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Daily Rules, Proposed Rules, and Notices of the Federal Government

DEPARTMENT OF THE INTERIOR

National Indian Gaming Commission

25 CFR Part 547

RIN 3141-AA27

Minimum Technical Standards for Class II Gaming Systems and Equipment

AGENCY: National Indian Gaming Commission, Interior.
ACTION: Final rule.
SUMMARY: The National Indian Gaming Commission (NIGC) is amending its technical standards to change the order of the first five sections; add definitions and amend existing definitions; amend requirements and time restrictions for grandfathered Class II gaming systems; amend the requirements concerning minimum odds for Class II games; amend standards for test labs; remove references to the Federal Communications Commission and Underwriters Laboratory; require a player interface to display a serial number and date of manufacture; amend requirements concerning approval of downloads to a Class II gaming system; and clarify the term "alternate standard."
DATES: Effective Date:October 22, 2012.
FOR FURTHER INFORMATION CONTACT: Michael Hoenig, National Indian Gaming Commission, 1441 L Street NW., Suite 9100, Washington, DC 20005. Telephone: 202-632-7003; email:michael_hoenig@nigc.gov.
SUPPLEMENTARY INFORMATION: I. Background

The Indian Gaming Regulatory Act (IGRA or Act), Public Law 100-497, 25 U.S.C. 2701et seq.,was signed into law on October 17, 1988. The Act establishes the NIGC and sets out a comprehensive framework for the regulation of gaming on Indian lands. On October 8, 2008, the NIGC published a final rule in theFederal RegistercalledTechnical Standards for Electronic, Computer, or Other Technologic Aids Used in the Play of Class II Games.73 FR 60508. The rule added a new part to the Commission's regulations establishing a process for ensuring the integrity of electronic Class II games and aids. The standards were designed to assist tribal gaming regulatory authorities and operators with ensuring the integrity and security of Class II gaming, the accountability of Class II gaming revenue, and provide guidance to equipment manufacturers and distributors of Class II gaming systems. The standards do not classify which games are Class II and which games are Class III.

On November 18, 2010, the NIGC issued a Notice of Inquiry and Notice of Consultation advising the public that the NIGC endeavored to conduct a comprehensive review of its regulations and requesting public comment on which were most in need of revision, in what order the Commission should review its regulations, and the process NIGC should utilize to make revisions. 75 FR 70680. On April 4, 2011, after consulting with tribes and reviewing all comments, the NIGC published a Notice of Regulatory Review Schedule (NRR) setting out a consultation schedule and process for review. 76 FR 18457. Part 547 was included in the third regulatory group reviewed pursuant to the NRR.

II. Previous Rulemaking Activity

On July 8, 2011, the Commission began a series of tribal consultations on part 547. Based in part on the recommendations to the Commission during consultations, on August 10, 2011, the Commission requested tribes nominate tribal representatives to serve on a Tribal Advisory Committee (TAC) to assist the Commission in drafting changes to part 543 and these technical standards. Beginning on October 20, 2011, the TAC held four meetings in which the Commission participated. All of the meetings were open to the public and three of the four were transcribed. On January 12, 2011, as a result of those meetings, the TAC submitted a proposed part 547 regulation to the Commission.

Upon reviewing the TAC's recommendation, and taking into consideration comments received through tribal consultations, the Commission published a discussion draft of the amended technical standards on its Web site. The discussion draft adopted a number of the TAC's recommendations, such as moving requirements that more appropriately belong to the Minimum Internal Control Standards found at 25 CFR part 543.

After publishing the discussion draft, the Commission conducted consultations in Mayetta, KS and San Diego, CA. In addition to tribal consultations, the Commission requested public comment on the discussion draft. Considering the comments received in response to the discussion draft, the Commission published a Notice of Proposed Rulemaking (“NPRM”) on June 1, 2012. 77 FR 32465. The NPRM invited interested parties to participate in the rulemaking process by submitting comments and any supporting data to the NIGC by July 31, 2012. After receiving several requests to extend the comment period, the Commission published notification in theFederal Registerthat it would do so by two weeks, establishing a new comment deadline of August 15, 2012. 77 FR 43196.

In addition to soliciting public comment in theFederal Register, the Commission also conducted an additional five tribal consultations to discuss the proposed rule with interested tribes and industry representatives. As with the discussion draft, the consultations and written comments have proven invaluable to the Commission in making needed amendments to the Class II technical standards.

III. Review of Public Comments

In response to our Notice of Proposed Rulemaking, published June 1, 2012, 77 FR 32465, we received the following comments.

General Comments

Comment:A number of commenters made miscellaneous editorial suggestions not intended to change the substance of the technical standards but to improve sentence structure, correct grammar, and preserve consistency of usage throughout the document.

