Gaming equipment makers push Nevada regulators for shorter approval times

September 30, 2023 9:08 PM
Photo: Photo composite CDC Gaming Reports
  • Buck Wargo, CDC Gaming Reports
September 30, 2023 9:08 PM
  • Buck Wargo, CDC Gaming Reports

Gaming-equipment manufacturers are pushing back against state regulators to shorten the approval process and allow their products and technology into casinos more quickly.

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In a nearly three-hour meeting Wednesday afternoon, the Nevada Gaming Control Board followed up on a similar workshop in March to continue drawing up regulatory changes that help streamline the process. What that will be, after Gov. Joe Lombardo’s freeze on new regulations has been lifted, remains to be determined.

“Today we’re talking about less field trials or field trials with very few conditions — less steps in the new gaming approval process,” said Gaming Control Board Chairman Kirk Hendrick. “For new games, we put out an industry notice that said if another state with a regulatory system similar to Nevada’s has already approved a machine and been out on the floor with 10 machines for 30 days, that’s will be deemed approved in Nevada. That’s a microcosm of new gaming devices that come out, a step in the right direction, and shows where our philosophy is coming from.”

Since March, regulators have reduced foreign gaming requirements, removed pre-approval to install systems games, and pared field tests for new gaming devices. Hendrick said They’ve shown themselves to be “risk tolerant” to whatever has been presented to the testing lab over the last eight months, without bending a statute or regulation.

“Speed is good for the industry and Nevada,” Hendrick said. “One of the reasons I took this job was to make radical change and if we can get it done collaboratively, this is going to be a big step in the right direction.”

Hendrick said they hear during “cocktail-party chatter” that Nevada isn’t the first to get new equipment out on the casino floor. The Board is asking suppliers to provide examples of that; regulators don’t go to New Jersey, Pennsylvania, Michigan, and other gaming states on a regular basis.

“If you’re telling us it takes eight notes to name that tune and 10 other jurisdictions are naming that tune in two notes, we want to be doing it in one note in Nevada. We want to be the best in the world,” Hendrick said.

Gaming Control IT Division Chief Jim Barbee said some operators will be going to software as a service in the future and the state’s approach will allow it to roll out more expeditiously. The Board is looking to implement the changes in November after taking suggestions from the industry and some ideas from other states.

Under the proposals, manufacturers will have an easier time finding a property to host a trial; their staff won’t have additional work other than to send a batch of reports on a weekly basis, Barbee said.

“Not only are you trying to sell a product, but sell a product with an albatross,” Barbee said. “Let’s take all these trial procedures off you and the licensee and let you sell the product. We’ll do the work on the back end.”

That would require additional staffing at the state level, but steps could be taken in the interim to gradually ramp up, Barbee said.

Hendrick said the goal is approving a game or device certified by an independent testing lab. Labs, however, test for technical, not legal, requirements, such as use of a credit card for gaming in Nevada where it’s illegal, but legal in other states. The concern is an unfair game for the customer and a loss of tax revenue, Hendrick said.

“I’m going to ask you to put your money where your mouth is,” Hendrick said. “If we approve these test cases and even if I have the right to do that as chair, we’ll pick a test case or two and you’ll have to agree as a condition to a minimum threshold for a violation of $500,000 to $1 million and up. I don’t want to drop something on the operators or the taxpayers or hurt the reputation of this industry.”

Daron Dorsey, executive director of the Association of Gaming Equipment Manufacturers (AGEM), said just the conversation is a positive, because there was a point in the past where it wasn’t. The manufacturers and suppliers want to get to yes on a product or process. That should be the goal.

Massachusetts doesn’t have a lab and relies on the independent-lab framework of Michigan, Dorsey said. The question is what can be done in Nevada within the legislative and regulatory framework to get the state aligned with “ideal jurisdictions,” coming in at the front of the line in deploying and approving products and technology.

AGEM attorney Dan Reaser said the Board has suggested that the starting point for approval is a review of comparable practices by other jurisdictions, but that shouldn’t be the standard. “We’ve discussed it long and hard among the working group deployed on this at AGEM and I have to say we categorically reject that approach.”

Hendrick countered that all he’s heard is Nevada is slower than other jurisdictions. “I’ve heard it so many times that Nevada is the slowest of the states. All I’m asking is can you give me a concrete example of why Nevada is slower? If you don’t like the question, fine, but nobody gets to raise it again.”

Reaser responded that any change in what Nevada does shouldn’t be driven by other states, since they have different statutory schemes and objectives.

