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Home , Casino game, Game of skill

Senate Bill 9 Comes to Life: The (Slot) Future Is Now

By A.C. Ansani

This article (i) explores the groundbreaking 2015 legislation that changed Nevada gaming laws as applicable to slot machines; (ii) provides practice pointers for gaming practitioners; and (iii) considers business opportunities for clients in the gaming operator and gaming manufacturing sectors. CONT. ON PAGE 31

NEVADA GAMING LAWYER | SEPTEMBER 2016 30 SEA CHANGE (e) Accommodate secure “The continued growth account wagering and May 21, 2016, marked the one and success of the transactions using gaming industry in the year anniversary of Nevada electronic commerce; and State of Nevada depend Governor Brian Sandoval on the fostering of a announcing that he signed (f) Require, when applicable, business and regulatory Senate Bill 9 (SB 9) originated appropriate information to environment that during the 78th Regular be disclosed to a player promotes continued explaining the outcome of Session of the Nevada State advances in the use of a will be affected by Legislature into law. technology in gaming, skill or identifiers. 2 Specifically, SB 9 amends which improves the Chapter 463 of the Nevada While SB 9 can be applicable entertainment Revised Statues by requiring to any form of game found in a experience, encourages the Nevada Gaming Nevada , whether a card innovation and supports Commission, with advice game, game, or a expansion of the and assistance from the wheel, this legislation is domestic technology Nevada Gaming Control expected to drastically change section of the economy Board, to “adopt regulations the type of slot machines that of this State.” 4 which encourage manufacturers can be deployed in the state. (Emphasis added). to develop and deploy gaming Considering that existing state With gaming markets rapidly devices, associated equipment laws and regulations regulating expanding around the world, and various gaming support gaming devices evolved from the Nevada legislature wisely systems that incorporate legislation enacted in 193 1, 3 the sought to change current laws innovative, alternative and question arises as to why is 1 in order to allow gaming advanced technology.” These there now a need for such manufacturers and casino regulations may include, impactful changes to gaming operators to keep Nevada without limitation, technical laws and regulations in Nevada. at the forefront of the standards for the manufacture The answers are found both in gaming experience. of gaming devices, associated the text of SB 9 itself and in the equipment, and gaming factual circumstances of current From a factual perspective, an support systems that: operations of Nevada . analysis of Nevada gaming Like any good piece of revenues at nonrestricted casino (a) Define and differentiate legislation, SB 9 provides a locations from 2000 to 2015 between the requirements well-founded basis justifying provides compelling data that for and the outcomes of a such changes in Section 1(b): would lead to a conclusion that , a and a hybrid game; (b) Allow flexibility in payout percentages or the outcome of a game as determined on the basis of nondiscriminatory identifiers; (c) Support integration of social networking technologies; (d) Facilitate among enrolled players the interaction and concurrent play of supported by networked server computers; 31 NEVADA GAMING LAWYER | SEPTEMBER 2016 additional legislative action the increasing popularity of drafting SB 9, in order to best would be beneficial to further table games and to the address the concerns of the the state’s interest in remaining fact that the win per day per gaming constituency in Nevada. the world’s leading gaming machine has increased from Based on the last several years destination. From 2000 to $87.72 in 2000 to $128.46 in of analysis and research, SB 9 2015, overall total win amount 2015, 10 which would allow a should open the door for (total amount won from casino operator to maintain its Nevada casinos to offer slot gamblers) year over year has revenue levels machines that can appeal to the increased by 14.75%. 5 In while decreasing game counts. next generation of players, while 2000, overall state gaming win also preserving status quo for amount was approximately $9.6 A comprehensive analysis of the current generation of slot billion. In 2015, overall win gaming revenue trends and slot machines on casino floors and amount was a little over $11.1 machine performance in Nevada allow Nevada casinos to lead billion. 6 Slot machine win is outside of the scope of this the worldwide competition for amount in comparison, article, because there are the casino gaming experience. increased by 8.98% for this numerous factors that impact same time period. Overall slot gaming revenues. Casino machine win amount in 2000 patrons have ever increasing was almost $6.2 billion. 