New Jersey Casino Licensing: From Second to None to Second Rate?

The hallmark of gambling regulation in the United States is the licensing of those persons who operate or profit from gambling.   The aim is to avoid the hidden owners, disguised interests and unsuitable persons that long ago dominated Las Vegas casinos.  State gambling laws generally require the investigation and licensing of any person involved in the ownership or operation of gambling, or who has a direct or indirect interest in the profits and losses from gambling. A licensing decision includes a determination of whether the applicant has any criminal history or associations, their source of funds, and their demonstrated compliance with gambling and other laws.

Certainly this has been true in New Jersey which from the inception of its regulatory scheme for casinos has prided itself on being second to none in the regulation of gambling.  But that claim has been seriously undermined of late as Atlantic City’s and New Jersey’s fiscal problems have mounted.

Last year, the New Jersey Department of Gambling Enforcement issued a dubious opinion that “gray market” online operators can operate in New Jersey provided that the jurisdiction whose law the grey market operator has been violating has not taken “affirmative, concrete action” by instituting a civil or criminal proceeding, issuing a cease or desist letter or by giving notice to the DGE that online gaming is illegal.  So for example, neither the fact that Canadian or Australian law restricts online gambling, nor that Australia had required Apple’s app store to remove online gambling apps would be a sufficient “concrete” statement.   Notice to Apple would not suffice; DGE wanted written notice to each company whose app was removed.  Yet the notion that criminal laws are inherently unclear as to what is prohibited until the first citation or arrest warrant is issued directly contradicts a premise of our legal system.  We do not presume that all laws are inherently vague until a prosecutor decides in the exercise of discretion and resource allocation which enforcement actions to bring.  In practice, in licensing online gambling companies New Jersey was not deterred by “gray market” operations or even a company’s history of violating state and federal gambling and banking laws.

Now New Jersey State Sen. Ray Lesniak has introduced Senate Bill S3001 which would allow Glenn Straub, the owner of the shuttered Revel Casino, to lease the casino operation to a third party and thereby avoid having to apply for and obtain a casino license.  This follows Mr. Straub’s unsuccessful attempts to convince the New Jersey Gambling Commission that he need not apply for a casino license.  While the bill states that the landlord can have no role in the conduct of gaming, the bill does not bar lease payments directly or indirectly tied to casino operations, profits or performance.

Were he to apply for a license, I have no reason to think that Mr. Straub would be found unsuitable under gambling license standards.  I know only that he apparently does not wish to be investigated or vetted as is required of other persons.  No applicant really likes the licensing and investigation process.  The process is expensive, takes too long and consumes a lot of personal time.   If those are Mr. Straub’s concerns, those are pains that should be remedied for all applicants and licensees.  If the issue is opening the Revel and putting persons back to work while Mr. Straub’s license application is pending, that can also be accomplished without exempting Mr. Straub from casino licensing.

But to not fully license Mr. Straub like a casino owner or operator because he may have the means to persuade the New Jersey Legislature to change the Casino Control Act is misguided.  As the Chairman of the New Jersey Casino Control Commission said: “We would turn the Casino Control Act on its head if we permitted this applicant to avoid licensure.”  After all, the next landlord after Mr. Straub may be someone who plainly could not be found suitable.

The question of who must be licensed in not an idle one.  In 1976, when the Nevada Gaming Commission determined that Frank “Lefty” Rosenthal could not evade licensing while secretly running four Las Vegas casinos, it was the start of the mob’s decline in Las Vegas.  Ironically, that was the year New Jersey voters authorized legal gambling with the understanding that the Legislature would ensure that gambling would be kept free of unlicensed elements.


Article by David Fried

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