Abstract
Economics
Of all the industries in Nevada, the gaming industry contributes more revenue to the state budget than any other single industry. 1 The gaming industry pays several types of taxes from general business license fees to property tax to sales and use tax. 2 In addition to these general business and property taxes, the Nevada gaming industry also pays specific gaming taxes. During fiscal year 2018, Nevada's nonrestricted statewide gaming win was $11,907,585. 3 Restricted properties with revenue of $1,000,000 or more reported a total gaming win of $11,857,319 for the same period. 4 In fiscal year 2018, gaming taxes alone accounted for $711.3 million in tax revenue or 47.3 percent of total General Fund revenues in the state budget. 5
Nevada has three major types of casino licenses: restricted; 6 nonrestricted, Group 1; 7 and nonrestricted, Group II. 8 A restricted license is granted for the operation of up to 15 slot machines where no other games are played, if slot machines are incidental to the primary business conducted at the location. 9 Restricted licenses are given to (a) bar, tavern, saloon, or other similar locations licensed to sell alcoholic beverages for on-premises consumption, other than just beer and wine, by the drink; (b) convenience stores (7 machine limit); (c) grocery stores; (d) drug stores; and (e) liquor stores (4 machine limit). 10 Nevada Gaming Regulation 3.015(4) grants discretion to the Nevada Gaming Commission to approve other locations upon a showing of exceptional circumstances that are consistent with state public policy.
Nonrestricted licenses are granted to several categories of licensee including; (a) casino owners operating 16 or more slot machines or any live games; (b) manufacturers and distributors of gaming equipment; (c) operators of mobile gaming systems; (d) operators of slot-machine routes; (e) operators of inter-casino linked systems; (f) disseminators; (g) pari-mutuel systems operators; (h) operators of interactive gaming systems; (i) class 1 service providers (also known as interactive gaming service providers); (j) manufacturers and distributors of interactive gaming systems; and (k) operators of cashless wagering systems.
Designation as a Group I 11 and Group II 12 nonrestricted licensee is tied to gross gaming revenues. The floor for group designation changes annually and is tied to the Consumer Price Index. 13 A Group I licensee is a nonrestricted licensee having gross revenue at or above $6,654,000 or a licensee whose operation primarily consists of a race book, sports pool, or both, with wagers of $74, 909,000 or more for fiscal year 2019. 14 Once a nonrestricted licensee qualifies as a Group I licensee, it keeps that designation. 15 As of June 30, 2019, the Nevada Gaming Commission has categorized 143 nonrestricted licensees as Group 1 and 313 nonrestricted licensees as Group II. 16
Gaming and tourism are critical to Nevada and its economy. Providing a variety of quality avenues for easy transportation to and from Nevada should be a critical priority for Nevada stakeholders. In 2018, Nevada received a C for its overall infrastructure. 17 Categories ranged from aviation, bridges, dams, drinking water, energy, public parks, roads, schools, solid waste, storm water, transit, and wastewater. While every category is important, the two most relevant categories for the gaming industry are aviation and roads. Nevada's 2018 Infrastructure Report Card acknowledges that while Nevada's infrastructure has been “steadily improving over the past several decades,” the “need to improve is evident.” 18
According to the Nevada Infrastructure Report Card, Nevada achieved a C rating in the aviation category. As the report indicates, because of rapid growth, both Reno and Las Vegas will need to increase their aviation services. This could be somewhat of a challenge for the existing airports; even “though both airports have invested in major additions and upgrades over the past decade, they are both limited as to how much more capacity they can handle.” 19 McCarran Airport in Las Vegas is essentially landlocked and faces aircraft size limitations. Reno-Tahoe International faces different obstacles. Reno experiences high winds and is limited in terms of volume of aircraft it can service. 20
Investment in the airport infrastructure seems to be a natural next step in terms of Nevada's public policy goals. However, long term planning and growth need to be accounted for. As Las Vegas continues to expand further south, regional airports may begin to make sense in Clark County. In Reno, new development projects are pushing expansion further north. According to the U.S. Department of Transportation, Federal Highway Administration, Nevada has 43,900 miles of roadway. 21 In November 2016, Clark County voters approved a fuel indexing tax that “will raise the motor fuels tax by 3.6 cents per gallon annually for 10 years, raising $3 billion for road funding.” 22 Washoe voters had already approved a similar measure in 2010. 23 Despite the increased funding, Nevada scored a C for its roadway infrastructure and continues to face a “$450 million backlog of road and bridge repairs” in rural and high traffic areas. 24
In 2018, casinos and hotels employed over 173,000 people. 25 In Nevada, casino employees are allowed to organize, and though not all casino employees are unionized, those that are, are represented by the Culinary Workers Union, Local 226. Chartered in 1935, Culinary Union members work as porters, housekeepers, cooks, kitchen workers, food servers, and cocktail servers. The Culinary Union and its influence grew as Las Vegas casinos transitioned during the 1960s and 1970s from family-owned companies to corporate entities. Following a citywide strike in Las Vegas in 1984, the Culinary Union continued to organize workers as new casinos opened. In the 1990s, the Culinary Union successfully struck at the Horseshoe and Frontier Casinos. The Frontier Strike lasted almost six and a half years and was one of the longest in United States history. 26 Culinary Union Local 226 continues to attempt to organize more nonunion casino workers and has been successful in its some of its attempts to unionize workers at casino properties in Las Vegas over the past few years. 27
Public Policy
Nevada is like no other gambling jurisdiction in the world. Nevada's gaming policy has slowly evolved as its gaming industry developed for more than 150 years. For just over 100 years, 28 Nevada has had a monopoly on legalized gambling in the United States. As gambling in Nevada transformed from a boom town pastime to corporate America, there was no specific attempt to define its market. That is what makes Nevada unique and is what accounts for the diversity of casinos and gambling establishments throughout Nevada. As the gaming industry in Nevada matured and transformed, Nevada remained flexible. Adaptability has allowed gaming in Nevada to develop and flourish in a way that is unparalleled.
