Arizona Tribal Gaming Supplier Regulatory Overview

Introduction

The state of Arizona offers casino gaming only at Native American casinos located on tribal lands. The state does maintain the Arizona Department of Gaming (“Department”), which, in conjunction with tribal gaming commissions, licenses and regulates entities that supply goods or services to Native American gaming facilities as authorized under the various tribal-state gaming compacts.

There are currently 15 Native American tribes operating 22 Class III casinos in Arizona. In addition, the state allows tribes to execute “transfer agreements” that transfer one tribe’s right to operate slot machines to another tribe. Currently, tribes operate over 14,000 slot machines in the state, as well as a variety of table games. There are currently no state-licensed commercial casinos in Arizona.

It should be noted that, although each tribe maintains an individual compact relationship with the state, the state has negotiated the Arizona Tribal-State Gaming Compact, which sets forth terms and standards that apply to all tribal gaming operations in the state.¹ The information in this analysis focuses on the state certification process as it mirrors individual tribal licensing approaches in the state.

Vendor Certification Requirements

Those entities that supply goods or services to a tribal gaming facility in excess of $10,000 in a given year must apply for and receive vendor certification from the Department. It should be noted that exemptions exist for institutional investors, professional training service providers, large publicly traded corporations, and entertainers.² Interested persons must first contact the tribal gaming office and receive a sponsorship letter before applying for certification through the Department. Once the Department has received the sponsorship letter and basic information regarding an applicant, it will determine the appropriate forms to be completed by the applicant.

Duration

A vendor certification is valid for a period of two years.³

Fees

Manufacturers and distributors of gaming devices must make a certification fee payment of $5,000 with submission of the application. The renewal fee for a manufacturer or distributor of gaming equipment is $1,000.⁴

All other providers of gaming or non-gaming services must make a certification fee payment of $1,500 with submission of the application. The renewal fee for gaming service providers is $500.⁵

It is important to note that the individual tribe may also assess a fee in connection with its tribal gaming office’s review of the application materials and issuance of an individual tribal license.⁶

Required Documents and Information

The Department will determine the appropriate forms to be completed by an applicant once the sponsorship letter from the tribe and basic information regarding the applicant is processed. The Department has divided applicants into two groups, Group 1 and Group 2, with different forms to be completed by each group. Group 1 applicants generally must supply more detailed information as compared to Group 2 applicants. The following list includes information and documentation necessary to complete all the applicable forms, although some items may not apply depending on the applicant’s grouping.

In order to complete the state certification packet, the applicant must supply the following information:

1. Basic identity information;
2. Type of goods or services to be provided;
3. The identity and license number of the tribal facility where goods or services will be provided;
4. The organizational structure;
5. Tax reporting status;
6. Whether the applicant is registered with the Arizona Corporation Commission;
7. Identity of all officers and directors;
8. Identity of shareholders holding 10 percent or more ownership interest;
9. Whether the applicant is planning any mergers or acquisitions;
10. Terms on which securities were issued, past 10 years;
11. Remuneration to employees (other than officers and directors) exceeding $100,000 per year;
12. List of sales agreements with Native American tribes for the past 12 months;
13. List of outside experts used by the company;
14. Description of regulation by other governmental agencies;
15. List of gaming licenses issued or pending in other jurisdictions; and
16. List of all cash in banks.⁷

In order to complete the state certification packet, the applicant must supply the following documents:

1. If incorporated outside Arizona, a letter of good standing from the state where the applicant is incorporated;
2. IRS Forms: ADG-902, ADG-903, ADG 906, IRS 4506, ADR 285;
3. Certified copy of Articles of Incorporation or other organizing documents;
4. Organizational chart;
5. Audited financial statements, past three years;
6. Prospectus or information statements issued, past three years;
7. Summaries of past and current litigation;
8. Summaries of past violations or concerns regarding gaming licenses or the ability to conduct gaming in a regulated jurisdiction; and
9. If the applicant is a public company, all SEC filings within 30 days of their issuance.⁸

Key Persons Licensing Requirements

Certain key persons are required to file individual certification applications in connection with a corporate certification application. These individuals include officers, directors, and shareholders. The Department will determine which individuals must file an individual certification application after receiving the sponsorship letter and basic corporate information from the tribe with which the company will be conducting business.

Duration

Individual certifications issued in connection with a corporate application are tied to the corporate license and, therefore, the duration will be the same as the corporate certification.

Fees

There are no fees associated with an individual certification application as the fees are included in the application fee for the corporate entity with which the individual is associated.

