LAS VEGAS BUSINESS PRESS:Online gaming will expand to include more states, analyst says

(NOTE: Coverage from the 2015 Global Gaming Expo, or G2E, in Las Vegas)

Gaming law analyst Kevin Cochran is optimistic the fledgling U.S. online gaming business will expand to include more states over the next five to 10 years as California, Pennsylvania, New York and others consider legalizing online poker and other Internet gaming.

“We’ll see two to three of the bigger states approve online gaming,” said Cochran, a senior legal analyst with Gambling Compliance in Washington, D.C.

Cochran predicted California and Pennsylvania would be next in line to approve online gaming within the next two to three years, he said Sept. 28 during a presentation at the Global Gaming Expo at Sands Expo and Convention Center.

So far only three states allow residents and visitors access to real-money wagering sites. Nevada became the first in the nation to pass online poker legislation in 2011. New Jersey and Delaware online offerings include casinos games such as blackjack and roulette in addition to real-money online poker.

Cochran said the U.S. online gaming market remains relatively small, because the three legalized markets have small population bases, making liquidity difficult to achieve.

He said Nevada and Delaware tried to expand the base of online poker players last year by signing a Multi-State Interstate Gaming Agreement, a first-of-its-kind arrangement that established a framework for the states to share regulatory standards for online poker. The agreement also lets both states control the number of entities that offer online gaming.

Cochran said Delaware gaming regulators are working on a similar agreement with New Jersey. However, initial financial results from online gaming have been unimpressive. New Jersey was hoping to bring in $80 million, but through November had earned $6.1 million in tax revenue from about $40 million in total revenue.

Delaware generated $1.9 million in tax revenue, while Nevada took in $10 million, according to Casino City’s 2015 Global Gaming Almanac.

“There has not been the great monetary returns that were expected,” Cochran said during an hourlong presentation titled “The Legal Side of iGaming: Consequences, Opportunities and Concerns” at the Global Gaming Expo.

The annual gathering, commonly known as G2E, brings together industry executives looking for new products to use in their casinos and resorts, as well as to discuss the latest industry trends.

G2E this year also featured an “Integrated Resort Experience.” The exhibit was divided into six sections, one each for hotel room, food and beverage, entertainment, meetings, spas and gaming.

Cochran said where the U.S. has been effective is regulating online gaming. He said those regulations have created an effective way to monitor a player’s age and location and enact responsible iGaming programs, such as limits, timeouts, self-exclusions and warning messages.

“Preventative measures are working in the U.S. and Canada,” he said. “New Jersey, for example, allows a player to exclude themselves while signing up for an account, or exclude themselves without admitting a gambling problem in case of background checks.”

Cochran said online gaming regulatory models deal with who to license, types of games to license, cooperation, liquidity pooling, black listing, player protection and advertising. In the United Kingdom, regulators license companies, including William Hill, to provide online gaming, while the Philippines licenses offshore gaming operators.

The Philippines doesn’t allow online gaming, but hosts servers for offshore companies as long as they keep an account with a bank in the country.

“In the U.S., online gaming licenses are tied to a land-based casino,” Cochran said. “That’s because states want to protect their land-based casino tax revenues.”

Cochran said while online gaming is highly regulated, fantasy sports is not being regulated. He said FanDuel, DraftKings and other fantasy sites have the best of both worlds — they are allowed to process payments online and operate in an unregulated marketplace.

Cochran declined to say whether he believed real-money fantasy sports is gambling, but he noted that Rep. Frank Pallone, D-N.J., has called for a congressional hearing to examine the relationship of fantasy sports to gambling and professional sports.

In a letter requesting a hearing, Pallone wrote, “Fans are currently allowed to risk money on the performance of an individual player. How is that different from wagering money on the outcome of a game?”

The Professional and Amateur Sports Protection Act of 1992 (PASPA) prohibits sports betting nationally except in Nevada, Delaware, Montana and Oregon, where it was grandfathered in because gambling was legal there before PASPA was passed.

PASPA carved out an exemption for fantasy sports as a game of skill, which Pallone believes has blurred the lines between fantasy sports and gambling.

Cochran said Nevada gaming regulators are analyzing the legalities of real-money fantasy sports. The Nevada Gaming Control Board hasn’t taken a position on daily fantasy sports. He said California and Massachusetts also are considering regulating fantasy sports.

“It’s on everybody’s radar,” Cochran said, adding that so far Kansas is the only state to legalize daily fantasy sports. The Kansas bill was introduced after the Kansas Racing and Gaming Commission said daily fantasy sports games constituted an illegal state lottery.

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NEVADA BUSINESS MAGAZINE: Economic Forecast 2016: Increasing Stability and Growth

By Chris Sieroty

According to analysts, Nevada’s economy will continue to show improvement in 2016, but with a few new wrinkles thrown in. Rising wages will mean more disposable income, which in turn boosts consumer spending. Job creation, described as the single best indicator of economic growth, is expected to add more than 52,000 workers to company payrolls this year, according to the Nevada Department of Employment, Training and Rehabilitation (DETR).

