Self-Regulation of Class II Gaming, 20236-20244 [2013-07621]

Agencies

• DEPARTMENT OF THE INTERIOR
• National Indian Gaming Commission

[Federal Register Volume 78, Number 65 (Thursday, April 4, 2013)]
[Rules and Regulations]
[Pages 20236-20244]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-07621]


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DEPARTMENT OF THE INTERIOR

National Indian Gaming Commission

25 CFR Part 518

RIN 3141-AA44


Self-Regulation of Class II Gaming

AGENCY: National Indian Gaming Commission.

ACTION: Final rule.

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SUMMARY: The National Indian Gaming Commission (NIGC or Commission) 
amends its regulation for the review and approval of petitions seeking 
the issuance of a certificate for tribal self-regulation of Class II 
gaming.

DATES: Effective Date: The effective date of these regulations is 
September 1, 2013.

FOR FURTHER INFORMATION CONTACT: John Hay, National Indian Gaming

[[Page 20237]]

Commission, 1441 L Street NW., Suite 9100, Washington, DC 20005. 
Telephone: 202-632-7003.

SUPPLEMENTARY INFORMATION:

I. Background

    The Indian Gaming Regulatory Act (IGRA or the Act), enacted on 
October 17, 1988, established the National Indian Gaming Commission 
(Commission). Pursuant to the Act, the Commission regulates Class II 
gaming and certain aspects of Class III gaming on Indian lands.

II. Previous Rulemaking Activity

    On November 18, 2010, the Commission issued a Notice of Inquiry and 
Notice of Consultation (``NOI'') advising the public that the NIGC was 
conducting a comprehensive review of its regulations and requesting 
public comment regarding which of its regulations were most in need of 
revision, in what order the NIGC should review its regulations, and the 
process the NIGC should utilize to make revisions. 75 FR 70680 (Nov. 
18, 2010). On April 4, 2011, after holding eight consultations and 
reviewing all of the public comments received, the Commission published 
a Notice of Regulatory Review Schedule (NRR), setting out a 
consultation schedule and process for review. 76 FR 18457 (April 4, 
2011). Part 518 was included in the fourth regulatory group reviewed as 
part of the NRR.
    The Commission conducted numerous tribal consultations as part of 
its review of part 518--Self-Regulation of Class II Gaming. Tribal 
consultations were held in every region of the country and were 
attended by many tribal leaders or their representatives. In addition 
to tribal consultations, on August 16, 2011, the Commission requested 
public comment on a preliminary draft of part 518. After considering 
the written comments received from the public, as well as comments made 
by participants at tribal consultations, the Commission published a 
Notice of Proposed Rulemaking on January 31, 2012 (77 FR 4714), 
proposing changes to part 518 to: (a) focus the criteria for receiving 
a certificate of self-regulation on a tribe's ability to regulate Class 
II gaming; and (b) clearly define and streamline the process by which a 
self-regulation petition is reviewed and a final determination is made 
by the Commission.

III. Review of Public Comments

    In response to our Notice of Proposed Rulemaking, published January 
31, 2012, 77 FR 4714, we received the following comments.

General Comments

    Comments: A few commenters stated that, although self-regulation is 
a goal for many tribes, the current regulations make the application 
and annual reporting process overly burdensome. The proposed rule makes 
self-regulation more available to all tribes.
    Response: The Commission agrees and has chosen to retain the 
proposed changes in the final rule.
    Comments: A few commenters stated that the inclusion of the full 
Commission in the review and approval process in the proposed rule 
assures tribes that their applications will be thoroughly vetted and 
that a final decision will be reached by the appropriate decision-
makers.
    Response: The Commission agrees and has retained the level of 
Commission involvement in the final rule.
    Comment: One commenter expressed concern that the Commission will 
use the petition process to review tribal revenue allocation plans and 
suggested that a review of these plans be specifically excluded.
    Response: The regulation does not require tribes to submit their 
tribal revenue allocation plans to the NIGC for review. However, the 
Commission is required to determine whether the gaming activity has 
been conducted in compliance with IGRA, which addresses the use of net 
gaming revenues. Accordingly, the Commission declines to exclude tribal 
revenue allocation plans specifically from its review.
    Comment: One commenter stated that, until the NIGC allows the self-
regulation program to function in the manner intended by Congress, 
tribes will continue to be discouraged from exercising their statutory 
right to attain self-regulation status.
    Response: The Commission believes that the changes to the 
regulation will encourage more tribes to take advantage of the self-
regulation program and the benefits of self-regulation.

518.3 Who is eligible to petition for a certificate of self-regulation?

    Comment on Sec.  518.3(b): One commenter suggested that ``all 
gaming'' be changed to ``Class II gaming,'' submitting that Sec.  
518.3(b) strongly implies that, in order for the NIGC to determine 
eligibility, the Commission will have to verify Class III compact and 
gaming compliance for those operations that have both Class II and 
Class III gaming activity.
    Response: The Commission has declined to incorporate the 
commenter's suggestion because, first, the majority of tribal gaming 
operations are both Class II and Class III. Further, the Commission is 
not aware of any tribe that separates its regulatory body by class of 
gaming. Therefore, it is appropriate for the Commission to examine the 
petitioning tribe's regulation of its gaming as a whole. Finally, IGRA 
does not limit self-regulation certification to only tribes that 
conduct Class II gaming in a stand-alone facility, but allows tribes 
with hybrid Class II/Class III gaming operations also to become self-
regulating.

