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Chapter 5 LEGAL ENVIRONMENTS

Chapter 5 LEGAL ENVIRONMENTS. Robert R. Russell, Gaming Analyst and David Waddell, Attorney: Fraser, Trebilcock, Davis & Dunlap, P.C. Selecting the Casino Industry as a Career Choice Is a Life Decision. Employee base expanded 85% in last decade

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Chapter 5 LEGAL ENVIRONMENTS

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  1. Chapter 5LEGAL ENVIRONMENTS Robert R. Russell, Gaming Analyst and David Waddell, Attorney: Fraser, Trebilcock, Davis & Dunlap, P.C.

  2. Selecting the Casino Industry as a Career Choice Is a Life Decision • Employee base expanded 85% in last decade • Casino gaming allowed in 11 states; Native American casino-style gaming authorized in 29 states • Directly employs over 700,000 who are managers or will have the opportunity to be a manager • Revenues grew nearly 1600% from 1979 to 1997 • People new to or interested in the industry often underestimate the extremely strict legal regulations • Imperative to understand at the start that personal integrity and history are key factors to your success.

  3. Personal Perspectives: Gaming Industry Professionals’ View of Legal Compliance • Personal history is of great interest to regulators. • The success of the industry has been built on strict regulations that govern the industry in the U.S. • Growth is due to stringent investigation of key personnel by regulators prior to licensing and establishment of internal controls. • Willful failure to follow regulations may result in permanent ban from the industry. • Integrity is crucial to acceptance in the community. • “Compliance before commerce.”

  4. THE LAYERS OF GAMING REGULATIONS: FEDERAL, STATE, & TRIBAL LAWS • Federal Regulations • Gambling Devices Act: • Establishes procedures for the manufacture and shipping of gaming equipment in interstate commerce; • Prevents shipment into jurisdictions where machines are not legal under state law; and • Requires manufacturers and distributors to keep detailed records of sales or service. • Bank Secrecy Act: • Established in 1970 to fight money laundering • Created with focus on banking • Amended in 1985 to include commercial casinos • Amended in 1996 to include Native American casinos • Charged with enforcement – the Department of Treasury

  5. U.S. Patriot Act: • Permits financial institutions to share information with one another. • Must identify and report activities that may involve money laundering or terrorist activity. . • Indian Gaming Regulatory Act (IGRA): • Established balance between tribal sovereignty and interest of states (1988). • Established regulatory procedures for tribal gaming. • Divided Indian gaming into three classes: Class I: social and traditional games within jurisdiction of tribes Class II: bingo and similar games – operated by a tribe if located in a state that permits that type of gaming Class III: Las Vegas style gambling • State must permit this type of gaming for any purpose by any entity. • Must be authorized by tribal resolution or ordinance. • A compact must be negotiated between tribe and state which defines how the gaming will be conducted.

  6. State Regulations • First step: Legalize the industry in a particular state. • Reasons industry was legalized outside of Nevada: • A way for state governments to raise revenue • To provide entertainment value to its residents • Structure and Duties of a State Gaming Control Board: • Size and scope of authority varies by jurisdiction • Determine applicants’ eligibility to receive a license • Supervise operations throughout the state • Investigate licensee on-site and investigate alleged violations • License electronic gambling manufacturers • Require availability of all financial documents • Inspect and test gaming-related products • Require reports on gaming education activities • Impose fines and revoke licenses for violations

  7. State Selection of Casino Operators • State decides which industry model it will develop, often within the legislation or law that legalized the industry. • The two most common models of casino markets are: • Free markets • Limited licenses - selection process is of more significance - greater number of applicants than available licenses - need strict, structured selection process to limit controversy • State Licensing and Background Investigations: • Provide gaming control board with information so the board can determine if applicant is “eligible and suitable” • Each state that authorizes gambling has its own unique laws • States also license suppliers - some only license gaming related suppliers such as slot manufacturers - others license non-gaming suppliers based on dollar thresholds - process for suppliers is similar to that of casino operators

  8. Tribal Casino Regulations • State licensing process is similar to requirement of Indian Gaming Regulatory Act (IGRA) • Difference – a Native American tribe is a sovereign entity: • Its government, not the state, is responsible for the oversight of its casino operation • Also responsible for licensing key employees and suppliers • Required under federal law to enter into a compact with the state for a Class III facility • IGRA created the National Indian Gaming Commission to assist with oversight and regulation. Its mission is to: • Regulate gaming activities on Indian lands • Ensure that tribes are primary beneficiaries of revenue • Assure that gaming is conducted fairly and honestly by both operators and players

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