Modernizing Nevada’s gaming regs

I saw this story in the Las Vegas Sun and decided to investigate further. Governor Sandoval, in his State of the State address, very briefly called for the modernization of Nevada’s gaming laws. Here’s the entire relevant extract from the speech:

Since I completed my term as chairman of the Nevada Gaming Commission, the gaming entertainment industry has expanded to new states and many new corners of the world. Competitive forces demand a new approach from our regulatory infrastructure. In an increasingly competitive and global economy, Nevada will be “the” place for gaming innovation. Nevada started this industry. We shaped its development, and we must remain the undisputed leader in the gaming economy. Twenty-first century demands mandate that we provide a flexible environment for the technological resources that are the underpinning of modern gaming devices. I have asked the leadership of our regulatory bodies to begin immediately to process statutory and regulatory changes that sensibly reflect the modernization of the industry.

GOVERNOR BRIAN SANDOVAL
STATE OF THE STATE ADDRESS
(pdf)

FYI, Sandoval was chair of the commission from 1999 to 2001; when he left, most casino slots still paid out in coin, the only servers on the gaming floor were toting cocktails, and Stanley Ho’s STDM still had a monopoly on Macau gaming. So there have been significant changes in the business in the last decade, and he’s right to call for modernization.

I don’t see any sweeping changes, since the consensus seems to be that you don’t fix what isn’t broken. I’d expect changes more along the lines of this (pdf), which are extremely technical, rather dry, and absolutely essential to the continued growth of the industry.

Evolution of MO blacklist

Interesting article in the St. Louis Post-Dispatch over the weekend about the evolution of Missouri’s casino blacklist:

For years, the crimes that barred gamblers from Missouri casinos read like Mafia movie plots.

Men with ties to Kansas City's notorious La Cosa Nostra ran illegal betting rings, threatened witnesses and skimmed money from Las Vegas casinos, according to FBI testimony. And the state, seeking a Mob-free gambling industry, banned each from Missouri's riverboats.

But that was more than 10 years ago. The blacklist is dealing from a new deck, and blackballing a different kind of professional: the public servant.

via Public servants are big fish in gambling blacklist net – STLtoday.com.

In general across the US there’s been a shift towards using it more for gaming-related offenses–cheating and the like–than organized crime affiliations.

If you’d like some cautionary reading, you can browse Nevada’s list of excluded persons or New Jersey’s exclusion list.

Prive investigation and gaming regulation

There’s a great article by Liz Benston in the LV Sun today about the investigation that ultimately deprived a nightclub of its license:

Managing a Las Vegas nightclub requires the deft and daring skill of operating a party environment that almost crosses the line into illegal activity. Anything less would be considered too tame to generate a buzz.

Planet Hollywood knew its tenant, the Prive nightclub, was crossing the line but didn’t stop it, and gaming regulators pounced.

Last week Planet Hollywood agreed to pay a $500,000 fine to the Gaming Control Board after acknowledging it knew of illegal and illicit activities occurring at the club, which operates on the mezzanine level above the casino. On Thursday the county denied the club a permanent liquor license, forcing its closure at midnight Tuesday, when its temporary liquor license expired. The club opened less than two years ago.

As a result of the unprecedented enforcement action against Planet Hollywood for allowing a nightclub to run wild, contracts between hotels and their nightclubs are now being rewritten to give the hotels greater authority to lay down the law with nightclub managers.

via Is the party over for Prive? – Las Vegas Sun.

If you haven’t already, I encourage you to click over and read the whole thing.

The goings-on at Prive bring up a deeper issue that I alluded to in a story about Randall Sayre’s 7/21 Industry Letter (pdf). Here’s most of the letter:

