Gaming regulators, manufacturers disagree on computer-code writers

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

Fri, Nov 20, 2009 (3 a.m.)

State gaming regulators and slot machines manufacturers are at odds over how Nevada should monitor independent contractors hired to write computer codes for new or updated machines.

The state Gaming Control Board agreed after a public hearing Nov. 13 that its staff would take another look at modifying proposed regulations.

At issue is whether independent contractors who write computer codes for licensed operators should be required to register with the Control Board.

Manufacturers fear requiring a contractor to register would produce a chilling effect to recruit freelance code writers who don’t want to submit personal information to a government entity.

But regulators are wary about not having any relationship with the creators of the programs that determine wins and losses for gamblers. Similarly, they recently had trouble with third-party operators of casino nightclubs and pools in which the operators didn’t seem to have the same appreciation for rules that licensees have.

Lawyers for the Association of Gaming Equipment Manufacturers and for Las Vegas-based Bally Technologies commented the most on the proposed Regulation 14 on manufacturing, distributing and operating intercasino linked systems, new and updated slot machines, online slot metering and cashless wagering systems.

The association drafted a regulation incorporating most of the language developed by the Control Board staff, but modifying rules on independent contractors, on “control programs” and on quarterly reporting requirements.

The association and Bally maintain that licensees should be responsible for the content of the computer codes only when they are submitted to the board’s gaming lab for approval.

“AGEM continues to view the registration requirement as unnecessary in those instances where the licensed manufacturer of the device or system assumes the responsibility for the control program and is performing the oversight function prescribed” by regulation, Dan Reaser of the law firm Lionel Sawyer & Collins, which is representing the association, said in a letter to regulators.

The group first addressed the issue in July when the board asked for comments on the regulation directed by the passage of Senate Bill 83 at this year’s legislative session.

Board members agreed to review the association’s concerns and will reconsider modifications to Regulation 14, probably in December.

Board Chairman Dennis Neilander said the give and take between the board and the regulators is routine in the regulatory process with the objective to draft rules that aren’t onerous to the industry.

The board sent three other amended regulations to the Nevada Gaming Commission, which is expected to have a public hearing in December with a second hearing and adoption in January.

Two regulations are cleaned-up measures that address “system-based games” and “system-supported games,” the new technology that runs slot machines from a central computer server instead of as individual units. Regulation 1, which defines “system-based,” and Regulation 5, which addresses them in the operation of gaming establishments, would be modified.

The commission also will consider modifications to Regulation 16 addressing publicly traded corporations and public offerings of securities.

In a bid to encourage more financial support from institutional investors, the amended regulation would raise the investment threshold from 10 percent ownership to 20 percent — 25 percent with a board-approved waiver — without having to be licensed by regulators.

That means institutional investors could put more money into Nevada companies without individuals having to submit to the scrutiny of a background investigation.