GAMBLINGCOMPLIANCE: ‘Right-Sized Reno’ Finds Its Place In The New Nevada

Once a gambler’s paradise, Reno fell on hard times years ago as northern California’s Indian casinos kept more people gambling closer to home, and then the Great Recession forced the region to get serious about reinventing itself.

Over the last decade, northern Nevada has worked to diversify its economy, moving away from its dependence on gambling to include industries such as technology, manufacturing and distribution.

But economic development officials, analysts and casino executives believe the gaming industry still plays an important role in the region’s economy.

“The gaming industry here has right-sized itself,” Gary Carano, chairman and CEO of Eldorado Resorts in Reno, told GamblingCompliance.

“It’s healthy,” Carano said. “Gaming was the dominant part of our economy for years. It’s not that way now and it will never go back to that era.”

In the last couple of years, the construction of Tesla Motors’ $5bn gigafactory and other technology projects have been credited with having a positive effect on the economy, especially the housing and job markets.

“The economy is doing well,” said Mark Nichols, a professor of economics at the University of Nevada, Reno.

“Unemployment is lower and businesses are starting to have a difficult time filling job openings. Generally, there’s an upbeat attitude. Maybe, we are getting a little overheated in our housing market.”

The Biggest Little City In The World

Today, Reno supports 13 commercial casinos. The downtown Reno casino corridor along Virginia Street includes Atlantis Casino, Eldorado Casino, Silver Legacy Casino, The Nugget and Monarch Casino.

Carano said Eldorado expects to benefit from its recent investment in downtown Reno.

The gaming company began 2016 owning seven casinos, after it spent $72.5m to acquire MGM Resorts International’s 50 percent share in the Silver Legacy Resort & Casino and all of the assets of Circus Circus Reno.

“These acquisitions have given us the opportunity to market to a new customer coming to Reno,” Carano said. “And compete more in the locals market.”

The company’s three Reno properties comprise almost 32 percent of the hotel rooms in the market. Carano said his customer base is 20 percent locals and 80 percent from northern California.

At the Atlantis, which is owned by Monarch Casino and Resort, it’s a similar story with a slightly different demographic.

David Farahi, Monarch’s chief operating officer, told GamblingCompliance that 55 percent of his business is locals, while 45 percent comes from out-of-market customers.

Even with a larger local customer base, Farahi said his resort is seeing more gaming revenue, which he attributed to locals having “more money in their pockets” to spend.

Farahi said the property attracts a middle class and upper middle class clientele. He said the Atlantis casino was able to attract higher end customers because of ongoing reinvesting in the property.

Carano said the Eldorado is connected with the Silver Legacy and Circus Circus via above-ground covered walkways, allowing the company to operate the properties as a single entity.

He said Eldorado would operate 4,100 rooms, more than 20 restaurants, lounges and nightclubs, along with 300 table games in downtown Reno.

As of December 31, 2015, there were 604 places in Washoe County, which includes Reno, to gamble. But the city has lost a few casinos in recent years.

Reno has also seen non-gaming hotels find success as neighbors to casinos.

For example, Fitzgeralds Casino-Hotel, which was transformed two years ago into the non-gaming Whitney Peak Hotel, closed in 2008 after 30 years on the Reno gaming map.

Meanwhile, renovations also have also begun to convert the former Siena Hotel Casino in Reno to non-gaming Renaissance Hotel. The construction is expected to be completed later this year.

Carano said the midweek stay at a non-gaming hotel has been very popular, especially with Tesla and other tech executives. He said the Whitney Peak has “been doing very well.”

Carano stressed that Eldorado Resorts also offers a non-gaming experience.

“We continue to tweak our offerings,” Carano said. “The non-gaming amenities are key in our industry. Everybody has slots, blackjack, but the key is to reinvest in your non-gaming amenities.”

Reno’s Efforts To Attract Millennials

But Carano admitted that the casino floor is also ripe for innovation to attract a new clientele — which is code for millennials.

He said the average Eldorado visitor is “still the 45-plus female with her husband, who plays slots and stays for two to three nights from the (San Francisco) Bay Area.”

Eldorado has seen an increase in the 25 to 35 year old customer, Carano said.

“They are not coming to gamble, but to experience the nightlife,” Carano said. “But guess what, our gaming revenues are up. So we continue to evaluate our offerings.”

Nevada has already changed its gaming regulations to allow for the introduction of variable payout slots in its casinos, paving the way for skill-based slot machines to live side-by-side with Wheel of Fortune or Blazing Sevens on the casino floor.

“Skill-based gaming is going to take some time,” Carano said. “Slot manufacturers at G2E (Global Gaming Expo) gave us a little taste of skill-based slots. That’s got a ways to go.”

Millennials, consisting of those born between 1980 and the mid-2000s, constitute the nation’s largest generation at one-third of the U.S. population. For most millennials, the primary things casinos offer — gambling in a large facility — is just unattractive.

Farahi said his property “certainly welcomes millennials, but it’s not our core business.”