Recently there has been a great deal of attention focused on nightclub operations affiliated with Nevada licensees. Clearly, this is an important issue which, if
left unattended, can lead to serious regulatory ramifications. In addition to nightclub operations, there are a number of other areas where
regulatory concerns have surfaced. Either through lack of knowledge or apathy, licensees are creating regulatory challenges in areas requiring corrective action. Following are just a few examples of these areas of interest:
• The conduct of promotions;
• Approval and conduct of tournaments and charitable events;
• Race and Sports Book Operations;
• Intellectual property theft; and
• Questionable or misleading advertising
The vast majority of this State’s licensees attempt to “get it right” and any indiscretions are typically addressed in a non-disciplinary fashion with the cooperation
of the licensee. The Board recognizes these are hard economic times and licensees are facing increased competitive pressures. This does not mean, however, the Board
can allow a reduction in the regulatory standards governing licensees’ operations. In order to reduce disciplinary actions and foster open communication between
the Board and gaming licensees, the Board is proposing informal seminars covering our collective areas of concern. These seminars would allow the Board to identify some
common pitfalls frequently seen and provide an opportunity for the industry to voice their challenges and concerns. The process will also provide any needed clarification of
governing statutes and regulations.
This would be an operator’s workshop, not a formal seminar on law. The appropriate audience would be mid-level supervisors and program managers. It would
be property individuals that are responsible for following and enforcing policy and legal/regulatory requirements.

I hope that Sayre is successful in getting the casinos to send their managers to these workshops. This is the kind of program that they should be thankful for. Here’s why:
Imagine a homeowner throwing a party. During the course of the night, things get a little loud. The police are called. Should they break down the doors and immediately rest everyone for disturbing the peace, or knock on the door, ask to homeowner to keep it down, and see what happens?

The first option preserves public order and minimizes the burden on law enforcement–imagine if they had to arrest, transport and book everyone in the house, instead of policing the rest of their jurisdiction. Of course, if things get loud again and noise complaints continue, they would have to take “corrective action,” but usually, a little reminder of neighborly courtesy is enough.

This is essentially Sayre’s approach. Some parts of the regulations casinos operate under–the Minimum Internal Control Standards–are completely unambiguous. You’re either in compliance with them, or not. Others are more nebulous. Take, for example, NRS 463.0129, the backbone of gaming regulation in Nevada:

NRS 463.0129 Public policy of state concerning gaming; license or approval revocable privilege.

1. The Legislature hereby finds, and declares to be the public policy of this state, that:

(a) The gaming industry is vitally important to the economy of the State and the general welfare of the inhabitants.

(b) The continued growth and success of gaming is dependent upon public confidence and trust that licensed gaming and the manufacture, sale and distribution of gaming devices and associated equipment are conducted honestly and competitively, that establishments which hold restricted and nonrestricted licenses where gaming is conducted and where gambling devices are operated do not unduly impact the quality of life enjoyed by residents of the surrounding neighborhoods, that the rights of the creditors of licensees are protected and that gaming is free from criminal and corruptive elements.

(c) Public confidence and trust can only be maintained by strict regulation of all persons, locations, practices, associations and activities related to the operation of licensed gaming establishments, the manufacture, sale or distribution of gaming devices and associated equipment and the operation of inter-casino linked systems.

(d) All establishments where gaming is conducted and where gaming devices are operated, and manufacturers, sellers and distributors of certain gaming devices and equipment, and operators of inter-casino linked systems must therefore be licensed, controlled and assisted to protect the public health, safety, morals, good order and general welfare of the inhabitants of the State, to foster the stability and success of gaming and to preserve the competitive economy and policies of free competition of the State of Nevada.

(e) To ensure that gaming is conducted honestly, competitively and free of criminal and corruptive elements, all gaming establishments in this state must remain open to the general public and the access of the general public to gaming activities must not be restricted in any manner except as provided by the Legislature.

The key here is the requirement that licensees “protect the public health, safety, morals, good order and general welfare of the inhabitants of the State, to foster the stability and success of gaming and to preserve the competitive economy and policies of free competition of the State of Nevada.” Technically, a casino could have its license revoked for a kitchen worker forgetting to wash his hands after using the bathroom–that is, after all, endangering the public health. Should that happen? No, because no one would be willing to build a multi-billion casino if their license rested on such a slender thread.

I’m aware that there is some disconnect–some might call it hypocrisy or at least confusion–in the idea of casinos as watchdogs of “morals” when the bulk of promotion for Las Vegas in the past few years has been geared towards proving that the city is a place without morality. But it’s clear that, in the minds of the industry and its regulators at least, that there is immorality and then there is immorality. Gambling more than you should is OK; cheating on your spouse with a consenting adult is OK; engaging in public sex or, if you a prostitute, soliciting clients in casinos is not. I’m not saying that drawing the line between these things is logical, or even rational; I’m just saying that it’s there, and everyone in the industry knows it.

A lot of things that Sayre makes reference to blur that line between permissible and impremissible immorality. The letter is the Control Board’s offer to work with the industry to clarify exactly where the line is, to explain what will put licensees in clear violation of NRS 463.0129. With this letter, the GCB is saying that, regardless of what’s been going on until now, here’s how things are going to run from now on. They’re doing this without staging intrusive raids or indiscriminately levying fines for things in this gray area.

If the operators don’t take the Board up on its offer, they will be out of excuses if they are tabbed for “corrective action.” They have an out–”I didn’t know that was a violation”–and if they don’t take it, they’ll only have themselves to blame.

Slotless bars in topless clubs

The state of Nevada gives you a pretty wide berth when it comes to where you put your slot machines. Mostly they are in age-restricted places like casinos and bars, but you can also find them in family-friendly supermarkets and airports. At the Reno-Tahoe Airport, you can literally buy a Happy Meal just feet away from the slots. I don’t know what that means, but I guess it means something. And I recommend the Mexican place there over the McDonald’s any day–the made-to-order nachos are certain to fill you up and rival the best restaurant offerings.

That’s a very long intro to this piece from the LV Sun about putting slot machines in strip clubs:

Strip clubs are, in the eyes of Nevada gaming regulators, not like restaurants, convenience markets or grocery stores.

And we’re not talking about the obvious differences. The three members of the Gaming Control Board say they don’t care whether the women working at the clubs are wearing tops.

They do care when entertainers, typically contract workers rather than company employees, solicit customers for sex and drugs or encourage violation of local “no touching” ordinances.

That’s what happened at Topless Girls of Glitter Gulch, a downtown strip club whose attempt to get a slot machine license was shot down by the Gaming Control Board this month after gaming agents making a visit to the club were solicited for prostitution and drugs.

“The activities … were egregious and obvious,” board member Randy Sayre said.

Strip clubs shouldn’t expect looser slot rules

Which begs the question: if these places aren’t suitable for gaming licenses, should their liquor licenses be revoked as well? It shouldn’t take the GCB to determine that some strip clubs are obviously soliciting patrons for prostitution and drugs.

From a consumer standpoint, of course, none of this makes much sense, and I understand why tourists don’t understand that they can choose either slots with a beer chaser or nude girls, but not both at once.

I don’t think putting slots in will do the strippers any favors–a lot of 20s are going to be going into the bill validators instead of g-strings. Maybe stripping and gambling are two things that are better left apart.

Unrestricted not so easy

A few months ago I listed the myriad things that you need to disclose when applying for a non-restricted casino license. Apparently Chet and Karla Cox aren’t regular readers, because they applied for a license without getting an attorney, and hit a few roadblocks. From the LV Sun:

Although Silver State would handle the filling, emptying and repairing of slot machines, regulatory reporting and player disputes would fall to the Coxes’ son, a college graduate with construction experience but little gaming experience.

Though C.J. Cox pledged to be on call at all hours, board member Randy Sayre said the young man still would be operating “under a learner’s permit.”

Clayton, noting that third-party operator Golden Gaming had been running the Coxes’ slot machines for more than a decade, raised another key question about the couple’s proposal.

“If the experience hasn’t been learned over the past 14 years, how can we be comforted that it is going to be learned in the next couple of years under this arrangement?” Clayton asked.

The Coxes also made omissions and mistakes on their license application.

The errors seemed innocent enough. They failed, for example, to disclose lawsuits that gas station managers handled and forwarded directly to insurance carriers without involving the Coxes.

They also neglected to mention a property they owned: a home inhabited by Chet’s mother that, for all intents and purposes, belonged to her even though it was in her son’s name. Then there was the fact that their company hadn’t notified Clark County’s Business License Department when it began operating slots at gas stations. And the Coxes also erred when they transferred ownership of a location without first seeking the board’s approval.

After receiving multiple notices from the board regarding the problems, the Coxes hired a gaming attorney midway through the licensing process to correct the mistakes and patch things up with regulators.

