ATTORNEY AT LARGE: Beware the rush to legalization
by Lloyd Levenson
October 1, 2009
On July 13, Ohio Gov. Ted Strickland, his state facing a $3.2 billion budget gap, directed the Ohio Lottery to place video lottery terminals at the state’s seven racetracks. Gaming was born in the Buckeye State.
Strickland’s five-point directive was remarkable in that it unabashedly called for fast action. “The Lottery Director Should Immediately Take Steps To Implement VLTs,” point No. 4 stated. Later in the directive Strickland wrote that “The Lottery Should Use any Existing Contracts It Has Which Would Permit the Rapid Implementation of VLTs. … ”
In reading the 740-word directive it was evident that speed of implementation — for the purpose of maximum economic gain — was the priority. Noticeably absent from the governor’s order was an emphasis on regulation. Only one of the 11 paragraphs concerned regulation: “Strict Background Checks of Prospective VLT Licensees Shall Be Undertaken: Strict criminal and financial background checks of all prospective VLT licensees shall be undertaken prior to the issuance of any such licenses, and only those meeting clearly articulated standards shall be granted such licenses.”
Now, I am not suggesting that Strickland is pooh-poohing the regulatory aspects of casino gambling. The regulations are being developed by the Ohio Lottery, and there is no reason to believe that Ohio’s VLT program will be any less well-regulated than those in states such as Delaware, New York, Rhode Island or West Virginia.
My point is this: States are increasingly looking toward gaming expansion as a quick fix for their budget problems, and they are increasingly looking to implement the new gaming as quickly as possible. I am left to wonder: At some point, will expediency come at the cost of a regulatory fiasco?
Pennsylvania, for one, illustrates why careful attention to the regulatory aspects is critical. It took that state 29 months from the time of legalization to the opening of the first casino in 2006. And yet a major regulatory issue — the role of the State Police in licensing investigations — was still unresolved well after the industry was established.
Whether casino gaming commences in a state within six months of legalization or within 12 months is irrelevant in the long run. Taking a little extra time at the start to address all possible regulatory issues will ensure that the industry has the public’s trust for decades to come.
Gaming is not a quick fix, nor should it be considered a Band-Aid for next year’s budget, however tempting that might be. In my experience the drive to get casinos open as quickly as possible may drive government to overlook matters that should not be overlooked. Such matters could include, for example, a rigorous investigative process to ensure that all applicants — as well as their senior employees and vendors — meet essential standards of good character, honesty and integrity.
Casinos, whether planned well or planned poorly, will be around for decades, long after this year’s fiscal problem fizzles out and is long forgotten. However, a poorly planned regulatory regimen that fails to engender sufficient confidence from investors or the public will not serve any interests, possibly including short-term interests as well.
Public officials in emerging markets need to recognize that effective regulation is not just a priority for regulators but is also a priority for casino operators, who recognize, often more quickly than others, that licensure is more than a badge of honor and is not just a clear demonstration of good character. It is also a competitive tool. Operators and suppliers both recognize that their long experience in securing licenses in multiple jurisdictions cannot easily be replicated by newcomers, and consequently these established companies have every interest in ensuring that emerging markets emulate existing markets by focusing on regulation.
Experienced operators and suppliers have another concern as well. They recognize that the gaming industry is only as strong as its weakest participant, and if any state or nation attempts to short-cut the licensing process it could allow participation by individuals or companies that would not pass muster elsewhere. That is an almost certain prescription for controversy — and perhaps even a scandal —and that benefits no one.
A prescription that is just as simple should be followed: Think long-term. Act long-term. Focus on integrity.
That is the formula to attract capital investment and public confidence.
Lloyd Levenson is CEO and chairman of the Casino Law Department of the Atlantic City/Las Vegas law firm Cooper Levenson (www.cooperlevenson.com). He can be reached at (609) 344-3161.
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