Get ready for sports book competition, regulator says

By Richard N. Velotta (contact), In Business reporter

Fri, Nov 13, 2009 (3 a.m.)

Nevada will face competition for race and sports books, a state gaming regulator predicts.

“The most pent-up demand is for sports wagering,” state Gaming Control Board member Randall Sayre told more than 60 lawyers at the 2009 Gaming Law Conference sponsored by the State Bar of Nevada.

Sayre made his remarks Nov. 6 at the Rio. The event included a keynote presentation by American Gaming Association President and CEO Frank Fahrenkopf and several panels on legal and regulatory issues in the gaming industry.

Sayre said as more states struggle to develop revenue sources, some will look to race and sports books as a solution.

“It’s about competition, competition and more competition,” Sayre said in response to a question about which issues will be prominent in the future. “There will be intense revenue pressures, more than we’ve ever seen before. The profound impact of competition on the state is not going to go away.”

Nevada, the only state to offer legal wagering on sports, nearly got its first competition this year when Delaware proposed allowing sports bets at racinos. The move was blocked by 3rd U.S. Circuit Court of Appeals when the National Football League, Major League Baseball, National Basketball Association and NCAA filed a motion in opposition.

Delaware was one of four states — the others are Oregon, Montana and New Jersey — that were exempt from legislation banning sports wagering in the United States, one of the last bills sponsored by former New Jersey Sen. Bill Bradley, who played professional basketball before getting into politics.

The four states had an exemption because they had lottery games tied to professional football results.

Sports betting accounts for just 1 percent of the total gaming win in Nevada every year.

Nevada Gaming Commissioner Radha Chanderraj said rapid advances in technology will challenge regulators as manufacturers work faster and faster to bring innovations to the market. She also expects the rapid expansion of gaming to foreign jurisdictions and monitoring Nevada licensees in those countries will be challenging.

Fahrenkopf gave an overview of the state of gaming and some observations on Washington’s views.

He said the vigorous debate on health care reform and upcoming discussions on energy policy reform — which he predicts will be even more contentious than health care because of the geographical interests at stake — have shoved gaming issues even lower on the pecking order.

Fahrenkopf said he doesn’t expect any movement this year on three Internet gambling measures introduced in Congress.

Rep. Barney Frank, D-Mass., has introduced a bill legalizing and regulating online gaming at the federal level, while Rep. Jim McDermott, D-Wash., has a companion bill that would establish federal taxation on online gambling.

Sen. Robert Menendez, D-N.J., has introduced a bill to legalize and regulate games of skill, such as poker, on the Internet.

The association has taken a neutral stance on Internet gambling because key members disagree about it. Harrah’s Entertainment, owner of the World Series of Poker, supports the Menendez legislation, while Steve Wynn of Wynn Resorts opposes the legalization of online gaming. MGM Mirage, meanwhile, supports online gaming, but wants states to regulate it instead of the federal government.

Fahrenkopf said the gaming industry is suffering through the recession as is other consumer-driven industries, primarily because of the credit crunch that has thwarted growth, and the reduction in consumer spending. Expansion, he said, has always been key to the health of the gaming industry, but when access to capital evaporated companies were forced to stop construction projects in midstream or cancel other projects.

Nowhere is that more evident than on the Strip, where Echelon, St. Regis Tower (Palazzo) and Fontainebleau were stopped in midconstruction and the New York-based Plaza Hotel canceled a project.

Fahrenkopf said resort markets such as Las Vegas and Atlantic City are struggling more than local drive-in markets because visitors are taking shorter trips and spending less on expensive nongaming amenities. Consumer spending in commercial casinos fell 4.7 percent in 2008, and revenue numbers are down 6.4 percent this year.

In Nevada revenue was down 9.3 percent in August, and in Atlantic City revenue dropped 12 percent in the third quarter. Surveys indicate nearly 40 percent of Americans are adjusting their vacation plans, and 56 percent are cutting back restaurant spending. Hotel occupancy rates and airline reservations are still dropping.

But things aren’t as bad in other markets.

Revenue in Indiana, Pennsylvania and Missouri have increased or remained steady and a new Las Vegas Sands casino in Pittsburgh attracted 23,000 visitors in its first month.

Overseas, Macau has been on a roller-coaster ride. In 2008 revenue hit $13.7 billion — its highest ever and 31 percent more than in 2007. But from November 2008 through June, revenue decreased month over month because of tightened visa restrictions by China. But restrictions were relaxed during the summer and Macau had $3.81 billion in revenue in the third quarter, 22.3 percent more than the previous highest level.

The City of Dreams property had 1.1 million visitors in July, 37,000 people a day.

Fahrenkopf said gaming is expanding in Asia with the Marina Bay Sands and Resorts World set to open in early 2010 in Singapore and efforts to develop a resort on Kinmen Island in Taiwan are under way.

Latin America, Fahrenkopf said, is poised to become the third largest global gaming region with the industry gaining strength in Chile, Colombia, Peru, Uruguay, Panama, Nicaragua and Costa Rica and legislation drafted to offer gaming in Mexico and Brazil. Major gaming equipment manufacturers have established a presence in the region already.

In a session on employment law, Patrick Hicks of the Littler law firm, said political changes in America are leading to policy changes that may be a concern to casino companies. President Barack Obama’s appointment of Hilda Solis, a strong supporter of unions, as labor secretary portends a sympathetic ear to union causes and organized labor’s priority is to support the Employee Free Choice Act.

Hicks also said lawyers should brush up on medical law with the arrival of the H1N1 pandemic. Lawyers should be able to answer these questions: Do we have to pay employees if we send them home? (No, but a bill has been introduced requiring five days of sick leave in those cases.) Can we require medical certifications? (Yes.) Can we require vaccinations? (No.) Can we tell employees that someone is infected? (No.) Can we distribute masks and gloves? (Yes, but they have to conform to Occupational Safety and Health Administration regulations.)

Another workplace issue involves policies on the use of social networks. With the growth in the number of users of Facebook, Twitter and MySpace and the popularity of blogging, Hicks said companies should consider policies on employees posting material about the employer online, the monitoring of employee “rant sites” and whether supervisors should conduct Google searches on job applicants.