Abstract
Key points in gaming history demonstrate why Nevada regulators have been crucial in supporting the growth of regulated gaming in the U.S. and globally. Since the 1959 Gaming Control Act, the protection of the state through the strict regulation of gaming has been a core principal that regulators continuously returned to. Certain key points in gaming history and how Nevada gaming regulators have responded using this principal includes several events, such as the expansion of gaming throughout the U.S. and internationally, and the rise of online gambling and the many forms it has since evolved into. This article reviews those points in history and the response by Nevada in consistently returning to that core principal.
INTRODUCTION
The modern form of Nevada gaming law began in 1959 with the passage of the Gaming Control Act. 1 This Act established the Nevada Gaming Control Board (“the Board”) and the Nevada Gaming Commission (“the Commission”) as the gaming regulatory bodies of the state. 2 With the creation of the Board and Commission, the Nevada legislature and Governor Grant Sawyer focused on strengthening the state's gaming regulation. This was in response to even throughout the 1950s where Nevada had faced nationally publicized scrutiny for its loose regulation of gaming.
The federal government began cracking down on organized crime, putting Nevada on a national stage in doing so. Televised hearings known as the Kefauver Committee hearings were broadcast for the nation's eyes and played out like reality TV. 3 Federal agents conducted interviews on charismatic mobsters, casting Nevada as a corrupt, crime-infiltrated state. At the conclusion of the hearings, the federal government threatened a tax on wagering that would ruin the industry, and so Nevada had to promise to clean up gaming. 4 Nevadans’ livelihoods depended on gaming, and so the state turned to the strict regulation of gaming to save it. The first major effort in doing so was in the creation of the Gaming Control Act. 5 First enacted to save Nevada, the Act's significance holds strong as a framework for regulators overseeing all persons and companies involved in gaming in Nevada.
Gambling was largely illegal outside of Nevada until 1976 when New Jersey passed a referendum allowing casinos in Atlantic City. The legalization of gaming outside Nevada understandably gave the Nevada legislature and gaming regulators renewed concern. Without relevant regulations, lawmakers contemplated whether Nevada had sufficient control over its gaming licensees’ operations outside the state. With insufficient control, the corruption that once colored the industry could remerge, and with it renewed threats of intervention by the federal government, and the potential to harm Nevada's gaming-reliant economy.
On the other hand, gaming businesses in Nevada were perfectly suited to expand to Atlantic City because of their decades of experience in Nevada's gaming market. Further, under the U.S. Constitution, Nevada lawmakers could not prevent companies from expanding outside the state, so regulators needed regulation in place that balanced oversight and expansion. This point in the expansion of gaming sparked the beginning of many changes for the industry in the U.S., but especially for the role of Nevada regulators. Regulators who were once focused on protecting gaming within the state now had to monitor gaming outside the state as well.
New Jersey and Nevada remained the only jurisdictions with legalized and regulated casinos in the U.S. until 1989 when three additional states legalized gambling. 6 By the early 1990s, 11 additional states legalized gambling, with more quickly following. 7 States began to recognize the benefits Las Vegas and Atlantic City received in legalizing and regulating gaming. The benefits of tax revenue and tourism were attractive, and it became clear that the fears of corruption could be managed with the right regulation. As of today, all but a handful of states have legalized gambling.
After Atlantic City, the rapid growth of gaming took several major forms, each again requiring a calculated response from Nevada regulators. The growth of gaming outside the state began with states legalizing riverboat casinos in the early 1990s, soon followed by the rise of offshore betting and online casinos in the mid-1990s. Online gaming was largely illegal in the U.S. under federal laws that applied to old technology. This meant uncertainty in how the federal law applied to the new technology, creating risk in violating federal law and triggering federal intervention once again.
While the uncertainty in online gaming continued, in the early 2000s, regulators were faced with new growth in the form of Nevada-based casino companies and Nevada-based gaming equipment manufacturers expanding operations abroad. Regulators had just experienced the growth of land-based gaming within the U.S., and now had to consider the implications of land-based casino growth internationally. Finally, the most recent historical change in gaming has been the legalization of sports betting across the U.S. Nevada had been exempt from the federal ban on sports wagering, along with only three other states. Today, sports betting is legalized in approximately half the U.S., and continues to grow. However, much like online gambling, sports betting implicates federal law, adding yet another dimension to consider in regulating through the growth of gaming.
