Speed bump for skill-based slots

Dec 15, 2015 3:00 AM

One of the last pieces to finish the regulatory puzzle for the advancement of “skill-based” slot machine games into the Nevada gaming industry is currently held in limbo. To maximize the potential for skill-based games on the slot floor, the manufactures need to take a page out of both mobile and online gaming in using wagering accounts.

Skill-based games can be player vs. machine, player vs. player or player vs. machine and other player, and include actions within the game where a player can buy additional time, specialty features, multipliers, play multiple games simultaneously or a host of other yet-to-be-imaged options, all of which are easier to accommodate with wagering accounts that track and rate skill play than playing anonymously and scrambling to feed cash or tickets into a machine while in action.

Sounds practical, the gaming community already has experience with account wagering by way of online poker, online race and sports wagering and mobile gaming so what is the holdup if account wagering is already available in Nevada gaming regulations?

As regulations were being developed for skill-based games, the Nevada Resort Association made it clear they felt wagering accounts related to skill-based should be limited to non-restricted licensees. The slot manufacturers, while wanting to keep the large casinos appeased, would be happier if their new products using wagering accounts were available to all potential buyers, and are basically staying mum. The restricted licensees do not wish to be precluded from using the wagering accounts in their operations. Thus something so apparently simple becomes ripe for argument.

Against this backdrop, draft regulations were developed and a workshop was scheduled for Dec. 2, then abruptly cancelled, and as of this writing is not yet rescheduled. The draft regulations, which would affect changes to Regs 5 and 5A, were developed without seeming preclusion to restricted classes of license but surprisingly held the specter of Gary Austin.

Old time Las Vegans will remember Gary Austin’s Race and Sports Book from days long ago and the story of when the book suddenly closed and left its clients holding winning tickets supposedly in the million dollar range, which back then was real serious money. That event was popularly attributed with causing some regulatory changes that required books to have a reserve approved by the Gaming Control Board to assure the players would be protected and paid.

In a similar fashion the proposed gaming regulations to permit account wagering have been drafted to include a similar type of reserve account for gaming operations that use wagering accounts along with third party audit requirements. While this looks like good protection for the customer, it could become a material cost for large gaming operators and certainly could become a prohibitive cost for smaller operators. It also could possibly materially shrink the market size potential for slot manufacturers, particularly if other jurisdictions emulate these draft regulations.

The draft language suggests the operators would need to have enough cash or cash equivalent held in a separate reserve, which they could not touch without GCB permission, and would at least equate the total amount of all the money held in wagering accounts by the gaming operator. In practicality if there was $5 million in wagering accounts then the gaming operator would have to have $5 million on hand to be able to pay out the accounts plus $5 million in cash or cash equivalents in a separate reserve account and have that reserve regularly audited by a CPA.

While it will take time for skill-based games to take off, in the early days of this form of wagering there is not likely to be very large amounts tied up in wagering accounts. However, down the road should skill-based games take off or wagering accounts become the norm in place of the current use of cash and tickets, these reserve amounts can become incredibly huge and cumbersome to regularly manage, if not disabling to all but the largest of gaming operators not suffering financing hardships.

To keep things going, perhaps the better way to deal with reserve accounts would be to only require the reserve if the total wagering accounts at an operator exceeded 50% of their cash on hand. This would still protect the customers, give all non-restricted licensees a chance at participating in this new avenue of casino gaming, not cap the market potential for the slot manufacturers and still materially favor the large gaming operators.

The Analyst is an experienced gaming industry executive who offers insight each week on events and issues affecting the industry. Contact The Analyst at [email protected].