GamblingCompliance: Racino Executive Urges Embrace Of Historical Racing


A veteran racetrack executive believes the next step in the evolution of pari-mutuel racing in the United States is to allow tracks to offer historical horseracing, also known as instant racing, which allows players to bet on replays of horse races.

“The fact is that in most jurisdictions we are not being allowed to sell our own product in the most modern and productive way,” Scott Wells, president and general manager of Remington Park and Lone Star Park said at the Pan American Conference.

Wells said a live horse race every 25 minutes is the traditional way to sell horseracing, but “many of us are stuck thinking that’s the only way.”

Wells said the industry’s product is not just the visual experience of watching the race.

“It’s the results of the race that are our core product,” Wells told several hundred trainers, racetrack executives, politicians and racing officials gathered inside a Grand Hyatt ballroom in Washington, D.C.

The Pan American Conference, which offered a number of panel discussions on the health of the horseracing industry, racetrack design and marketing, was held May 17-20.

“The results of the race are what determine the winners and losers … and the distribution of the mutuel pools and purses. And the results are filed away forever. It doesn’t have to be that way,” Wells said.

Wells cited Oaklawn Park’s success with historical racing at its track in Hot Springs, Arkansas, which first offered the games in 2000, as an example a new revenue stream for racetracks.

Churchill Downs is also considering adding historic racing machines at the Louisville, Kentucky, track.

Bill Carstanjen, CEO of Churchill Downs, said during a first-quarter conference call in April that the machines have already been put in place at racetracks Kentucky Downs, Ellis Park and the Red Mile.

“We are intrigued by the idea and continue to analyze it closely,” Carstanjen said.

Historical racing games play like slot machines but base payouts on a pari-mutuel formula with winning combinations determined by previously run horse races.

“Historical horseracing gives us the opportunity to sell our real product — the results of the race — repeatedly in a modern, fast paced way, which is what the marketplace demands,” Wells said.

For those skeptical that historical racing is legal, Wells said that “as long as it is done in a pari-mutuel way, it is clearly been approved in all gaming jurisdictions.”

“Not to allow racetracks to have historical racings … is a restriction of fair trade. It keeps the industry in handcuffs,” said Scott Wells of Remington and Lone Star racetracks.

Wells added that unlike video gaming terminals (VGTs), which have saturated some gaming markets, instant racing should only be done at racetracks. Allowing the product more widely would “add dramatically to purses and the viability of the breeding and racing industries.”

During his 45-minute presentation titled “The Racino Experience,” Wells admitted that running two racetracks can “get a little depressing,” especially with the declining numbers of on-track bettors.

Wells also showed a few Remington Park commercials that incorporated jockeys to promote the track’s casino. As well as two commercial racinos, Oklahoma is home to 124 tribal casinos on Native American lands.

“Off course there has been a proliferation of gambling choices for everyone,” Wells said. “Where for many years Las Vegas and Atlantic City were the only choices that allowed gambling … now that pie has been divided into a thousand pieces.”

Defined as a marriage between casino gambling and horseracing, West Virginia pioneered the racino concept in 1990 when MTR Gaming Group was allowed to introduce gaming machines to Mountaineer Race Track and Gaming Resort in Chester.

Today there are 55 racinos nationwide, according to data compiled by GamblingCompliance.

In Oklahoma, racinos were legalized when a state-wide ballot measure was passed 60 to 40 percent in the fall of 2004. Wells said Remington Park was on the verge of closing when the measure was approved by voters.

“The racino model was very beneficial to Remington Park and the Oklahoma horse racing industry,” Wells said. “Our purses rose by 400 percent … our handle is up 30 percent.”

But increasing attendance at the track is still a struggle.

In Wells’ experience, 25 percent of racing customers play in the casino before they leave; only 5 percent of casino players bet on racing.

Wells cited those numbers in saying opponents of racinos could justifiably argue that basing your business on slot machines will just keep eroding horseracing.

“That’s a difficult argument to dispute,” Wells said. “But let me say I’ve had the racino experience and the non-racino experience for the last four years as the manager of Lone Star Park.”

