Bally’s Corporation appeared before the Nevada Gaming Commission (NGC) at a meeting yesterday. It was seeking approval to formally take over operations at the Tropicana, which it purchased last year, and to add a racebook and sports pool.
The commissioners granted their unanimous approval to the company. It became clear at the meeting that Bally’s plans extensive upgrades to the property, which is one of the oldest on the Las Vegas Strip. Initially constructed in 1957, its last major renovation was over a decade ago.
Bally’s announced the acquisition in April 2021 and completed the deal in June. It received preliminary approval to take over operations from the Nevada Gaming Control Board (NGCB) earlier this month.
Although Bally’s got the go-ahead from the NGC, the approval did come with a warning. Commissioner Ben Kieckhefer wanted to discuss a point that had come up at the NGCB meeting regarding the gray market activities of Bally’s subsidiary Gamesys. In particular, he wanted assurance that Bally’s expects to update its standards to meet Nevada policies.
“Gray markets” refers to jurisdictions where a form of gambling isn’t explicitly addressed in the relevant laws. That’s often the case for online casinos, as many gambling laws predate the modern internet.
There are many shades of gray within that definition. It depends both on a government’s attitude towards gray market operators and on interpreting the exact wording of the law.
The relevant portion of the discussion starts at around the 57-minute mark of the recording of the meeting available on YouTube.
A Difference in Standards
Gamesys is an online casino operator and platform provider. Bally’s acquired it last year for $2.7 billion, in large part to support its entry into the US online gambling space. As part of the deal, former Gamesys CEO Lee Fenton took over the CEO role at Bally’s.
Commissioner Kieckhefer’s issue appeared to be that Bally’s had told the NGCB that it had been applying the New Jersey Division of Gaming Enforcement (NJDGE)‘s standards in deciding whether or not to enter a gray market.
Though he was choosing his words carefully, the Kieckhefer appeared to be telling Bally’s that the NJ standard would not be good enough for Nevada gaming regulators. He began by saying:
I wanted to revisit the discussion that you had at the Board, however, regarding gray markets. And the corporate philosophy of using the New Jersey model to evaluate whether to enter into a market. That seems like a deviation from what has been Nevada policy in the past. That participation in gray markets has been given, perhaps, a stronger view than what happens in New Jersey.
Dan Fenimore, speaking on behalf of Bally’s, explained that the company’s Compliance Committee is already at work auditing its standards. He said that using the NJDGE’s standards is a legacy decision related to Gamesys’s position in the US before its acquisition by Bally’s. Gamesys hadn’t been operating in any North American jurisdictions other than New Jersey, so there had been no need to consider other standards.
That model was the model used by Gamesys before it became part of Bally’s. Because its only domestic regulator in North America was New Jersey. So New Jersey said ‘here’s the standard for our licensees.’ So, Gamesys applied that two-pronged standard.
The Sticking Point Seems to Be Japan
Commissioner Kieckhefer raised the specific issue of Japan. Its laws don’t specifically address online gambling, but the government has clarified that it considers it illegal.
Nonetheless, at least one online casino – Vera & John Casino – with ties to Gamesys has actively targeted Japanese customers. While Kieckhefer didn’t mention any specific activities, that may be his concern.
Fenimore said that Gamesys retained reputable local council regarding Japanese law. He stressed that it only acts in a business-to-business capacity there. (Generally speaking, technology suppliers enjoy more legal and regulatory leeway than the operators who market to and directly serve the end user.)
Kieckhefer, a former Nevada Senator, said he’s looking at the situation from a policy perspective, not a legal one.
Japan amended its gambling laws in 2018 to allow for integrated casino resorts. Kieckhefer says that, from a policymaker’s perspective, if Japanese lawmakers had intended to allow for online gambling, that would have been part of the conversation at that time.
To him, the lack of language about online gambling in the new law indicates that Japan should be considered a black market, at least in terms of its policy intent.
An Implied Agreement
The topic of how regulators should view non-compliance or questionable compliance in other jurisdictions is a matter of ongoing debate. That’s especially true when it comes to suppliers. It has, for instance, come up with SBTech (now owned by DraftKings) and Evolution in the last few years.
Kieckhefer’s comment was just that, a comment. However, if there was an implied warning contained in it, Bally’s seems to have received the message.
At one point, Kieckhefer came close to asserting that Bally’s would need to change its compliance standards to suit Nevada:
I appreciate that perhaps that decision hasn’t been made at the compliance level for Bally’s. But I just wanted to raise that issue, that if it was a hard and fixed decision [to use the New Jersey model], that would [require] a change of policy for the State of Nevada to be okay with that, and I’m not sure we are.
However, it seems that Bally’s is well aware of the potential issue and intends to do whatever it takes to comply with Nevada’s wishes. Bally’s Independent Director Wanda Wilson cut in at the end to offer Commissioner Kieckhefer her assurances:
Let me say that we most certainly are listening to what you have to say as we go forward to put together these policies. We have heard you. Clearly, we have heard you.