Watch Out for Illegal Gambling in Your Casino

Posted in Casino Winnings, Club Venue Regulations, Gaming, Nevada

You own a casino. You have a license for gambling. You want to run a promotional sweepstakes tied to your member/loyalty cards. Consumers enter the drawing each time they use their member/loyalty card to gamble or to buy goods or services at your casino.  No problem, right? Maybe. The answer will depend on which state you are in.

In Nevada, you probably are OK. NRS Section 462.015(2) specifically excludes from its definition of illegal lotteries any “promotional scheme conducted by a licensed gaming establishment in direct association with a licensed gaming activity, contest or tournament.”

In most other states, however, the general definition of an illegal lottery will apply – that is, an activity with the three elements of change, prize, and consideration.  And a chance-based promotional program may not be a form of game expressly approved by the local gaming authorities.  In such states, the standard cure is to include a no-purchase-necessary alternate means of entry (AMOE).

But that’s not the end of the analysis. The AMOE also must provide equal dignity and a reasonably equal chance to win for the non-paying player.  In a very simple promotion where a paying player gets only one entry into the drawing, the AMOE could be a postal mail-in option for the non-paying person also to obtain a single entry.

How about a more complex situation where the card member earns one entry for every dollar spent?  In that case, merely providing a single entry via postal mail – even with the option to submit multiple postal requests – won’t necessarily be enough. This is particularly true if the average or typical paying person likely will obtain hundreds or more entries during the time period of the promotion.

One possible way to address the latter situation could be to determine the typical number of entries a paying player is likely to obtain during a reasonable time period, and then provide that same number of entries for each mail-in request.  Depending on the duration of the program and the number of overall entries a typical paying player is likely to accrue, there then might be further limitations on how many AMOE requests the non-paying player can submit. For example, if the number of entries granted for each postal AMOE equals the typical daily spend by a card holder, and if the promotion lasts for several days or weeks, then you might allow only one postal AMOE request per day.  The exact formula and mechanics will vary based on the particular facts of each situation. The guiding principle is “equal dignity.”

The point is to remember that not every chance-based activity in your casino is necessarily covered by your gaming license.   Promotional programs may need to be treated differently.  Violations of the anti-lottery laws carry criminal penalties. Plus, such violations can cause complications with the gaming regulatory authorities.  Vetting these programs with experienced counsel is always recommended.

Greenberg Traurig’s Loretta Tuell Recognized at American Gaming Association Global Gaming Expo

Posted in Awards & Recognitions, Gaming, Las Vegas

Loretta Tuell_Global Gaming ExpoDENVER – Oct. 17, 2016 – Shareholder Loretta A. Tuell, of global law firm Greenberg Traurig, LLP, was recognized for her leadership in Indian Country gaming during this year’s Global Gaming Expo (G2E) in Las Vegas. Tuell is a member of Greenberg Traurig’s American Indian Law Practice and Global Gaming Practice. Tuell focuses her practice on American Indian law, governmental law and policy, and gaming matters.

Tuell was recognized by the National Indian Gaming Association (NIGA) during the annual Tribal Leaders’ reception. In recognition of her contributions, NIGA Chairman Ernie Stevens presented Tuell with a turquoise squash necklace. NIGA is an inter-tribal association of 184 federally recognized Indian Tribes united with the mission of protecting and preserving tribal sovereignty and the ability of Tribes to attain economic self-sufficiency through gaming and other forms of economic development.

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Guest Privacy, Safety and Security

Posted in Employee Policies

A jury’s decision to award sportscaster Erin Andrews $55 million as a result of a hotel’s failure to reasonably safeguard her privacy, safety and security is a forceful and important reminder to hotel owners and operators: A guest’s privacy and safety are paramount.  Certainly this jury saw it that way, and other juries might reach the same conclusion.  Not only should hotels and professional hotel operators have proper policies in place to protect the safety, security and privacy of its guests, they must also adhere to and follow those policies.

