Sayre came aboard and Munro ended up with the attorney general's office, but it got the public wondering whether Gibbons was looking to shake up Nevada's gaming regulatory environment, since longtime Nevada Gaming Commission Chairman Peter Bernhard also was up for reappointment.

It didn't take long for the answer: Gibbons reappointed Bernhard and his counterpart on the Control Board, Dennis Neilander, to their respective regulatory boards, and the commission remains the same as it was when the gubernatorial transition occurred.

Bernhard, who first became chairman of the five-member commission when the turmoil of 9/11 erupted, has been a steady voice in gaming regulation ever since.

An attorney with the Bullivant House Bailey law firm, Bernhard specializes in business, commercial litigation, intellectual property and real estate and land use in his law practice.

Bernhard talked with In Business Las Vegas about some of the latest regulatory issues before the Nevada Gaming Commission.

Question: For those who are unfamiliar with gaming regulation in Nevada, explain how Nevada's two-tiered system works.

Answer: The Nevada system has been in existence for many, many years with two different agencies. One is the state Gaming Control Board and the second is the Nevada Gaming Commission. The Gaming Control Board has a staff made up of in excess of 450 employees, all of whom work daily in various divisions to oversee the operation of casinos in Nevada. The Gaming Control Board is a three-member board, all of whom also are full time and all of whom work in various different areas of responsibility as assigned by the chairman of the Control Board. The Control Board acts as a recommending body to the commission on licensing matters and also acts as a research arm to assist the commission with respect to policy decisions that come to the commission.

Now the commission is a five-member body. It's a part-time body made up of people appointed by the governor, and those appointments are for periods of four years. The presently constituted commission includes Radha Chanderraj, an accountant and a lawyer; former Lt. Gov. and state Sen. Sue Wagner; we have former state Sen. Ray Rawson; and Art Marshall, who is a businessman. I have been serving as the chair since 2001. I am a lawyer by trade and I spend most of my time on my other job as a lawyer, working part time as chairman of the commission.

There's also some political subdivision, isn't there?

Politically, the statute says there shall be no more than three members from any one political party, and that's been part of the law ever since the commission was formed.

In an interview last year, former Gaming Control Board member Bobby Siller suggested that the two-tier system is not cost-effective to the state because of the redundancies of two presentations to two boards. He suggested the commission hear matters in which a split vote occurs or appeals to board decisions. What do you think?

I have a lot of respect for former member Siller and he and I worked closely on a lot of matters over the years. I think there are very valuable functions that the board performs and also separate but valuable functions that the commission performs. I think the fact that we're a part-time body made up of people who are out in the community doing various different business dealings and having different contacts gives us a different perspective from the board, which is full time.

I know that the Nevada model has been followed in other states. Some other jurisdictions simply have one regulatory authority. I think there are pros and cons in both of those systems, but we function very well, I think, working together on matters where interests coincide between the board and the commission. There are occasional times when there will be differences and I think those make for a better regulatory system.

How has gaming regulation evolved in your tenure on the Gaming Commission?

I was appointed to fill the remaining term of former Chairman Brian Sandoval. My first meeting was October of 2001, right after the events of 9/11. At that time, we were concerned about stability and security of the gaming industry, and we didn't know what effect that particular event would have on Nevada licensees, the gaming business and gaming regulation. I think that since that time the industry has responded very well to address the concerns that were presented at that time. And, of course, we all worked very closely with the licensees to make sure that Nevada could be a safe destination for people who want to come to Nevada.

Since that time, the main evolution of the gaming regulatory system involves technology, and almost every issue we have has some element of technology attached to it. It's not just the machines you see on the floor, but it also involves the back-office systems for accounting and making sure taxes are paid properly. All of these things have presented challenges, and I think you're aware that we had our lab move into a separate facility fairly recently, which has been a tremendous benefit to us in making sure that we can have state-of-the-art analysis of all of the technology coming forward throughout the industry.

Where can there be improvements made?

