Nevada i-GamingA Workshop

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Gaming Compliance

Nevada iGaming

Greg GemignaniLionel Sawyer & Collins+1 702 383 8989grg@lionelsawyer.com

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Gaming Compliance

Agenda TopicsBrief Overview of Terms Used in Nevada for

Networked GamingHistory of iGaming in Nevada2011 Legislative Session

AB258 SB218 Student Bill

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Nevada & Networked GamingNevada uses a somewhat unique set of terms to

describe different forms of networked gaming.These terms are used in other jurisdictions, but do

not always have the same meaning as they do in Nevada

This has resulted in some confusion in reporting and understanding iGaming issues in Nevada

Additionally, Nevada’s sports wagering industry, which is unique in the U.S. adds to the confusion

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Nevada & Networked Gaming The Gaming Premises

A “gaming premises” is any facility in which is approved for licensed restricted or non-restricted gaming.

The “gaming premises” includes everything within the lot of the facility.

For large casino hotel resorts, this means everything within the boarders defined by the adjacent streets.

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Nevada & Networked Gaming

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Nevada & Networked Gaming Sports Wagering

PASPA prohibited any state or tribe from enacting or permitting sports wagering and prohibited anyone from relying on such enactment to engage in sports wagering. However there was an exemption for Nevada to continue sports wagering in a manner consistent with its conduct between XXXX and XXXX

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Nevada & Networked Gaming

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Nevada & Networked Gaming Interactive Gaming or iGaming

In 2001, networked based gaming was in its infancy and was being conducted in various parts of the world on public and private networks

The Nevada legislature used the phrase “interactive gaming” to capture wide area network based gaming regardless of the type of network used as a medium. Internet Cable TV Cell phone (non-internet)

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Nevada & iGaming In 2001, the Nevada legislature enacted the

first interactive/online gaming statutes in the U.S.

The 2001 legislation envisioned an industry similar to terrestrial gaming, namely, one in which operators (casinos) and manufacturers (gaming device manufacturers) were the only licensed supply side participants.

The 2001 legislation limited operator licenses to large casino operators.

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Nevada & iGaming As part of the enabling legislation, the legislature

required the Nevada Gaming Commission to make certain findings.

Among those requirements was a requirement that the activity could be conducted in compliance with federal law.

A letter from the Bush era Department of Justice indicated that the U.S. DOJ believed that the conduct of interactive gaming would violate one or more federal laws.

This ended the regulatory activities related to iGaming in Nevada in 2002.

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Nevada & iGaming In 2006, the U.S. Congress enacted the

Unlawful Internet Gambling Enforcement Act (UIGEA)

The UIGEA specifically exempted intrastate wagering from its definition of “unlawful internet wagering”

This was viewed by many states as a federal expression that intrastate gaming activities sanctioned by a state were not the subject of federal regulation or prohibition.

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Nevada 2011 Legislation In 2011, three bills were introduced to promote

interactive gaming within NevadaAB258 – The Poker BillSB218 – The Omnibus Gaming BillXXXXX – The Preliminary Finding of Suitability

BillEach of these bills plays a role in promoting the

regulation of interactive gaming and the use of interactive gaming technologies in Nevada

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Nevada AB258As originally introduced, AB258 was a bill that

would radically alter Nevada’s gaming regulator regime by carving out special privileges for applicants of interactive gaming poker licenses.

After a letter from Governor Sandoval, the bill was modified to avoid special privileges, avoid constitutional issues, and avoid any modification of the gaming regulatory regime in the state.

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Nevada AB258AB258 ultimately did the following:

It removed the requirements that the Commission make the findings required in 2001

It required the Board to draft and the Commission to adopt regulations regarding intrastate online poker

It allowed the Commission to issue licenses in compliance with federal law, should federal law change.

It allowed the Commission to issue interstate licenses upon a change in federal law or a change in the U.S. DOJ’s interpretation of federal law that such interstate activity can be conducted in compliance with federal law.

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Nevada SB218SB218 was the final bill that included concepts

from other bills and was the bi-annual omnibus gaming bill.

SB218 recognized that the licensed operator and manufacturer model of iGaming expressed in the 2001 legislation was an outdated concept.

In response SB218 introduced the concept of a “service provider” as a licensed or licensable activity.

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Nevada SB218“Service Providers” are anyone, in conduction

with a licensed interactive gaming operator engage in any of the following:

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Nevada SB218 Regulations related to SB218 further classified

service providers into three classes. Class 3 Service providers are mark licensees and

marketing affiliates. Only subject to cursory investigation.

Class 1 Service providers are…. Class 2 Service providers are anyone that does not

fit in either class 1 or class 3. Class two and three providers may deemed Class 1

service providers at the discretion of the Chairman.

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Nevada SBxxFrom the inception of regulated gaming in

Nevada until this year, the only way for anyone to trigger a gaming investigation was to engage in an activity requiring licensing. This means executing a definitive agreement to

purchase a licensed operator, provide services requiring a license, or committing to an activity requiring licensing

Many deals and investments were thus negotiated drafted and executed with provisions that made the entire arrangement subject to licensing approval.

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Nevada SBxxSBxxx changed this by allowing an applicant to

apply for a finding of suitabilitySuch an application will subject the applicant to

the full investigative scrutiny previously reserved for license applicants.

However, it does not require a definitive agreement to be executed or the imminent conduct of an activity requiring licensing.

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Nevada SBxx It is a vehicle for vetting suitability in NevadaThe investigative materials and reports from a

preliminary finding can be used as a foundation for a future licensing application.

A licensing applicant that has a prior finding of suitability will generally be investigated only for the period after the issuance of the finding of suitability. This has the potential for dramatically reduce the investigative time normally experienced by license applicants.

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Nevada SBxxSBxx provided an opportunity for prospective

investors, service providers, manufacturers and general licensees to determine their suitability before committing significant resources and investment to negotiating, engineering, and executing a definitive deal.

Additionally, it provides current licensees with a stable of potential partners and suppliers that are suitable for licensing, thus making those with a preliminary finding more desirable.

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Questions