Mom and pop roughed up in gaming license bid – Las Vegas Sun

This has been a real week for me hearing about the license process. Last Friday, I was on a panel with former GCB member Bobby Siller, who talked about his time on the Board and his role in the licensing process. Mr. Siller is a great guy who, as I was flattered to learn, had actually read some of my work. That’s gratifying because I’ve been a big fan of his for years–to the extent that you can be a fan of a state regulator. Talking with him for a few minutes reminded me why–he has a real sense for the big picture of Nevada regulation, which is about more than statues and minimum internal control standards–it’s about the net effect on the community. Super nice guy, too, but I wouldn’t want to walk into a GCB hearing unprepared on his watch.

Then on Tuesday I moderated a panel with current GCB member Randy Sayre, who gave his perspective on the process. Member Sayre (I learned that’s what you call GCB members, particularly in a juridicial context) has had a 27-year career with the GCB, and had pinpoint accuracy on a wide range of administrative and regulatory issues.

After a question about reciprocity between the gaming boards of various states, I hit Member Sayre with a follow up: What about Columbia Sussex, which has been denied a license in one jurisdiction and is scuttling quickly out of at least one more?

Sayre responded that the GCB was taking the issue seriously, and that there was a process for determining if another state’s license denial was justified or unjustified. There’s been a history of Nevada allowing licensees that New Jersey has denied–Hilton Hotels (circa 1985) & Caesars World (circa 1979), for example. As one 1 of 8 people (3 GCB members, 5 Gaming Commission members) in the process, Member Sayre wasn’t about to publicly talk about the specifics of the case before the process was finished. Likewise, without having access to the material that they do, I can’t say whether the GCB should make a recommendation one way or the other–though I think it’s certainly worth investigating. I get the sense that this is going to be a process that is ultimately fair to everyone, particularly the people of Nevada.

With tax season just behind us (unless you got an extension), many of us feel intruded upon. But trust me–you’ve got nothing on people who need to go before the GCB and get (or keep) a gaming license.

2007 NV gaming digest posted

For you short attention-span Gaming Abstract junkies out there, Christmas came a little early this year. I’ve completed and posted a convenient 1-pdf breakdown of the 2007 Nevada gaming win. If you don’t want to click through, here are some high points:

Total money gambled:
Slots: $138.7 billion
Tables: $32.3 billion
Total: $171 billion

Casino win:
Total slot win: $8.5 billion
Total table win: $4.2 billion
Total gaming win: $12.8
(They don’t add up because of rounding)

The collective house only kept about 7.5 cents of each dollar gambled.

There were fewer gaming positions in 2007 than 2006, but handle (amount wagered) was up by $1 billion and revenues were up by abut $200 million. So people gambled more on fewer machines. Let’s call it an increase in gaming efficiency.

I know that the GCB released the numbers last week, but I’m doing much better this year than last: I didn’t get the 2006 totals posted until June last year. The funny thing is that I started getting calls and emails in the first week of January wondering when the new breakdown would be posted.

My hat’s off to the numbers-crunchers over at the GCB. They’ve got to work with data coming in from hundreds of locations, not all of which place as high a priority on the revenue reports as we do.

IP jackpot dispute

This came up last week, but I’m just getting around to it today. It’s from the Sun-Herald:

The three-member Mississippi Gaming Commission ruled unanimously Thursday that a gambler should be paid $1 million in a jackpot dispute, but a lawyer for the IP Casino said he expects the decision to be appealed.

The slot machine was mistakenly programmed to be a stand-alone progressive.

The casino contends the gambler is owed only $8,000 because that’s what the machine advertised. The machine, owned by IGT and leased to the casino, can be used as a standard slot or a progressive. An IGT technician set the progressive option when the casino had ordered a standard slot.

Florida Eash of Biloxi hit the jackpot Feb. 19, 2006. The machine lit up, informing her she had won $1 million. When casino employees told her the jackpot was $8,000, she requested the Gaming Commission investigate.

Gaming agents decided in favor of Eash and so did Larry Gregory, the agency’s executive director. The casino appealed that decision to Joan Myers, the agency’s hearing examiner. She decided in favor of the casino, ruling the contract between the gambler and the casino is spelled out on the machine’s signage.

The Gaming Commission on Thursday reversed the hearing examiner’s ruling after reviewing officials’ reports and transcripts.

Eash, who is in the real estate business and bet around $52,000 on table games and slots at the casino between December 2005 and February 2006, had represented herself before the hearing examiner. The casino had four lawyers.