7 In forms of non-gaming options 2015, however, this value only available to them that compete increased to $7 billion, 8 which with gaming activities available. does not keep pace with the For instance, the ten increase in overall state win nightclubs in the country earned amounts determined from a combined $550 million in overall gaming positions. revenues in 2015. Seven of these clubs are located in Las Vegas. 11 WHEELS IN MOTION Additionally, there is debate over There is great anticipation and exactly who the excitement as to how SB 9 will In 2000, target player is or change the way slot machines should be and slot mach1ine9 uni2ts w,er8e re4por4ted are played and what kind of whether the focus games the manufacturing throughout all nonrestricted of slot machine industry will produce. Slot casinos in Nevada. However, the developers should machine game developers are be directed toward now able to create games that state only reported 149,364 slot the Millennial incorporate a skill element, machines in 2015 throughout all generation (those either as a main game or as a ages 18-34 in 13 nonrestricted casinos. 12 bonus feature. New games 2015), or the designed with the provisions of current, older slot SB 9 in mind may also exploit a An additional factor related to player demographic, or a platform that provides a broad slot machine performance that combination of both. range of popular video games provides a more granular Furthermore, over the last that may be incorporated into method of analysis is the total decade, gaming markets have slot machines used for count of slot machines in the been expanding worldwide, communal gaming, such as first- state. In 2000, 192,844 slot ranging from the massive person shooter games or skilled machine units were reported gaming enclaves arising in word-assembly games common throughout all nonrestricted Macau and Singapore to in social media. 14 Additionally, casinos in Nevada. However, domestic expansion of casino SB 9 will allow rules extending the state only reported 149,364 gaming such as the four new social networking capacities slot machines in 2015 statewide casino gaming facility onto the casino floor that can throughout all nonrestricted licenses issued in New York. “personalize” the player casinos. 9 Numerous influences Clearly, the legislature was well experience while playing slots impact these decreased machine and socializing the experience. 15 count statistics, ranging from informed in formulating and NEVADA GAMING LAWYER | SEPTEMBER 2016 32 It is widely hoped that the workshops to discuss the impact 108, pages 396-97, 78th “new” slot machines that will be of SB 9 on current Nevada Regular Session (2015). produced will invigorate interest gaming regulations in order to On September 17, 2015, the in machines and received commentary from the Commission enacted indeed the entire structure of gaming industry and formulate comprehensive amendments to modern casinos floors, all in effective regulatory amendments Regulations 4.030, 6.110 and order to better address the to Nevada gaming regulations 14 in order to effectuate SB 9. perceived needs of the next and technical standards. While One of the more notable generation of gamblers. SB 9 is intended to spawn amendments to Regulation 14 is creativity in game the addition of the definition of design, it must not a “Game of Skill” under be lost that Regulation 14.010(10). For Nevada will always the first time in the history of have a primary the state, a is state interest in permitted to be played “in gaming to protect which the skill of the player, the public by rather than chance, is the maintaining the dominant factor in affecting the highest standards outcome of the game as of integrity in determined over a period of gaming products continuous play.” 16 The deployed in the Commission further approved a state. While new definition of a “Hybrid regulators continue Game,” which means a “game to balance all of in which a combination of the these factors in skill of a player and chance introducing affects the outcome of the game regulations for the as determined over a period of new games, several continuous play.” 17 Maybe the amendments to the most interesting addition to Nevada regulations Regulation 14 is the addition of and technical the definition of an “Identifier.” standards have An Identifier means “any followed. specific and verifiable fact In providing concerning a player or group of counsel to a players which is based upon As a practitioner, gaming client, a practitioner objective criteria relating to the the question thus arises as to would direct the client to the player or group of players, how to best counsel a following regulations for review including without limitation: manufacturing client that would in the embodiment of SB 9. It (a) The frequency, value or like to either produce a “new” should be noted that the Board extent of predefined slot machine or a gaming and Commission are still commercial activity; operator client looking to offer continuing their work on “new” slot