Response:The Commission accepted all such changes where they improve clarity and editorial consistency, and these are reflected throughout the final rule. Substantive changes are addressed in the responses to comments below.

Comment:A number of commenters recommended the Commission accept, without alteration, the draft of the Technical Standards provided to it by its tribal advisory committee. Other commenters recommended the Commission adopt a draft of the regulation prepared and submitted by the Tribal Gaming Working Group (“TGWG”).

Response:The Commission greatly appreciates the assistance and advice of the TAC in developing these amendments to the technical standards. The Commission is also aware of the hours the TGWG put into its recommended part 547 and appreciates its participation in the process. After carefully reviewing those recommendations, and in several cases incorporating them into the NPRM and this final rule, the Commission declines to adopt either proposal whole-cloth.

Comment:A few commenters suggested that the NIGC lacks authority to implement or enforce these standards.

Response:The Commission, pursuant to IGRA, possesses the authority to adopt these technical standards. Congress expressed the concern that gaming under IGRA be “conducted fairly and honestly by both the operator and players” and “to ensure that the Indian tribe is the primary beneficiary of the gaming operation.” 25 U.S.C. 2702(2). The technical standards are designed to ensure these concerns are addressed. These standards implement the authority granted the Commission to monitor, inspect, and examine Class II gaming, 25 U.S.C. 2706(b)(1)-(4), and to promulgate such regulations as it deems appropriate to implement the provisions of IGRA. 25 U.S.C. 2706(b)(10).

Regulation Title

Comment:One commenter suggested simplifying the title of part 547 fromMinimum Technical Standards for Gaming Equipment Used With the Play of Class II Gamesto the simpler title ofMinimum Technical Standards for the Play of Class II Gaming Systems.

Response:The Commission agrees the title for this part should be simplified. It declines to adopt the recommended title, though, because this part applies not only to Class II gaming systems, but to all equipment, including computer, electronic, or other technologic aids used with Class II games. The Commission instead has amended the part's title toMinimum Technical Standards for Class II gaming systems and equipment.

547.2Definitions

Comment:Several commenters recommended amending the definition ofAgentto permit the use of computer applications to perform the function(s) of an agent.

Response:The Commission declines to accept this recommendation. The term “computer applications” is undefined and potentially broad. Any hardware under the control of an agent is exempt from the testing requirements of this part, and thus amending the definition ofAgentin this manner potentially would exempt hardware that is subject to testing requirements such as financial instrument acceptors, financial instrument dispensers, etc.

Comment:One commenter asked the Commission to clarify that the definition ofReflexive softwaremeans that the Class II gaming system can never look at the historical activity or status of the game or player to deprive a player of an award or to declare a player a winner. The commenter distinguishes the awarding of a prize as a result of a reflexive decision by software from “good neighbor” awards that are not part of the pay-table which, according to the commenter, are “promotions.”

Response:The commenter is correct that the definition ofReflexive softwareis not intended to encompass “promotional awards” made based on the player's accumulated “player points” or the player's membership in a casino player's club. Such awards are not based on the outcome of the game, but another set of factors separate and apart from the game results. Rather, the definition ofReflexive softwareis intended to encompass any decisions made by software that would change the outcome of the game. For example, a random ball draw produces a sequence of numbers that would entitle a player to the top advertised prize; then the system discards this sequence and replaces it with a new ball draw sequence whereby the patron wins a lower prize.

Comment:Several commenters supported the removal of the definition ofProprietary Class II gaming componentand the word “proprietary” from the definitions ofCashless systemandVoucher system.The changes were first made in the discussion draft of part 547 published by the Commission, but removed from the NPRM. Commenters recommend, however, that the Commission reiterate and further clarify the reasons for including the new and changed definitions in the discussion draft in the first place, as well as the reason for removing it from the NPRM.

Response:The Commission appreciates the comments in support of the change. The intended purpose of the new and amended definitions was to distinguish the common back of the house component systems that communicate with all Class II gaming systems, regardless of the manufacturer, from those components that work exclusively with one manufacturer's Class II system. An example of such a system is a Class II gaming system with a voucher functionality that only allows a patron to use adispensed voucheron other electronic player interfaces on the same Class II gaming system, and not on electronic player interfaces from a different Class II gaming system at the same tribal gaming facility. Conversely, voucher systems that are part of a common back of the house system allow a dispensed voucher to be used on any electronic player interface at the same tribal gaming facility.

Upon review of the standards, the Commission concluded that this definition is not necessary and has led to confusion. Therefore, it was removed from the proposed rule and not reinserted into this final rule.

547.3Who is responsible for implementing these standards?

Comment:Several commenters supported the NPRM's removal of language asserting that “TGRAs also regulate Class II gaming,” but advocate changing § 547.3(a) to reflect that TGRAs are the primary regulators of Indian Gaming. Other commenters suggested that the Commission use this preamble to reiterate its position that tribes are the primary regulators of tribal gaming.

