Gaming regulators delay decision on sports book refunds

John Wilen

Tuesday, Nov. 3, 1998 | 11:24 a.m.

Nevada gaming regulators Monday approved a slate of new race and sports book regulations -- including several measures designed to combat messenger betting.

But they delayed acting on the most controversial of the proposed regulations, which would ban the use of rebates, refunds and special promotions like can't-lose bets to attract high-rollers.

The Nevada Gaming Commission, meeting via teleconference Monday morning, acted after industry representatives and the Nevada Gaming Control Board were unable to reach a compromise on the rebate issue.

The part-time Gaming Commission establishes gaming rules based on recommendations from the Board, which is a full-time body running day-to-day regulation of Nevada casinos.

The industry in recent weeks proposed regulations that would allow books to award prizes, but not cash rebates, to their best customers.

But Board officials oppose the idea, saying that allowing books to award prizes that can easily be converted to cash is tantamount to letting them offer cash rebates.

If promotions are banned, industry officials say, book handle will decline 10 to 20 percent statewide. That may be true, say Board officials, but book revenues will not be affected, as revenues now are artificially depressed by the rebates books offer.

Commission Chairman Bill Curran suggested a telephone conference was not the appropriate place for commissioners to undertake an exhaustive examination of the issue.

"My own sense is that the language is a little complex," said Curran.

The Commission followed Curran's lead and agreed to discuss the issue at the Commission's regular November meeting. Final passage will be scheduled for December. The proposed regulations would not take effect until Jan. 1.

At issue is what actions race books will be allowed to take to attract high-rollers. The whole controversy stems from a 1997 state law banning books from offering their best customers rebates on their wagering activity.

That law was passed in response to an incident in which California horse owners pressured California tracks to turn off their video feed to Nevada race books. The horse owners charged Nevada books were unfairly attracting their best customers away by offering rebates, and demanded either higher dissemination fees or an end to rebates.

Under the rebate system, a book offers customers who bet a certain minimum daily amount -- say $100,000 -- a refund equal to a certain percentage of their daily wagering -- say 10 percent.

After the Legislature outlawed the practice, the Board charges, some books side-stepped the law. They offered patrons who meet the daily minimum access to special wagers designed to refund those patrons a similar percentage.

For instance, the customers may have been allowed to bet on a field of horses against a 99-1 longshot, a bet that's almost impossible to lose. If they did happen to lose that bet, Board officials say, customers were allowed to bet again until they won back 10 percent of their wagers.

"The only reason for offering that bet was to offer the patron a rebate," said Greg Gail, chief of the Gaming Control Board's audit division, at a Gaming Commission meeting last week.

Industry representatives resent any implication that they're violating the law, and argue the law does not prohibit them from offering their best customers access to promotional wagers.

"We're not trying to circumvent the statute," said Barry Lieberman, general counsel of Coast Resorts.

The Commission also approved the following changes:

-Wagers will still be allowed in chips or vouchers, but non-cash transactions will be subject to reporting requirements similar to those that govern cash transactions. The Board had wanted to ban non-cash wagering at the books, but agreed to accept reporting requirements for non-cash wagers.

-Books will be allowed to exempt certain regular pre-designated customers from the reporting requirements, subject to Board approval.

-Books must justify changes in betting limits by filling out a form detailing how the change benefits the book. Board officials charge the books regularly offer their best customers special limits not available to other customers.

-Books must hold enough money in reserve to cover all wagers in the event of bankruptcy or a disaster.

-All lines, odds or changes must be posted or otherwise made available to the public.

-Book employees are prohibited from placing bets at their books or at affiliated books, and employees with control over lines or odds must be licensed as key employees.

-Cell phones and pagers are prohibited from books, and wagers cannot be placed via the Internet. Using a computer to dial directly into a book to place wagers is allowed. The idea here is to make messenger betting more difficult.

The Internet prohibition was passed over the objection of Victor Salerno, president and chief executive of American Wagering Inc., which operates Leroy's Race and Sports Books in casinos throughout Nevada. American Wagering was recently granted an Australian license to run an Internet-based book.

Fresh from a conference on Internet gambling, Salerno warned that Nevada was missing an opportunity by banning the use of the Internet for gambling.

"I feel that we are really going backwards as a state by not recognizing this at this time," Salerno said.

Commissioner Augie Gurrola seemed sympathetic to Salerno's argument, saying the Commission should take a more in-depth look at the possibility of allowing the Internet as a medium of communication for gambling.

But Curran and other commissioners were reluctant to make a last-minute substantive change to the regulations, and urged Salerno to petition the Commission at a later date for a regulation allowing gambling over the Internet.