“We are paying close attention to both things,” Farahi said when it comes to skilled-based gaming and e-sports.

He said skill-based gaming is not only for millennials, but there is a portion of Generation X that cares about it.

As for e-sports, Farahi said there could be something there for the casino to consider.

E-sports, or professional competitive video gaming, is set to become a $1.9bn industry by 2018, according to predictions by analysts SuperData, and some in Reno see an opportunity.

Carano said there is definitely an opportunity for northern Nevada casinos when it comes to hosting e-sports tournaments. He cited the success of the recent North American LCS for League of Legends tournament at the Mandalay Bay Events Center in Las Vegas.

The e-sports tournament attracted 3,800 fans on its first day and 6,800 on the second day.

“That’s what’s exciting,” Carano said. “We have the venue to have these e-tournaments. I’d be foolish not to explore the opportunity to host one of these events.”

It’s The Economy Stupid

Nichols said the gaming industry has found its place within the northern Nevada economy, but casinos are not experiencing a resurgence. He said gaming companies are “confident that things have bottomed out.”

“The gaming industry here has shrunk. It’s not going to come back to being the dominant industry. Revenue growth should be consistent with population growth,” said Mark Nichols, a professor of economics at the University of Nevada, Reno

Washoe County, which includes Reno, reported a 3.2 percent increase in gaming revenues last year to $776.3m, according to the Nevada Gaming Control Board.

Those numbers represent a 26 percent decline in revenues since 2007. Gaming statistics compiled by GamblingCompliance show revenues in Washoe County fell from $1.04bn in 2007 to $776.3m in 2015.

“Tourists are still part of this economy,” Nichols said. “But with businesses here like Tesla and Switch we are attracting a wider clientele.”

Nichols added that wider clientele includes millennials who are “skiing and rock climbing and staying at non-gaming hotels downtown.”

Predicting Reno’s Future

Despite Reno’s resurgence, few are expecting to see any significant expansion of the city’s casino sector.

Farahi noted that there are 15,000 hotel rooms in Reno, a number that should keep any new casino resorts from being built for some time in northern Nevada.

“That is a lot,” he said. “We still have a lot of over capacity. Last year, there was only $100m in EBITDA reported by all resorts combined, according to the gaming commission. We would need a serious recovery before it made sense for anyone to build a new resort.”

Currently, the building of any new resorts has been replaced with millions of dollars being reinvested in older casinos, as companies upgrade everything from rooms to restaurants to race and sports books.

“We are really excited about the economy,” Farahi said. “Five years ago, especially ten years ago, gaming and construction dominated the region’s economy. Now we have attracted manufacturing, distribution and high-tech jobs. These new jobs give us a more stable, viable economy. This is why we are very excited.”

“Who knows where this economy is going,” said Carano of Eldorado Resorts. “If this economy does what everyone thinks it will do … then I would think we would all be pretty happy.”

GAMBLINGCOMPLIANCE: AGA Analyzes New Federal Rule For Overtime Pay

20TH MAY 2016 | WRITTEN BY: CHRIS SIEROTY

An American Gaming Association (AGA) executive said Thursday their members continue to analyze a new federal rule that could make more casino workers nationwide eligible for overtime pay.

“As part of efforts led by the U.S. Chamber of Commerce, the gaming industry has joined the many other business interests expressing concerns to Congress and the administration about the potential implications of this final Department of Labor rule,” said Whitaker Askew, AGA’s vice president.

In an email to GamblingCompliance, Askew said as “our members continue to analyze the final rule and its impact on their operation,” the AGA will continue to work with them and policymakers to “ensure fair and proper compliance.”

The rule, which the Obama administration unveiled Wednesday, would let full-time salaried employees earn overtime if they make up to $47,476 a year, more than double the current limit of $23,660 a year.

The Labor Department estimates that the rule would increase the pay of 4.2m additional workers.

The change is scheduled to take effect December 1.

The AGA represents a wide range of gaming companies, from Penn National Gaming and MGM Resorts International to Aristocrat Technologies and Scientific Games.

GAMBLINGCOMPLIANCE: US Congress Takes Aim At California Tribal Casinos

4TH MAY 2016 | WRITTEN BY: CHRIS SIEROTY

A federal bill challenging the ability of the North Fork Rancheria of Mono Indians to build a casino on property the tribe has in federal trust in central California is being called “a shameful attempt at the 11th hour to stop competition,” according to the tribe’s chairwoman.

House Bill 5079, sponsored by California Republican Rep. Doug LaMalfa, says that “certain off-reservation” tribal casinos defeated in a state referendum or not approved by the state legislature cannot be approved by the federal government.

The bill, known as the California Compact Protection Act, amends the Indian Gaming Regulatory Act (IGRA) “to require that, in California, certain off-reservation gaming proposals shall be subject to the full ratification and referendum process established by California state law.”

The legislative effort to curtail tribal casino growth has also been supported by at least one of California’s two senators.

Senator Dianne Feinstein, a Democrat, has caught tribal leaders off guard in the past by introducing legislation to stop what she calls “reservation shopping.”