While tourism and hospitality have helped sustain the state’s economic growth in the last few years, housing is expected to be even stronger as prices have stabilized and fewer homes are falling into foreclosure.

“We are growing again,” said Stephen Miller, director of the Center for Business and Economic Research at UNLV. “We are not quite back to where we were at the peak, before the recession. We are in the seventh year of recovery.”

Miller described Nevada as “ground zero” for the recession. But, Tesla Motors coming on board this year, Switch and new casino developments on the Strip are good news for Nevada’s recovery, he said.

Economists and industry analysts agree that, moving into 2016, the state’s economy is now stable with the possibility of posting a 3 percent growth rate by the end of the year. So, what will the state’s main industries do this year to reach that 3 percent growth rate?

Gaming and Tourism

Las Vegas continues to experience strong visitor volume and, in 2014, even posted a record-breaking 41.1 million tourists. This year tourism is on pace to beat that record. However, casino revenue figures took a small dip in Nevada last year.

Rossi Ralenkotter, president and CEO of the Las Vegas Convention and Visitors Authority, couldn’t estimate visitor totals for 2016, but said he does, “anticipate major events like the presidential debate and a robust convention calendar will attract large amounts of visitors to our city.”

He also attributed the Strip’s continued growth, despite a crowded casino industry nationwide, to the uniqueness of what Las Vegas has to offer.

“Las Vegas is more than a destination, it’s an experience,” said Ralenkotter. “Much like our visitors’ interest, Las Vegas is a destination that is constantly changing and evolving. Whether you’re interested in the latest gaming, production, concert, sporting event or another form of entertainment, there is always something new to see in Las Vegas and an activity to suit every taste.”

That diversity of offerings has had a mixed impact on gaming revenues. Casinos statewide collected just over $11 billion in 2014, which was down 1.14 percent from 2013. The Strip totaled $6.37 billion, down 2.08 percent from 2013, according to the Nevada Gaming Control Board.

Ralenkotter expected conventions and the election year to lead the way in 2016. But what new projects will help attract new and returning visitors to the Strip? In 2014, Las Vegas benefited from the openings of the Cromwell and SLS Las Vegas among other projects.

And, Ralenkotter said the city has more than $7 billion in projects planned or under construction over the next few years.

“[In 2015], we saw the opening of the Grand Bazaar Shops at Bally’s, Omnia nightclub at Caesars Palace, Rock in Rio festival grounds and the first phase of the Mandalay Bay Convention Center just to name a few,” Ralenkotter said. “[In 2016], MGM Resorts International will have several new venues including a 20,000 seat arena.”

He said convention attendance was up more than 5.3 percent over the 5 million convention delegates last year. McCarran International Airport is also helping visitor numbers as arrivals and departures surged nearly 6 percent at the start of the fourth quarter.

Reno-Tahoe International Airport continued to post positive growth for 2015, with the latest figures for total passengers up 4.3 percent.

“In terms of visitor counts, we are slightly ahead of where we were last year,” said Jennifer Cunningham, interim managing director of the Reno-Sparks Convention and Visitors Authority. “We expect 4.7 million visitors, which is just above last year’s 4.6 million visitors.”

Cunningham also expects that number will rise as the Northern Nevada economy recovers. However, she said, the region’s hotels are already enjoying a 9.1 percent increase in their average daily room rate.

As of December, the average daily room rate was $94.52. Those rates are a result of a combination of factors including some upgrades, an improving economy, more conventions and an influx of company executives considering relocating to Reno.

Real Estate

After the devastation Nevada’s housing market suffered during the recession, Southern Nevada experienced increased stability in its real estate market last year, and that stability is expected to continue into 2016.

“Think back to the roller coaster ride when home prices were rising and land values were approaching a million dollars an acre,” said Brian Gordon, a principal with Applied Analysis. “Then the recession brought with it falling home values and foreclosures for the better part of a decade. Now, prices are more realistic. The real estate market is more sustainable.”

Gordon said, overall, the Southern Nevada real estate market experienced increased stability in 2015, and he expected that trend to continue into 2016. He described housing prices as more sustainable, with price appreciation averaging about 10 percent, down from the pre-recession high of 30 percent.

Entering the new year, the median price of an existing single-family home sold in Southern Nevada was just above $220,000, compared with $200,000 at the end of 2014. Home prices have bounced back steadily since bottoming out at $118,000 in January of 2012, but are still off from their highs in June 2006 of $315,000.

Going forward into 2016, Gordon believes the underlying fundamentals of the local economy remain sound with population and employment growth rates above the national average, and the region’s core tourism industry pressing forward with all-time high visitor volumes.

“Expectations for the economic climate bode well for the Southern Nevada real estate market,” Gordon said. “From a housing perspective, the number of home sales has remained elevated while supply-side conditions have remained in check.”

He added that price points have continued to rise and, while the pace of price appreciation may slow this year, overall pricing trends are expected to remain positive. Gordon said the recovering housing market has led to fewer homeowners being underwater and the risk of foreclosures and bank-owned assets flooding the market has greatly diminished.

