Watch gaming license transfers
There are over 580 businesses that hold gaming licenses in the Reno/Sparks and Carson Valley areas.
A small number of these businesses include the commonly identified gaming properties such as Harrah’s, the Eldorado Hotel, and the Silver Legacy.
The vast majority of these businesses hold “restricted gaming licenses” which limit gaming activities to the operation of 15 or fewer gaming devices.
Yet, the owners of all of these businesses are subject to the same level of regulatory oversight by the State Gaming Control Board and the Nevada Gaming Commission in regards to their ownership of such businesses.
A review of the Gaming Commission’s records reveals that the most common violations of the commission’s regulations by restricted gaming licensees involve unauthorized transfers of ownership interests.
Except for persons owing interests in publicly traded gaming companies, all persons who own an interest in a business that has a gaming license must be individually licensed by the Gaming Commission before acquiring such interests.
This requirement applies equally to owners of the largest hotel casino resorts as it does to owners of bars, taverns, convenience stores, and other small businesses that offer gaming devices to their patrons.
Nevada’s concept of pre-approval by the licensing authority is fundamental to its system of gaming control.
The law requires that all persons proposing to acquire an interest in a business that is licensed to conduct gaming must be investigated and approved by the Gaming Commission before they acquire such interests, regardless of the number of gaming devices operated or the percentage of the business owned by the applicant.
As simple as these requirements are, they are frequently misunderstood by persons owning businesses where gaming activities are incidental to the primary business conducted on the premises.
Sales of bars and interests in bars often raise transfer of interest problems.
Anxious sellers often forget that any change in ownership of the business requires prior approval by the commission.
Consequently, partners are often bought out or interests are modified without compliance with the commission’s prior approval requirements.
Some bar owners (and some sales professionals and lawyers) believe that the sale of a bar can be completed with the buyer “operating under” the seller’s license until the buyer can get its own license.
There is no legal basis for such procedures, and violators are routinely fined by the commission when the transaction ultimately comes to light.
Similarly, divorces involving owners of businesses licensed for gaming often result in inadvertent violations of law.
The typical example involves property settlement arrangements relating to interests in a licensed business that is owned by a married couple when a divorce occurs.
If the business is not liquidated through sale to another party, it is usually continued by one of the spouses with a buy out of the other spouse’s interest.
Again, the transfer of interest must be approved in advance by the Gaming Commission regardless of the agreement by the affected parties or the approval of the property division by the court having jurisdiction over the divorce.
Common business and estate planning techniques frequently require approvals before they can be implemented.
This includes situations where businesses are transformed from sole proprietorships or partnerships into corporations or trusts.
Trusts, corporations, and limited liability companies are all legal entities which must additionally be licensed according to Nevada gaming law, in addition to any personal license the owner or owners may hold.
Consequently, if the business is licensed, the transfer of it to another legal entity requires advance approval or, in some cases, submission to the Control Board for prior administrative review and informal approval.
Licensees also need to be aware of the commission’s regulations dealing with the death, disability, insolvency, or bankruptcy of a licensee.
The representative of a deceased or disabled licensee is required to report the fact of death or disability of the licensee to the board immediately and to file an application for approval as the successor within 30 days after such event.
No distribution of a decedent’s interest in a business holding a gaming license may occur until the recipient has been licensed.
A licensee that becomes the subject of a receivership or bankruptcy must also notify the board of the commencement of the bankruptcy proceedings or the appointment of a receiver over the licensee’s affairs and seek approval of the receiver or trustee.
A word about the lawyer’s role in these transgressions the board and the commission have consistently taken the position that following the advice of counsel is not a defense to an administrative disciplinary charge.
While this argument may be a mitigating circumstance in determining the penalty to be imposed, it has never been accepted as an excuse for noncompliance with the provisions of the Gaming Control Act or of the commission’s regulations.
Gaming licenses and the related right to conduct gaming activities are privileges under Nevada law and once obtained, are valuable
contributors to the success and profitability of the businesses that hold them.
As individually licensed persons, the owners of such businesses are required to understand and provide for compliance with all applicable laws and regulations.
The failure by an owner to do so can result in substantial fines and loss of the valuable privilege.
Bud Hicks is a Reno-based partner in the Nevada law firm of McDonald, Carano,Wilson and one of Nevada’s most experienced and recognized gaming law practitioners.
For the past 30 years, his primary area of practice has been gaming law and related corporate, litigation, and transactional matters.
Heather Ashbridge, who started with Nevada State Development Corporation in 2008, previously served in several roles with the organization, including assistant vice president and loan officer. She is based in NSDC’s Reno office.