A NEVADA LAWYER PARTS THE CURTAIN OF NOSTALGIA – NEVADA’S GAMING ODYSSEY By U.S. Senator Richard H. Bryan (Ret.) When the Comstock Lode was discovered near Virginia City in 1859 hundreds of prospectors, entrepreneurs, and adventurists crossed the Sierra Nevada and came to Nevada seeking their fortune. They brought with them a gambling culture. In 1861, the Nevada Territory was created, and Abraham Lincoln appointed James Nye as the Territorial Governor. Nye opposed games of chance and urged the Territorial Legislature to ban them. Responding to the Governor’s request, the legislature imposed stiff penalties for running or participating in a game of chance. Thus, began a 70-year odyssey with Nevada decriminalizing gambling in 1869 and then reversing course at the height of the Progressive Era and banning nearly all forms of gambling in1909. 9 NEVADA GAMING LAWYER SEPTEMBER 2020 With the decline of mining, happens here, stays here” continues Nevada’s population at the turn the mystique that Nevada is a very of the 20th century had declined to different place. 45,000. In desperate need of a new industry and recognition of the From 1931 to 1945, gambling was change in the social mores of the regulated at the local government country, Nevada liberalized its level. Gaming establishments were divorce laws, shortening the period treated like other businesses and to establish a Nevada residence and cities and counties issued business expanding the grounds for divorce. licenses and collected taxes. The Among the first to take advantage state played no role. That was of the new law was Mary Pickford, about to change. WWII brought “America’s Sweetheart,” who came thousands of GI’s to train at Stead to Nevada to get a divorce so she Air Base in Reno and at the Las could marry another Hollywood Vegas Army Air Corp Base. In 1941, icon – Douglas Fairbanks. Her Tommy Hull opened the El Rancho lawyer was Pat McCarran. The Vegas in Las Vegas, on the highway initial reaction by the bar was to Los Angeles. The following year, outrage, at the transparent the Last Frontier opened nearby. attempt to create a short time The Las Vegas “Strip” was born. Nevada residence. Cooler heads Gambling was becoming a major prevailed as more pragmatic industry and a new chapter in the lawyers recognized this was a new opportunity for the legal profession evolution of gambling regulations and in short order Reno become was about to begin. the “Divorce Capital” of America. With the onset of the Great The 1945 legislature enacted Depression and the continuing legislation that would transform decline of mining, once again gaming regulation. The legislation Nevada was in search of a new required a state gaming license industry. A freshman legislator prior to the issuance of a local from Winnemucca, Phil Tobin, gaming license and imposed a introduced legislation legalizing “gross gaming tax” on licensees. casino gambling and Governor The Nevada Tax Commission was Balzar signed the bill. The initial designated as the state agency to framework for Nevada’s largest issue gaming licenses and to collect industry was now in place. Mayme the gross gaming tax. Calculation Stocker’s Northern Club in Las of the gross gaming tax due was Vegas and the Bank Club in Reno simple: all of the licensees’ were among the first gaming winnings minus payouts to winning licenses issued. The combination customers. The gross tax provision of Nevada’s liberalized divorce was controversial. Governor laws and casino gaming subjected Carville favored enhanced taxes Nevada to harsh criticism. Nevada on the gaming licenses to be was branded as a modern-day issued rather than a gross tax. Sodom and Gomorrah. That legacy Notwithstanding his opposition to a has faded but the Las Vegas gross gaming tax, the bill approved Convention & Visitor’s Authority’s by the legislature contained a gross highly successful campaign “What gaming tax and Governor Carville NEVADA GAMING LAWYER SEPTEMBER 2020 10 allowed the legislation to become crime, “The Mob,” looking to 14 cities, including Las Vegas, and law without his signature. The expand its operations, saw an called 600 witnesses to testify. decision to impose a gross gaming opportunity in the burgeoning tax on the industry was farsighted. gaming mecca of Las Vegas. Bugsy Television was in its infancy, but an The gross revenue collected in the Siegel persuaded his friend, Meyer estimated 30 million people tuned in. The gangsters were the star most recent biennium was $1.5 Lansky, that Las Vegas presented witnesses and their testimony or billion and represents 18.5% of a new opportunity. Lansky and invocation of the Fifth Amendment the total general fund. Siegel, joined by Gus Greenbaum and Moe Sedway, purchased the El was riveting theater. The national The new legislation was silent on Cortez in 1945. “The Mob” had publicity Kefauver received earned the question – what authority, if