downloaded. Logging of the unique software signature will satisfy this requirement;

(v)The outcome of any software verification following the download (success or failure); and

(vi)The name and identification number, or other unique identifier, of any individual(s) conducting or scheduling a download.

(b)*Verifying downloads.* Following download of any game software, the Class II gaming system shall verify the downloaded software using a software signature verification method that meets the requirements of § 547.8(f). The tribal gaming regulatory authority shall confirm the verification. § 547.13 What are the minimum technical standards for program storage media? This section provides minimum standards for removable, (re-)writable, and non-writable storage media in Class II gaming systems.

(a)*Removable program storage media.* All removable program storage media shall maintain an internal checksum or signature of its contents. Verification of this checksum or signature is to be performed after every restart. If the verification fails, the affected Class II gaming system component(s) shall lock up and enter a fault state.

(b)*Non-rewritable program storage media.*

(1)All EPROMs and Programmable Logic Devices

(PLDs)that have erasure windows shall be fitted with covers over their erasure windows.

(2)All unused areas of EPROMs shall be written with the inverse of the erased state (e.g., zero bits (00 hex) for most EPROMs), random data, or repeats of the program data.

(3)Flash memory storage components intended to have the same logical function as ROM, i.e. not to be dynamically written, shall be write-protected or otherwise protected from unauthorized modification.

(4)The write cycle shall be closed or finished for all CD-ROMs such that it is not possible to write any further data to the CD.

(5)Write protected hard disks are permitted if the means of enabling the write protect is easily viewable and can be sealed in place.

(c)*Writable and rewritable program storage media.*

(1)Writable and rewritable program storage, such as hard disk drives, Flash memory, writable CD-ROMs, and writable DVDs, may be used provided that the software stored thereon may be verified using the mechanism provided pursuant to § 547.8(f).

(2)Program storage shall be structured so there is a verifiable separation of fixed data (e.g. program, fixed parameters, DLLs) and variable data.

(d)*Identification of program storage media.*

(1)All program storage media that is not re-writable in circuit, (e.g. EPROM, CD-ROM) shall be uniquely identified, displaying:

(i)Manufacturer;

(ii)Program identifier;

(iii)Program version number(s); and

(iv)Location information, if critical (e.g. socket position 3 on the printed circuit board). § 547.14 What are the minimum technical standards for electronic random number generation? This section provides minimum standards for electronic RNGs in Class II gaming systems.

(a)*Properties.*

(1)All RNGs shall produce output having the following properties:

(i)Statistical randomness;

(ii)Unpredictability; and

(iii)Non-repeatability.

(b)*Statistical Randomness.*

(1)Numbers produced by an RNG shall be statistically random individually and in the permutations and combinations used in the application under the rules of the game. For example, if a bingo game with 75 objects with numbers or other designations has a progressive winning pattern of the five numbers or other designations on the bottom of the card and the winning of this prize is defined to be the five numbers or other designations are matched in the first five objects drawn, the likelihood of each of the 75C5 combinations are to be verified to be statistically equal.

(2)Numbers produced by an RNG shall pass the statistical tests for randomness to a 99% confidence level, which may include:

(i)Chi-square test;

(ii)Equi-distribution (frequency) test;

(iii)Gap test;

(iv)Poker test;

(v)Coupon collector's test;

(vi)Permutation test;

(vii)Run test (patterns of occurrences shall not be recurrent);

(viii)Spectral test;

(ix)Serial correlation test potency and degree of serial correlation (outcomes shall be independent from the previous game); and

(x)Test on subsequences.

(c)*Unpredictability.*

(1)It shall not be feasible to predict future outputs of an RNG, even if the algorithm and the past sequence of outputs are known.

(2)Unpredictability shall be ensured by re-seeding or by continuously cycling the RNG, and by providing a sufficient number of RNG states for the applications supported.

(3)Re-seeding may be used where the re-seeding input is at least as statistically random as, and independent of, the output of the RNG being re-seeded.

(d)*Non-repeatability.* The RNG shall not be initialized to reproduce the same output stream that it has produced before, nor shall any two instances of an RNG produce the same stream as each other. This property shall be ensured by initial seeding that comes from:

(1)A source of “true” randomness, such as a hardware random noise generator; or

(2)A combination of timestamps, parameters unique to a Class II gaming system, previous RNG outputs, or other, similar method.

(e)*General requirements.*

(1)Software that calls an RNG to derive game outcome events shall immediately use the output returned in accordance with the game rules.

(2)The use of multiple RNGs is permitted as long as they operate in accordance with this section.

(3)RNG outputs shall not be arbitrarily discarded or selected.