Gambling in Nevada was not always the economic driver it has become. Initially, the state was not dependent on gaming and did not directly tax it. 29 Anyone that wished to operate a casino was welcomed. As innovations such as the air conditioner and automobiles became more affordable, Nevada's viability as a tourist destination increased, as did its population. 30 Around the mid-1940s, organized crime began to show an interest in owning gambling houses in Nevada. The first state casino license requirement was implemented in 1945. The initial license tax was calculated at one percent of gross revenue and overseen by the Nevada Tax Commission. 31
Illegal gambling persisted as Nevada began to attract more tourists. As tourism became a viable industry for the state, the interests of unsavory gambling houses and tourism began to conflict. As tourist allegations of being swindled by zoos, roadside museums, and highway attractions (often fronts for crooked gaming operations) gained attention, 32 Governor Pittman exclaimed, “We've spent millions of dollars on good roads to attract tourists … and we are not going to stand for them being fleeced.” 33
Despite its ability to license casinos, the Nevada Tax Commission was not treated as though they had any regulatory authority. In response to many factors, including the burgeoning tourism industry in Nevada, in 1947, then Attorney General Alan Bible issued an opinion that paved the way for a change in the procedure for approving gaming licenses. He advised the Tax Commission that they had, “the right to consider an applicant's background; and if it found ‘reasonable ground to apprehend that the grant of a license would be against the public inters, the commission had the power to deny the application.’” 34
As gaming operations grew, out-of-state operators began to show an interest and came to Nevada to open up shop. Not long after these new operators arrived, allegations of cheating and violence followed. When Harry Sherwood was killed in his own casino, Nevada Tax Commissioner Bill Moore established a framework of accountability. Moore insisted that operators “put square dice and new decks on the tables,” warned them that investigators would visit unannounced, and reminded them that each operator had an obligation to pay their taxes. Moore stated, “This is the only state in the Union where gaming is allowed on a legal and above-board basis. It's high time we consider it as such.” 35 It was during this time period that the framework for regulation that Nevada has today was fashioned.
After almost 30 years of legalized gambling operations, Nevada began to appreciate that regulated gambling, particularly in southern Nevada, was an industry, upon which the state was becoming more and more dependent for tax revenue. In 1955 the state legislature created the Gaming Control Board within the Nevada Tax Commission. This was the first serious regulatory effort made to oversee legalized gambling. During the early 1950s, The Senate Special Committee to Investigate Organized Crime was very critical of Nevada. 36 During the next several years, The federal government attempted to raid and tax Nevada casinos. 37 Rather than allow the federal government to come in and regulate gaming, Nevada took matters into its own hands by swiftly buttressing its regulatory framework to require those who operated gaming to meet stringent suitability requirements and standards. 38
During the 1950s and 1960s, robust gaming regulations were enacted in Nevada to prevent the federal government from interfering with the casinos in Nevada. It became essential that gaming operators and employees were licensed and strictly regulated to ensure that gaming was conducted honestly and fairly without outside influence in the form of corruption, political pressure, or conflict of interest. In 1961, the Nevada Resort Association (NRA) was created. Establishing a trade organization became the first step toward enlarging the reach of gaming into the travel and tourism realm. Originally acting on behalf of southern Nevada casino industry interests, today, the NRA enjoys a diversity of membership from properties located throughout the state. 39
The transition in the late 1960s from individual licensure to corporate licensure was unpopular. Concerns about allowing corporations to obtain licensure centered on accountability and the ability to manipulate corporate stock. 40 To address the concern over stock manipulation, Nevada required every equity holder to be licensed. This posed no problem for private corporations but was untenable for public corporations where stocks were traded on the open market and equity constantly changed. This requirement was changed two years later in 1969. Concerns about corporations and regulated gambling seem to have been overstated. As regulation was tweaked, increases in equity investment significantly benefitted Nevada resulting in more capital expenditures on the strip in southern Nevada, an increase in jobs, and even more taxes for Nevada's coffers.
In 1977, the Nevada Supreme Court reinforced the credibility of the Nevada Gaming Commission by affirming that the licensure determination was exclusively within its jurisdiction and that there was no judicial recourse for applicants that had been denied licenses.
41
That same year, the Nevada Legislature declared the public policy for the state of Nevada as follows:
(a) The gaming industry is vitally important to the economy of the state and the general welfare of the inhabitants. (b) The continued growth and success of the gaming industry is dependent upon public confidence and trust that licensed gaming is conducted honestly and competitively and that the gaming industry is free from criminal and corruptive elements. (c) Public confidence and trust can only be maintained by strict regulation of all persons, locations, practices, associations and activities related to the operation of licensed gaming establishments and the manufacture or distribution of gambling devices and equipment. (d) All establishments where gaming is conducted and where gambling devices are operated, and manufacturers, sellers and distributors of certain gambling devices and equipment in the state shall therefore be licensed, controlled and assisted to protect the public health, safety, morals, good order and general welfare of the inhabitants of the state and to preserve the competitive economy and policies of free competition of the State of Nevada.
42
Perhaps it was the publicity that surrounded organized crime's involvement in Nevada's casinos that prompted the Nevada Legislature to codify a statement of public policy in 1977 regarding legalized gambling in Nevada. The continued lack of significant economic development may have also served to reinforce Nevada's dependence on gambling for tax revenues, further prompting the legislature's public policy statement. Stressing the importance of public confidence and trust, the legislature reinforced that “licensed gaming be conducted honestly and competitively and that the gaming industry [be] free from criminal and corruptive elements.” 43 Coincidentally, at the time the legislature was making its public policy determinations, a series of cases were working their way through the Nevada judiciary involving Frank “Lefty” Rosenthal. 44
As a result of the Nevada Legislature's determination that “public confidence and trust [would] be maintained by strict regulation” as the means to “protect the public health, safety, morals, good order and general welfare,” the legitimacy of the Nevada Gaming Control Board was reinforced. 45 As legalized gambling in Nevada began to shed itself of criminal activity and organized crime could no longer operate, corporate gaming operations were able to come in and market Nevada as a tourist destination.
