GamblingCompliance: Maryland Lawmaker Promises To Reintroduce Problem Gambling Bill

20TH APR 2017 | WRITTEN BY: CHRIS SIEROTY

A bill increasing fees on slots and table games in Maryland to pay for problem gambling programs was approved in the Assembly only to have the Senate pass an amended bill without the increases shortly before the legislature adjourned for the year.

Delegate Nick Mosby said the General Assembly passed his problem gambling bill 138-1, with two members absent, but House Bill 1227 was stripped of the fee increases “within the last couple of hours of the session.”

“I am really disappointed,” Mosby told GamblingCompliance.

“I will bring the bill back in January,” Mosby said. “This time I will work with my Senate colleagues to get it done.”

Maryland’s casino operators already make annual payments to the state’s Problem Gambling Fund based on the number of gaming machines and table games they operate.

HB 1227, also known as the Problem Gambling Funding and Treatment Act of 2017, would have increased the annual fee for each video lottery terminal (VLT) from $425 to $500, while the annual fee for table games would have increased from $500 to $700.

Mosby estimated HB 1227 would have added about $1m annually to the state’s Problem Gambling Fund.

“When it comes to problem gambling there is a huge need in Maryland,” Mosby, a Democrat from Baltimore, said.

Mosby estimated that 150,000 people in Maryland had some form of a gambling problem.

According to the most recent figures published by the University of Maryland’s School of Medicine’s Center of Excellence on Problem Gambling, 67 percent of callers to their helpline were male, while 33 percent were female.

An overwhelming majority — 72 percent — reported casino-based gambling as the primary problem. Of those seeking help, 27 percent cited slot machines and 73 percent reported other casino games as being most problematic.

Other problems included lottery games (8 percent), non casino card games (3 percent) and horseracing (3 percent).

States with legalized casino gaming adopt varying approaches when it comes to allocating moneys to address problem gambling.

Typically, states either allocate a portion of overall tax revenues or casino admission fees to problem gambling, or instead levy fixed amounts on casino operators.

In addition to state statutory requirements, the American Gaming Association (AGA) has issued a Code of Conduct for Responsible Gaming, which deals with employee assistance and training, alcohol service and casino gambling advertising and marketing, among other things.

In the past fiscal year, Maryland dedicated about $4m to problem gambling. That figure will increase next fiscal year with the opening in December of MGM National Harbor.

But the amount is still less than half of 1 percent of the casinos’ annual revenues.

Keith Whyte, executive director of the National Council on Problem Gambling, said funding on a state level should equal 1 percent of total gaming revenue — encompassing lottery, as well as casinos and other forms of gambling.

A comprehensive problem gambling program should provide treatment, prevention, research and education, Whyte said.

The Senate approved an amended version of HB 1227 45-0, with two members absent.

Although the proposed fee increases were removed from the final version, the final bill simply states the intent of lawmakers for the Problem Gambling Fund to primarily provide financial support for treatment and prevention programs, including in- and outpatient treatments and educational services.

Maryland’s 90-day legislative session ended shortly before midnight on April 10.

Mosby said his bill was all about being “proactive and responsible” when it comes to protecting Maryland’s residents.

He said the extra $1m was not enough, given the significant growth of casino gaming industry in the state.

A record revenue month for MGM National Harbor helped post the strongest month yet for all six of Maryland’s casinos, which brought in $141.2m in revenue in March, according to revenue figures released by Maryland Lottery and Gaming.

The new record beats the previous high of $133.5m, set in December when MGM debuted, the agency said.

“It has become a billion dollar industry in Maryland,” Mosby said.

Advertisements

PaymentsCompliance: Nevada Bill Would Block Taxes On Blockchain Transactions

12TH APR 2017 | WRITTEN BY: CHRIS SIEROTY IN WASHINGTON, D.C.

A senator in Nevada has told PaymentsCompliance it is crucial to the state’s economic viability that it positions itself as a “safe space for entrepreneurs” developing companies that utilize blockchain technology.

To begin to create a supportive environment, Republican Senator Ben Kieckhefer filed a bill that would prevent local authorities from imposing fees or taxes on the use of blockchain technology.

Nevada Senate Bill 398 is concerned with creating a legal foundation for blockchain contracts and records.

“As blockchain is growing and evolving … I want companies to know that Nevada has a legal structure that ensures transactions conducted over a blockchain will be recognized by our courts,” Kieckhefer said.

Hopefully, the senator said, it will encourage more companies to do business in Nevada.

Kieckhefer said one of the companies he was working with was Filament, which is a Reno-based blockchain company.

“It isn’t often that a new technology comes along that completely changes the way we interact with each other,” Filament chief executive Allison Clift-Jennings wrote in a letter supporting SB 398 to the Senate Judiciary Committee.

“It happened with the advent of the internet and later with the smartphone revolution,” Clift-Jennings said. “The blockchain is a new technology that’s just as important.”

Clift-Jennings said that blockchain technology has the “ability to reduce fraud and bring new trust to existing interactions.”

Under Kieckhefer’s proposal, the use of blockchain technology or licensure would not be taxed by local government in Nevada.

But nothing in the bill “prohibits a local governmental entity from using a blockchain or smart contract in the performance of its powers or duties.”

A similar bill was signed on March 31 by Republican Arizona Governor Doug Ducey that would enshrine signatures recorded on a blockchain and smart contracts — self-executing pieces of code — under state law.

Specifically, House Bill 2417, aimed to make those types of records “considered to be in an electronic format and to be an electronic record.”

The Arizona law was also similar to a measure passed in Vermont last year that would make blockchain data admissible in court.

The bill also focused on data that would be a “factor or record” tied to a blockchain.