As of Tuesday, the senator was said to be considering her options when it comes to introducing new legislation in an election year.

LaMalfa’s bill targets the planned North Fork casino project and the Enterprise Rancheria casino in Yuba County, which is about 55 miles north of Sacramento, California.

The bill was co-sponsored by Republican Rep. Raul Ruiz, and Democrats Reps. Jeff Denham, Paul Cook and Jared Huffman. All lawmakers represent districts in California.

Kevin Eastman, LaMalfa’s legislative director, did not respond to requests for comment on Tuesday. He told Law360 on Friday that the legislation was in reaction to two recent federal court decisions.

In February, a federal judge in California ordered the state to negotiate a new gaming compact with the Enterprise Rancheria, while another federal court judge in November ordered California to reach a gaming compact with the North Fork.

In their rulings, both judges found the state had failed to negotiate in good faith.

“Despite its name, the bill has nothing to do with protecting compacts or tribes,” said Maryann McGovern, chairwoman of the North Fork Rancheria of Mono Indians.

“It is simply an attempt to establish two classes of tribes in California – rich tribes that have long enjoyed the benefits of gaming using their wealth to stop landless tribes from ever participating in casino gaming,” said Maryann McGovern, chairwoman of the North Fork Rancheria of Mono Indians.

McGovern told GamblingCompliance the tribe has worked for more than a decade to comply with every requirement of federal law. She also described the bill as a “jobs killer” that undermines the tribe’s long-term partnership with Madera County.

The Madera casino compact was the subject of a ballot proposition in 2014 — Proposition 48 — through which 61 percent of voters decided to overturn the tribe’s compact. The North Fork project had been supported by Governor Jerry Brown and the state legislature.

Meanwhile, the Enterprise Rancheria compact was supported by the governor but never taken up by the state legislature.  Glenda Nelson, tribal chairwoman, was unavailable for comment.

Under federal law, the tribes can still seek approval from the federal government whether or not the state approves.

Both projects are under consideration by the U.S. Department of the Interior.

McGovern said LaMalfa’s bill opens up the IGRA in a manner that could seriously affect not only tribal gaming but also tribal rights and sovereignty. IGRA was approved by Congress in 1988 to regulate gaming on tribal lands.

But not everyone believes HB 5079 will do serious damage to California’s lucrative tribal gaming market, or to sovereignty rights of tribes.

“Stand Up (California) is supportive of any legislation that protects the will of the voters of California and ensures that the tribal state compact process treats all tribes equally and fairly,” Cheryl Schmit, director of Stand Up California told GamblingCompliance.

Schmit said it was important to note that Section 20 of IGRA, which provides the exemptions for gaming on “after-acquired” lands, does not have a legislative history.

“There was never a committee hearing and never a debate on the exception or development of definitions for the exceptions,” she said. “Certainly this section of IGRA should be amended so that it resembles a balance between tribes, states and the federal levels of government.”

The North Fork tribe and partner Red Rock Resorts, formerly Station Casinos, want to build a casino-resort with 2,000 slot machines, 40 table games and a hotel on 305 acres along Highway 99 just north of the city of Madera.

The casino site is 36 miles from the rancheria’s traditional reservation and some 240 miles north of Los Angeles.

Enterprise Rancheria broke ground on its 140,000 square foot Yuba county casino last month. The $170m first phase of construction will include the casino, restaurants, bars and conference rooms.

The casino is scheduled to open in about a year as a Class II gaming facility with bingo, electronic games and non-banked (no house) card games. A compact would allow for Class III Las Vegas-style gambling.

The Enterprise Rancheria went to mediation on Monday with state officials after failing to negotiate a gaming compact within 60 days of the court’s ruling. Both sides will report back on July 1.

One other off-reservation casino has been approved in California, but the tribe has yet to begin construction. The Fort Mojave Indian Tribe near Needles, California, some 256 miles northeast of Los Angeles, received approval in November 2008 for a casino about three miles from Needles.

Tribal gaming is big business in California, with gaming revenues having increased 4.4 percent in fiscal 2014 to $7.29bn, up from $6.99bn in FY2013, according to the latest revenue figures by the National Indian Gaming Commission.

NEVADA BUSINESS MAGAZINE:How to Lease or Buy: A Guide to the Rebounding Commercial RE Industry

Buying or leasing commercial real estate is a stressful and complex process that can be difficult for even the best of brokers in Nevada. What about for entrepreneurs or business executives whose areas of expertise may be in gaming or healthcare? How should they evaluate the pros and cons of buying or leasing, choosing a location and making a purchase?

Taber Thill, senior vice president at Colliers International in Las Vegas, said it’s important for executives to ask brokers questions about their experience, or what area of commercial real estate they specialize in and if they are able to find you the property a company needs. As for the entrepreneurs and executives, Thill advised having an idea of what type of commercial property needed, and be willing to adjust expectations to maximize the investment.

