Like many of you I am sure, I was somewhat taken aback by the news that Caesars Entertainment failed a mandatory background check in Massachusetts and was forced to withdraw from the partnership attempting to win one of the state’s four gaming licenses for Suffolk Downs racetrack in Boston.
Honestly, this just doesn’t ring right. Despite some well publicized financial issues, Caesars Entertainment is still one of the preeminent casino developers in the nation and the world, operators of 54 casinos in 13 states and six countries, with nary a whisper of major impropriety. It is one of the companies a jurisdiction intent on establishing a successful gaming market should welcome, not drive away. Hell, Caesars CEO Gary Loveman even lives in the state.
Despite these bona fides, the Massachusetts Gaming Commission rejected Caesars for two primary reasons: Its relationship with the Gansevoort Hotel Group, a boutique hotel developer that was partners with Caesars in a Las Vegas development with rumored ties to organized crime; and the company’s handling of Terrance Watanabe, an Asian high roller who claimed the company plied him with alcohol when he lost million at its tables in 2007. Caesars was quick to defend itself—it withdrew from its arrangement with Gansevoort and the company reached a settlement with Watanabe and restructured its policies with high rollers—but these excuses did not curry any favor with the commission.
Loveman was understandably upset by these results, telling the Boston Globethat the state has set unprecedented licensing standards that companies are going to have a hard time meeting. “It’s going to be very difficult for sophisticated, multi-jurisdictional operators to tolerate the environment this commission has created,” he said. “In other jurisdictions if you do something that raises a regulator’s concerns . . . in almost every instance, as long as you discontinue or disassociate, it is considered a reasonable action.”
To the commission’s credit, five other casino development companies have already passed its background check—Penn National Gaming, Cordish Cos., Raynham Park and partner Greenwood Racing, Mohegan Sun, and Rush Street Gaming. Of course, none of these companies have the size or scope of Caesars Entertainment. Hanging Caesars out to dry for infractions that it has since resolved seems to smack of overzealousness on the part of the commission; or is there something more involved? Caesars was attempting to develop a $1 billion casino at Suffolk Downs, a project that had raised the ire of local anti-gaming groups. The casino expansion plan is up for a vote in early November, and with Caesars out of the project, there is a good chance it will not pass. Could the rejection of Caesars be a coincidence in a state where Tip O’Neill famously said “all politics is local”?
Whatever the reasons, Caesars travails were not lost on other developers seeking to do business with the state.
“In my 47 years of business in the gaming industry, [the Massachusetts licensing process] is probably one of the most challenging, complex situations that I’ve ever faced,” Steve Wynn, who its attempting to build a $1.2 billion resort in the community of Everett, told Bloomberg. “If I was in any other business, and I was willing to spend the kind of money, create the kind of jobs that these states have requested, we would have the red carpet rolled out for us. But if you’re in the gaming business, there’s sort of a crummy presumption that you might be unsavory.”
In jurisdictions where casino gaming has been successful, a partnership often forms between the casino operators and state and local officials, each looking for ways to grow and protect a trade that employees thousands of people and raises millions of dollars in taxes. So far, this relationship in Massachusetts appears to be off to a very rocky start, not good for a state that is already late to the casino party, and can use the backing and market support generated by large casino companies such as Caesars Entertainment and Wynn Resorts.