The Sun Herald | 03/16/2007 | Woman wins jackpot dispute

Usually these disputes are settled in the house’s favor, so this caught my eye.

Russian casinos iced

Russia’s casino industry has seen explosive growth in the past few years, but things are changing. From the Miami Herald:

Garish or goofy or grim, Russia’s casinos and slot-machine halls are some of the most vivid testimony to communism’s collapse.

But, under legislation approved Wednesday by Russia’s lower house of parliament, the $6 billion industry is to be driven out of Moscow, St. Petersburg and most of the rest of Russia.

Once the bill is signed into law, gamblers will have only until mid-2009 to lay their bets in Russia’s major cities. After that they’ll have to go to a remote part of Siberia or three other regions distant from Moscow.

”These are repressive measures — essentially they amount to a ban,” said Yevgeny Kovtun, vice president of the Association of Gambling Businesses, which unites about 30 gaming companies.

With the exception of a drab national lottery, Soviet citizens had no outlet for their speculative urges. That changed with the arrival of capitalism: Neon-decked casinos sprouted in big cities — the exterior of one in Moscow looks like a steamship — some offering prizes of luxury cars or $1 million in cash. Slot-machine halls have appeared throughout the country, sometimes even next to schools.

Russia’s oil-driven economic upswing of recent years sent new cash to the gaming tables. But a public backlash has grown.

”This is a business based on vice. It brings no good,” said Vladimir Medinsky, deputy chairman of the parliament committee that drafted the legislation.

”It hasn’t been banned altogether, because it is a natural vice and should therefore be controlled,” he told The Associated Press.

Industry players say that while limitations are needed, a complete ban except for the gaming zones is harsh and could kill the industry. The restrictions, they say, assume Russians will be ready to jump on a plane and fly to the taiga — the sub-Arctic forest region — to make a bet.

”In the U.S. people know about Las Vegas from childhood, but in Russia gambling tourism doesn’t exist,” Kovtun said. “Before, a person would pop into a casino or slot-machine hall between the metro and his house. Now . . . the gaming companies will have to entice him to the Pacific coast.”

The zones, which are currently infrastructure-free wilderness, are located in the Altai region in Siberia, the Pacific coast region of Primorsky, the Kaliningrad area along the Baltic coast and an area in Russia’s south between Rostov and Krasnodar.

MiamiHerald.com | 12/21/2006 | Russia freezes gambling, sends it to Siberia

So we’re going to see Las Vegas in the Altai? Stranger things have happened. It will all boil down to infrastructure and marketing.

Russians veto casino bill

The Russian State Duma–their version of parliament–voted down a bill that would have created a new regulatory framework for Russian casinos. Existing regulation, it seems, is something of a slapdash affair. From RIA Novosti:

The bill’s doom does not mean gamblers and casino proprietors have several more years to enjoy the absence of related legislation, some happily drawing super-profits, others squandering their money, as before. The fate of the Russian gambling business is sealed, bill or no bill. Debates on the issue have been raging for years, with numerous arguments for and against. The State Duma discussed bills, one after another. Authorities took the hard line in some parts of the country. For example, all casinos and slot machine halls were closed within two days in Chechnya and North Ossetia. Now, President Vladimir Putin has issued a final verdict. He likened gambling to drug addiction and alcoholism in a public address, and offered the State Duma a bill of his own to fetter the vice.

Recent research by the Moscow Serbsky Psychiatry Institute produced some sensational revelations: gambling has become an obsession with more than two million Russians. Moscow, with its enormous number of slot machines, has 330,000 compulsive gamblers. The owner of just one slot machine makes an average profit of $10,000 per month. Gambling business tax returns have struck a seven billion ruble mark, roughly $260 million.

Many Russians hate gambling. State Duma member Vladimir Medinsky, author of one of the legislative amendment draft versions, went so far as to say concrete walls topped with barbed wire ought to be built round “casinos and other such filth” to keep young people and old-timers away. Another parliamentarian, Anatoly Aksakov, offered a package of Civil Code amendments envisaging incapacitation of gamblers.