Based in Grand Prairie, Texas, Lone Star Park is owned by the Chickasaw Nation of Oklahoma. The tribe have also owned Remington Park, located near Oklahoma City, since 2009.

“Texas is surrounded by Louisiana, Arkansas, Oklahoma and New Mexico, all of which have casinos to support racing at the racetracks,” Wells said. “That has been catastrophic for the Texas horseracing industry.”

Wells was also critical of a move last year to try and adopt historical horseracing in Texas.

Under pressure from the state’s political leaders, Texas racing commissioners voted in February to rescind regulations that would have permitted historical racing machines at tracks.

“Texas politicians had one hand [behind their backs] … taking donations from politicians in other states, especially from casino interests in other states,” Wells said. “Texas has been held to a standstill.”

Wells admitted that Lone Star Park was “not doing well,” but he praised the Chickasaw Nation for their willingness to invest millions of dollars in both tracks.

This year, Lone Star Park will host 50 days of racing between April and July. Remington Park hosts 119 days and is in the midst of an annual quarter horse meet that runs through June 3, with live thoroughbred racing between September and December.


GamblingCompliance: AML Compliance Lawyers Cautious After MoneyGram Deal


Anti-money laundering (AML) and gaming law experts believe a settlement of civil charges brought by the federal government against a former MoneyGram compliance executive may make it harder to find quality applicants for AML compliance roles in casinos and other financial institutions.

Thomas Haider served as MoneyGram International’s chief compliance officer from 2003 until 2008, supervising the company’s fraud and AML compliance departments.

Haider was accused of failing to ensure compliance with AML and Bank Secrecy Act (BSA) laws during his career with the money transfer company, and last week settled the claims by paying a $250,000 penalty.

“I think it may have a chilling effect on qualified people taking the job,” said Donna More, a partner at Fox Rothschild in Chicago, of the impact on the ability of casinos and other groups to recruit AML compliance officers.

“Perhaps going forward they should be included in the D&O (Directors & Officers) insurance.”

Sharon Levin, a partner at WilmerHale in New York, said the Haider case serves as a warning to compliance officers that they face an increased risk of personal liability.

“In Haider, a court for the first time held that the Bank Secrecy Act permits the Treasury Department to sue individuals for an institution’s AML compliance failures,” Levin told GamblingCompliance.

“By reaching a settlement, that decision cannot be challenged on appeal,” she said. “But the Haider decision is unlikely to be the last word on this question.”

Levin’s advice: “Compliance officers should understand what insurance coverage they have, specifically whether their legal fees will be covered.”

On top of the $250,000 fine, Haider agreed as part of the settlement with prosecutors in Manhattan to accept a three-year ban on acting as a compliance employee at any money transfer company.

The Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury, which announced the civil action against Haider on December 18, 2014, had originally sought a $1m fine.

Although the Haider case does not involve casinos, it comes amid a period of intense scrutiny of the gaming industry’s AML practices on the part of FinCEN.

Casinos, just like banks and money transmitters such as MoneyGram, are considered a form of financial institution subject to the reporting and other compliance requirements established by the BSA.

Jennifer Roberts, an adjunct professor at the University of Nevada, Las Vegas’ William S. Boyd School of Law, said the penalty against an “individual compliance officer is something that should certainly be noticed.”

“However, the Haider case involved numerous ‘willful’ violations and several significant lapses in compliance,” Roberts said.

As part of the settlement, Haider accepted responsibility for failing to terminate contracts with specific MoneyGram outlets after receiving information that indicated the outlets were complicit in consumer fraud schemes.

According to a 50-page complaint, Haider also accepted responsibility for structuring MoneyGram’s AML program so that fraud reports about outlets were not generally provided to analysts who were responsible for filing suspicious activity reports to the government.

In a statement emailed to GamblingCompliance by one of his attorneys, Ian Comisky of Fox Rothschild in Philadelphia, Haider defended his work at MoneyGram despite the settlement.

