Posts by sierotyfeatures

My name is Chris Sieroty, and I’m U.S. Editor with GamblingCompliance in Washington, D.C. We are a trade publication covering the gambling industry. Previously, I was a producer with KNPR’s State of Nevada news program, as well as a contributing writer with Nevada Business magazine, and the banking and finance columnist with the Las Vegas Business Press. Prior to joining KNPR, I was a gaming and banking reporter with the Las Vegas Review-Journal and Las Vegas Business Press. I also was the Banking Insider columnist for the Las Vegas Business Press. This blog allows me to post stories that have been previously published in various newspapers and magazines, while also allowing me to publish original content on subjects that interest me from sports to politics and whatever else amuses me. You can contact me at chrissierroty@gmail.com

GamblingCompliance: Massachusetts Preparing For Supreme Court Ruling On Sports Betting

8TH DEC 2017 | WRITTEN BY: CHRIS SIEROTY

The U.S. Supreme Court next year is expected to overturn a federal ban on sports betting and gaming regulators in Massachusetts agreed on Thursday to research how a possible state-wide sports betting industry would work.

Ed Bedrosian, executive director of the Massachusetts Gaming Commission (MGC), said that although there is a lot of interest in this case, he would take a cautious approach to educating the commission, the legislature and the governor.

“The outcome of this case could have implications for sports betting in Massachusetts,” Bedrosian told the MGC on Thursday. “There are many issues to be decided … should we legalize sports betting.”

Bedrosian told commissioners those issues include tax rates, regulatory restrictions, number of licenses, who gets the licenses, and whether to allow online sports betting or restrict it to in-person wagering at brick-and-mortar casinos.

On Monday, the Supreme Court heard oral arguments in the case of Christie v NCAA, where outgoing New Jersey Republican Governor Chris Christie is challenging the Professional and Amateur Sports Protection Act (PASPA).

PASPA restricts sports wagering to Nevada and allows partial exemptions for Delaware, Montana and Oregon. Attorneys for New Jersey claimed PASPA was unconstitutional because it violates states’ rights.

“If the Supreme Court strikes down PASPA, I would not expect Congress to act to ban sports betting altogether, given the change in attitudes since 1992, when PASPA was enacted,” said Mark Hichar, a partner with Hinckley Allen law firm based in Boston and Providence, Rhode Island.

Another issue to be considered, according to Hichar, is the federal Wire Act and its impact on online betting.

“If PASPA is struck down, the Wire Act would still function to prohibit communication of sports betting by phone or internet across state lines,” Hichar told GamblingCompliance.

The Supreme Court is expected to rule by the end of June, granting states such as Massachusetts a narrow window of time to assess their options.

Bedrosian told commissioners that MGC staff would draft a white paper on sports betting and provide the legislature with a comprehensive overview of this emerging topic.

That idea was supported by MGC chairman Stephen Crosby, who said he spoke recently with legislative staff on Beacon Hill who did not know what the case means for the state.

Crosby requested that Bedrosian’s report give commissioners “the lay of the land for each possible outcome.”

“It appears New Jersey may win, but it is very hard to tell what the Supreme Court will do,” said commissioner Lloyd Macdonald.

Macdonald suggested the high court justices could side with the NCAA or narrowly tailor their decisionto allow sports betting in New Jersey and not nationwide.

“I would underscore the word cautious as being the characterization of our approach here,” Macdonald said. “Before we spend significant resources on this I think we should wait and see what happens with the case before the court.”

Commissioner Enrique Zuniga suggested Bedrosian take a look at what other states have been doing to prepare for the possibility of legal sports betting.

“There has been a lot of activity with states passing laws to [allow for] sports betting should PASPA fall,” Zuniga said.

Crosby added that if there was a “competitive consideration we ought to get the legislature enough of a heads up that if they wanted to prepare … they’d have enough time.”

Neighboring Connecticut passed a law earlier this year mandating state officials to prepare regulations for sports betting, even though further legislation would be required to implement the regime.

Pennsylvania and Mississippi also passed legislation this year to prepare themselves for the outcome of the Supreme Court case.

