Center for Gaming Research

What Asia can Learn from Las Vegas, and Vice Versa

 

            Macau has been called the Las Vegas of Asia.  Since the casino industry in this Special Administrative Region of China has already passed Nevada's famous Strip in gaming revenue, win per table and handle per machine, perhaps it is Las Vegas that should be dubbed the Macau of the United States.

            I have an unique perspective on this development.  Like many others, I often act as a consultant and expert witness for governments and industry, in North America and Asia.  But I also have taught Gaming Law at the University of Nevada-Reno, in China, Spain, France and Slovenia, and every June at the University of Macau.

            So what lessons can the casino capitols of the world learn from each other?  Here are a few:

1)        Gambling has to be strictly regulated to keep it honest and prevent scandals. 

2)        Casino regulation requires knowing who the real owners are and the background of everyone involved in the casino's operation.

3)        Casino regulation also requires keeping track of every dollar, or pataca, that goes in or comes out.

4)        And watch the hands that handle the money - that means the dealers and up, more than the players.

            All these points relate to why we regulate legal gambling at all.  Wouldn't it be easier to just sell the licenses to the highest bidders and then bow out?  Most governments don't do that, in part because they want to make even more money, by selling licenses and then getting a large share of the gaming revenues through taxes.  This means that governments have a direct stake in casinos' profits and are hurt if insiders skim off the top before the profits can be taxed.  It also means...

 

5)        Governments always get greedy and raise taxes if you're successful.

            But governments also have a duty to protect patrons.  A license is seen as a promise by the government to everyone who enters a casino that they will get an honest game.  One problem when organized crime (in the U.S., they call themselves "O.C.") runs casinos is they have no qualms about rigging games to increase their take.  This even happens with dis-organized crime: dealers who steal by slipping chips to a confederate will cheat other players, so their tables won't have suspiciously low holds.

            The decision whether to have casinos is a state, not a federal, issue.  But infiltration by O.C. can attract unwanted attention from higher governments.  In the 1950s, U.S. Senator Estes Kefaufver held the first televised hearings, which linked Nevada casinos with O.C.  The state feared the federal government would step in and kill the industry, so it created the first true regulatory system.

6)        Legalization opens the door to an unrelenting push for more gambling: more casinos; additional games, loosening of restrictions on hours, stakes and credit.

7)        Regulators start out tough, but can become overly friendly to operators.

8)        Over time, almost every decision regulators make is favorable, or at least neutral, to operators. 

            Casino executives often think regulators are against them, since they may turn down nine out of ten requests.  But they do grant that tenth request.  And since players aren't organized, regulators' decisions almost never favor patrons.

9)        The first casinos have fantastic returns on investment, due to pent up demand.

10)      This leads inevitably to an over-supply and bankruptcies, if there is no limit to the number of licenses.

11)      The situation is made worse, because it is impossible to control neighboring jurisdictions.  Monopolies are extremely profitable.  That's why they won't let you have one.

            Iowa legalized low-limit riverboat casinos with the idea of being the only "Las Vegas" between Nevada and New Jersey, living primarily off the Chicago market.  It would have worked, if only Illinois would have cooperated and had not authorized high-limit casinos.  Iowa had to raise its limits, although some of the boats did sail south.

12)      Legalization gives legislators and regulators the chance to be social engineers.  Cruising was designed to protect gamblers from themselves.  No one thought what it meant to lock a compulsive gambler in a casino for four hours.

13)      Experiments sometimes work, and sometimes fail.

14)      Conventional wisdom should be followed, and ignored.

            The Atlantis went bust in Atlantic, in part for having a three-story casino with large windows.  On the other hand, before the Sands opened in Macau, "everyone" said Chinese gamblers hate slot machines.  And "everyone" said the Mirage would never work, because casinos in Las Vegas had to have doors opening on the sidewalk.   

            As the G2E's, especially the G2E Asia, have shown, slot machines do not always have to be video screens with three symbols down and five across.

15)      Be prepared for inevitable problems: Slot machines malfunctioning, players claiming they have won when they have not, minors trying to sneak in, disruptive drunks.

16)      And for potential scandals that are not your fault: Patrons leaving children in cars, reporters catching politicians making enormous bets.

17)      And for the law changing: Smoking bans, government requiring more reporting of cash transactions.

            All this leads to the most important rule:

18)      Understand and accept that casinos are not like other businesses.  They are not adult Disneylands®.