The settlement also resolves Haider’s “separate claims against the Treasury Department based upon illegal media leaks that occurred in 2014, which were intended to … damage Haider’s reputation,” the statement said.

As for the gaming industry, Roberts said that many companies already have robust compliance programs in place because there has always been a risk of disciplinary actions by state regulators for major compliance failures.

“Not to mention, [AML] compliance officers have had the opportunity to enhance programs because of more recent FinCEN enforcement against the gaming industry,” Roberts said. “In the Haider case, you are talking about violations that occurred almost ten years ago.”

Levin said that regulators have tried to hold individuals responsible for corporate wrongdoing.

“AML is no different,” Levin said. “Regulators are showing a sustained interest in holding AML compliance officers personally liable for the institution’s AML deficiencies. This trend is likely to continue.”

Recent FinCEN enforcement actions have targeted various gaming companies, including CG Technology, California’s Hawaii Gardens and Oaks Club card rooms, Caesars Entertainment and the Trump Taj Mahal in Atlantic City.

FinCEN has also fined and barred a casino executive in the Northern Mariana Islands, although the individual in question was responsible for marketing programs involving high-rollers and was not an AML compliance officer.

Under the BSA, casinos and card clubs are expected to report all transactions worth more than $10,000, in addition to any others that could appear to be suspicious.

Federal regulators also expect casinos and other financial entities to demonstrate a so-called “culture of compliance.”

Levin said effective AML starts at the top.

“An AML officer must have strong independent authority and the support of the institution’s leadership,” Levin said. “This settlement only reinforces the importance of the support of company executives.”

The American Gaming Association (AGA) in 2014 published the casino industry’s first set of best practices for AML compliance.

Elizabeth Cronan, senior director of gaming policy at the AGA, said that individual compliance officers play a critical role on a daily basis.

“Compliance officers are essential to the industry’s strong culture of compliance,” Cronan told GamblingCompliance in an email.

GamblingCompliance: Nevada’s Sandoval Lobbies Sessions Over Online Regulation


With a 2011 Department of Justice legal memo under review, Nevada Governor Brian Sandoval has assured U.S. Attorney General Jeff Sessions that online gaming is well regulated and that controls on underage gambling and geo-location are working effectively.

Sandoval spent several days last week in Washington, D.C. meeting with Sessions, U.S. Department of Energy Secretary Rick Perry and Environmental Protection Agency Administrator Scott Pruitt, while also having a working breakfast at the White House.

“We talked about internet gaming and I reminded [Sessions] that I’m a former chairman of the Nevada Gaming Commission and I have personally worked on and sponsored a bill that allowed for interstate poker,” Sandoval said.

The governor noted he has also negotiated an interstate compact with Delaware, a decision that has “worked extremely well.”

“I am not aware of any issues associated with underage gaming with regard to internet poker and [players having] access to those sites that don’t live within the borders of Nevada,” the two-term Republican governor said.

Sandoval also said he told Sessions that Nevada has been “better than anybody in the country, if not the world, when it comes to the regulation of gaming.”

The meeting between Sandoval and Sessions came amid rumors that the attorney general, a former U.S. Senator from Alabama, is mulling a move to overturn the 2011 U.S. Department of Justice legal opinion that allows states to regulate online casino, poker and lottery games.

At his Senate confirmation hearing in January, Sessions said he was not a fan of the memo finding that the 1961 Wire Act only applies to online sports betting.

Still, Anthony Cabot, a partner with law firm Lewis Roca Rothgerber Christie in Las Vegas, said several problems exist with the notion that Sessions can simply change the 2011 opinion.

Cabot noted that the Fifth Circuit U.S. Court of Appeals already decided in a 2002 case involving Mastercard that the Wire Act only applies to sports.

“Therefore, the branch of government that has primary responsibility for interpreting the law already has done so consistent with the 2011 opinion.”

In addition, the 2011 opinion, besides being correct, is extremely well researched and reasoned, according to Cabot.

“It will be difficult to even conceive of how this attorney general will justify a reversal on a purely analytical basis,” Cabot said.