Meanwhile, a 2013 casino law already allows New York’s four casino-resorts to set up sports wagering lounges as soon as the federal ban is overturned.

Consideration of the impact of the case comes as major casino-resorts are being developed by Wynn Resorts near Boston and MGM in Springfield. Penn National’s Plainridge Park Casino opened for business two years ago.

“This is important to Massachusetts casinos,” Hichar said of sports betting. “Although sportsbooks are not as profitable to casinos as slot machines, casino sportsbooks provide considerable indirect benefit.”

For example, Hichar said, “they increase casino traffic, since those visiting casino sports books are likely to attend with friends and relatives – all of whom may visit other casino gaming and non-gaming offerings.”

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GamblingCompliance: U.S. Casinos At Risk Of RICO Lawsuits From Marijuana

30TH NOV 2017 | WRITTEN BY: CHRIS SIEROTY

A federal law designed to prosecute organized crime has given opponents of states that have legalized marijuana a tool in their efforts to slow down the expansion of the industry, putting casinos at risk if they do business with marijuana companies, according to one top lawyer.

Brian Barnes, an attorney with Cooper & Kirk in Washington, D.C., told the Nevada Gaming Policy Committee on Wednesday that his firm has brought two lawsuits in Colorado arguing marijuana businesses violate civil racketeering laws.

He admitted that racketeering was a novel approach, but Barnes said the legal theory is that any business participating in the marijuana industry in any capacity is exposing itself to significant liability.

“Federal law prohibits virtually every aspect of the marijuana business,” Barnes told the 12-member committee. “The potential of civil liability under the federal racketeering statute would be a threat to casinos.”

The Racketeer Influenced and Corrupt Organizations (RICO) Act of 1970 established federal criminal penalties for activity that benefits a criminal enterprise. The RICO Act also provides for civil lawsuits by people who claim to be hurt by the racketeering.

“RICO is almost tailor-made to bring suits against marijuana businesses,” Barnes said.

Barnes said one of the cases he has filed — Safe Streets Alliance v Alternative Holistic Healing — claims a marijuana growing facility in Colorado is interfering with its neighbors’ use and value of their land.

The case is still pending before the U.S. 10th Circuit Court of Appeals, he said.

Another case Barnes cited Wednesday was New Vision Hotels v Medical Marijuana of the Rockies. The marijuana dispensary closed in April 2015 three months after Barnes sued not only the shop but companies doing business with it, citing RICO violations.

“Operating a marijuana business is federal racketeering,” Barnes said. “Investors and those who that facilitate that business are at risk of civil liability under RICO.”

Barnes added that there is a “real risk” the gaming industry faces from any “co-mingling with marijuana businesses.” He even suggested that casinos “might be” at risk of civil RICO lawsuits from hosting business-to-business marijuana industry conventions.

At the end of the five-hour meeting on Wednesday, several policy committee members disagreed with Barnes and suggested there was a potential business opportunity for casinos in Nevada to host business-to-business conventions.

Paul Camacho, vice president of anti-money laundering compliance at Station Casinos in Las Vegas, reminded the committee that doing business with customers who earn their money through marijuana “means a casino is committing money laundering.”

“We are federally regulated financial institutions,” Camacho said. “Simply put, we can’t violate federal law. State law doesn’t change the fact that it is still money laundering.”

Currently, 29 states and the District of Columbia have legalized medical marijuana, while eight states and D.C. have legalized recreational marijuana. In November 2016, voters approved Question 2, which legalized recreational marijuana in Nevada.

“Since passage of Question 2, I have called for Nevada’s marijuana industry to be well regulated, restricted and respected,” said Republican Governor Brian Sandoval, who chairs the committee.

Sandoval reminded attendees and participants at Wednesday’s hearing that regulators have been clear on banning the consumption of marijuana on licensed gaming properties, but there are additional policy considerations.

The Nevada Gaming Commission also will not license individuals who run medical or recreational dispensaries, because even though marijuana is now legal in Nevada, it is still considered to be illegal under federal law.