Response:The Commission declines to insert the requested language into the regulation. The Commission agrees that tribes are the primary regulators of Indian gaming, but has never understood that to mean that the regulatory authority of a TGRA is superior to that of the NIGC. Rather, theCommission recognizes TGRAs are the day-to-day regulators of Indian gaming and the first line of oversight at every facility. Although the findings section of IGRA states that tribes have the exclusive right to regulate gaming activity on Indian lands, IGRA also establishes a regulatory scheme that includes the NIGC as well as tribes.

547.4What are the rules of general application for this part?

Comment:Rather than require a game to meet a minimum odds requirement, these technical standards require that a player be informed if the odds of winning a top prize exceed 100 million to one. This change was made at the discussion draft stage, and comments were overwhelmingly supportive. One commenter, however, submitted comments in opposition to the change. The comment asserts that the NPRM's removal of a minimum odds requirement is not fair to the public. According to the comment, players have the right to expect that an advertised jackpot is winnable and the regulatory community has an obligation to protect that player's rights of expectation by establishing some minimum, guaranteed threshold. The commenter recommends reinserting a minimum odds requirement.

Response:The Commission respectfully disagrees and declines to accept the commenter's suggestion. This amendment allows operations to increase advertised top prizes, but also gives the player the ability to make an informed decision regarding whether to play a game that may have a higher pay-out, but decreased odds of winning.

547.5How does a tribal government, TGRA, or tribal gaming operation comply with this part?

When implemented in 2008, the part 547 technical standards introduced several new requirements for Class II gaming systems designed to protect the security and integrity of Class II gaming systems and tribal operations. The Commission understood, however, that some existing Class II gaming systems might not meet all of the requirements of the technical standards. Therefore, to avoid any potentially significant economic and practical consequences of requiring immediate compliance, the Commission implemented a five-year “grandfather period” for eligible gaming systems. The Commission believed that a five year period was sufficient for market forces to move equipment toward compliance with the standards.

To qualify as a grandfathered game pursuant to the current regulations, a gaming system must have been submitted to a testing laboratory within 120 days of November 10, 2008. The testing laboratory must have then reviewed the gaming system for compliance with a specific, minimum set of requirements, and have issued a report to the applicable TGRA, which must have then approved the gaming system for grandfather status. At the end of the five year period—November 10, 2013—the grandfathered systems must be brought into compliance with the requirements of part 547 or removed from play.

Comment:The Commission received several comments on the grandfathering provisions, the majority of which focused on the five year duration. Commenters unanimously opposed maintaining the sunset provision in the grandfather clause, citing serious negative financial impact of requiring the grandfathered systems to be brought into full compliance or removed from play. In response to questions posed by the NIGC in the NPRM, commenters submitted that withdrawing and replacing grandfathered systems could cost in the range of $46 million to $65.5 million. One commenter asserts that twenty Oklahoma gaming tribes estimate that they will lose in excess of $82 million. One commenter also pointed out that, not only will a sunset provision have a significant economic impact in the future, many tribes have already spent millions of dollars developing and defending the legal status of the grandfathered games.

Other commenters noted that grandfathered games are valid, legal games, which have never presented, nor do they now present a risk of any kind to either the tribes or patrons. Commenters stated that they do not understand how a game can be safe and reliable one day, but not the very next. According to these commenters, no evidence has been provided that grandfathered games present some hidden danger. If there is something wrong with a particular game, though, the TGRA will act to correct it.

Other commenters point out that tribes obtained court decisions determining that certain grandfathered games are lawful Class II games. Some commenters request the NIGC include a provision explicitly stating that nothing in this part is intended to prohibit the continued use of any gaming system or component ruled to be Class II by any judicial rulings.

In lieu of mandating grandfathered systems by removed by a specific date, other commenters suggested that a more reasoned regulatory approach would be one in which grandfathered Class II gaming systems are eliminated from operation through attrition and/or market forces. One commenter noted the Commission's calculation that such removal through attrition or market forces would have occurred within the five year sunset provision was clearly wrong.

Response:The Commission appreciates all of the articulate, well reasoned comments it received on this issue. This, more than any other topic, has been the subject of long deliberation and analysis within the Commission. The Commission acknowledges that grandfathered machines have, for the most part, continued to operate with relatively few problems to the patron or the gaming operations. Nevertheless, lack of a major incident in the past does not mean that the grandfathered Class II gaming systems pose no risk to patrons and the gaming operation. For example, § 547.15 of this Rule sets minimum requirements for security of sensitive data and wireless and wired communications. Because a grandfathered system does not need to meet this standard, there may be a risk of data being intercepted or tampered with, when that data is constantly being transmitted to/from equipment on the floor.