            Amusement parks do not have to worry about restrictions on their rights to advertise, whether their contracts are enforceable, and how to collect debts from patrons.  They aren't normally faced by opposition from churches, or accused of ruining families.  No one suggests outlawing all bars because of drunk drivers.

            Hire the most experienced personnel you can find, from anywhere in the world.  Security and day-to-day operations are most important in the short run.  But you also need to retain the best outside experts in fields like marketing and law, or you won't have any long run.

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#145 © Copyright 2009.  Professor I Nelson Rose is recognized as one of the world's leading experts on gambling law.  His latest books, Internet Gaming Law and Gaming Law: Cases and Materials, are available through his website,  www.GamblingAndTheLaw.com.

Not Your Grandmother's Bingo

 

            One of the biggest fights in the often strange world of legal gaming is -- What is bingo?

            This has been fought in courts for more than a decade.  One case almost made it to the U.S. Supreme Court.  But then-Chief Justice Rehnquist refused to hear the appeal, because he did not want to become the butt of jokes on late-night talk shows.

            But bingo is no laughing matter.  At least as many people play bingo as play poker.  And bingo halls make money.  Leading industry analyst Eugene Martin Christiansen estimates the nation's commercial, charity and tribal bingo games have gross revenues of more than $3.5 billion a year.

            Nobody has much trouble, any more, with paper bingo played with ink daubers or paper pull-tabs sold by hand.  These are clearly Class II games under the Indian Gaming Regulatory Act.

            Tribes can set up Class II games without having to ask permission from the state in which the bingo hall is located.  Class III gaming requires a formal tribal-state compact.

            The problem is electronics.  With computers and video screens, bingo can be played on a gaming device that is as easy to play as a slot machine, and as much fun.

            For the past five years, National Indian Gaming Commission Chairman Phil Hogen has been trying to get a bright line drawn in the law between what is a Class II bingo or pull-tab device and what is a Class II lottery or slot machine.  His efforts have not been greeted warmly by tribes, manufacturers or players.

            According to Indian Country Today, at a Senate Committee on Indian Affairs hearing on April 17, 2008, Hogen responded to a question, "Senator, I'm going home sometime soon.  I'm going back to the Black Hills.  When you hear that 'hurrah' out in Indian country, you'll know that happened.  But the thing is, I gotta get this done . . . so that the industry, the manufacturers, the tribes, the states can know what's going on."

            Why the deadline for bingo regulations should be tied to Hogen's retirement date is not clear.

            But, more importantly, who exactly does not know "what's going on"?

            The current regulations and court decisions are not difficult to understand.  I have worked with bingo played both on and off Indian land, and no one seems terribly confused.  Manufacturers and operators of linked bingo devices and paper pull-tab dispensing machines with video screens understand when I suggest modifications to keep their games within the law.  I have given a number of Legal Opinions to tribes and tribal suppliers that a gaming device is Class II and not Class III, and to commercial and charity bingo operators that a gaming device is bingo and not a slot machine. 

            While everyone inside bingo is in favor of the current situation, state governments, the federal Department of Justice and direct competitors, including casinos, want the law not clarified, but changed.  I recently filed an amicus brief with the Alabama Supreme Court, because the Governor thinks all bingo should be played with paper cards and ink daubers.

            Their problem is that the law of bingo today has more to do with how the game was played in the 1980s than the 1930s (when, by the way, they did not use ink daubers).

            For hundreds of years, bingo and its predecessors, lotto and tombola, were played with hard paper cards and markers.  When bingo was brought over to the U.S. in the 1920s and Americanized -- changed from a three by nine card into the familiar five by five -- players often covered their numbers with beans.  In fact, entrepreneur Edwin Lowe, who is credited with inventing the modern version, called his game "Beano," which is still the accepted name in Massachusetts.  An apocryphal story says the name was changed when an overeager winner tried to call out, "Beano!" and blurted out, "Bingo!"

            In the 1980s, hard paper cards and loose markers gave way to preprinted sheets of paper, "flimsies," and large ink daubers.  Players could daub quickly, without having to worry about knocking beans all over the table.  The game got faster and faster, leading to "speed" or "quicky" bingo, in which the caller calls the numbers as fast as he can.  Other fast games included "instant bingo," in its many variations, and U-Pick 'Em, where players could choose their own numbers on three by three bingo cards.