While Nevada Revised Statutes § 463.0129 has been tweaked from time to time in the 42 years since it was adopted, elected officials in Nevada continue to adopt laws and policies that work to reinforce the policies adopted in 1977. The gaming industry is and remains “vitally important to the economy of the state of Nevada.” Nevada's public policy appears to reflect a government protection approach to gaming regulation. 46 Essential to state economics, gaming remains open to the general public. 47 In essence, with rigorous regulatory requirements and despite the associated high costs, a gaming license in Nevada is considered to be a revocable privilege, not a right.
As late as 1983, Nevada was still dealing with some remaining organized crime figures. Staying true to the public policy goals outlined by the legislature a few years earlier, the Gaming Control Board took the initiative to clean up gaming operations in casinos that still felt the lingering effects of organized crime. Individuals with questionable character were removed from management positions and were replaced with people who met the statutory requirements of being:
(a) A person of good character, honesty and integrity;
(b) A person whose prior activities, criminal record, if any, reputation, habits and associations do not pose a threat to the public interest of this State or to the effective regulation and control of gaming or charitable lotteries, or create or enhance the dangers of unsuitable, unfair or illegal practices, methods and activities in the conduct of gaming or charitable lotteries or in the carrying on of the business and financial arrangements incidental thereto; and
(c) In all other respects qualified to be licensed or found suitable consistently with the declared policy of the State. 48
With the authority of the Nevada Gaming Control Board and Nevada Gaming Commission firmly established and organized crime all but removed from Nevada, the Nevada Legislature began to limit what had previously been open and unfettered competition in the gaming industry. Applicable only in southern Nevada, the Gaming Enterprise District Act of 1989 gave residents living near a proposed casino site the ability to vote on whether or not they wanted a casino in the neighborhood and to potentially restrict casino development. 49
Shortly after the 1989 Legislative Session, the first integrated resort, the Mirage, opened on the Las Vegas Strip. Two short years later, Nevada's public policy shifted again, ever so slightly, toward further restrictions on which type of gambling operation could enter the market and where they could locate. During the 1991 Legislative Session, Senate Bill 535, more commonly referred to as the Resort Hotel Standards Act, was passed and specified that “… a nonrestricted gaming license should be utilized as a tool for economic development … it [a nonrestricted gaming license] would be denied to any applicant except a resort hotel in Washoe or Clark County.” 50 Committee testimony indicates that the Resort Hotel Standards Act would ensure that “ … all new gaming properties meet high standards and … require newcomers to make an equitable and fair capital contribution to enhance the continued growth of the gaming industry.” 51 For the first time in 60 years, with the passage of Gaming Enterprise Districts and the Resort Hotel Standards Act, the Nevada Legislature put limits on the type and the location of gaming enterprises. Were it not for a grandfather clause added to the Resort Hotel Standards Act, planned projects at the time would not have met the new requirements and would have been abandoned. 52
Always setting the standard for the gaming industry, Nevada was the first jurisdiction in the United States to legalize gambling on the Internet. In 2001, the legislature passed the Interactive Gaming Act of 2001. Despite creating the framework for gaming on the Internet, Internet gaming has not been fully utilized or embraced in Nevada. It wasn't until 2013 that Ultimate Poker.com launched the first Internet poker site from Nevada. 53 Within two years, its operations were shuttered. 54
Nevada has been very successful in achieving its public policy goals regarding the gaming industry. The Nevada Legislature relies on the Nevada Gaming Commission and the Nevada Gaming Control Board to enforce its public policy objectives. One of the many functions of the Nevada Gaming Control Board is to ensure that the state receives its full share of gaming taxes. Having adopted a “culture of compliance,” casinos are subject to regulatory audits, internal audits, independent compliance reviews, adherence to technical standards and testing for slot machines, game review and analysis, patron dispute processes that allow players to challenge a casino's conduct, and are required to self-report regulatory violations. These measures help maintain public confidence that gaming is conducted honestly. Gaming industry stakeholders work with state regulators to ensure that criminal activity is not allowed to take place in Nevada casinos. The policy statement from Senate Bill 9, passed during the 2015 legislative session, sums it up: “The continued growth and success of the gaming industry in the State of Nevada depends on the fostering of a business and regulatory environment that promotes continued advances in the use of technology in gaming, which improves the entertainment experience, encourages innovation and supports expansion of the domestic technology sector of the economy of this State.” 55
Agency Structure
Nevada has a government structure that is typical of most states in America. There are three branches of government: executive, judicial, and legislative. The executive branch at the state level consists of six constitutional officers. 56 Nevada's 17 counties provide additional services and governance at the local level. Other forms of local government include cities, towns, school districts, general improvement districts, and various special and local improvement districts. The Nevada Judiciary has a state supreme court, appellate court, district courts, justices of the peace, and municipal courts. The legislature is currently comprised of 63 elected officials, 21 senators and 42 assemblypersons, and meets every other year. Legislators are subject to term limitations of 12 years.
The Nevada Gaming Commission and the Nevada Gaming Control Board are the state agencies given authority to regulate gaming in the state of Nevada.
The Gaming Control Board
The Board is composed of three members who serve four-year terms. Board members are appointed by the governor and serve in a full-time capacity. The Nevada Gaming Control Board has six divisions: Administration, Audit, Enforcement, Investigations, Tax and License, and Technology. There are six offices located around the state: one in Carson City, one in Elko, two in Las Vegas, one in Laughlin, and one in Reno. It has a staff of approximately 400 employees and an annual budget of approximately $45 million.