The Commission agrees with commenters, however, that the prior Commission's analysis regarding the continued economic viability of the grandfathered systems has proven to be mistaken. The Commission established the five year sunset provision in the midst of a much stronger economy. In the time that has followed the economic downturn, though, many tribal gaming operations have set new priorities that may require keeping a grandfathered system on the gaming floor for a longer period of time.

Balancing those economic needs against a risk that increases as technology advances and grandfathered machines remain static, the Commission extended the grandfathered system by an additional five years. Under this final rule, a grandfathered system may continue in operation until November 10, 2018.

The Commission declines, however, to insert language conveying that nothing in this part is intended to prohibit the continued use of any gaming system or component ruled to be Class II by any judicial rulings. Including such a provision may lead to the false impression that this part is intended to address classification. It is not. Nothing in part 547 bears on the classification of a game as Class II or Class III. The provision requires only that, for any Class II game to be available for play, the game must havebeen certified as a grandfathered Class II gaming system or comply with the standards in part 547, and that systems must comply with all standards in part 547 by November 10, 2018.

Comment:Several commenters recommended removing the limitation in part 547 that only those systems manufactured before November 10, 2008 may be submitted for certification for grandfathering. The commenters recommend that, instead, the Commission amend § 547.5(b) to include as grandfathered games, all Class II gaming systems certified as grandfathered prior to the effective date of this final rule.

Response:The Commission declines to adopt the commenters' suggestion to allow Class II gaming systems manufactured after November 10, 2008 to be certified as grandfathered systems. When the current regulation was published in 2008, it was clear that any Class II gaming system manufactured from that date forward had to meet the minimum technical standards contained in part 547. As a result, there should not be any Class II gaming systems manufactured after November 10, 2008 that do not meet those standards.

The Commission understands, however, there are several Class II gaming systems manufactured before November 10, 2008 that may not have been submitted for grandfathering certification within 120 days of November 10, 2008, as the current rule requires. The Commission heard myriad reasons as to why a manufacturer or gaming operation may not have submitted systems for grandfathering certification. For example, Class II systems that, at the time, seemed unmarketable have once again become in demand for economic reasons. The Commission agrees that games that would otherwise be usable as grandfathered Class II system should be eligible for certification. For this reason, the Commission is reopening the time period to certify a Class II gaming system manufactured before November 10, 2008, as a grandfathered system.

Comment:Several commenters raised a concern that, as written, § 547.7(a) may require any Class II game system manufactured before November 10, 2008, regardless of whether the game is otherwise fully compliant with part 547, to be submitted for grandfather certification.

Response:The Commission amended the language found in the NPRM to make clear that, if a game is fully compliant, it does not need to be submitted for certification pursuant to § 547.5(a). The section now states, “[a]ny Class II gaming system manufactured before November 10, 2008, that is not already certified pursuant to this sub-section or compliant with paragraph (c) of this section may be made available for use at any tribal gaming operation if * * *”

The Commission also amended the language of § 547.5(b) to clarify that, if a grandfather system is brought into full compliance with this part, it is no longer considered a grandfathered system and the strictures of §§ 547.5(a) and (b) no longer apply.

Comment:Commenters requested adding a provision that “nothing in this section is intended to prevent a TGRA from approving a grandfathered component to be added to a fully compliant Class II gaming system, or affect the certification of a fully compliant Class II gaming system.”

Response:The Commission declines to adopt this suggestion. In the NPRM, the Commission asked for comments regarding repairs and modifications to Class II game systems. Specifically, the Commission wanted feedback on the effect of requiring all repairs, replacements, and modifications of grandfathered Class II gaming systems to be fully compliant with the regulations. Responses unanimously opposed any requirement that repairs or modifications be fully compliant. Upon considering those comments and deliberating, the Commission has left the repair, replacement, and modification sections as they are in the current rule. However, the goal of this part is to bring all Class II gaming systems further into compliance. Even the current regulation requires a modification, at a minimum, to maintain or advance the system's compliance with this part. To allow a grandfathered component to be added to a fully compliant system would work against that goal by allowing a system to be regressively modified, bringing it further out of, rather than into, compliance with these regulations. If a grandfathered component is added to an otherwise fully compliant Class II gaming system, that system ceases to be fully compliant.

Comment:Section 547.5(a)(7) of the NPRM requires a supplier of any player interface to designate each player interface with a permanently affixed label containing an identifying number and the date of manufacture. Commenters assert that this language may limit technology by eliminating the potential use of a consumer handheld device that is not distributed by the Class II game manufacturer or supplier. Commenters recommend that the proposed rule be modified to clarify that such a label is not required in the case of consumer devices such as mobile devices and tablets.