For the first part of the fourth-quarter of 2015, 6.7 percent of all local sales were short sales, which is down from 10.6 percent from the same period in 2014, according to the Greater Las Vegas Association of Realtors (GLVAR).

Gordon did caution the “supply-demand balance” for vacant land has held prices at a premium relative to the devastation created during the economic downturn.

“Home builders are finding it difficult to identify, acquire and improve land price points that make financial sense,” Gordon said. “Elevated land prices are forcing higher densities and many of the challenges faced during the economic boom of the early to mid-2000s. Higher land prices are also being passed along to the end buyer of new homes, which is creating challenges from a pricing perspective.”

Gordon said that Bureau of Land Management (BLM) public land auctions may be one solution to increase the availability of land at more competitive prices. He said this will be “a key issue to monitor in 2016 and beyond.

In Northern Nevada, Telsa Motors $5 billion battery factory and the businesses following the electric car maker continue to have an impact on the region’s housing market.

The median sales price of an existing single family home in Washoe County is $280,000, $294,866 in Reno and $264,000 in Sparks. The median sales price in Fernley was just over $173,500.

“Those are healthy numbers,” said Brian Bonnenfant, project manager of The Center for Regional Studies at the University of Nevada, Reno (UNR). “We are way better off than we were three to four years ago.”

Economic Development

The same could be said for Nevada’s efforts at economic diversification. Nevada’s economy had been driven for years by gaming and construction. The reliance on those two industries drove the state into economic devastation when the recession hit.

Economic development officials say they’ve learned their lesson. Now, the state’s new motto is “economic diversity.”

Gaming revenues have improved modestly and construction jobs have begun to return as the Strip experiences $7 billion in new projects over the next few years. In addition, companies are looking to set up shop in Northern Nevada in particular. But, are these efforts paying off?

According to Mike Kazmierski, CEO of the Economic Development Authority of Western Nevada (EDAWN), they are. He said Northern Nevada expects continued significant growth in 2016 as more companies take advantage of Nevada’s tax friendly environment.

Kazmierski said EDAWN has focused its efforts on lobbying technology, data, logistics, e-commerce and manufacturing companies to the region. He said their success is measured by the number of companies who visit Northern Nevada on a monthly basis and his organization’s close rate.

In 2015, EDAWN averaged 10 to 12 company visits per month, up from four visits a month, while the closure rate is about 70 percent.

“Those numbers are not expected to decline,” Kazmierski said. “This is before Tesla hires anyone.”

To illustrate his point, Kazmierski highlighted the three latest deals to be publicized. He said Quality Bicycle Products will add 50 jobs when it opens a Reno distribution center, and BI Nutraceuticals will open a manufacturing and distribution center in Reno and hire up to 120 employees.

Meanwhile, eBay Inc. will build its fourth data center at the Tahoe-Reno Industrial Center. Kazmierski said the new companies created more than 3,000 jobs last year, a trend the he expected would continue this year.

Kazmierski cautioned that housing is a concern, especially as apartments and homes are needed to house construction and other employees. He said the housing shortage will be helped by “some repurposing of old casinos and new houses are on the way.”

In Southern Nevada, the region’s top economic development official characterized 2016 as a year of “cautious optimisim.”

“Every negative indicator continues to ratchet downward, and we’re finally seeing some positive wage growth for Nevadans,” said Jonas Peterson, president and CEO of the Las Vegas Global Economic Alliance (LVGEA).

Weekly wages in Nevada averaged $854 during the second quarter of 2015, up 2.5 percent from the $833 for the same period in 2014, according to DETR.

Peterson said Southern Nevada has some “pretty big opportunities” for development, with the catch being landing “some large economic development clients.” He said absent more problems overseas, Las Vegas should see continued growth through 2016.

Among the companies to relocate to Southern Nevada in 2015 was Premium Waters Inc. which will invest $10.7 million in a local plant and hire 29 employees. eBay will also expand its data center operations in Las Vegas, and expects to spend $182 million on the project.

“We have opportunities to attract many different types of companies, but in the short-term we’re best poised to attract light manufacturers and distributors,” Peterson said.

One example is Faraday Future, an electric car company that recently announced it will invest $1 billion to build a 900-acre factory at Apex in North Las Vegas. Peterson didn’t discuss Faraday, but said Southern Nevada would benefit from an influx of jobs and capital.

“That’s a positive,” Peterson said. “But these projects are few and far between. When we become aware of opportunities, we are definitely going to eagerly explore those, but we’re also focused on developing our own talent pool of young entrepreneurs who could go on to create the next Fortune 500 company right here in Las Vegas.”

Peterson said his organization can’t simply, “go hunt the white whale while ignoring the other fish in the sea.”

Gordon added that a, “massive investment of this nature could help bolster Southern Nevada’s manufacturing profile and generate a significant ripple effect.”

