Nevada Legalizes Worldwide Account Wagering with the Possibility of Rebating

Effective today, a new law is in place in Nevada that permits inter-jurisdictional, interactive account wagering.

Subject to regulations to be promulgated over the next several months by the Nevada Gaming Commission, Nevada race books will be able to accept pari-mutuel wagers from anywhere in the world "in which such wagering is legal." And notwithstanding, the existing Nevada statute prohibiting rebating, this new law gives the Nevada Gaming Commission the further permission to pass regulations that carve out exemptions from the prohibition so that race books would be able to provide rebates or otherwise increase the payoffs "if the Commission determines that such exemptions are in the best interests of the State of Nevada and licensed gaming in this state."

The new law, introduced as Senate Bill 3 of the 2003 Session, was passed June 9 and became law on June 11, but the effective date is today.

Account Wagering

SB 3 started life as a measure designed to raise some revenue for fair racing in Nevada. Somewhere along the line, the bill was amended to deal with the issues of interactive account wagering, and rebating. Concerning account wagering, the new law changes the previous statutory prevision that limits activity to wagers "made by wire communication from patrons within the State of Nevada or from states in which such wagering is legal."

The new language will now read:

This subsection does not prohibit a person licensed to accept, pursuant to regulations adopted by the Nevada Gaming Commission, off-track pari-mutuel wagers from accepting wagers made by wire communication from patrons within the State of Nevada, from other states in which such wagering is legal or from places outside the United States in which such wagering is legal. (N.R.S. 463.020 (3) (b) )

A further amendment to the statute makes clear that appropriate "border control technology" is intended to be applied by any race book wishing to avail itself of inter-jurisdictional account wagering:

The regulations of the Nevada Gaming Commission may include, without limitation:
(d) Prescribing the permissible communications technology and requiring the implementation of border control technology that will ensure that a person cannot place a wager with a race book in this state from another state or another location where placing such a wager is illegal. (N.R.S. 464.020 (4) )

Anthony Cabot of the Nevada law firm of Lionel Sawyer & Collins testified on March 21, 2003 in front of the Nevada Senate Judiciary Committee in his capacity as legal counsel for the Nevada Pari-mutuel Association. As reported in the transcript of the hearing, in his prepared testimony, plus comments before the Committee, Cabot made several points of interest:

For account wagering as contained in the Nevada statutes, "The method of communication can be by telephone or any of the other evolving technologies."
Some fourteen states have legalized account wagering, including California, which acted "only after obtaining a legal opinion from its attorney general that account wagering was legal under 2000 Federal amendments" to the Interstate Horse Racing Act of 1978.
"Unlike our competitors in other states, our proposed amendment will require the implementation of border control technology that will provide a high level of security that persons can not place a wager from a state where it is illegal to do so… [Under SB 3,] discretion remains with the regulators to determine the level of border technology imposed."
It is interesting to note that while Mr. Cabot's remarks focused on the need to adopt these measures as a means of strengthening the competitiveness of Nevada's pari-mutuel race-betting industry, in tandem with Nevada's exemption from Federal prohibitions on sports wagering the actual amendatory language contained in SB 3 may create an opportunity for Nevada to develop an inter-jurisdictional industry based upon sports betting, so long as the sports betting product is pari-mutuel in nature.
Rebating
The transcript of the Committee hearing indicates that Mr. Cabot's prepared remarks included the following comments with regard to the issue of "rebates":
The second requested change involves the prohibition against race books giving rebates to patrons. A rebate is when a patron is given a discount on the face amount of the wager or given a portion of every bet back.
The prohibition was implemented in 1997 because the California tracks refused to provide our books access to their wagering pools without it.
We capitulated as a point of diplomacy to end an extended blackout of California racing in our race books.
California tracks, however, are now giving out rebates. Likewise, OTBs and tracks across the country and world are following such practices.
We are not requesting that the prohibition be lifted, only that the Nevada Gaming Commission be able to carve out exceptions to the prohibition that are in the best interests of the State and only after conducting opening (sic) meetings.
This procedure will allow the industry and the regulators to better respond to market conditions as they come up.

Finally, it is instructive to note the exchange of comments between State Senator Care and Dennis K. Neilander, Chairman of the Nevada State Gaming Comtrol Board:
Senator Care: "A race book has no discretion to offer a rebate, right now. How does it differ for a resort? I guess the theory behind what resorts do goes to marketing as well. They have discretion to forgive a marker or they can rebate. Are their similar regulations to what we are looking for here?"
Mr. Neilander: "They have the discretion to rebate, Senator. The industry uses the term rebates in the context of a discount. A marker can be discounted for certain players. They may be required to pay back only 90 percent of the marker. The way we address this is primarily through taxation and we have a series of existing regulations governing when discounts are or are not included in revenue and the proper method of settling a marker. You are correct; it is within their jurisdiction and their discretion to make these determinations. Pari-mutuel wagering was singled out because of the situation with California blacking out the signal. … Of course, anything considered gross revenue to us is going to be subject to a tax…"
Here is the text of the amendment that will permit the Nevada Gaming Commission to approve a policy of "rebates" with regard to an "off-track pari-mutuel wager":
The Nevada Gaming Commission may, by regulation, exempt certain bets, refunds, rebates, payoffs or bonuses from the provisions of subsection 1 if the Commission determines that such exemptions are in the best interests of the State of Nevada and licensed gaming in this state. Any bets, refunds, rebates, payoffs or bonuses that would result in the amount of such bets, refunds, rebates, payoffs or bonuses being directly or indirectly deductible from gross revenue may not be exempt. N.R.S. 463.075 (4)