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Role for Regulators

What is the real role of the regulator?

Role for Regulators

My friend Richard Schuetz is a regular contributor to our magazine. I’ve known Richard for more than 25 years in all the iterations of his career, including his current role as a member of the California Gaming Commission.

And I’m sure the last thing he thought he’d be was a regulator.

Last month, we published an article by Richard about how difficult it has become for regulators to keep up with technology and the convoluted corporate structure of gaming companies, suppliers and their affiliates.

But let’s be clear. Most regulators have some kind of political connections in their states. They are either former legislators or someone who has advised or contributed to legislators’ campaigns. Very rarely is it anyone who has any experience in the gaming industry (Richard is an exception, with an operational, start-up, tribal and supplier background).

 Richard’s articles always make me think, and the December feature plunged me into the endless loop of “What is the real role of the regulator?”

This is a crucial definition, especially in today’s reality of online vs. land-based gaming. Full disclosure: We have a company in New Jersey involved in online gaming as an affiliate marketing company, As such, I’ve been paying close attention to how New Jersey is regulating online gaming.

I attended a few sessions of the Nevada Gaming Control Board when they were considering the legalization of iGaming. The board eventually settled on online poker, but the bulk of the hearings considered the technology of iGaming—ID verification, geolocation, payment processing and the like. While none of this was perfected at that time—and still isn’t—it was all just a matter of time before it would be.

The big question is what faces all regulators at one time or another—land-based or online: Are the participants in the industry clean and trustworthy, and good corporate citizens?

So once the technology questions are resolved—as they soon will be—how do you evaluate the companies that want to participate in the iGaming industry?

Since Nevada is such a small sample, the decisions it makes, however well-reasoned and logical, will not be the “gold standard”—despite what Tony Cabot asserts in the iGaming North America column on page 58. New Jersey is more likely the state that will determine the future of iGaming regulation, if nothing else because of its critical mass.

So the bottom line is if the company applying for a license is transparent enough and has the integrity needed to participate in the state’s iGaming industry, the same criteria you consider for land-based casinos should apply.

So let’s review the history of the New Jersey regulatory system. Pretty tough. In the early days of gaming in the state, Caesars applied for a license while controlled by the Perlman brothers, Stewart and Clifford. Rumor had it—with a strong set of evidence to back it up—the brothers were connected to Meyer Lansky, the Miami mobster. The brothers quickly sold the company and it was immediately licensed.

There are multiple examples of this kind of thing in New Jersey, Nevada and other states. Take out the offenders and it’s a clean slate. But what about the “tainted assets?”—the money, products or services developed under the questionable regime—wonder the critics. Well, no state has tried to define those assets in the land-based industry, so how can you do it online?

But back to the basics. What is the role of the regulator? Certainly to assure the integrity of the operators and suppliers, and the fairness of the games to allow participants in the industry to thrive.

For iGaming, that should be a breeze. Everything is digitally recorded. If regulators can track the financial and equity transactions of the companies involved in iGaming, it simply becomes a matter of an objective review.

But, of course, none of this is that easy. Today’s transactions in the gaming industry are like a game of three-card monte. You never know what they’re hiding beneath each card. Richard Schuetz presciently outlined the difficulties in last month’s feature. This REIT structure that gaming operators have seemingly embraced can become a Rubik’s Cube.

And what about the lottery-slot-iGaming-social gaming structure of the manufacturers? Let’s try to untangle that!

Yes, regulators have a tough job these days, but only the future of the gaming industry is riding on their decision. Thanks, Richard, for bringing this to our attention.

Roger Gros is publisher of Global Gaming Business, the industry's leading gaming trade publication, and all its related publications. Prior to joining Global Gaming Business, Gros was president of Inlet Communications, an independent consulting firm. He was vice president of Casino Journal Publishing Group from 1984-2000, and held virtually every editorial title during his tenure. Gros was editor of Casino Journal, the National Gaming Summary and the Atlantic City Insider, and was the founding editor of Casino Player magazine. He was a co-founder of the American Gaming Summit and the Southern Gaming Summit conferences and trade shows. He is the author of the best-selling book, How to Win at Casino Gambling (Carlton Books, 1995), now in its fourth edition. Gros was named "Businessman of the Year" for 1998 by the Greater Atlantic City Chamber of Commerce, and received the Lifetime Achievement Award from the American Gaming Association in 2012.

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