Q: Why is selling a casino so complicated?

A: This response is limited to commercial casinos. At the foundation of the casino gaming industry, there is a partnership between the authorizing jurisdiction and the casino operators that have been selected or licensed to operate casinos in the host jurisdiction. As the regulated casino gaming industry expanded outside of Nevada and New Jersey, states and international jurisdictions have developed either a free market model or a limited licensing model. Depending upon the market there are very different processes that must be followed in order to purchase a casino license. If you are looking at getting involved in a Native American casino project, it is important to review the limitations that Congress has placed onto these developments via the enactment of the Indian Gaming Regulatory Act. There are three aspects of the transaction that any interested business investor should consider in connection with exploring whether it is a good business investment decision to purchase some or all of a commercial casino.

First, as a casino license is a privileged license and there are strict rules on ownership qualification, the business owner or group of investors must consider conducting a licensing qualification analysis. This process can be completed by reviewing the laws, rules and policies of the gaming agency as well as the licensing qualification standards, all of which a casino license applicant will be subject to comply with.

Secondly, the casino acquisition analysis should involve a review of the minimum capital investment or debt-to-equity requirements. Many jurisdictions require that a casino developer hold a minimum level of equity in the project, and this threshold is a very important factor in determining an investor’s desire to enter into the business transaction.

Finally, it is important that the investor review the required ongoing reporting and licensing commitments either at the state level or via the local host community. There are many additional due diligence items that are required in connection with a casino purchasing process; however, for investors new to the industry, these are three very important areas that should be reviewed. Without an understanding of these core areas, and without some pre-planning and analysis, the process can become extremely complicated.

Gaming industry advisor Regulatory Management Counselors, P.C. authored this article. Visit the Gaming Advisors section of this website to find out more about gaming licensing and compliance advisors.