G2E Gaming Experts Discuss Bad Actors Clauses and How They Impact State by State Regulatory Approvals

A late day conference panel at the Global Gaming Expo in Las Vegas didn’t draw the crowd it deserved due to conflicts with other panels, but some experts from the gaming industry had some strong views on who should be in the online gaming market and who shouldn’t.

Melissa Blau, Director and Consultant at iGaming Capital moderated the panel and led out with the question on how one defines the term “bad actor” for purposes of regulatory approvals.

Yaniv Sherman, V.P. and  Head of Business Development and Sales for 888 led out saying that the term has various connotations but is really just the opposite of someone who is licensed.

Jan Jones, V.P. of Communications and Government Relations for Caesars Entertainment agreed and added that for regulatory and legislative purposes the term means simply “not licensable”.

David Deitch, Attorney with Ifrah Law in Washington, said the term refers to specific definitions of those companies that would not get licenses.  Deitch pointed out that suitability for licensing was always determined by the regulatory agencies, but that in Nevada, the legislature took that job away from regulators this year.

Michael Rumbolz, Director of Seminole Hard Rock International, somewhat agreed with Deitch, saying in the past legislation is usually broad leaving suitability questions up to the regulators, enumerating things in the law that potentially “could” disqualify any applicant, but with the decision made by regulators.  Now, newly signed legislation in Nevada, for example, discards that premise with the legislature making the decision prior to any applications. 

Marc Comella, Vice President of Regulatory Compliance with Bally Technologies, stated that as a supplier, he things a “bad actor” label should be left up to the regulatory bodies as it always has been, asserting in fact, that it’s wrong for legislators to have stepped in to that job.

Jones disagreeing, jumped back and claimed that legislators always decided what should happen with licensing procedures but Rumboltz disagreed with Jones there.

Deitch then added that the “2006″ mandate used in Nevada is a problem.  It’s not tied to any convictions or other criteria other than a date of operation. Using a 2006 date, said Deitch, doesn’t make any allowances for good guys or bad guys. Tying suitability to a date when the Unlawful Internet Gambling Enforcement Act (UIGEA) was signed is a problem.  UIGEA itself didn’t make anything illegal. You can get wrong results using a bright line like this.

Rumbolz said he’s not sure that regulatory agencies always mind a bright line, in some respects it could make their jobs easier.

Jones voiced disagreement that UIGEA was unclear, as she has done many times in the last year, although that stance is different than one she had prior to 2012. There were arrests, said Jones, companies broke the law, people were indicted. Those are the bad actors that UIGEA was meant for.

Deitch responded to Jones that anything that was illegal after 2006 was also illegal before then. Even those companies that withdrew after UIGEA knew that too.

Sherman added that 888′s attorneys were clear about withdrawing from the US market post UIGEA.  No sound company would have stayed on post UIGEA and those that did stay on, did so after contemplating their risk management for profit.  888, said Sherman, never regretted their decision to leave the US market.

Comella added that the the combination of legislative and regulatory decisions for suitability are important.

Blau asked the panel whether it was true that some states require a predominance test, for example the skill vs. luck argument for poker.

Deitch explained that some respected lawyers have indeed argued that in the courts. The most recent case being US v DiCristina in New York, where a senior judge, Jack Weinstein, reversed a jury decision citing that the argument of skill vs luck was persuasive.

Jones replied saying that it doesn’t matter, that federal laws would trump any state findings.  Deitch then explained that that was not true, since UIGEA relies on underlying state offenses, not making anything illegal by itself. He did clarify though, that the second circuit appeals court reversed the Weinstein decision, reinstating the guilty verdict and holding that the poker game played in Brooklyn was illegal. Additional appeals are still possible.

Sherman asserted that 888 did nothing unlawful. The answer is simple according to Sherman, if you need a license and you don’t have one, you are operating illegally and you should get out, like 888 did.  Sherman did not address the fact that 888 offered casino gaming online in a big way since the late 1990′s.

On the subject of interstate compacts, Jones suggested that experienced states like Nevada and New Jersey can use their regulatory expertise to aid smaller states, enabling them to enter the market, but Rumbolz brought up the fact that most experts believe that compacts between states will be problematic if the standards, such as bad actor clauses, are so different in varying jurisdictions.

In response, Jones made clear that she believes New Jersey and Nevada will never enter a compact with different bad actor clauses in place. Sherman then said that 888 believes that if compacts are in place, that operators will be able to single out which operators in others states they would agree to share with.  Jones then acquiesced.

Rumbolz pointed out that regulators compete with each other every day and each of them think their procedures are the better ones. This cold be an issue for compacts as well.

To close, Blau asked the panel if New Jersey is ready to launch quickly, on the planned November 26 date, does anyone think PokerStars will receive a license there?

The panelists were considering how to answer when David Deitch replied that he doesn’t know yet what will happen in New Jersey, but that one thing is sure, New Jersey players certainly want PokerStars to be licensed.

Jones quickly grabbed a microphone and claimed that if that’s true, it’s only because that’s all those players know.

If she asks New Jersey players why, she may get a different reason.

 

Disclosure: The author is a New Jersey resident.

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