The Administration Division manages the agency's human resources department, tasks the agency's hearing officers, oversees patron disputes, and conducts legal research projects. The Audit Division reviews and audits the financial practices of casinos, their operations, oversees bankroll requirements, and determines compliance with reported gross gaming revenue and live entertainment tax. The Enforcement Division employs approximately 90 agents who are certified peace officers and carry badges. The division oversees gaming employee registration and charitable gaming requests, conducts misconduct investigations, monitors club venues, and conducts undercover work. The Investigations Division is responsible for the suitability and licensing applications received by the Board. It conducts thorough financial and criminal background investigations of proposed licensees and is responsible for investigating and analyzing publicly traded companies. Its compliance unit evaluates the compliance plans submitted by licensees required to have them. The Tax & License Division monitors casinos' licensing fees and ensures tax collection. Lastly, the Technology Division is responsible for inspecting all games and associated equipment exposed for play in Nevada.
The Nevada Gaming Commission
The Nevada Gaming Commission was created in 1959 when the Nevada Legislature voted to pass the Gaming Control Act. The purpose behind Nevada's two-tier system, comprised of the Board and the Commission, is to provide a system of check and balances for Board decisions and to make certain the Board doesn't get too liberal in granting licenses.
The Gaming Control Act serves as the foundation for what has become Nevada's modern regulatory structure. The Nevada Gaming Commission meets monthly after the Board's meeting and reviews the Board's recommendations, The Commission can adopt, condition, or reject the Board's recommendation. Acting in a quasi-judicial capacity, the Commission rules on work permit appeal cases and serves as the policymaking body having been charged with the responsibility of adopting regulations that implement and enforce the state laws governing gaming. The Commission is the final authority on gaming licensing matters. The Commission can approve, restrict, limit, condition, deny, revoke, or suspend any gaming license. The Commission also has the final say on disciplinary matters. When the Board believes discipline against a gaming licensee is appropriate, the Board acts in a prosecutorial capacity, while the Commission acts in the judicial capacity to determine whether any sanctions should be imposed. 57 The discretion vested in the Commission makes it a very powerful agency yet it has limited staff and the member positions are part-time.
The Attorney General's Office
The Attorney General's Office provides a full range of legal services and legal counsel for Nevada's state agencies, including the Nevada Gaming Commission, the Nevada Gaming Control Board, and the Nevada Gaming Policy Committee. The Attorney General's Office regularly provides legal advice for the board. Through its gaming division, it provides litigation and administrative services, such as representing the Board and Commission at monthly public meetings.
A large portion of the gaming division's legal services is comprised of disciplinary actions brought against gaming licensees for violations of gaming regulations and statutes, hearings on the surrender of gaming licenses, actions to add to the list of excluded persons, litigating disputes, and drafting regulations. 58
The Gaming Policy Committee
Created in 1961 by Governor Grant Sawyer, the Gaming Policy Committee is a 12-member committee which meets at the call of the governor to discuss matters of gaming policy. The committee is advisory in nature and its recommendations are not binding on the Nevada Gaming Commission or the Nevada Gaming Control Board.
As the Gaming Policy Committee meets on an as-needed basis in special sessions to formulate policy recommendations, the committee has convened only a handful of times since 2012. 59 Policy discussion topics include Internet gaming, daily fantasy sports, esports, and marijuana. 60 The most recent meeting took place on March 5, 2018, at which time the committee adopted a policy recommendation regarding marijuana and the gaming industry. 61
Another function of the Committee is to provide an independent review and decision, prior to judicial review, of local government decisions as to whether nonrestricted gaming businesses should be permitted to operate outside designated gaming enterprise districts. 62
License denial, disputes, and dispute resolution processes
If the Nevada Gaming Commission denies a gaming license, that is the end of the matter and there is no recourse available through judicial review. 63 A license denial prohibits the applicant from conducting business or securing employment within the gaming industry in Nevada. The only recourse for the applicant of a license denial is to file a new license application. However, if an existing gaming license is revoked or a licensee is disciplined, the licensee may appeal to the District Court of Nevada for a review of the Commission's decision. 64 For decades, the Commission only had three choices: grant the license, deny the license, or remand the application back to the Board for further investigation and reconsideration. 65 In 2017, the Nevada Legislature enacted a provision to allow the Commission to reject an application. 66 Per the statute, a rejected application “does not constitute a determination of the suitability of the applicant or a denial of the application of the applicant.” 67
Nevada Revised Statute § 463.362(2) provides a process for resolving patron disputes. Disputes may occur if a casino patron questions the outcome of a game or the operation of a slot machine. When the amount in controversy is “at least $500, the licensee shall immediately notify the Board.” 68 If the amount in dispute is less than $500, “the licensee shall notify patron of the patron's right to request that the Board conduct an investigation.” 69
Once the Board is notified, an enforcement agent is tasked with investigating the dispute. As part of the investigation, the patron is interviewed and asked to provide a written statement; casino staff are interviewed and asked to provide written statements; witnesses are identified; physical evidence including photographs, video of the events, and surveillance recordings leading up to and including the dispute are collected; the area where the dispute took place is sealed off; and the game and any gaming equipment involved are taken out of service so that it cannot be played or touched by anyone else.
Once the investigation is complete, the agent issues a report with his or her findings and decision. If either the patron or the licensee doesn't like the decision, they can appeal it. A request for a hearing before the Board must be made within 20 days of the initial determination. If a request for a hearing is not made within the allotted time period, all administrative review is waived.
The hearing is conducted before a board hearing examiner. Evidence is presented and testimony is provided. If the patron lives out of town, the hearing can be by telephonic appearance. Patrons, representatives from the casino, and representatives from the manufacturer if a slot machine or associated equipment is involved are usually present at the hearing. During the hearing, rules of evidence do not apply and hearsay evidence is allowed. The party appealing the agent's decision has to prove by a preponderance of evidence that the agent's decision was in error. The hearing determines whether the agent's decision will be affirmed, modified, or reversed. At the conclusion of the hearing, the hearing officer makes a recommendation to the Board. The Board considers the recommendation at a public hearing in which they affirm, reverse, or remand it for further review. Once the Board makes a final determination, the aggrieved party may appeal to the district court within 20 days.