The Faraday project is expected to bring 4,500 jobs to Southern Nevada. Additionally, the company is projected to create 13,000 direct and indirect jobs and generate $760 million in tax revenue over 20 years.


While weekly wages have risen modestly and the unemployment rate has declined over the last year, retail analysts say that an increase in take home pay has translated into increased consumer spending over the holiday season.

Bryan Wachter, senior vice president with the Retail Association of Nevada, said he expects that consumer confidence to carry the retail sector into 2016. He said taxable retail sales for the 2014-15 fiscal year (latest available data) were $50.7 billion, which was an all-time high and a 6.3 percent increase over the previous fiscal year.

“Consumer confidence is up,” Wachter said. “When we were in the recession, consumers cut back on spending. They are spending money now. They want to spend money.”

Wachter said consumers may not be where they want to be financially, but they are more confident this year because they believe they’ll still have a job when the bills come due. He added that over the last three years, a lack of confidence in the job market has kept spending down.

“Consumer debt increases … that’s a good thing,” Wachter said. “Credit card debt is a down payment in the future. That spells some confidence [that] people will have some income.”

Though the Retail Association hasn’t released its growth projections for retail sales in 2016, Wachter did say holiday hiring was up slightly and was expected to reach 6,500 in Nevada, with about 10 percent of those employees carrying on in full-time positions.

Looking To The Future

Experts believe that growth in Nevada will continue to be steady, as there are no strong signals in the economy for a recession similar to 2008, or even the technology bubble of the early 2000s.

Both Peterson and Kazmierski expect more companies to move to Nevada, creating even more job opportunities and moving the state toward a more diversified economy.

“Diversity in the economy is going to reflect a broader make-up of industries than we currently see,” Peterson said. “I think there’s a major misconception that a diversified economy means that we’ve somehow forsaken our number one industry – gaming and tourism.”

Peterson explained the region has a major opportunity to leverage its dominance in gaming and tourism to attract ancillary industries.

“From there, we have natural growth opportunities in logistics and distribution due to our geographic location at the crossroads of the Southwest,” he said.

All in all, experts agree that 2016 is looking bright for Nevada. From increased diversification to recovering industries and an abundance of cautious optimism, all signs point to a healthy economy for the Silver State.

LAS VEGAS BUSINESS PRESS: Las Vegas bankers look ahead to 2016

By Chris Sieroty

Special to the Las Vegas Business Press

January 3 – 7:00 p.m.

It’s the start of a New Year, and plenty of industry analysts have already been quoted about how the Las Vegas economic recovery will affect the local banking industry.

Even with the Federal Reserve raising interest rates last month for the first time in a decade, most analysts believe more increases will arrive this year. And that those rate hikes are a sign of strength of the U.S. economy.

But what other changes are on the horizon for 2016, and how is a more stringent regulatory environment affecting banks in Southern Nevada?

John Wilcox, senior vice president and regional banking manager with City National Bank; Gene Galloway, president and CEO of Plaza Bank; Terry Shirey, president and CEO of Nevada State Bank, and George Smith, Nevada president with Bank of America, share their thoughts.

Q: What is the most important trend that will drive the banking industry in 2016?

Wilcox: Technology will be more of a driving force in banking as a way to become more efficient and responsive to its clients. With shrinking margins, utilizing technology will be a critical part of maintaining profitability at necessary levels.

Galloway: Clearly, the regulatory environment continues to be a challenge. Additionally, we are seeing more banks reaching on credit structure and pricing. I guess it is true bankers have short memories.

Shirey: Interest rates. Whether or not the Fed’s 0.25 percent increase was the start of a long-term trend of increasing rates or a blip in a prolonged period of low interest rates will drive a lot of what you see in banking, and will also tell us a lot about the strength of the U.S. economy.

Smith: It’s all about convenience in 2016. Customers are electing to make their lives easier through technology and the convenience of self-service banking. It’s a different industry than just a few years ago — customers access, pay and spend online, and are using their mobile devices more than ever, and it will keep growing. Nationally, Bank of America has 32 million mobile banking and online users, with 18 million customers actively using our mobile banking platform alone — and that number grows at a rate of over 5,500 users a day. We also have ATMs with live, U.S.-based tellers that bank after our branches close and open, processing more types of transactions than standard ATMs. It’s a self-service platform our customers appreciate as an additional option for their banking needs. Technology-wise, already, our users are able to sign-in using fingerprint authentication, and use their wearable devices like the Apple watch to set same-day financial center appointments with specialists and view balances and recent transactions.

Q: What else can we expect to see in 2016?

Wilcox: We’ll see a market responding to an increasing interest rate environment for the first time in a decade. This will motivate businesses to get off the sidelines and invest in growth from pent up demand. This will help businesses, consumers and the banking industry.

Galloway: Continued improvement in the overall economic conditions. This improvement will be overshadowed by the elections coming up and the uncertainty surrounding them.

Shirey: The continued evolution of consumer banking as mobile adoption accelerates, ATMs become “smarter,” and the way consumers use branches and interact with their money continues to change. Those banks that embrace the changes and insist on providing means for their clients to bank the way they want will be the most successful. What won’t change in all of this is the importance of relationships and the value of having local bankers to help find solutions and solve problems for their customers.