Commercial real estate includes a number of property types. According to the National Association of Realtors, multifamily residential, office, industrial or retail properties that can be bought or sold in a real estate market are all considered commercial real estate.

So should a Las Vegas or Reno business owner buy? “I think it all depends on what their requirements are for space,” said Sheila Colfer, president of CCIM, or Certified Commercial Investment Member, Northern Nevada.

Colfer said it’s also about getting greater control over the costs of real estate, as opposed to leasing where market conditions could lead to higher rental costs. Another benefit to buying is tax purposes and asset appreciation. Both Colfer and Thill said there was no one-size-fits-all strategy for buying or leasing commercial real estate. It depends on the needs of each business. With that in mind, when deciding to buy or lease it’s important to understand the market.

Market Conditions

After several years of recession followed by years of modest, but uneven, economic recovery statewide, Nevada’s commercial real estate market finally seems to be back in business. That growth is being led by strong numbers in taxable sales and employment. Occupancy in commercial real estate is rising, led by industrial but with credible increases in office and retail.

Due to an upswing in the market, investors and tenants are willing to buy and lease. In fact brokers completed a number of sizeable deals last year, including the VFM Manufacturing Facility in the Southwest part of Clark County for $10.5 million in November.

Overall, investment sales in Southern Nevada totaled $204.2 million last year, with just over 2.3 million square feet sold for an average price per square-foot of $88.55. The average sale size was 59,000 square feet in Southern Nevada.

Leasing rates for industrial, office, retail and medical continue to gather momentum. “But supply is a little concerning, especially when it comes to big box retail and distribution space,” said Jarrad Katz, a senior vice president and principal with MDL Group in Las Vegas. “Lease rates have not reached a value that would justify the construction of more large industrial properties in Southern Nevada.”

According to Colliers, the average industrial lease rate in Southern Nevada was 64 cents per square foot.

“We are about a year or so away from running out of 5,000 to 18,000-square-foot space,” Katz said. “There’s not much of that space being built, because it’s more expensive to build with more bathrooms and office space.”

He also attributed the slowdown in industrial construction to “comps at break even and [spiking] prices for land” in Southern Nevada.

“I don’t see land prices going down,” Katz said. “Along the (southern) beltway, that land was trading at $1 million an acre in 2006 and 2007. When the recession hit, the zone was changed to residential to get top dollar.”

In Northern Nevada, both demand for office and industrial space continues to be very strong as leasing activity continues to increase in all the major submarkets as well as investors returning to the market. Publicity and awareness of the Reno industrial market is at an all-time high. Interest from manufacturers, distributors, and investors remains strong.

Similar to the industrial market in Southern Nevada, product under 100,000 square feet is very tight. According to Colliers in Reno, available Class A under 100,000 square feet, “is almost nonexistent.”

“I think everybody had a good year in 2015, and continues to have a good year early on in 2016,” said Colfer. “It started with Tesla, and continued with Switch and other companies moving into the region.”

Colfer, who is also a broker with Dickson Commercial Group in Reno, credited the attractive commercial real estate market to the Economic Development Authority of Western Nevada (EDAWN) and their efforts at attracting businesses to Northern Nevada.

“Our market has tightened up,” Colfer said. “Company executives looking to buy or lease should make sure they give themselves enough time. They need to start earlier than they think when it comes to looking for space.”

In terms of office space in Southern Nevada, Thill said it all depends on location. He said those areas where “demand is very high” include the 215 Beltway, the Southwest and in The Hughes Center, a well establish 1.4 million square feet of Class A space. Thill said most businesses are looking at those areas, while the older areas of the region are suffering from outdated product.

“A lot of these buildings were built in the 1980s and are single story for a single tenant,” Thill said. “The average single tenant size in the 1980s averages 2,000 to 2,500 square feet. Today that’s up to between 7,000 and 8,000 square feet.”

Thill stressed that potential buyers and tenants should ask their broker about the market conditions, and whether their firm has research to help choose where the best opportunities are to buy or lease commercial real estate.

Questions to Ask a Commercial Broker

Choosing a broker to help find commercial space for a business or negotiate a lease can be a daunting task. Thill said any executive or entrepreneur should make sure that a broker’s experience, capacity, motivation and specialization will work for them. He said before choosing a commercial real estate broker collect information by asking the broker specific questions about how they’ll handle each client.

What is the broker’s specialization?

Does the broker focus specifically on the area where their client’s building is located and their building type and class? Does the broker specialize in representing owners?

What is the broker’s experience?

The broker should provide information on his or her track record of dealing with similar leasing challenges, similar building types and buildings in the same area. When provided with a case study, a potential client should press the broker to better understand the context of their success in terms of original expectations or the market constraints on the outcome.

What is the broker’s motivation?

Will the client’s goals for the property be aligned with the broker’s goals? For example, Thill said hiring a broker who is not specialized in property types needed, whether industrial or office or others, might mean the broker spends less time studying new submarkets and specific challenges in-depth.

What’s the broker’s capacity?

