Indy Gaming: Expanding usage of mobile wallets and cashless payments requires education for players and casino staff

Good morning, and welcome to the Indy Gaming newsletter, a weekly look at gaming matters nationally and internationally and how they tie back to Nevada.

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Sightline Payments Executive Vice President Omer Sattar compared the initial use of digital payment technology on casino floors to the rollout two decades ago of the now familiar ticket in-ticket out system on slot machines.

Acceptance by players was initially mixed.

Customers missed the clinking of coins into a tray and didn’t understand why they received a voucher when they cashed out from a game after feeding the machine real dollar bills. Slot players had to be taught to take the ticket to a kiosk or casino cage for payment. They also needed instruction on using the receipt at another gaming device.

“There was a lot of learning and education for both players and casino staff,” said Sattar, a co-founder of Las Vegas-based Sightline, a financial technology company that launched more than a decade ago.

Today, casino customers are hard-pressed to find coin-operated slot machines other than downtown in the historical second-floor gaming area at the D Las Vegas, inside the El Cortez and at a handful of rural Nevada properties.

The expanding use of digital wallets and cashless gaming in casinos will require a similar educational effort to the ticket in-ticket out system. But Sattar believes the technology will soon become commonplace.

Last week, Sightline completed $244 million in financing that will fund the company’s training efforts for casino staff, pay for technology upgrades and expand usage of digital payment products. Earlier this year, Sightline completed a separate $100 million funding round that was partly utilized to acquire a digital platform for customer loyalty programs.

Sightline Executive Vice President Omer Sattar. (Courtesy photo)

“Educating frontline casino staff is key to rolling out digital payment products,” Sattar said. But that’s just part of the effort. “It’s a one-two punch. Not only do we have to build out our core product, but in rolling it out, we need to provide technology upgrades across the casino floor.”

The good news is that unlike the rollout of ticket in-ticket out technology, gaming customers in 2021 are accustomed to paying for many products and services through digital wallets or credit cards linked to mobile devices.

“We use apps for everything, but the functionality of most casino apps has been confined to checking loyalty points or viewing maps of the casino floor,” Sattar said.

With digital payment systems expanding everywhere, upgrades to casino apps are necessary improvements, he said.

The American Gaming Association’s nearly two-year advocacy effort to modernize the industry and move casinos away from cash-centric gaming into a digital payment world was fast-tracked by COVID-19. Research conducted last year by the Washington D.C.-based trade organization found that more than 60 percent of casino customers wanted cashless or digital payment options.

Sightline’s initial business was to provide payment systems and processes for legal online gaming. It grew quickly through the 2018 legalization of sports betting. States adopted mobile sports wagering along with retail sportsbooks.

Sightline’s recent funding came from Cannae Holdings, the investment arm of Vegas Golden Knights owner Bill Foley, along with Resorts World Las Vegas owner Genting Group of Malaysia, Point Break Capital Management and Walter Kortschak, the company’s founding investor. Previous funding came from hedge fund Searchlight Capital Partners.

“I think of Sightline as a company bridging the past and the future of the gambling industry,” Eilers & Krejcik Gaming analyst Chris Grove said. “I think the industry needs more of those bridges in order to strike a balance between continuing to serve the customers of today while welcoming the customers of tomorrow.”

Macquarie Securities analyst Chad Beynon credited Sightline, along with publicly traded gaming equipment providers Everi Holdings, International Game Technology and Scientific Games, for helping the gaming industry “advance the customer experience” with cashless and mobile wallet technologies.

“The pandemic has certainly served as an accelerator for gaming technology and cashless is one of the most important advancements the industry has seen for years,” Beynon said.

Sightline was valued this month by its investors at $1 billion, making it Nevada’s first “unicorn,” a financial term referring to private technology companies with an appraisal of $1 billion or more.

In a statement, Foley said he was “more bullish than ever about Sightline’s ability to be at the forefront of the digital transformation afoot in the North American gaming, sports, and entertainment ecosystem.”

Foley commended Sightline for its part in the June 24 opening of the $4.3 billion Resorts World Las Vegas. The company was one of five gaming technology providers involved in the roll-out of cashless gaming capabilities for the new Strip property’s slot machines, table games and the sportsbook.