Response:The Commission appreciates the commenters' concern, but stresses the importance of the requirement that every player interface contain this information. Ensuring that this information is displayed somewhere on the player interface protects both the player and the gaming operation. This is especially true when the player interface is as easily interchangeable as a handheld device or tablet. However, to lessen the potential burden on these devices, the Commission has changed the provision, now found in § 547.5(b), to require that the player interface “exhibit information consistent with § 547.7(d) of this part and any other information required by the TGRA.” The provision no longer requires a “permanently affixed label” thereby giving the manufacturer or supplier additional options for ensuring that the information is displayed.

Comment:Section 547.5(c)(4) of the NPRM requires the test lab to confirm that “the operation of each player interface has been certified that it will not be compromised or affected by” certain events. Commenters point out, however, that testing labs do not testeachplayer interface that is added to the gaming floor, but rather models of the player interface. Commenters request that the Commission amend this section to clarify that it does not require every player interface to undergo testing.

Response:The Commission agrees with the commenters and has changed the section to specify that the testing laboratory's written report confirms that “the operation of a player interface prototype has been certified.”

547.7What are the minimum technical hardware standards applicable to Class II gaming systems?

Comment:One commenter suggested that the words “designed to be” should be inserted into the beginning of § 547.7(f) of the NPRM so that the section reads as follows: “Any class II gaming system components that store financial instruments and that are notdesigned to beoperated * * *.”

Response:The Commission declines to adopt this recommendation, but acknowledges that the section is confusing as drafted in the NPRM. To clarify that this is a technical standard capable of being tested, rather than a control standard that belongs in part 543, the Commission has changed the section to read:

“Any financial instrument storage components managed by Class II gaming system software must be located withina secure and locked area, cabinet, or housing that is of a robust construction designed to resist determined illegal entry and to protect internal components.”

547.8What are the minimum technical software standards applicable to Class II gaming systems?

Comment:Several commenters expressed concern that the section's prohibition of any automatic changes to game rules may operate to limit the use of certain technologies that may otherwise provide for full and clear disclosure of all rules and any changes thereof.

Response:The Commission changed § 547.8(b)(1) of the NPRM to state: “Each game played on the Class II gaming system must follow and not deviate from a constant set of rules for each game provided to players pursuant to § 547.16. There must be no undisclosed changes of rules.” Although the Commission still believes that there should be no automatic rule changes, it believes that the first sentence of the section adequately addresses its concern. By requiring each game to “follow and not deviate from a constant set of rules for each game,” it clearly prohibits the game from changing the rules given to the player pursuant to § 547.16.

Comment:When the Commission published the discussion draft of these standards, it carried over the current regulation's requirement found in § 547.8(k)(3) that the validity of affected data stored in critical memory must be checked after certain events. The current regulation and discussion draft included both “each attendant paid win” and “each attendant paid progressive win” in that list of events. In response to the discussion draft, the Commission received a comment suggesting that it delete the reference to attendant paid progressive wins, as each attendant paid progressive win is just a subset of “each attendant paid win,” which is already noted in subparagraph (ii). The Commission initially agreed with the commenter, striking the requirement from the NPRM as redundant. Upon further review, however, and as the result of internal discussions, the Commission is reinstating the requirement.

“Attendant paid win” does not encompass “attendant paid progressive wins.” They are industry terms that have separate and distinct meanings. For example, Arizona Class III gaming compacts require that an attendant paid jackpot meter “shall not accumulate progressive amounts,” because attendant paid progressive payouts are recorded separately. As a result, if the Commission leaves “each attendant paid progressive win” off of the list of events that trigger a check of the affected data, it would be leaving a gap in the testing standards for critical memory. Therefore, the Commission has reinserted the requirement in this final rule.

Comment:Section 547.8 of the current technical standards contains certain requirements regarding entertaining displays. Section 547.8(a)(2)(ii) requires that, between plays of any game, or until a new game option is selected, the player interface must display the final results for the last game, including the entertaining display. Section 547.8(d)(2), meanwhile, requires that the entertaining display be included in the last game recall.

The NPRM removed references to entertaining displays from both of these sections. Nearly all of the comments expressed support for the change. Comments focused on the fact that the entertaining display has no significance to the outcome of the game. One commenter, however, opposed this change. The commenter suggested that the revision to § 547.8(a)(2)(ii) would require the game display to “go blank” between games.

The commenter also objected to the discussion draft no longer requiring last game recall to include the entertaining display. The commenter noted that when a pay-table on a player interface indicates that certain combinations of symbols will result in certain prizes, a player has a reasonable right to expect a prize if that combination of symbols appears on the pay line of the “entertainment only” display. The commenter asserts that if a game posts a prize schedule corresponding to the entertaining display instead of, or in addition to, the bingo card, and a prize paying combination of symbols appears in the entertaining display but no prizes are awarded, the integrity of the gaming system and reputation of the tribe may be called into question.