Some brokers who claim to dominate the market have taken on so many clients that each client’s property will not be their top priority (or even close). These brokers may speak only in general terms to what they’ll do. To ensure a broker will devote substantial time to the project, potential buyers and sellers should ask to see the broker’s detailed marketing strategy and action plan.

What are the broker’s resources?

Many boutique and local commercial real estate firms have very limited platforms, with little research, marketing and administrative support. This means a broker is responsible to deliver all or most of it alone, which can result in a slimmer service offering to clients.

One aspect that shouldn’t be overlooked are brokers that are members of a professional organization. Certified Commercial Investment Members (CCIM) and the Society of Industrial and Office Realtors (SIOR) are two organizations that offer members support through education and a network of professional resources. Both organizations require extensive education and experience to obtain certification.

Thill added that it’s alright to ask if a broker’s service is guaranteed. No one can guarantee an outcome based on the marketplace in Nevada, but brokers and their support teams should be committed to keeping their promises. That means offering a specific action plan. Define, from the beginning, expectations for service, reporting and accountability.

Katz, who specializes in industrial properties, said that potential buyers or tenants should ask about a building’s power usage, turning radius for trucks, even how close the property is to the freeway. He urged people to ask about lease rates and amenities when looking at commercial buildings, whether industrial or retail.

Licensing Requirements and Broker Fees

So is there a difference between a realtor, a broker and real estate agent? Yes, but it can be confusing for the layperson. In Nevada, a real estate agent, typically known as a real estate salesperson, is a person who has completed 90 hours of real estate education, of which 18 hours are devoted to Nevada real estate law. They do not have to attend any particular school, but they must pass the licensing exam, according to the state of Nevada’s Real Estate Division.

A broker, on the other hand, is someone who has received 64 credit hours of school training of which 27 hours are devoted to Nevada real estate law, and must pass a more stringent exam before being licensed.

In Nevada, real estate agents obtain a license from the Real Estate Division. The costs are as follows: $299 for required Nevada education, $100 for state examination, $210 for salesperson’s license or $250 for broker’s license for the first two years, between $37.50 and $80 for fingerprinting. The costs varies for advertising and office fees.

Meanwhile, brokerage fees can be a little confusing, especially if it is the first time a company is entering into the purchase or lease of a commercial property. Brokerage fees are negotiable and may be different from company to company or even agent to agent.

“Typically, on a lease transaction the fee for representing the tenant or the end-users is between 4 and 5 percent,” Thill said. “On sales, it depends on if the building is full or vacant or if it’s owner-occupied.”

Thill, who is also president of the Society of Industrial and Office Realtors (SIOR), in Las Vegas, said fees related to sales are based on the value of a property. For example, a building sold for $5 million or less, a broker would charge 3 percent, between $10 million and $20 million, 5 percent and over $20 million, it’s 1 percent to 2 percent.

“The amount of work is the same whether you are selling a $5 million or $30 million building,” Thill said. “Compensation may be geared toward the purchase price.”

It’s clear that buying or selling a property is a tricky venture with many variables at play. Understanding the market going in is vital to any executive’s success, and hiring a knowledgable professional can be key.

GAMBLINGCOMPLIANCE: DFS Companies Pull Out Of Idaho, Alabama

DraftKings and FanDuel have quit providing paid daily fantasy sports (DFS) contests in Idaho, making it the second state in less than a week in which the companies have agreed to pull out and refund player deposits.

The agreement with DraftKings and FanDuel was reached after three months of negotiations, Idaho Attorney General Lawrence Wasden said Monday.

On Friday, both companies pulled out of Alabama following a similar agreement.

“The concern I have is that paid daily sports offerings provided by these companies constitute gambling under Idaho law,” Wasden said in a statement.

“I have a duty to enforce and uphold that law. I commend the companies for negotiating in good faith and agreeing not to make these contests available in Idaho.”

Under the terms of the agreement, as of May 1 the companies will not allow any consumers in Idaho to participate in any of their paid online fantasy football, baseball, basketball and other sports contests.

Both FanDuel and DraftKings have agreed to process requests by their Idaho customers to withdraw their account balances in a timely manner. The companies will monitor Idaho players based on geoblocking technology or through IP addresses.

Wasden began a review of the companies and their websites in January amid concerns regarding the legality of the daily fantasy sports contests offered by those companies.

The Idaho Constitution prohibits gambling except for the state lottery, pari-mutual wagering, bingo and raffle games.

“Idaho defines gambling, in part, as risking money or other thing(s) of value for gain that is contingent in whole or part upon chance or the outcome of an event, including a sporting event,” Wasden said.

Wasden said he was concerned that DFS offerings require participants to risk money for a cash prize contingent upon individual athletes’ collective performance in various sporting events.

“As I see it, this falls within Idaho’s definition of gambling,” Wasden said.

However, Wasden did say Monday the sites could offer “free” DFS leagues or other contests that offer prizes to players in Idaho.

Idaho and Alabama became the 10th an 11th states in which the attorney general considered DFS to be a form of gambling and illegal.