The Regulators
Selection criteria for the Nevada Gaming Commission members
Nevada Revised Statute § 463.023 establishes the qualifications required as well as the limitations imposed upon persons who are appointed to the Nevada Gaming Commission as follows:
Each member of the Commission shall be:
a. a citizen of the United States; and
b. a resident of the State of Nevada.
No member of the Legislature, no person holding any elective office in the State Government, nor any officer or official of any political party shall be eligible to appointment to the Commission.
It is the intention of the Legislature that the Commission shall be composed of the most qualified persons available, preferably no two of whom shall be of the same profession or major field of industry; but no person actively engaged or having a direct pecuniary interest in gaming activities shall be a member of the Commission.
Not more than three members of the Commission shall be of the same major political affiliation. 70
Recognizing that Nevada Gaming Commission members fulfill their responsibilities to the state in a part-time capacity, 71 Nevada Revised Statutes § 463.025 states that Nevada Gaming Commission members, “shall devote such time to the business of the Commission as may be necessary to the discharge of their duties.” Because Commission members are allowed to engage in employment outside of the Commission, their compensation is relatively low.
Before being authorized to act in an official capacity, Commission members take the constitutional oath of office and affirm they are “not actively engaged in and [do] not hold a direct pecuniary interest in gaming activities.” 72
In an attempt to keep politics out of the gaming regulatory environment, Nevada Gaming Commission members are prohibited from participating in political conventions or any committee of any political party. 73
Selection criteria for Nevada Gaming Control Board members
The Nevada Legislature establishes the qualifications and eligibility for Nevada Gaming Control Board members by statute.
Each member of the Board shall:
a. Be a citizen of the United States.
b. Be, or within six months after appointment become and remain, a resident of the State of Nevada. 74
Other statutory requirements state that no member of the legislature, no person holding any elective office in the state government, nor any officer or official of any political party is eligible for appointment to the Board. Board members must also be the “most qualified persons available.” 75
Of the three members that make up the Nevada Gaming Control Board, Nevada Revised Statutes § 463.040 further specifies that one member of the Board must be a certified public accountant licensed in a state within the United States or a public accountant that qualifies under the provisions of Nevada Revised Statutes § 628 with at least five years of general accounting experience, a comprehensive knowledge, and possess expertise in “corporate finance and auditing, general finance, gaming or economics.” 76 One member must be selected due to “training and experience in the fields of investigation, law enforcement, law or gaming.” 77 The chair of the Board, who acts as the executive director, “must have at least five years of responsible administrative experience in public or business administration or possess broad management skills.” 78
Political involvement and conflicts of interest
Nevada Gaming Control Board members work full-time for the state of Nevada 79 and are subject to prohibitions in areas of other employment as well as certain political activities and financial interests. Nevada Revised Statutes § 463.060 states that “except as otherwise provided in NRS 284.143, each member shall devote his or her entire time and attention to the business of the Board and shall not pursue any other business or occupation or hold any other office of profit.” 80 From a practical perspective, Nevada Revised Statutes § 284.143 is so limiting that all but minor forms of outside employment would be impossible to maintain because additional employment cannot conflict with the duties of the Nevada Gaming Control Board, cannot conflict with Board hours which are 8 am to 5 pm, Monday through Friday, and is subject to Board Chair approval. 81 No instances of a Board member engaging in outside employment are immediately identifiable.
As is the case with the Nevada Gaming Commission, Nevada Gaming Control Board members are prohibited from membership in “any political convention” or acting as a member of any committee of any political party.” 82 What differentiates the Commission from the Board is that Board members “shall not … “engage in any party activities.” 83
In Nevada, “A member shall not be pecuniarily interested in any business or organization holding a gaming license” under NRS chapter 463, 84 and must also “swear that the member is not pecuniarily interested in any business or organization holding a gaming license or doing business with any such person or organization.” 85
The aforementioned provisions requiring specific qualifications, prevention of political activities during the members' tenure, and no financial interests within the casino industry help ensure expertise and inhibit both political influence and conflict of interest amongst Nevada regulators.
Term of office and removal
Regulators in Nevada are appointed for four-year terms. 86 In situations where a Board member vacates his or her office early, a newly appointed Board member is only allowed to serve out the remainder of the unfinished term and is subject to the reappointment process.
Nevada Revised Statutes § 463.050(3) outlines the removal process a governor may undertake for misfeasance, malfeasance, or nonfeasance in office. A member subject to the removal process must be served with a copy of the alleged charges. 87 If the member charged requests a public hearing, 88 the governor must hold a public hearing. If a hearing is not requested, then the “member is removed effective 10 days after the service of charges upon the member.” 89
Cooling off period
According to Nevada Revised Statutes chapter 281A, Ethics in Government, former members of the Nevada Gaming Control Board or Nevada Gaming Commission are prohibited from appearing before the Nevada Gaming Control Board and/or Nevada Gaming Commission on behalf of a Nevada licensee, or any person required to register with either agency or employed by any such licensee or person for one year after the termination of the member's service. 90 Board members, commission members, and former employees are also prohibited from soliciting or accepting employment from a business or industry governed by the regulations adopted by the Commission for one year after their departure. 91
During a cooling off period, Nevada licensees may not employ a former regulator for a period of one year following the last day of that person's service with the Board or Commission if their principal duties included the formulation of policy for regulations governing the industry, their employment responsibilities included the direct performance of “activities, or controll[ing] or influence[ing] an audit, decision, investigation or other action, which significantly affected the business or industry which might … employ the former public officer or employee,” 92 or if as a result of government service or employment, the former member or employee possesses “knowledge of trade secrets of a direct competitor.” 93 The cooling off period avoids the appearance that Nevada licensees can improperly influence a regulator by holding out the possibility of immediate post-public sector employment. 94
Current or former Nevada Gaming Control Board and Nevada Gaming Commission members and employees may file a request for an advisory opinion concerning the application of the relevant facts to that person's case from the Nevada Commission on Ethics. 95 When determining if Nevada Revised Statutes § 281A.555 is applicable to any particular situation, the Nevada Commission on Ethics is required to consider the “best interests of the public,” the “continued ethical integrity of the State Government or political subdivision,” and the provisions of Nevada Revised Statutes chapter 281A. 96
Open meetings
Open government and public access to government meetings and processes are critical components of procedural due process for Nevada's citizens. The Nevada Gaming Control Board hearings have been consistently open to the public since it was created in 1955. In 1959, the exemption from the public meeting requirement for Board hearings was limited to investigative hearings. 97 No such specific requirement for the Nevada Gaming Commission is found in Nevada Revised Statutes chapter 463. However, the provision of Nevada Revised Statutes § 241.020 applies to the Nevada Gaming Commission and its regular monthly Commission hearings are open to the public.
