Casino operators and analysts are examining and criticizing Massachusetts regulators’ every act as the Bay State officials try to decide who will be awarded licenses to open casinos.
This says something about how far legal gaming has come. Until a few years ago, it was the casino applicants who were subjected to strict scrutiny. And none of them would have dreamed of publicly saying anything negative about state officials, who, after all, have the power of life and death over their proposed billion dollar projects.
But here is Steve Wynn, in a conference call with investors, complaining about what he called “freshman regulatory agencies” and “their unbelievable preoccupation that maybe a gangster is going to get in.” He said he was “flabbergasted” that Caesars Entertainment had withdrawn its bid to build a casino at Suffolk Downs after state officials questioned Caesars’ partnership with a company that supposedly had ties to organized crime in Russia.
“[T]hese states are asking us to come and spend billions of dollars. Now if we were any other business, they would stand on their head and spit wooden nickels to get billions of dollars invested from any other business. But we find ourselves being treated in many respects as if they’re doing us a favor.”
Wynn is unintentionally correct: Legally, a casino license is a privilege, not a right. The state is, in fact, doing a gaming company a favor by even considering its application, let alone allowing it to do what would otherwise be a felony.
Wynn, chairman of Wynn Resorts Ltd., is known for criticizing President Barack Obama, going so far as to characterize him as a socialist, while praising the gaming regulators in Macau. Macau is, of course, part of the communist People’s Republic of China.
I have been teaching classes in gaming law at the University of Macau for six years, and I can confirm that things are done differently there. Macau was a Portuguese colony for centuries and has a legal tradition derived from European civil law, not English or American common law.
More importantly, no one has ever accused China of being a democracy. When the chief executive officer of Macau announced that there would be a moratorium on new casinos, there were no hearings or statutes or even regulations for such an announcement.
Wynn is right that American lawmakers and regulators do have a preoccupation with gangsters. And he is correct that that preoccupation is found mostly in “freshman regulatory agencies.”
All administrators start out tough on the businesses they regulate. It is only after a few years that government regulators get a feel for the industry and the people who work there. The danger with regulation is not that state officials are too strict. A lot has been written about “captive regulators” who become too friendly with the businesses they are supposed to control.
Legal gaming creates an even greater challenge for government oversight. American casino applicants and operators need to remember that gambling is considered a morally suspect industry. There is a history of infiltration by organized crime. And during most of our history, casinos have been illegal in virtually every state.
The result is that the law treats gaming different from all other legal businesses, often in ways that defy common sense. A casino’s contracts, especially the gambling debts owed to it by losing patrons, are often unenforceable. Casinos and their executives may be barred from contributing to political campaigns.
My personal favorite is the archaic law, still on the books, that prohibits state lotteries from broadcasting commercials in other states that don’t have their own state lotteries. So, the California Lottery cannot run ads on Las Vegas TV. This is to prevent the good citizens of Nevada from hearing about the evils of California’s legal gambling.
If Wynn doesn’t like the way things are being done by casino regulators in Massachusetts, I wonder what he would think about this pronouncement from the Supreme Court of Nevada:
“We view gaming as a matter reserved to the states. . .Within this context we find no room for federally protected constitutional rights. This distinctively state problem is to be governed, controlled and regulated by the state legislature and, to the extent the legislature decrees, by the Nevada Constitution. It is apparent that if we were to recognize federal protections of this wholly privileged state enterprise, necessary state control would be substantially diminished and federal intrusion invited.”
Does the court really mean that regulators can discriminate on the basis of race? Can they deny a casino license simply because they don’t like a name, like “Wynn?”
Yes, it means exactly that. Applicants in Nevada have no state or federal constitutional rights unless the state Legislature says so.
Other states, particularly New Jersey, have rejected that state’s rights position as going too far. But even those states have expressly stated that a casino license is a privilege, not a right.
This does not mean that applicants have no rights. They have the rights they have been given under the statutes legalizing casino gaming. The most important of these, in practice, is that regulators have to follow their own procedures.
And the “doing us a favor” postures only apply to applicants, not licensees. While a company applying for a casino license may have almost no rights, an operator who has been granted a license is in a completely different position legally. A license is a very important piece of property. And government cannot take away a person’s property without due process.
The standards for taking a license have to be spelled out in advance and be specific enough that the operator knows what it can and cannot do. The rules are often the same for denying an application as for revoking a license. But the U.S. Constitution requires, even in Nevada, that the state cannot take away a license without giving the casino notice and an opportunity to be heard.
The double standard applies to courts as well. Applicants who are denied licenses may try to sue state regulators, but these efforts always fail. Operators who have their casino licenses taken away also usually fail, but at least the courts will hear their claims.
Wynn, as one of the world’s most successful casino operators, understandingly does not like having the status of a mere applicant:
“If I was any other business and I was willing to spend the kind of money, create the kind of jobs that these states have requested, we would have the red carpet rolled out for us, and the Governor and everybody else would be delighted to talk to us. But if you are in the gaming business, there’s sort of a crummy presumption that you might be unsavory. And that burns me up. . .But honestly, in gaming, very often, not in Asia, but here, you can come with your money, your best efforts, your reputation, your brand, and you get the impression that they think they’re doing you a favor sometimes saying hi to you.”