On its website, the lobbying group Fantasy Sports For All urged Idaho residents to email their standard note to state lawmakers asking them to keep “fantasy sports accessible for Idaho residents.”

“You should decide if you play fantasy sports, not lawmakers,” the group said.

In an email to its Idaho users, FanDuel said it had “always operated within the law in Idaho, however, as we continue to evaluate the legal framework, we have decided to suspend our paid operations in the state.”

“We are continually working to clarify the law and look forward to working with legislators to enact consumer protections so that we can bring our paid contests back to Idaho sports fans once again. As has always been the case, users in Idaho can withdraw their funds at any time,” FanDuel said.

Attorneys general in several states, including Texas, Hawaii and Mississippi, have formally opined that DFS is illegal under state law, according to U.S. Daily Fantasy Sports Tracker, GamblingCompliance’s legislative monitoring service.

One of those opinions from the Tennessee attorney general was overruled last week after Governor Bill Haslam signed a bill legalizing and regulating DFS. The state joined Indiana and Virginia in regulating DFS, but Tennessee is the first state to impose a direct tax on contests adjusted revenues.

Wasden also said the Idaho Legislature could act to legalize and regulate DFS, or the contests could resume “if a court with authority and jurisdiction in Idaho rules in favor of any form of such contests.”

The agreement is not “an admission of liability or evidence of wrongdoing by the companies,” the attorney general said.

The two-page release made no specific references to other DFS companies.

There is a similar story in Alabama, where both FanDuel and DraftKings are complying with a cease and desist letters issued by the state attorney general last month.

In a statement emailed to GamblingCompliance, a FanDuel spokeswoman says the company believes it had always operated within the law in Alabama.

“And while we strongly disagree with the attorney general’s opinion, we respect him and the office and have decided to suspend paid contests in the state. It’s an unfortunate development for legions of fantasy sports fan, but the state legislature can conclusively resolve this issue and bring fantasy play back to Alabama,” she said.

DraftKings also issued a statement announcing its decision to leave Alabama.

“While we disagree with the Attorney General’s conclusions and know that DFS players join in our disappointment that we are ceasing operations in Alabama, we look forward to continued and constructive engagement with state legislators,” the company said.

Neither FanDuel or DraftKings stated how many customers would be affected by their decision to pull out of Idaho or Alabama.

On April 5, Alabama Attorney General Luther Strange announced the cease and desist letters after reviewing the state’s gambling statutes and determined that “paid daily fantasy sports contests constitute illegal gambling.”

A pair of identical bills was filed in the Alabama House and Senate in early February to create a regulatory framework for DFS operators under Strange’s office.

Both House Bill 56 and Senate Bill 114 must pass both chambers before the legislature is scheduled to adjourn on May 16.

GamblingCompliance: Nevada Invites Businesses, Investors To Bet On Sports

 

Sports betting is a $4bn annual business in Nevada, but a change in state law has opened up a whole new range of opportunities for sportsbooks to increase their business by allowing wagers from out of state investors.

Call it mutual funds for sports bettors.

Legal “entity wagering” funds in Nevada work by allowing state registered businesses to accept money for bets from investors living outside the state. But like a 401(k) plan, the investor does not actually make the bets. The company in Nevada does.

Nevada race and sports books can refuse to accept these funds’ bets, just as they are free to turn down wagers from individuals, according to an executive with CG Technology.

CG Technology, which operates eight sportsbooks in Las Vegas, was one of the authors of Senate Bill 443 and helped guide the bill through the 2015 Nevada legislature.

Quinton Singleton, vice president and general counsel at CG Technology, expects entity wagering to have a noticeable impact on the race and sports book business.

The popularity of sports betting reached record levels in 2015, with Nevada sportsbooks taking in an all-time high of $4.23bn in wagers.

The Nevada Gaming Control Board said bookmakers won almost $231.8m last year on that record handle.

Singleton said that entity betting is simply an opportunity to grow liquidity and expand the marketplace by bringing in new people to the gaming industry, many of whom are setting up businesses in Nevada.

“They are bringing business to Nevada … that’s important to notice,” Singleton told GamblingCompliance.

He said these funds will also employ different investment strategies, similar to any mutual fund or hedge fund. Singleton noted that some funds might offer a minimum investment of $50 in an effort to get 1,000 people, while others might limit their pool of potential investors with a $50,000 initial investment.

So far, CG Technology, formerly known as Cantor Gaming, is the only Nevada gaming company to allow entity betting. The company has been getting requests and has published a guide to establishing an entity account on its website.

One of those entities that have placed bets with CG Technology is Reno-based Bettor Investments LLC. After attracting interest from more than a dozen initial investors, Bettor Investments placed its first bet on March 29.

“I lost my first bet, but won the second bet,” Matt Stuart, founder of Bettor Investments, told GamblingCompliance.

“It’s a brand new part of the business. I expect a deluge of people wanting to participate in our legal sports-betting investor fund.”

