Companies that have never done business with casinos or businesses that are looking to expand their business to new geographic areas may be surprised to learn that they must often meet strict and complicated licensing requirements to legally sell goods or services to a casino.

A governmental body having jurisdiction over regulating the casino (i.e., the country, state, province, band or tribe) normally grants these licenses. Usually, a "gaming control board" or "gaming commission" is appointed by the governmental body to handle the complicated steps involved in granting licenses.

The GamingRegulation.com website includes a global directory of both regulatory agencies and gaming licensing and compliance advisors. In addition, you will find the "Licensing by Jurisdiction" summary matrix in the Vendor Licensing section of this website very helpful, as it provides a broad look at the various licensing requirements and ongoing reporting obligations for suppliers/vendors working with casinos located in various jurisdictions offering commercial and tribal casino gaming. That section also includes links to detailed jurisdictional analyses summarizing the licensing and reporting obligations for individual jurisdictions.

The process of supplier licensing is used as a method to ensure that unsuitable parties do not infiltrate the gaming industry and impact its integrity. Companies wishing to conduct business with casinos in more than one jurisdiction face unique challenges because the requirements vary widely from state to state.

In most jurisdictions, a vendor can expect to be closely scrutinized to ensure that its owners and key employees do not have criminal histories as well as to ensure the financial viability of the business applying for a license. Gaming control authorities typically conduct thorough and extensive background investigations.

All gaming jurisdictions, however, have unique and varying approaches to regulating supplier activity. For example, almost every state requires a manufacturer of items specifically for gaming activity to be licensed and to undergo a suitability determination. Many states, however, also require manufacturers or suppliers of non-gaming related goods or services to also receive a license before conducting business with a gaming facility. In addition, some jurisdictions require suppliers meeting certain dollar thresholds of business with casinos, regardless of the product or service, to become licensed with the state agency. Thus, even businesses that are supplying goods or services totally unrelated to the industry (e.g., carpet suppliers) may need to take the necessary steps to get licensed.

Because of the disparity between licensing and other regulatory requirements, a number of the U.S. gaming regulatory agencies (e.g., New Jersey and Nevada) are in the process of reviewing their regulations in order to ensure that they are operating effectively and efficiently in order relieve the industry of unnecessary regulatory burdens, as well to keep up with technological advancements.

Any business seeking to enter into a new market should conduct a jurisdictional “License Analysis” to verify the licensing requirements of a particular jurisdiction. Most jurisdictions have license applications to be completed and filed with the gaming control authorities. In many cases, the owners and employees of the business seeking licensure will need individual applications for certain “Key Persons” as well as fingerprint cards and a criminal history summary.

Frequently, gaming jurisdictions have strict provisions prohibiting people who have been convicted of felonies, gaming-related crimes, and, in some jurisdictions, misdemeanors involving dishonesty, from becoming licensed as suppliers. If any of your owners or employees meets this criteria, you may wish to consult legal counsel for assistance with the process.

Suppliers, owners, and key employees of suppliers of goods and services may also be asked for extensive financial information and personal balance sheets. Gaming jurisdictions examine this information to determine whether the potential licensee has financial issues that may provide a vulnerability or inclination to criminal elements to attempt to exert influence within the industry.

Gaming regulators are concerned that individuals who are in desperate financial straits may be susceptible to attempts by criminals to get assistance in illegal endeavors. Frequently, gaming control authorities are empowered with broad discretion to deny licensure based on a lack of “business probity” or a lack of “financial stability.”

Importantly, each gaming jurisdiction tends to have unique requirements or restrictions that apply to licensed gaming industry suppliers. Additionally, initial licensing is not the end of the process. Most gaming jurisdictions impose ongoing reporting and disclosure requirements on gaming suppliers and require licenses to be renewed on a periodic (e.g., annual or biannual) basis.

Typically, gaming industry suppliers will be subject to a wide variety of additional criminal law provisions as a result of their participation in the casino industry. It is imperative that any company beginning to supply casinos with goods or services finds out what unusual or peculiar laws there may be in a particular jurisdiction, as this is the only way to ensure that an inadvertent criminal violation does not occur.

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.