Public records requests may be made of both the Board and the Commission. Since 1955, any information or data required by the Board or Commission regarding “earning or revenue of any applicant or licensee” was “considered confidential and … not [to be] revealed in whole or in part” except for a few limited exceptions involving agency administration, court orders, or certain federal government agency requests. 98 Subject to several amendments in the past 64 years, Nevada Revised Statutes § 463.120 was most recently amended by the 2017 Nevada Legislature to include, “any information or data” communicated to an agent or employee of the Board or Commission “in connection with its regulatory, investigative or enforcement authority.” 99 The amendment also provides that “confidentiality and privilege are not waived if the information and data are shared or have been shared with an authorized agent of any agency of the United States Government, any state or political subdivision of a state or the government of any foreign country in connection with its regulatory, investigative or enforcement authority” regardless of when that information or data was shared. 100 Nevada licensees are also given “a privilege to refuse to disclose, and to prevent any other person or governmental agent, employee or agency from disclosing the privileged information and data.” 101
Ex parte communications
Ex parte communication occurs when one party to a matter communicates with the fact finder or decision maker of a matter outside of a public forum and/or outside of the presence of the other parties to the same matter. In disciplinary actions, the finder of fact and decision maker is the Nevada Gaming Commission. The Nevada Gaming Control Board conducts investigations into potential violations of regulatory matters and makes the determination as to whether filing a complaint is warranted. In this capacity, the Board acts in a prosecutorial function. As such, the Board can and does meet with respondents and their counsel.
Nevada Gaming Control Board Agency accountability
The Nevada Gaming Control Board has established strict standards for employee conduct and agency accountability. Brian Duffrin, a former chief of the Administration Division, described agency accountability in this way:
The Gaming Control Board (Board) has many policies, procedures and internal controls in place including our Human Resources Manual, Agency Directives, Division Procedures as well as specific internal controls for each Division. In addition, we are subject to State and Federal laws as they relate to managing our personnel. We constantly review these based on our own internal audits as well as audits from outside entities and complete updates as needed. The Board also mandates employee evaluations and discusses performance and work practices with its employees. Job duties and expectations are amended as necessary. Many of the Board's employees are peace officers and in certain cases, because of that status, have extra duties and obligations imposed upon them and subject to specific employment guidelines. Lastly, all Board employees are given a mission statement and guiding principles that essentially encapsulates the Board's goals of fighting corruption and acting in a professional and ethical manner.”
102
The guiding principles, displayed on the Nevada Gaming Control Board website, are as follows:
In all decisions and in the performance of our jobs, our highest priority is our duty to protect the citizens of Nevada and visitors to our state by ensuring the interests of the agency, any employee or any licensee are not placed above our duty to our citizens and visitors.
We act with a high degree of integrity, honesty and respect in carrying out our duties and in our interactions with our stakeholders.
We are committed to protecting the confidentiality of all information entrusted to us by applicants, licensees and other stakeholders.
Our objectivity, independence and impartiality are beyond reproach. We avoid all personal or professional circumstances or conflicts that would call these into question.
Our processes ensure all actions, decisions and policies are consistently applied and do not result in advantages or disadvantages to any party to the detriment of another.
Our investigations, audits and tests, while comprehensive, are objective and fair-minded. Written reports of such actions are made with a high degree of care with special attention to accuracy.
We carry out our duties in a rigorous and thorough manner and utilize the resources provided to us wisely and only for the legitimate purposes of the agency.
We continuously challenge ourselves to improve the practices and processes of the agency to keep pace with the industry's change, growth and innovation and our legislative mandates.
We continuously improve our public communication and public access to provide guidance and assistance to those we hold accountable for compliance.
We foster and maintain cooperative relationships with other governmental bodies, domestic and foreign, and our professionalism and competence bolsters our reputation as world class participants in gaming regulation.