Since April 1, Bettor Investments has posted 11 wins; six loses and pushed two bets, according to a tally on the company’s website. Stuart said the fund has wagered on baseball, hockey, basketball and soccer games.

As of Tuesday, Stuart said there were more than 20 potential investors in the pipeline who are ready to deposit between $500 and $2,500 with Bettor Investments.

The maximum investment limit will be raised on an individual basis on July 1. Stuart said he developed “internal controls” at the start so he did not put “investor money at risk on a massive scale.”

Stuart declined to say how much money he has raised, or how much money he has wagered on his company’s first 19 bets.

“I’m excited that we were able to get this completed in time for the start of the 2016 Major League Baseball season.” said Stuart.

“It’s been a long nine months, but Nevada continues to show leadership when it comes to helping promote options for people outside the state to participate.”

Stuart said he has received interest from people all over the world, including Spain, Austria and Switzerland.

“I’ve even had one potential investor interested in a five [figure] investment with us, but I’ve asked him to hold off until July 1,” Stuart said.

Bettor Investments expects to launch additional funds later this year, especially an NFL betting fund in July. The idea is to collect money from investors who are only interested in professional football “right before week one before cashing out after the Super Bowl,” Stuart said.

In Las Vegas, Blue Chips Sports Advisors is an entity wagering firm that is still in the development stages, according to Rajeev Sharma, who founded the company with his partner, Maxwell Phillips.

Blue Chip Advisors fund will mirror that of a mutual fund, according to the company’s marketing materials. Fidelity defines a mutual fund as an investment program funded by shareholders that trades in diversified holdings and is professionally managed.

“Our goal is to begin operations by baseball season 2017,” Sharma said.

SB 443 was set up to be transparent, Singleton said. According to the law, each sports-betting entity must register with Nevada’s secretary of state, and the entity must disclose what is being wagered on to its investors.

Stuart told GamblingCompliance that he sends out a text to each investor after each wager on an event begins.

Each investor must submit their name, address, proof of identity with a government issued ID, and tax information to the betting entity. The entity is then required to disclose that information to Nevada regulators.

Investors must be 21 or older, and bettors have no say about what is being bet on.

The information will allow the race and sports book to do a background check to make sure the businesses and identities of those involved are suitable.

The sportsbooks are responsible for collecting the information, but Nevada gaming regulators have the option of reviewing a business entity’s members and investors.

Furthermore, an investment group’s funds must be deposited in a Nevada bank. Stuart said those funds will then be transferred electronically to CG Technology for the purpose of placing a wager.

Any profits will then be transferred back into the entity’s bank account to be either used to place additional bets or paid out to investors, according to Stuart. He said that he expects investors will be paid quarterly.

Singleton said entity-wagering is “square with all state and federal laws.”

He said the law does not violate the U.S. Wire Act, which specifically bans the use of telephones and the Internet to transmit across state lines any wagers and information regarding bets on sporting events.

“Casinos wire funds in and out all the time,” Singleton said. “They’ve been doing that for more than 20 years now.”

Daniel Wallach, a gaming lawyer with Becker and Poliakoff in Fort Lauderdale, Florida, was a bit more cautious in his assessment of entity wagering. Wallach said Nevada’s expansion of sports betting “is precisely what PASPA was passed to avoid.”

The Professional and Amateur Sports Protection Act (PASPA) is a 1992 federal law that restricts legalized sports betting to a handful of states, including Nevada, Delaware, Montana and Oregon.

“It can be seen as violating the spirit of PASPA, if not the law itself,” Wallach told GamblingCompliance.

“In all likelihood Nevada’s law will largely escape scrutiny from PASPA and the Wire Act. Without a willing plaintiff it is ruled … academic at this point.”

GamblingCompliance: The Curious State Of U.S. Online Gambling

 

Legal online gambling in the U.S. has produced little in the way of tax revenues over the last three years since Nevada, Delaware and New Jersey introduced well regulated markets that attracted companies offering everything from online slot machines to poker and blackjack.

Gaming executives, lawyers and analysts interviewed by GamblingCompliance agreed that the promise of hundreds of millions of dollars in tax revenues has fallen short. But each expressed confidence that more states would begin to legalize online gambling.

They cautioned that any new industry takes time to evolve.

In New Jersey, Republican Governor Chris Christie, who signed the legislation in 2013, expected Internet gambling to generate $150m in tax revenue in its first year to help balance the state’s budget.

Others were more conservative with their estimates. GamblingCompliance projected a market worth around $39m in tax revenue in the first year. At the end of the market’s first full year of operation in 2014, New Jersey’s 15 percent tax on online gambling generated taxes of $2.32m.

Taxes increased $22.3m on total online casino revenue of $125m in 2015, according to the state’s Division of Gaming Enforcement (DGE).

“It took a long time to gain some traction,” said Matt Davey, CEO of NYX Gaming Group.

“The New Jersey market has shown excellent growth. It’s about a $150m market … similar size to Sweden in terms of population. We expect it to grow to $250m over the next couple of years.”