            Every bingo card on flimsies had a serial number.  Simple computers allowed operators to know instantly if a claimed "Bingo!" was a winner.

            Those same computers allowed players to play the game directly on a video screen or hand-held device.

            At the time IGRA was being considered by Congress and signed into law in 1987 and 1988, bingo was being played on competing electronic devices.  These included the Bingo-Master, ElectroBingo, Easy Bingo/Bingo Brain, Cadillac Bingo, Diamond Bingo, Starship Bingo, and Bingo Card Minder, which played simultaneously dozens of bingo cards held in the machines' memory; MegaBingo, a large-prize bingo game played in multiple locations through the use of computers, satellites and telephone lines; automated paper pull-tab dispensing machines; and Lightning Bingo, which was a bingo game played on linked electronic devices.

            It was the intent of Congress to keep these games legal.  I know, because I drafted language that was incorporated into the legislative history of IGRA.  This was for clients who wanted to make sure they could stay in business.

            Hogen's proposed regulations would change the law.  Here are some examples:

$          Bingo cards would have to be displayed.  Bingo cardminders never displayed all of the cards being played.

$          Bingo could only be played with exactly 75 numbers.  Bingo is sometimes played with 90 number and with patterns such "jail bars" where only the Bs, Ns and Os are used.

$          Variants of bingo cannot have pre-covered numbers.  No Free Space?

$          Players have to wait at least two seconds for the game to begin, unless there are six players entered.  Games and devices were invented in the 1980s to speed up the play of the game, not slow it down.

            And my favorite:  If all the players leave before the game is over, the game is declared void and wagers are returned to the players.  How exactly is the operator supposed to return wagers to players who have left the game?

On June 5, 2008, Hogen and the NIGC gave up the fight, at least temporarily, to impose these new regs on tribes and manufacturers.  The federal regulators were hurt by their own estimates, that tribes would lose thousands of jobs and up to $2.8 billion a year in revenue, and by reports by me and other gaming experts on what constitutes the game of bingo.

 

            But, in a sign that bad ideas never die, Hogen sent a letter to a tribe in Alaska telling them that they could not install 30 proposed bingo machines.  Considering there are currently 50,924 Class II machines out there, Hogen will be writing a lot of letters before his term expires.

 

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#145 © Copyright 2009.  Professor I. Nelson Rose is recognized as one of the world's leading authorities on gambling law and is a consultant and expert witness for governments and industry.  His latest books, Internet Gaming Law and Gaming Law: Cases and Materials, are available through his website,  www.GamblingAndTheLaw.com.

Prosecutors Claim Internet Gaming Ads Violate Local Laws

            Here's a quote that should scare anyone involved with any form of legal gaming.

            The federal Department of Justice ("DOJ") got Google, Microsoft and Yahoo to agree to pay $31.5 million in fines to settle claims that they had promoted illegal gambling by running ads on the Internet.  The DOJ announced that the fines were "for corporate conduct the government found in violation of the Federal Wire Wager Act, federal wagering excise tax laws, and various states' statutes and municipal laws prohibiting gambling."

            The DOJ has subtly, but greatly, expanded its war of intimidation against Internet gambling.  It has openly declared that it has the right to file criminal charges against anyone who violates any state or municipal law.

            Of course, every state, city and county has laws against gambling.  Nevada, for example, actively prosecutes illegal bookies and anyone else who operates commercial gambling without the necessary licenses.

            And every state and municipality has laws against advertising illegal gambling, and often, even legal gambling.

            A Georgia law, for example, makes it a crime to "knowingly print, publish, or advertise any lottery or other scheme for commercial gambling."  An Atlantic City casino that allows residents of Georgia to register online for a poker tournament might be violating this statute.

            In a case that it later criticized, but did not expressly overrule, the U.S. Supreme Court ruled that Puerto Rico could prohibit casino advertising to its residents.

            The Supreme Court also declared that it was constitutional for Congress to limit television and radio state lottery commercial broadcasts to states with state lotteries.  That is still the law today: A Las Vegas T.V. station might lose its license if it airs an ad for the California State Lottery.

            However, in the Greater New Orleans Broadcasting case, the Court ruled that it did indeed violate the First Amendment for Congress to prohibit a Louisiana-licensed casino from advertising on Louisiana T.V. and radio stations.  The main problem was that the prohibition was irrational, since identical, but tribally-owned, casinos could broadcast their commercials.