As industry veterans and careful industry observers know, effective employee training, especially those on the front-line of guest contact and the delivery of guest services, is paramount.  Hotel employees must know what is required and expected of them under the policies and procedures, and perform accordingly.  By its nature, the hotel industry is focused on providing guests with consistent excellent guest services that lead to a consistent positive guest experience.  In order for owners and operators to consistently deliver such excellent guest experiences, they would be wise to revisit and re-examine current training and operations, and make any modifications needed to reasonably ensure the safety, security and privacy of their guests.

The Court in the Andrews cases noted, as is the case in many jurisdictions, that hotel owners and operators owe a special duty of care to their guests.  The jury seemed to reach the very logical conclusion that this duty extends to reasonably providing for the privacy, safety and security of their guests.  If this jury verdict is taken as potentially predictive of the future in similar cases, the potential consequences for failing to reasonably provide for the privacy, safety and security of hotel guests may be disastrous.  There is no time like the present for owners and operators to ensure that they have up-to-date, written policies in place that address guest safety, security and privacy, and that all employees are being effectively trained to ensure compliance with such policies.  At the bare minimum, such policies should make it very clear that hotel employees should never provide a guest’s room information to any other person without that guest’s permission.  While this is considered to be standard industry practice already, clearly there are those persons who will find creative ways to gain this and other information for illegal or improper purposes.  The point is that these policies should also be regularly updated to account for legal developments, such as the Andrews case, and employee training should be an ongoing enterprise within the hotel.  If there are any questions as to whether such a policy complies with the applicable law or industry standards in any given jurisdiction, owners or operators should consult with appropriate legal counsel.

UK to Implement Fourth Money Laundering Directive, Presenting an Opportunity for the Gaming Sector to Provide Input

Posted in Brexit, Gaming

The current EU Money Laundering and Terrorist Financing (ML/TF) measures are contained in the Third Money Laundering Directive (3MLD). 3MLD was implemented into UK law by the Money Laundering Regulations 2007, the Proceeds of Crime Act 2002, and the Terrorism Act 2000. These Regulations promote a proportionate risk-based approach that requires relevant businesses and individuals to identify and assess their money laundering risks and to put in place their own systems and controls.

The Fourth Money Laundering Directive (4MLD), published in June 2015, will give effect to the Financial Action Task Force’s updated ML/TF standards. 4MLD places new requirements on relevant businesses and changes some of the obligations under 3MLD. All EU Member States have two years to implement the Directive into national law. Despite the Brexit vote, the UK remains a full EU Member State for the time being, and must continue to negotiate and implement EU legislation until its exit agreement is finalised.

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Greenberg Traurig’s Erica Okerberg Receives “40 Under 40 Award”

Posted in Awards & Recognitions, Gaming

OKERBERGEErica Okerberg, an associate in the Las Vegas office of international law firm Greenberg Traurig, LLP, has been chosen by Global Gaming Business (GGB) Magazine’s advisory board as one of their “40 Under 40.” The entire list of 40 Under 40 honorees will be published in the November issue of GGB Magazine. Honorees were recognized during the Global Gaming Expo at the Emerging Leaders Networking Reception on Sept. 28 in Las Vegas.

“We, here in the Global Gaming Practice of Greenberg Traurig, are very proud of Erica and are happy to see that her hard work has been recognized by Global Gaming Business Magazine,” said Martha A. Sabol, co-chair of the Global Gaming Practice.

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SEC Scrutinizes Severance Agreements for Compliance With Dodd-Frank

Posted in SEC

Recent SEC Fines

On Aug. 16, 2016, the U.S. Securities and Exchange Commission (SEC) announced that it had issued its second fine in as many weeks concerning a company’s use of severance agreements that contain confidentiality and/or covenant-not-to-sue or release provisions that allegedly violate SEC whistleblower Rules.