machines on their amending regulations and (b) The subscription or floor. Unsurprisingly, the technical standards that will be enrollment in particular Nevada Gaming Control Board appropriate to accommodate SB services; and staff, along with the 9. As of the publishing Nevada Gaming Commission, submission date, SB 9 has not (c) The use of a particular have been hard at work since been codified into Nevada technology concurrently SB 9 became effective. Starting Revised Statutes and can be with the play of a in May 2015, the Board has found in its entirety in the gaming device; conducted several public Statutes of Nevada, Chapter (d) The skill of the player; 33 NEVADA GAMING LAWYER | SEPTEMBER 2016 (e) The skill of the player When counseling a client that “Random Selection Process relative to the skill of any intends to produce “new” and Random Number other player participating gaming equipment for Nevada Generator.” These in the same game; licensees as a result of SB 9, it amendments alone added about (f) The degree of skill is not enough to simply direct four pages of text to Technical required by the game; or that client to Regulation 14. Standard 1. What is important to note is the depth of the Any combination of (a) to (f), amendments to the technical 18 inclusive.” Identifiers are later standards in order to allow permitted under Regulation 14 counsel to work with to be used to determine which manufacturers of both games games are presented to or and associated equipment in available for selection by a 19 walking through the regulatory player. This regulatory change and technical criteria needed to will allow manufacturers and produce the widely anticipated casino licensees to “facilitate SB 9 games. among enrolled players, the interaction and concurrent play The regulatory changes did not of games” using identifiers for stop with addressing only the players or groups of players. technical capacity and capability For example, in concept, a of games. Counsel must also game or group of games with a provide guidance to skill-based bonus round may appropriately direct gaming identify particular players that industry clients to the proper have shown particular expertise license required for that client’s on that skill bonus. If some of intended business in Nevada. The Board and staff labored these “highly skilled” players On November 19, 2015, the intensely over the latter part of happen to be in a casino at the Commission adopted regulatory 2015 and through January same time, the games could changes to Regulations 2016 to change the Technical simultaneously trigger a skill- 14.020, 14.302, and 14.305. based bonus round, allowing Standards as needed to These changes require that this group of players to have a effectuate changes in gaming manufacturers or distributors competitive while in equipment. Amendments to of associated equipment in the traditional casino setting. Nevada Technical Standards 0, Nevada must register with 1, and 2 became effective on Additionally, the Board is the Commission if such February 15, 2016. 21 These also currently considering associated equipment: amendments to Regulation standards will become the 5.220, 5.240, as well as a new blueprint for producing a (a) Is used directly in gaming; Regulation 5.225 and compliant game that has the Regulation 5A.020, in order to expanded capacities intended (b) Has the ability to add or incorporate changes in wagering under SB 9 and the amended subtract cash, cash accounts in order to regulations. For example, equivalents or wagering accommodate in-game Technical Standard 1 was credits to a game, gaming commerce such as buying game amended to include Section device or cashless 20 enhancements. This is again 1.200, providing for “Logging wagering system; further indication of the work Requirements for the use of done by the Board and staff to Identifiers,” along with Section (c) Interfaces with and affects maximize the intended effects 1.30, providing for technical the operation of a game, of SB 9 (and SB 38) while standards for “Gaming Devices gaming device, cashless still maintaining the integrity that Incorporate Skill,” and wagering system or other of gaming machine regulations amendments adding Section associated equipment; in Nevada. 1.400, which defines the NEVADA GAMING LAWYER | SEPTEMBER 2016 34 (d) Is used directly or and Commission to be found shooter competition round indirectly in the reporting suitable as a licensed among the elite video game, of gross revenue; manufacturer. player-carded peer group. The question that still remains (and (e) Records sales for use in FIRST STEPS . . . is one that has no amount of an area subject to the tax legal counsel can answer) is will At this point, counsel and the imposed by NRS this newly designed, high- client have now thoroughly 368A.200; or concept game be popular with reviewed the intent and players and find an audience in guidance of SB 9, the gaming (f) Is otherwise determined by Nevada casinos? market in Nevada, the amended the commission to create a As with most aspects of gaming risk to the integrity of regulations and technical gaming and protection of standards, and the potential marketing, the answer is, it the public if not licensing issues as to whether depends. Regardless of how inspected. 