Introduction

Although California does not offer commercial casino gaming, the state contains several Native American tribes that offer varying levels of gaming activity. In addition, the state maintains the California Gambling Control Commission (“Commission”), which establishes licensing and internal control rules, as well as represents the state’s interest during the state-tribal compacting process.¹ In sum, licensing of suppliers to gaming establishment is regulated both by individual tribes and the state of California. This analysis will provide a general overview of the licensing guidelines for suppliers of goods or services to California gaming establishments and will discuss both Class II and Class III gaming regulation in the state.

There are currently 58 tribal casinos operated by 57 tribes in the state.² In total, the state has ratified gaming compacts with 67 tribes.³

For manufacturers and distributors of gambling equipment (defined in detail below), there is a registration process conducted by the state and a licensing and suitability determination that is conducted by the individual tribe.⁴

Class II Gaming

Tribes offering Class II gaming, typically in the form of bingo, may establish gaming rules and regulations solely through their tribal gaming commission and without the intervention of the state.⁵ Class II gaming must, however, be in accordance with National Indian Gaming Commission (“NIGC”) rules and federal law.⁶

In connection with each tribe’s self-regulation of Class II gaming, the NIGC requires all gaming-related ordinances and regulations to be approved by the NIGC prior to their implementation.⁷

Although the NIGC has put forth rules regarding the licensure of key facility management personnel and the establishment of certain management contracts, the rules do not put forth a system for vendor or supplier licensing. These requirements are established solely by the tribe with the approval of the NIGC.

Class II gaming machines, however, must meet the technical standards required by 25 C.F.R. § 547 et seq.⁸ As a general point, Class II machines are “electronic, computer, or other technological aids” for the conduct of Class II games.⁹

State Registration

The state of California, however, requires that all manufacturers or distributors of “remote caller bingo equipment, supplies, or services or card-minding devices” must receive a license from the state prior to conducting business.¹⁰ The entity must complete an interim license application that includes a $500 non-refundable application fee and fingerprint cards.¹¹

Class III Gaming – Tribal Process¹²

Compact provisions generally require the licensure of “[a]ll persons in any way connected with the Gaming Operation or Facility…including, but not limited to…Gaming Resource Suppliers.”¹³ Tribes may establish independent regulations regarding licensing or may work in cooperation with the Commission to evaluate the suitability of applicants. However, some compacts may require that all license applicants submit to parallel tribal and state review processes in connection with their background and suitability determination.¹⁴

In connection with the suitability determination required by compact provisions, the tribe may contract with the state agency to conduct the required background checks.¹⁵

Entity Licensure

Gaming licenses issued by the tribe may not exceed two years in duration and applications for renewal must be received prior to the current license expiration date.¹⁶

Compact provisions require that any entity “who, directly or indirectly, has provided, or is deemed likely to provide at least twenty-five thousand dollars ($25,000) in Gaming Resources in any 12 month period” to be licensed by the tribal gaming agency as a Gaming Resource Supplier.¹⁷ "Gaming Resources" is defined as:

…any goods or services provided or used in connection with Class III Gaming Activities, whether exclusively or otherwise, including, but not limited to, equipment, furniture, gambling devices and ancillary equipment, implements of gaming activities such as playing cards and dice, furniture designed primarily for Class III gaming activities, maintenance or security equipment and services and Class III gaming consulting services. “Gaming Resources” does not include professional accounting and legal services.¹⁸

In addition, “Gaming Activities” is defined as “the Class III gaming activities authorized” by the individual compact.¹⁹

The tribe may not issue a gaming license unless it is satisfied that the applicant meets all of the following criteria:

1. The applicant is of good character, honesty, and integrity;
2. The applicant’s background does not indicate that the applicant will pose a threat to the public interest or to the integrity of gaming; and
3. The applicant meets all tribal, state, and federal requirements for licensure.²⁰

Principals

Compact provisions may require that the tribe apply the same provisions regarding licensure of entities to:

(i) each of its officers and directors; (ii) each of its principal management employees, including any chief executive officer, chief financial officer, chief operating officer and general manager; (iii) each of its owners or partners, if an unincorporated business; [and] (iv) each of its shareholders who owns more than 10 percent of the shares of the corporation, if a corporation…²¹

Class III Gaming – State Process

Gaming Resource Suppliers

In addition to the tribal process mentioned above, those Gaming Resource Suppliers who must apply for licensure under a tribal gaming compact must also apply for state registration.