“We should continue to foster the growth of the gaming industry. We should continue to foster marijuana businesses. But they cannot meet,” said Tony Alamo, chairman of the Nevada Gaming Commission and a member of the policy committee.

Alamo, who is a medical doctor, admitted there was a need for medical marijuana.

“The need is small … the want is big,” Alamo said.

Alamo described gaming as the “lifeblood of the state,” but he said it is not the job of regulators to micro-manage operators who know what they are doing.

Sandoval expected the state Gaming Policy Committee to meet again in February to discuss policy recommendations before a final report is sent to the governor’s office and gaming regulators.

The committee expects to propose legislation when the Nevada legislature meets in 2019.

GamblingCompliance: New Jersey Congressman Expects PASPA To Be Overturned

17TH NOV 2017 | WRITTEN BY: CHRIS SIEROTY

As one of New Jersey’s leading supporters of legalizing sports betting, Congressman Frank Pallone expects the U.S. Supreme Court to issue a favorable ruling in the state’s case, but he believes there is enough political support to overturn the ban even if the federal law is upheld.

“The process, obviously, would take longer, but I do think there is favorable movement in Congress for some sort of federal legislation” Pallone said on Thursday during a day-long conference on the future of sports betting held in the U.S. Senate’s Russell office building.

The Professional and Amateur Sports Protection Act (PASPA) of 1992 effectively created a federal ban on sports betting everywhere expect for Nevada and three other states.

The Supreme Court decided on June 27 to hear New Jersey’s appeal to permit sports betting in spite of the ban.

“It’s clear to me that when the [Supreme Court] takes a case like this … they are concerned about it and want to make some sort of ruling,” Pallone said.

Oral arguments in New Jersey’s appeal before the Supreme Court are scheduled for December 4, with a ruling expected by June.

If you look at it on its face, Pallone said, PASPA makes no sense.

“It has been 25 years since PASPA has been enacted and it is doing nothing to stop the spread of illegal sports betting,” he said.

Pallone, the ranking member of the House Committee on Energy and Commerce, said the committee recently spent six months reviewing federal gaming laws and developing a legislative proposal that would include a repeal of PASPA.

The result of the committee’s work is the Gaming Accountability and Modernization Enhancement Act, or GAME Act.

The GAME Act would repeal PASPA, allowing states to decide if they want to legalize sports betting, along with online gaming, while ensuring there are consumer protections and stringent controls built into states’ regulatory regimes.

“Overall, it is a question of fairness,” said Representative Frank Pallone, a New Jersey Democrat. “Why should one state be allowed to have [sports] gaming and the other doesn’t. Why should the federal government tell the states what to do?”

Since 2012, New Jersey has been trying to add sports betting in the hopes that the new option would boost business at Atlantic City casinos and the state’s racetracks.

Pallone said there is a difference between 25 years ago, when PASPA was adopted, and today.

“States are broke, New Jersey is broke, essentially … they want to be able to make money to deal with their budget problems from gaming, whether it is through sports betting or internet gaming,” the congressman said.

The GAME Act remains in draft form, meaning it has yet to be introduced in Congress and Pallone said the committee’s staff continues to welcome feedback from the gaming industry, sports leagues and other stakeholders.

Even if PASPA were to be overturned by the Supreme Court there is still the issue of the Wire Act, the 1961 law that complements other federal gambling statutes and forbids the transmission of sports bets across state lines.

Jeffrey Carroll, Democratic staff director with the Energy and Commerce Committee, told GamblingCompliance on Thursday that the GAME Act legislation gets around the Wire Act by allowing intrastate wagering, or bets made within a state’s borders.

When asked about liquidity sharing agreements, similar to those formed by Nevada, Delaware and New Jersey with online poker, Carroll said those were part of the legislation as well.

Pallone on Thursday declined to give his prediction on when New Jersey and other states beyond Nevada would have legal sports betting, but he did remind around 100 attendees that “as you well know … sports betting is happening in every state; just that it’s illegal.”