Sattar said Sightline gained a valuable understanding of the ins and outs of the endeavor in launching cashless gaming throughout the casino. Staff from Sightline and other companies were “on the ground for weeks” as part of the training effort.

Sightline is also part of Boyd Gaming’s cashless wagering rollout on slot machines in partnership with Aristocrat Technologies. A Boyd-branded mobile wallet has soft-launched at five regional casinos: Blue Chip and Belterra in Indiana; Valley Forge in Pennsylvania; Belterra Park in Ohio; and Aliante Casino in North Las Vegas.

Boyd Gaming CEO Keith Smith said in July that its mobile wallet could be live in 21 casinos by the end of the year, pending regulatory approval. He said the digital payment system was being tested in non-gaming areas of Aliante and could be available for table games as early as this fall.

Which brings Sattar to an immediate aim for Sightline — reducing the amount of time it takes for a customer to download the app and establish an account. He said the goal is lowering the time to three minutes or less, an industry standard.

“We’re getting close,” he said.

The office of social gaming developer PlayStudios in Summerlin. The company went public on the Nasdaq in late June 2021. (Photo courtesy of PlayStudios)

Stock price decline doesn’t alter analyst’s view of social game developer PlayStudios

Eilers & Krejcik Gaming analyst Adam Krejcik offered investors a positive outlook on Las Vegas-based social game developer PlayStudios in a research report released last week, despite a nearly 50 percent decline in PlayStudios’ stock price on the Nasdaq since going public at the end of June.

Krejcik, a principal in the Southern California-based firm who follows the digital and interactive gaming industry, said the company’s stock was battered as part of a market-wide sell-off by investors holding shares in special purpose acquisition companies (SPACs), a vehicle that took PlayStudios public.

“High redemptions rates and a flood of new companies has caused investors to sour on this space,” Krejcik wrote.

He noted that PlayStudios, which he ranked as the eighth largest company in the roughly $7 billion-a-year social gaming sector, has a “strong” balance sheet with $230 million and another $150 million available in a revolving credit line.

“We believe PlayStudios will be very aggressive when it comes to [mergers and acquisitions] and is likely evaluating multiple targets,” Krejcik said. “Management has stated the ability to execute [on mergers and acquisitions] was the primary reason for going public.”

PlayStudios is headquartered in Summerlin and led by Chairman and CEO Andrew Pascal, a former casino and gaming equipment company executive. PlayStudios operates a large portfolio of free-to-play casual mobile and social games including myVegas Slots, my KONAMI Slots, myVegas Blackjack, POP! Slots and recently released myVegas Bingo.

Last month, PlayStudios said its release of Kingdom Boss would be delayed until the fourth quarter. The game will serve as the company’s first new title outside of the social casino category, Krejcik said. PlayStudios reduced its 2021 full-year guidance for revenues and cash flow because of the delay.

Krejcik said the market for acquiring mobile games “remains extremely competitive with a number of large digital game companies, all with significant liquidity, vying for high-growth and scaled targets.” He cited Zynga and Playtika as PlayStudios’ primary competitors.

Although he doesn’t provide stock recommendations or price-targets on companies, Krejcik said the shares of PlayStudios are “trading at a significant discount relative to the peer group.”

PlayStudios controls the playRewards loyalty platform, where online and mobile players can earn real-world rewards from more than 95 partners and 290 entertainment, retail, travel, leisure and gaming brands.

PlayStudios merged earlier this year with Acies Acquisition Corp., a SPAC created by former MGM Resorts Chairman and CEO Jim Murren and two former Morgan Stanley investment banking executives. Shareholders own 64 percent of the company, and institutional investors control a combined 18 percent. Murren and the Acies sponsors own 3 percent. Following the merger, PlayStudios put 15 percent of the company on the open market.

Murren joined the board along with current MGM Resorts CEO Bill Hornbuckle.