Through its regulation, Nevada has gained a reputation as the “gold standard” of gaming. Nevada has built an economy heavily reliant on the success of gaming, and so regulators have had no choice but to maintain a high standard throughout the state's history.
This standard is contained in one core principle, found in Nevada gaming law and regulation, and consistently reiterated by the Board and Commission: protecting the state through the strict regulation of gaming. Through the U.S. and global expansion of gaming, Nevada regulators have always returned to that principle. This article traces those certain key points in gaming history where Nevada regulators have acted upon this principle, illustrating the vital role of the Board and Commission through the growth of gaming.
NEVADA REGULATORS AND FOREIGN GAMING
The beginning of Nevada's role in the regulation of gaming outside the state is marked by Nevada Revised Statutes (NRS) §§ 463.680–463.720, which is known as the “Foreign Gaming” statute. This statute was enacted in 1977 in response to the legalization of gaming in New Jersey. This statute was enacted with the understanding that the state's gaming licensees were expanding their operations outside the state, and that Nevada needed to continue to ensure that they could continue to strictly enforce gaming regulation. 8
The intent of the statute was to closely monitor those out-of-state operations, reflecting the still-fresh concerns over corrupt influences in gaming. Nevada was also motivated by the state's dependence on gaming revenue, and the belief that discredit to the state's gaming industry could hurt tourism, thereby negatively impacting the economic welfare of the state. When first enacted, this statute required gaming licensees to obtain preliminary approval from Nevada regulators to conduct gaming outside Nevada. 9 Failure to do so would put their Nevada license at risk. This approval process allowed Nevada regulators to first decide whether the licensee's activities met the state's strict regulatory standards.
Applications to operate foreign gaming had been relatively infrequent until the early 1990s. Initially, most applicants were Nevada-based gaming companies seeking to enter the New Jersey and Australia gaming markets. 10 Then, with a wave of legalized gaming across the U.S., the number of applications increased greatly, creating tension for regulators in balancing the strict regulation of gaming while protecting the state's own gaming economy from competition and corrupt influence.
The Foreign Gaming statute in its initial form required prior approval by Nevada regulators before a licensee could conduct certain gaming business outside the state. This changed in 1993 after the process became too slow for Nevada businesses. The success of gaming in Las Vegas and Atlantic City prompted many states to legalize and regulate gambling. 11 This wave of legalization began with Iowa and Illinois introducing riverboats in 1989. 12 Soon, South Dakota followed, designating Deadwood as a casino city. 13 By 1993, six states had legalized riverboat casinos. 14
Even though states were quickly becoming comfortable with legalized and regulated gaming, many still placed heavy restrictions related to when and how much gambling could take place. However, as competition and appreciation for the economic benefits of gaming grew, states lessened those restrictions, and more forms of gaming were legalized. 15 By the mid-1990s, Colorado, Louisiana, Michigan, Missouri, and Mississippi had legalized commercial gaming. 16 With such rapid expansion of the industry, many companies in the mature Las Vegas market saw great potential outside the state and needed to act quick.