GamblingCompliance: PokerStars Mulling Pennsylvania Partnership Options

10TH NOV 2017 | WRITTEN BY: CHRIS SIEROTY

The Stars Group expects to be ready to launch in Pennsylvania as soon as next year, according to comments made by executives on Thursday following publication of its third-quarter earnings.

“We are poised to take advantage of the positive momentum in the growth of online gaming globally and the continued march towards regulation, including in the United States where we aim to be among the first operators to launch in Pennsylvania when that state opens its door to online poker and casino,” Rafi Ashkenazi, CEO of PokerStars parent company The Stars Group, told analysts on Thursday during an earnings conference call.

Pennsylvania Governor Tom Wolf on October 30 signed a bill that will make the Keystone State the fourth in the U.S. to legalize online gaming or poker.

The bill limits licenses to land-based casinos for an initial period of 120 days, before any remaining licenses for online slots, table games and poker are then made available to other companies.

Marlon Goldstein, The Stars’ executive vice president and chief legal officer, said the company is “still evaluating our options” in terms of a partnership with a local casino operator or possibly acquiring an operator license of its own.

“We are really excited to be competing in that market sequentially as soon as next year,” Goldstein said.

The comments came after the parent company of PokerStars posted third-quarter revenue of $329.4m, a 21.7 percent increase from the $270.6m in the third quarter last year.

Broken down by geography, 64 percent of The Stars revenue came from the European Union, 18 percent from other parts of Europe, 13 percent from the Americas and 5 percent from the rest of the world.

Poker revenue was up 13 percent on the prior year to $221.4m, while casino and sportsbook revenues were up 48 percent to $95.2m during the quarter. Poker accounted for 67 percent of total revenue, while the other two verticals accounted for 29 percent.

Casino quarterly active users (QAU) improved to 553,000, while sports QAUs were up 14.8 percent to 273,000.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) also climbed 26.5 percent year-on-year to $155.7m.

The Stars saw improved player net yield of $150, up from $127 in the third quarter of 2016.

The company also reported real-money online poker revenue increasing 12.5 percent to $221.4m, despite QAUs remaining flat from the same period last year at around 2.1m.

The increase in poker revenue came despite the number of active poker players remaining flat when compared with the prior year.

Those numbers may have been affected by The Stars’ withdrawal from both Australia and Colombia during the quarter, although the company’s poker vertical did benefit from its relaunch late last year in Portugal.

“We continue to have dialogue with regulators and are hopeful we will be able to re-enter these markets in the future,” Brian Kyle, CFO of The Stars, told analysts.

As for Pennsylvania, Kyle expected The Stars and its brands to be a significant player in a market that is expected to be larger than that of New Jersey, where PokerStars operates a website through a partnership with Atlantic City’s Resorts casino.

“We received some promising news from the U.S two weeks ago, as Pennsylvania became the fourth U.S state to authorize iGaming within its borders, including poker casino, and if the U.S. federal law changes, sports,” Kyle said.

“Pennsylvania is poised to become a significant marketplace for iGaming and a potential boost to our U.S poker business as Pennsylvania is expected to share liquidity with New Jersey and other U.S state as they regulate.”

Kyle said The Stars was optimistic that Pennsylvania will be a “catalyst for other U.S states to continue the momentum of iGaming regulation in the U.S.”

Elsewhere, The Stars credited its quarterly poker revenue gains to the rollout of the company’s Stars Rewards loyalty program. Ashkenazi said the program has led to increased engagement and cross-sell from poker to casino and sportsbook.

“When we look at GGR, it has had a positive impact both overall and with poker,” Ashkenazi said. “Star Rewards was designed to increase engagement.”

He said that 85 percent of its players have joined the loyalty program.

Ashkenazi also attributed the casino gains to expansion and higher yield per customer. He said The Stars had still not increased its direct marketing of its casino site, and probably would not until the third quarter of 2018.

Despite pulling out of Australia in September, Kyle on Thursday reaffirmed the company’s full-year guidance for revenues of between $1.28bn and $1.31bn and adjusted earnings of between $445m and $469m.