Smith: Our customer service centers are creating jobs in Las Vegas, such as our call center in Summerlin that’s adding upwards of 200 new jobs in 2016. This call center focuses on our clients’ digital needs and we pick up service calls from all over the western United States. There are also two large casino deals on The Strip being discussed, and we could see a ripple effect on the economy as a result. In, 2016, we’ll be integrating Merrill Lynch advisors in the vast majority of our financial centers along with other lending specialist like mortgage and small business experts, so that our customers will be able to see an expert advisor in their local branch, which will be a huge asset to them.

Q: The post-2008 regulatory environment continues to evolve. What are the most significant changes that have arrived or are on their way?

Wilcox: The Ability to Repay, or ATR, has changed the way banks have to document and underwrite its borrowers in order to verify income and source of repayment. This has created some challenges with clients. However, as all banks continue to educate their clients about these changes, this will become less of an issue.

Galloway: Banks are still working through the impact of Dodd-Frank. This coupled with the heightened importance of cybersecurity will continue to impact many banks.

Shirey: The stricter mortgage underwriting standards, in particular the “ability to repay” rules mandated by Dodd-Frank that took effect this past year have had the largest client impact. Many smaller banks got out of the mortgage business altogether given the high cost of compliance. We have adapted to the changes and have found a way to provide a good client experience, but the new process is not as simple as it once was.

Smith: We’re a more straightforward company because we’ve exited businesses and sold assets that did not fit our client-focused strategy, and we’ve put most of our legacy issues behind us. We’re a stronger, more sound company because we’ve built record levels of capital and liquidity and strengthened our risk management practices. All of these efforts have allowed us to focus on our customers and clients like never before, and to deliver the full power of our resources and global reach to help them achieve their goals. Through stronger relationships with customers and clients, and better connectivity across our teams, we’re building strong, financially secure communities and growing responsibly.

Q: If you could change one thing about the banking business, what would it be?

Wilcox: Well most bankers would probably comment first on the regulatory environment. However, the ability for banks to attract young people as a career choice is a growing challenge. Banks need to invest in the future of its industry by attracting, training and mentoring the future leaders of its industry.

Galloway: I would say the blame game. Congress blames the banks, the consumer blames the banks. I can assure you the normal community bank did not cause all the pain that has been endured over the past few years.

Shirey: I would love to see a regulatory and economic environment that supported more new banks. There have only been three new banks chartered in the United States since 2010.

Smith: Reflecting on the past, I wish Las Vegas did not have to experience the financial crisis of 2008 in the manner it did. It impacted everyone and our community unfortunately paid a deep price. In terms of banking, the stronger banks survived – these banks had a long, slow and steady climb, but have returned to a strong footing. The aftermath is that the legitimate, well-capitalized banks are here to service customers. With new regulations, banks are much more capitalized because the laws have changed. It’s ultimately a much better environment for the consumer.

Q: How would you describe the current state of the Las Vegas economy and what impact do you think it will have on your business going into 2016?

Wilcox: It’s like a runner who is warmed up and is in the starting block waiting for the gun to go off. Some have jumped the gun and some are still waiting for a signal to jump in. Those businesses that are engaged in growth strategies now will be the winners. City National is excited about future opportunities, which is why it’s making significant investments in its Nevada operations. City National is very bullish about the future of the Nevada economy.

Galloway: Las Vegas continues to improve in all areas. Unemployment is continuing its downward trend; there is greater business and consumer confidence. Commercial real estate is continuing its recovery. Tourism is approaching all-time record levels. Plus we are seeing an increase in the number of nongaming industries moving into Nevada overall. This bodes well for our future. Lastly, we are returning to consistent level of net level of new in-migration to Las Vegas. Done right, I see 2016 as a very good year for community banking and Las Vegas in general.

Shirey: There is a lot to be positive about as we enter 2016. Real estate values and the metrics along the Strip corridor continue to trend in a positive direction. These two sectors of our economy have always been incredibly important to the Valley’s economy, so this bodes well. We are still near the top of many of the wrong lists (foreclosures, homes under water) but we are much better positioned than two years ago. Plus, we are starting to see economic development efforts beginning to bear fruit with the recent Faraday announcement. In general, what is good news for economy is good news for banking in Las Vegas, and vice versa.

Smith: The economy is steadily growing but it is not robust. The impact on us will be bullish for the most part. There is a slow growth in construction, mid-level construction specifically. You’ve seen a lot of clients really defer buying machinery or holding off on doing things because they are concerned about the economy. Now people have a bit more confidence and we’ve seen equipment financing tick up a bit. Housing is also generally up a bit, as builders are building more homes.

LAS VEGAS BUSINESS PRESS: Ruling won’t slow push for marijuana banking in Nevada

By Chris Sieroty

Special to the Las Vegas Business Press

January 18, 2016 – 4:14am

The booming marijuana industry in Colorado suffered a setback this month when a federal judge in Denver dismissed a credit union’s lawsuit seeking to access the nation’s financial system.