1. Duration and Fees

For each business entity, there is a $500 application fee and a $20,000 background investigation deposit due when the application is submitted. Unused portions of the background investigation deposit will be refunded to the applicant.²² The duration of the license will depend on the type of business conducted and the agreement between the applicant and the tribal gaming facility.

2. Application

In order to complete the necessary application forms, the following information is required:

1. Basic identity information;
2. List of gaming licenses issued to the applicant in any other jurisdictions;
3. Type of organizational structure; and
4. List of shareholders holding greater than 10% ownership or who hold significant influence over the organization.²³

In order to complete the necessary application forms, the following documents must be provided:

1. Current organization chart;
2. Copy of Secretary of State annual certification; and
3. List of current tribal gaming licenses in California and/or other states.²⁴

It should be noted that Principals of Gaming Resource Suppliers must complete the same application as entities. Individuals, however, must also provide two FBI Fingerprint Cards (if a non-California resident) or a Live Scan Service Form (if a California resident).

Manufacturers of Gaming Equipment

The Commission regulates manufacturers and distributors of gaming equipment through its regulations.²⁵ The Commission has established two classes of manufacturers and distributors: Class A and Class B.

In addition, each tribe offering Class III games operates in accordance with an individual compact negotiated between the tribe and the state government. It is important to note that the Commission will exempt from state registration any Class B manufacturer or distributor of gambling equipment if that entity is “subject to requirements of a Tribal Gaming Agency pursuant to a uniform regulation (1) that has been approved by the Association of Tribal and State Gaming Regulators, and is in effect [pursuant to compact provisions], and (2) that includes the requirements…to provide quarterly reports to the Commission pursuant to [individual compact provisions].”

1. Class B Manufacturer or Distributor

Manufacturers and distributors are “any person that manufactures, including the assembly, production, programming, or modification of, distributes, sells, leases, inspects, tests, repairs, refurbishes, or stores gambling equipment in this state or for use in this state.”²⁶ These entities must be registered according to their classification under Commission regulations.²⁷

The Commission defines as Class B:

…any manufacturer or distributor that has no place of business in the State of California and that does not transport gambling equipment to a destination within the State of California, other than transportation of gambling equipment from an out-of-state location to a tribal gaming facility in this state in compliance with…the applicable Tribal-State Gaming Compact.²⁸

Class A consists of all manufacturers and distributors not covered by the above definition.²⁹ Because Class A only covers in-state manufacturers and distributors, this analysis will focus primarily on Class B applicants.

Furthermore, the Commission has put forth a specific definition of the term “Gambling Equipment.” This term is defined as:

…any slot machine or device as defined in…the Penal Code. “Gambling Equipment” also includes (A) any essential part and (B) any inoperable slot machine or device that is substantially complete and repairable or that can be made operable with the installation or one or more essential parts.³⁰

Under the California Penal Code, slot machines are defined as follows.

…a machine, apparatus, or device that is adapted, or may readily be converted, for use in a way that, as a result of the insertion of any piece of money or coin or other object, or by any other means, the machine or device is caused to operate or may be operated, and by reason of any element of hazard or chance or of other outcome of operation unpredictable to him or her, the user may receive or become entitled to receive any piece of money, credit, allowance, or thing of value…³¹

2. Registration

In order to register to operate as a manufacturer or distributor of gambling equipment, an entity must provide the following information with supporting documentation:

1. Basic identity information;
2. Address of each establishment in California where the applicant conducts business involving gambling equipment, including storage facilities;
3. A statement specifying the business that the applicant engages in with regard to gambling equipment;
4. Whether the applicant is a Class A or Class B manufacturer or distributor;
5. The identity, address, and contact information for the applicant’s CEO or equivalent;
6. A copy of the licensure or authorization to manufacture or distribute gambling equipment in the applicant’s principal jurisdiction of residence;
7. A copy of the applicant’s federal registration under the Gambling Devices Act of 1962 or a statement of why the applicant does not have such a registration;
8. Whether the manufacturer or distributor has currently designated an agent for service of process in California and his or her registration with the California Secretary of State; and
9. A declaration that the application is accurate and complete within the personal knowledge of the individual completing the application.³²

There are no initial application or renewal fees associated with a Class B registration.³³