Now based in Toronto, The Stars has long-term debt of $2.45bn. During the third quarter, the company secured an additional $75m under its second lien term loan agreement.

GamblingCompliance: MGM Buys WNBA Team As Sports Settle In Las Vegas

20TH OCT 2017 | WRITTEN BY: CHRIS SIEROTY

MGM’s purchase of a Women’s National Basketball Association (WNBA) franchise underlines the rapprochement between professional sports and the casino industry even if it is unlikely to lead to other franchises being acquired by gaming companies, according to a leading sports analyst.

Michael Colangelo, a sports consultant in Los Angeles, called MGM Resorts International’s purchase of WNBA’s San Antonio Stars an “interesting investment,” but he does not expect the casino company to look to acquire another professional franchise.

“Another professional team may be difficult,” Colangelo told GamblingCompliance on Thursday. “This could theoretically be to test to see how it works out. The billion-dollar investment would be difficult with their current debt structure.”

As of June 30, MGM’s outstanding debt stood at $13.3bn.

“MGM would most likely want to own a team in Las Vegas. The National Football League (NFL) is already moving there. The National Hockey League (NHL) is already there. There aren’t many options,” said Colangelo, assistant director of the Sports Business Institute with the University of Southern California’s Marshall School of Business.

MGM on Wednesday acquired the San Antonio Stars and will relocate the team to Las Vegas, another move by a professional sports franchise to the nation’s gambling capital.

Terms of the deal were not disclosed.

Colangelo said professional sports leagues will be careful moving into Las Vegas and will continue to monitor and learn from the NHL’s Vegas Golden Knights.

The Golden Knights began their inaugural season this month playing their games at the T-Mobile Arena on the Strip, which is owned and operated by MGM.

“In terms of MGM, we’ve reviewed the problem with raising capital to purchase a team,” Colangelo said. “They would really have to show shareholders true value since National Basketball Association (NBA), NFL and Major League Baseball (MLB) teams are so expensive.”

He added that “any expansion fee would be prohibitive to a publicly traded company.”

Bill Foley, owner of the Golden Knights, paid $500m to the other NHL owners as an expansion fee. When the NHL expanded in 2000 to Minnesota and Columbus each paid just $80m to join the league.

Maybe Major League Soccer (MLS) would work, “if they think that Vegas is America’s next great sport city, but their expansion fee is pretty high,” Colangelo said.

“The NBA could be an option, but that’s a longshot due to the costs associated with an NBA team and the fact that teams aren’t moving. The NFL is not an option since teams must be privately owned by majority ownership.”

NFL owners voted 31-1 in March to allow the Oakland Raiders to move their franchise to Las Vegas by 2020.

“Publicly-traded companies have owned — and do own — professional sports teams, but this is a bit different where a publicly-traded casino company owns a team,” Colangelo said. “The truth is views are starting to shift in regards to gambling.”

The WNBA welcomed MGM’s acquisition of one of its struggling franchises.

“We are thrilled to bring the first major professional basketball team to Las Vegas,” said WNBA president Lisa Borders. “With its culture of diversity and inclusion, MGM is an ideal fit for the WNBA.”

Borders said the move has already been approved by the WNBA and NBA Board of Governors. The Stars franchise was originally established for the WNBA’s inaugural season in 1997 in Salt Lake City before moving to San Antonio prior to the 2003 season.

“We appreciate, now more than ever, the league’s confidence in Las Vegas and believe the team will be a tremendous addition to the city,” said Lilian Tomovich, MGM’s chief experience and marketing officer.

Colangelo believes gaming companies will continue to seek out opportunities to add new entertainment offerings.

“It not only helps them diversify their portfolio, but it also helps them put an event in a building 17 nights a year,” Colangelo said. “There are new venues popping up in Las Vegas at an amazing rate. There is a lot of competition to bring in actual events so these venues aren’t dormant.”

The move is not the WNBA’s first relocation of a team into a casino.

The Connecticut Sun are owned by the Mohegan tribe and play their games at the Mohegan Sun casino-resort.