“I’m going to sit here in the choir pit and you go ahead and preach, because that’s exactly what I’ve been saying,” Hendrick replied. “Can you tell me what these other states are doing? I don’t know and now you’re going to tell me they’re doing it differently.”

Reaser said the debate needs to move away from whether a practice in another jurisdiction is or isn’t relevant; in many instances they aren’t comparable. “For over a decade, the Board has argued — in many instances validly — that processes are driven by unique Nevada requirements for technology. A leading example is the method by which you track and report gross-revenue data. Spending a lot of time and effort in coming up with a recommendation for you, looking at jurisdictional comparison approaches, we view as not advancing the ball.”

Reaser said the objective of evaluating modernization of technology processes is not just to do as well as another jurisdiction, but the goal should be at the forefront as best in class.

“The Board has historically defended its processes by focusing on how the industry wants to very specifically change a particular procedure, path, or approach and in those discussions the Board can’t articulate why it needs to do what it does,” Reaser said. “For those reasons, the working group at AGEM believes the discussion on modernization and reform has to be calibrated. The industry should recommend what is the best-in-class duration for Board and Commission actions on different types of requests or applications.”

Reaser wasn’t only talking about situations that require an independent-testing-lab certification. He said state regulators have the tools, but what needs to be discussed is the “appropriate number of days” to complete the regulatory process for a particular type of technology to either be approved or rejected.

For new gaming devices, Board approval for a field trial, if directed, would be completed in 28 days unless changes were needed, Reaser suggested. The Board chair would have 15 days within receiving an application to approve or reject and if an objection is made, it must identify corrective action. The applicant would have 10 days to submit those actions and the Board would deny the application if the corrections didn’t hit the mark; otherwise, it would be approved in three days.

Device modifications would be completed in 18 days with a five-day approval/rejection period. Unless a field trial were directed, for new table games that haven’t received any testing-lab certification, there would be 10 days to approve or object.

If technology required a hearing, it would be placed on the Board of Commission agenda the following month, Reaser said. It should also be done on the consent agenda. No regulations would need to be changed for that to be implemented, but could work within the existing framework.

Hendrick noted that AGEM, Reaser, and Dorsey had spent a lot of time on their proposal and that he’d been looking for “something concrete to dig into.” He said he was glad to hear that Nevada no longer needed to compare itself to other states, but could instead focus on “the best the state can be and as fast as it can in a true regulatory framework.”

Board member Brittnie Watkins’s was concerned that if any process driven by deadlines in which technology was rejected, the industry would complain that the regulators weren’t having ongoing conversations about products like it has done traditionally. She said the Board doesn’t have the resources at this time to turn around those requests.

Reaser said the “rub” would be on the industry if there were any problems.

Barbee was also worried that the Board would be focused on deadlines instead of collaboration. The process takes time and would be concerning from a “capacity standpoint that we won’t have the people to review thoroughly and get the notice out. We’ll find ourselves up against the clock to render a decision and if we don’t have the information, we have to stop the clock.”

Board member Judge George Assad pointed to the airline industry that has had problems with aircraft from time to time. The airlines fix the problem, but if there’s a loss of life, they get sued.

“Trial lawyers will step in and make sure you get that product right or they will sue you from here to kingdom come,” Assad said. “It’s that simple. We had a cyber breach recently (with MGM Resorts International and Caesars Entertainment). Class-action suits are already flying with allegations they didn’t have enough protection and security protocols and didn’t do enough to mitigate. There are plenty of checks and balances on the industry with respect to cyberattacks. There will be plenty of checks and balances here with new products and modified products and new games. These timelines are less than what (regulators) are recommending. You’ve given us more time. Everything here is producing a framework from which we can move forward. I think it’s long overdue.”

Patrick Bland, chief technology officer for Acres Manufacturing that offers casino loyalty and other solutions, said he’s excited about what’s transpired since the workshop in March and the willingness to offer more flexibility. Regulatory bodies don’t control software in the financial-services and securities industry, which is trusted with its billions in transactions without having to submit to a testing lab when they make changes in their systems.

“I’m thrilled we’re having this conversation,” Brand said. “What we do in Nevada, how we move forward and embrace technology and innovation, doesn’t just impact us, but the whole globe. I’m not sitting here advocating about getting rid of testing labs. We need them. They serve a purpose, but how can we stop letting the regulatory tail drive the innovation dog?”

Bland suggested that maybe there can be a handful of innovation banks at a casino that wouldn’t require a testing lab as a way to get it in the market and see if it’s worth pursuing.