GamblingCompliance: Nevada Considers Lowering Gambling Age to 18


A proposal to lower Nevada’s gambling age is among the 317 early bill draft requests (BDR) submitted so far by lawmakers and agencies for possible consideration by the 2017 Nevada legislature.

The list on the state legislature’s website is updated regularly with new proposals and offers a peek into some of the issues legislators will debate when they convene February 6 in Carson City for a 120-day session held every two years.

The list provides just a small description of what the proposals are all about. Written details are not released until bills are actually introduced in the Assembly or Senate.

For example, Republican Assemblyman Jim Wheeler’s BDR number 37 description reads: “Lowers minimum age to gamble in Nevada.”

Wheeler said his proposal would lower Nevada’s gambling age to 18 from 21.

“The idea of a BDR is to get the conversation going,” Wheeler told GamblingCompliance. “I’m also looking at it as a way to boost gaming revenues. I haven’t heard back yet from the NRA (Nevada Resort Association).”

Wheeler said he has asked the state’s legislative counsel to do a report on what type of revenue this proposal could generate. He added that his proposal could expand Nevada’s tourism to a younger generation.

“Anyone who is old enough to fight for their country is old enough to enjoy themselves,” Wheeler said in a phone interview. “I see a few problems with it, but there are a few benefits to my proposal. Let’s take a look at the idea.


PaymentsCompliance: California’s Digital Currency Bill Shelved Until 2017


California’s legislature has shelved proposals to introduce new regulations for virtual currency businesses, the bill’s author told PaymentsCompliance in a statement. 

Reintroduced earlier this month, Assembly Bill 1326, or the California Bitcoin license bill, has been referred back to the Senate’s Rules Committee and the Assembly’s Committee on Banking and Finance.

“I have decided to remove AB 1326 from consideration for a vote this year,” said Democratic assemblyman Matt Dababneh, who is also the chairman of the Banking and Finance Committee.

“The use of virtual currency and the technology behind it is becoming more mainstream and prevalent as a payment option in communities throughout the state, but like any financial product or service, it comes with potential risks to customers,” Dababneh said.

Since Dababneh introduced AB 1326 in 2015, the bill has been amended five times in both the Assembly and Senate.

It was most recently amended by the Senate on August 8, when it was pulled from the inactive file.

Mark Farouk, chief consultant with the Assembly’s Committee on Banking and Finance, confirmed on Wednesday that at this point, with only about two weeks left in the current session, the bill “will not be brought up for a vote.”

Farouk said the next version of the bill should be introduced in January, and it will not look the same as the version pulled this week, although added he expected there to be “some form of regulation” of digital currency in California eventually.

The bill has been debated by lawmakers, technology advocacy groups, and industry representatives since its introduction last year.

The version of the bill introduced last week drew praise from legal experts for its “lighter touch” approach to the emerging payments technology.

Some virtual currency advocates, however, were concerned it would reduce California’s capability to support virtual currency start-ups.

In a letter to the Senate Banking and Financial Institutions Committee chairman Steven M. Glazer, Jerry Brito, the executive director of Coin Center, described the new bill as a completely re-written piece of legislation.

“The new bill is silent on the question of money transmission licensing — preserving that uncertainty — and instead sets up a new and separate enrollment scheme with which businesses will also have to comply,” Brito wrote.

He added that at the very least, Coin Center and its supporters would expect the creation of a new “enrollment program” would take the place of money transmission licensing, therefore providing clarity.

“If it does not,” Brito said, “then it is difficult to see what is the purpose of this bill.”

The bill no longer proposes to license businesses, but instead would create a new digital currency business enrollment program, lasting five years.

Brito’s seven-page letter took issue with that program, arguing that “enrollment should only be required of entities who present true risks to consumers.”

Dababneh’s statement did not address any of Brito’s concerns with the legislation, instead saying he pulled the bill because its current version does not create a lasting regulatory framework that protects consumers and allows this industry to thrive in California.

“Federal regulators have recently issued guidance for virtual currency businesses, the IRS has regulations addressing its tax status, and the FBI auctioned Bitcoin seized as part of the Silk Road case,” Dababneh said.

“All of these examples further demonstrate that digital currency is growing and here to stay.”