We always get the complaint from the industry that we're not able to move quickly enough and people always want to say, "Can't my application be processed quicker?" whether it be an application for a new license of a new operator or a new gaming device or piece of associated equipment that would come through and be evaluated. Of course, we're constrained by the limits of the budget that we have from the Legislature and we can only do things so fast. In many ways, we have to make sure because we are the last safeguard between something going wrong with what the industry presents and the public, and the public's confidence in the integrity of the games. Our view has always been that we have to take the time necessary to make sure it's done right and it may not always meet with people's timetables from a business perspective. But at least I think we have been able to accommodate and improve at least over the last 10 to 20 years, keeping in mind our primary responsibility to protect the industry and to protect the public in gaming.

A lot of the policy changes in Nevada are being driven by technology. How does the commission stay ahead of the curve on technological advancements in the industry?

You're assuming that we do stay ahead of the curve. We try. We rely considerably on the Gaming Control Board staff and on the board itself. I think we do have the advantage or benefit in Nevada of having licensees who also are very conscientious in presenting the pros and cons, strengths and weaknesses of the various technology advances they're implementing.

I think that relationship works very well. I think most licensees believe that if they submit a piece of technology that's not ready for the market that it's going to cost them a lot more in terms of time and money to send it to the board, have it rejected for some reason and then redo it and present it back again. Licensees have an incentive to make sure things are fairly well established by the time they submit to the board. The lab takes a look at that and makes sure it complies with the regulations. Then we, as the commission, have to rely on what the licensee has presented to the board, what the staff has presented to the board and what the board presents to us.

A recent technology matter involved the introduction of EDITH — the Electronic Debit Interactive Terminal Housing developed by Global Cash Access — that would have allowed casino guests to use a debit card to draw from their bank account and print a bar-coded voucher that could be used in a slot machine. Yet the technology concept was unanimously rejected by the commission. Why?

The concept was rejected as a matter of policy. The board advised us after extensive work by our lab that the technology itself could be regulated and properly accounted for. That was not the issue. The issue was a broader issue of whether it was consistent with Nevada policy to allow that sort of transfer directly from a debit card into a voucher which would be used primarily if not exclusively for gaming. As the discussion on the record at our meeting showed, there was at least some concern whether or not the direct or very closely direct tie to a bank account and a slot machine was going to be breached.

If there was going to be a line to cross, was the policy of the state at the point where it could accept that, and the commission unanimously decided that, no, we're not ready as a policy matter even though the technology could be regulated. It was a policy issue. In the absence of any legislative directive, the commission has to make those types of judgment calls. And it's not an easy question, but we have to look out for the industry itself and for the policy of the state of Nevada.

A casino could place dozens more ATMs around the casinos floor making them just as numerous as EDITH terminals. What's the difference?

I don't know that the number of machines was the policy issue. The question is would there be a difference between transferring from an ATM delivering cash, which then would have to be placed into another device in order to gamble, or whether there could be a direct link between what the machine disseminated and going back into a gaming machine. At least at this point in time, the decision was that the commission did not want to adopt a concept — not just for that particular machine, but for any machine — that would result in a voucher suitable for play in a gaming machine to go directly from an ATM.

To explain a little bit, the Legislature had spoken with respect to credit cards. As technology advances, ATM cards become much more like credit cards where there can be overdraft protection so a person actually can be borrowing money through the use of an ATM card just as they can with a credit card. So if the Legislature were to address this issue and tell us that we should regulate credit cards and ATM cards and allow them to be used to get a voucher, we would be happy to do that. The staff and the board, I think, correctly told us that they were ready and able to do that regulating if and when the policy decision was made that that was a good thing for the state.

Your son is a sociology professor at UNLV and has been very active in problem gambling research. How much did interaction with him impact your stance on the EDITH request?

I don't think it had any effect. My job as a state regulator is to look at this from the policy of the state, and although the emphasis of the presentation and the evidence at our meeting discussed the issue of problem gamblers, I think my comments at the meeting were that this was a broader issue that didn't affect just those people who might have a problem with their gambling habits.

The issue is whether or not Nevada wants to be in the forefront of telling people throughout the world, even those who don't have a gambling problem, that Nevada is going to do everything it can to get into a bank account. It's ordinary people who want to come to Nevada for entertainment, and our licensees spend a lot of time and a lot of money marketing Las Vegas and the rest of the state as an entertainment destination to then make it appear as if, "And, by the way, we're going to try to get into your bank account if we can." At least at this point in time, the commission decided that was not where we wanted to go.