Required Documents and Information

In order to complete the state certification packet for individuals, the applicant must supply the following information:

1. Basic identity information;
2. Marital information;
3. Education history;
4. Military history;
5. Arrest, detention, and criminal history;
6. Litigation history;
7. List of residences, past 10 years;
8. Employment history, past 10 years;
9. Character references from five individuals who are not family or employers;
10. Other professional or industry licenses held;
11. Past licensing disciplinary actions;
12. Financial interests in gaming ventures;
13. Relationships with individuals in the gaming industry; and
14. Detailed financial history.⁹

In order to complete the state certification packet for individuals, the applicant must supply the following documents:

1. Copy of DD-214, if applicable; and
2. Photograph.¹⁰

Licensing Process

The applicant must be approved both by the tribal gaming office and the Department.¹¹ To begin the certification process, an interested person or entity must first contact and receive a sponsorship letter from the tribal gaming office that oversees the casino or gaming facility. The letter is sent directly from the tribal gaming office to the Department, which, in turn, contacts the applicant and determines the appropriate certification forms that need to be completed. The Department will then review the application materials and conduct routine background checks in order to evaluate the applicant’s ability to conform with tribal-state compacts and regulations.

A temporary license to conduct business with a licensed gaming facility may be issued by the Department once a completed application has been submitted if the Department has a good-faith belief that the applicant meets the requirements compact.¹²

If an applicant is denied a certification by the Department, then the applicant may request a full hearing on the matter.¹³

An applicant may only withdraw a submitted application with the written permission of the Department.¹⁴

Disclosure and Reporting Requirements

Before License Is Issued

Any change in circumstance that would materially affect the information contained in an application must be reported to the Department and tribal gaming office.

After License Is Issued

If there is a change in the principals of a licensed entity, then the entity must notify the Department and any new principal must submit the appropriate certification and tribal licensing applications within 30 days of the change.¹⁵

An entity holding a certification must answer all reasonable requests for information made by the Department within fourteen 14 days of the request.¹⁶

Gaming Technology Standards

All of the tribal gaming compacts negotiated with the state maintain technical standards for gaming machines. Slot machines must payout at least 80 percent during the life of the game and video poker machines must pay out at least 83 percent during the life of the game.¹⁷ Compact terms also require that all machines be connected to an on-line monitoring system operated by the state.¹⁸ In addition, entities regulated by another governmental agency may be determined to be exempt from the vendor certification requirements.¹⁹

Exemptions also exist for institutional investors, professional training service providers, large publicly traded corporations, and entertainers.²⁰

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¹Arizona Department of Gaming website, 'Tribal-State Compacts,' March 24, 2011, http://www.gm.state.az.us/compacts.htm.
²Arizona Tribal-State Gaming Compact, 'Vendor Certification and Licensing Procedures,' Appendix J(I)(A).
³Arizona Tribal-State Gaming Compact, Sec. 5(i).
⁴Arizona Tribal-State Gaming Compact, Sec. 5(i).
⁵Arizona Tribal-State Gaming Compact, Sec. 5(i).
⁶Arizona Tribal-State Gaming Compact, Sec. 5(i).
⁷See Arizona Department of Gaming, Group 1- Initial Application Packet.
⁸See Arizona Department of Gaming, Group 1- Initial Application Packet.
⁹See Arizona Department of Gaming, Group 1- Initial Application Packet.
¹⁰See Arizona Department of Gaming, Group 1- Initial Application Packet.
¹¹Arizona Tribal-State Gaming Compact, Sec. 5(a).
¹²Agreement to Amend the Arizona Tribal-State Gaming Compact, Attachment 3, Sec. 5(n)(2), 'Temporary Certification,' effective March 25, 2009.
¹³Arizona Tribal-State Gaming Compact, Sec. 5(h).
¹⁴Arizona Tribal-State Gaming Compact, Sec. 5(r).
¹⁵Arizona Tribal-State Gaming Compact, Sec. 5(e).
¹⁶Arizona Tribal-State Gaming Compact, Sec. 5(f)(13).
¹⁷Arizona Department of Gaming website, 'Who We Are,' March 24, 2011, http://www.gm.state.az.us/aboutus.htm.
¹⁸Id."

In addition, each gaming compact contains a detailed list of technical standards for various gaming devices, components, and software. These standards are contained in Appendix A to each gaming compact, available at the Department’s website, http://www.gm.state.az.us/compacts.htm.

Exemptions

If the Department and a tribal gaming office agree that the certification of a vendor is not necessary to protect the public interest, then the state and tribal gaming office may waive the certification requirements. Gaming industry advisor Regulatory Management Counselors, P.C. authored this article. Visit the Gaming Advisors section of this website to find out more about gaming licensing and compliance advisors.