 

            As a nice twist, one of the lawyers for the American Gaming Association in the Greater New Orleans Broadcasting, arguing for the right of casinos to advertise, was my former classmate, John Roberts, now Chief Justice of the United States.

            Ironically, it was the DOJ that expanded the decision, by announcing that it would no longer go after any casino broadcaster under federal law, even in states without licensed casinos.

            But the DOJ never said it would not enforce state prohibitions on gambling ads.  And the Supreme Court has never said those state statutes are unconstitutional.

            The good news is that there is so much legal gambling in the country now, that it would be difficult to defend a state law that prohibits the advertising of legal gaming from another state.  And the Internet, like television and radio waves, cannot be kept out.

            It is possible that DOJ is once again merely beating its chest, and not intending to go after any more online advertisers.  And it's not even clear if local laws do apply to the Internet.

            Still, if I were in charge of a licensed casino, I would have my lawyers look again at my web advertising, with an eye on avoiding "various states' statutes and municipal laws prohibiting gambling."

END

#08-19 © Copyright 2009.  Professor I. Nelson Rose is recognized as one of the world's leading experts on gambling law.  His latest books, Internet Gaming Law (2^nd edition just published), Gaming Law: Cases and Materials, and Blackjack and the Law are available through his website, www.GamblingAndTheLaw.com.

We've got our 15th podcast up. This one features Global Gaming Business publisher Roger Gros and is an informative and revealing look back at his years on both sides of the table. If you've ever wanted to know about how the media covers gambling, this is a must-listen. 015_gros.mp3

Gambling and the Law®:

Can Everyone Win In Florida?

 

            Sometimes the most important part of a legal document are the words that are not there.

            Gov. Charlie Crist, for example, just signed a new compact with the Seminole Tribe.  It expressly allows the Tribe to have slot machines and banking card games, like blackjack.    

            What the compact doesn't mention is limits.  So, the Tribe is free to decide not only its stakes and hours of operations, but how many slot machines and table games it wants, in all seven of its casinos.

            It also means the compact violates federal and state law and is invalid - unless the Florida State Legislature decides to ratify it anyway.

            Crist signed a similar tribal-state compact in 2007.  But he was sued by the Florida House of Representatives.

            The case wasn't even close.

            The Florida Supreme Court ruled that Crist and the Seminoles could agree to slot machines, because the State Constitution permits slots in parimutuel outlets in two counties.  But the Governor simply could not enter into a compact for a prohibited game, like blackjack.  The Court held the compact invalid, because only the State Legislature can decide what forms of gaming are legal in the state.

            In light of threats, of questionable legality, by the federal Secretary of Interior to impose rules for slot machines without the state's input or revenue sharing, the State Legislature authorized Crist to enter into a new compact.  He had until 11:59 pm on August 31, 2009.  He made it, with only a few hours to spare.

            But the State Legislature had authorized the Governor to enter into a compact which allowed banking card games only at the tribe's four casinos in Broward and Hillsborough counties.  The Seminoles' lawyer, Barry Richard, the lead litigator for George W. Bush in the 2000 Florida voting fiasco, was widely quoted as saying,

            "The tribe has substantial arguments that they would be able to have blackjack, whether or not they have a compact.  I can't guarantee they're going to get it, but [the possibility] is a very strong incentive for the Legislature to work something out.  If they don't, the state is going to get no money."

Of course, blackjack is only available through a valid compact.

            The compact contains a few other strange departures from what the Legislature required.  Where the Legislature required that injured patrons could receive up to $1 million, the Governor and tribe agreed to a cap of only $100,000 on patron tort claims; hardly sufficient in a wrongful death case. 

            The revenue sharing is also different, but still a minimum of 12%, reaching up to 25% of gaming win over $2.25 billion in Broward County.  The state will eventually get billions, but the tribe will stop paying if state or privately-owned casino-style gambling expands.

            Crist did give one bone to competitors:  Cardrooms would be able to spread no-limit poker games.

            The State Legislature now has only an up or down vote on the proposed compact.  The lawmakers will have to decide if they can live with this, or hope for another, better deal, while the state's budget deficit continues to grow.

            My guess is the Legislators will throw in some additional side requirements, like decent insurance protection for patrons and some tax breaks for competitors, and sign off on the deal.  For it is politics, not law, that will determine who wins in Florida.  As the man who brought us George W. Bush - even though Al Gore got more votes - put it, "If they don't, the state is going to get no money."

