Critical Compliance

Compliance means business.

That probably sounds like a cute play on words that is subject to more than one interpretation. Although no one ever accused me of being “cute,” I plead guilty as charged. Consider the ways in which that statement rings true:

• Licensed casino operators and suppliers are required by regulators in states that offer legal gaming to have robust compliance committees that must review and ultimately approve or disallow proposed actions by their licensed organizations.
• The very existence of such committees—and of a public commitment to compliance—is a bulwark of public confidence in gaming as a leisure activity.
• Public confidence in gaming is the residue of a half-century of effective laws and regulations designed to ensure that the gaming industry‚ as well as its employees and suppliers, have demonstrated they meet high standards of good character, honesty and integrity.
• Public confidence is a necessity to fuel the expansion of gaming and its attendant economic benefits, which range from expanded employment to growth in tax revenue, tourism, urban development and other policy goals.

The longstanding and active existence of compliance committees and staff means that compliance is good for business. It ultimately drives revenue and helps companies meet, and often exceed, those laudable goals. That reality raises serious questions for the elected and appointed policymakers who create these standards and demand adherence from their applicants and licensees:

• Can illegal operators be brought inside the tent where they too must develop their own compliance-focused internal controls?
• Does the simple fact that they engaged in illegal gaming disqualify them from licensure?

A troubling trend is emerging in multiple jurisdictions in which policymakers view the increasing intrusion from “skill” slot machines, sweepstakes and other, newer forms of illegal gambling as both trouble spots and, in some cases, as opportunities. The rhetorical question that accompanies such thinking is: They are here, and they have identified some form of public demand, so why not license, tax and regulate them?

The not-so-rhetorical answer is: Because they have not been authorized in advance to offer such games of chance, they are not legal. If such operations do offer some form of “compliance,” it is not to ensure compliance with laws and regulations, but presumably to ensure that they employ some questionable measure of distance from laws and regulations. Having a non-compliance committee should not be a ticket to licensure.

Compliance committees and staff—sometimes referred to in tongue-in-cheek fashion as “departments of lost revenue”—have slowly, quietly built public trust in legal gaming as a valid, regulated and fair industry that advances the public interest. In doing so, they help generate trust, which generates visits and spending, which in turn generates revenue.

The very word “compliance” means that gaming operators must commit in advance to adherence when they seek licensure, meaning that the rules come first. The principles of licensure cannot be refashioned to retrofit those who have flaunted the rules, which would be a surefire path to declining public trust and declining revenue.

Building public trust is a never-ending process in every state. I learned this the hard way recently while waiting for a table in a popular New Jersey restaurant. Another patron and I engaged in conversation, which led to discussion as to “what do you do” and “what have you done.”

I proudly noted during the course of the conversation that I am a former New Jersey gaming regulator, a fact that puts me in the company of such compliance giants as Tom Auriemma, who has chaired multiple compliance committees, and Fred Gushin, the CEO of Spectrum Gaming Group who is my former partner. Those trailblazers have committed their working lives to advance compliance and have deservedly led the way in building public trust one step at a time.

The other diner leaned over to quietly ask: Can those regulators really be trusted, or are they in the industry’s pocket? I responded with a quite audible sigh that I hoped would not dampen his appetite. Such chance encounters make clear that the hard work of ensuring public trust is not over.

A recent article in The New York Times on an unrelated matter noted quite clearly that “public trust is easily lost and difficult to rebuild—a lesson that we may have to (re)learn.”

Those who have endeavored to build business models that circumvent gaming policy cannot be brought into the tent after the fact. They must be evicted from the marketplace.