Fourth Corner Credit Union had challenged a decision by the U.S. Federal Reserve Bank of Kansas City that barred the credit union from taking deposits or issuing credit to marijuana dispensaries or grow facilities.

The credit union was chartered by Colorado in 2014, two years after voters decided to legalize recreational marijuana. In dismissing Fourth Corner’s lawsuit U.S. District Judge R. Brooke Jackson pointed out marijuana is still illegal under federal law.

Jackson added that financial institutions that deal with money made by medical or recreational marijuana businesses could be breaking the law.

So, the ruling leaves two questions.

One, what’s next for Fourth Corner Credit Union? That is still to be determined.

The second question is, how does Jackson’s ruling affect the group behind the effort to license Battle Born Credit Union in Nevada? Randi Thompson, a lobbyist and owner of Randi Thompson Consulting in Reno, told the Las Vegas Business Press the judge’s decision won’t impact their efforts to open a credit union that services marijuana businesses.

“We have taken a different path,” Thompson said. “We have learned from Fourth Corner’s experience and have reached out to the Federal Reserve in San Francisco.”

She said the seven people trying to form the credit union have reached out to state and federal banking regulators to share their business plan. Thompson said the difference between Colorado and Nevada is that Nevada allows credit union to have private insurance.

Fourth Corner had sought and was rejected by the National Credit Union Administration in their attempt to get federal insurance.

“You can’t go to the Fed without insurance,” Thompson said. “The judge had to follow federal law.”

Thompson hopes for a different outcome when Battle Born Credit Union seeks approval from the Federal Reserve in San Francisco. She said the “Fed in Kansas City is a little more conservative than the one in San Francisco.”

“They are open to seeing our application,” Thompson said.

In an interview with the Business Press in August, Thompson said she was hopeful Battle Born would open by the end of 2015. She told the Business Press this month that the process is in a holding pattern while “we deal with our compliance strategy.”

Thompson said it was crucial that Battle Born is able to show federal regulators that they are tracking every dollar that is deposited. She said, “If a marijuana dispensary deposits $100, we need to be able to show them it was a legitimate transaction.”

Thompson also attributed the delay to their only being three dispensaries statewide. However, if voters approve recreational marijuana in Nevada in November, she expected the issue of banking these businesses to pick up momentum.

Access to basic banking services to Nevada’s legal medical marijuana business is one of the most crucial challenges. Dispensary owners find themselves paying their rent, employees, operational costs and taxes in cash.

Wally Murray, chairman of the Nevada Credit Union League and CEO of the Greater Nevada Credit Union in Reno, in a statement to the Business Press said he was hopeful Congress would act to help credit unions.

“The Nevada Credit Union League is dedicated to working with all credit unions and their members to fight for access to the banking services they need,” Murray said. “We hope that, in the light of the Denver federal judge’s ruling, Congress will take action to address the excessive legal and regulatory burdens involved for credit unions and other financial institutions when considering serving legal marijuana-related businesses.


Stumpf reappointed to Fed Advisory Council

The Federal Reserve Bank of San Francisco’s board of directors on Jan. 1 reappointed John G. Stumpf to represent the district on the Federal Advisory Council for a second one-year term. Stumpf is chairman and CEO of Well Fargo & Co.

The Federal Advisory Council consists of one member, generally from the commercial banking industry, from each of the 12 Reserve Bank District. Nevada is a member of the 12th District, which is part of the Federal Reserve Bank in San Francisco.

The council usually meets with the Board of Governors in Washington, D.C., to discuss economic and banking matters.


CO-OP, U.S. Bank: branches matter

We seem to live our lives using our smartphones or tablets to do everything, including our financial transactions. But consumers still prefer visiting brick-and-mortar branches, according to studies from CO-OP Financial Services and U.S. Bank.

“Branches are not going away, but they are changing,” Sarah Canepa Bang, chief strategy officer for CO-OP Shared Branch, said in a statement. “The modern customer wants it all — mobile, online and branches.”

According to the survey, 63 percent of respondents indicated they will never make all of their financial transactions digitally; 80 percent prefer working with an actual banker or teller instead of a virtual one. And, 86 percent plan to do business in actual branches during the next five years.

Copyright ©Las Vegas Review-Journal, Inc. 2016. All rights reserved

LAS VEGAS BUSINESS PRESS: Marijuana credit union pushes ahead

The question many medical marijuana business owners find challenging to answer is how are they going to pay their bills, employees, and even taxes without access to a bank or credit union account?

We’ve all read stories of dispensary owners walking into City Hall with $50,000 in cash to pay their business license fees or paying a power bill and rent with money orders purchased at a local convenience store.

But as medical and recreational marijuana business exploded in Colorado, Chris Nevitt and others believed they had an answer with Denver-based Fourth Corner Credit Union. Fourth Corner would have allowed dispensary owners and growers to access basic checking, along with lines of credit and other financial products.

