NATIONAL CONFERENCE OF LEGISLATORS FROM GAMING STATES WINTER MEETING HOLYWOOD, FLORIDA JANUARY 10, 2014

1. NATIONAL CONFERENCE OF LEGISLATORS FROM GAMING STATESWINTER MEETINGHOLYWOOD, FLORIDAJANUARY 10, 2014 Larry Eliason, phone (605) 773-6050 email- larry.eliason@state.sd.us

2. DISCLAIMER THE COMMENTS AND OPINIONS EXPRESSED IN THIS PRESENTATION ARE SOLELY THOSE OF THE PRESENTER AND ARE NOT AND SHOULD NOT BE CONSTRUED TO BE THE OPINIONS OF THE SOUTH DAKOTA COMMISSION ON GAMING THE BIRMINGHAM RACING COMMISSION THE SOUTH DAKOTA RACING COMMISSION OR ANY CURRENT OR FORMER MEMBER OF ANY OF THOSE COMMISSIONS OR ANY OTHER PERSONS WHETHER LIVING, DEAD OR FICTIONAL.

3. DIFFERENCES CasinoRace Track Most bettors are Most bettors are participants in the games spectators House controls payouts Payout are Slots hold percentage determined by Table limits betting action Number of decks in shoe Operators and gaming All participants employees are licensed all licensed No national license ARCI license and database rulings database House collects only Track collects when when player loses player makes his bet

5. TAX STRUCTURE DIFFERENCES Pari mutuel bet (tax rate 4.5%) Player A bets $500 and loses bet Tax 4.5% x $500 = $22.50 tax Player B bets $100 and wins $1,000 Tax 4.5 % x $100 = $4.50 tax Total pari mutuel tax on $600 bet $27.00 Casino bet (tax rate 9.0%) Player C plays $100 in slot machine and wins $300 (200 x 9% = $18.00 tax credit for casino) Player D plays $500 in slot machine and loses all Tax 9% x $500 = $45.00 - $18.00 tax credit from C Total tax due $27.00 Total gaming tax on $600 bet is $27.00 Even though casino tax is twice the rat as pari mutuel tax Pari mutuel tax is on handle (amount bet) Casino tax is on net casino win (bets minus payouts)

6. SPECTRUM GAMING GROUP STUDY: “ The regulation of casino gambling is unique from other types of business activity because of the speed of transactions, the amount of money that changes hands and the way in which transactions are completed. Unlike other type of business money changes hands in some cases with no documentation”

7. SPECTRUM GAMING GROUP STUDY: “Although generalizations can made about regulatory models, no two states have regulatory agencies that truly comparable in all respects. There are simply too many unique forums, too many different types of gaming venues and too many unique legal structures in every state”

8. Regulators need to be properly staffed, equipped and trained to regulate casino gaming.New forms of gaming should not be allowed to operate until the regulatory agency staff has been equipped and trained.

9. SPECTRUM GAMING GROUP STUDY: “those companies and individuals applying for a casino or vendor license should be required to pay for all costs associated with the conduct of their background investigations. This requirement allows the regulatory agency to undertake what are often complex and multifaceted entity and other investigations without having the taxpayers of the state pay for these types of investigations” These investigations take time. Do NOT take shortcuts or bend to political pressure for quick approval.

10. To determine suitability for licensure the burden of proof is on the applicant. To suspend or revoke a license the burden of proof is on the government.

11. RECOMMENDATIONS If combining the duties of a newly created regulatory body (casino gambling) with those of a long standing regulatory body (pari mutuel) make sure statues are consistent Examples Minimum age for betting Disqualifying factors for a license Felony convictions & suspended sentences Make sure that existing tax collection statues apply to gaming taxes if delinquent If using a Commission system allow/require applicants or licensees to pay costs of special meetings called at their request.