The Sun used to be located in Orlando, Florida, but financial problems in 2002 left the franchise close to disbanding before the Mohegan Tribe bought the team and relocated them to Connecticut.

PaymentsCompliance: Personal Liability Regime Threatens U.S. Gambling Sector

6TH OCT 2017 | WRITTEN BY: CHRIS SIEROTY IN LAS VEGAS

U.S. enforcement authorities have warned businesses linked to the country’s gambling sector that their appetite for taking action against individuals is growing larger.

“We have been focused on individual liability,” Veronica Agpaoa, an enforcement officer with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), told delegates at this week’s Global Gaming Expo (G2E) in Las Vegas.

Agpaoa also cited FinCEN’s $1m fine against Sparks Nugget Casino in northern Nevada, reported by sister publication GamblingCompliance, as a “good example of how a culture of non-compliance can impact the company.”

Last year, FinCEN accused Sparks Nugget of “egregiously” violating its anti-money laundering (AML) responsibilities under the Bank Secrecy Act (BSA), including disregarding the recommendations of the casino’s own compliance manager.

The agency also said the casino chose not to file suspicious activity reports (SARs) the manager had prepared and ordered her not to interact with Internal Revenue Service auditors.

Agpaoa described the Thomas Haider case as a wake-up call for the casino industry that made them “think about individual liability” when it came to AML violations.

Haider, the former chief compliance officer of money transmitter MoneyGram, agreed in May to pay a $250,000 civil penalty and be barred from employment in a similar role at any financial institution for three years.

The case had been closely watched by the payments and gambling industries as a test of the federal government’s willingness to punish executives for institutional failures.

Haider was sued by the U.S. government in 2014 for allegedly failing to stop fraudulent transfers and structuring an ineffective AML program.

Vasilios Chirsos, a principal in PwC’s financial crimes unit, credited the gaming industry for taking up the challenge of dealing with AML compliance issues, especially when it comes to increasing corporate spending.

He said gaming companies surveyed by PwC had increased spending on compliance by 74 percent, which “is a remarkable figure.”

Chirsos and Agpaoa participated in an hour-long G2E panel discussion on AML and financial crime compliance on Tuesday.

Chirsos urged compliance officers attending the session to take a risk-based approach to checking their AML programs.

“If I was sitting in your shoes, I would want to get an outside test of your AML program,” Chirsos said. “It needs to be done on a regular basis. You don’t want an independent test that is insufficient and won’t prepare you for an audit.”

John Byrne, an attorney with the Association of Certified Anti-Money Laundering Specialists (ACAMS), said that companies need to invest in employee training and monitoring high-risk gamblers to avoid FinCEN or Internal Revenue Service audits, fines and potential criminal liability.

“We still have room for improvement,” said Byrne, who moderated the panel discussion.

“It starts at the top with internal controls and training,” Byrne said. “Many companies have policies and procedures written down but [they] are never updated or read. It’s important the policy is well understood as part of [your] corporate culture.”

The gaming industry is also being asked to file SARs with FinCEN if they deem a cyber event to be suspicious.

“The [government] has been vague on what information needs to be included when filing a SAR,” said Elizabeth Tranchina, vice president and legal counsel with Pinnacle Entertainment. “We are asking for more guidance. It’s a judgment call for now.”

Agpaoa expected new guidelines soon after discussing the issue with the American Gaming Association (AGA) through a FinCEN committee “to help out policies in the future.”

In January, FinCEN also issued new guidance to clarify when individual casinos may share SARs with their parent companies or affiliates.

FinCEN’s view is that SAR-sharing within domestic offices will enhance a casino’s ability to form a clear and comprehensive understating of the “red-flag” activities engaged in by customers, resulting in more uniform and consistent compliance practices.

Patrick Martin, director of regulatory compliance with the Ohio Casino Control Commission, told about three-dozen attendees that the new policy has resulted in increased sharing of SARs between casinos and enforcement agencies.