22 the client is providing product quickly new gaming machines that requires a manufacturer, are deployed under the auspices distributor or associated of SB 9, casinos still need These changes also provide equipment manufacturer license. players to fill the seats at for a $1,000 fee for such Suppose the potential existing slot machines. Despite registration and allow a manufacturer or distributor the decrease in overall slot registration to be effective for client is getting ready to launch machines counts in Nevada’s three calendar years from the a slot machine with a skill– nonrestricted casinos over the date of the registration or 23 based bonus feature that has a last decade, by all counts the renewal. A registered variable payback table along current player base is a pretty associated equipment with smart device interface good market, worth $7 billion manufacturer must notify the capability to allow a player to annually. Some gaming Board within 30 days of a have a seamless communal analysts predict that a move by change in ownership, officers, social media experience, all the the casino industry toward or directors of the entity while waiting for the live-action skill-based slot machines could and the Commission may, upon recommendation from the Board, call the associated equipment manufacturer or distributor forward for a finding of suitability to be a manufacturer or distributor. 24 At a minimum, any client new to the licensed gaming manufacturer space in Nevada should be advised of their licensing requirements depending on the product manufactured and the potential costs and ramifications of possibly being called forward by the Board

35 NEVADA GAMING LAWYER | SEPTEMBER 2016 re-energize the market and Nevada gaming regulators, is it entertain and draw in players attract younger players, but not worth the time and resources to both new and old using the for a few years. 25 The reality is develop an SB 9 game for tools provided by the legislators that the current generation of Nevada casinos? The answer is and regulators. The end result slot machine players will absolutely yes. The Nevada will require some time to fully continue to feed the casino legislature opened up a very evaluate the results of these industry in the short term, while wide door by enacting SB 9. collective efforts on the slot long-term strategies are needed The Nevada Gaming Control machine industry, but it is to create interest from Board and Nevada Gaming entirely reasonable to expect Millennials in future casino slot Commission have been doing imminently more entertaining machine floors, along with the the heavy lifting necessary to slot machines in the near future next generation of players after produce regulations and for all demographics, regardless the Millennials. technical standards sufficient to of age. bring SB 9 to life and to also Thus, the question that protect the integrity of the A.C. Ansani is an Assistant General Counsel for naturally follows is even in Nevada market and players. the Gaming Division of Scientific Games consideration of the yeoman Corporation, based in Las Vegas. He also serves efforts of the state legislature, The manufacturing industry is as a member of the Executive Committee of the Gaming Law Section of the State Bar of Nevada. the governor’s office, and very busy creating games to

1 2015 Nev. Stat.396-97 (Chapter 108, SB 9), § 2. 13 See supra note 1 § 3(a). 2 Id.,§ 3(a)-(f). 14 Id . at § 2. 3 History of Gaming in Nevada 1864-1931 (2016), Nevada Resort Association, 15 Id. http://www.nevadaresorts.org/about/ history/. 16 NGC Reg. 14.010(10). 4 See supra note 1 § 1(b). 17 NGC Reg. 14.010(14). 5 Nevada Gaming Revenue: Long Term Trends at 1 (2016), UNLV Center for 18 NGC Reg. 14.010(15). Gaming Research, http://gaming.unlv. edu. 19 NGC Reg. 14.040(8). 6 Id. 20 NGC Notice 2015 – 11R. 7 Id ., at 2. 21 NGC Tech. Std. 0, 1, 2. 8 Id. 22 NGC Reg. 14.020(4). 9 Id. 23 NGC Reg. 14.302(3). 10 Id. 24 NGC Reg. 14.305. 11 H. McIntyre, America’s 10 Biggest Nightclubs Earned Over $550 Million in 25 M. Preston, Not So Random: Skill Games & the Casino of the Future , Revenue Last Year , FORBES MAGAZINE (2016), GLOBAL GAMING BUSINESS MAGAZINE (April 2016), http://www.forbes.com/sites/hughmcintyre/2015/05/26/americas-10-biggest- http://ggbmagazine.com/issue/vol-15-no-4-april-2016/article/not-so-random- nightclubs-earned-over-550-million-in-revenue-last-year/#235eca827627. skill-games-the-casino-of-the-future 12 Millennials Overtake Baby Boomers as America’s Largest Generation, Pew Research Center (Apr. 25, 2016). http://www.pewresearch.org/fact- tank/2016/04/25/millennials-overtake-baby-boomers/. NEVADA GAMING LAWYER | SEPTEMBER 2016 36