Intellectual Property Law

Does the Indian Gaming Regulatory Act Cover Internet Gaming?

By IBLS Editor

Federal law authorizes US Indian tribes to regulate gaming activities within Indian lands provided that the gaming activity is not expressly prohibited by federal law or the law of the state where the Indian tribe is located.  The US Congress enacted the Gaming Regulatory Act (GRA) in 1988 to provide a statutory basis for the operation of gaming by Indian tribes.  GRA classifies gaming activities in three groups and it is still uncertain where specifically Internet gaming fits within this classification.     

GRA divides gaming activities in three classes.  "Class I gaming" includes social games offering prizes of minimal value or Indian gaming performed as part of or in connection with tribal ceremonies or celebrations.  Class I gaming are under the sole control of the Indian tribes; no federal or state law regulates these gaming activities. Definitely, Internet gaming activities are not within GRA Class I gaming.

"Class II gaming" includes (1) games of chance such as bingo, cards, pull-tabs, lotto, punch boards, tip jars, poker, instant bingo, and other games similar to bingo played in the same location, "whether or not electronic, computer, or other technologic aids are used in connection therewith." According to GRA, games of chance present the following characteristics, (a) they are played for monetary or other type of prizes with cards bearing numbers or other designations; (b) the card holder covers such numbers or designations and objects are drawn or electronically determined; and (c) the game is won by the person finding the previously designated numbers or designations on the card or object used.  (2) Card games authorized by state law or played within the state and not expressly prohibited by state law and complying with state regulations on hours of operation, wagers, and pot sizes.  GRA expressly notes that Class II gaming does not include banking card games such as chemin de fer, baccarat and blackjack; or "electronic or electromechanical facsimiles of any game of chance or slot machines of any kind." Class II gaming are regulated by the National Indian Gaming Commission (NIGC), which set licensing requirements and rules on distribution of revenue, and can be licensed by Indian tribes as long as the state allows that type of gaming.  Class III gaming includes any other form of gaming that is not Class I or Class II gaming.  Examples of Class III gaming are roulette and casino games, blackjack, among lotteries, among others. Class III gaming is regulated by Indian tribes when they enter into agreement with the state in which they are located, authorizing a specific gaming activity.          

A careful reading of Class II and Class III gaming suggests that Internet gaming should be in either of these categories.  Some authors suggest the Internet gaming is covered under GRA Class II gaming.  They base their position on a literal reading of the phrase "whether or not electronic, computer, or other technologic aids are used in connection therewith."  The C.F.R. § 502.7 defines the phrase   "electronic, computer, or other technologic aids" and says that they are not games of chance; just devices used to help players or the playing of a game. Others claim Internet gaming are Class III gaming.  They based their position on the statutory phrase that notes that Class II gaming does not include "electronic or electromechanical facsimiles of any game of chance or slot machines of any kind."  The C.F.R. § 502.8 defines the latest phrase as a mechanical device designed and used in connection with gabling activities that when operated or by its operation, and an element of chance, can delivery any money or property. 

Thus, the central discussion is whether Internet gaming should be considered technological aid under Class II or electronic or electromechanical facsimiles under Class III.  The controversy is ongoing.  Indian tribes argue Internet gaming is under Class II.  Inclusion of Internet gaming in Class II provides Indian tribes with autonomy in its regulation as they are not required to negotiate with state authorities (especially in terms of revenue). Yet, the federal prohibition of certain forms of Internet gambling and prohibition for financial institutions to get involve in these activities, narrow (not eliminate) the Indian tribes' Internet gaming aspirations.

Full post as published by IBLS Internet Law Blog on August 19, 2008 (boomark / email).