518.4 What must a tribe submit to the Commission as part of its 
petition?

    Comments on Sec.  518.4(a)-(c): A number of commenters stated that 
any submission requirements in Sec.  518.4 not directly related to a 
tribe's capacity for self-regulation or the qualifying criteria for 
petitioning tribes in Sec.  518.5, should be removed entirely or 
revised to ensure that each requirement is directly related to 
assessing a tribe's regulatory capacity.
    Response: The Commission has eliminated superfluous submission 
requirements and tailored the remaining requirements to elicit 
information demonstrating a tribe's regulatory framework and capacity 
to regulate its gaming activities.
    Comments on Sec.  518.4(c)(v): A number of commenters questioned 
the benefit and relevance of requiring tribes to submit the resumes 
tribal regulatory agency employees, recommending that the submission 
requirements in Sec.  518.4(c)(v) be eliminated. Section 518.4(c)(v) 
requires that a petitioning tribe submit a list of the current 
regulators and employees of the tribal regulatory body, their complete 
resumes, their titles and the dates they began employment. In the 
commenters' view, the NIGC is not, and should not be, in a position to 
evaluate the competence of individual staff members employed by a 
tribal regulatory agency.
    Response: The resumes of tribal gaming regulators demonstrate the 
experience and capability of the tribal regulators. The competence of 
tribal gaming regulators bears directly on a tribe's ability to 
regulate its gaming. Therefore, the Commission has determined to retain 
this requirement in the final rule.
    Comments on Sec.  518.4(c)(v): A few commenters stated that, 
although a detailed TGRA organizational chart could be a valuable tool 
in assessing a TGRA's capabilities, there is no value in submitting a 
list of current regulators and employees of the tribal regulatory

[[Page 20238]]

body. Instead, they suggested that the NIGC require only that employee 
names and background files be made available at the time of the NIGC 
site visit during the approval process.
    Response: The Commission agrees with the comments and has revised 
the regulation to require tribes to make the names and background files 
of current regulators available to the NIGC, upon request.
    Comments on Sec.  518.4(c)(vii): A few commenters stated that the 
provision in Sec.  518.4(c)(vii) requiring a tribe to list all gaming 
internal controls is not only burdensome, but also unnecessary, because 
it provides little or no insight into a tribe's capacity for self-
regulation. The commenters also submitted that this requirement is 
redundant, because tribal internal control systems (TICS) are evaluated 
annually as part of the IGRA-required audit.
    Response: The Commission disagrees. Each tribe should have readily 
available a list of internal gaming controls, which is a useful tool in 
examining the robustness of a tribe's regulatory framework.
    Comment on Sec.  518.4(c)(vii): One commenter suggested that the 
agreed-upon-procedures attestation would be sufficient to satisfy the 
concerns of Sec.  518.4(c)(vii), which requires petitioning tribes to 
submit a list of internal controls used at the gaming facility.
    Response: The Commission has determined that, although an agreed-
upon-procedures attestation would fulfill some of the purposes of Sec.  
518.4(c)(vii), an up-to-date list of the internal gaming controls is 
beneficial to its review. For purposes of a certificate of self-
regulation, IGRA requires that the NIGC determine that the tribe has 
``conducted the operation on a fiscally and economically sound basis.'' 
In that regard, a list of internal controls can be used by the NIGC to 
examine the effectiveness of the tribe in enforcing compliance with its 
own controls. Further, the NIGC needs to ascertain the strength of 
these controls at the time the petition is being reviewed, not at the 
time of the agreed-upon-procedures attestation.
    Comment on Sec. Sec.  518.4(c)(v) and (vii): One commenter 
suggested eliminating the submission requirements in Sec.  518.4(c)(v) 
and Sec.  518.4(c)(vii) because they do not focus on a tribal 
government's capacity for self-regulation.
    Response: The Commission views the existence and enforcement of 
internal controls to be an important indicator of the tribe's ability 
to regulate its gaming activity. Therefore, the Commission has retained 
those requirements in the final rule.