(4)Where a sequence of outputs is required, the whole of the sequence in the order generated shall be used in accordance with the game rules.

(5)The Class II gaming system shall neither adjust the RNG process or game outcomes based on the history of prizes obtained in previous games nor make any reflexive or secondary decision that affects the results shown to the player or game outcome. Nothing in this paragraph shall prohibit the use of alternative displays.

(f)*Scaling algorithms and scaled numbers.* An RNG that provides output scaled to given ranges shall:

(1)Be independent and uniform over the range;

(2)Provide numbers scaled to the ranges required by game rules, and notwithstanding the requirements of paragraph (e)(3) of this section, may discard numbers that do not map uniformly onto the required range but shall use the first number in sequence which does map correctly to the range;

(3)Be capable of producing every possible outcome of a game according to its rules; and

(4)Use an unbiased algorithm. A scaling algorithm is considered to be unbiased if the measured bias is no greater than 1 in 100 million. § 547.15 What are the minimum technical standards for electronic data communications between system components? This section provides minimum standards for electronic data communications with gaming equipment or components used with Class II gaming systems.

(a)*Sensitive data.* Communication of sensitive data shall be secure from eavesdropping, access, tampering, intrusion or alteration unauthorized by the tribal gaming regulatory authority. Sensitive data shall include, but not be limited to:

(1)RNG seeds and outcomes;

(2)Encryption keys, where the implementation chosen requires transmission of keys;

(3)PINs;

(4)Passwords;

(5)Financial instrument transactions;

(6)Transfers of funds;

(7)Player tracking information;

(8)Download Packages; and

(9)Any information that affects game outcome.

(b)*Wireless communications.*

(1)Wireless access points shall not be accessible to the general public.

(2)Open or unsecured wireless communications are prohibited.

(3)Wireless communications shall be secured using a methodology that makes eavesdropping, access, tampering, intrusion or alteration impractical. By way of illustration, such methodologies include encryption, frequency hopping, and code division multiplex access (as in cell phone technology).

(c)Methodologies shall be used that will ensure the reliable transfer of data and provide a reasonable ability to detect and act upon any corruption of the data.

(d)Class II gaming systems shall record detectable, unauthorized access or intrusion attempts.

(e)Remote communications shall only be allowed if authorized by the tribal gaming regulatory authority. Class II gaming systems shall have the ability to enable or disable remote access, and the default state shall be set to disabled.

(f)Failure of data communications shall not affect the integrity of critical memory.

(g)The Class II gaming system shall log the establishment, loss, and re-establishment of data communications between sensitive Class II gaming system components. § 547.16 What are the minimum standards for game artwork, glass, and rules? This section provides standards for the display of game artwork, the displays on belly or top glass, and the display and disclosure of game rules, whether in physical or electronic form.

(a)*Rules, instructions, and prize schedules, generally.* The following shall at all times be displayed or made readily available to the player upon request:

(1)Game name, rules, and options such as the purchase or wager amount stated clearly and unambiguously;

(2)Denomination;

(3)Instructions for play on, and use of, the player interface, including the functions of all buttons; and

(4)A prize schedule or other explanation, sufficient to allow a player to determine the correctness of all prizes awarded, including;

(i)The range and values obtainable for any variable prize;

(ii)Whether the value of a prize depends on the purchase or wager amount; and

(iii)The means of division of any pari-mutuel prizes; but

(iv)For bingo and games similar to bingo, the prize schedule or other explanation need not state that subsets of winning patterns are not awarded as additional prizes ( *e.g.* five in a row does not also pay three in a row or four in a row), unless there are exceptions, which shall be clearly stated.

(b)*Disclaimers.* The Class II gaming system shall continually display:

(1)“Malfunctions void all prizes and plays” or equivalent; and

(2)“Actual Prizes Determined by Bingo [or other applicable Class II game] Play. Other Displays for Entertainment Only.” or equivalent. § 547.17 How does a gaming operation apply for a variance from these standards?

(a)*Tribal Gaming Regulatory Authority approval.*

(1)A tribal gaming regulatory authority may approve a variance from the requirements of this part if it has determined that the variance will achieve a level of security and integrity sufficient to accomplish the purpose of the standard it is to replace.

(2)For each enumerated standard for which the tribal gaming regulatory authority approves a variance, it shall submit to the Chairman within 30 days, a detailed report, which shall include the following:

(i)An explanation of how the variance achieves a level of security and integrity sufficient to accomplish the purpose of the standard it is to replace; and

(ii)The variance as granted and the record on which it is based.

(3)In the event that the tribal gaming regulatory authority or the tribe's government chooses to submit a variance request directly to the Chairman for joint government to government review, the tribal gaming regulatory authority or tribal government may do so without the approval requirement set forth in paragraph

(1)of this section.