Other items of interest:

Las Vegas-based Marker Trax, a cashless system for issuing casino markers, landed a partnership with gaming equipment provider Scientific Games. Marker Trax was founded in 2018 by gaming industry veteran Gary Ellis. The product scores and approves players for credit. The system is currently in place in Nevada at Ellis Island Casino in Las Vegas, properties operated by Golden Entertainment, including Strat Resort and Tower, and the Wendover Nugget in rural Nevada. Two Southern California tribal casinos also use Marker Trax. Scientific Games Senior Vice President Rob Bone said the system would be added to the company’s cashless gaming technology. “We have followed the evolution of Marker Trax and we see low friction, player credit offerings as a compelling addition,” Bone said. “This partnership enhances the player’s gaming experience.”

Japan’s casino expansion efforts took another nosedive over the weekend. Yokohama elected an anti-integrated resort candidate as its new mayor, ending the city’s quest for one of the country’s potential casino licenses. Japan has debated adding casinos for more than a decade. The departure of Yokohama was a blow to Resorts World Las Vegas owner Genting Berhad of Malaysia, which had put all its chips into the city’s efforts. In February, Wynn Resorts took itself out of the running for a Yokohama casino after withdrawing from the Osaka process in 2019. Las Vegas Sands withdrew entirely from the Japan effort in 2020. MGM Resorts remains heavily invested in Osaka, which one Japanese management predicted would be the only city to legalize an integrated resort.

Lyle Berman. (Courtesy photo)

Lyle Berman has the distinction of being a member of three gaming industry halls of fame: The American Gaming Association’s Gaming Hall of Fame, the Poker Hall of Fame and the Mississippi Gaming Hall of Fame. Last Friday, Golden Entertainment announced in a Securities and Exchange Commission filing that Berman, 80, was retiring from the company’s board. Berman’s Lakes Entertainment and Las Vegas-based Golden Gaming merged in 2015, and Berman served as a board member and consultant. He also was a co-founder in Grand Casinos, which helped establish Mississippi’s casino market. In poker, Berman won three World Series of Poker individual event championship bracelets and helped create the World Poker Tour.

In an interview with reporter Tony Batt of (paywalled) Vixio Gambling Compliance, Nevada Gaming Control Board Chairman Brin Gibson said remote registration for sports wagering remains a challenge in Nevada despite its usage in other states. Nevada requires anyone signing up with a mobile sports wagering company to do so in person at a casino sportsbook. “What it really comes down to is that remote sign-up — I think some see it as sort of a camel’s nose or incremental step toward potentially allowing operators that have not made the investment in brick and mortar to enter the marketplace here,” Gibson said. Remote registration has been proposed, but has received harsh criticism from several casino operators. Gibson said support for remote registration is “still out there. It’s still alive, and I don’t know that it’s going to go away.”

A day after MGM Resorts set an Oct. 15 deadline for employees to be vaccinated against COVID-19, Las Vegas-based casino operator Golden Entertainment issued a similar mandate. In a letter to employees dated Aug. 17, Golden President Charles Protell wrote the company is preparing “to require unvaccinated staff at certain properties and corporate offices to present either proof of vaccination or a negative COVID-19 test on a weekly basis.” In Nevada, Golden operates the Strat Tower and Resort, two Arizona Charlie’s properties in Las Vegas, casinos in Pahrump and Laughlin and more than 60 taverns statewide. The company also has a casino resort in Maryland. Protell said Golden employees would receive more information on the requirement. MGM Resorts, which has 57,000 employees, was the first large nationwide casino operator and first Nevada casino company to require salaried employees to be vaccinated against COVID-19 as a condition of employment. The company is exploring an extension of the vaccine mandate to cover hourly employees and other positions.

In 1989, Deadwood, South Dakota became the nation’s third legal casino market, following Nevada and Atlantic City. Voters legalized sports betting at the old west town’s small stakes casinos last year. Now, casino giant MGM Resorts International is getting into the game. The company said last week that BetMGM, its 50-50 sports betting joint venture with Entain Plc., will open retail sportsbooks and provide mobile sports wagering to the small Tin Lizzie and Cadillac Jack's casinos operated by Liv Hospitality. Pending regulatory approval, BetMGM will be available in South Dakota next month, just in time for the NFL and college football seasons. South Dakota is one of 10 states that has legalized sports betting but has yet to launch operations. Sports betting is legal and active in 22 states and Washington D.C.

