If an individual were heading to a hospital’s operating theater for surgery, it would be troubling to that individual to understand that the people who approved the surgical procedures had no experience in medicine. Imagine if the folks regulating this operation were two lawyers, a termed-out politician, a retired police officer, and a longtime contributor to the governor.
So, too, those who drive across a bridge on the way to work would hope that the people responsible for the rules by which that bridge was designed, constructed, and maintained would have had some professional training and credentials in the world of bridge building.
The good news is that the people who oversee our surgeries, our bridges, and the myriad other things that affect our lives are generally experienced, competent, and know what they are doing.
Yet, in gaming, the higher-level people overseeing the industry often do not have a hint at how any of it works — and we wonder why regulation is such a hot mess of different policies and practices as we traverse the United States.
We can probably blame this on Nevada.
The Nevada model, flawed as it is
Gaming was legalized in 1931 in Nevada and was treated with a laissez-faire attitude. The state became more involved in 1945 when a 1% tax was levied on the industry, and the collection of this tax was the responsibility of the Nevada Tax Commission. This tax was doubled the next time the legislature met in 1947. Beyond that, the regulation applied to the industry was fairly insignificant.
With better roads, automobiles, and air conditioning being developed in the mid-1950s and beyond, the casino industry began growing in southern Nevada. It was being shaped by people who really understood the business. Unfortunately, these people understood the business because they had been in the business in places where it was not legal — places like Chicago, Cleveland, and Dallas. This generally implied they had curious backgrounds, at best.
These new Nevadans knew the games, yet some were terrible at accounting and could never seem to get the revenue figures right. This reality introduced such terms as “first count” and “skimming” into the Nevada gaming vocabulary. It also created a position in some organizations for a person called a “bagman.”
These folks were also aggressive in the accounts receivables department, often suggesting that a player may develop a limp or some other malady if they did not pick up their markers. So, too, cheaters may also have suffered a bit of misfortune.
As a result of these business practices, politicians and policing agencies from outside the state began to look at what was happening in Nevada. Some of these outside politicians were using Nevada to bolster their law-and-order bona fides to enhance their political careers. They would hold hearings, conduct raids, make arrests, and leak a wide assortment of information to the press. It is always popular for politicians to be for law and order.
The risk of all of this to Nevada was that the industry could be closed down or taxed out of existence by the federal government. This concern was very real when one understands that because of its sparse population, Nevada had two senators and only one congressman — a far cry from a power bloc in Washington, D.C.
Branding issue created a different problem
The folks in Nevada then hatched a plan to thwart the effort by the federal government to kill the rather scrawny goose that was beginning to lay an occasional golden egg. The plan was to build a regulatory edifice around legalized gambling to 1. Regulate the industry and eliminate the bad people and practices; or 2. Give the impression that they were regulating the industry and eliminating bad people and practices.
This regulatory structure would be known as a bifurcated system — that is, one comprised of two parts. One part was designed to handle the investigative and compliance aspects of controlling the industry; the other was to be an adjudicatory body to determine who could participate in the industry and to pass judgment on any transgressions. Cops and accountants generally staffed the first group, and laypeople occupied the second.
It was terribly important that this second group had nothing to do with the industry, for the casinos had such a bad brand image that having someone from the industry on the regulatory board could remind people of the fox being in the henhouse. This group had to give the appearance that it was squeaky clean.
Well, that was then, and this is now.
For many years the industry in Nevada became known for aggressively working to remove and keep bad actors away from the industry. Through background investigations, auditing, and compliance checks, this was accomplished. This model was exported across the U.S. as additional jurisdictions offered casino gaming, always with many laypeople involved in the adjudicatory and rule-making processes.
One would think that all of these years of cleansing would allow people with knowledge about the industry to then serve as regulators, making for the higher-level decision processes to be handled by people who were alive to the realities of the business. This would be particularly nice as the industry gained in complexity and technological sophistication.
Not only did Nevada generally continue to appoint people who knew little about the industry to its top regulatory positions, but as gaming was exported to the other states across the U.S., this characteristic traveled with it.
For politicians who lose their other jobs
As one now looks across the U.S. at who gets appointed to these regulatory entities, it is not people who have insight about gaming, but generally people from the political and governmental classes. A common example is termed-out politicians. This keeps them on the state payroll and ups their retirement benefits, for they retire at a higher pay scale. They take care of each other this way.
Another source of appointees is politicians who lost elections. This is the reward for representing and supporting the party. Then, of course, come the friends, kin, and people who operate within the political and governmental milieu. Sometimes, even politicians’ spouses are appointed to gaming boards and commissions.
So, it seems that during the 60-plus years that started by working to get organized crime away from the industry, we have just replaced it with the unorganized nonsense of politicians using these appointments to take care of their own.
If this is progress, it is a very small step.