(b)*Chairman Review.*

(1)The Chairman may approve or object to a variance granted by a tribal gaming regulatory authority.

(2)Any objection by the Chairman shall be in written form with an explanation why the variance as approved by the tribal gaming regulatory authority does not provide a level of security or integrity sufficient to accomplish the purpose of the standard it is to replace.

(3)If the Chairman fails to approve or object in writing within 60 days after the date of receipt of a complete submission, the variance shall be considered approved by the Chairman. The Chairman and the tribal gaming regulatory authority may, by agreement, extend this deadline an additional 60 days.

(4)No variance may be implemented until approved by the tribal gaming regulatory authority pursuant to paragraph (a)(1) of this section or the Chairman has approved pursuant to paragraph (b)(1) of this section.

(c)*Commission Review.*

(1)Should the tribal gaming regulatory authority elect to maintain its approval after written objection by the Chairman, the tribal gaming regulatory authority shall be entitled to an appeal to the full Commission in accordance with the following process:

(i)Within 60 days of receiving an objection, the tribal gaming regulatory authority shall file a written notice of appeal with the Commission which may include a request for an oral hearing or it may request that the matter be decided upon written submissions.

(ii)Within 10 days after filing a notice of appeal the tribal gaming regulatory authority shall file a supplemental statement specifying the reasons why the tribal gaming regulatory authority believes the Chairman's objection should be reviewed, and shall include supporting documentation, if any.

(iii)Failure to file an appeal or submit the supplemental statement within the time provided by this section shall result in a waiver of the opportunity for an appeal.

(iv)If an oral hearing is requested it shall take place within 30 days of the notice of appeal and a record shall be made.

(v)If the tribal gaming regulatory authority requests that the appeal be decided on the basis of written submission, the Commission shall issue a written decision within 30 days of receiving the supplemental statement

(vi)The Commission shall issue a decision within 30 days of the oral hearing. The Commission shall uphold the objection of the Chairman, only if, upon de novo review of the record upon which the Chairman's decision is based, the Commission determines that the variance approved by the tribal gaming regulatory authority does not achieve a level of security and integrity sufficient to accomplish the purpose of the standard it is to replace.

(vii)The Commission's decision shall constitute final agency action. Dated: October 17, 2007. Philip N. Hogen, Chairman Cloyce V. Choney, Vice Chairman Norman H. DesRosiers Commissioner. [FR Doc. E7-20789 Filed 10-23-07; 8:45 am] BILLING CODE 7565-01-P 72 205 Wednesday, October 24, 2007 Presidential Documents Part V The President Proclamation 8192—National Character Counts Week, 2007 Proclamation 8193—National Forest Products Week, 2007 Executive Order 13449—Protection of Striped Bass and Red Drum Fish Populations Title 3— The President Proclamation 8192 of October 19, 2007 National Character Counts Week, 2007 By the President of the United States of America A Proclamation The greatness of a nation is measured not by power or wealth but by the character of its people. During National Character Counts Week, we underscore our dedication to promoting values for our young people and encourage all Americans to demonstrate good character. As America's youth strive to become responsible adults, they carry with them the values and traditions they were taught as children. At home, parents and families can teach universal values such as respect, tolerance, self-restraint, fairness, and compassion. In the community, we all can set good examples and demonstrate the virtues of leadership, patriotism, and responsible citizenship. The members of our Armed Forces demonstrate the strength of America's character by answering the call of service to our Nation. Through the Helping America's Youth initiative, caring adults are connected with at-risk youth so that they have a mentor and an example as they navigate the challenges young people face. By working together, we can give children the skill and habits they need to reach their full potential. During National Character Counts Week and throughout the year, I urge all citizens to support the character development of our youth and make a difference in the lives of others. One way for all Americans to add to the character of our country is to volunteer to help a neighbor in need, and more information can be found at volunteer.gov. I encourage every American to serve a cause greater than themselves and set a positive example in their community. NOW, THEREFORE, I, GEORGE W. BUSH, President of the United States of America, by virtue of the authority vested in me by the Constitution and laws of the United States, do hereby proclaim October 21 through October 27, 2007, as National Character Counts Week. I call upon public officials, educators, librarians, parents, students, and all Americans to observe this week with appropriate ceremonies, activities, and programs. IN WITNESS WHEREOF, I have hereunto set my hand this nineteenth day of October, in the year of our Lord two thousand seven, and of the Independence of the United States of America the two hundred and thirty-second. GWBOLD.EPS [FR Doc. 07-5297 Filed 10-23-07; 8:50 am]

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