3. Reporting Requirements

Entities that are registered as a manufacturer or distributor of gambling equipment must provide information and reports to the Commission on a continuing basis. These include a quarterly report noting details regarding each shipment, sale, lease, or transfer of gambling devices to a facility located in the state.³⁴ The registered entity must also notify the Commission whenever there is a shipment to a tribal gaming facility, in accordance with the procedures put forth in the tribal-state gaming compact.³⁵

In addition, the registered entity must advise the Commission, in writing, of any new California business location or termination of any existing California business location within 15 days of the change.³⁶

Registered entities must also submit to any reasonable request for information from the Commission regarding their business in the state.³⁷

¹For a more detailed mission statement, please visit the California Gambling Control Commission’s website at: www.cgcc.ca.gov/?pageID=aboutus&pageName=About%20Us.
²California Gambling Control Commission, 'Tribal Casino Locations.'
³California Gambling Control Commission, 'Ratified Tribal-State Compacts.' For a complete listing with links to each individual compact, please visit the Commission’s website at: www.cgcc.ca.gov/?pageID=compacts.
⁴See California Gambling Control Commission, 'Manufacturers and Distributors of Gambling Equipment,' www.cgcc.ca.gov/?pageID=manufacturersDistributors&pageName=Licensees%20and%20Registrants.
⁵See 25 C.F.R. § 518 et seq.
⁶See 25 U.S.C. § 2704 et seq.
⁷See 25 C.F.R. § 522 et seq. Note that this section also applies to all Class III gaming regulations.
⁸For the language of this section, please follow the following link provided by the NIGC: www.nigc.gov/LinkClick.aspx?link=NIGC+Uploads%2flawsregulations%2fcommissionregulations%2fSEC.547.pdf&tabid=104&mid=761.
⁹25 C.F.R. § 547.1.
¹⁰California Gambling Control Commission, Regulation 12492(b).
¹¹California Gambling Control Commission, Regulation 12492(d)(2).
¹²Note that each individual tribe maintains individual licensing requirements and procedures. For purposes of this analysis, the Tribal-State Compact Between The State of California And The Barona Band Of Mission Indians was used to give general examples of compact provisions.
¹³Tribal-State Compact Between The State of California And The Barona Band Of Mission Indians, Sec. 6.4.1.
¹⁴Tribal-State Compact Between The State of California And The Barona Band Of Mission Indians, Sec. 6.5.6.
¹⁵Tribal-State Compact Between The State of California And The Barona Band Of Mission Indians, Sec. 6.4.8.
¹⁶Tribal-State Compact Between The State of California And The Barona Band Of Mission Indians, Sec. 6.5.2.
¹⁷Tribal-State Compact Between The State of California And The Barona Band Of Mission Indians, Sec. 6.4.5.
¹⁸Tribal-State Compact Between The State of California And The Barona Band Of Mission Indians, Sec. 2.11.
¹⁹Tribal-State Compact Between The State of California And The Barona Band Of Mission Indians, Sec. 2.4.
²⁰Tribal-State Compact Between The State of California And The Barona Band Of Mission Indians, Sec. 6.4.3.
²¹Tribal-State Compact Between The State of California And The Barona Band Of Mission Indians, Sec. 6.4.7.
²²Application for Finding of Suitability, Gaming Resource Supplier/Financial Sources Provider (Vendor), p. 1.
²³Application for Finding of Suitability, Gaming Resource Supplier/Financial Sources Provider (Vendor).
²⁴Application for Finding of Suitability, Gaming Resource Supplier/Financial Sources Provider (Vendor).
²⁵See California Gambling Control Commission, Regulation 12300 et seq.
²⁶California Gambling Control Commission, Regulation 12300(b)(7).
²⁷California Gambling Control Commission Regulation 12301(a).
²⁸California Gambling Control Commission, Regulation 12300(b)(2).
²⁹California Gambling Control Commission, Regulation 12300(b)(2).
³⁰California Gambling Control Commission, Regulation 12300(b)(5).
³¹Cal. Pen. Code § 330b.
³²California Gambling Control Commission, Regulation 12301(b)(1)-(9).
³³California Gambling Control Commission, Regulation 12301(b)(10)(A).
³⁴California Gambling Control Commission, Regulation 12303(a)(1).
³⁵California Gambling Control Commission, Regulation 12303(a)(1)(D).
³⁶California Gambling Control Commission, Regulation 12303(a)(2).
³⁷California Gambling Control Commission, Regulation 12303(a)(3)-(5).

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.