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New Slot Machines Without Strings

Nobody would ever claim that California’s Indian tribes are pushovers at the bargaining table, especially in their current guise as Vegas-scale gambling entrepreneurs.

But one wonders whether the reason the biggest casino tribes have shown so much spine in facing down Gov. Arnold Schwarzenegger’s demand to share their slot machine action is because they’ve been quietly preparing a Plan B, derived from this question: When is a slot machine not a slot machine?

The question is relevant because the state-tribal compacts governing Indian gaming in California forbid any tribe to deploy more than 2,000 slots in its casinos. For such tribes as Southern California’s Morongo, Pechanga and Agua Caliente, that doesn’t come close to satisfying demand: On a weekend night at Pechanga, you better be prepared to wait in line for a slot machine to become available.

But the limit applies only to slots that are slots, identical to the machines in Nevada casinos and defined under the federal Indian Gaming Regulatory Act of 1988 as “Class III” devices. It doesn’t apply to Class II machines, which must be based on bingo -- a feature that’s not as restrictive as it sounds. Major slot machine companies have spent millions of R&D; dollars on making them look and play so much like conventional slots that customers (they hope) won’t be able to tell the difference.

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The potential payoff is obvious. By federal law, the regulation of Class II machines belongs exclusively to the National Indian Gaming Commission. States can’t limit their installation or tax them. For a busy tribal casino bumping up against its slot limit, they can provide a decent, if not ideal, relief valve.

“Tribes don’t need slots to build and expand their business right now,” says Michael Lombardi, an Indian gaming consultant who recently staged a seminar for California tribes about the law and politics of Class II machines.

Even if the big gaming tribes haven’t alluded explicitly to the potential of Class II gaming in their talks with the governor, the issue is surely lurking behind the scrim. Some tribes may think their best alternative to the governor’s plan is a November ballot initiative that would give the tribes unlimited gaming if they pay the state corporate income tax (8.84%) on their winnings. But you never know with voters, especially with the governor vowing to campaign against the measure. Class II gaming gives the tribes another weapon to use in dissuading Schwarzenegger from pushing any demands they can’t live with.

High on the blacklist are a couple of provisions in the model compacts several tribes are expected to sign with the governor today. In return for unlimited slots, these tribes would allow binding arbitration of disputes with customers and neighbors, along with unfettered union organizing of their employees. Holdouts such as the Morongo and Pechanga, however, talk as though such incursions into tribal sovereignty are bigger deal-breakers than any formula for sharing the revenue from expanded gaming.

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Nevertheless, the big tribes may want to brandish the Class II threat only as a last resort. Casino managers, after all, still prefer Class III devices. Class II rules require at least two players to log onto interlinked machines; the idea is that they’re playing against each other, not against the house.

A representation of a bingo card is generally part of the game display, even if the rest of the screen mimics the spinning reels of a slot machine. And players can’t just pull a lever or press a button to set the game in motion. Instead, they have to interact with the machine in a way that replicates daubing the numbers on a paper bingo card, either by hitting another button or poking at the screen.

“At heart it’s still a bingo game,” says Ed Rogich, vice president for marketing at International Game Technology Inc., which manufactures both Class II and III devices.

The bottom line is that Class II machines are much slower-playing than conventional slots, which is anathema to the house and reduces their appeal to slots aficionados. Lombardi estimates that they produce as little as 25% of the take of conventional machines.

At Pechanga, tribal gaming commission member Andrew Miranda expresses hope that Class II machines “are viable and playable.” But he adds that “we’ve never exposed them in a great number.” To say the least: When I dropped by the Pechanga casino last week, staffers told me that all of their Class II games had recently been removed, and I couldn’t find any on the floor.

This suggests, of course, that the big tribes may brandish the Class II threat only as a last resort.

Still, manufacturers keep trying to blur the line between the formats by producing machines they claim are Class II but play just like Class III.

State attorneys general have also tried, so far unsuccessfully, to narrow the definition of permitted tribal games. Such efforts have kept the National Indian Gaming Commission’s lawyers busy in court. “Congress did make it clear that there has to be a perceptible difference” between the classes, NIGC Chairman Philip N. Hogen says. But the 1988 act left so much ambiguity, he explains, the commission is now taking its third crack at establishing a dividing line.

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In the end, economics and politics will probably prove the deciding factors in the games’ spread in California, where the big tribes are faced with two tempting options: unlimited conventional slots carrying a price in revenue-sharing or regulatory constraints, or unlimited near-slots that don’t bring in as much cash -- but don’t come with strings attached, either.

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Golden State appears every Monday and Thursday. You can reach Michael Hiltzik at golden.state@latimes.com and read his previous columns at latimes.com/hiltzik.


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