The casino lobby fought back. The state regulation bill took so long to appear in parliament for its second reading partly due to a huge number of proposed amendments providing legal loopholes for proprietors to continue reaping their fabulous profits. Now, President Putin’s draft bill leaves no room for compromise. It envisages a complete ban on Internet gambling throughout Russia, and proposes to establish analogues of Las Vegas by 2009 – areas of legalized gambling under strict state control. As the presidential blueprint has it, there will be no more than four such gambler’s paradises in the entire country.

RIA Novosti – Opinion & analysis – Gambling to be exiled in Russia

I did an interview with NTV, a Russian TV channel, a week or so ago, and was struck at how anti-gambling the questions were. At one point, the reporter asked me whether gambling was “less uncivilized” in Las Vegas, now that all gamblers didn’t lose everything they had and blow their brains out (his words) at the tables.

I simply had to say that there was no record of a time when corpses littered the streets (as they would if all gamblers promptly suicided).

People have said that Macau was a den of iniquity before 2002, but from this story it seems that Moscow is the real 21st century Dodge City.

Antigua strikes back…with words

When I learned of the new “money laundering” online gambling indictments, I thought that Antigua might have something to say. Now they do. From their press release, which I got in my email:

Antiguan government officials reacted angrily today to news that the United States Department of Justice has released indictments of two Antiguan residents on money laundering charges related to their operation of an Antigua based and licensed gaming service provider. The charges, contained in an indictment dated 7 April 2005, accuse William Scott and Jessica Davis of violating United States anti-money laundering laws through their operation of World Wide Telesports, or WWTS. Ironically, the allegations hinge on purported violations by the two of United States legislation known as the “Wire Act” and the “Travel Act,” the application of both of which to gaming operators from Antigua was found last year by the World Trade Organisation to be contrary to the American obligations under WTO law.

Antigua’s Ambassador to the WTO, Dr John W. Ashe, doesn’t see the indictments and Antigua’s WTO victory to be unrelated. “These indictments, coming down at a time when the United States is supposed to be undertaking efforts to comply with the rulings of the WTO, are surely no coincidence. It is more than just a little ironic that the United States Department of Justice has chosen to single out for prosecution a well-known gaming service provider from Antigua, a jurisdiction that has been leading global efforts to license, regulate, supervise and oversee a robust yet clean and safe gaming industry over the Internet–and the only jurisdiction to take on the United States at the World Trade Organisation–and win–on this exact issue.”

Under WTO procedures, the United States had until 3 April 2006 to comply with the rulings of the WTO in the gambling case. Having initially stated that coming into compliance would involve significant legislative efforts, the United States made a surprise announcement at the WTO meeting last month that it was already in compliance with the adverse ruling, despite having taken no apparent corrective action at all. The parties are in the early stages of a process at the WTO whereby a panel will review the current situation and assess the status of United States compliance. “We are looking forward to this review process,” said Dr Ashe, “and we feel very confident that once again the WTO will agree with us that the United States’ position on Internet gaming from our country is simply trade discrimination–disguised restrictions on trade in services in violation of the WTO agreements. In the year since we won our case, facts have only gotten better for Antigua and worse for the United States.”

The indictments do not allege that Mr Scott and Ms Davis engaged in any money laundering conduct other than by virtue of conducting the ordinary business of a licensed Antiguan gaming company, conduct that not only is lawful in Antigua, but much of which is clearly lawful in the United States as well. The Antiguan Solicitor General and Chairman of Antigua’s Financial Services Regulatory Commission, Mr Lebrecht Hesse, announced that the Antiguan government would be contacting the United States directly to lodge a protest over the latest action of the Department of Justice. “Coming at a time when Antigua and the United States are expected to be working together on a reasonable solution to our dispute, these indictments announced by the Americans yesterday–which I note have been laying unsealed, in secret, since they were returned over a year ago–are pretty incredible. We trust that these indictments do not represent the official position of the United States government and rather represent the work of some over-zealous prosecutor. We look forward to the US administration’s prompt clarification of this most unfortunate incident.”

Turning to the subjects of the indictments, Mr Hesse observed as Chairman of the FSRC “both of these individuals have been through the extensive due diligence process we subject all major participants in our gaming industry to, and both have been found fit and proper to conduct this kind of regulated business in Antigua. To our knowledge, Mr Scott and Ms Davis-Dyett have been law-abiding citizens since coming to this country some years ago.”

As I’ve said a million times already, this is the major issue of the Internet: the collision between national borders and international commerce.