Our professional work environment is demanding and respects the individual differences of our employees. We set a high standard for hiring and advance employees based on demonstrated achievement. 103
Problem Gambling
The gambling age for all forms of gambling, except charitable lotteries, is 21 in the state of Nevada. 104 The age for participation in charitable lotteries with cash prizes is 18. 105 For charitable lotteries with non-cash prizes, there does not appear to be an age restriction for participation. 106 Though dated, a report provided to the Nevada Department of Human Resources, Gambling and Problem Gambling in Nevada, in March of 2002, provides the results of a study conducted in Nevada and asserts “the combined prevalence of problem and probable pathological gambling in Nevada is 6.4%, higher than every other jurisdiction where similar surveys” have been conducted. 107 In that same report, 85.6% of respondents had gambled in some form at least once, 67.9% had gambled within the preceding year of the survey, 28.1% indicated monthly play, and 19% had gambled weekly. 108
The Nevada Council on Problem Gambling was established in 1984. 109 While the Council focuses on awareness and prevention, it also “… serves as an advocate, an information resource, and a provider of programs and services to meet the needs of individuals and families who are affected by problem gambling.” 110 As part of its community outreach, a variety of cost-free programs are offered, such as “Given the Chance,” an awareness program for youth and “Damage Done,” an awareness program for families. 111 The Council also provides training that satisfies Nevada Gaming Regulation 5.170 requiring that Nevada gaming licensees provide their employees with problem gambling training. The Council has effectively trained tens of thousands of employees throughout the state of Nevada since 1999. 112
Nevada requires that any gaming licensee that “engages in the issuance of credit, check cashing, or the direct mail marketing of gaming opportunities” to implement a program that “allows patrons to self-limit their access to the issuance of credit, check cashing, or direct mail marketing by that licensee.” 113 Failure by a licensee to establish such a program is grounds for discipline. 114
In Nevada, when table games are exposed for play, information about wagers must be prominently posted if there is a minimum or maximum wager required at a particular table. Credit and/or debit cards are not accepted at the tables. When slot machines are exposed for play, credit and debit card acceptors are forbidden, but cash bill acceptors are allowed. More common are ticket acceptors. Nevada uses a ticket in/ticket out system where money is put in a kiosk and a slip of paper with the dollar amount selected for play is returned to the customer who then deposits the paper into the slot machine. When finished, the slot machine issues a paper slip for credit which can then be redeemed for cash at a kiosk or at the cage. Nevada's payouts on slot machines vary depending on location and on the type of slot machine. 115
In 1999, Nevada instituted a self-exclusion policy. 116 Regulation 5.170(4) requires that each gaming licensee that issues credit, provides check cashing services, or engages in direct mail marketing for gaming opportunities must allow patrons to self-limit their access to credit, check cashing, and adverting by implementing the following:
(a) The development of written materials for dissemination to patrons explaining the program;
(b) The development of written forms allowing patrons to participate in the program;
(c) Standards and procedures that allow a patron to be prohibited from access to check cashing, the issuance of credit, and the participation in direct mail marketing of gaming opportunities;
(d) Standards and procedures that allow a patron to be removed from the licensee's direct mailing and other direct marketing regarding gaming opportunities at that licensee's location; and
(e) Procedures and forms requiring the patron to notify a designated office of the licensee within 10 days of the patron's receipt of any financial gaming privilege, material or promotion covered by the program.
The regulation grants the Board chair the discretion to request that licensees submit their programs for review. 117 If the chair determines that the licensee's program does not meet the minimum requirements of the regulation, “the Chair may issue such a determination identifying the deficiencies and specifying a time certain within which such deficiencies must be cured.” 118 A licensee who fails to establish the above program elements can be subject to disciplinary action. 119 There is no requirement that a centralized list for self-exclusion be created or maintained or that the state be notified of the names of person requesting self-exclusion. 120
In 1999, the Nevada Gaming Control Board issued regulations related to problem gambling. Licensees, both restricted and nonrestricted, are required
to post or provide in conspicuous places in or near gaming and cage areas and cash dispensing machines located in gaming areas written materials concerning the nature and symptoms of problem gambling and the toll-free telephone number of the National Council on Problem Gambling or a similar entity approved by the chairman of the board that provides information and referral services for problem gamblers. 121
Licensees are also required to train employees in the “nature and symptoms” 122 of problem gamblers and how to provide information and resources about problem gambling programs to patrons. 123 Failure to provide for training or programs are grounds for disciplinary action. 124
In order to provide additional pathways to address problem gambling, in 2005, the Nevada Legislature enacted chapter 458A of the Nevada Revised Statutes and established the Advisory Committee on Problem Gambling (ACPG). The ACPG is tasked with reviewing requests from state agencies, political subdivisions, organizations, and educational institutions for grants and contracts for services to provide programs concerning prevention and treatment for problem gambling. Among other things, 125 the ACPG is authorized to assist the Department of Health and Human Services “in determining the needs of local communities and in establishing priorities for funding programs for the prevention and treatment of problem gambling and funding services related to the development of data, the assessment of needs, the performance of evaluations or technical assistance.” 126 The ACPG, at the discretion of its chair, is also empowered to “[c]onsider specific problems or other matters that are related to and within the scope of activities of the Advisory Committee. … ” 127
In 1980, the Diagnostic and Statistical Manual of Mental Disorders (DSM) III categorized problem gambling as an impulse control disorder with a specific diagnosis of pathological gambling. Not much changed in 1994 when the updated DSM IV was published. Problem gambling continued to be categorized as an impulse control disorder with a diagnosis of pathological gambling. However, everything changed in 2014. For the first time, the DSM-V categorization included a non-substance addiction, gambling, as a diagnosable addictive disorder. A gambling disorder is identified through the following behaviors:
A. Persistent and recurrent problematic gambling behavior leading to clinically significant impairment or distress, as indicated by the individual exhibiting four (or more) of the following in a 12-month period: 1. Needs to gamble with increasing amounts of money in order to achieve the desired excitement. 2. Is restless or irritable when attempting to cut down or stop gambling. 3. Has made repeated unsuccessful efforts to control, cut back, or stop gambling. 4. Is often preoccupied with gambling (e.g., having persistent thoughts of reliving past gambling experiences, handicapping or planning the next venture, thinking of ways to get money with which to gamble). 5. Often gambles when feeling distressed (e.g., helpless, guilty, anxious, depressed). 6. After losing money gambling, often returns another day to get even (“chasing” one's losses). 7. Lies to conceal the extent of involvement with gambling. 8. Has jeopardized or lost a significant relationship, job, or educational or career opportunity because of gambling. 9. Relies on others to provide money to relieve desperate financial situations caused by gambling.”