Before starting new out-of-state business, Nevada gaming companies needed to get the Commission's approval. 17 This approval requirement meant slower expansion efforts, and a damper on Nevada gaming companies’ ability to compete with non-Nevada gaming companies who did not have the same regulatory barrier. Regulators and lawmakers recognized the statute as overly burdensome and responded by adjusting the law in such a manner that would still allow for a sufficient level of oversight. 18
In 1993, the Nevada legislature amended the law, removing the initial approval requirement. 19 Gaming companies were instead required to self-report certain documents, accounting controls, regulatory reports, changes in ownership, complaints, and arrests in the foreign jurisdiction on a regular basis. 20
In 1997, the Foreign Gaming statute was again amended, adding NRS § 463.715. This section added a provision to the statute that required a gaming licensee to file with the Board an application for a finding of suitability regarding its gaming activities or associations outside the state “if the Board determines that an actual or intended activity or association of a licensee in a foreign gaming operation may be prohibited pursuant to subsection 3 of NRS § 463.720.” 21 Subsection 3 of NRS 463.720 provides that a licensee may not knowingly “engage in an activity or enter into an association that is unsuitable for a licensee.” 22
The Board already had the power to require a finding of suitability regarding the licensees associations throughout the Gaming Control Act, 23 but the Board introduced the bill to make clear that this power also applied to licensees engaging in certain foreign gaming operations. 24 In response to the growing market outside of Nevada, requiring a finding of suitability for behaviors or associations under subsection 3 of NRS 463.720 gave Nevada regulators stronger oversight over out-of-state operations. If the Board found an association fell under this section, the licensee would be required to cease ties with that association, or otherwise risk losing its license and ability to operate in Nevada.
Testifying on the bill, then chair of the Gaming Control Board Dennis Neilander recognized the industry had become global and that there was a need to make clear to licensees that this power extended to foreign operations. 25 As a result, Nevada regulators have not only ensured their ability to protect the integrity of gaming within the state but have also gained influence on gaming operations beyond the state.
NEVADA REGULATORS AND ONLINE GAMING
Gaming continued to proliferate throughout the world, and the emergence of the internet inevitably led to online gambling in the mid-1990s. Online gambling, in the form of both online sports wagering and online casinos, was illegal under U.S. law. However, offshore betting sites and casinos were legal in some countries, although typically not regulated to the strict extent to which gaming is regulated in Nevada. Many Nevada companies sought to enter the online gaming market abroad, leading Nevada regulators to pay careful attention to licensees’ involvement in those operations. 26
Although U.S. companies could legally operate internet gambling under the laws of the foreign jurisdictions they were in, they could not take bets from anyone located in the U.S. or otherwise be in violation of 18 U.S. Code § 1084, the “Wire Act.” Being unable to legally provide their services to the U.S. market, U.S. companies operating abroad had to ensure those foreign operations did not run afoul of federal law, while Nevada gaming companies had to also work carefully under the watch of Nevada regulators. Meanwhile, Nevada regulators faced unique issues tangled in uncertainties in applying federal law to Nevada's interest in regulating internet gaming.
In 1999, Nevada gaming regulators filed a complaint against its gaming licensee American Wagering, the operator of Leroy's Sports and Race Book in the state. 27 American Wagering, through its subsidiary, Mega$ports Pty., Ltd., received an internet gaming operation license from the Australia Capital Territory's Bookmakers Licensing Committee and began running an internet gambling operation out of Canberra, Australia. The Nevada Gaming Control Board's complaint alleged that American Wagering was operating unsuitably through its subsidiary by accepting bets from persons located Nevada in violation of the Wire Act and Nevada law. 28
The Nevada Gaming Control Board had its Las Vegas agent use a Canadian server to place a bet with Mega$ports. 29 This work-around allowed those located in Nevada to place bets, which a Nevada gaming licensed company could not legally facilitate pursuant to the Wire Act and NRS § 465.093. American Wagering settled the complaint, neither admitting nor denying the allegations, and subsequently sold Mega$ports in 2002. 30
In 1999, another Nevada gaming licensed company, International Game Technology PLC (IGT), invested in an Australian online betting company. IGT had bought a minority stake in the company, Access Systems Pty., Ltd. (“Access”), which developed software for online gaming companies. 31 A year later IGT became concerned because Access made a deal with a company that aggressively marketed sports betting to U.S. residents. 32
As offering sports betting to the U.S. market was illegal for U.S. companies, IGT sought to avoid any association with that company and sold its minority stake in Access. Had IGT kept its stake in Access, it would have risked anything from scrutiny to disciplinary action by Nevada regulators, as the mere association was sufficient for reprimand.
