Tribal Lottery System

What the tribal lottery system is

The Tribal Lottery System is a secured network comprised of servers, computers, player terminals, firewalls, switches, cashier terminals, kiosks and peripheral devices that communicate as a whole to provide the gambling experience in a casino. The Tribal Lottery System includes:

• An accounting system which is how cash, vouchers and player points are able to be used to make wagers on the machines. The accounting systems track the money in and out of the player terminals, cashier stations and kiosks, and track the day-to-day financial liability and income of the casino.
• The central determination system, which randomizes the electronic scratch ticket outcomes (wins/losses) and delivers them in a predetermined order to the player terminals.
• Player terminals which provide the graphical representation of each electronic scratch ticket outcome that is delivered to the player at each machine.

How do they work?

The quick answer is that they are linked lottery terminals where a central computer delivers a virtual "scratch ticket" to a player terminal, upon the request of a casino guest.

Am I playing by myself against the player terminal?

No. The virtual scratch tickets are dispensed from a finite "game set" that delivers tickets randomly to two or more terminals. The most common scenario is that players on the same bank (group) of machines are playing from the same game set.

How do the bonus rounds work?

Generally, the bonus rounds are for entertainment purposes only, and your interaction with the machine in these rounds has no impact on the outcome of the ticket that had already been delivered to your player terminal. Certain newer games (such as Monopoly) allow you to play more than one scratch ticket at the same time or give you as a prize the opportunity to play from a different game set.

What is the minimum payout for the machines?

Seventy-five percent of the wagers received must be paid back to customers for every game set put into play. Most casinos set the payouts much higher than this.

Who regulates the machines?

The primary regulators at the casino are the tribal gaming agencies (TGAs) of each tribe. Each casino is required to have at least one TGA agent on duty during gaming hours. TGAs must get involved in machine disputes if casino employees cannot resolve the issue. The Gambling Commission's Tribal Gaming Unit (TGU) agents conduct regular on-site visits that involve testing of the machines for compliance.

How are the machines tested?

Samples of each component in play are approved by an independent testing lab as well as the Gambling Commission's Electronic Gambling Lab. The machines in the tribal casinos must match those tested exactly. TGA's and state agents test the machines to ensure they are identical to approved prototypes.

History of the Tribal Lottery System

How the “Friendly Lawsuit” Began

The Indian Gaming Regulatory Act (IGRA), passed by Congress in 1988, permits tribes to conduct certain types of gaming (Class III) only if they enter into a compact with the state. IGRA requires states to negotiate in good faith with tribes regarding any form of gaming that is authorized in the state for any person or purpose.

From the outset of Gaming Compact negotiations between the State of Washington and the Tribes, the two sides could not agree as to whether slot machines and other machine games were legal in Washington, and subject to negotiation under IGRA. The Tribes argued that failure to negotiate for machines was an act of bad faith by the state.

IGRA provided for settlement of bad faith claims by filing suit in federal court. However, several states, including Washington, asserted that they were not subject to such lawsuits because of the State's sovereign immunity. The U.S. Supreme Court accepted this argument, effectively eliminating the dispute resolution process under IGRA where states assert immunity defenses.

In 1994, to resolve the impasse over slot machines, several tribes and former Governor Lowry and Attorney General Christine Gregoire on behalf of the State agreed to a limited waiver of immunity for the purpose of a consensual lawsuit (the "friendly lawsuit"). The parties agreed to present to the federal court the question of what types of gaming devices, if any, are permitted under Washington State Law, and they agreed to be bound by the decision of the court.

The Court’s Decision and Resulting Negotiations

On September 26, 1997, the court issued its order and held that the State was not required to negotiate slot machines, but that other gambling devices were subject to negotiation as long as they did not constitute:

1) Mechanical or lottery devices activated by the insertion of a coin or by the insertion of any object purchased by any person taking a chance by gambling in respect to the device.

2) Electronic or mechanical devices or video terminals which allow for individual play against such devices or terminals.

12 tribes that had tribal/state compacts for gaming negotiated a compact amendment with the Gambling Commission staff and the Attorney General's office over machines that fit within the Court's order. An "Agreement in Principle" was reached in June 1998 on a gaming device modeled after the state lottery.

Terms of the Proposed Compact Amendment (Appendix X)

A gaming system operated under the standards of the new amendment (Appendix X) would be called a “Tribal Lottery System” (TLS).