The entry of PokerStars into New Jersey boosted New Jersey’s online revenues in March, despite the company being operational for less than two weeks. PokerStars earned about $600,000, according to the DGE.

Overall, online gambling in New Jersey generated $15.5m in March, a 17.7 percent increase over $13.1m earned in March 2015 and a monthly record total.

PokerStars launched its New Jersey website on March 21 and is the state’s largest poker network by poker traffic, according to the PokerScout website.

NYX Gaming provides slot games to PokerStars in New Jersey. Amaya, PokerStars parent company, along with William Hill and SkyBet, are investors in NYX Gaming.

Jeff Ifrah, a founding member of Ifrah Law in Washington D.C., said growth in New Jersey’s online gambling revenues would help convince other states to legalize online gambling.

“Things looked like they were happening in Pennsylvania and New York, but then [efforts] in both states got stalled,” Ifrah said. “It’s not clear we are going to get anything again this year.”

But, Ifrah said, as long as New Jersey’s online gambling industry keeps growing that will help “get Pennsylvania and New York over the hump.”

Nevada has been limited by legalizing only online poker, while online gambling in Delaware generated$299,789 in online gambling revenues in February.

The Nevada Gaming Control Board in November 2014 stopped reporting how much revenue the state receives from online poker specifically because there were not enough operators to warrant collecting the numbers.

Davey said Nevada’s decision to legalize only online poker showed why it was a difficult business model. He said the lesson that Nevada taught the industry and regulators is that states must “offer a broader list of products.”

Ultimate Poker, an online poker site launched by Station Casinos, closed in November 2014 after nearly 19 months in operation, leaving Nevada with two operating poker websites — WSOP.com, and Real Gaming, a website associated with the South Point Casino.

Caesars Interactive Entertainment (CIE), an online and mobile gaming subsidiary of Caesars Growth Partners LLC, owns the World Series of Poker Brand and its Playtika division. CIE posted record revenueof $209.2m for 2015 and operates real-money gambling sites in Nevada and New Jersey.

“We’ve been [able] to turn Nevada and New Jersey into a break even or better business,” Bill Rini, head of online poker at CIE in Las Vegas, said. “We are doing fairly well.”

Rini said that business could only improve as more states legalize online gambling.

He declined to speculate on how many states might legalize online gambling. Rini said as larger states legalize online poker it will allow for more compacts between states, enabling CIE to “get that economy of scale.”

Nevada and Delaware reached an interstate agreement in February 2014, connecting online poker players between the two states, and increasing the number of players online. The compact was launched in March 2015.

Still, the agreement’s initial impact on terms of revenue has been muted, leaving observers to urge continued patience as the U.S. online market develops.

“It’s a flat industry from a growth standpoint,” said Matthew Katz, CEO of the geolocation and KYC company CAMS LLC.

“2016 will be a year to ensure all systems are stable. It’s the calm before the storm.”

Katz expects the industry to “regain some momentum” next year, once the November elections are over. He said he seriously doubted that any politician would make online gambling a priority in an election year.

Katz also said daily fantasy sports (DFS) could be used to support the expansion of online gambling. He said that if DFS can be proven to generate substantial tax revenues, then online poker and other casino games might have an easier path to legalization.

Ifrah said the problem is lawmakers do not view DFS and online gambling as the same thing.

“Daily fantasy sports are important to their constituents,” Ifrah said. “Some legislators believe they will be punished for not supporting this. This is a reflection of the marketing that DFS does.”

So, which U.S. states are candidates to legalize online gambling in 2017?

Davey said that he expects between six to 12 states to legalize online gambling within the next five years.

“It will change, but it takes time. We don’t think there will be a federal model that will regulate online gambling, but it will be a state driven model. Each state will need to make a decision. Some will, some won’t. It will happen over time,” said Matt Davey, CEO, NYX Gaming.

Other industry observers believe New York and Pennsylvania are more likely than California to approve online gambling next year.

“The politics in California is a lot more complicated,” said Frank Fantini, CEO of Fantini Research. “In California, you have so many competing interests, from tribal gaming to racetracks and card clubs. Politically, it has been difficult to come up with a consensus.”

The newest effort to legalize online poker in California was introduced in the legislature in February. The biggest change over previous bills is Assembly Bill 2863, which would exclude racetracks from being operators in exchange for up to $60m a year.

“It’s a long process in California, with a lot of competing interests,” Rini said. “For us, every state presents its own opportunities and challenges.”

Meanwhile, the Pennsylvania legislature is considering a bill, House Bill 649, to reform the gaming laws in the state.

Online poker in New York is in limbo while lawmakers deal with constitutional issues over whether poker is a skill-based game or gambling.

Michigan on Friday became the latest state to consider online gaming with a bill in the state Senate that would regulate online poker and other casino games.

Senate Bill 889 would restrict access to players aged 21 and older, Michigan-based casinos and tribal casinos could apply for a license, but no more than eight licenses would be granted, a $5m licensing fee and a 10 percent tax on gross gaming revenue.