Montana Administrative Register Notice 23-16-260 No. 1   01/14/2022    
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In the matter of the amendment of ARM 23.16.101, 23.16.116, 23.16.117, 23.16.118. 23.16.119, 23.16.301, 23.16.508, 23.16.1703, 23.16.1704, 23.16.1705, 23.16.1713, 23.16.1714, 23.16.1802, 23.16.1901, 23.16.1904, 23.16.1911, 23.16.1918, 23.16.1920, 23.16.1922, 23.16.1931, and 23.16.3501 pertaining to transfer of interest among licensees, transfer of interest to new owners, shake-a-day games, changes in managers, sports pools and sports tabs, Electronic Player Rewards Systems, and procedure on VGM malfunction and the repeal of ARM 23.16.2115 pertaining to the use of AARS data for player tracking




















            TO: All Concerned Persons


1. On November 5, 2021, the Department of Justice published MAR Notice No. 23-16-260, pertaining to the public hearing on the proposed amendment and repeal of the above-stated rules, at page 1449 of the 2021 Montana Administrative Register, Issue Number 21.


            2. The department has amended ARM 23.16.101, 23.16.116, 23.16.118. 23.16.119, 23.16.301, 23.16.508, 23.16.1703, 23.16.1704, 23.16.1705, 23.16.1713, 23.16.1714, 23.16.1901, 23.16.1911, 23.16.1920, 23.16.1922, 23.16.1931, and 23.16.3501, and repealed 23.16.2115 as proposed.


3. The department has amended the following rules as proposed, but with the following changes from the original proposal, new matter underlined, deleted matter interlined:


23.16.117 TRANSFER OF INTEREST TO NEW OWNER (1) through (8) remain as proposed.

(9)  Transfers of control of a licensed gambling operation into a receivership, trust, an estate mandated by court order, or to an attorney in fact actually exercising control under a power of attorney require an amended application to be filed.  The transfer of ownership interest to an estate that results from the death of a licensee may be reported on Form 37.

(a) through (10) remain as proposed.


AUTH: 23-5-112, 23-5-115, MCA

IMP: 23-5-115, 23-5-118, 23-5-176, MCA


23.16.1802 DEFINITIONS (1) through (8) remain as proposed.

(9) "EPRS" (electronic player rewards system) means a stand-alone system that electronically acquires information from VGMs to be used for any purpose for the purpose of player rewards, as authorized by Title 23, chapter 5, MCA.

(10) through (31) remain as proposed.


AUTH: 23-5-115, 23-5-602, 23-5-621, MCA

IMP: 23-5-111, 23-5-112, 23-5-115, 23-5-151, 23-5-602, 23-5-603, 23-5-607, 23-5-608, 23-5-610, 23-5-611, 23-5-612, 23-5-621, 23-5-637, MCA



(4) VGM manufacturers must report software or hardware malfunctions on a completed Form 50A supported by all required documents. The Form 50A and supporting documents must be submitted to the department within 24 hours of the malfunction being reported to, or identified confirmed by, the VGM manufacturer.

            (5) and (6) remain as proposed.


AUTH: 23-5-115, 23-5-608, 23-5-621, MCA

IMP: 23-5-602, 23-5-607, 23-5-608, 23-5-616, 23-5-621, MCA


23.16.1918 TESTING FEES (1) Each person submitting an EPRS capable of interfacing with a VGM, VGM, AARS, or CTVS, or a modification to an approved EPRS capable of interfacing with a VGM, VGM, AARS, or CTVS for testing and department approval must:

(a) through (3) remain as proposed.


AUTH: 23-5-115, 23-5-621, MCA

IMP: 23-5-631, 23-5-637, MCA


4. The department conducted a public hearing on November 29, 2021, on the proposed amendment and repeal and accepted comments through 5:00 p.m., December 29, 2021. The department has thoroughly considered the comments received at the public hearing and those timely submitted in writing.  A summary of the comments received and the department's response follows:


COMMENT #1: An attorney, whose practice is centered on gambling and liquor licensees, business transactions, and estate planning, commented the proposed amendment to ARM 23.16.117, regarding powers of attorney, is overbroad. The commenter advised the amended rule could negatively impact many business owners whose routine estate plan includes a power of attorney which may never be used on the gambling operation. The commenter observed virtually all estate plans include a power of attorney. As proposed, the rule could be read to transfer an ownership interest upon the licensee's execution of a power of attorney–even if that power of attorney is never employed to exercise control of the gambling operation.