518.5 What criteria must a tribe meet to receive a certificate of self-
regulation?

    Comment on Sec.  518.5(a): A few commenters stated that the 
criteria in Sec.  518.5(a) remain inundated with subjective terms that 
do not provide any meaningful guidance as to how they will be 
interpreted by the NIGC. Without greater objectivity, the subjective 
terms provide the NIGC too much discretion in deciding whether a 
petition should be approved.
    Response: The majority of the criteria set forth in Sec.  518.5(a) 
are explicitly provided for by Congress in IGRA for purposes of 
evaluating whether a certificate of self-regulation should be issued. 
Thus, Congress directed that the Commission conduct an evaluation 
utilizing such terms.
    Comment on Sec.  518.5(a): A few commenters stated that Sec.  518.5 
simply restates the statute and does not define or clarify how the 
terms ``safe, fair, and honest,'' ``generally free,'' ``adequate 
systems,'' and ``fiscally and economically sound'' will be interpreted 
by the NIGC during the approval process. The commenters noted that, to 
be effective, regulations must do more than simply restate what the 
statute requires, and the rulemaking process should result in 
regulations that provide meaningful guidance to readers as to how a 
statutory method will be implemented by the agency.
    Response: The Commission believes that the terms contained in the 
regulation are clear, and has, therefore, declined to remove them from 
the regulation. The Commission is available to assist tribes to 
understand and satisfy the qualifying criteria should tribes have 
questions or require clarification.
    Comment on Sec.  518.5: One commenter stated that, in the 
commenter's view, the purpose of Sec.  518.5 should be two-fold: first, 
to provide guidance regarding what the many subjective terms used in 
Sec.  518.5 mean so that tribal governments will understand how to meet 
the criteria, and second, to reasonably constrain the NIGC's discretion 
with regard to its approval process.
    Response: As noted above, the Commission believes that the terms 
contained in the regulation are clear, and has, therefore, declined to 
remove them from the regulation. The Commission is available to assist 
tribes to understand and satisfy the qualifying criteria should tribes 
have questions or require clarification.. Thus, the Commission intends 
to provide additional guidance to petitioning tribes upon request.
    Comment on Sec.  518.5(a)(1)(i): One commenter suggested that the 
NIGC could require tribal governments to show three years of clean 
audits, free of any material findings, to demonstrate that it has 
``conducted its gaming activity in a manner that has resulted in an 
effective and honest accounting of all revenues.''
    Response: The Commission agrees that past audits are an important 
way for a tribe to demonstrate that it has met the approval criteria. 
However, the Commission has determined that those tribes having some 
anomalies in their audits should not be foreclosed from approval. 
Therefore, although the Commission will take into account audit 
findings when making its determination, past audits will not be the 
only way for a tribe to demonstrate that it has ``conducted its gaming 
activity in a manner that has resulted in an effective and honest 
accounting of all revenues.''
    Comment on Sec.  518.5(a)(1)(iii): One commenter stated that, to 
show that a tribe's gaming activities have been ``generally free of 
evidence of criminal or dishonest activity,'' a tribal government could 
certify that it: (1) Maintains a robust system to detect and preclude 
money laundering activities, pursuant to Title 31; (2) maintains a 
system designed to ensure the exclusion of unsavory persons from the 
gaming facility; and (3) effectively deals with any suspected criminal 
activity relative to employees, customers, and vendors by referring 
suspected to the appropriate law enforcement agency for investigation 
and prosecution.
    Response: The Commission agrees that such a certification would be 
one way to demonstrate that the tribe's gaming activities have been 
``generally free of evidence of criminal or dishonest activity.'' 
However, the Commission declines to incorporate the suggested change 
because other, equally acceptable types of evidence exist to 
demonstrate compliance with the provision, and the Commission believes 
that tribes should be afforded flexibility when fulfilling the 
requirements of this section.
    Comments on Sec. Sec.  518.5(a)(2)-(4): A few commenters suggested 
that the term ``gaming operation,'' found in Sec.  518.(a)(2) and Sec.  
518.5(a) (4), be changed to ``Class II gaming operation,'' and the term 
``gaming activity,'' found in Sec.  518.5(a)(3), be changed to ``Class 
II gaming activity,'' pointing out that, by not limiting the qualifying 
criteria to Class II gaming operations or activities, it is implied 
that the NIGC will have to verify Class III compact and gaming 
compliance for those operations that

[[Page 20239]]

have both Class II and Class III gaming activity.
    Response: Because the majority of tribal gaming operations are both 
Class II and Class III, the Commission believes it is appropriate and 
practical to examine and evaluate a petitioning tribe's regulation of 
its gaming as a whole. Like petitioning tribes that conduct Class II 
gaming only, petitioning tribes conducting hybrid operations are also 
required to comply with IGRA, NIGC regulations, and the tribe's own 
gaming ordinance and gaming regulations.
    Comment on Sec.  518.5(a)(3): A commenter expressed concern that 
the Commission will require petitioning tribal governments to show 
absolute and perfect compliance with Federal and tribal laws during the 
requisite 3-year period. The commenter pointed out that IGRA does not 
require absolute compliance with Federal and tribal laws to receive a 
self-regulation certificate, instead using the more flexible terms 
``generally free'' and ``adequate.''
    Response: Consistent with 25 U.S.C. 2710(c)(4)(a), the Commission 
requires a petitioning tribe to demonstrate that it has adopted and is 
implementing adequate systems for the accounting of all of its Class II 
gaming activity. When a tribe's operation consists of both Class II and 
Class III gaming activities, the tribe is required to demonstrate that 
it has adopted and is implementing adequate systems for the accounting 
of all gaming activity. The Commission retains the discretion to 
determine whether or not violations are sufficiently serious to prevent 
the issuance of a certificate of self-regulation.
    Comment on Sec.  518.5(b): One commenter stated that Sec.  518.5(b) 
makes the certification process more difficult by imposing a number of 
additional requirements, some of which exceed the statutory 
requirements for conducting tribal gaming.
    Response: The Commission disagrees. The indicators in the list set 
forth in Sec. Sec.  518.5(b)(1)-(9) are not mandatory prerequisites for 
a tribe to be issued a certificate of self-regulation, but are intended 
to offer guidance to petitioning tribes as to how they may demonstrate 
to the Commission that they have met the criteria of Sec.  518.5(a). 
This list is not intended to be exhaustive or to prevent the Commission 
from considering other factors.
    Comments on Sec. Sec.  518.5(b)(ix) and (xii): A few commenters 
stated that two of the examples listed in Sec. Sec.  518.5(b)(ix) and 
(vii) should be removed because they reference vendor licensing 
standards and procedures, which are not required by IGRA. Vendor 
licensing is a matter of tribal, not Federal, law.
    Response: Although vendor licensing is not addressed in IGRA, 
except for management contractors, it is a strong indicator that a 
tribe has the ability to properly regulate its gaming. Section 518.5(b) 
simply provides guidance to tribes and is not a list of factors that 
must be present for the tribe's petition for self-regulation to be 
approved. Thus, the regulation does not require a tribe to have any 
specific standards or procedures for vendor licensing, and the absence 
of any standards or procedures is not specifically a grounds for 
denial.