Nevada licensees sought to enter foreign gaming markets like Australia because it was among several countries offering a legalized, regulated online gaming industry. Nevada licensees had to limit their involvement in online gaming to places where the operations were legal. However, because there were many gray areas in the laws of online gaming, Nevada regulators were still watchful of those companies who did. 33
While licensees were legally operating abroad, online gambling remained illegal under U.S. law pursuant to the Wire Act. This Act dates back to the 1960s, originally applying to wagers placed through a telegraph, and eventually landline phones. Applying such an antiquated law created confusion and uncertainty as to its application to internet gambling, and once again became a means for Nevada to be scrutinized by federal law enforcement.
In the mid-1990s, the Caribbean nation of Antigua and Barbuda was among the first to legalize online gaming. 34 By the year 2000, 93 internet gaming licensees had set up operations on the island and were generating $7 billion in revenue. 35 This attracted many companies, among which was the U.S. company World Sports Exchange (WSE). WSE set up operations in Antigua but had advertised its offshore sportsbook services to the U.S. through newspaper, radio, and TV. 36 WSE had U.S. bettors wire money to the company in Antigua and then call an 800-number or use the internet to place bets. 37
When WSE took these bets, they implicated the Wire Act, drawing the attention of federal prosecutors. The owner of WSE, Jay Cohen, argued his operations were not in violation of the Wire Act because the bets were received in Antigua where gambling was legal. 38 This argument did not hold as the bets were still being placed from within the U.S., and Cohen became the first person convicted under the Wire Act. He was sentenced to 17 months in a federal prison located just outside Las Vegas. 39 This interpretation of the Wire Act by the Second Circuit Court of Appeals meant that even U.S. companies with legal online operations outside the U.S. may be reached by U.S. law enforcement agencies and courts.
With this decision in mind, in 2001 the Nevada legislature legalized internet gambling. AB 466 passed, authorizing the Commission to enact regulations on internet gaming. However, this bill required the Commission to first determine whether online games could be conducted in compliance with all applicable laws, that they were secure and reliable, and that the games were consistent with the public policy of the state before enacting the regulation, which is “to foster the stability and success of gaming. 40
The bill also limited the operation of online gaming to nonrestricted gaming licensees, creating a high barrier to entry for companies outside the state or country looking to offer online gambling in Nevada. 41 In contrast, offshore gaming sites operating from unregulated or less regulated environments provided easy market entry and relatively insignificant regulatory costs. 42
AB 466 became law with the help of MGM Mirage. MGM Mirage had begun online gaming operations in the Isle of Man, where internet gaming had recently been legalized. 43 MGM Mirage became one of the first major U.S. casinos to venture into internet gaming. 44 Nevada required its gaming licensees operating in foreign jurisdictions do so in accordance with NRS § 465.720, requiring them to follow the laws and regulations of the countries they operate in, 45 as MGM Mirage had done in the Isle of Man. 46
However, with the Cohen decision and interpretation of the Wire Act, MGM Mirage could clearly not accept wagers from U.S. bettors, which comprised 80% of the customers who logged in. 47 MGM Mirage was forced to close the operation in 2003 and took a $5 million loss, as it could not compete with the online gaming companies who did take bets from the U.S. 48
Although AB 466 had given the Commission the power to enact internet gaming regulations, all efforts ended in 2002. The Board and Commission chairs sent the Department of Justice (DOJ) a letter requesting an opinion on internet gambling, per the provision in AB 466 requiring the Commission to enact those regulations only so long as online gaming could be operated legally. The DOJ responded, citing the Wire Act, among other similar federal online gambling laws, stating all online gambling is illegal, and those operating it are subject to federal prosecution. 49 This halted Nevada's internet gaming efforts for a time.
