The Future of I-Gaming in Nevada

The future of intrastate gambling in Nevada is hazy, but Nevada Gaming Control Board Chairman Dennis Neilander says two public hearings, slated for October and November, may paint a clearer picture.

Neilander said he's seen mixed views from industry insiders and the general public on what regulators should do now that the U.S. Department of Justice has opined that operating an online casino is a violation of the federal Wire Act.

"The idea was to tap into gamblers who were located in jurisdictions where online gambling was legal and for our licensees to bring in new business that way."

-Dennis Neilander
Nevada Gaming Commission

Regulators had been working on an intrastate system for over a year, but part of their mission, as legislated by the state assembly, was to ensure that any system used by the state is in compliance with federal laws.

While many legal experts in the gaming industry, citing case law, disagree with the DOJ opinion, Neilander said regulators can't in good faith approve an interstate system.

The only viable option, Neilander said, is for state regulators to look at an intrastate system, but he added that the original goals for passing the enabling legislation might not be reached.

"We were hoping to expand our tax base with an interstate system," he said. "The idea was to tap into gamblers who were located in jurisdictions where online gambling was legal and for our licensees to bring in new business that way."

Instead Neilander feels there is a good chance that if an intrastate system is approved, not only would tax money fail to increase, but it could decrease.

"There are some major concerns about any intrastate system cannibalizing the existing marketplace," he said.

And revenue concerns aren't the only thing causing regulators to have their doubts about an intrastate system; the approach Nevada has taken over the last 10-15 years regarding "local" gaming also creates a challenge.

In their heyday, slot machines were found all over Nevada, from convenience stores and diners to retail outlets and grocery stores. Neilander said new laws have decreased the availability of "convenience" gambling in Nevada.

"It used to be just about anybody could get a license for 15 or more slot machines," he said. "Now anyone who wants that many must have a hotel facility with at least 200 rooms. New laws only allow for slots in places like drug stores, grocery stores, restaurants and bars, as opposed to the host of fringe businesses that were allowed to have them before."

Neilander said some operators have told him they have little or no interest in an intrastate gaming system, but he's also heard from those on the other side of the argument.

"We have heard from operators who are concerned that an intrastate system won't have much value for them," he said. "But then there are a lot of people who want us to look into the approach because it will give residents a choice if they want to gamble at home while online or not."

The Gaming Control Board held a public meeting last month to get input on the matter from both the industry and residents. Neilander said there are two more meetings scheduled, one in October and a second in November.

Early indications, he said, are that more companies and representative in favor of an intrastate system will give presentations to the board at its October meeting.

If approved, interactive intrastate betting could also be accessible from hotel rooms.

Among those who opposed the approach at the September meeting were representatives from Station Casinos Inc., which has already developed a system that could be adapted for intrastate use.

Jack Godfrey, a lawyer for Station, told the commission that limiting the pool of users to just Nevada residents would risk a decline in business at the state's casinos and hotels.

Even if the tax issues are resolved and a majority of operators in the state support an intrastate system, there's no guarantee it would be approved. Regardless of what the industry wants, certain parameters must first be met. Among them is an assurance that technology exists to determine online gamblers' locations and ages and whether the activity can be monitored while it's happening.

The parameters were spelled out in a Nevada bill passed in 2001. So far there has been no indication as to how close technology providers are to meeting them.