Any move will draw criticism due to the interest of Sheldon Adelson, the influential Republican Party donor and chairman of Las Vegas Sands, in the topic of online gambling.

“No matter how hard online casinos try to cover it up, bad actors from all over the world continue to hack internet games,” John Ashbrook, a spokesman for the Coalition to Stop Internet Gambling.

“And we’re hopeful that the Department of Justice will reverse the Obama-era overreach that exposed Americans to a dangerous set of online predators.”

The Coalition to Stop Internet Gambling, a group supported by Las Vegas Sands, continues to lobby lawmakers to ban online gambling.

Jeff Ifrah, founder of Ifrah Law in Washington, D.C., said Sessions has always been a “keen advocate for state’s rights” as a U.S. senator and predicted “he will continue to be that advocate as our attorney general.”

“Were the DOJ memo to be rewritten to suggest the federal Wire Act can be used to prosecute non-sports betting related activity, such as poker and casino gaming, or even online lottery games, our federal courts will be called upon for their analysis of that question,” Ifrah said.

“Previously, two federal courts of appeal have reasoned that the language of the Wire Act is narrow and applies only to sports-betting related activity.”

Sandoval had already pushed back against a potential move to ban online gambling in his capacity as vice-chairman of the National Governors’ Association (NGA).

The NGA sent Sessions a letter last month requesting he leave decisions over online gambling policy to the states, not the federal government.

“As you review this issue, we encourage you to take note of the current regulatory mechanisms put in place by the states to ensure that consumers and children are protected, and that licensees comply with strict standards of conduct,” Sandoval and NGA chairman Governor Terry McAuliffe, a Democrat from Virginia, wrote.

The letter also warned Sessions that a federal “ban drives this activity offshore to unregulated markets.”

Since 2011, only Nevada, New Jersey and Delaware have legalized online poker and casino games, with a handful of state lotteries moving online as well.

But other states, including Pennsylvania, are considering legislation, while gaming experts also warn of wider fallout from any move to alter the scope of the Wire Act.

“Although the reversal of the DOJ’s 2011 memo might have minimal impact on interactive (internet) gaming in Nevada because of the current restriction to poker, it could certainly have an impact on the ability to conduct intrastate sports wagering, server-based gaming, account wagering, and other emerging wagering technologies in the state,” said Jennifer Roberts, associate director of the UNLV International Center for Gaming Regulation.

“Clearly, a reversal would have a much greater impact on the revived growth in New Jersey’s gaming market, as well as those states offering online lottery products,” Roberts said.

In the short term, David Schwartz, director for the Center for Gaming Research at UNLV, said any reversal would have a small negative effect.

“Poker is about 1 percent of the total gaming win, and online is a fraction of that,” Schwartz said.

“Long term, though, there could be negative consequences for Las Vegas-based companies, as this would inhibit efforts to roll out a wider menu of online offerings in Nevada, eliminate revenue sources from states where it is already legal, and complicate efforts to legalize it in new states,” Schwartz said.

Besides online gaming, Sandoval also used his visit to the nation’s capital to reiterate his “absolute opposition” to a proposed nuclear waste repository at Yucca Mountain and urged Perry to explore an alternative to deal with the “nation’s nuclear waste problem.”

Sandoval and the American Gaming Association (AGA) are opposed to the Energy Department operating a storage facility some 90 miles north of Las Vegas. The area is one of the nation’s top tourist destinations, drawing 43m tourists annually and generating $59bn in revenue, according to the Las Vegas Convention and Visitors Authority.

Sandoval told reporters on Friday that he made it extremely clear to Perry that “whether we’re friends or not, we’re not friends on this, that I would do everything in my power to oppose the project.”

Sandoval also warned Perry, a former Texas governor, that Nevada would use “every legal opportunity at our disposal to attack the assigning of the Yucca Mountain as a high level nuclear repository in our state.”

GamblingCompliance: Massachusetts Considers Revoking Mandatory Licensing Of Directors


The Massachusetts Gaming Commission (MGC) on Thursday approved proposed changes to the state’s regulations governing electronic games, while also discussing a proposal to revoke mandatory licensure of outside directors of casino companies.