128
What is most helpful with the new diagnostic approach is that problem gambling disorders are viewed according to a severity index. If four or more behaviors are engaged in within a 12 month period, the disorder is mild, engaging in six or more behaviors indicates a moderate addiction, and if nine of the behaviors are engaged in over a 12 month period, the gambling addiction is severe.
While 86%–90% of adults in the United States gamble, it is estimated that 1.2%–2.5% of the population suffer from a mild to severe gambling disorder. Adolescents, as a group, have relatively high incidences of problem gambling even though they are not allowed to gamble.
The prevalence of youth problem gambling ranges from 2% to 6% and appears to be at least as high if not higher than adult rates. It is curious, that there are no obvious differences, in youth prevalence rates between jurisdictions, despite significant variations in availability [of gambling opportunities] and enforcement of illegal underage gambling. However, countries where youth have greater access to gambling tend to have somewhat lower rates of adult problem gambling. 129
Recognizing that some who may suffer from problem gambling may interact with the Nevada judicial system, the 2009 Nevada Legislature gave discretion to the courts to “establish a program for the treatment of problem gambling. … ” 130 In Nevada this is referred to as a diversion program. The assignment to a diversionary program is discretionary and the agreement must include the following:
a. Terms and conditions for successful completion of the program;
b. Require restitution as a condition upon the election of treatment;
c. Provide for progress reports;
d. Be administered by a qualified mental health professional;
e. Provide information and encouragement through educational, counseling and support sessions;
f. Allow for the participant to understand the medical, psychological, social and financial implications of problem gambling;
g. Contain referrals to community, health, substance abuse, religious and social service agencies for additional resources and related services, as needed; and
h. Require the person with the gambling problem to pay the cost of the program, if possible. 131
While eligibility requirements vary, if a problem gambler has been convicted of crimes committed in “furtherance or as a result of problem gambling” he or she is generally eligible to be assigned to a treatment program. Exceptions exist for certain felonies or misdemeanors against persons, crimes against a child, sexual offenses, acts of domestic violence, a record of two or more convictions, multiple felonies, pending criminal proceedings alleging a felony, other pending proceedings alleging felony acts, probation or parole status, or previous assignment to treatment. 132
If a court determines that a person is eligible to participate in a treatment program for problem gambling and the court determines that the conditions for the treatment have been satisfied, “the conviction will be set aside” and the records related to the conviction can be sealed. 133 However, failure to complete the program to the court's satisfaction allows for the sentencing and execution of the sentence to proceed. 134
Clark County has implemented this diversion program for those suffering from a gambling addiction. 135 “Instead of prison or probation, judges now have the discretion to order counseling for those addicted to gambling and retain oversight of their recovery. Advocates say it's more cost-effective than incarceration and a proactive way to reduce the number of repeat offenses.” 136
Nevada has also established a Problem Gambling Account as part of the State Budget. Prior to 2011, Nevada Revised Statutes § 463.320 called for the quarterly deposit in the Problem Gambling Account of an amount equal to $2 for each slot machine subject to the license fee imposed pursuant to Nevada Revised Statutes §§ 463.373 and 463.375. When budget shortfalls plagued Nevada as a result of the recession and additional funds for the state budget were needed over the 2011–2013 biennium, the 2011 Legislature approved Assembly Bill 500, which reduced the amount per slot machine deposited in the Problem Gambling Account from $2 to $1. The other $1 was deposited in the State General Fund for fiscal year 2012 and fiscal year 2013. This provision in Assembly Bill 500 expired on June 30, 2013 and the $2 deposit to the Problem Gambling Account resumed July 1, 2013. In 2019, the Nevada Legislature changed the funding formula for the Problem Gambling Account and eliminated the $2 per slot machine per quarter funding mechanism. Problem gambling in Nevada is now funded through a general fund allocation in the state budget every biennium. An increase of about $600,000 was approved for fiscal year 2020-21. 137
For the past few years, Nevada's Advisory Committee on Problem Gambling has been discussing how to better administer problem gambling resources throughout the state. The Committee is considering several pathways, including; (1) workforce development and training for counselors, early referral agents, healthcare providers, and teachers, (2) prevention education and a public relations campaign with an eye toward specific target groups, i.e., high school, veterans, and seniors; (3) an information campaign educating the public about knowing one's limits, and warnings about problem gambling behaviors and how to identify them; (4) multi-agency coordination; (5) research; (6) helplines; and (7) evaluations of the problem gambling programs to ensure that needs assessments are occurring, that measurable goals are pursued and that there is an outcome and process evaluation. 138
As the discussions continue with the Advisory Committee, perhaps some thought should be given to educating the judiciary, 139 ecclesiastical leaders, social workers, first responders, doctors, lawyers, accountants, and other non-gaming professionals as part of the workforce and training development piece. Prevention education and public relations campaigns should be aimed at the general population with an emphasis on how addiction affects families and social groupings.
Viewing these problems along a continuum instead of as discrete behaviors maybe more helpful in providing intervention and treatment options. Research is always valuable, and Nevada's last prevalence of problem gambling study was done in 2002. Since that time, Nevada's population has changed in fundamental ways ranging from incredible growth to the great recession when there was significant movement out of the state, back to a state of steady growth. Obtaining current data would help policymakers determine how their policies are working and better inform them as to how to improve community resources. Focusing on providing a range of services instead of independently administered programs can make providing resources more effective and would improve the delivery of services to those manifesting addictive gambling behaviors. Finding support networks, creating referral services that utilize social workers, marriage and family counselors, certified gambling counselors, and others should also be part of a comprehensive solution and may improve the identification and treatment of addictive gambling disorders.
Recommendations from the report provided to the Nevada Department of Human Resources, Gambling and Problem Gambling in Nevada, in March of 2002 included working with insurance companies to provide coverage for individuals with gambling-related concerns, embarking on a “public education and prevention” campaign, developing “government-industry initiatives,” providing additional training for mental health professionals, and creating a “gambling counselor certification program.” 140