The credit union asked for but never received permission from federal insurers and regulators to open. Fourth Corner is suing the Federal Reserve Bank of Kansas City and the National Credit Union Administration for denying its applications.

Although medical and recreational marijuana is legal in Colorado, it is still illegal on the federal level. That distinction has discouraged most banks and credit unions from working with marijuana businesses.

Fourth Corner’s failure is not deterring the efforts of the so-called gang of seven to get Battle Born Credit Union open in Nevada. Randi Thompson, a lobbyist and owner of Randi Thompson Consulting in Reno, told the Las Vegas Business Press she was disappointed, but Fourth Corner’s failure would not affect Battle Born’s efforts to form a credit union.

“We’ve had a couple of pre-application meetings with the Financial Institutions Division,” Thompson said. “We are still working on our application. Our focus from the ground up has been on creating a rigorous compliance strategy.”

Thompson said work on creating Battle Born Credit Union began two years ago. She said Fourth Corner struggled because Colorado doesn’t allow a private insurer option for financial institutions. Battle Born is preparing to file its applications with the Nevada Financial Institutions Division and American Share Insurance, a private depository insurance company, by early next month.

Thompson is hopeful Battle Born will open by the end of the year.

She said the credit union will “be headquartered in Las Vegas, because that’s where most of the businesses are located.” But, Battle Born will have a branch in Northern Nevada.

In a lengthy email to medical marijuana establishments in Nevada, Steve Trollope, business manager for BBCU LLC, set out the differences between Fourth Corner and Battle Born “primarily to dispel any concerns.”

Trollope said Fourth Corner was always going to have difficulty being approved by the National Credit Union Administration.

“Without depository insurance, the Federal Reserve Bank will not approve any application from a financial institution seeking access to the (Fed) system,” Trollope said.

He said other factors contributed to the demise of Fourth Corner’s application including not fully developing its compliance plans to deal with anti-money laundering laws.

Under Treasury Department guidelines from last year, financial institutions must file suspicious activity reports when a marijuana business opens or closes an account.

That report lists three classifications of concern: “limited,” “priority,” and “termination.” But the Treasury Department’s guidance left unclear whether it was legal to do business with dispensaries or growers.

According to Trollope, Battle Born’s strategy includes finalizing a workable compliance plan and software, and not approaching the Federal Reserve for a master account until the credit union has received both its state charter and private insurance proposals.

A master account gives a credit union or bank access to the Fed’s payment facilities, including its check clearing, wire transfer and Automated Clearing House facilities.

“We believe that our strategy strengthens the application process and increases the probability our applications for our state charter, private insurance and (Federal Reserve) master account will be approved,” Trollope said.

Trollope says there are “no guarantees we’ll get approved by federal regulators.” He believes the business plan “provides a lot more credibility when we approach the Fed.”

Battle Born’s business plan also includes Trollope, Thompson and others walking away once the credit union is established.

“We will have nothing to do with the operation,” Thompson said. “We’ll set up the compliance and stand up the credit union and then walk away.”

Thompson said the board of the nonprofit credit union will be made up of people who make their living from marijuana businesses statewide.

She also expressed her confidence that a Nevada-based credit union would be the first financial institution to gain federal approval to open for business.

“Where else but Nevada?” Thompson said. “We made gambling and prostitution legal. We are good at making the illegal legal.”

Meanwhile, Fourth Corner is hoping a federal judge will intervene, forcing regulators to approve the credit union. A pair of lawsuits filed this month in federal court in Denver challenge recent decisions by the National Credit Union Administration and Federal Reserve to deny their applications.

The credit union, which has the backing of Colorado’s governor, was set up to serve the state’s marijuana business but needed permission from federal insurers and regulators before opening its doors. The Federal Reserve rejected Fourth Corner’s application last month.

“We filed our suits as a regrettable last resort,” Nevitt, chairman of Fourth Corner, said in a statement. “Our mission … is to set a new bar for transparency with every regulator and regulatory process.”

Nevitt said Colorado’s Financial Services Division approved their charter, so “we are just looking for a similarly fair hearing” from the National Credit Union Administration and the Federal Reserve.

For now, Fourth Corner’s future is tangled up in lawsuits in federal court, while Battle Born completes its state and private depository insurance applications.

Neither Thompson or Trollope would discuss what comes next should Battle Born’s application for a master account be denied by the Federal Reserve

Maybe reflecting growing public support for medical marijuana, the Senate Appropriations Committee narrowly approved opening up banking services to state legal marijuana businesses. Senate Bill 1726 would prohibit the federal government from penalizing banks that work with marijuana businesses and protect them from prosecution.

“It’s encouraging to see members of the Senate stepping up and joining the House to address the banking crisis facing our industry,” said Aaron Smith, executive director of the National Cannabis Industry Association.

Smith said access to basic banking services is one of the most crucial challenges facing legal marijuana businesses. The bill is being supported by a bipartisan group of senators from Oregon, Washington and Colorado, all states with legalized medical and recreational marijuana industries.