These recent SEC charges arise from SEC Rules, passed in August 2011 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), which enable whistleblowers to collect 10 percent to 30 percent of the total award when giving information that leads to an action recovering at least $1 million. Rule 21F-17 provides that “[n]o person may take any action to impede an individual from communicating directly with the [SEC] staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement.”

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Brexit: Implications for the Gaming Industry

Posted in Brexit, Gaming

This note addresses the impact of Brexit on the gaming industry. It is one of a series of GTM Alerts designed to assist businesses in identifying the legal issues to consider and address in response to the UK’s referendum vote of 23 June 2016 to withdraw from the European Union. In particular, it considers the impact that Brexit might have on gaming companies located in the UK and Gibraltar. Gibraltar is a self-governing British overseas territory which joined the EU in 1973 at the same time as the UK as part of the UK rather than as a separate Member State. As a result, if the UK leaves the EU, then so too must Gibraltar.

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Greenberg Traurig Participates in the 2016 International Gaming Summit

Posted in Events

May 31 through June 2, 2016, members of Greenberg Traurig’s Global Gaming Practice participated in the 2016 International Gaming Summit hosted by the International Association of Gaming Advisors (IAGA).  The Summit, for the first time, was held in conjunction with the Gaming Regulators European Forum (GREF). The Malta Gaming Authority also co-hosted the event. The Summit took place in St. Julian’s, Malta, where approximately 220 delegates from 36 countries across five continents met and discussed the gaming industry’s most pressing issues.

Greenberg Traurig Co-Chair of the Global Gaming Practice and President of IAGA at the time, Martha A. Sabol, made opening remarks at the Summit and presided over the President’s dinner.  Other members of Greenberg Traurig’s Global Gaming Practice participated in the Summit, including Co-Chair Mark Clayton, who moderated a panel on social gaming, e-sports, and fantasy sports, as well as participated in the GLI University Regulations Seminar.  Clayton also helped oversee the conference’s program committee.

The Summit program focused on critical issues facing the global gaming industry including anti-money laundering compliance initiatives, daily fantasy sports issues, casino expansion into emerging markets, financing, responsible gaming, online gaming, e-sports, and other pressing issues. Topic experts from every major gaming jurisdiction, including some of the gaming industry’s most highly regarded executives, general counsels, compliance officers, and financial advisors, attended and engaged in lively panel discussions.

Greenberg Traurig’s Martha Sabol addresses attendees at the IAGA Summit.

IRS Issue: Gaming Industry Vigilance Helps Correct a Possible Mistake

Posted in Casino Winnings, Internal Revenue Service, Nevada, Tax

The casino industry overwhelmingly voiced its displeasure last year when the U.S. Internal Revenue Service (IRS) suggested that slot machine jackpot reporting requirements be lowered from $1,200 to $600.


Gaming leaders from the 40 states that are home to land-based casinos, riverboat casinos, race track casinos, and Indian casinos, said reducing the jackpot levels would create an unnecessary burden on the businesses and customers.

The IRS may have listened.

In April 2015, American Gaming Association CEO Geoff Freeman told a group of casino leaders at a meeting in Pittsburgh that the IRS had seemingly backed away from the proposed changes.

While many in the gaming industry are hoping that is true, we are still awaiting a definitive resolution. The IRS has been radio silent on the matter since June 2015 when it hosted a public hearing in Washington D.C. to gauge response to the idea.

The American Gaming Association came out strongly against the IRS’s proposed changes as soon as the news was announced. The organization gathered background information and sought input from its membership. Freeman and other gaming leaders even testified in opposition at the public hearing.

Under current rules, when a player wins $1,200 or more on a slot machine, the game locks up and cannot be played while the customer is required to fill out a W2-G form in order to report the winnings to the IRS. The process often takes anywhere from 10 minutes to a half-hour.