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#2009-13 © Copyright 2009.  Professor I Nelson Rose is recognized as one of the world's leading authorities on gambling law and is a consultant and expert witness for players, governments and industry.  His latest books, Internet Gaming Law (2nd edition just published), Blackjack and the Law and Gaming Law: Cases and Materials, are available through his website, www.GamblingAndTheLaw.com.

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Almost the Law

 

            Law school classes are conducted using the case method.  Students are given published court opinions and then questioned on what they deduce the law is.  This produces lawyers with the mistaken belief that the first place to look when conducting legal research is reported cases.

            It is dangerous to forget that the final say on the law still usually means a bill that has been approved by a legislature and signed by the executive.

            With a few important exceptions - Indian gaming, interstate horseracing and Internet gaming - it is state legislatures, not the federal government, who determine the most important issues involving legal gambling. 

            So, what are the big issues facing lawmakers?  Looking at the bills that were introduced in state legislatures over the years shows us not only what is being proposed, but what actually becomes law.

            Almost every state is looking at expanding legal gaming.  The Hawaii Legislature had so many proposals to legalize gambling that it passed a Resolution, now gone, declaring no new gaming proposals. 

            Yet in every state, almost all expansion bills still can't get out of committee. 

            But one occasionally does pass and is signed into law.  These inevitably lead to more proposals for expansion, never reduction.

            States start with legalizing charity bingo and licensing horseracing.  There still are a few that don't have state lotteries.  But the current trend is proposals for racinos.  This year, they were approved for Ohio.  And once slot machines or video lottery terminals are introduced, there are always campaigns to expand with table games, as recently happened in West Virginia and Delaware.

            Delaware has the additional advantage of being one of the few states grandfathered-in under the federal Professional and Amateur Protection Act, with the right to take sports bets through its state lottery.  I was hired by the Delaware State Lottery to recommend what the tax rate on the new sports books should be. 

            But expansion is still the exception, not the rule.  The gaming industry has gained great political power in many states, but card clubs and casinos still lose most of their battles.  This is particularly true when they want restrictions relaxed, such as being able to operate longer hours or higher stake games.  And forget about getting tax rates reduced, unless there have been a few high-publicity bankruptcies.  The failure of almost every bill having anything directly to do with gaming and money, except raising taxes, shows how important it is to make sure everything is done right when legal gambling is first introduced into a state.

            Legal gaming is especially politically weak when confronted with widespread social movements.  Having legislators mandate such things as smoke-free rooms can hurt business when there are direct competitors, such as tribal casinos, that don't have the same restrictions.  The casinos in Black Hawk, Cripple Creek and Central City did not celebrate when Colorado repealed their exemption from the "Colorado Clean Indoor Air Act."

            Every proposal to bring in legal gaming now includes provisions to help problem gamblers, such as proposal in California to keep ATMs off the gaming floor.

            Casinos are still viewed as slightly immoral deep pockets.  So, bills to exempt businesses from burdensome taxes, in states like Colorado, Indiana, Kansas and Nebraska, or to preserve historic buildings in Montana, expressly exclude casinos from the benefits of the new laws.

            One Connecticut representative introduced a bill that could create a national nightmare for casinos and players:  to tax out-of-state visitors on all they have won at casinos in the state.

            States are ramping up their competition for the gaming dollar.  The Louisiana Legislature created a committee to study "the effects of Mississippi's decision to land-base its casinos."  We know what the recommendations will be:  "a study is necessary for the state to determine whether a move to limited inland gaming would also lead to increased economic development in this state..."

            But Tom Burch, a Kentucky Representative, had the ultimate solution for competition.  He introduced a resolution that Kentucky send a submarine to sink any Indiana riverboat casino that strayed onto its side of the Ohio River.

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© Copyright 2009. Professor I Nelson Rose is recognized as one of the world's leading experts on gambling law and is a consultant and expert witness for players, governments and industry.  His latest books, Internet Gaming Law (2^nd edition just published), Blackjack and the Law and Gaming Law: Cases and Materials, are available

At the 14th International Conference on Gambling and Risk-Taking, Dr. Schwartz talks to Dennis Conrad about casino marketing hits and misses and his new book, Conrad on Casino Marketing. This quick interview with one of the masters of casino marketing is a must-listen for anyone who's interested in how casinos reach out to their players.

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