Those senators that signed on to the bill are Jeff Merkley, D-Ore.; Ron Wyden, D-Ore.; Cory Gardner, R-Colo.; Michael Bennet, D-Colo., and Patty Murphy, D-Wash.

A similar amendment was passed by the House last year, but was stripped out during the final Senate budget negotiations. The House has not yet debated the Marijuana Businesses Access to Banking Act of 2015.

Las Vegas Business Press – Small loans led to growing business

LAS VEGAS BUISNESS PRESS: Overdraft fees ‘inhumane,’ Green Dot founder says

Steve Streit, founder and chief executive of Green Dot Corp., is viewed by some in the financial services industry as a pioneer, building one of the nation’s largest bank holding and reloadable debit card companies.

Others view Streit, who drew up the business plan in his bedroom office in San Marino, Calif., as a passionate advocate for the unbanked and underserved communities nationwide, including Las Vegas.

“We are designed to serve the masses, many who may not make enough money to use traditional banks or credit unions,” Streit said during an interview with Oliver Wyman, a partner and co-head of the retail and banking practice at Oliver Wyman at PayThink 2015.

PayThink 2015 was held Sept. 28-Sept. 30 at The Cosmopolitan of Las Vegas. The convention included a number of panel discussions and interviews with financial services executives about the future of consumer payments, including mobile payments and prepaid.

Streit said many in the financial services industry may not realize that Green Dot is a publically traded company with five million active customers, who reload their cards 30 to 40 million times annually. He said Green Dot handles about $20 billion in deposits annually nationwide.

He said Green Dot is not alone in the prepaid card space, noting that NetSpend and American Express compete with his company.

“American Express is our largest competitor,” Streit said. “They’ve been a vicious competitor, but we have survived. We do have a niche and a brand name that means something to consumers.”

He added that American Express is not available in a lot of places, especially in low and moderate income areas. But Green Dot has remained in a good position to compete, especially after signing a new five-year agreement with Walmart.

Green Dot has worked with Walmart since 2007 when it launched the MoneyCard program. Last year, Green Dot and Walmart announced Go Bank, a mobile-first checking account that aims to serve those who are underbanked.

According to the Federal Deposit Insurance Corp., as of 2013, 9.6 million American households were unbanked. The FDIC reported that another 24.8 million were underbanked, meaning they had a bank account but also used services outside the banking system.

In Nevada, 7.9 percent of the population is unbanked, while 24.7 percent are classified as underbanked. According to the U.S. Census Bureau, Nevada’s population estimate as of Sept. 30 was 2.839 million residents.

Streit said Green Dot doesn’t charge overdraft fees. Green Dot’s fee structure, which includes a $5.95 monthly fee without a waiver and a $4.95 reload fee in stores, among others, has not changed since 2009, he said.

He said leaving fees where they are was simply about “not angering your customers,” many of whom make between $9 and $10 an hour and don’t meet the minimum requirements to open an account at their local bank or credit union.

But as Green Dot and other prepaid companies look to expand their businesses by offering non-traditional products, the Consumer Financial Protection Bureau has proposed changes that will impact how these companies conduct themselves.

The proposed rules would demand greater transparency and tighter regulation of the prepaid card industry. The bureau wants more transparency in the information provided to consumers about how the products work and what fees are involved.

Federal regulators also want to limit how much customers can be charged for various features and transactions. In addition, any prepaid account that allows customers to overdraft or overdraw would be required under the Federal Reserve’s Regulation Z to be treated like a credit product.

The Consumer Financial Protection Bureau’s 900-pages of proposals to regulate the prepaid industry has drawn push back from a trade group that represents the industry.

In a letter submitted to the bureau, the Network Branded Prepaid Card Association urged regulators “to show restraint … and avoid imposing overly broad restrictions on prepaid accounts, which could ultimately have the effect of limiting access to popular features and functionality and potentially eliminate entire categories of prepaid cards from the market.”

When asked about the proposed prepaid rules, Streit said “Green Dot supports the CFPB pre-paid rules.” He added that many users of his company’s products earn just over minimum wage so hitting them with an overdraft fee of $20 is “punitive.”

Streit went so far as describing overdraft fees as “inhumane and cruel.”

“We don’t know when the rules will become law,” Streit told almost 300 attendees at PayThink 2015. “But overdraft fees hurt the product long-term.”

Streit said it’s “pretty hard to argue against these things,” including transparency in the information provided to consumers He then reiterated his company’s support of the bureau.

He said Green Dot was always looking for more business opportunities. Streit said the company is looking at offering credit products “on a nationwide basis.”

“We offer a savings account product,” he said. “But it’s not used for long-term savings. It’s more of an electronic cookie jar … it’s there to use it.’

When it comes to saving money, Streit said his customers “are not lazy, they don’t have the money.” He said the banking system makes money off the haves, but the have-nots are growing.

“We have a mission,” he said. “We are a public company, but it’s a good business. We are not a charity. We do think it’s a great business opportunity to offer products to (customers) that are not particularly well served” by the traditional financial services industry.