The internet gaming battle once again returned to Nevada in 2011 with PokerStars, an Isle of Man-based company. PokerStars set its sights on the legalization of online poker in Nevada. 50 With AB 258, PokerStars proposed amending the 2001 internet gaming statutes to again compel the Board and Commission to adopt regulations for online gaming, but this time, just for online poker. 51
PokerStars’ proposed legislation included a provision that would prevent the Commission from denying a gaming license based on an applicant's involvement in accepting wagers from U.S. bettors, which is a violation of the Wire Act, giving the Commission clear grounds for denial of the application. The proposed legislation also stated that if the application was denied on such basis, the applicant would have the ability to seek judicial review of the decision. 52
A denied Nevada gaming application means a company may not have any involvement in gaming in Nevada. Nevertheless, efforts in passing the legislation as proposed took a turn when the PokerStars CEO was mentioned in an April 2011 DOJ indictment, which charged several online poker companies with circumventing 31 U.S.C. §§ 5361–5366, the Unlawful Internet Gambling Enforcement Act (UIGEA), which would have otherwise prevented financial institutions from facilitating the bets between PokerStars and U.S. residents, had PokerStars not hidden the nature of those transactions. 53
AB 258 passed, but with changes to the original PokerStars proposal. Those changes included, in part, that the Commission could still deny an applicant based on its involvement in accepting wagers from the U.S. This meant that PokerStars was unable to enter the Nevada market without risking being denied a gaming license and being forever banned from the Nevada gaming industry.
The legislative findings also indicated that the purpose of the legislation was that Nevada “leads the nation in gaming regulation and enforcement” and is “uniquely positioned to develop an effective and comprehensive regulatory structure” for online gaming, and that to “prepare for possible federal legislation, the State of Nevada must develop the necessary structure for licensure, regulation and enforcement.” 54
The bill held true to its purpose. It required the Commission to adopt online poker regulations for Nevada, and explicitly stated that any online gambling that crossed state borders would not be licensed until federal law authorized it or the DOJ notified the Board or Commission in writing that it was permissible under federal law. 55 With these changes, calculated chances were being taken to regulate online gaming.
In December 2011, the Board and Commission adopted the regulation relating to the operation of online poker under Nevada Gaming Commission Regulation 5A. 56 In September 2011, the DOJ had reversed its interpretation of the Wire Act, issuing an opinion that interpreted the law to say that any online gaming that does not relate to a sporting event or contest falls outside of the reach of the Wire Act; therefore, the Wire Act was likely inapplicable to online poker because poker is not a sporting event or contest. 57
This change in the interpretation of the Wire Act allowed online poker in Nevada to again make moves in the next legislative session in 2013 when AB 114 58 and AB 360 59 became law. These changes allowed for state compacts so that online poker in Nevada could be connected to other jurisdictions with legalized online poker. However, Nevada still treaded carefully, with Governor Sandoval recognizing that communicating with the DOJ was vital to ensuring that cross-jurisdictional poker could be operated in compliance with federal law. 60
In 2018, the DOJ again adjusted its opinion, stating the Wire Act also applies to online gambling and online lotteries. 61 This change came after several states, including Nevada, relied on the 2011 opinion in legalizing online gaming. However, litigation out of the First 62 and Fifth Circuits 63 interpreted the Wire Act to apply to sports only. Even with uncertainty in the Wire Act remaining, online poker continues to operate in Nevada, and in conjunction with other states where online poker is legal, without interference. Nevertheless, Nevada licensees still must operate online gaming in compliance with the strict state regulation of gaming.
In 2018, the Board filed a complaint against Nevada gaming licensee BOOMTOWN. The company's web designer had made internet links available to Nevadans that allowed access to an offshore casino site based and regulated in Curacao, a small Caribbean island. 64 The allegations in the complaint included violations of the Wire Act, as well as NRS § 465.093, which makes transmitting wagers to or from another person outside the state illegal. 65 The company was fined $40,000, and was required to implement training and education specifically addressing illegal gaming in Nevada and to donate to a Nevada problem gambling center. 66
Today, online gaming continues to grow, with Nevada gaming licensees still under the strict scrutiny of Nevada gaming law. MGM currently conducts online casino operations in New Jersey, West Virginia, and Michigan. 67 Caesars Casino, Golden Nugget Casino, and Boyd Gaming, all Nevada gaming licensees, also operate online casinos in various states. 68 Many of Nevada's slot machine manufacturers, such as Scientific Games, IGT, and others, are in the online gaming business as well. 69 As online gaming and the related technology continues to grow, many Nevada licensees grow with it, giving regulators new issues to consider in regulating gaming in Nevada.
