The Need for Regulatory Structures
Is gaming regulation a state issue, a national issue or a global issue? The answer is yes to all of the above. What happens in gaming anywhere affects gaming everywhere, and that is quite simply the nature of an industry that is blossoming in every possible direction.
The American Gaming Association, as its first name and Washington, D.C., address might indicate, is focused on legislation, education and advocacy for the United States gaming industry. So why, then, is this organization addressing regulators in Macau, organizing the G2E Asia and speaking to officials in other countries?
“I don’t envision us becoming the International Gaming Association, but we do focus on those things that are important to U.S. companies,” explained Frank J. Fahrenkopf Jr., AGA president and CEO.
Plainly, overseas markets are important to overseas companies. Macau, as you may have heard, is booming. Vietnam is emerging. Japan may test the casino waters. Eastern Europe is opening up. Even Russia is trying to harness its gaming industry to encourage international investment. U.S. gaming companies, however, must tread carefully into foreign jurisdictions, because profit potential alone cannot dictate entry.
Seeking oversight, controlWith greater scrutiny than ever before, American gaming operators are seeking-even demanding-high-quality, transparent gaming regulation as a condition of investment. As Fahrenkopf explained, “This is a strange industry in that companies want tough regulation with law-enforcement backing...If you get in trouble somewhere else, it puts your licenses in jeopardy in the states.”
Enter the AGA, which as the embodiment of its collective members-most major American gaming companies-is encouraging foreign jurisdictions of the importance of toeing the regulatory line.
Fahrenkopf’s message to regulators and government officials in other countries is that quality regulation results in foreign direct investment by companies that are prepared to write 10-figure checks and employ thousands of people.
Whether through the AGA or other means, countries are getting the message. The Czech Republic, for instance, is attempting for the third time to amend its gaming act; the first two tries were rejected by the European Union as unacceptable for various reasons. Czech’s new head regulator, Petr Vrzan, recognizes the needs for effective regulation to not only reign in a runaway industry, but to encourage investment by foreign operators.
Regulatory willpowerOn a related theme, the importance of regulation at the national and international level has created some tensions, but also allowed some new heroes to emerge.
Phil Hogen, chairman of the National Indian Gaming Commission, is one such hero. He has an extraordinarily difficult job in regulating tribal casinos across the United States, ranging across every time zone and economic strata.
The NIGC has proposed regulations that attempt to define a “bright line” between Class II games and Class III games, and that is an extraordinarily difficult task under even the best of circumstances. He has to balance a dizzying array of interests. Some believe that Class II machines (a form of bingo using electronic and technologic aids) and Class III (casino-style games found in commercial gaming markets) need to have distinct boundaries. If such boundaries are not defined, the line will become more blurred as technology advances. Those who hold this view believe that there will be no need for state compacts, as the point becomes moot (at least as far as slot machines are concerned).
Another view is that the effort to draw a bright line removes an important negotiating tactic from tribes seeking to negotiate compacts with state governments, and most tribes do not start out with a strong bargaining posture, according to this argument.
Hogen has waded into this fray with a combination of common sense and humor. At the recent Global Gaming Expo, he faced a room that included quite a few potentially hostile attendees who would rather the NIGC simply stayed away.
Hogen was not even a speaker at this particular session, but graciously agreed to address the audience. He walked up to the microphone and quickly disarmed the crowd, with the quip: “How would you like to have this gig?”
Hogen explained that his agency has a responsibility and a job to do, and will listen to every interested party-but he will not walk away from his duty.
In any language on any continent, that speaks volumes.