GamblingCompliance: Gaming Regulators Struggle To Deal With Legal Marijuana

3RD OCT 2017 | WRITTEN BY: CHRIS SIEROTY IN LAS VEGAS

Nevada’s legalization of medical and recreational marijuana has made it easier for users to buy pot at dispensaries but more difficult for gaming companies that must deal with a wide-range of compliance, employment and ethical issues that result from legal cannabis.

The Nevada Gaming Control Board will not license individuals who run medical or recreational dispensaries, because even though marijuana is now legal in Nevada, it is still considered to be illegal under federal law.

State gaming laws and regulations specifically prohibit behavior by gaming licensees that would discredit the industry.

Nevada gaming regulators believe violating federal law would do exactly that. They are also concerned that the federal government may investigate the state’s multi-billion-dollar gaming industry if it appears state officials are unconcerned about pot use.

“We think that gaming companies should not be involved in medical (or recreational) marijuana now,” Terry Johnson, a member of the Nevada Gaming Control Board, said Monday at the Global Gaming Expo (G2E) at Sands Expo and Convention Center in Las Vegas.

Johnson participated in a panel discussion on the impact marijuana legislation at the state level was having on the gaming industry.

He said regulators were concerned about the co-mingling of cash from any casino business that might be involved in the lawful marijuana sector. Johnson said there is “no banking of pot cash.”

He also expressed concern about gaming assets being the subject of public forfeiture from any legal problems that arise from a company being involved with medical or recreational marijuana on a state level.

Currently 29 states and the District of Columbia have legalized medical marijuana, while eight states and D.C. have legalized recreational marijuana.

“It’s still a Schedule 1 drug, which means it’s illegal for any purpose,” under federal law, said William Bogot, an attorney with Fox Rothchild in Chicago.

Bogot cited the so-called Cole memorandum, issued in August 2013 by then-U.S. Deputy Attorney General James M. Cole, which set expectations for the federal government, state governments and law enforcement on how to deal with states that had voted for, and implemented, legal cannabis programs.

Cole wrote that if states create strict regulatory guidelines to monitor the growth, distribution and sale of regulated cannabis and create a transparent market, the federal government would leave the states alone.

“Recently this has been on shaky ground,” Bogot said. “Attorney General Jeff Sessions has said he does not agree with the Cole memo. So far we are waiting to see what happens.”

Sean McGuinness, an attorney with Lewis Roca Rothgerber Christie in Las Vegas, agreed.

“If there is some challenge, Colorado Governor John Hickenlooper has said he is ready to challenge the federal action,” McGuinness said. “Governor Brian Sandoval in Nevada may be in the same situation.”

Colorado, which is home to both commercial and tribal gaming and legal marijuana, also has strict regulations banning casino operators from doing business with marijuana entities.

“I’ve had operators get in touch with me to ask if they can get involved in the marijuana business,” said Mark Hartman, executive director of the Colorado Department of Revenue.

Hartman has turned them down, saying it is unlawful in the eyes of the federal government.

He also said one individual gave up his gaming license to get into the marijuana business. He declined to identify the person.

Colorado was the first state to legalize recreational marijuana in 2014. But Colorado and Nevada are both struggling to implement rules for marijuana intoxication and responsible gambling.

Johnson said one of the responsibilities a gaming licensee has in Nevada is monitoring for gamblers who might be intoxicated by alcohol.

He said the question of cannabis and responsible gaming should be one of the issues tackled when Governor Sandoval’s Nevada Gaming Policy Committee meets in December.

Sandoval issued an executive order in September summoning the 12-member committee to address the issues surrounding recreational marijuana use and how it affects the gaming industry.

“Since the passage of [2016’s marijuana referendum] Question 2, I have called for Nevada’s marijuana industry to be well-regulated, restricted and respected,” Sandoval said in a statement.

Sandoval said the committee would look at the issues surrounding legal marijuana to protect the state’s “gold standard gaming reputation.”

“Gaming has an outsized economic impact on our state,” Johnson said at G2E. “We have to make decisions to keep that industry strong.”

The policy committee is expected to make its recommendations to the state Gaming Control Board by June 15 next year.