Small casino and tavern operators caution Nevada regulators about expanding online gaming

A cross-section of Nevada gaming operators has voiced opposition to expanding the state’s online gaming regulations, saying any proposed changes should be explored by the governor’s Gaming Policy Committee and ultimately approved by state lawmakers.

In a four-page letter sent last week to the chairmen of the Nevada Gaming Control Board and Nevada Gaming Commission, nearly 30 small casino owners, tavern operators and CEOs outlined reasons they believe online gaming would damage their business operations.

The letter originated in the corporate offices of Red Rock Resorts and is viewed by its signers as a preemptive measure even as regulators have delayed any plans to change the state’s online gaming guidelines as spelled out in Gaming Regulation 5A.

Red Rock Resorts CEO Frank Fertitta III and Vice Chairman Lorenzo Fertitta, whose company operates the Station Casinos properties throughout the Las Vegas Valley, signed the letter.

A company spokesman declined to comment on the letter. Station Casinos backed Ultimate Poker, Nevada’s online power website. The business folded after 19 months after falling short of projections.

“We want there to be a discussion, not just throw the doors open,” said Andrew Diss, vice president of government affairs for Meruelo Gaming, the company that owns the Grand Sierra in Reno and the Sahara in Las Vegas. Meruelo Gaming CEO Alex Meruelo was one of the executives who signed the letter.

Diss was the only representative from any of the companies listed as signers who would comment publicly. He said the group believes any changes concerning online gaming expansion are policy matters.

“We believe (the Gaming Policy Committee) is the proper venue,” Diss said.

In the letter, gaming executives wrote, “We strongly oppose any expansion of online gaming in Nevada. In your potential consideration of online gaming, we ask that you are deliberate in determining if online gaming is needed to grow Nevada’s economy, helpful to our local communities and consistent with our long-established regulatory framework.”

Among the concerns raised in the letter were fears that online gaming would undermine investments made by gaming developers in physical gaming locations, cannibalize small operator gaming revenue and weaken the state’s public policy and regulatory framework.

Gaming executives also expressed support for restricted gaming operations – 15 or fewer slot machines – believing licensing of out-of-state online gaming companies could damage those businesses. 

Former Gov. Brian Sandoval reinstituted the Gaming Policy Committee in 2011 after a nearly 20-year absence. He directed the 12-person panel, which the governor chairs, to create policy advice for the Legislature on four issues during his two terms – internet gaming, daily fantasy sports, eSports and legal marijuana.

Gov. Steve Sisolak has not reinstated the panel, which includes regulators, members of the gaming industry, tribal gaming leaders, lawmakers and other stakeholders.

“We believe the policy committee will be a much more inclusive way,” Diss said.

The Gaming Control Board had scheduled a public workshop in May to discuss 15 suggested changes to the regulations, including removing provisions that limit interactive gaming to just poker and changing the rules requiring in-person registration for mobile sports betting accounts. But the meeting was cancelled, and board Chairman Brin Gibson said at the time the workshop would be rescheduled after the Legislature adjourned in June. 

Regulators have scheduled a workshop for Wednesday, but it is focused on “amending the definition of wagering accounts.”

Gibson acknowledged receiving the letter but declined to comment on Monday. On Tuesday, in a statement released by the Control Board, Gibson said he “appreciates the exchange of ideas on topics of importance to the state’s gaming industry.”

The state’s largest casino operators – MGM Resorts International, Caesars Entertainment, Wynn Resorts, Las Vegas Sands and Boyd Gaming – were not represented in the letter. Other than Las Vegas Sands, the companies have online gaming operations in states outside Nevada, mostly through mobile sports betting.

A spokesman for Boyd Gaming said he was aware of the letter but declined to comment. Boyd, through its partnership with sports betting operator FanDuel, operates legal online casinos in Pennsylvania and New Jersey, where the company also operates traditional casinos.

Online gaming expansion has become a growing topic nationwide after two states, New Jersey and Pennsylvania, reported higher than normal online gaming revenues last year when casinos nationwide were closed because of the COVID-19 pandemic.