“Blockchain technology has certainly gained transaction among Nevada’s entrepreneurs,” Kieckhefer said.

Kieckhefer’s four-page bill states that a local government is prohibited from “(1) imposing a tax or fee on the use of blockchain; (2) requiring a certificate, license or permit to use a blockchain; and (3) imposing any other requirement relating to the use of a blockchain.”

The bill would also prohibit the exclusion of blockchain records in “proceedings,” noting in Section 11 that “if a law requires a record to be in writing, submission of a blockchain which electronically contains the record satisfies the law.”

“A smart contract, record or signature may not be denied legal effect or enforceability solely because blockchain was used to create, store or verify the smart contract, record or signature,” the bill said.

“In a [legal] proceeding, evidence of a smart contract, record or signature must not be excluded solely because a blockchain was used to create, store, or verify the smart contract, record or signature.”

But with less than half of the 120-day session left in Nevada, lawmakers have limited time to approve what is a wide-ranging piece of legislation that deals with relatively new technology.

If the bill dies in the 2017 Nevada legislature, Kieckhefer would have to wait until February 2019 to file another measure.

“While I’m not sure any specific problems will be created if we don’t pass this legislation, I believe Nevada could miss out on a significant opportunity to become a destination state for entrepreneurs and businesses working in this area,” the senator said.

GamblingCompliance: REITs A Risky Business For Casinos, Analyst Warns

3RD APR 2017 | WRITTEN BY: CHRIS SIEROTY

Although a prominent feature of the casino industry, the days of U.S. gaming companies spinning off their properties into real-estate investment trusts (REITs) may now have passed, according to one leading gaming analyst.

At least one senior analyst with Fitch Ratings Service believes REITs are now looking to be a more risky business structure for the casino industry.

Alex Bumazhny, director of gaming, lodging and leisure research at Fitch Ratings, said a rising interest rate environment is the “principal deterrent to further gaming REIT transactions.”

In a 23-page report, Bumazhny wrote that gaming revenues “are not ideal for supporting the long-term, largely fixed, triple-net leases found in gaming REITs.”

“Additional REIT transactions are less likely due to rising interest rates, high costs, lengthy spinoff process times with uncertain outcomes, cooling activist interest and questionable business rationales,” Bumazhny wrote.

REITs have become a prominent operating structure in the regional gaming industry in recent years.

Since 2013, the assets of 54 regional casinos are now owned by REITs and the trend “likely contributed to higher trading multiples for all regional gaming assets,” Bumazhny said.

The first casino REIT was formed by Penn National Gaming, which spun off 21 of its 29 casinos and racinos and leased them back to the original company through triple-net lease agreements.

Since its creation almost four years ago, Gaming and Leisure Properties (GLPI) — the Penn National REIT spin-off — has since completed more than $5bn in transactions.

The most recent acquisition was announced on March 28, when the company spent $44m to acquire the holding companies for Bally’s Casino Tunica and Resorts Casino Tunica from rival Caesars Entertainment.

When the deal closes by June, Penn National will operate both casinos and lease the underlying property from GLPI for a total annual rent of $9m.

GLPI announced in July 2015 that it had acquired the real estate owned by regional gaming operator Pinnacle Entertainment for $4.75bn in an all-stock deal and would lease the casinos back to Pinnacle.

REITs have existed for more than 50 years in the U.S. after Congress granted legal authority to form the trusts in 1960 as an amendment to the Cigar Excise Tax Extension.

REITs do not pay federal income taxes, but are required to distribute 90 percent of their taxable earnings to shareholders.

In addition to Penn National and Pinnacle, MGM Resorts International announced in October 2015 the creation of REIT to be called MGM Growth Properties in a tax structure that does not include a tax-free spin-off.

Meanwhile, Caesars is asking permission from a federal bankruptcy judge to convert its largest operating division into a REIT as part of a pre-packaged Chapter 11 restructuring.

Boyd Gaming and Las Vegas Sands have also been approached by shareholders about spinning off their properties into a REIT. But both companies have stayed away from changing their corporate structure.

Bumazhny believes it is now unlikely additional gaming REITs will be created or larger gaming companies will sell their assets wholesale to REITs.

“Rising interest rates, which are pressuring triple-net lease REIT valuations, have diluted previously generous multiple arbitrages available to gaming companies looking to spin off their gaming assets to a REIT,” Alex Bumazhny of Fitch Ratings wrote. “Additionally, higher valuations ascribed to gaming assets, possibly in part due to the available option of selling to a REIT, have also diluted the multiple-arbitrage opportunity.”

Other factors that make additional casino REITs less likely include tighter laws governing tax-efficient REIT transactions, and tepid interest from the existing pool of gaming companies in monetizing their assets through a REIT transaction.

Bumazhny also attributed the decline in activity to “waning activist investor interest in realizing value through gaming REIT spins.”

In December 2015, Congress passed tax legislation — the Protecting Americans from Tax Hikes Act (PATH) — to eliminate tax-free structures, such as the Penn National and GLPI deal.

However, Caesars could still create a tax-free REIT because the company submitted a request to the IRS in March 2015, eight months before the deadline.

“We are uncertain whether Boyd Gaming or other larger gaming companies that could be viable REIT candidates have made the deadline,” Bumazhny wrote. “However, we suspect that they have done so in order to preserve optionality.”

The remaining key players in the regional casino sector have been quiet on REITs over the past couple of years.

Instead, Eldorado Resorts recently purchased Isle of Capri, Station Casinos owner Red Rock Resorts has issued an IPO and Boyd has refinanced most of its debt and purchased several assets in Nevada.

“None of these transactions preclude a REIT transaction, but they do show that REITs are not top of mind,” Bumazhny said.