The gaming industry was concerned that lowering the reporting levels to $600 would increase the number of reports that would have to be filled out by customers. The activity would be time consuming for both casino employees and customers. One Wall Street gaming analyst estimated the lost time on the machines necessary to fulfill the new reporting rules could cost casinos more than $500,000 in lost revenue. Longer down time from slot machine play means less revenue for the casinos and a reduction in tax dollars for state and local governments.

The IRS first enacted the $1,200 reporting threshold for slot machines, table games, and keno in 1977. At that time, the only legal gambling options in the U.S. existed in Nevada with casinos and parimutuel racing.

Much has changed. In today’s ever-expanding gaming world, where casinos offer customers state-of-the-art slot machines that utilize cashless gaming technology, a jackpot of $600 happens on a far more frequent basis.

Many casino customers, in protesting the IRS proposal, suggested the jackpot reporting limits be raised to reflect inflation. Seniors worried their Medicare premiums would increase because their adjusted gross income would rise based on the figures compiled through additional jackpot reporting forms.

Freeman told CDC Gaming Reports in April that the casino industry spoke “with one voice” in opposition to the IRS proposal.

This matter goes to show how gaming, or any industry, can face risk from misunderstanding by the public or a government agency.

GT will continue to report on further developments. Subscribe to GT’s Gaming blog to receive updates.

Entity Wagering Could Grow Nevada Sports Betting Business

Posted in Entity Wagering, Nevada, Sports Betting Industry

shutterstock_114012112The potential for legalized sports betting has been debated since National Basketball Association Commissioner Adam Silver wrote a New York Times op-ed piece in 2014 suggesting that gambling on professional sports be allowed. The debate on legalizing sports wagering nationwide is still an active discussion. The 1992 Professional and Amateur Sports Protection Act restricts sports betting to four states. While Nevada is the only state with full-scale sports wagering, Delaware, Oregon, and Montana offer small-stakes sports betting and New Jersey has been attempting to legalize sports betting by allowing its Atlantic City casinos to open Las Vegas-style books. The state is awaiting a ruling on the issue by the U.S. Third Circuit Court of Appeals.

Nevada, even with its full-scale sports wagering, continues to find ways to fine tune its laws covering sports betting in order to enhance wagering opportunities for its sports book industry.

In June 2015 lawmakers and state gaming regulators approved new regulations covering entity wagering, which now allow the formation of business groups to place race and sports bets. Investors can join the entities and share in the profits and losses from large wagers at Nevada sports books.

This concept could grow the Nevada’s sports betting industry, which took in more than $4.23 billion in legal wagers in 2015, $231.8 million of that collected from sports books winnings. In fact, backers of entity wagering and gaming industry analysts believe the idea has the potential to triple Nevada’s sports gambling business over the next five years.

Greenberg Traurig client CG Technology (CG), one of Nevada’s largest independent race and sports book operators, was an early proponent behind entity wagering. Under GT’s advisement, CG leadership authored Senate Bill 443, the initial legislation that was signed into law by Gov. Brian Sandoval in June 2015. CG also helped write the regulations that were approved five months later.

Executives from CG (which operates eight Las Vegas sports books), believe that entity wagering solidifies Nevada’s place as the epicenter for sports wagering in North America.

Under the new regulations, Nevada-based business entities can open sports wagering accounts with participating sports books for the purpose of betting on sports and racing. Participants from outside the state are welcomed to invest in the qualified funds. However, the investors are not permitted to direct the wagering activity.

Investors have to be age 21 or over and must submit to the entity their background information, including a government-issued identification card and taxpayer number.

Sports betting investment funds can employ various investment strategies. The structure allows for small minimum investments to increase the number of participants, or larger investments to limit the fund’s size. Profits from any wagers are deposited into the entity’s bank account and used for future wagers or for payouts to investors.

Entity wagering in Nevada does not violate the U.S. Wire Act because the wagers are not transmitted across state lines by the telephone or the Internet.