NEVADA REGULATORS AND SPORTS BETTING
For nearly 70 years, sports betting was confined to only a handful of states. 70 Among those, Nevada had the most appealing sports betting experience, giving it a majority of the sport betting market. 71 This changed dramatically in 2018, when the United States Supreme Court overturned a federal ban on sports betting. In Murphy v. NCAA, 72 the 1992 Professional and Amateur Sports Protection Act (PASPA) was struck down as unconstitutional. PASPA had kept most states from offering fully legalized sports betting, with few exceptions. 73 The repeal of PASPA had given states a clear path to legalizing sports betting, which many took quick advantage of.
Within six months of the repeal, seven states joined the small handful in offering sports betting. Today, most states have either legalized sports betting or have pending legislation that would legalize sports betting. 74 Since PASPA's repeal, sports betting has grown significantly in the form of mobile, online, and retail sportsbooks and continues to grow.
Before the repeal of PASPA, a popular form of betting was daily fantasy sports (DFS). DFS was available in Nevada for a time but halted in 2015 when the Board issued a notice to licensees on the legality of DFS. A memo from the Nevada Attorney General's Office categorized DFS under sports pools and gambling games, meaning it would require companies to first obtain a license to operate DFS. 75 Whether DFS constituted gambling under Nevada law meant the difference between whether a company needed a costly nonrestricted license or not, and DFS had been operating without one for several years already. 76
Prior to the industry notice, DFS had come under increasing scrutiny by Nevada regulators after a DraftKings employee won $350,000 playing DFS on FanDuel using non-public information. 77 Today, no DFS sites yet operate in Nevada, and many other states have also deemed DFS a gambling game, requiring the companies to be licensed.
Sports wagering has continually required Nevada gaming regulators to watch licensees as sports betting laws in other jurisdictions evolve, and as cross-border sports wagering remains illegal under the Wire Act. In 2014, 2016, and 2018, Cantor Gaming Technologies (or CG Technology), a previously licensed sportsbook operator in Nevada, paid significant fines to Nevada regulators for various counts of failing to operate its sportsbook with integrity and an unsuitable method of operation. In 2014, the company was fined $5.5 million, the largest in history at the time, for failing to properly supervise a sportsbook director who was involved in a nationwide illegal sports betting ring. 78
In 2016, the company again paid a fine of $1.5 million for miscalculating and shorting bettor payouts. 79 And again in 2018, the company faced fines of $2 million for taking mobile wagers from Arizona, Texas, and California. 80 Even though the repeal of PASPA has allowed states to legalize sports betting, some have kept it illegal. This has added another level of complexity. With varying laws and uncertain interpretations, Nevada regulators must not only monitor licensees’ actions in the state, but also their actions relative to the laws of the many jurisdictions in which they do business.
Prior to states legalizing various forms of online gaming, and prior to the repeal of PASPA, many companies and individuals had illegal gambling operations. These companies have a significant hurdle before the possibility of obtaining a license in Nevada, if any chance at all.
As Nevada has demonstrated with PokerStars, companies and individuals who act contrary to the state's strict gaming policies are often shut out from Nevada's gaming industry completely. Nevada law broadly states that the grounds for denial of a gaming license application can include any activity that “discredits or tends to discredit the State of Nevada or the gaming industry.” 81
The Board investigates and evaluates applicants, and recommends approval or denial of that applicant's license based on Nevada law and regulation, including certain criteria such as “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.” 82 The Commission then makes the final determination using information provided by the Board's recommendation. Therefore, licensees must endure an investigation and two public hearings, and pass the scrutiny of two bodies of decision makers before possibly obtaining a gaming license.