518.7 What process will the Commission use to review and certify 
petitions?

    Comments on Sec.  518.7(f): A few commenters stated that they were 
concerned that the self-regulation process for approving or denying 
petitions was too rigid, and suggested removing the proposed Sec.  
518.7(f) and replacing it with procedures that allow tribes seeking to 
become self-regulating a more informal and collaborative process.
    Response: The Commission believes that the inclusion of a formal 
process in the regulations preserves a tribe's right to due process, 
and neither precludes informal meetings with the Commission nor 
prevents collaboration with the Commission throughout the approval 
process, if requested.
    Comments on Sec.  518.7(f): A few commenters suggested that Sec.  
518.7(f), which designates final Commission determinations as final 
agency actions, be removed. The commenters maintain that Commission 
decisions related to self-regulation should never be final agency 
actions since this designation will either terminate the process or set 
up an adversarial process of appeal, and, in either event, will 
foreclose the possibility of further collaborative efforts between the 
NIGC and petitioning tribes.
    Response: The Commission disagrees. By allowing a decision to 
become final agency action, the Commission is ensuring that tribes have 
the right to challenge the Commission's final decisions, and their 
underlying rationales, in Federal court. The Commission has determined 
that this is an important right for tribes and should not be limited.
    Comment on Sec.  518.7(f): One commenter suggested the inclusion of 
additional, less formal procedures to facilitate a more informal, 
collaborative process, which would be more conducive to problem-
solving. For example, the procedures for issuing preliminary 
determinations could be replaced with procedures for developing and 
entering into intergovernmental agreements that identify deficiencies 
in a petitioning tribe's application and outline the steps necessary 
for the tribe to attain self-regulation status. Further, the procedures 
for hearings could be replaced with procedures for meetings in which 
the NIGC and the tribe informally discuss perceived shortfalls in the 
petition and how the shortfalls can be remedied to the NIGC's 
satisfaction.
    Response: The regulations do not prevent tribes and the NIGC from 
meeting informally and engaging in regular communication, outside of 
the formal process, regarding any aspect of the self-regulation process 
up to the Commission's final determination. The Commission envisions 
regular and meaningful collaboration and communication with interested 
tribes to assist them with achieving certification.
    Comment on Sec.  518.7(g): One commenter suggested removing Sec.  
518.7(g), which allows tribal governments to withdraw and resubmit a 
petition for self-regulation. It is the commenter's view that tribal 
governments should only have to submit a petition once, and that any 
information provided by a tribe in response to identified deficiencies 
in the petition should be submitted as supplemental materials to the 
petition. This would prevent a tribe from having to go through the 
complete certification process multiple times, as well as the unchanged 
portion of a tribe's petition from repeatedly undergoing the same 
initial review process. Instead, the NIGC would review only the 
supplemental materials to verify that the identified deficiencies had 
been adequately resolved. If the NIGC subsequently found remaining 
issues in the petition, such issues could similarly be resolved through 
additional supplementary submissions.
    Response: The Commission disagrees. Tribal governments should have 
the right to withdraw a petition for any reason. Further, allowing 
tribes to complete the certification process piecemeal, potentially 
over many months or even years, fails to recognize that the status and 
strength of a tribe's gaming regulation could change after a petition 
is submitted, thus rendering the Commission's review untimely and 
ineffective.

518.10 What must a self-regulating tribe provide the Commission to 
maintain its self-regulatory status?

    Comment: One commenter suggested changing the word ``on'' April 15 
in Sec.  518.10(a) to ``by'' April 15, to give self-

[[Page 20240]]

regulating tribes more flexibility in satisfying the required annual 
submission.
    Response: The Commission agrees and the recommended change has been 
adopted.
    Comment on Sec.  518.10(a): One commenter expressed strong support 
for the proposed change to remove the annual requirement that tribes 
report the usage of its net gaming revenues.
    Response: The Commission agrees and this change is reflected in the 
final rule.
    Comment on Sec.  518.10(a)(2): One commenter expressed support for 
the proposed change in Sec.  518.10(a)(2) narrowing the scope of 
employees covered under this section to include only those employees 
working for the tribal regulatory body.
    Response: The Commission agrees that narrowing the scope of this 
section to employees of the tribal regulatory body, as opposed to all 
employees hired and licensed by the tribe, decreases the burden on 
self-regulating tribes and properly focuses attention on a tribe's 
ability to regulate its gaming activity.
    Comment on Sec.  518.10(a)(2): One commenter stated that the term 
``licensed,'' as used in proposed Sec.  518.10(a)(2), should be removed 
because it is an inaccurate characterization of tribal gaming 
regulatory employees. In practice, while most employees of tribal 
regulatory bodies are screened and subjected to background 
investigations, they are generally not ``hired and licensed'' by the 
tribe. Nor do they fit within the meaning of the terms ``key employee'' 
or ``primary management official,'' two categories of employee which 
are required to be licensed under IGRA. Another commenter stated that 
because most employees of tribal regulatory bodies are not ``hired and 
licensed,'' under the language in Sec.  518.10(2), there would be very 
few tribal regulatory employees who would be required to submit 
complete resumes. The commenter does not see any other option in light 
of the language of 25 U.S.C. 2710(c)(5)(b), and notes that this 
requirement alone may dissuade his tribe from pursuing a certificate of 
self-regulation.
    Response: The Commission understands the concern over the use of 
the terms ``hired and licensed.'' However, IGRA, at 25 U.S.C. 
2710(c)(5)(B), mandates that self-regulating tribes submit this 
information for employees ``hired and licensed by the tribe subsequent 
to the issuance of a certificate of self-regulation.'' Since the 
statute specifically uses the terms ``hired and licensed,'' the 
Commission declines to make the recommended change. Moreover, some 
tribes do in fact subject the individuals who work for their gaming 
regulatory bodies to licensing and, as a consequence, the standard is 
applicable.
    Comment on Sec.  518.10: One commenter stated that, because all 
tribes must comply with the background and licensing regulatory 
requirements of parts 556 and 558, the NIGC already has suitability 
reports for all employees who are licensed by the tribal gaming 
regulatory authority. A tribe's compliance with parts 556 and 558 
should be sufficient to satisfy the annual submission requirements of 
Sec.  518.10.
    Response: The Commission disagrees. Parts 556 and 558 address 
licensing for key employees and primary management employees only. IGRA 
mandates a much broader pool of individuals that must be addressed by 
self-regulating tribes through their annual submissions.

