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Regulatory Overview

The gaming industry has experienced unprecedented growth and expansion throughout the world. An essential foundation of the success that has led to such enormous growth has been the use of sound legal and regulatory structures. The robust regulatory systems adopted in various jurisdictions have given the public confidence in the gaming industry, helping ensure fair play for the ultimate consumer and protecting the industry from infiltration (direct or indirect) by cheaters, money launderers or other criminal enterprises. Although each jurisdiction adopts its own laws, rules, regulations and procedures, there are numerous models for regulation followed throughout the world. As such, there are many common themes and practices that anyone interested in conducting business in the industry should be aware of.

The value of a gaming license or exemption should never be overlooked by those seeking to do business in this complex but navigable industry.

Without a top-down corporate appreciation for compliance, a company’s product development success may be short lived, as it only takes one mistake to derail a company from its gaming-related business efforts.

It is important to understand that the foundation of all gaming regulatory systems is an established and ongoing regulatory expectation of “compliance.”

If an entity intends to be involved in the gaming industry as an operator, investor, lender, employee, supplier or vendor to a casino or other gaming venue, most gaming regulatory structures require knowledge of and compliance with the jurisdiction’s particular rules and interpretations of rules.

Although there are many seemingly universal regulatory concepts that most jurisdictions follow, it is important to understand that dialogue and communication with regulators are critical to success. The basic tenet of compliance is the regulators’ expectation that regulated parties will police themselves, voluntarily comply, and self-report any noncompliance or other matters or situations that the regulators might deem relevant.

Most gaming regulatory systems have three major components: (1) licensing, (2) audit and (3) enforcement. The goal of licensing is to ensure that only qualified, suitable companies and individuals are involved in the regulated aspects of the industry.

The licensing process is used to keep criminal elements out and to ensure that the licensed parties have the capability (financially, ethically and competently) to provide the role, goods or services that have been offered. This ensures fair play for casino patrons and helps accomplish the public policy objective of preventing money laundering, cheating, embezzlement and other unsavory activities.

The audit and enforcement components are somewhat intertwined. The audit process monitors and reviews compliance with the applicable laws, regulations, rules and policies of a jurisdiction. In the event of a violation, the enforcement process will come into play, with regulators enforcing applicable sanctions. These sanctions can include the loss of the privilege to work in the gaming industry in that jurisdiction, suspensions for certain lengths of time, fines, reprimands or other unique penalties developed by a jurisdiction.

Many times, if issues arise that compromise one’s gaming license, it can and will have a profound negative effect throughout other jurisdictions that require reporting of such events.

Gaming regulatory bodies in various jurisdictions are all involved in licensing and regulating their casino operations. In most jurisdictions, there are also regulatory requirements and possible licensing, registration or exemption processes with respect to vendors and suppliers to casinos.

Some jurisdictions only regulate companies selling gaming equipment to casinos, while many others have requirements applicable to nongaming suppliers, as well.

The value of a gaming license goes beyond the simple authorization to provide goods or services to casino clients in a single casino gaming jurisdiction. The license also serves as confirmation to regulatory bodies both inside and outside the traditional commercial and tribal bricks-and-mortar casino industry – such as those that regulate iGaming, horse racing, dog racing, charitable gaming and state lotteries – that the company and its principal employees have successfully passed through a rigorous suitability, operations and financial review. Proper licensing provides assurance that a company operates according to high standards of integrity and compliance.

As gaming authorities are in close communication with their counterparts in other jurisdictions and other gaming industries, a strong reputation in one jurisdiction can provide a platform for future compliance efforts in other jurisdictions as a company expands into new gaming markets.

In addition, most gaming markets are also home to various gaming associations, which serve to unify and educate industry partners. Such associations are important to the gaming industry as they seek to unify the interests of operators, suppliers and regulators, respectively.