The Board created what is called the Black Book in 1960. This book is a “List of Excluded Persons,” which originally listed 11 persons, all with mob ties. 83 Today, the Black Book lists 35 members. 84 Among those members are persons convicted of match fixing, and they include Peter Jay Lenz and Richard “The Fixer” Perry. 85 Lenz was considered a threat “to legalized gaming in Nevada” in the decision by Nevada regulators, 86 while Perry was added in 1992 for influencing the outcome of sporting events. Perry was also convicted for multiple crimes prior to joining the book, including tax evasion, a racing scandal, and bribery. 87
The members of the Black Book are not only excluded from gaming premises, but gaming licensees must know who they are and identify them on their premises or risk being deemed by the Board to be operating unsuitably. 88
As sports betting expands, Nevada regulators must revisit what it means to protect the integrity of gaming in the state. With different iterations of sports gambling, such as esports, peer-to-peer sportsbooks, and other new technologies, regulation must continuously be revised. DFS, mobile wagering, and offshore wagering have all demonstrated the challenges in creating and changing regulations in an unprecedented gaming environment, making the phrase “the strict regulation of gaming” a more challenging concept. Nevada, once having been among only a handful of states with sports betting, has quickly become one of many, requiring regulators to now balance the protection of the integrity of Nevada gaming with the economic welfare of the industry.
NEVADA REGULATORS AND CASINOS ABROAD
Nevada's best-known gaming companies operate in locations around the world. The most profitable of these locations is Macau, where MGM, Wynn, and the Sands currently have casino operations. 89 After the expansion of Nevada casinos domestically, licensees sought out new international markets, finding opportunity in both Macau and Singapore, and soon, Japan. This means that the Foreign Gaming statute not only applies domestically, but also internationally, and creates a new layer of complexity in what it means to strictly regulate gaming in Nevada.
Macau surpasses Nevada in gaming revenues, and quickly has become an attractive market for Nevada based companies. However, Macau has a very different gaming landscape compared to Nevada. Stanley Ho held a monopoly on gaming in Macau from 1961 to 2002 when the government awarded the gaming monopoly bid to the Society for Tourism and Entertainment of Macau (STDM). 90 However, Stanley Ho's monopoly in Macau ended when the Macanese government opened the bidding once again and awarded rights to operate casinos to three entities. Those entities included Stanley Ho's STDM, but also Nevada operators Wynn Resorts, the Las Vegas Sands, and MGM Mirage. 91
In 2006, Wynn Macau began operating, eventually opening the Encore Macau in 2010 and Wynn Palace in 2016. In 2007, MGM Macau began operations, and the Las Vegas Sands opened Venetian Macau. Both MGM Macau and Las Vegas Sands have been confronted by Nevada's strict regulatory scrutiny for its Macau operations.
To enter the Macau market, MGM Mirage sought to partner with the family of Stanley Ho. Stanley Ho had been alleged by international law enforcement authorities to hold ties with Chinese organized crime triads. 92 These ties were also traced to Stanley Ho's daughter, Pansy Ho. 93 MGM Mirage, also seeking to operate gaming in New Jersey, faced scrutiny by regulators there, who found Pansy Ho unsuitable under their gaming laws and regulations and encouraged MGM Mirage to disassociate itself from Pansy Ho in order to be permitted to operate in New Jersey. 94 Instead of disassociating from Pansy Ho, MGM Mirage left New Jersey completely and operated as a 50–50 joint venture with Pansy Ho in Macau. 95
In contrast, Nevada gaming regulators found Pansy Ho suitable as a business association for MGM Mirage after extensive hearings in March 2007. Even though Nevada gaming regulators could have also required MGM Mirage to disassociate, the investigation played out such that Nevada regulators were satisfied, giving MGM Mirage a pass from Nevada to work with Pansy Ho in Macau.
The Las Vegas Sands Corporation also faced regulatory challenges in Nevada for its operations in Macau. In May 2016, the Board filed a complaint against Las Vegas Sands Corporation for violating gaming laws and operating unsuitably. 96 This decision was based on federal allegations of violating anti money-laundering and bribery-law accounting provisions in both its Macau and Las Vegas casinos.