518.11 Does a tribe that holds a certificate of self-regulation have a 
continuing duty to advise the Commission of any additional information?

    Comments on Sec.  518.11: A few commenters disagreed with the 
revision in Sec.  518.11that requires a tribe to report material 
changes within ``three business days,'' and recommended that the 
original term, ``immediately,'' be restored. In their view, the 
proposed time frame of three business days may be too short. The 
general term of ``immediately'' is seen as being a more reasonable time 
frame because it is broad enough to allow tribal governments to resolve 
possible issues on their own before reporting them to the NIGC. As 
primary regulators, tribes should be given sufficient time and 
flexibility to resolve possible issues.
    Response: The Commission disagrees. This provision is designed to 
allow the Commission to be notified when a material change occurs so 
that it may make its own determination as to whether the change affects 
the eligibility of a tribe to maintain its certificate of self-
regulation. In many instances, a material change may not affect a 
tribe's certification, leaving no issue for the tribe to resolve. In 
addition, reporting a material change after it has been resolved 
renders the intent of the statutory provision meaningless, because the 
material change has been addressed without Commission consideration of 
it and its impact upon the certificate. Notifying the Commission within 
three business days allows the Commission to assess the situation, to 
provide technical assistance where appropriate, to monitor how quickly 
a tribe responds and to consider the ramifications if a tribe fails to 
take action.
    Comments on Sec.  518.11: A few commenters stated that they 
disagreed with some of the ``circumstances'' listed in Sec.  518.11 
that may constitute ``changes in circumstances'' requiring notification 
to the NIGC. The commenters noted that the circumstances listed in 
Sec.  518.11 do not directly relate to the approval criteria for self-
regulation or a tribe's regulatory capacity, and are overly subjective 
and vague. For example, the circumstance of ``financial instability'' 
could be construed to cover a range of issues not related to a tribe's 
regulatory capacity. Additionally, the circumstance of ``a change in 
management contractor'' is irrelevant to the self-regulation qualifying 
criteria in Sec.  518.5, which do not include management contractors, 
and which were already deemed met by any tribe issued a self-regulation 
certificate. This circumstance is unnecessary to an assessment of a 
tribe's regulatory capacity, especially since the NIGC is responsible 
for conducting background investigations of management contractors 
under IGRA and will already have in its possession the requested 
information.
    Response: The Commission agrees that a change in management 
contractor should not have to be reported to the Commission as a 
requirement of Sec.  518.11. Therefore, the example of a change in 
management contractor has been removed. However, the Commission has 
determined to retain the example of ``financial instability'' because 
it may have a direct impact on a tribe's ability to regulate, 
especially in those cases in which a tribal gaming regulatory body is 
funded from the gaming activity.

518.12 Which investigative or enforcement powers of the Commission are 
inapplicable to self-regulating tribes?

    Comment: One commenter was pleased that the proposed rule now 
describes, with specificity, the powers of the NIGC that are 
inapplicable once a tribe is issued a certificate of self-regulation.
    Response: The Commission agrees and has retained the provision in 
the final rule.

Regulatory Matters

Regulatory Flexibility Act

    This final rule will not have a significant economic effect on a 
substantial number of small entities as defined under the Regulatory 
Flexibility

[[Page 20241]]

Act, 5 U.S.C. 601 et seq. Indian tribes are not considered to be small 
entities for purposes of the Regulatory Flexibility Act.

Small Business Regulatory Enforcement Fairness Act

    This final 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.

Unfunded Mandate 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 final rule does not unduly burden the 
judicial system and meets the requirements of sections 3(a) and 3(b)(2) 
of the Executive Order.

National Environmental Policy Act

    The Commission has determined that this final 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.

Paperwork Reduction Act

    The information collection requirements contained in this rule were 
previously approved by the Office of Management and Budget as required 
by 44 U.S.C. 3501, et seq., and assigned OMB Control Number 3141-0008. 
The OMB control number expires on October 31, 2013.