Michigan launched legal online gaming in January, joining New Jersey, Pennsylvania, West Virginia and Delaware with full-scale online casinos. Nevada legalized online poker in 2013 but there is just one such site – World Series of Poker, which is run by Caesars. The state’s small population has been one reason cited for online poker not flourishing.

According to the American Gaming Association (AGA), online gaming revenue in the U.S. was $1.69 billion in the first six months of the year, a 165.8 percent increase compared to the same six-month period in 2020.

“Online gaming has been approved in states with a limited number of commercial casinos, some without any commercial casinos at all,” gaming executives wrote. “In states with limited land-based gaming properties, online gaming may capture gaming tax revenue for the state that it otherwise would not receive by providing easier access to gaming entertainment.”

Other signatures on the letter included downtown Las Vegas casino operators Derek Stevens (Circa Casino Resort, D Las Vegas, and Golden Gate), Kenny Epstein (El Cortez) and Jonathan Jossel (Plaza).

Golden Entertainment CEO Blake Sartini also signed the letter. Golden operates the Strat in downtown Las Vegas, casinos in the Las Vegas Valley, Laughlin and Pahrump, and a statewide slot machine route business along with a robust restricted gaming tavern operation.

Northern Nevada casino operators Anthony Marnell III (Nugget Casino Resort), Ferenc Szony (Truckee Gaming), Jeff Siri (Club Cal Neva), Rob Mederios (Boomtown), J Grant Lincoln (Baldini’s) and John Farahi (Monarch Casino Resort), were also among the signers.

Sisolak appoints his former general counsel as new Gaming Control Board chair

Gov. Steve Sisolak has chosen his former general counsel, J. Brin Gibson, to lead the Nevada Gaming Control Board.

Sisolak announced on Tuesday afternoon that he was appointing Gibson as the new chair and executive director of the gaming regulatory agency. Gibson will take the reins following the departure of Sandra Douglass Morgan, who last month accepted a position on Fidelity National Financials' Board of Directors.

Gibson, who most recently served as a shareholder at Brownstein Hyatt Farber Schreck, will start his new role Nov. 18. He will be leaving his position with the law firm.

“I am humbled and honored that Governor Sisolak would appoint me chair of the Nevada Gaming Control Board at this point in the state's history,” Gibson said in a statement. “It is a position that has been occupied with individuals of high character and ability, including the outgoing chair, Sandra Douglass Morgan, who has done an exceptional job under the most difficult circumstances. I will work tirelessly to serve with the same sense of honor and dignity for the position those before me have shown.” 

Gibson’s path to the Nevada Gaming Control Board began at Brigham Young University, where he earned his bachelor of arts, master of public policy and juris doctor degrees. He went on to serve as first assistant attorney general and chief of the gaming division within the Nevada attorney general’s office, overseeing a staff of nearly 400 lawyers and legal support professionals. Gibson's time in that office coincided with former Republican Attorney General Adam Laxalt's leadership.

As chief of the gaming division, Gibson also served as primary legal counsel to the Nevada Gaming Control Board, Nevada Gaming Commission and Nevada Gaming Policy Committee. Former Gov. Brian Sandoval also appointed Gibson to serve as the commissioner of the Colorado River Commission of Nevada. 

During the summer, Gibson helped the governor’s office during the two special legislative sessions, underscoring his close working relationship with Sisolak. He served as the governor’s general counsel from January 2019 until January 2020.

Sisolak, in a statement, lauded Gibson as “exactly the type of committed public servant” needed at this time in the state’s history.

"Brin's extensive background and expertise in highly regulated industries, including his experience as Chief of the Gaming Division, makes him a perfect fit for this position, and I look forward to watching him excel in this position,” the governor wrote.

The Nevada Gaming Control Board next meets Dec. 2 and Dec. 3.

Sisolak’s top legal adviser, architect of new cannabis regulatory regime leaving for private sector

Cannabis advisory board

J. Brin Gibson, the top legal adviser in Gov. Steve Sisolak’s administration and an architect of a new cannabis regulatory regime that’s still getting off the ground, is leaving the post for a job in the private sector.

Sisolak announced the news in a press release on Thursday. He said an interim general counsel will be named in the coming days. 