Response:The Commission respectfully disagrees. The standard, as proposed, does not require a blank screen. It requires the player interface to display the wager amount and all prizes and total credits won during the last game played, the final results of the last game played, and any default purchase or wager amount for the next play.

The Commission agrees that the reputation of an operation is of utmost importance and can reach beyond a particular facility to bolster or harm the reputation of Indian gaming. However, the game of bingo is dictated by the ball draw and the bingo card, not the entertaining display. This is made clear by the disclaimer required by § 547.16, clarifying that actual prizes are determined by bingo play not the entertaining display. For the technical standards to require last game recall to include the entertaining display would incorrectly emphasize an aspect of the game that has no bearing on its outcome.

The Commission also disagrees with the commenter's assessment that, if the entertaining display indicates a win, the patron should be paid regardless of the bingo results. Prizes should only be awarded on Class II electronic bingo games if the patron has won according to the bingo card.

547.12What are the minimum technical standards for downloading on a Class II gaming system?

Comment:The proposed rule removed the requirement from § 547.12 that the TGRA authorize all downloads by a Class II gaming system. This change was first made in the discussion draft and many commenters requested clarification that nothing prohibits the TGRA from maintaining the download approval requirement. In the NPRM, the Commission reiterated that, as stated in § 547.3(a), the Commission recognizes that the TGRA regulates technical standards and, accordingly, may implement stricter standards. One commenter to the NPRM, however, stated that although they understand that the TGRA has the authority to require restrictions to control software downloads, the purpose of including this requirement in the technical standard is to ensure that manufacturers implement processes in the design of their products. According to the commenter, these standards should incorporate controls over digital content as part of the design of Class II systems rather than implement awkward or ineffective controls after the fact. According to the commenter, the original intent of the standard was to ensure control over downloadable content until the TGRA has performed an independent software authentication.

Response:The Commission agrees with the commenter that controls must be incorporated to ensure control over downloadable content until the TGRA has performed an independent software authentication. But the Commission also believes that § 547.12, as included in the NPRM, establishes those controls. The NPRM removed the requirement that downloads be conducted only as authorized by the TGRA. The Commission continues to believe that the download authorization requirement is an internal control that belongs inpart 543, where it has been relocated. The remaining requirements in § 547.12 ensure control over the downloaded information in multiple ways. The standard requires each system to use secure methodologies in delivering the downloaded data, and provide information that the TGRA will need when making its decision to approve or disapprove use of downloaded information. The standard also requires that any downloaded game software be capable of being verified by the Class II gaming system. All of these requirements provide the TGRA with the information necessary to exercise its authority, as required by the part 543 Minimum Internal Control Standards, to approve downloads.

547.14What are the minimum technical standards for electronic random number generation?

Comment:Several commenters noted that changes made to § 547.14(b)(2) regarding random number generation (“RNG”) could negatively impact Class II gaming. According to the commenters, the current rule permits the use of various discretionary RNG tests. The proposed rule, however, mandated three specific tests. Although in many instances a Class II gaming system that has already been certified as compliant may have performed these now mandatory tests, other systems may not have been certified because the tests were not previously required. Thus, this new requirement may necessitate recertification of a fully compliant system at a substantial cost and inconvenience to tribal gaming operations. The commenters recommended either restoring the wording of the current rule or including language to clarify that these new requirements are not applicable to previously certified Class II gaming systems.

Response:The Commission agrees with the commenters and has restored the wording of § 547.14(b)(2) to that of the current rule. The change to three mandatory RNG tests was made after discussions with the TAC, and was based on the fact that the Commission was informed that these three tests were nearly always performed as a matter of course and should be made mandatory. However, the Commission acknowledges that this change would create an additional testing requirement and run the risk of decertifying several machines. Rather than making the mandatory testing requirement prospective, thereby creating a third category of certified games (those certified as grandfathered, those certified as fully compliant prior to the effective date without the mandatory RNG tests, and those certified as fully compliant after the effective date with the mandatory RNG test), the Commission restored the language of the current rule, and all tests are discretionary. The Commission reminds TGRAs, however, that these are minimum standards—a TGRA may require that any of the tests be performed as part of the certification process.

Comment:Several commenters expressed concern about § 547.14(f) of the NPRM, which requires an RNG that provides output scaled to given ranges to use an unbiased algorithm. The current regulation specifies that a scaling algorithm is considered to be unbiased if the measured bias is no greater than 1 in 100 million. This ratio was later updated by NIGC bulletin to 1 in 50 million. The NPRM, however, changed the standard to require that the RNG use an unbiased algorithm and any bias be reported to the TGRA. Commenters assert that this is an unrealistic or untestable standard. In support, commenters point out that requiringanybias is a maximum standard, not minimum. Commenters also note that, because there will always be some—often insignificant—measure of bias, the standard will require near constant reporting to the TGRA.

