Why isn’t there an industry standard? feat. Dr. Mike Ahlgren

In this interview edition, Dr. Mike Ahlgren discusses who regulates the gaming industry, how every casino is different, and why the gaming industry doesn't have a national standard.

Why Are All Casinos Different?

Heather: Dr. Ahlgren, thank you very much for being on the show. I really appreciate it.

Dr. Ahlgren: My pleasure.

Heather: Now, you are a professor at Penn State. You have a PHD in Gaming and Hospitality. You have worked at the American Gaming Association. When it comes to regulation, do you think it’s a good idea that everybody has different rules and regulations that they follow, or do you think everyone should have an industry standard?

Dr. Ahlgren: Well, from the industry perspective, I would think it would be much easier if you could standardize it. But I don’t think there’s any chance to that because when I met with Gaming Control in Pennsylvania, they wanted to make the argument that they do it a little bit better than Nevada, and in a way, they would be eliminating their own jobs, to some degree, if they just… and the other side of it, I think the selfish side to the industry, don’t forget this. If you’re going to have one standard fits all, well that would probably be done federally, that would make sense. And the gaming industry doesn’t really want that because usually with regulation, comes taxes. And the gaming industry has been very successful at shutting down any attempt to tax the industry from a federal level.

Heather: Casinos basically pay everyone’s state tax. We don’t have to pay our state tax.

Dr. Ahlgren: Well that’s true. And the gaming taxes are only paid on the state level as well, right?

Heather: Right.

Dr. Ahlgren: So I mean that’s what you’re saying, it’s that state gaming tax that really makes it so we don’t pay. Nevada’s low already, you know, comparatively speaking with the gaming tax. I mean, Pennsylvania is 55% vs, you know, about 8%, once you factor everything in, in Nevada. So, Nevada is already extremely low. You know, if the Federal Government came along and wanted to tax it, as well, they would put it on top of the 8%. In Nevada, they certainly wouldn’t say, ‘we’ll cut back since you’re going to take a piece’. That wouldn’t happen. So, in that sense, you know, maybe the industry is fortunate that we don’t have, you know, federal regulations. A lot of times there’s a plus and a minus to everything.

Heather: Why is Nevada held in such high regard from all around the world, when it comes to gaming industry standards and regulation?

Dr. Ahlgren: Well, I suppose it’s because Nevada was largely the first one to really legitimize the business. They were the first ones that were successful at, really, transforming into a corporate business. Even if it was, technically, legal after 1931, we know that there were a lot of influences that weren’t, maybe, completely on the right side of the law. So, Nevada understood, and it was really once they got rid of that, both through the willpower of the gaming commission, you know, people like Harry Reid.

When they sort of pushed out that underworld influence, that’s when, really, if you look at the development of the industry in Las Vegas, that’s when it exploded. Nobody was going to spend 3 billion dollars building a casino, when it was run by a bunch of mobsters behind-the-scenes. Once you legitimize, then you could access the capital from Wall Street. Nevada was the first one that really did that. That made it legitimate and made it a legal enterprise. And then part of the reason they were able to do that was because they became good regulators. Now when the next place wants to looks, when Singapore looks or Pennsylvania or whatever. They look to Nevada.

And I was just talking to some industry people who said sort of jokingly that everyone has to put their own spin to it. So they go, they take a look at Nevada and then they take most of it, but then they can’t just copy it because then maybe they’re not doing their job. So they tweak this and they tweak that and that becomes a big pain for manufacturers. But one of the manufacturers was telling me that when they ship slot machines, some states, essentially, the chips, the computer that sits inside the slot machine, some states, you can just build the whole thing and ship it as one unit, some of them want the box and the brain to it needs to be sent separately. And there’s all sorts of different rules because the regulators all want to put their, sort of, special twist on it. But the reality is, I think all of them borrow a lot from Nevada and they’re the first ones that did it. So, that would be my answer.