When I was in Atlantic City over the summer, I met with many of my casino executive friends there. As usual in New Jersey, the conversations always turn to regulations. As someone who cut his teeth on gaming in Atlantic City, the regulations were always the city’s Achilles’ Heel. No matter how much they would try to reform the regulatory process, it was never enough. Regulations were still onerous, time consuming and costly for 30 years… until Governor Chris Christie instituted real reform.
Christie’s plan dramatically restructured the state regulatory system, giving the Division of Gaming Enforcement clear investigatory power, with the authority to recommend any action. The Casino Control Commission was responsible for rendering the decisions suggested by the DGE. Although the CCC could disagree with the DGE, those instances would be rare since the CCC had no investigatory arm.
The first director of the DGE in this era is David Rebuck, a former assistant attorney general. And it’s here where my discussions with the Atlantic City casino execs took a dramatic turn from the days of yore, when the nicest thing any casino exec could say about a regulator is that he or she was tolerable. But the comments I got about Rebuck were uniformly positive. They said he “gets it” when it comes to the balance of integrity and business decisions, something previous regulators didn’t understand.
In Nevada, this attitude toward regulators is commonplace because there is a common interest in strengthening the industry, both in its integrity and in its business success.
But look north to Massachusetts and you see the traditional adversarial relationship between regulators and operators. This was the attitude New Jersey took toward operators when it started regulating in 1978. But that was understandable. Nevada was just then cleaning up its house of dirty characters, and New Jersey didn’t want to start allowing them.
But today, we have almost 50 years of clear, concise regulations… 50 years of understanding how to regulate a cooperative industry… and 50 years of experience so we understand what works and what doesn’t.
And what doesn’t work, if you want a regulatory system that promotes integrity but also brings to the jurisdiction the appropriate results, is an adversarial attitude. Steve Wynn scolded the Bay State regulators last month for overreaching and acting like “freshmen.”
“We find ourselves being treated, in many respects, as if they are doing us a favor,” he said.
Caesars Entertainment Chairman and CEO Gary Loveman reacted in a similar manner after his company was forced out of a partnership in Boston after a report to the commission by an outside consultant cited many factors that were either irrelevant or settled, with no opportunity for Caesars to contest the findings.
“I’m deeply disappointed and frankly angry about this outcome as it’s inconsistent with our experience in every jurisdiction in which we’ve operated,” Loveman said.
Unfortunately, Massachusetts is not alone. Just ask operators in Pennsylvania, Illinois, Missouri or other states that believe they have something to prove by cracking down on companies that have invested billions of dollars and employ thousands of people in their jurisdictions.
The proper role of a regulator is to ensure that the games are being conducted with integrity and customers are getting a fair shake. Examine the finances of the operator and the major investors to be certain that they can pay contractors, winning players and the state. Make sure that there is no criminal activity by the operators and the owners.
But don’t worry about other jurisdictions if the company complies with all the existing regulations in those areas. If an executive has been licensed in multiple jurisdictions, there’s probably nothing left to uncover. And don’t overlook the commitment to the community those companies and executives exhibit because you want the same thing in your region.
Regulation is a funny thing. It’s a revolving door. A regulator’s term is usually very short, anywhere from two to four years. There’s very little time to ramp up and learn about an industry that most of them barely understand. Guidance is important, and when a consultant fails to do their job and doesn’t explain context or history, a “freshman” regulator may jump to illogical conclusions.
There needs to be a standard based on years of experience and history that a regulator can apply from day one. Sure, there is plenty of nuance and a regulator will learn that over time. But let’s start with a basic background that can be accepted by regulators across the board. If there are more questions, regulators can call the applicant in to explain. But to make judgments without the applicant’s feedback is dangerous and unnecessary. Let’s fix this before it gets out of hand.