Response:The Commission agrees with the commenters and has restored the current regulation's standard. The rule still requires the RNG to use an unbiased algorithm, but specifies that a scaling algorithm is unbiased if the measured bias is no greater than 1 in 50 million. As the Commission previously explained in Bulletin 2008-4, this bias standard adequately protects the statistical randomness of the number generator.

Comment:Commenters suggest that the § 547.16(b) requirement that player interfaces continually display disclaimers is burdensome and unfeasible in smaller devices such as hand held devices. A suggested option is to include alternate language requiring the disclaimer to be displayed only until acknowledged by the player.

Response:The Commission declines to adopt this recommendation. The disclaimers are of critical importance, and, therefore, the Commission believes that it is necessary that they be displayed somewhere on the player interface at all times.

547.17How does a TGRA apply to implement an alternate minimum standard to those required by this part?

Comment:Section 547.17 permits a TGRA to approve an alternate standard to those set out in this part. That alternate standard, however, is subject to the review and approval of the NIGC Chair. To facilitate that review, the TGRA must submit (1) a detailed report to the NIGC, which must include an explanation of how the alternate standard achieves a level of security and integrity sufficient to accomplish the purpose of the standard it is to replace, and (2) the alternate standard, as approved, and the record upon which it is based. Some commenters stated that these two requirements are redundant and the “record upon which [the alternate standard] is based” will necessarily include the detailed statement.

Response:The Commission disagrees. The first requirement is a statement from the TGRA to the Commission about the standard as approved, while the second requirement is the standard itself and all of the documents and information the TGRA used in deciding whether to grant the alternate standard.

Comment:A few commenters asked for the standard be changed to clarify that the TGRA can implement the alternate standard as soon as it is approved by the TGRA.

Response:The Commission has amended § 547.17(a) to include the statement that a gaming operation may implement an alternate standard upon TGRA approval subject to the Chair's decision pursuant to sub-section (b). The Commission believes that this language makes clear that an alternate standard may be implemented upon TGRA approval. To further alleviate any potential confusion regarding the alternate standard process, the Commission has also added language specifying that, if the Chair approves an alternate standard, the gaming operation may continue to operate accordingly. The rule now also specifies, however, that, if the Chair objects to the alternate standard, the gaming operation must cease using the alternate standard and must follow the applicable minimum technical standard.

Finally, this final rule clarifies that the TGRA may appeal the Chair's decision to approve or object to an alternate standard pursuant to 25 CFR subchapter H. The Commission believes that, because the rule requires the TGRA to approve and submit the alternate standard for NIGC review, the TGRA should be the entity to appeal a Chair decision it disagrees with.

IV. Regulatory Matters Regulatory Flexibility Act

The rule will not have a significant impact on a substantial number of smallentities as defined under the Regulatory Flexibility Act, 5 U.S.C. 601,et seq.Moreover, Indian tribes are not considered to be small entities for the purposes of the Regulatory Flexibility Act.

Small Business Regulatory Enforcement Fairness Act

The rule is not a major rule under 5 U.S.C. 804(2), the Small Business Regulatory Enforcement Fairness Act. The rule does not have an effect on the economy of $100 million or more. The rule will not cause a major increase in costs or prices for consumers, individual industries, Federal, State, local government agencies or geographic regions. Nor will the rule have a significant adverse effect on competition, employment, investment, productivity, innovation, or the ability of the enterprises, to compete with foreign based enterprises.

Unfunded Mandate Reform Act

The Commission, as an independent regulatory agency, 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 the 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 has determined that the 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 the 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 (OMB) as required by 44 U.S.C. 3501et seq.and assigned OMB Control Number 3141-0014 which expired. The NIGC is in the process of reinstating that Control Number. The final rule does not require any significant changes in information collection under the Paperwork Reduction Act of 1995, 44 U.S.C. 3501et seq.

List of Subjects in 25 CFR Part 547

Gambling, Indian—Indian lands, Indian—tribal government.

For the reasons set forth in the preamble, the NIGC revises 25 CFR part 547 as follows: PART 547—MINIMUM TECHNICAL STANDARDS FOR CLASS II GAMING SYSTEMS AND EQUIPMENT Sec. 547.1 What is the purpose of this part? 547.2 What are the definitions for this part? 547.3 Who is responsible for implementing these standards? 547.4 What are the rules of general application for this part? 547.5 How does a tribal government, TGRA, or tribal gaming operation comply with 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 TGRA apply to implement an alternate minimum standard to those required by this part? 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 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 an 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.

Advertised top prize.The highest single prize available based on information contained in the prize schedule and help screens.

Agent.A person authorized by the tribal gaming operation, as approved by the TGRA, to make decisions or to perform tasks or actions on behalf of the tribal gaming operation.

