Gaming Control chief: Raise level of ownership for casino licensing

The Senate Judiciary Committee held initial hearings Friday on two bills that have relevance to the future of Internet gaming within Nevada.

One of the bills would establish regulations for companies seeking to provide interactive gaming services, while the other regulates "hosting centers," which house computer networks at a location separate from casinos.

Senate Bill 103 would require the Nevada Gaming Commission to establish licensing requirements and fees for each "interactive gaming service providers" to act on behalf of a gaming establishment.

"There have been various legislative efforts focused on Internet gaming in the United States," Robert Faiss, a gaming attorney with Lionel, Sawyer & Collins, told the committee. "There has been much speculation who will be the first state" to legalize online gaming.

He reminded lawmakers the Nevada legislation previously passed an Internet gambling bill in November 2001, but the regulations were not formed. In 2002, the U.S. Department of Justice warned Nevada that it could consider the bill to be illegal.

SB103 does not specify that the gaming commission cannot discriminate against operators that have previously operated Internet gambling sites without U.S. licensing.

The measure does not discuss opening Nevada's intranet gambling to other jurisdictions outside of the state. Intranet is a system within Nevada, while the Internet operates state-by-state.

Faiss, who represented Cantor Gaming at the hearing, said his client had no involvement in crafting the bill, but did support the measure.

The second bill, SB218, authorizes the Nevada Gaming Control Board to set up and regulate "hosting centers" and authorize "service providers" as amendments to current regulations with the gaming commission's advisement.

It introduces the terms "hosting centers" and "service providers" as new definitions to the state's gaming regulations.

Nevada Gaming Control Board Chairman Mark Lipparelli said the bill also suggests creating a new class of license, potentially separating restrictions placed on service providers, such as ATM providers or software technology firms, from those applied to operators.

Lipparelli described the proposed service provider license as a "midtier category." Under the proposed bill, service providers would be able to gain a specific license from the state's Gaming Commission to perform services on behalf of already-licensed operators.

"Today, there is really is no option for these companies," said Lipparelli, adding that licensing is very expensive and "cost-prohibitive for some companies to do business" in Nevada.

He said the similarities of both bills had to be worked out and brought back before the committee. Supporters of SB103 included Cantor Gaming CEO Lee Amaitis and Vegas.com owner Danny Greenspun.

Lipparelli's bill would also raise the level of ownership in Nevada casinos to 5 percent before requiring individual licensing. He assured lawmakers that regulators would still be able, if needed, to require licensing for investors with less than a 5 percent stake.

But regulators now must hear and license even small-percentage owners, which is often costly and time-consuming.

The most controversial section of SB218 is a requirement that specifies that services charges, which are collected and obtained by third parties, are subject to the tax on live entertainment.

"This provision applies retroactively from Jan. 1, 2004, the date on which the imposition of the tax on live entertainment became effective," the measure read.

Lipparelli told the committee that this was the "correct language that will address the issue."

This brought an immediate response from state Sen. Valerie Weiner, D-Las Vegas, and chairwoman of the Senate Judiciary Committee. Weiner asked whether this was an existing tax or a new tax.

He said the committee was charged with finding if a tax applies or if it doesn't apply.

The meeting was in Carson City but videoconferenced to Las Vegas.

Jennifer Roberts, a gaming attorney with Lionel Sawyer & Collins, appeared on behalf of AEG LV LLC and addressed the committee from Las Vegas. Roberts said Section 13 of the bill was aimed directly at her client.

She said AEG, which operates the Coliseum at Caesars Palace, was not required to pay taxes on service charges collected on tickets sold. AEG has sued in District Court in Las Vegas seeking to have regulators' previous decision overturned.

Roberts stressed the "court, not the Legislature is the appropriate venue" to seek a solution.

Weiner said time was short for the committee to consider one or both measures. Friday's committee hearing was adjourned without a vote. She expected the committee to hold additional hearings on the bills next week.

Contact reporter Chris Sieroty at
csieroty@reviewjournal.com or 702-477-3893.