One of the arguments that came out of the EDITH debate was that there wasn't enough research on whether the device would be good or bad for problem gamblers. Couldn't that same argument be used on just about any new technology that speeds play or makes it more efficient?

The same argument could be made, but, again, I didn't see the decision that was presented to us as hinging on whether or not research was there. Again, I think the record from our meeting will show — and I made some comments on the record — about how research would be nice, research is not going to give a definitive answer, one way or another, whether a particular gaming device or technology is going to be incrementally significant in either increasing or decreasing problem gambling behavior.

That was a very, very narrow aspect of the issue presented to us and I think the broader issue was whether or not Nevada wanted to step across the line which I thought was already established. This was the big change that this particular device presented to us, to dispense a gaming voucher tied directly to an ATM card as opposed to an ATM machine which dispenses cash.

Do you think the EDITH device concept would be revisited by the commission if it turns out to be a popular feature in other gaming jurisdictions?

The mechanism is there for that to happen. The policy directive we have from the Nevada Legislature is to make sure our regulations do not render our licensees at a competitive disadvantage with other jurisdictions. Based on the information presented to us, other jurisdictions had not yet approved this device. There has not been any great clamor from the public that the particular device in question or any other machine that would disseminate a voucher for use in a gaming machine from an ATM card was something that was needed at this point.

There was no indication that our licensees would be at a competitive disadvantage because other jurisdictions or the public at large was using this and requiring this in order to stay competitive. If other jurisdictions were to approve this, and if it appeared to be something that put our licensees at a competitive disadvantage, we clearly have the policy directive from the Legislature to look at that and see if that's a factor in our decision.

Similarly, if the Legislature were to look at this and say, "We think you should regulate the distribution of a gaming voucher based on an ATM card," then we, of course, would go into that, and our board has already told us that they can regulate that so then we would simply implement whatever the Legislature were to direct, but that has not been done.

We're soon going to see wireless gaming technology in casinos that would enable people to play at poolside or in restaurants. What, if any, concerns do you have about some of those devices?

We have a lot of the same concerns that we had. In this case, the Legislature did pass a statute that allowed mobile gaming systems to be presented for us to regulate. We looked at the same types of issues that we looked at with respect to Internet gaming. That is, can we limit the use of mobile gaming devices to a geographic setting which, in our regulation, will be within the boundaries of a licensee's property? Can we make sure that there are appropriate verifications to make sure that the person that uses the mobile gaming device is of suitable age?

Our lab did an excellent job of looking at this and the technology and said, "Yes, we can provide various safeguards to protect the public from these devices being used by minors." There are various devices and each company coming before us with a mobile gaming system may have a different way to do this. But those are the types of issues that we as regulators had to be concerned about. Finally, in addition to the geographic location and the age discrimination to make sure that only people over 21 could use them, we also had to make sure we were comfortable that the integrity of the games would be respected.

We were convinced based on the legislative directive and the work of our staff in the lab that, yes, depending on what systems are brought before us, we can make sure the games are fair, that they're operating correctly just as if they were a gaming device on the floor of the casino.

We're also going to be seeing server-based games in local casinos soon. Those will enable slot floor managers to change denominations, pay tables and the look of a casino with a few computer keystrokes. What, if any, concerns do you have about that technology?

In presenting the server-based gaming concept, one of the big concerns was whether or not the public would be confident that the game itself protected the integrity of the process. One of the safeguards that has been part of our discussion and our regulation would be a four-minute down period so that the games could not be changed "on the fly," so to speak, so that people would understand that if a configuration is changed through server-based gaming that there would be plenty of time for them to decide whether they wanted to play the new configuration or not.

Again, the technology involved in server-based gaming was something that our lab was able to verify that it could be studied, reviewed and approved as far as protecting the integrity of the game process itself. The analogy is that if a licensee were permitted to take a slot machine of one theme and replace it with another machine of another theme, physically, was the server-based gaming concept something that would simply allow that be done without physically moving one machine out putting another one in.