RESPONSE #1:  The department's intent for the proposed amendment was to include transfers of control under powers of attorney in the same general classification as transfers of control through court-ordered receiverships, trusts, or estates. The commenter's remarks are valid in that a power of attorney is a planned device which is prepared against an event (e.g., accident or serious illness) which may never occur so no transfer of control will occur. By contrast, transfers of control mandated by court order are not part of any individual's or business' preplanning and in every case will result in a stranger to the license assuming control. The proposed amendment will be improved by language limiting its application to attorneys in fact actually exercising control under a power of attorney. If a power of attorney does not result in the attorney in fact actually exercising control of a licensed gambling operation the department does not view ARM 23.16.117 to apply. If, however, an attorney in fact does apply his or her authority under a power of attorney there has been a transfer of control to a stranger to the license and the licensee must adhere to ARM 23.16.117.  The department will amend the rule accordingly.


COMMENT #2: The Montana Coin Machine Operators Association (association), through its representative, offered written comment. The association suggested the proposed amendment to ARM 23.16.1802(9) could be improved to clarify the scope of the definition. The association opined the proposed definition of an EPRS (electronic player rewards system) could be read to be overbroad, capturing systems that acquire VGM information for uses other than player rewards. The association requested limiting language.


RESPONSE #2:  The department concurs the proposed EPRS definition was intended to include only systems that acquire information for authorized player rewards purposes. The department will amend the proposed definition as suggested by the Montana Coin Machine Operators Association.


COMMENT #3:  A major VGM manufacturer submitted a comment regarding ARM 23.16.1904(4), recommending the department substitute the proposed 24-hour malfunction reporting period for a more indefinite reporting period such as "immediately." Alternatively, the commenter suggested a 48-hour reporting period to allow time in which to prepare a malfunction notification which is more in keeping with industry response standards.


RESPONSE #3: The department's aim in the rule amendment was to add manufacturers to those required to report suspected or confirmed VGM malfunctions. To protect the gambling public and gambling operators, the department must learn of malfunctions as soon as is practicable. To ensure prompt reporting, the draft rule established a 24-hour reporting period for manufacturers which is measurable and avoids concerns of vagueness from an indefinite period such as "immediately." However, it is not the department's intent to impose an unreasonable time deadline on manufacturers. To balance the public's and gambling operators' need for a rapid response against manufacturers' need for sufficient time to research a suspected malfunction, the department will amend the proposed rule to begin the 24-hour reporting period from the time a manufacturer "confirms" a malfunction through a prompt investigation.


COMMENT #4: The Montana Coin Machine Operators Association, through its representative, offered written comment. The association suggested the proposed amendment to ARM 23.16.1918 could be improved to clarify the scope of testing contemplated by the rule. The association observed HB 197 Section 1(9) provides, "If a player rewards system communicates with a video gambling machine, the department shall only test and approve the hardware interface and software interface to ensure that the player rewards system does not affect the play of the video gambling machine." The Association concluded the proposed language of ARM 23.16.1918(1)(b) could be read to allow GCD testing of updates on electronic player rewards systems which are unable to affect the play of a VGM.  


COMMENT #5:  Similar to Comment #4, the Gaming Industry Association, through its representative, offered oral comments at the public hearing and follow-up written comments concerning the proposed amendment to ARM 23.16.1918. As with Comment #4, the Gaming Industry Association suggested the rule is overbroad and could require GCD testing of EPRS that do not interface with a VGM's software or hardware. The Gaming Industry Association's proposed solution was to add clarifying and limiting language to require testing only if an EPRS interfaces with a VGM.


RESPONSES #4 and #5:  The department concurs the legislation, HB 197, disallows EPRS testing except where an EPRS may interface with VGM software or hardware. Though the statute controls, these industry groups remain concerned and suggest the rule could be improved with specificity. The department will insert new language expressly limiting EPRS testing fees to systems interfacing with a VGM.



/s/ Derek Oestreicher                                 /s/ Austin Knudsen             

Derek Oestreicher                                      Austin Knudsen

Rule Reviewer                                            Attorney General

                                                                   Department of Justice


Certified to the Secretary of State January 4, 2022.



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