The first count alleged poor record-keeping, citing the Nevada regulations addressing grounds for disciplinary actions against its gaming licensees, which states, in part, “[f]ailure to exercise discretion and sound judgment to prevent incidents which might reflect on the repute of the State of Nevada and act as a detriment to the development of the industry.” 97 The second count alleged the casino failed to file a suspicious casino activity report, which is required by federal law. Sands agreed to pay a fine of $2 million to the Nevada Gaming Control Board. 98
The expansion of Nevada casinos into new jurisdictions continues with Japan. Japan recently extended its gaming laws, and in 2018 began considering bids from operators for three integrated resorts. 99 Nevada companies, including the Las Vegas Sands, Wynn, MGM, Hard Rock International, and Mohegan Sun, were among the interested bidders. 100 The bidding process was narrowed down as Sands and the Wynn pulled out of the Yokohama casino bid, 101 while MGM won the Osaka casino bid. 102 Mohegan Sun, a tribal gaming entity, and as of 2020 a Nevada gaming licensee, also entered the bidding for a location in Japan. 103
Mohegan Sun became the first tribal gaming entity to operate a casino in Las Vegas, which means the company is now under the jurisdiction of the Board and Commission. 104 Mohegan Sun also operates a casino in South Korea. 105
An international gaming industry has given Nevada licensees an opportunity to diversify their gaming business, but not without strict oversight. Licensees continue to be held to Nevada regulatory standards, so long as they hold a Nevada gaming license. The international reach of Nevada standards has created a new layer for regulators to consider when enacting and enforcing regulation.
Nevada is no longer the single gaming market, but rather one among many with the added advantage of having witnessed and survived the many changes to the industry since its inception in the mid-1900s. This experience is recognized in gaming jurisdictions worldwide and has given Nevada regulators a chance to share those experiences and promote gaming integrity on a global scale.
NEVADA GAMING REGULATORS AND CROSS-JURISDICTIONAL COLLABORATION
Nevada gaming regulators often collaborate with other states and countries on best practices in gaming law and regulation. Nevada's strict gaming regulations have often been used as a model for other jurisdictions looking to draft their own gaming laws and regulations, and Nevada has looked to others for strengthening their own. Mississippi nearly word-for-word modeled its own 1972 Gaming Control Act after Nevada's. 106 Nevada sought insight on online gaming laws in 2011, working with the Britain-based Alderney Gaming Control Commission on a framework for online gambling.
The two regulatory bodies also entered into an agreement enabling both regulatory bodies to collaborate on various regulatory matters, including investigations. 107 In 2019 Japan, in consideration of legalizing gambling and issuing licenses to gaming companies, looked to Nevada regulators for guidance and insight. 108
Gaming jurisdictions continue to look to Nevada when crafting their own laws and regulations because Nevada has a long, well-developed history in the regulation of gaming. Nevada has endured criminal influence, economic downturns, sweeping changes in technology, and the widespread legalization of gaming in other jurisdictions, yet has maintained its status over the many decades as the gaming center of the world.
CONCLUSION
When the 1959 Gaming Control Act was signed into law, the intent was to protect the state and strengthen gaming regulation. 109 To protect the state against further rumors of a corrupt Nevada, no Board or Commission members were chosen from within the gaming industry. 110 All gaming license applicants were required by regulation to go through a lengthy, detailed licensing process to ensure that their “integrity, honesty, and good character” fit the state's strict regulation of gaming. 111 Since these changes, the industry has evolved tremendously. Through the nearly 70 years since the Gaming Control Act was enacted, Nevada regulators have remined unwavering in enforcing this policy.
Today, Nevada regulators recognize gaming has evolved significantly outside the state, changing the state's position in a now global gaming industry. Rapid change has meant that innovation often does not neatly fit in old regulation, and even quickly outpaces new regulation. This has given Nevada gaming regulators a new role where their history in regulating gaming can be leveraged to solve unique challenges, and to share the challenges of the past with new gaming jurisdictions.
In this new role, regulators are demonstrating how constructive and economically empowering regulated gaming can be, while promoting the idea that integrity must be a constant for its success. This means that even though Nevada is dependent on the success of gaming within the state, as gaming has grown, it could just as well now also be dependent on the success of gaming throughout the world.