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December 17, 2014

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Baccarat in the sky

A casino mogul expects to start cashing in soon on the long trip between Macau and Las Vegas

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Chris Morris

Steve Wynn has considered offering in-flight gambling but rejected the idea for other than legal reasons, people close to him say.

Steve Wynn has considered offering in-flight gambling but rejected the idea for other than legal reasons, people close to him say.

Sheldon Adelson’s newest tactic to rake in gambling revenue — by ferrying high rollers between his Venetian resorts in Macau and Las Vegas and breaking out the baccarat tables at 30,000 feet — raises the question: Why hasn’t someone else already done it?

At least one competing company, MGM Mirage, didn’t think it was legal.

The earnings potential for high-altitude gambling, untapped for now, is immense. Because transoceanic flights operate in international airspace, there’s no government to regulate the games or collect taxes. (Nevada taxes billions of dollars of Las Vegas Strip gambling revenue at 6.75 percent, and the tax rate in Macau, which generates similar revenue, is about 40 percent.)

Adelson’s Las Vegas Sands Corp., which expects to begin in-flight gambling soon after purchasing two Lockheed wide-bodied jets, is benefiting from an exception to a U.S. law that tightly restricts gambling on aircraft.

In 1994 Congress amended a law that regulates the transportation of gambling devices in the United States by specifically prohibiting the operation of gambling devices on flights into and out of the country.

The amendment came as foreign airlines were beginning to offer gambling on flights outside of the country as well as on flights destined for the United States.

The Federal Aviation Administration says the law effectively excludes private aircraft and charter flights from the gambling ban.

FAA spokesman Ian Gregor says nothing in the law, then, bans the kind of high-altitude gambling envisioned by Las Vegas Sands over the Pacific Ocean.

That comes as a surprise to at least one competitor.

MGM Mirage had discussed the possibility of offering gambling on charter flights over the years, but the idea didn’t get very far “because we were not aware of any legal or regulatory approval for this,” spokesman Alan Feldman said.

Would the company reconsider now? Feldman said he wasn’t sure.

Steve Wynn has considered and rejected in-flight gambling ventures for other than legal reasons, people close to him say.

Gambling on commercial flights remains controversial, not to mention illegal, in the United States.

Before the 1994 amendment that all but banned in-flight gambling, only a few airlines had experimented with or even discussed gambling onboard aircraft. They included Singapore Airlines, which offered a few slot machines on certain flights, and Swissair, which offered an electronic entertainment system that included gambling. The ban, along with the 1998 crash of Swissair Flight 111 off Nova Scotia, chilled future efforts to explore gambling options. According to news accounts of the crash, the Swissair plane was brought down by a fire that started in the entertainment system.

More than a decade ago, Harrah’s Entertainment tested a gambling system for use on airplanes but abandoned the effort after the system ran into technical difficulties.

Gaming attorney Tony Cabot said Las Vegas Sands might have another legal avenue for offering high-altitude baccarat games. The 1994 amendment refers to a federal law that applies to electric or mechanical gambling games rather than table games, he said.

Adelson’s aircraft would offer only table games, according to the state Gaming Control Board, which has been notified of the company’s plans.

Las Vegas Sands representatives did not return phone calls for comment.

The prospect of gambling onboard aircraft raises other regulatory questions.

Gaming Control Board Chairman Dennis Neilander said gambling onboard aircraft falls under the state’s foreign gaming law, which applies to gambling activities offered by Nevada companies outside of the state.

Under the foreign gaming rules, Nevada casino operators must submit periodic reports to Nevada authorities on their operations to show they are conducting business honestly. Companies also have to submit annual reports showing proper auditing and surveillance procedures.

They also must run their out-of-state casinos according to the rules and regulations of the other state, foreign country or tribal reservation.

But these rules weren’t designed to accommodate airline casinos, because the regulatory authority in question — the FAA — doesn’t regulate gambling operations.

“We don’t have the authority to tell people they can or cannot gamble,” Gregor said.

Although no casino operator has attempted an aircraft casino, the Gaming Control Board has some history overseeing casinos located in a regulatory no man’s land.

Years ago, a few Nevada operators managed small casinos onboard cruise ships that operated in international waters. Today, no Las Vegas companies are connected with cruise ship gambling. Nevada regulators historically required that Nevada companies operate cruise ship casinos like their land-based casinos, with some exceptions. Casino executives on cruise ships weren’t licensed, nor did regulators mediate patron disputes on the high seas.

Attorneys say regulators will similarly oversee aircraft casinos.

Neilander won’t speculate about the aircraft casino offered by Las Vegas Sands, which hasn’t submitted a formal plan to the Gaming Control Board.

A Nevada company operating an aircraft casino probably would submit a proposal outlining its security and accounting procedures before moving forward, he said. The company wouldn’t have to receive prior approval for the proposal but could be subject to disciplinary action if information in its reports to the board revealed possible violations of basic operating procedures or put Nevada in a bad light, Neilander said.

Gambling in the air presents an unusual challenge that goes beyond cruise ship gambling, which is virtually indistinguishable from a land-based casino, legal experts say.

The Association of Flight Attendants criticized gambling in the 1990s, telling the FAA that it feared unruly customers who had lost money and was uncomfortable with the prospect of mediating gambling disputes.

The federal government has been reluctant to allow gambling on commercial flights, citing among other things concerns about whether it would exacerbate problem gambling.

Before the 1994 ban, several manufacturers were building expensive aircraft entertainment systems with gambling features. Former Chrysler chief Lee Iacocca considered them potential cash cows that could generate $1 billion a year for a single airline, mostly from gambling.

Few airlines offer gambling, and the business has been slow to expand, even on foreign flights over international waters, where they aren’t subject to any country’s laws. Among the reasons: cost, space at the expense of passenger seats — and passengers arriving in a foul mood after a bad luck streak at 30,000 feet.

Los Angeles-based gaming attorney I. Nelson Rose suspects there isn’t much demand for in-flight gambling because it is so widespread on land and at sea.

Aircraft giant Airbus is considering building a casino onboard its A380, the world’s largest passenger plane.

At least one carrier, Dublin, Ireland-based Ryanair, says it plans to expand its gambling offerings on flights over the English Channel, and has raised the possibility that it wouldn’t charge for tickets — because there would be enough gambling revenue to cover the airfare.

Beats a free drink.

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