Nevada Moving Closer to Intrastate Online Poker Industry: Q & A with Gaming Attorney Mark Clayton

In the not-too-distant future some Americans are going to play in the first licensed and regulated online poker industry in U.S. gaming history — as Nevada, the first state to legalize any form of gambling, will be at the helm, allowing its residents and visitors to wager on the virtual felt.

Nevada is set to hold a hearing on Thursday regarding regulations crafted by the Gaming Control Board that would provide framework for the Silver State to oversee intrastate Internet poker.

The Nevada Gaming Commission meeting in Las Vegas could result in regulations being adopted and licensing on the horizon. The new batch of regulatory drafts must be finalized by Feb. 1, 2012, per Nevada law.

Six companies have already applied to be licensed once regulations are ready, and reviewing some of the material is underway, according to the Control Board.

International Game Technology, 888, Bally Technologies, Cantor Gaming and Shuffle Master are seeking to be service providers, while South Point Poker is looking to be an operator.

At the last Control Board hearing, held in early December, some of the upcoming industry’s likely participants were represented by some of gaming’s most experienced attorneys.

Card Player had the chance to speak with Mark Clayton, Control Board member from 2005 to 2008 and current lawyer for online poker site 888, to discuss a handful of details pertaining to what the next steps are, and aren’t, for Nevada to break ground with its first operational site.

Brian Pempus: After the Nevada Gaming Commission adopts these regulations, could you walk me through the next steps necessary for the first online poker site to be up and running in the state?

Mark Clayton: Basically there would be two application processes. One would be the operator of an interactive gaming system. Those operators, by the regulations, are basically the brick-and-mortar casinos. So, “X” casino would apply to become an operator. Now if they had the technology in house and developed, then there would be approval of the technology through the lab — no different than a gaming device today that gets tested by the lab. To the extent that the brick-and-mortar casino doesn’t have a technology solution, then a currently operating Internet gaming site could submit an interactive gaming service provider application. Once they are approved as a service provider then they can provide their technology to an operator, and effectively run and manage the gaming system on behalf of the operator. But, then again, they also need to be licensed and separately their technology would need to be tested and approved.

BP: After those licenses are granted, they are free to open up their respective businesses?

MC: That’s correct. There are no other statutory requirements in place at that point.

BP: Can you talk about how long you predicate the licensing phase of all of this taking? Is it going to be pretty short for some companies that have history with Nevada regulators?

MC: All the operators have to be existing resort casinos in Nevada, so those are all well known to the [Nevada Gaming Commission]. The issuing of those licenses will not be the gating factor. I think the bigger gating factor will be the testing of the technology — that is the platform. Those technologies have not yet been submitted, so that will be the longer lead item to get to an operational state.

BP: Just to clarify: Will intrastate online poker fall into any gray area of federal law?

MC: It’s been the collective wisdom that intrastate poker, depending on how it’s architected, would not implicate any federal laws.

BP: So Nevada wouldn’t have to seek any form of clarification from the federal government or the Department of Justice?

MC: Yeah, the way the law is structured, the Nevada Gaming Commission would seek clarification of federal law if it were to offer interstate — across state lines — Internet poker.

BP: There has been some notion at the federal level about the Internet as inherently interstate. Do you think this is related to law being antiquated in the sense of not considering new technologies that exist to keep things within state borders?

MC: I think the issue has been that certain data packages may cross state lines. I understand that there are technology solutions that can address that. I am not versed well enough to what they are or how they work, but I’ve been told, I’ve been advised, that the technology is set as such that it could ensure that communications don’t cross state lines, and thus implicate federal law.

BP: Is this going to be similar to the way Nevada already has operators with mobile gaming devices for sports betting?

MC: Correct. That could be one of the technology solutions. Because to allow sports betting by telephone or on mobile devices — an Android or an app for the iPhone — part of the technology they test is to make sure the geo-location works, that you’re physically within the state of Nevada. Obviously, then the [Gaming Control] Board gets comfortable, and then again it’s all proprietary as far as the individual technology that each company is using. But obviously they get comfortable that the person is in the state of Nevada and communicating with a Nevada book. I would assume you would see similar technology deployed in the intrastate [online poker] solution.

BP: At the last Gaming Control Board hearing you spoke about being able to verify age with a high degree of certainty prior to a player submitting all of their documents. Can you talk about what methods you can use to get that level of certainty before receiving a copy of their driver’s license, pay stub, and whatnot?

MC: Basically, at least in the European jurisdictions, there are dedicated governmental websites for confirming a person’s identity. We here in the states obviously don’t have a similar system, but there are third-party solutions that can help verify people based on other public records. We have not seen those commercial solutions, at least formally presented to the Board and the Commission, but that would be part of the process. Rather than dictating that you should use “X” service or “Y” process, it’s up to the best practices of each individual operator to decide what the best solution is, and then it would be reviewed by the Board. So everyone may have a unique solution.

BP: Do you think this could be an ancillary industry that opens up here in Nevada as a result of an online poker system?

MC: We have seen similar databases develop in the European jurisdictions so it wouldn’t surprise me that they would migrate or that new businesses would open up to provide that service.

BP: Switching to 888: Does this company have any goals to be up and operational by the start of the 2012 World Series of Poker?

MC: They’re a client, so I am limited to what I can say about what their plans may or may not be.

Follow Brian Pempus on Twitter — @brianpempus

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