The Democrat from Santa Barbara stressed that a user of virtual currency in California has no protection from loss, and businesses that use, transmit or store virtual currency “live in an ecosystem of regulatory uncertainty.”

“Potential harm to consumers is not some remote possibility, but has already happened,” Dababneh added.

“Just recently a Bitcoin hack led to an estimated loss of $65m.

“Virtual currency businesses have a place at the financial services table, but like other financial services, California needs a set of minimum standards and protections.”

GamblingCompliance:DoJ Official Warns Casinos On AML Compliance


The Gardens Casino and Sparks Nugget combined were recently fined more than $3m for anti-money laundering (AML) violations, mistakes a federal law enforcement official warned other casinos Tuesday to avoid making.

“Despite its importance, compliance often takes a back seat to other financial considerations,” Deborah Conner, deputy chief of the U.S. Department of Justice’s Asset Forfeiture and Money Laundering Section, said in remarks prepared for an AML conference in Las Vegas.

“Compliance is seldom thought of as a money-maker for any business,” Conner said.

“That view can be especially true in the gaming industry where financial services, and their attendant compliance costs, may be considered secondary to the primary mission of … customer entertainment.”

Conner was the keynote speaker Tuesday at the 2016 National Title 31 Suspicious Activity & Risk Assessment Conference & Expo held at the Cosmopolitan of Las Vegas.

Casinos and card clubs have been required to comply with reporting requirements of the Bank Secrecy Act (BSA) for many years, and since 2001 have been obligated to implement formal AML policies.

Recent years have also seen a notable increase in federal enforcement activity for AML lapses, with at least seven actions brought against licensed gaming operators since the beginning of 2015.

According to federal regulations, AML programs must consist of at least four components: internal policies, procedures and control; a designated compliance officer; ongoing AML training; and independent auditing to test the effectiveness of the program.

But Conner reminded gaming executives Tuesday that these “four pillars of a compliance program … are simply the minimum requirements,” and may not be sufficient given the specific risks confronting casinos and card clubs.

“In other words, there is no one-size-fits-all compliance program,” Conner said.

She added that from the Justice Department’s perspective, effective compliance programs should ensure a casino’s senior managers provide strong and visible support for their corporate compliance policies, and compliance staff should have stature within the company.

Compliance policies should also be effectively enforced, with Conner warning that the DoJ “does not look favorably on situations in which low-level employees who may have engaged in misconduct are terminated, but the more senior people who either directed or deliberately turned a blind eye to the conduct suffer no consequences.”

Conner reminded conference attendees that compliance teams need adequate funding and access to the necessary resources to do their jobs.

“While the requirement may seem logical, a gross violation of this requirement occurred just a few months ago in the $1m enforcement action against Sparks Nugget,” she said.

Sparks Nugget, previously known as John Ascuaga’s Nugget, in Sparks, Nevada, was fined for what the Financial Crimes Enforcement Network (FinCEN), a branch of the U.S. Department of Treasury, said were egregious violations of its AML responsibility under the BSA.

FinCEN found the northern Nevada casino had disregarded the recommendations of its own compliance manager, choosing not to file suspicious activity reports (SARs) the manager had prepared and ordered her not to interact with Internal Revenue Service auditors.

Sparks Nugget also failed to report several currency transaction reports (CTRs) and committed hundreds of recordkeeping violations, according to FinCEN.

“This is the type of behavior that is unacceptable under the BSA and this enforcement action should serve as a warning for other institutions,” Conner said.

Conner said effective detection of illicit money laundering activity in the gaming industry goes beyond AML and BSA compliance, and includes “know your customer” requirements, sharing customer money transfer information and cooperating with law enforcement.

Conner advised casinos and card clubs to make a particular effort to identify the beneficial owners of funds when it is apparent that transactions are being conducted by or through a third party, such as a junket operator.

Conner admitted that it may be difficult for a casino or card club to know every customer that passes through its casino. However, she cautioned, the industry would be wise to “identify those customers … who pose the greatest risk to your business.”

Conner also repeated that federal law enforcement agencies expect any customer information gathered by casinos’ marketing officials — “the business side” — should be shared with “the compliance side of the house.”

A recent example of “know your customer” deficiencies was California’s Hawaiian Gardens Casino, which agreed to a $2.8m settlement with FinCEN in July.