Audit mode.The mode in which it is possible to view Class II gaming system accounting functions and statistics and perform non-player-related functions.

Cancel credit.An action initiated by the Class II gaming system by which 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.

CD-ROM.Compact Disc—Read Only Memory.

Chair.The Chair of the National Indian Gaming Commission.

Class II gaming.Class II gaming has the same meaning as defined 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 established by the Indian Gaming Regulatory Act, 25 U.S.C. 2701et seq.

Coupon.A financial instrument of fixed wagering value 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 gamingsystem for such purposes as changing the component software.

DVD.Digital Video Disk or Digital Versatile Disk.

Electromagnetic interference.The disruption of operation of an electronic device when it is in the vicinity of an electromagnetic field in the radio frequency spectrum that is caused by another electronic device.

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.

Enroll.The process by which a Class II gaming system identifies and establishes communications with an additional system component to allow for live gaming activity to take place on that component.

EPROM.Erasable Programmable Read Only Memory—a non-volatile storage chip or device 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 system.

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, such as a bill validator.

Financial instrument dispenser.Any component that dispenses financial instruments, such as a ticket printer.

Financial instrument storage component.Any component that stores financial instruments, such as a drop box.

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.A person who is a customer or guest of the tribal gaming operation and may interact with a Class II game. Also may be referred to as a “player”.

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(s) 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 a 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 that 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 TGRA pursuant to § 547.5(f).

TGRA.Tribal gaming regulatory authority, which is the entity authorized by tribal law to regulate gaming conducted pursuant to the Indian Gaming Regulatory Act.

Unenroll.The process by which a Class II gaming system disconnects an enrolled system component, disallowing any live gaming activity to take place on that component.

Voucher.A financial instrument of fixed wagering value, usually paper, that can be used only 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 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.

§ 547.3 Who is responsible for implementing these standards?

(a)Minimum standards.These are minimum standards and a TGRA may establish and implement additional technical standards that do not conflict with the standards set out in this part.

(b)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.

(c)Only applicable standards apply.Gaming equipment and software must meet all applicable requirements of this part. 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. These standards do not apply to associated equipment such as voucher and kiosk systems.

(d)State jurisdiction.Nothing in this part should be construed to grant to a state jurisdiction over Class II gaming or to extend a state's jurisdiction over Class III gaming.

§ 547.4 What are the rules of general application for this part?

(a)Fairness.No Class II gaming system may cheat or mislead users. All prizes advertised must be available to win during the game. A test laboratory must calculate and/or verify the mathematical expectations of game play, where applicable, in accordance with the manufacturer stated submission. The results must be included in the test laboratory's report to the TGRA. At the request of the TGRA, the manufacturer must also submit the mathematical expectations of the game play to the TGRA.

(b)Approved gaming equipment and software only.All gaming equipment and software used with Class II gaming systems must be identical in all respects to a prototype reviewed and tested by a testing laboratory and approved for use by the TGRA pursuant to § 547.5(a) through (c).

(c)Proper functioning.All gaming equipment and software used with ClassII gaming systems must perform according to the manufacturer's design and operating specifications.

§ 547.5 How does a tribal government, TGRA, or tribal gaming operation comply with this part?

(a)Grandfathered gaming systems:Any Class II gaming system manufactured before November 10, 2008, that is not already certified pursuant to this sub-section or compliant with paragraph (c) of this section may be made available for use at any tribal gaming operation if:

(1) The TGRA submits the Class II gaming system software that affects the play of the Class II game, together with the signature verification required by § 547.8(f) to a testing laboratory recognized pursuant to paragraph (f) of this section within 120 days after October 22, 2012;

(2) The testing laboratory tests the submission to the standards established by § 547.8(b), § 547.8(f), § 547.14, and any additional technical standards adopted by the TGRA;

(3) The testing laboratory provides the TGRA with a formal written report setting forth and certifying to the findings and conclusions of the test;

(4) The TGRA makes a finding, in the form of a certificate provided to the supplier or manufacturer of the Class II gaming system, that the Class II gaming system qualifies for grandfather status under the provisions of this section. A TGRA may make such a finding only upon receipt of a testing laboratory's report that the Class II gaming system is compliant with § 547.8(b), § 547.8(f), § 547.14, and any other technical standards adopted by the TGRA. If the TGRA 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), § 547.14, or any other technical standards adopted by the TGRA, then the gaming system must immediately be removed from play and not be utilized.

(5) The TGRA retains 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; and

(6) The TGRA retains 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.

(b)Grandfather provisions.All Class II gaming systems manufactured on or before November 10, 2008, that have been 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 ten years from November 10, 2008.

(2) Grandfathered Class II gaming systems may only be used as approved by the TGRA. The TGRA must transmit its notice of that approval, identifying the grandfathered Class II gaming system and its components, to the Commission.

(3) Remote communications may only be