The National Indian Gaming Commission on Wednesday completed the withdrawal of controversial regulations that would have cost tribes more than a $1 billion in revenues.

The agency spent more than two years developing the rules in hopes of resolving an issue that has lingered since the start of the Bush administration. But tribes vehemently objected out of fear their $28 billion industry would suffer.

Those concerns were validated by an economic analysis that said tribes would lose $1.2 billion in Class II revenues if the proposal went into effect. That represents a significant portion of the $3.6 billion that tribes earned on games like bingo and pull tabs in 2006.

Class III games like slot machines and table games continue to make up the bulk of tribal casino revenues. But with the downturn in the national economy dominating headlines and some tribes seeing a slowdown in revenues, the withdrawal of the regulations brings some sense of stability to Indian Country.

"I believe, and hope others will agree, that with these regulations we have struck a reasonable balance of setting regulatory standards that will give some level of certainty and guidance to manufacturers, protect the integrity of Class II gaming, and provide tribes with a viable economic opportunity well into the future," said NIGC vice chairman Norman DesRosiers.

Chairman Phil Hogen announced he was stopping work on the regulations in June in order to complete the economic analysis. The rules dealt with classification standards and definitions of Class II games and if they went into effect, certain machines that are currently considered Class II would fall into the Class III category.

That means some tribes would have not been able to operate the machines unless they shared revenues with the state under their Class III gaming compacts. Other tribes would have not been able to operate them at all, either due to the lack of a compact or limitations in existing compacts.

Despite the complaints raised by tribes, Hogen and DesRosiers remain concerned about the issue. In a notice accompanying the withdrawal of the regulations, they said tribes will continue to face state and federal encroachments on the industry.

"Indian gaming operations located far from population centers will be greatly harmed as a result," the notice states. "Patrons will spend their money downtown and closer to home rather than driving out to the reservation."

Two other Class II regulations affecting technical standards and minimum internal control standards were kept on the agenda but do not pose a major threat to tribal revenues. They are being sent for publication in the Federal Register.

News of the withdrawal was welcomed in Congress yesterday. Rep. Nick Rahall (D-West Virginia), the chairman of the House Natural Resources Committee, said tribes weren't adequately consulted by the NIGC.

"As a result of the commission's recent action, I trust that Indian tribes will be consulted regarding the future need for, and development of, any regulations that affect their livelihood," said Rahall.

Relevant Documents:
Economic Analysis | Withdrawal of Classification Standards | Withdrawal of Definitions | Press Release | MICS Rule

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