List of Subjects in 25 CFR Part 518

    Gambling, Indian-lands, Indian-tribal government, Reporting and 
recordkeeping requirements.
    Accordingly, for the reasons discussed in the preamble, the 
Commission revises 25 CFR part 518 to read as follows:

PART 518 --SELF-REGULATION OF CLASS II GAMING

Sec.
518.1 What does this part cover?
518.2 Who will administer the self-regulation program for the 
Commission?
518.3 Who is eligible to petition for a certificate of self-
regulation?
518.4 What must a tribe submit to the Commission as part of its 
petition?
518.5 What criteria must a tribe meet to receive a certificate of 
self-regulation?
518.6 What are the responsibilities of the Office of Self-Regulation 
in the certification process?
518.7 What process will the Commission use to review and certify 
petitions?
518.8 What is the hearing process?
518.9 When will a certificate of self-regulation become effective?
518.10 What must a self-regulating tribe provide the Commission to 
maintain its self-regulatory status?
518.11 Does a tribe that holds a certificate of self-regulation have 
a continuing duty to advise the Commission of any additional 
information?
518.12 Which investigative or enforcement powers of the Commission 
are inapplicable to self-regulating tribes?
518.13 When may the Commission revoke a certificate of self-
regulation?
518.14 May a tribe request a hearing on the Commission's proposal to 
revoke its certificate?

    Authority: 25 U.S.C. Sec.  2706(b)(10); E.O. 13175.


Sec.  518.1  What does this part cover?

    This part sets forth requirements for obtaining a certificate of 
self-regulation of Class II gaming operations under 25 U.S.C. 2710(c). 
When the Commission issues a certificate of self-regulation, the 
certificate is issued to the tribe, not to a particular gaming 
operation. The certificate applies to all Class II gaming activity 
conducted by the tribe holding the certificate.


Sec.  518.2  Who will administer the self-regulation program for the 
Commission?

    The self-regulation program will be administered by the Office of 
Self-Regulation. The Chair shall appoint one Commissioner to administer 
the Office of Self-Regulation.


Sec.  518.3  Who is eligible to petition for a certificate of self-
regulation?

    A tribe is eligible to petition the Commission for a certificate of 
self-regulation of Class II gaming if, for a three (3)-year period 
immediately preceding the date of its petition:
    (a) The tribe has continuously conducted such gaming;
    (b) All gaming that the tribe has engaged in, or has licensed and 
regulated, on Indian lands within the tribe's jurisdiction, is located 
within a State that permits such gaming for any purpose by any person, 
organization or entity (and such gaming is not otherwise specifically 
prohibited on Indian lands by Federal law), in accordance with 25 
U.S.C. 2710(b)(1)(A);
    (c) The governing body of the tribe has adopted an ordinance or 
resolution that the Chair has approved, in accordance with 25 U.S.C. 
2710(b)(1)(B);
    (d) The tribe has otherwise complied with the provisions of 25 
U.S.C. 2710; and
    (e) The gaming operation and the tribal regulatory body have, for 
the three (3) years immediately preceding the date of the petition, 
maintained all records required to support the petition for self-
regulation.


Sec.  518.4  What must a tribe submit to the Commission as part of its 
petition?

    A petition for a certificate of self-regulation is complete under 
this part when it contains:
    (a) Two copies on 8\1/2\'' x 11'' paper of a petition for self-
regulation approved by the governing body of the tribe and certified as 
authentic by an authorized tribal official;
    (b) A description of how the tribe meets the eligibility criteria 
in Sec.  518.3, which may include supporting documentation; and
    (c) The following information with supporting documentation:
    (1) A brief history of each gaming operation(s), including the 
opening dates and periods of voluntary or involuntary closure;
    (2) An organizational chart of the tribal regulatory body;
    (3) A brief description of the criteria tribal regulators must meet 
before being eligible for employment as a tribal regulator;
    (4) A brief description of the process by which the tribal 
regulatory body is funded, and the funding level for the three years 
immediately preceding the date of the petition;
    (5) A list of the current regulators and employees of the tribal 
regulatory body, their complete resumes, their titles, the dates they 
began employment, and, if serving limited terms, the expiration date of 
such terms;
    (6) A brief description of the accounting system(s) at the gaming 
operation which tracks the flow of the gaming revenues;

[[Page 20242]]

    (7) A list of gaming activity internal controls at the gaming 
operation(s);
    (8) A description of the record keeping system(s) for all 
investigations, enforcement actions, and prosecutions of violations of 
the tribal gaming ordinance or regulations, for the three (3)-year 
period immediately preceding the date of the petition; and
    (9) The tribe's current set of gaming regulations, if not included 
in the approved tribal gaming ordinance.


Sec.  518.5  What criteria must a tribe meet to receive a certificate 
of self-regulation?