"Brin’s sharp legal mind, extensive experience in both the public and private sector, and respect for the rule of law proved absolutely invaluable in guiding our office through a successful legislative session and the first year of my Administration,” Sisolak said. “I couldn’t be happier for him and his family as they transition to this exciting new chapter.”

Gibson, who previously worked as head of the gaming division in the Nevada Attorney General’s Office, played a key role in designing a new Cannabis Control Board in the mold of Nevada’s well-respected Gaming Control Board. He chaired an advisory board that worked to craft the bill authorizing the new board.

His departure comes at a time of flux for marijuana regulation, however. The board is still being stood up and transitioned from the oversight of the Department of Taxation; an executive director has been publicly announced but not members of the board.

Marijuana labs recently have come under scrutiny for inaccurate reporting on product potency and for passing products with levels of contaminants that should have failed. Sisolak called for a secretive, special task force to investigate “potential corruption,” and license transfers were frozen in the fall.

State officials said they are looking forward to the full implementation of the Cannabis Compliance Board as they work to address a high rate of unfilled positions in the state’s Marijuana Enforcement Division. 

Gibson said in a statement that it was an honor to work for Sisolak since the Democratic governor took office a year ago.

“I am proud of how many good things we have accomplished together to improve the lives of every Nevada family,” Gibson said. “I am grateful for the support the Governor and staff have provided me and my family as I embark on this new opportunity.”

Sisolak requests bill creating Cannabis Control Board; current plan is for paid, part-time board and advisory group

Making good on his promise from his State of the State speech, Gov. Steve Sisolak has requested a bill that would create a Cannabis Control Board in Nevada.

J. Brin Gibson, Sisolak’s general counsel and chairman of an advisory panel that’s explored marijuana regulatory structures over the past few weeks, said the outline of the proposed bill was submitted on Thursday. A Sisolak executive order calling for more effective marijuana oversight had set a Friday deadline for completing “enabling language for the Legislature’s consideration.”

Sisolak’s office did not provide a written version of the request, but Gibson said the plan is for a five-person, paid, part-time board with members that have no financial interest in the marijuana industry. There would also be an unpaid advisory board on which people who are involved in the industry could participate.

He said it’s up to the Legislature and governor whether the board should be a standalone entity with some support from state agencies such as the Enterprise Information Technology Services, or under the umbrella of another agency. In general, he said the concept is to take existing Department of Taxation marijuana division staff and put them in the new structure with the addition of a board and an advisory board.

“I don't know how many additional people we're talking about but not that many,” he said about staffing levels.

Staff at the Legislative Counsel Bureau are tasked with turning the recommendations into bill language. It’s unclear when the bill will be introduced or brought up for a hearing.

The Department of Taxation has a 44-position unit that currently oversees the marijuana industry, but Sisolak has envisioned a different regulatory structure more akin to the Nevada Gaming Control Board. The Department of Taxation has come under scrutiny for, among other things, a lack of transparency in awarding conditional dispensary licenses late last year — an issue that has attracted lawsuits.

Panel questions whether state has staff, authority to adequately regulate marijuana industry

Cannabis advisory board

The chair of a committee that is helping design a new oversight structure for Nevada’s marijuana industry questioned on Friday whether the state’s current regulatory body is large enough and powerful enough to manage the complicated task at hand.

J. Brin Gibson, who is Gov. Steve Sisolak’s general counsel and chairs the advisory panel developing the Cannabis Compliance Board, said the ratio of Nevada Department of Taxation investigators and auditors to marijuana licensees seemed low compared with the structure in place to regulate gambling in Nevada. While there are about four times as many gaming licenses as marijuana business licenses, the Gaming Control Board has about 10 times as many staff members as the marijuana division of the tax department.

“When I look at the numbers of your employees and I look at the number of your licensees, when you compare that to the gaming space,” he said during the advisory panel’s first meeting, “I'll just admit it — I'm skeptical that you're able to do the kind of investigation and enforcement actions that this kind of privileged license requires.”

Citing concerns about transparency in Nevada’s current marijuana regulation system, Sisolak signed an executive order last month tasking the board with preparing a bill for lawmakers that would create a Cannabis Compliance Board. With a mid-March deadline for finalizing the bill concept, panelists are culling ideas from the Nevada casino regulation regime that’s considered the international gold standard.