Types of Games:

Electronic "Scratch" Tickets with a finite number of tickets with a pre-determined number of winning tickets; or

On-line Lottery that was limited to 5 games to be consistent with the state’s lottery and drawings not less than every 30 minutes.

Systems would use an electronic "smart" card or other cashless instrument to place wagers.

• No cash in or out of the machines.
• System allowed winnings (credits) to be replayed.

Player terminals could not have handles or mechanical spinning reels.

Minimum prize payout for each game was 75%.

$5.00 was the maximum wager.

A 3-year moratorium on "machine" gambling negotiations began at the Governor’s signing of the Amendment. Alternative technical standards could be allowed.

Each tribe was allocated 425 player terminals for the first year with a possible increase to 675 player terminals after 12 months.

Each tribe could operate 1,500 player terminals per facility by leasing machine rights from other tribes.

Tribes would be required to make charitable and community contributions.

An independent testing lab would test system components, then the State would approve or disapprove, with samples of equipment delivered to the State for the purpose of determining compliance.

Timelines

A standing committee of the Legislature (Commerce and Labor Committee) held a public hearing on November 6, 1998; no comments were forwarded to the Commission.

The Gambling Commission had 45 days to hold hearings and to take a final vote on the amendments; was passed by a vote of 5:2 on November 12, 1998.

The agreement was forwarded to Governor Locke, who signed it on November 23, 1998.

Appendix X2

In 2006, the number of player terminals in the state was approaching the maximum allowed under Appendix X. The state and the tribes re-entered negotiations for a new compact amendment. The tribes wanted more player terminal allocations, higher wagers, unlimited hours of operation, and player terminals that accepted cash directly instead of just cashless instruments. The state wanted increased technical and operational controls on the tribal lottery systems, and support for smoking cessation and problem gambling programs. The resulting agreement was Appendix X2, which provided the following:

$20 wagers would be allowed on 15% of a tribe’s terminals.

Each tribe’s allocation increased to 975 player terminals.

Each tribe could operate 2,500 player terminals at a single facility by leasing machine rights from other tribes. Each tribe that operated two facilities could operate up to 3,000 player terminals combined between the two facilities.

The Muckleshoot, Puyallup, and Tulalip Tribes could each operate a maximum of 3,500 player terminals, which could increase to 4,000 player terminals after three years, but no more than 2,500 machines could be at a single facility.

Tribes would be required to make contributions to organizations that helped reduce problem gambling and to organizations that helped discourage tobacco use.

Tribes would set the operating hours of their casinos.

Technical and operational security measures to protect the tribal lottery systems were clarified and expanded.

In March 2007, Governor Christine Gregoire and twenty-seven tribes signed Appendix X2. Tribes began converting their tribal lottery systems to cash-in systems compliant with the new security requirements.

Appendix X2 Amendment

Appendix X2 Amendment authorized a number of changes.

• Tribes ensure all cash dispensing outlets and point of sale machines within its gaming facilities do not accept electronic benefits cards.
• Each Tribe’s allocation of player terminals increased 1,075. The maximum number of machines allowed at a facility did not change.
• Annual regulatory fees for each Tribe’s gaming activities shall be determined according to the State’s current cost allocation model, eliminates the 10% pre-payment discount, credit, and alternative regulatory fee agreement options, the State provides 90 days’ notice when changing the cost allocation model, the State shall provide an audited accounting of its actual costs by April 30th of the following year.
• Each Tribe’s annual contributions towards problem gambling and smoking cessation services established in Appendix X2 shall be paid within 1 year of the close of the Tribe’s fiscal year to match other required contribution timeframes.

Increasing terminal allocation

Each Tribe may increase its allocation by 50 player terminals, but only if the following conditions are met.

A tribe must provide the state with:

• Written notice that there are 500 or fewer player terminals available for lease among all Tribes participating in the Tribal Lottery System
• A certification from an independent accounting firm that confirms the number of machines available.

Within 30 days, the State reviews the certification and verifies the player terminals available for lease in the state. Any allocation change would be effective 30 days after notification by the State to the Tribe.

This allocation is limited to 1 per 12-month period.

If any Washington Tribe will operate more than 1,075 player terminals upon opening a new gaming facility, a Tribe can notify the State, and with State concurrence, receive an additional 50 player terminal increase within the 12-month period.

When a Tribe receives an increase under this section, any other compacted Washington Tribe shall receive the same increase.