    (a) The Commission shall issue a certificate of self-regulation if 
it determines that for a three (3)-year period, the tribe has:
    (1) Conducted its gaming activity in a manner that:
    (i) Has resulted in an effective and honest accounting of all 
revenues;
    (ii) Has resulted in a reputation for safe, fair, and honest 
operation of the activity; and
    (iii) Has been generally free of evidence of criminal or dishonest 
activity;
    (2) Conducted its gaming operation on a fiscally and economically 
sound basis;
    (3) Conducted its gaming activity in compliance with the IGRA, NIGC 
regulations in this chapter, and the tribe's gaming ordinance and 
gaming regulations; and
    (4) Adopted and is implementing adequate systems for:
    (i) Accounting of all revenues from the gaming activity;
    (ii) Investigating, licensing and monitoring of all employees of 
the gaming activity;
    (iii) Investigating, enforcing, prosecuting, or referring for 
prosecution violations of its gaming ordinance and regulations; and
    (iv) Prosecuting criminal or dishonest activity or referring such 
activity for prosecution.
    (b) A tribe may illustrate that it has met the criteria listed in 
paragraph (a) of this section by addressing factors such as those 
listed below. The list of factors is not all-inclusive; other factors 
not listed here may also be addressed and considered.
    (1) The tribe adopted and is implementing minimum internal control 
standards which are at least as stringent as those promulgated by the 
Commission;
    (2) The tribe requires tribal gaming regulators to meet the same 
suitability requirements as those required for key employees and 
primary management officials of the gaming operation(s);
    (3) The tribe's gaming operation utilizes an adequate system for 
accounting of all gaming revenues from Class II gaming activity;
    (4) The tribe has a dispute resolution process for gaming operation 
customers and has taken steps to ensure that the process is adequately 
implemented;
    (5) The tribe has a gaming regulatory body which:
    (i) Monitors gaming activities to ensure compliance with Federal 
and tribal laws and regulations;
    (ii) Monitors the gaming revenues accounting system for continued 
effectiveness;
    (iii) Performs routine operational or other audits of the Class II 
gaming activities;
    (iv) Routinely receives and reviews gaming revenue accounting 
information from the gaming operation(s);
    (v) Has access to, and may inspect, examine, photocopy and audit, 
all papers, books, and records of the gaming operation(s) and Class II 
gaming activities;
    (vi) Monitors compliance with minimum internal control standards 
for the gaming operation;
    (vii) Has adopted and is implementing an adequate system for 
investigating, licensing, and monitoring of all employees of the gaming 
activity;
    (viii) Maintains records on licensees and on persons denied 
licenses, including persons otherwise prohibited from engaging in 
gaming activities within the tribe's jurisdiction;
    (ix) Establishes standards for, and issues, vendor licenses or 
permits to persons or entities who deal with the gaming operation, such 
as manufacturers and suppliers of services, equipment and supplies;
    (x) Establishes or approves the rules governing Class II games, and 
requires their posting;
    (xi) Has adopted and is implementing an adequate system for the 
investigation of possible violations of the tribal gaming ordinance and 
regulations, and takes appropriate enforcement actions; and
    (xii) Takes testimony and conducts hearings on regulatory matters, 
including matters related to the revocation of primary management 
officials, key employee and vendor licenses;
    (6) The tribe allocates and appropriates a sufficient source of 
permanent and stable funding for the tribal regulatory body;
    (7) The tribe has adopted and is implementing a conflict of 
interest policy for the regulators/regulatory body and their staff;
    (8) The tribe has adopted and is implementing a system for adequate 
prosecution of violations of the tribal gaming ordinance and 
regulations or referrals for prosecution; and
    (9) The tribe demonstrates that the operation is being conducted in 
a manner which adequately protects the environment and the public 
health and safety.
    (c) The tribe assists the Commission with access and information-
gathering responsibilities during the certification process.
    (d) The burden of establishing self-regulation is upon the tribe 
filing the petition.


Sec.  518.6  What are the responsibilities of the Office of Self-
Regulation in the certification process?

    The Office of Self-Regulation shall be responsible for directing 
and coordinating the certification process. It shall provide a written 
report and recommendation to the Commission as to whether a certificate 
of self-regulation should be issued or denied, and a copy of the report 
and recommendation to the petitioning tribe.


Sec.  518.7  What process will the Commission use to review and certify 
petitions?

    (a) Petitions for self-regulation shall be submitted by tribes to 
the Office of Self-Regulation.
    (1) Within 30 days of receipt of a tribe's petition, the Office of 
Self-Regulation shall conduct a review of the tribe's petition to 
determine whether it is complete under Sec.  518.4.
    (2) If the tribe's petition is incomplete, the Office of Self-
Regulation shall notify the tribe by letter, certified mail or return 
receipt requested, of any obvious deficiencies or significant omissions 
in the petition. A tribe with an incomplete petition may submit 
additional information and/or clarification within 30 days of receipt 
of notice of an incomplete petition.
    (3) If the tribe's petition is complete, the Office of Self-
Regulation shall notify the tribe in writing.
    (b) Once a tribe's petition is complete, the Office of Self-
Regulation shall conduct a review to determine whether the tribe meets 
the eligibility criteria in Sec.  518.3 and the approval criteria in 
Sec.  518.5. During its review, the Office of Self-Regulation:
    (1) May request from the tribe any additional material it deems 
necessary to assess whether the tribe has met the criteria for self-
regulation.
    (2) Will coordinate an on-site review and verification of the 
information submitted by the petitioning tribe.
    (c) Within 120 days of notice of a complete petition under Sec.  
518.4, the Office of Self-Regulation shall provide a recommendation and 
written report to

[[Page 20243]]