In a meeting that lasted nearly six hours, they heard detailed presentations from the Gaming Control Board and gambling industry experts. UNLV Professor Greg Gemignani shared a historical retrospective detailing how Nevada’s gambling industry, plagued with corruption and bloodshed and threatened with a federal crackdown in its early years, cleaned up its act and took on strict regulation starting in the 1950s.

Under the current regime, applicants seeking a casino license must undergo a rigorous background check that can sometimes last months or years and includes a review of five years of bank statements and tax returns, an investigation of social media accounts and personal visits by investigators to places where the applicant has lived to interview people who have worked with the applicant.

Panelists noted parallels between gambling and cannabis, which both had their roots in illegal activity before being corralled into Nevada’s mainstream. A major difference is that the Gaming Control Board has matured over six decades, while marijuana’s regulatory structure has only been evolving since 2013, when lawmakers voted to authorize medical marijuana dispensaries.  

Taxation officials reported Friday that in the year since recreational sales began, there had been no documented instances of diversion, when legal marijuana from one state ends up in another market illegally. The agency said it had eight instances in which it suspended someone’s license for anywhere from five days to five months, but has not yet revoked someone’s license or had a hearing in which someone challenged the finding of violation.

That fact surprised Gibson.

“It just strikes me as almost improbable, nearly impossible, that you've yet to have a single hearing on a civil penalty,” he said. “That's just absolutely incredible.”  

Panelists also discussed what they view as a loophole in the agency’s ability to regulate the market. The Nevada Department of Taxation has no staff that is POST [Peace Officer Standards and Training] certified, meaning they have the training and authorization to carry out law enforcement activities.

The department said it only worked with legal licensees and did not have the authority to address criminality in the black market, although Jorge Pupo, deputy executive director of the marijuana enforcement division, said the agency has a good working relationship with police. He cited an example where the department worked with police to shut down a clandestine, illegal marijuana party in a warehouse.

By contrast, the Nevada Gaming Control Board has 91 certified peace officers who do investigations, analyze intelligence and make arrests.

“In order to allow people to collect their rightful dues for their investment in this industry, you've got to control the black market,” Gibson said. “And so the fact that there are no POST-certified employees of your agency concerns me greatly.”

Member and Clark County Commissioner Chris Giunchigliani said she was concerned that taxation officials didn’t track instances when people call the police on a licensee. And panelist and state Sen. Yvanna Cancela said the lack of law enforcement authority leaves gaps when it comes to things such as illegal advertising or delivery services — people can’t call regulators and expect them to enforce those laws.

“I agree,” Pupo said. “The problem is, we don't have any authority, right? But it is a problem, and we recognize that it is a problem.”

Panelists also suggested there needs to be more accountability on marijuana agent cards, which are afforded to people who work at, own or serve on the board of a marijuana business. Regulators need to track whether applicants accrued any disqualifying criminal convictions after they gained the agent card, panelists said.  

Giunchigliani said she was aware of two marijuana industry employees who were fired from one business for theft but immediately hired by another business, with no communication about the disciplinary action.

The taxation department outlined the work it has already done in enforcing marijuana laws and regulations. Violations are categorized from Category I — the most serious, which is grounds for revoking a license — to Category V, which are for violations “that are inconsistent with the orderly regulation of the sale or production of marijuana or marijuana products.”

The state has assessed $603,250 in fines and collected $181,500 of that, with some of the fines reduced through settlement agreements.

The agency also said it conducted 234 investigations in the first year of legal recreational marijuana sales, and substantiated 146 of those complaints. There is currently one establishment in danger of license revocation, but that process is on hold as the business works through settlement discussions with the enforcement division.

The panel is expected to meet again next week, although the exact topics have not yet been decided and several state employees have been assigned research tasks ahead of it. Melanie Young, the recently appointed director of the Nevada Department of Taxation, said Gibson directed her to analyze the marijuana division’s staffing levels and how they compare to what the Gaming Control Board’s levels would be if it had a similar number of licensees.

“I think we’re really excited to work with Gov. Sisolak and the team and see where we can make improvements,” she said.