Again, our lab was very diligent in looking at all of these issues and we are confident that the process itself will protect the integrity of the game so that it's the functional equivalent of having a machine physically removed from the location with another one placed in there without having to deal with all of the time, expense, labor of actually physically moving these machines.

The commission recently approved skill to be allowed to determine the amount of a bonus paid on a slot machine. Considering that most view poker as a game requiring skill, do you see a time where video game skills play a greater role in playing a slot machine?

Based on the information presented to us in that circumstance, I think, yes, there will be an increased emphasis on that. As regulators, we treat this conservatively, taking steps that we think are consistent with our regulatory responsibilities while at the same time taking into account the fact that certain skill-based elements might make it more exciting and interesting for a patron.

In the particular case you're talking about, the skill-based aspect of the game would come into play only in a bonus round and would allow a certain minimum bonus to be paid no matter what the skill of the player. So once a player earned a bonus, the player would receive some sort of reward and that reward could be increased if the player exhibited a certain greater degree of skill, in this case, the Pong game concept. We felt that was something we could regulate appropriately and it could provide something attractive for patrons. And, yes, I think the clear indication, from what we've heard, is that there will be more and more of these concepts coming forward.

There are some critics of the gaming industry who say that now it's time to consider removing slot machines from convenience stores and supermarkets since children are exposed to them on shopping trips. Is there any appetite for making such a policy change on what many consider to be an embarrassment to the state?

As an attorney and not as a regulator, I look at that as an issue that also involves some due-process implications for licensees that already have these machines in their facilities. It's always been an issue. People have discussed this over the last 15 to 20 years. There has been a definite trend toward decreasing the opportunities for those types of games in places of greater convenience where young people can congregate and maybe be affected by them.

I don't see that there would be any regulatory power or authority to step in and try to undo what has been a longtime history in the state of Nevada. I don't know whether the Legislature would consider anything like that either. It's something that's beyond the purview of us as regulators. We deal with the law and the licensee operations as we have them, and we regulate them to make sure they're fair, and we make sure licensees follow the rules and don't allow minors to congregate or to play in those areas.

Do you have any personal feelings about it?

No, as a regulator, my job is to look out for the policy of the state of Nevada.

The Gaming Commission and the state Gaming Control Board have some major licensing matters coming before them in the months ahead with many of them based on public companies going private. Do you feel this is a positive trend for Nevada?

Again, I don't really have an opinion on whether it's positive or negative. Our job is to look at each and every application as it comes before us and see whether it's consistent with the policies of the state of Nevada. We have done that in the past with other applications in this general area and will do that with all of them in the future, based on the particular facts and circumstances presented.

Tax matters aren't policy decisions the Gaming Commission must consider, but we'd be curious in hearing your thoughts on citizen groups that feel the gaming industry should pay for a greater share of goods and services.

That's well beyond the purview of our regulatory responsibilities.

Does the gaming industry pay enough in taxes for the impact it has on local citizens?

Again, that's beyond our purview as regulators.

We've seen a lot of foreign investment by companies like Las Vegas Sands Corp., Wynn Resorts and MGM Mirage. Is this a good thing for Nevada?

From a regulator's perspective, we are limited in terms of what we can or cannot do with respect to foreign gaming activities of our licensees. We do watch very closely over those activities, and we get periodic reports from all of our licensees in other jurisdictions to be sure they are following the laws of those jurisdictions. We will review those things, and if there are issues presented which cause regulatory concern for us, then our staff and our board will investigate and has the power to present a complaint to the commission.

You get a lot of opportunities to get information about licensees when they appear before the commission. How is this valuable to you as a regulator?

I think any regulator is well-served with whatever information a regulator can obtain, as long as it's reliable. I think the examples you're talking about our situations where licensees come before us for approval of a going-forward shelf offering where they can have the opportunity to have offerings in the public markets without coming in for prior approval from the board and commission.

Those give us an opportunity to get an idea of what the licensees have done during the previous couple of years and also what plans they have, if any, which can be disclosed publicly about how they intend to use the opportunities that the financial markets present in future ventures. So we use those events as opportunities to learn a little bit more based on what the companies can tell us given the restrictions on disclosures in the public markets.