the full Commission and the petitioning tribe.
    (1) If the Office of Self-Regulation determines that the tribe has 
satisfied the criteria for a certificate of self-regulation, it shall 
recommend to the Commission that a certificate be issued to the tribe.
    (2) If the Office of Self-Regulation determines that the tribe has 
not met the criteria for a certificate of self-regulation, it shall 
recommend to the Commission that it not issue a certificate to the 
tribe.
    (3) The Office of Self-Regulation shall make all information, on 
which it relies in making its recommendation and report, available to 
the tribe, subject to the confidentiality requirements in 25 U.S.C. 
2716(a), and shall afford the tribe an opportunity to respond.
    (4) The report shall include:
    (i) Findings as to whether each of the eligibility criteria is met, 
and a summary of the basis for each finding;
    (ii) Findings as to whether each of the approval criteria is met, 
and a summary of the basis for each finding;
    (iii) A recommendation to the Commission as to whether it should 
issue the tribe a certificate of self-regulation; and
    (iv) A list of any documents and other information received in 
support of the tribe's petition.
    (5) A tribe shall have 30 days from the date of issuance of the 
report to submit to the Office of Self-Regulation a response to the 
report.
    (d) After receiving the Office of Self-Regulation's recommendation 
and report, and a tribe's response to the report, the Commission shall 
issue preliminary findings as to whether the eligibility and approval 
criteria are met. The Commission's preliminary findings will be 
provided to the tribe within 30 days of receipt of the report.
    (e) Upon receipt of the Commission's preliminary findings, the 
tribe can request, in writing, a hearing before the Commission, as set 
forth in Sec.  518.8. Hearing requests shall be made to the Office of 
Self-Regulation, and shall specify the issues to be addressed by the 
tribe at the hearing and any proposed oral or written testimony the 
tribe wishes to present.
    (f) The Commission shall issue a final determination 30 days after 
issuance of its preliminary findings or after the conclusion of a 
hearing, if one is held. The decision of the Commission to approve or 
deny a petition shall be a final agency action.
    (g) A tribe may withdraw its petition and resubmit it at any time 
prior to the issuance of the Commission's final determination.


Sec.  518.8  What is the hearing process?

    (a) Within 10 days of receipt of the request for a hearing, the 
Office of Self-Regulation shall notify the tribe of the date and place 
of the hearing. The notice shall also set a hearing schedule, the time 
allotted for testimony and oral argument, and the order of the 
presentation.
    (1) To the extent possible, the hearing will be scheduled not later 
than 60 days after the notice is issued, and the hearing schedule will 
be issued at least 30 days prior to the hearing.
    (2) [Reserved]
    (b) The Commission shall issue a decision on the petition within 30 
days after the hearing's conclusion. The decision shall set forth, with 
particularity, findings regarding the tribe's satisfaction of the self-
regulation standards in this Part. If the Commission determines that a 
certificate will issue, it will do so in accordance with Sec.  518.11.
    (c) The decision of the Commission to approve or deny a petition 
shall be a final agency action.


Sec.  518.9  When will a certificate of self-regulation become 
effective?

    A certificate of self-regulation shall become effective on January 
1 of the year following the year in which the Commission determines 
that a certificate will issue. Petitions will be reviewed in 
chronological order based on the date of receipt of a complete 
petition.


Sec.  518.10  What must a self-regulating tribe provide the Commission 
to maintain its self-regulatory status?

    Each tribe that holds a certificate of self-regulation shall be 
required to submit the following information by April 15 of each year 
following the first year of self-regulation, or within 120 days after 
the end of each fiscal year of the gaming operation, as required by 25 
CFR 571.13:
    (a) An annual independent audit, to be filed with the Commission, 
as required by 25 U.S.C. 2710(b)(2)(c); and
    (b) A complete resume for all employees of the tribal regulatory 
body hired and licensed by the tribe subsequent to its receipt of a 
certificate of self-regulation, to be filed with the Office of Self-
Regulation.
    Failure to submit the information required by this section may 
result in revocation of a certificate of self-regulation.


Sec.  518.11  Does a tribe that holds a certificate of self-regulation 
have a continuing duty to advise the Commission of any additional 
information?

    Yes. A tribe that holds a certificate of self-regulation has a 
continuing duty to advise the Commission within three business days of 
any changes in circumstances that are material to the approval criteria 
in Sec.  518.5 and may reasonably cause the Commission to review and 
revoke the tribe's certificate of self-regulation. Failure to do so is 
grounds for revocation of a certificate of self-regulation. Such 
circumstances may include, but are not limited to, a change of primary 
regulatory official; financial instability; or any other factors that 
are material to the decision to grant a certificate of self-regulation.


Sec.  518.12  Which investigative or enforcement powers of the 
Commission are inapplicable to self-regulating tribes?

    During any time in which a tribe has a certificate of self-
regulation, the powers of the Commission, as set forth in 25 U.S.C. 
2706(b)(1)-(4), shall be inapplicable.


Sec.  518.13  When may the Commission revoke a certificate of self-
regulation?

    The Commission may, after an opportunity for a hearing, revoke a 
certificate of self-regulation by a majority vote of its members if it 
determines that the tribe no longer meets the eligibility criteria of 
Sec.  518.3, the approval criteria of Sec.  518.5, the requirements of 
Sec.  518.10 or the requirements of Sec.  518.11. The Commission shall 
provide the tribe with prompt notice of the Commission's intent to 
revoke a certificate of self-regulation under this part. Such notice 
shall state the reasons for the Commission's action and shall advise 
the tribe of its right to a hearing under part 584 or right to appeal 
under part 585. The decision to revoke a certificate is a final agency 
action and is appealable to Federal District Court pursuant to 25 
U.S.C. 2714.


Sec.  518.14  May a tribe request a hearing on the Commission's 
proposal to revoke its certificate of self-regulation?

    Yes. A tribe may request a hearing regarding the Commission's 
proposal to revoke a certificate of self-regulation. Such a request 
shall be filed with the Commission pursuant to part 584. Failure to 
request a hearing within the time provided by part 584 shall constitute 
a waiver of the right to a hearing.


[[Page 20244]]


    Dated: March 28, 2013, Washington, DC.
Tracie L. Stevens,
Chairwoman.
Daniel J. Little,
Associate Commissioner.
[FR Doc. 2013-07621 Filed 4-3-13; 8:45 am]
BILLING CODE 7565-01-P