Gambling is a tech industry. Are Nevada regulators up for the challenge?

Nevada is failing to keep pace with other states in the race to approve new games and technology, Gov. Joe Lombardo asserted during his state of the state speech in January, and now regulators are responding. On Tuesday, the Nevada Gaming Control Board will hear industry suggestions for upping its game.

“We need to work with the Control Board to ensure the logjam is cleared,” Lombardo said.

“He makes a good point,” says Alan Feldman, a former MGM Resorts executive and Distinguished Fellow in Responsible Gaming at UNLV’s International Gaming Institute.

“The technology is changing so quickly, and there is pressure on regulatory agencies around the country to be able to facilitate the process, and it just takes too long.”

“If there is a perception that the Board is not adequately responding to the industry’s needs, whether it be in the Technology area or any area, we will address any issues and strive to do better,” said Gaming Control Board chairman Kirk Hendrick, who declined to be interviewed by the Current, but responded to written questions.

“Gambling today is in many ways a Global Tech Industry,” said Tim Miller, executive director of the British Gambling Commission at the International Casino Exhibition in London in February. “This looks and feels more like international ‘Big Tech’ than where gambling companies were only 20 years ago. And that clearly has implications not just for how they operate but how they impact on consumers and how we as regulators need to do our jobs as well.”

“I think a lot of people just don’t understand the due diligence process, and that it can take some time,” says Craig Ferreira, acting executive director of UNLV’s International Center for Gaming Regulation. “They don’t think in terms of the speed to market that these companies are moving at. They don’t think about all the stakeholders that regulatory bodies have to answer to, to ensure that products and services are safe from a consumer protection standpoint. With gaming and gambling products, you’ve got to deal with Responsible Gambling issues, money laundering issues.”

Feldman says delays in approving technology are common in other states.

“Nevada does have some stricter rules about the process, and they probably date back longer simply because we have the oldest regulatory structure,” he says. “Maybe it’s time to take a look at some of the things that we’ve held on to possibly for a little too long.”

One solution “technology companies would love” according to Feldman, is a single licensing process recognized by all states that would save governments money by eliminating duplication.

Gold standard or slow standard?

The Silver State, once the only game in America for placing a legal bet in a casino or on a sporting event, and the self-professed “gold standard” in regulation, has been slow to enact technological advancements common in other states.

In January 2022, when the Nevada Gaming Commission voted to allow casino patrons to engage in cashless betting on table games and slot machines without first presenting identification, the practice was already standard in seven other states.

Unlike more than 30 states that allow sports betting, Nevada prohibits gamblers from setting up mobile accounts without visiting a sports book in person. In just a few years, Nevada has gone from the top of the heap in legal sports betting to fourth in the nation in terms of the amount bet.

Last year, sports bettors in Nevada wagered $8.7 billion. New York, in its first year of legal betting, set a U.S. record of $16.2 billion. New Jersey ($10.9 billion) and Illinois ($9.7 billion) also topped Nevada’s sports betting handle for the year.

Nevada taxes sports bets at 6.25%. New York’s tax is 51%. A federal excise tax levies all sports bets at .0025.

“You can open a bank account on your phone without visiting the bank,” says former gaming executive and regulator Richard Schuetz, adding the state’s policy is anti-competitive and designed to ensure gamblers spend on brick-and-mortar amenities such as food and drink at least once. “It has nothing to do with ensuring identity. People like to shop prices when betting. If I’m at Caesars and I want to open an account at Circa, I have to get an Uber or get in my car and drive down there, which adds to traffic and contributes to global warming.  It doesn’t make sense.”

“The Board’s role is to effectively regulate the gaming industry,” Hendrick said of the state’s requirement that gamblers appear in person. “If the Nevada Legislature or the Governor’s Office believe that the gaming industry should be revised, the Board will ensure that the conduct is properly regulated.”

Lombardo’s appointments of Hendrick, a former deputy attorney general for the gaming division in the 1990s and most recently an executive with the Ultimate Fighting Championship, and George Assad, a former judge who once worked as a dealer and pit boss, raise questions about regulators’ ability to react to and anticipate change in a high-tech environment, says Schuetz. “You wouldn’t say ‘I’m going to do a technology startup’ with this group.”

Assad declined to be interviewed.

Brain drain?

Savvy regulators willing to work for government pay are hard to find, says Ferreira of UNLV, especially in the post-COVID era of early retirement.

“You’ve got a lot of agencies, not necessarily just in Nevada, playing catchup to bring people on board, get them trained, and ready to jump into service,” he says. “Everybody’s feeling that and regulatory bodies are no different.”

“It’s absolutely a problem,” Schuetz agrees.”But in most of these other states, it’s not an industry that the state absolutely lives and dies by. The system is broken, because they don’t pay enough to attract talent and it’s become too political, with constant turnover as a result.”

Morale was low at the GCB before Lombardo singled out the agency’s slow response to technology, according to insiders who asked not to be named. Low pay, relative to the industry they regulate, and constant turnover resulting from political appointments are taking a toll, they say.

“If there are morale issues, it is important that we create better communication and camaraderie amongst everyone at the Nevada Gaming Control Board,” Hendrick wrote to the Current. “In that regard, I am planning several ways to recognize achievement and increase morale at the Board.”

Former GCB chairman Brin Gibson, who earned a salary of $142,961, told Vegas Inc. he and his family “sacrificed a great deal” for him to serve in that capacity.  He  stepped down in November to earn more in the private sector.

“I mean, some people might say, ‘Oh, well, the salary, it’s sufficient.’ And it was sufficient. But it’s not what I could have made,” he said.

“For Nevada to maintain an effective regulatory system, it is imperative that the state’s gaming agents are adequately compensated,” Hendrick said in written responses to questions, adding part of his role is “to encourage all stakeholders in Nevada’s gaming industry to help the Nevada Legislature understand that appropriately compensating the Board’s agents can prevent the Board from becoming a training ground for outside private or public agencies.”

This article first appeared in the Nevada Current. Nevada Current is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity.