Thursday, July 23, 2015

Updates to Nevada’s Gaming Laws – 2015 Legislative Session (Cont.)

By Jennifer Gaynor, Kate Lowenhar-Fisher and Greg Gemignani

This is the final blog post regarding the 2015 Nevada legislative session.

Procedural and Administrative Changes and Clarifications

AB40

A key administrative change effected by AB40 is to change the name of the “State Gaming Control Board” to the “Nevada Gaming Control Board.”

This bill also serves to clarify that certain actions and proceedings of the Board are not subject to certain provisions of the Nevada Open Meeting Law (“OML”). Specifically, the OML requires all deliberation, actions, and discussions of a public body to take place in a public setting. This bill grants a limited exemption to the Board from the open meeting law related to the Board’s investigative activities while inquiring as to whether a violation has occurred and, if so, what actions should be taken in determining if those violations have occurred. The OML still applies to the Board’s procedures, including monthly meetings.

Updates to Nevada’s Live Entertainment Tax (NRS Chapter 368A)

SB266

Under existing law, the rate and imposition of the tax depended upon the size of the facility in which the live entertainment is provided, with the break being 7,500 persons or fewer. Those facilities were to charge the patron a 10% tax on admission, food and merchandise. The old law provided a reduced tax rate for facilities above 7,500 persons, where the rate was reduced to 5%. The new tax rate will be a uniform 9% of the admission charge to a facility where live entertainment is provided, however, the tax is not imposed on amounts paid for food, refreshments or merchandise. The value of certain admission provided to a patron on a complimentary basis is excluded from the tax.

Additionally, under the new law, there is no distinction in the size of the facility or whether live entertainment was provided by licensed vs. non-licensed entities. The prior exclusion for events that were provided outdoors was eliminated. All live entertainment events are taxed uniformly (with certain exemptions for charitable activities where fewer than 7,500 tickets are sold), however, NASCAR would be exempt if they give Nevada a second race weekend and professional sports would be exempt if one of the teams playing in the contest is domiciled in Nevada. Combat sports are exempt from the live entertainment tax but are subject to the levies imposed by other sections of the law that have oversight by the Nevada Athletic Commission. Finally, collegiate sports involving Nevada’s schools are exempt, with the exemption of the Silver bowl, which would not be exempted.

The effective date of the law was July 1, 2015, which would be applicable to events that were previously subject to the old law; however, if not previously taxed under the old law, the effective date would be October 1, 2015. For example, the National Finals Rodeo would be covered under the new law, but prepaid tickets sold prior to October 1, 2015, would be exempt.

Amendments to Other Areas of Privileged Licensing

SB22

This bill moves the local licensing and regulatory power over certain persons and businesses, including importers of liquor, wholesale dealers of beer or wines and liquors, winemakers, instructional winemaking facilities, breweries, brew pubs and craft distilleries, from the board of county commissioners of the county in which the applicant maintains his or her principal place of business to the governing body of the city in which the business is located, if the applicant’s principal place of business is located within an incorporated city.

Tuesday, July 21, 2015

Updates to Nevada’s Gaming Law – 2015 Legislative Session (Cont.)

By Jennifer Gaynor, Kate Lowenhar-Fisher and Greg Gemignani

This is a continuation of the blog post on July 16, 2015 regarding the 2015 Nevada legislative session.

Extending the Reach of Nevada’s Gaming Regulation: SB38, SB40 and SB409

SB38

Senate Bill 38 extends the reach of the Board to a new category of licensees, to nightclubs and day clubs that are located on the premises of a Nevada licensed casino resort. Senate Bill 38 essentially treats club operators in a manner similar to gaming licensees. If required by the Board or the Nevada Gaming Commission, the employees of such clubs shall be subject to a background investigation similar to those conducted for gaming employees.

As noted in a previous blog post, Senate Bill 38 also expands the powers of the Board to regulate and license associated equipment manufacturers (“AEMs”). Specifically, licensing or findings of suitability for AEMs will move from discretionary to mandatory. This change will also shift the burden for the cost of any licensing investigations from the Board to the AEM applicant. Finally, the employees of an AEM are now deemed to be “gaming employees” and subject to regulation as such.

This bill also removes certain licensure requirements for manufacturers of equipment associated with interactive gaming. The Board determined that there are two categories of interactive gaming service providers with no need for licensure: those who provide certain intellectual property related to identifying interactive gaming systems and those who provide information regarding persons for customer lists and databases. The Board has similarly considered removing licensing requirements for cash access and wagering service providers, and had language to this extent in the initial draft of the bill, but decided to keep those requirements in place.

Finally, SB38 amends Nevada’s charitable lottery laws to expressly list nonprofit alumni organizations and legal bar associations as qualified nonprofit organizations that may offer charitable lotteries and to permit statewide charitable lotteries. It also clarifies language in the statute regarding triggers for charitable lottery registration requirements to be consistent with the Board’s practice.

SB40

Filed on behalf of the Board, Senate Bill 40 targets illegal offshore wagering sites and other illegal bookmakers. It prohibits a person from receiving any compensation or reward, or any percentage or share of the money or property played for, in return for facilitating a bet on a future contingent event, unless that person has the required gaming license to do so. The Board brought this bill because Nevada did not have an illegal bookmaking law to use to prosecute this illegal activity. The intent was to make a specific illegal bookmaking statute the Board can utilize in future prosecutions instead of a licensing statute (NRS 463.160)

SB409

Senate Bill 409 amends Nevada’s consumer reporting laws to remove restrictions on what a credit reporting agency may report to gaming operators. Now a credit reporting agency is no longer prohibited from reporting to gaming licensees information about a job applicant regarding bankruptcies older than ten years, other civil judgments older than seven years, and criminal convictions older than seven years. Now there is no limitation on how far back such checks may run.

Thursday, July 16, 2015

Updates to Nevada’s Gaming Laws – 2015 Legislative Session

By Jennifer Gaynor, Kate Lowenhar-Fisher and Greg Gemignani

This is the first in a series of blog posts addressing the 2015 Nevada legislative session.

Now that the dust has settled on the 2015 Nevada legislative session, we find the gaming landscape has been altered in some pretty interesting ways. There are a few bills that will allow Nevada gaming licensees to explore a diverse new world of gaming technologies and offerings, other bills that serve to extend the reach of Nevada’s gaming regulators to new entities and activities, and yet others that clarify administrative issues and procedures.

Exploring New Worlds of Gaming: SB9, SB443 and SB445

SB9

This bill gives Nevada’s gaming regulators a policy directive and enhanced rulemaking authority to develop technical standards for “hybrid” games – games that are a blend of skill and chance, where the outcome will be determined by both as well as external factors including frequency of play, use of other casino services, and use in combination with other technologies. The idea is to ensure Nevada’s leadership in the next generation of gaming, and to attract a new generation of customers who relate to electronic skill-based game play and would be drawn to features such as bonus rounds that reward the skill of a player, integration of the games with their social media accounts, interactive networked game play, and the use of electronic commerce transactions. The first public regulation workshop on SB9 was already held by the Nevada Gaming Control Board (the “Board”) on June 24, 2015, with the next to be held sometime this summer.

SB443

Senate Bill 443 is the “entity wagering” bill. It allows the formation of business entities to place race and sports pool wagers, where out-of-state investors can join business entities and share the profits and losses from wagers at Nevada gambling establishments.

SB445

Senate Bill 445 permits licensed race and sports book operators to provide centralized management to race and sports book operations in Nevada and other jurisdictions where such bets are legal.

Tuesday, July 14, 2015

New Nevada Licensing Scheme in the Works for Associated Equipment Manufacturers

By Jennifer Gaynor, Kate Lowenhar-Fisher, Greg Gemignani and Jeff Silver

Associated equipment manufacturers (“AEMs”) who do business in Nevada are soon going to be subject to a whole new level of gaming licensure requirements. Thanks to the recent passage of Nevada Senate Bill 38, the Nevada Gaming Control Board (the “Board”) has been granted expanded power to regulate and license AEMs.

Most gaming jurisdictions lump all gaming equipment manufacturers into a single “manufacturer” licensing category. Nevada is an exception; it classifies manufacturers into two groups: gaming device manufacturers and AEMs.

In Nevada, gaming devices, which include slot machines, are defined as those devices or objects used in connection with gaming that affect the result of a wager by determining win or loss. Associated gaming equipment is anything other than a gaming device that is tangential to the gaming operation. Examples include dice, cards, items that report revenue, and equipment used for counting money.

Under the current Nevada regulatory scheme, gaming device manufacturers are required to go through the full gaming licensure process with the Board and the Nevada Gaming Commission (the “Commission”). AEMs on the other hand, are not required to have a Nevada gaming license but are subject to generally much less rigorous discretionary licensing approvals.

Now, with SB38, the licensing for AEMs will move from discretionary to mandatory. This does not mean that every AEM will need to undergo the full licensing process like a gaming device manufacturer. What the Board envisions is a tiered system for AEM licensure and approvals, which will consist of different classes of regulatory approvals or licensure depending on where on the scale an AEM falls, from full gaming licensure to nothing at all.

This change is also intended to shift the burden for the cost of any licensing investigations from the Board to the AEM applicant. This is because in Nevada the gaming applicant is required to pay the cost of the licensing investigation in cases of mandatory licensure, but the Board must bear the cost of investigation when it calls forward an entity or person who is subject only to licensure on a discretionary basis. Therefore, those AEMs that will be required to undergo the mandatory full licensing process will also be required to pay the substantial costs of that licensing investigation. The rate currently charged by the Board’s investigative staff is $135 per hour, and the gaming laboratory agents, who are charged with deciding into which classification or tier an AEM will fall, are now billing their time at $155 per hour.

Finally, the employees of an AEM are now deemed to be “gaming employees” and subject to regulation as such.

What this will mean for AEMs will be dependent on the type of equipment they manufacture and where that type of equipment may fall within the tiered structure that the Board and Commission will be crafting. The Board will be hosting workshops where members of the AEM industry will have the opportunity to provide input. Our gaming attorneys will be monitoring and participating in this process. For more information on the Board’s regulatory process or other questions about SB38, please contact Greg Gemignani (ggemignani@dickinsonwright.com), Kate Lowenhar-Fisher (klowenhar-fisher@dickinsonwright.com), Jeff Silver (jsilver@dickinsonwright.com) or Jennifer Gaynor (jgaynor@dickinsonwright.com).

Tuesday, June 30, 2015

The Next Generation of Gamers

By Jeffrey A. Silver

On April 29, 2015, the UC Berkeley Golden Bears eSports team beat Arizona State to win the collegiate video gaming championship tournament. The winners received their remaining years’ tuition, and if they were graduating seniors, they received a year’s worth of tuition in cash. The contest was sponsored by Blizzard Entertainment, a video game developer whose “Heroes of the Storm” game, which was used in the competition, is scheduled to be released this month. The most notable “milestone” was that the game was broadcast live on ESPN2.

In July 2014 a similar contest featuring the game “Dota 2” was held in a Seattle basketball arena crammed with 11,000 screaming spectators. The contestants were playing for $11 million in total prize money and, according to The New York Times, “moved another step closer to securing [social] gaming’s legitimacy as a major-league spectator sport.” The October 2014 “League of Legends” tournament that was held in Seoul, Korea’s soccer stadium was sold out with 40,000 fans in attendance, another indicator of the rabid devotion to this form of entertainment.

“Global revenue for games is $20 billion higher than the music industry’s and is chasing that of the movie business,” says Nick Wingfield, a writer for The New York Times, and “this fall [2014], Robert Morris University in Chicago will dole out over $500,000 in athletic scholarships to gamers.” He added, “More than 70 million people worldwide watch e-sports over the Internet or on TVs, according to estimates by SuperData Research.”

The Las Vegas Convention and Visitors Authority (“LVCVA”) recently released its year-end statistics that showed over 41 million visitors came to Las Vegas in 2014, a new record! However, there were also a few notable trends in the 2014 “Las Vegas Visitor Profile” conducted by my friends at GLS Research in San Francisco, a company which prepares the annual report for the LVCVA. Their in-person interviews of 3,600 visitors per month revealed that 19% of the interviewees stated that this was their first trip to Las Vegas, and 47% of all visitors said their primary reason for visiting Las Vegas was vacation or pleasure, up significantly from 41% last year. Of the new visitors, 69% said they came primarily for either vacation or pleasure. However, the most surprising, or perhaps disconcerting, statistic was that only 12% of the visitors said they came primarily to gamble!

These two stories are not disparate. Combine them with the recent successes of fantasy sports and we can plainly see the preference of both the millennials and Gen-Xers to a more varied, interactive, and challenging form of gaming entertainment. This is surely a “sea change,” but the dilemma for legalized gaming is to find a way to monetize the phenomenon. The Nevada Legislature recently passed SB 9, which was hurriedly signed into law by the Governor. The preamble to the Bill states, “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.”

In sum, the Legislature has directed the Nevada Gaming Commission to adopt regulations that encourage manufacturers to deploy gaming devices that differentiate requirements for outcomes of a game of skill, a game of chance, and hybrid game. To accomplish this, greater flexibility must be allowed in payout percentages. The Commission was also asked to provide guidelines for some type of integration of social networking technologies so that players enrolled in interactive mediums could engage in games supported by networked servers.

Dickinson Wright’s gaming lawyers are poised to represent game manufacturers, developers, and other ancillary businesses who need access to the casino and resort industry or whose products may require regulatory review.

To read the complete article, please click here.

Tuesday, June 23, 2015

New Law Provides Gaming Industry with Broader Background Investigation Powers

By Kate Lowenhar-Fisher, Jennifer Gaynor and Greg Gemignani

The Nevada Legislature has amended the state’s consumer reporting laws to remove restrictions on the information a credit reporting agency may report to gaming operators. With the passage of Senate Bill 409, a credit reporting agency is no longer prohibited from reporting to gaming licensees information about a job applicant regarding bankruptcies older than ten years, other civil judgments older than seven years, and criminal convictions older than seven years.

Sponsored by former Nevada Gaming Control Board Chairman Senator Mark Lipparelli, SB409 is aimed at allowing gaming operators to conduct more thorough background checks on prospective employees.

Federal law (15 U.S.C. § 1681c) prohibits a credit reporting agency from disclosing in an individual’s credit report information related to a bankruptcy filing that is more than ten years old and certain other negative credit information, including reports of a civil judgment or criminal proceeding that is more than seven years old. Nevada Revised Statutes 598C.150 contained similar prohibitions.

However, the federal law provides for certain exceptions, including an exception for a credit report prepared in connection with the employment of an individual whose salary will be greater than $75,000.

Senate Bill 409 creates a similar exception in Nevada state law for a credit report prepared for a gaming licensee in connection with a person who is seeking employment with the licensee or employment in a position connected directly with the licensee’s operations.

The bill also removes the prohibition against disclosing a record of conviction of a crime which is more than seven years old, meaning that there is no limitation of time for which such a record may be disclosed.

These changes are effective upon bill passage, which means that those seeking positions in Nevada’s gaming industry should be aware that this information will be made available to their prospective employer and take extra care to proactively disclose all bankruptcies, civil judgments, and criminal proceedings, no matter the age of the event.

Tuesday, June 16, 2015

Beyond the Slot Machine: New Bill Directs Nevada’s Gaming Regulators to Craft Regulations to Allow “Hybrid” Games

By Kate Lowenhar-Fisher, Jennifer Gaynor and Greg Gemignani

Nevada is the world’s preeminent gaming destination. Not by chance, but by being a leader in gaming and entertainment innovations. Nevada was the first state in the nation to legalize gaming in 1931, the first to introduce the world to the “casino-resort” with the Mirage in 1989, and, more recently, the first state to license and regulate Internet gaming. Now Nevada legislators have given regulators the green light to allow for the state to take a leadership position in the new world of “hybrid” games.

What is a “hybrid” game? For those who follow gaming law, you know there are two types of games, skill games and games of chance. Then there are those games that fall somewhere on the spectrum between “pure skill” games and “pure chance” games. A “hybrid” game would be one where, by definition, the outcome will be determined by a combination of skill and chance – and possibly other factors (or “identifiers”), including frequency of play, use of other casino services or amenities, and use in combination with other technologies, such as social networking platforms like Facebook and Instagram.

The idea is to draw in a new generation of customers who relate to electronic skill-based game play and would be drawn to features such as bonus rounds that reward the skill of a player, integration of the games with their social media accounts, interactive networked game play, and the use of electronic commerce transactions.

Senate Bill 9 calls for the Nevada Gaming Commission to draft regulations allowing the development of such technology for gaming devices. The bill includes a policy directive and enhanced rulemaking authority to make it clear that Nevada’s gaming regulators have the authority to both develop technical standards for such hybrid games and to allow incorporation of other technologies into gaming devices.