Gaming Technology Providers-Law and Policy (790-1013)

Aug. 29th, 2017

Week 1
Class 1
Instructor: Mark Lerner
TWEN*
Assignments and Quizzes*-Always check
Grading-Syllabus
Executive summary of new jurisdiction (2 weeks)
Always review or read: 10-K 7 Q quarterly reports
Gaming Manufacturers
Slot machines used to acct for 10% of casino revenues, today they acct for 50% to
100% of casino revenues.
Asia: today their casinos are predominantly table games
Real spinners vs. video spinners
Outcomes based on mathematical algorithms
Most successful game in history: Wheel of Fortune
*Compare and contract how casinos and manufactures are regulated?
*How do regulations match up with the policies they are meant to ?
Jobs for gaming lawyers for manufacturing co.-more opportunities than Casinos
Clue: for 10-K
Gross Revenue-Line item in financial table not textbook
What does Nevada Law say a manufacturer is?
If there is a wager, then its gambling.
Wager: sum of money or representative value risked on an occurrence for wich the
outcome is uncertain
Mississippi statutes-almost identical to Nevadas
New Jersey: different wording, same concepts
*Definitions are jurisdiction specific
Casinos only apply local law
Manufacturers apply different jurisdictions Law depending on business relations
How the local regulatory agencies interpret status and definitions
Assignment #2 Due Wed. Aug. 30th

Week1 Aug. 30th, 2017

Class 2
Definition of lottery:
Price
Chance
Consideration
Nevada-Manufacturer: someone who makes gaming devices for use and play in
Nevada
Video lottery terminal: slot machine that the jurisdiction doesnt want to call slot
machine
Course materials/jurisdiction summaries (writing and presentation)
Manufacturers: Do they have to be licensed, do their products have to be approved?
Week 2
Class 3
Gaming Manufacturers by the Numbers
Manufacturers:
Companies
IGT: $5.2 billion ($2.2B w/o lottery)-2016 Form 20-F, p.6(p.30)
SGMS: $2.9 billion ($2.1B w/o lottery)-2016 Form 10-K, p.41
Industry revenue
Per AGA: $6 billion
Per AGEM: $18B
Operators:
Companies
Wynn Las Vegas: $1.6B-2016 Form 10-K, p.20
Sands Las Vegas: $1.6 B-2016 Form 10-K, pp.45-47, 50
Industry revenue
Per AGA: $81 B
Slot Machines:
Average selling price-$16,647
$51.73/day for WAP, premium, daily free participations units
$15.29/day for leased games
SGMS 2016 Form 10-K, p.49
Average daily win (win=coin-in minus coin-out)
Handle: money that goes into the machine
Slot machines shipped in 2016
SGMS: $31,610-2016 Form 10-K, p.40
IGT: ?
All companies: 100, 000???
Compare:
HP-Computers: 52million
Apple iPhones: 41 million (Q3)
Apple iPads: 11 million (Q3)
Sale of Goods Contract-1 year default warranty
60 days is the typical warranty manufacturers offer for gaming machines
Slot machines cost (16,647) vs. system cost (5 million)
IP-game
Sept. 20-Presentation

Week 3
Class 4

Manufacturers dont pay gaming revenue.

Manufacturers vs. Casinos
More jurisdictions for manufacturers
80% of jurisdictions have renewal periods annually-Casino
2-3 times per year-Manufacturers
Licensing:
 Nev. Rev. Stat. &463.0129
Licensing Basics:
o Entity:
Must be licensed
If there are other companies in the structure, they may or
many not have to be licensed or registered in some fashion.
E.g. holding, companies=shareholders
E.g. member/manager
o People:
Principals must be licensed
Directors (or equivalent)
Public companies: not all director
Officers (or equivalents)
Office v. tittle
o Owners:
Private co.: all shareholders must be licensed
Public co.: different rules
Common rule: >5% (sometimes >10%) interest must be
licensed
Kansas: 0.05%
Common rule: controlling shareholders
Different rules for institutional investors:
o Less than 15%-25%
o No intent to control
o No seat on board
o No say in management
o For investment purposes only
Why the exception?

Week 3
Class 5
September 13, 2017

Reasons for regulating gaming:

Historical
Taxes
Licensing Requirements based on e.g.:
Casinos vs. Manufacturers
Customers General Public B2B
Competitiveness Yes Yes
Gaming License Single Several
Credit Check Yes (Soft Inquiry) Yes(Soft Inquiry)

NRS 463.489
NRS 463.530
NRS 463.635
NRS 463.637
NRS 463.639
Application for Nevada Gaming License Forms Review of Forms 1&2
NRS 463.140(5)
Licensing Sale of stocks

Week 5
Class 6
Assignment: Basic idea of structure and function of regulatory commission. Do
manufacturers have to be licensed, do their products have to be approved. How
many ppl.? Regulatory scheme implemented by state vs. Tribe. If products require
approvals, do they labs, are the labs internal or external? How much it costs to do an
investigation.
How does the process match up with the purposes? How does re-licensing every
year helps fulfil the principles of gaming regulation? How do application fulfill
policies?

Week 6
Class 7
Friday Oct 20th, 10am-Visit to factory
Gamblingcompliance.com-jurisdiction summary- good source
1988- riverboat gambling started
NRS 463.0157 Gaming employee defined-Manufacturers (i) who as a manufacturer
are you worried about as a regulator?
Key employee-very jurisdiction specific e.g New Jersey vs. Nevada
General counsel
Gaming employee registration Nevada gaming control board & commission (ppt.)
NRS 463. -12

Week 6
Class 8
Casino Structure
Employee Roles
VP of finance: in charge of budget, making sure the revenue is paid, they oversee
internal controls, oversees and has connections with internal and external audits
VP of marketing: work wit casino host, in charge of marketing, media, junket
representatives-almost like a casino host, but rather a third party contractor rather
than an internal employee
VP of human resources: union rep, workers comp, OSHA, make sure that there is
compliance with federal, state and local laws
Racings sports books
Casino Design
Surveillance Standards
Week 6
Class 9

Manufacturers Gaming License

Grounds for disqualifications
Manufacturers: have to be registered at almost every jurisdiction. Main question-
Whether you are physically at a casino.
Help desk personnel at the casino has to be registered as well.
NRS 463.0157 Gaming Employee defined (casino v. manufacturers)
NRS 464.010
NRS 464.430
Why gaming engineers have to be licensed?
To prevent:
Cheat, Stealing-Team
Taxes-are not a concern under gaming manufacturers regulation
81B dollar industry
Regulation & policy break down, there is not a close relation
Currentness
1 a)

Week 7
Class 10

How slot machines work?

Microprocessor controlled
Random number generator
Outcome of each play is determined and stored in non-volatile memory before the
outcome is displayed
Last game recall feature accurately recalls stored outcomes
Malfunction voids all pays and plays.
No magic switches
TITO (cashless)
Mostly video now

Mechanism for resolving disputes

Week 7
Class 11

Player dispute involves, patron, player, casino, regulatory agency (which generally
investigates issues reports and makes decisions), and the manufacturers who built
the machine.

NRS 463.362 Resolution of Disputes