The five-member commission requested gaming industry comment on the state’s requirement for licensing of outside directors, with most of the responses asking for a reciprocity policy or a more basic background check.

“Recruiting outside directors is a constant challenge for licensed gaming companies,” Geoff Freeman, president and CEO of the American Gaming Association (AGA), said in a letter to the commission.

Freeman noted that outside directors with experience in finance, marketing and technology can contribute to a gaming licensee’s management and growth.

“Yet many potential outside directors have never been licensed in the casino industry,” Freeman said. “An intrusive personal background check and suitability investigation for a part-time responsibility frequently deters talented business leaders.”

Freeman wrote that outside directors who have already gone through the rigorous background investigation and licensing process in one state may be forced to do it all over again in another jurisdiction.

He called on commissioners to consider two proposals to streamline the process:

* Recognition of Reciprocity: If an outside director is licensed in another U.S. regulated gaming jurisdiction, the Massachusetts Gaming Commission would permit that individual to “waive in” without further background investigation.

* Basic Background Registration: In the absence of an existing license in another state gaming jurisdiction, the outside director would disclose basic employment and identification information through a straightforward registration process.

Freeman added that by following established approaches in New Jersey, Pennsylvania and Michigan, Massachusetts would have the discretion to require licensure depending on the individual’s role in the casino company.

Robert DeSalvio, president of Wynn Boston Harbor, also submitted a letter of support for revoking mandatory licensure of outside directors in Massachusetts.

In a letter to the MGC, Nicholas Casiello, an attorney with Fox Rothschild, who represents MGM Resorts International in Massachusetts, said his client has problems attracting “highly qualified candidates” because of licensing requirements.

MGM Resorts operates in eight states, including Nevada and New Jersey. The company’s $950m casino in downtown Springfield, Massachusetts, is scheduled to open next year.

So far, Penn National Gaming’s Plainridge Park Casino is the only gaming facility open in Massachusetts. Wynn Resorts will open the $2.4bn Wynn Boston Harbor in 2019.

“Any reduction in licensing requirements of any jurisdiction in which MGM operates would be welcome and helpful in MGM’s continuing endeavours to attract qualified board members,” Casiello wrote.

Casiello urged the MGC to follow the approach taken by the Pennsylvania Gaming Control Board, “in which only directors of publically traded companies holding certain positions have to be licensed.”

According to Pennsylvania’s gaming statute, all directors in a “privately held company must qualify.”

Meanwhile, “for publicly traded companies, only those outside directors who serve on the audit committee or are the chairman of the board (must qualify). However, the gaming board, in its discretion, may determine that any director must qualify.”

Both Massachusetts gaming commissioner Enrique Zuniga and chairman Stephen Crosby expressed their support for Pennsylvania’s approach to licensing outside directors.

Zuniga said the the Pennsylvania approach was an “easy tool for us to implement.”

Crosby agreed, saying he would “definitely like to pursue this,” but wants to “think about it a little more.”

The gaming commission on Thursday also decided to begin the process of considering proposed changes to the state’s rules governing standards for gaming devices.

Todd Grossman, the MGC’s deputy counsel, said his department had received comment from Scientific Games on the proposed changes, and would also talk with Gaming Laboratories International (GLI).

Among the changes to the standards are demands the licensee develop and submit for approval a “preventative maintenance program for the care and upkeep” of any physical part of any slot machine on the gaming floor.

The proposed rules would also deny the use of credit cards, debit cards or government issued electronic benefits transfer cards to play slot machines or purchase “any form or gaming value.”

Skill-based games, meanwhile, would be accommodated if they comply with the most recent update to GLI’s independent technical standards.

Grossman told commissioners that there may be other changes, but he suggested setting up a public hearing on the proposed changes and new regulations. As of Friday, no public hearing had been scheduled.

GamblingCompliance: Maryland Lawmaker Promises To Reintroduce Problem Gambling Bill


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.

PaymentsCompliance: Nevada Bill Would Block Taxes On Blockchain Transactions


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


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.