Among other things, FinCEN said the Los Angeles-area card club allowed patrons to gamble anonymously and failed to use customer databases to complete information in its AML filings.

“I cannot emphasize this point enough — sharing customer information with your AML compliance components is not only critical to being able to identify high-risk customers, it’s also required under the BSA,” Conner said.

Hawaiian Gardens Casino was just one of several card rooms that were recently fined by federal authorities for lapses in AML compliance.

In December, the Oaks Club near San Francisco was fined $650,000 by FinCEN, and in January theNormandie Casino agreed to pay $2.4m to settle a criminal complaint brought by the U.S. Attorney’s office in Los Angeles.

In her speech, Conner also highlighted another action brought by FinCEN that resulted in an $8m fine being brought last August against the Caesars Palace casino in Las Vegas.

According to FinCEN, Caesars Palace turned a blind eye to its “private gaming salons” where its wealthiest clientele could anonymously gamble millions of dollars in a single visit.

Despite the elevated risk present in these salons, Caesars allowed some of the riskiest financial transactions to go unreported, Conner said.

Furthermore, Caesars marketed the salons through branch offices in the U.S. and abroad, but failed to adequately monitor transactions, such as large wire transfers, conducted through these offices for suspicious activity, she said.

Conner said the DoJ was “keenly aware of the unique compliance challenges” faced by the gaming industry, but nevertheless operators have a “responsibility in the fight against illicit finance.”

“You may have noticed that, in explaining casinos’ AML expectations, I cited a number of recent enforcement actions FinCEN had brought against casinos,” Conner said.

“While FinCEN has been very active on this front in the last two years, make no mistake, the DoJ will pursue criminal charges and penalties against any financial institution — including casinos and card clubs — that willfully violates BSA.”

GAMBLINGCOMPLIANCE: Nevada’s USFantasy Could Become A DFS Model


USFantasy Sports will begin providing daily fantasy sports (DFS) contests to approximately 60 locations throughout Nevada later this month, but the company’s founder expects his business to quickly expand beyond the state’s borders.

The launch of the Las Vegas-based DFS company, whose games are based on a pari-mutuel wagering system, comes as the fantasy sports industry in the U.S. is rapidly shifting from unregulated to regulated.

For perspective, 28 states have this year considered legislation to regulate fantasy sports.

Of those, eight, with New York being the latest, have passed or enacted new regulations, according to a GamblingCompliance Research Services report.

Nevada is unique in that it has regulated fantasy sports without passing new legislation, instead requiring fantasy sports firms to receive a full gaming license before they are allowed to do business in the state.

“We will be in the race and sports books [in Nevada] as another product on their existing systems,” Vic Salerno, founder of USFantasy, told GamblingCompliance.

Salerno said he has had contact with gaming regulators and lawmakers in Pennsylvania, Virginia, Mississippi, Indiana, Iowa, Massachusetts and New Jersey, among about a half dozen other states.

The company has also talked with California racetracks about adding the betting menu to their regular list of pari-mutuel options. USFantasy is waiting for California Attorney General Kamala Harris to decide whether DFS is gambling or a game of skill.

“The states have different laws or are drafting them now,” Salerno said.

USFantasy was the first and only fantasy sports company to be licensed in Nevada after the Nevada Gaming Control Board (NGCB) in October banned unlicensed DFS operators.

The control board released a formal memo stating that DFS constituted gambling under state law and banning companies, such as DraftKings and FanDuel, from doing business in Nevada unless they were licensed.

But will USFantasy’s launch on a wide scale in Nevada change the minds of the two largest DFS companies when it comes to licensing?

Analysts have said they do not expect DraftKings, FanDuel or any other fantasy sports companies to apply for a gaming license in Nevada anytime soon.

“I don’t believe that USFantasy’s success will have a material effect on how DraftKings or FanDuel approach Nevada,” said Chris Grove, a partner with Narus Advisors.

Grove said that DraftKings and FanDuel objections revolved around the “licensing process and the classification of DFS as gambling, and USFantasy — regardless of how big of a success it is — won’t speak to either of those concerns.”

Peter Schoenke, president of and chairman of the Fantasy Sports Trade Association, agreed, adding that the high costs and long wait times for licensing in Nevada will keep companies away.

“It’s a different animal in Nevada,” Schoenke said.

