Change will be good for casinos

As Joe Biden is sworn in Wednesday, gaming attorneys said they wouldn’t be surprised if the Department of Justice reinterprets a 1961 federal law and allows sports wagering across state borders — a potential boon for Nevada.

Industry observers said they saw a lot of positives for the gaming industry with a Biden Administration and that the $1,400 stimulus proposed for adults and enhanced and extended unemployment benefits would find its way into casino spending. They also said his federally-funded and aggressive vaccination program would benefit a destination market like Las Vegas that relies on air travel.

Biden-nominated Attorney General Merrick Garland is expected to revert back to the interpretation of the 1961 Wire Act under the Obama Administration. The Trump DOJ reinterpreted the Wire Act as deeming all forms of online gambling as illegal and had lotteries and the gaming industry on edge just as sports betting expansion and iGaming escalated. The issue is still being resolved in federal court.

This is the first Democratic attorney general since the U.S. Supreme Court in May 2018 paved the way for the expansion of full-fledged sports wagering outside of Nevada. Some 21 states have legalized sports betting and more are on the horizon in 2021 and 2022. States are also eyeing legalizing iGaming, currently available in a handful of states.

“I think with a new attorney general and the fact so many states are legalizing sports wagering and have confirmed it’s not bad but good, there’s a reason it should be expanded to be interstate instead of just intrastate. That way everybody will benefit,” said Las Vegas gaming attorney Frank Schreck with Brownstein Hyatt Farber Schreck. “I think you’ll see a push for interstate sports wagering. There was an exemption cut out of the Wire Act for horse racing decades ago. All they have to say is it doesn’t cover sports betting.”

That would be a boon to Nevada because it would allow people in states with large populations to bet into properties here, Schreck said. Only people in states that allow sports betting would be eligible.

“It would be helpful to Nevada if that was the case because Nevada is the gold standard,” Schreck said. “Someone in New Jersey could also open an account here.”

Jeff Silver, a Las Vegas gaming attorney with Dickinson Wright and a former member of the Nevada Gaming Control Board, said he expects to see a reinterpretation of the Wire Act that would encourage states to move forward with online gaming, including sports betting. That could allow interstate sports betting, but states won’t readily accept casino properties in other states siphoning off business. They would need a compact between states like was done for poker.

“You need states to negotiate to divide the spoils,” Silver said. “Otherwise, it would be tested in court, and the last thing you want is the judiciary to opine on the legality of conduct.”

Silver said that reinterpretation could apply to slots as well and open up for some large slot jackpots as happens now in which states collaborate on lotteries where there are drawings in the hundreds of millions of dollars.

“When you combine the megabuck slots you come up with outstanding numbers in both jurisdictions,” Silver said. “Mega Millions and Powerball lottery are interstate in which tickets are sold all over the country. There’s no difference in that than making sports wagers across state lines. From a bookmakers’ perspective, that’s the best thing that could happen because bookmakers are supposed to have a balanced book on both sides and profit off the vigorish.”

That is the best option because the last thing industry observers and gaming attorneys said they want is involvement in Congress over the issue of sports wagering. That could lead to a ban on college sports wagering, an increase in the .25 percent federal excise tax many want eliminated and other restrictions or requirements currently not in place that could stifle the low-margin sports betting industry. Soon-to-be Sen. Majority Leader Chuck Schumer, D-New York, has even backed a federal sports gambling bill.

A change the gaming industry supports, led by the American Gaming Association, is for the Department of Treasury to increase the $1,200 slot tax threshold in place since 1977 to $5,000. That could happen in the Biden Administration.

Barry Jonas, director of equity/research and gaming with Truist Securities, said there’s an expectation that taxes will increase during the Biden Administration and that could mean less money flowing from higher income people into casinos. In contrast, any stimulus would likely bring money into the industry as it did when the casino industry reopened last spring, he said.

“Anytime you have a lot of stimulus money coming in, for right or wrong, that money needs some place to park itself directly or indirectly and that could make its way to casino floors,” Jonas said. “Stimulus in the near term is as important as a vaccine (program) could be.”

Biden has a strong relationship with Las Vegas, and there aren’t any massive concerns about him, Jonas said.

“As long as we see stimulus come in and interest rates low, which seems to be the case for now, that will bode well for Vegas,” Jonas said. “(As for the flip side), it depends on how bad taxes go up and to a certain point you can’t keep printing money and don’t think there will be inflation at some point. That likely has negative consequences of different facets to the economy filtering to Las Vegas.”

Schreck said except for the Wire Act he doesn’t anticipate any other major changes under Biden who he said understands “this industry.” Heather Murren, the wife of former MGM Resorts International CEO Jim Murren, was one of Biden’s top fundraisers, Schreck said.

“Jim Murren has had lots of conversations with him,” Schreck said.

“Biden’s been out to Vegas and talked to a lot of us, and he’s well aware of the gaming industry. I don’t see him doing anything that disadvantages the industry.”

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