Slot machine providers ‘not overly concerned’ about Oklahoma dispute By Howard Stutz, Executive Editor, CDC Gaming Reports December 18, 2019 at 3:30 am The war of words between Oklahoma’s Indian casino community and the state’s governor has caught the cursory interest of gaming equipment manufacturers. The companies, at least right now, believe the battle is just talk. They can’t imagine any disruption in the nation’s No. 2 Indian gaming state, which produces roughly 8% of total tribal casino revenue in the U.S. Oklahoma Governor Kevin Stitt, however, said recently that the state’s gaming compacts with 31 tribes, covering some 130 establishments, expire Jan. 1. He wants to negotiate higher exclusivity fees – currently ranging from 4% to 10% of revenues – that cover gaming activities where tribes offer Class III gaming. Annual revenues from the fees provide Oklahoma with $150 million. “While any restrictions on Class III gaming in Oklahoma could be a headwind, most operators believe a compact renewal agreement will be reached,” said SunTrust Bank gaming analyst Barry Jonas. Class III gaming covers commercial casino-style slot machines and non-card-based table games, such as craps and roulette. The slots operate with random number generators and are operated in conjunction with Class II games, slots where jackpots are determined through a central system. Tribes such as Cherokee Nation, Chickasaw Nation and the Choctaw Nation of Oklahoma have both Class II and Class III games. “Many Class III cabinets in (Oklahoma) can be converted to Class II in a worst-case scenario,” Jonas said. In the most recent Indian Gaming Industry Report from Casino City, Oklahoma’s tribal casinos produced $4.36 billion in gaming revenue and $753 million in non-gaming revenue. Both totals were the second highest in the nation behind California. The tribes operate almost 74,000 slot machines, a figure that has grown since the report came out earlier this year. California economist Alan Meister, who produces the report, said Oklahoma Indian gaming has experienced revenue increases for 15 straight years. WinStar World Casino “While there were more Class III gaming machines than Class II in Oklahoma, Class II machines continued to maintain a strong presence in the state,” Meister wrote. Statewide, Oklahoma’s gaming operations range in size from an annex at a gas station to the Chickasaw’s WinStar World Resort, a half-mile-long casino with more than 8,000 slot and video gaming machines and 99 table games. So why flip over the apple cart? The exclusivity fees are designed to limit states to tribal casino operations. At a SunTrust Bank-hosted investor conference last week at Encore Boston Harbor, Oklahoma came up in discussions with executives from International Game Technology, Scientific Games, AGS and Everi Holdings. Word leaked during the conference that Oklahoma’s governor was considering opening the state to commercial casino operators if the tribes weren’t willing to bargain. Stitt said he met with commercial casino executives in Las Vegas while attending the Western Governors Conference. However, the Republican governor – who is himself a member of the Cherokee Nation – said that his first priority is to strike a deal with the tribes. Jonas told investors that gaming equipment company representatives “did not seem overly concerned” about Oklahoma forcing the tribes to give up their Class III games. Management from Las Vegas-based AGS, which has a large presence in Class II and Class III games in Oklahoma, told the conference that many states oppose banning Class III slots. Oklahoma, they said, doesn’t want to lose the lucrative benefit from the games, which will likely continue to grow as the market expands. In an op-ed article in the Tulsa World in July, Stitt wrote that tribes with Class III slots in other states pay exclusivity fees of between 20% and 25%. But an Associated Press report found that tribal casinos in states bordering Oklahoma pay much less. Arizona’s fees range from 1% to 8%, and New Mexico’s from 2% to 10%. Voters in Arkansas approved a casino measure in 2018 that calls for fees from 13% to 20%, but the deal allows for commercial operators, not just tribal governments, to apply for a casino license. Oklahoma lawmakers and voters overwhelmingly approved tribal casinos in 2004. A legislative report that year stated the tribal compacts expire Jan. 1, but automatically renew for another 15 years, and that, at that time, any fees can be renewed. Stitt believes the courts will decide the issue. Oklahoma Chickasaw Meanwhile, tribal leaders say their contribution to Oklahoma goes beyond gaming revenues. #commentary – Slot machine providers ‘not overly concerned’ about Oklahoma dispute. –@howardstutz, CDC Gaming Reports. https://t.co/O9xVtUbeFS #CDCgaming — CDC Gaming Reports (@CDCNewswire) December 18, 2019 The Chickasaw pointed to a study conducted by Meinders School of Business at Oklahoma City University that revealed their tribe contributed more than $3.18 billion to the Oklahoma economy in 2015 alone. “Comparing commercial tax rates in other states to exclusivity fees paid by Oklahoma tribes is an apples-to-oranges comparison,” Kimberly Teehee, vice president of government relations for Cherokee Nation Businesses, told Associated Press. “Commercial casino operators do not pave roads in their states, build homes for people in their communities, provide college scholarships to needy students or keep hospitals open in rural, underserved communities.” Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at email@example.com. Follow @howardstutz on Twitter.