The doors to opportunity for USFantasy are expected to open quickly in other states such as Indiana, Minnesota and Pennsylvania where legislation and rulemaking to allow fantasy action are being put in place.

DFS companies are also now preparing to do business once again in New York.

New York Democrat Governor Andrew Cuomo on Wednesday signed a bill passed back in June that legalizes and regulates paid fantasy sports.

Cuomo explained his decision to sign the bill, saying: “Daily fantasy sports has proven to be popular in New York, but until now have operated with no supervision and no protections for players.”

The governor added that companies will be regulated by the state’s gaming commission. Cuomo also expected DFS to generate $4m in revenue to fund state education.

As New York legalizes DFS and football season approaches, Salerno believes Nevada will keep him busy enough for the time being.

USFantasy is offering its product to casino members of the Nevada Pari-Mutuel Association.

“The casinos will subscribe to the USFantasy platform through a licensed disseminator, which will distribute the contests to area and sportsbooks within Nevada casinos,” a company statement said.

USFantasy is different from DraftKings or FanDuel, where a player pays an entry fee and picks a roster of players usually under a salary cap format.

Salerno’s USFantasy offers pari-mutuel-style fantasy games, where contests are based on a single position. Players can choose from a pool of players, betting on them to “win,” “place,” or “show.”

For fantasy football, a $1m progressive jackpot Pick 7 contest is planned for correctly selecting the winners of seven different categories.

All wagers are placed in a pari-mutuel pool and distributed after all player performances are completed and tabulated. USFantasy will open for business with DFS baseball, followed by football.

Wagering is also done on a pari-mutuel basis, so wagers that are bet heavily on one player, say Ben Roethlisberger of the Pittsburgh Steelers, will not pay as well as bets placed on less popular players with higher odds.

Salerno said he will consider USFantasy a success if “a Nevada pool expands to most … states to rival lotteries.”

According to USFantasy, regulated pari-mutuel systems currently operate in 43 states.

Schoenke said there was a lot of curiously within the industry about USFantasy.

“We want to see if it looks and feels like a fantasy product,” Schoenke said, adding that it is hard to speculate about whether USFantasy will be successful.

Just the pool of potential American fantasy sports customers has grown since 2009 as participation in season-long leagues or DFS has doubled from 27m to an estimated 57.4m this year.

Compared with the overall number of fantasy sports players, DFS is still a relatively small industry with about 4.5m players last year. The Fantasy Sports Trade Association reports overall the average annual spend is $556 per fantasy sports player.

“I think the primary impact of USFantasy in Nevada will be to increase the presence of fantasy sports-style wagers in the sportsbook environment,” Grove said.

Grove cautioned that he was not sure that pari-mutuel style fantasy would ever rise to the level of accounting for a significant part of sportsbook activity in Nevada.

“But, it’s worth noting that proposition bets, which are quite similar in nature to the fantasy-style wager, have been cited as one of the drivers of growth for sports betting in Nevada,” Grove said.

The state receives a percentage of the handle, but with USFantasy currently licensed only in Nevada, the wagering pools are limited. Handle and win figures will be included in the control board’s monthly revenue report under the category of “sports pari-mutuel.”

“It is its own category,” said Michael Lawton, senior research analyst with the control board. “Currently, no one reports anything, so as a result it falls off the report.”

If USFantasy launches as scheduled later this month, the first week or so of revenues would be released in late September.

As Salerno puts the finishing touches on USFantasy, analysts believe the next few months are crucial for DFS.

“Uncertainty is the watchword,” Grove said.

Schoenke did not deny that issues remain, but said the fantasy sports industry had turned the momentum around from last fall “when our industry was under attack from all sides.”

He cited being able to pass new laws in eight states as an achievement; however, legislative battles are expected as legislators gather in Texas and Nevada next year.

Grove said the issues facing the industry range from how does it perform in new regulated markets like Missouri and Indiana, and what do player volumes look like in the absence of the massive market blitz on television last year?

In addition, will the cultural pushback against DFS have a material impact on consumer demand? Has the industry seen the last of forced exits from key states? Are the reported federal investigations, led by prosecutors in Florida and Manhattan, winding down or ramping up?

Grove said those are just a few of the critical questions that remain open “as we move into what has traditionally been far and away the most active quarter for the year for daily fantasy sports.”