Chapter 5 LEGAL ENVIRONMENTS

Hashimoto: Casino Management: A Strategic Approach

© 2008 Pearson Education, Upper Saddle River, NJ 07458.

All Rights Reserved.




Chapter 5LEGAL ENVIRONMENTS

Robert R. Russell, Gaming Analyst and David Waddell, Attorney:

Fraser, Trebilcock, Davis & Dunlap, P.C.







Selecting the Casino Industry as a Career Choice Is a Life Decision Employee base expanded 85% in last decade Casino gaming allowed in 11 states; Native American

casino-style gaming authorized in 29 states Directly employs over 700,000 who are managers or

will have the opportunity to be a manager Revenues grew nearly 1600% from 1979 to 1997 People new to or interested in the industry often

underestimate the extremely strict legal regulations Imperative to understand at the start that personal

integrity and history are key factors to your success.







Personal Perspectives: Gaming Industry Professionals’ View of Legal Compliance

Personal history is of great interest to regulators. The success of the industry has been built on strict

regulations that govern the industry in the U.S. Growth is due to stringent investigation of key

personnel by regulators prior to licensing and establishment of internal controls.

Willful failure to follow regulations may result in permanent ban from the industry.

Integrity is crucial to acceptance in the community.

“Compliance before commerce.”







THE LAYERS OF GAMING REGULATIONS: FEDERAL, STATE, & TRIBAL LAWS

Federal Regulations Gambling Devices Act:

• Establishes procedures for the manufacture and shipping of gaming equipment in interstate commerce;

• Prevents shipment into jurisdictions where machines are not legal under state law; and

• Requires manufacturers and distributors to keep detailed records of sales or service.

Bank Secrecy Act: Established in 1970 to fight money laundering Created with focus on banking Amended in 1985 to include commercial casinos Amended in 1996 to include Native American casinos Charged with enforcement – the Department of

Treasury







U.S. Patriot Act: Permits financial institutions to share information with one

another. Must identify and report activities that may involve money

laundering or terrorist activity. . Indian Gaming Regulatory Act (IGRA):

Established balance between tribal sovereignty and interest of states (1988).

Established regulatory procedures for tribal gaming. Divided Indian gaming into three classes:

Class I: social and traditional games within jurisdiction of tribes

Class II: bingo and similar games – operated by a tribe if located in a state that permits that type of gaming

Class III: Las Vegas style gambling- State must permit this type of gaming for any purpose by any entity.

- Must be authorized by tribal resolution or ordinance. - A compact must be negotiated between tribe and state which defines how the gaming will be conducted.







State Regulations First step: Legalize the industry in a particular

state.

Reasons industry was legalized outside of Nevada: A way for state governments to raise revenue To provide entertainment value to its residents

Structure and Duties of a State Gaming Control Board:

Size and scope of authority varies by jurisdiction Determine applicants’ eligibility to receive a license Supervise operations throughout the state Investigate licensee on-site and investigate alleged violations License electronic gambling manufacturers Require availability of all financial documents Inspect and test gaming-related products Require reports on gaming education activities Impose fines and revoke licenses for violations







State Selection of Casino Operators State decides which industry model it will develop,

often within the legislation or law that legalized the industry.

The two most common models of casino markets are: Free markets Limited licenses

- selection process is of more significance

- greater number of applicants than available licenses- need strict, structured selection process to limit controversy

State Licensing and Background Investigations: Provide gaming control board with information so the

board can determine if applicant is “eligible and suitable” Each state that authorizes gambling has its own unique

laws States also license suppliers

- some only license gaming related suppliers such as slot manufacturers- others license non-gaming suppliers based on dollar thresholds- process for suppliers is similar to that of casino operators







Tribal Casino Regulations State licensing process is similar to requirement of

Indian Gaming Regulatory Act (IGRA)

Difference – a Native American tribe is a sovereign entity:

Its government, not the state, is responsible for the oversight of its casino operation

Also responsible for licensing key employees and suppliers

Required under federal law to enter into a compact with the state for a Class III facility

IGRA created the National Indian Gaming Commission to assist with oversight and regulation. Its mission is to:

Regulate gaming activities on Indian lands Ensure that tribes are primary beneficiaries of revenue Assure that gaming is conducted fairly and honestly by

both operators and players

Chapter 5 LEGAL ENVIRONMENTS

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