established its first gaming beach him a vice presidential nomination any, the Tax Commission had to head in Nevada. The following on the national Democratic ticket inquire into the background of year, they sold the El Cortez. in 1956. prospective licensees. The Tax Together with Billy Wilkerson of Kefauver brought his Committee to Commission turned to Attorney the Hollywood Reporter, they Las Vegas on November 15, 1950 at General, Alan Bible, later a U.S. began development of the the Federal Courthouse, now the Senator, for guidance. Bible’s Flamingo Hotel – placing Siegel in site of the Mob Museum. The Las Steve Cukrov - stock.adobe.com response was one of the most charge. Plagued by costly overruns Vegas hearing was less dramatic significant legal opinions in the and a disastrous opening, “The than some of the earlier hearings, history of Nevada’s regulation Mob” had had enough and Siegel but the testimony of William J. of gambling. Bible opined that was murdered gangland style in Moore, a manager at the Last although the newly enacted Los Angeles. His assailants were Frontier and a member of the State legislation did not expressly confer never identified. Tax Commission, exposed the role upon the Tax Commission the of “The Mob” in controlling the Elsewhere in America a reform authority to conduct background “race wire.” In the days before cell movement swept across the checks, the legislature, by phones and TV, information on Country – closing many illegal authorizing the Commission to sporting events was transmitted to gaming operations in a number grant gaming licenses, included the casinos by a “race wire.” The of cities. Organized crime had the implicit authority to inquire information transmitted included prospered during the Prohibition into the background and probity not only the results of a horse race, Era and sought to expand its of the applicants seeking a license. but included the odds and payoff. The modern era of the state’s gambling interests. “The Mob” primary role in regulating gaming and its activities were prominently Moore explained that Bugsy Siegel, and collecting taxes had begun. featured in major newspapers and a few years earlier, had gained other publications engendering control of the race wire. Casinos Nevada, and Las Vegas in much negative publicity. could only get access to the wire particular, experienced enormous if they paid Siegel. No payoff, no growth during WWII and the In 1950, Senator Estes Kefauver access. The 1949 State Legislature years that followed. Las Vegas’s from Tennessee introduced a changed that and mandated equal population tripled from 8,000 to resolution to investigate the access for all casinos. nearly 25,000 in the 1950 census. role of “The Mob” in interstate In 1941, J. K. Houssel Sr. opened commerce. The United States The Kefauver Committee hearing the El Cortez Hotel and Casino Special Committee to Investigate exposed the activities of “The Mob” in downtown Las Vegas. The Ongoing Crime in Interstate in Las Vegas and led to threats property quickly turned a profit. Commerce were formed and by Congress to impose new taxes On the “Strip” the El Rancho Vegas chaired by Kefauver. The on Nevada’s gaming casinos. and Last Frontier were generating Kefauver Committee, as it came Responding to the potential impressive numbers. Organized to be known, held hearings in federal threat, the state took a 11 NEVADA GAMING LAWYER SEPTEMBER 2020 more aggressive role in regulating the be licensed. The bill was During the 1977 legislative session, casino industry. In 1955, the state controversial. George Dickerson, I served in the State Senate on the legislature created the Gaming a former Clark County District Judiciary Committee. Nevada was Control Board (“Board”) and made Attorney and then Chairman of the about to lose its status as the only it a division of the Nevada Tax Commission, resigned as a matter state to have legalized casino Commission. Its purpose was to of principle because he was gambling. Nevada’s gaming eliminate undesirable elements in concerned this would weaken the regulators were about to embark Nevada gaming and to require state’s control over gaming. The upon uncharted waters. Protecting regulations for the licensing and legislation passed. Today, the Las the integrity of Nevada’s gaming operations of gaming. Vegas Strip is dotted with casino was the guiding principle. Among properties costing into the billions the potential issues: what control, Four years later, Governor Sawyer to construct. The amount of capital proposed legislation removing if any, would Nevada regulators to construct such properties could have with respect to a Nevada the Tax Commission from its not have been amassed without a licensee whose conduct in New role in regulating gaming and corporate structure. creating a new entity – the Nevada Jersey reflected unfavorably on Gaming Commission (“Commission”).