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Tribes giving up revenues, exclusivity in compact
Wednesday, January 21, 2004

Oklahoma tribes will give up their hold on electronic gaming machines and share revenues with the state as part of an agreement announced by Gov. Brad Henry (D) on Tuesday.

The proposed compact, which requires legislative approval, bails out the failing racetrack industry. Owners of those facilities would be allowed to install the same casino machines that have become cash cows for some of the biggest tribes in the state.

"This legislation will help save jobs and produce new funding for education," Henry said. "It will save one industry, the horse industry, and allow the state to regulate and share in the revenue of another, tribal gaming."

The agreement applies to three racetracks: Remington Park in Oklahoma City, Blue Ribbon Downs in Sallisaw and Will Rogers Downs in Claremore. The Choctaw Nation recently purchased the Blue Ribbon Downs and, along with the other tracks, will be able to offer a specified number of machines in addition to pari-mutuel horse races, which are considered a form of Class III gaming under federal law.

The proposed compact also aims to resolve a particularly thorny area of Oklahoma's Indian gaming industry. It would ensure that tribes can offer certain electronic games without fear of violating federal law. The National Indian Gaming Commission (NIGC), a federal agency, has threatened to shut down facilities if they offer legally questionable machines.

The provision largely benefits three large tribes that were involved in discussions with Henry and horse racing executives. The Choctaw, Cherokee and Chickasaw nations offer more electronic games than any other tribes in the state and are willing to part with a share of their expanding empires.

Another potential winner includes Multimedia Games Inc. (NASDAQ: MGAM), a leading casino game manufacturer based in Texas. The three tribes are MGAM's biggest customers -- the Chickasaw Nation was threatened with fines for operating an MGAM product. The tribe settled after agreeing the machine could not be operated without a compact.

The proposed compact, called a "win-win" by Henry, tracks legislation that failed to clear the state Legislature last year. Language in that bill legalized machines produced by MGAM and Sierra Design Group, another game manufacturer. Additional details of the latest proposal are to be released at a meeting today, and could end up legalizing the machine that caused trouble for the tribes.

Last summer, state officials estimated a gaming compact could bring up to $30 million a year from tribal facilities. Now they say revenues could reach $80 million.

The numbers reflect surging interest in the Class II gaming market. Several companies are looking to challenge MGAM's presence and showed off some of their machines at the 9th annual Western Indian Gaming Conference, which was held in Palm Springs, California, last week.

The products are souped-up versions of bingo, but they mimic the look and feel of a slot machine, which aren't legal in Oklahoma. To clarify the difference between bingo machines and slots, NIGC has issued guidelines to tribes and the industry.

The Oklahoma compact would presumably free tribes from worrying about the guidelines. It would also relieve them of NIGC's authority, which they have considered too intrusive in the past couple of years.

Casino machines are the subject of two cases the Bush administration is asking the U.S. Supreme Court to review. In one case, two Oklahoma tribes successfully overturned NIGC's position on an electronic game. Reply briefs by the tribes are due this week and the next, unless an extension is granted.

The Choctaw Nation purchased Blue Ribbon Downs for $4.25 million in November. The tribe has received a state license to offer horse races. The tribe doesn't plan on placing the facility in trust, according a published report. The land is actually within the Cherokee Nation's jurisdiction.

Relevant Links:
Oklahoma Gov. Brad Henry - http://www.governor.state.ok.us
Multimedia Games - http://www.multimediagames.com
National Indian Gaming Commission - http://www.nigc.gov