Schuetz: Nevada’s Governor Lombardo Has Work Cut Out As Gaming Board Turmoil Invites Feds

“The time is always right to do what is right.”

— Martin Luther King, Jr.

I believe Nevada Gov. Joe Lombardo is a decent man. He is presently a bit challenged because, as a Republican ex-sheriff, he is in a position of having to accept that it is cool to assault a cop if the person doing the beating had on a red baseball cap. 

He also needs to get someone on his budget team who has mastered the skills of adding and subtracting, for it is embarrassing to submit a budget that flunks basic math and then send some poor aide to go out and inform the press and public that they will fix the math and resubmit it. After all, in a small state like Nevada, a silly math mistake of a few hundred million here and a few hundred million there can soon add up. 

However, one of the most material potential threats to his reputation is that he may catch the heat for destroying the brand of gaming regulation in Nevada, which is no small event.

For one to suggest that Gov. Lombardo is responsible for destroying the reputation of gaming regulation in Nevada would be a bit unfair, however. When he was elected, it was already on life support. Through his apparent inattention and lack of vision about politics and gaming, Governor Lombardo took this very sick patient and choked the life out of it. It seems that Lombardo understands a great deal more about raising money from casinos than about how they work and the importance of regulating them well.

Before I continue, let me be clear about who I believe is a class of victims here, and these are the non-appointed men and women who serve the Nevada Gaming Control Board. Nothing in this opinion finds fault with these people. I started interacting with the Board in the 1980s and have often been impressed with the service these people provide to the gambling industry and the state of Nevada (okay, sometimes the game approval/tech folks got on my last nerve). The damage to Nevada’s gaming regulation brand does not rest with these people but rather with the appointed Board leadership, the politicians, and a few executives who were freelancing without apparent fear within the facilities. These folks comprise the evil empire here.

Gov. Lombardo presently has a gaming board comprised of three people, two of whom have resigned. One of those two people is the source of a lawsuit from a Board employee against the Board. The only person not resigning has a very questionable background and qualifications to serve on any board. Moreover, all three are presently from the legal profession, contrary to the intended design of the board. It is as if someone was testing the notion as to how many lawyers does it take to totally screw up a gaming control board? It seems the answer is three.

Deeper dimensions and a revolving door

Another reality is that the federal government is knee-deep in Nevada gaming, and it has to do with a bunch of California bookies, money launderers, athletes, and whatnot that the Nevada Gaming Control Board seems to have missed, overlooked, or ignored (pick one or more). And there are, I would argue, more boots to fall in those investigations. Sorry, Nevada, the embarrassment has not yet ended.

There is also a very ugly dimension to a lot of this because the Board was informed that nasty stuff was going on long ago and either fell asleep at the wheel or just wished really hard that it would go away. 

Since the Board chairmanship was vacated by the enormously competent A.G. Burnett in 2017, the chair position has resembled a summer job for a teenager. What I mean by that is since A.G., few have barely taken the time to put any wear and tear on their Board’s office furniture.

A.G. Burnett stepped down from the position of chairperson of the Nevada Gaming Control Board in December 2017 after serving on the board for 11 years. Becky Harris was then appointed to the chair position in January 2018. She barely lasted a year. In the six years, starting with Ms. Harris’s appointment and until Kirk Hendricks’s resignation, which was just announced, there have been five different chairpersons. Again, that is five people in seven years.

If the goal of the Board is to offer stable leadership, this turnover is a joke. 

I have served on two gaming regulatory entities. I was a commissioner for the California Gambling Control Commission and the executive director of the Bermuda Casino Gaming Commission. I also helped the City of Detroit and the state of Kansas introduce casino gambling. Before taking those positions, I had a long history of working in the global gaming industry, starting as a dealer and ending as a CEO of a Las Vegas casino company. Moreover, I have taught casino management and regulation at colleges and universities worldwide.

From that vantage point, I want to attest that it takes time to get up to speed in a regulatory agency. Bureaucracies are funny beasts, and they take time to figure out how they do and do not work. Moreover, I do not believe that any of the Board Chairs following A.G. Burnett had any meaningful casino experience where they actually got their hands dirty in a casino.

In short, the chairs were gone by the time they figured out everyone’s name, where stuff was, what their job entailed, and who they could trust. That leads to terrible regulation.

In the discipline of economics, there is a large corpus of literature on regulation, and within that mass of literature is an incredible amount of literature on regulatory failure. Aided by the creativity of many politicians and regulators, these different causes and types of failure have exhibited dramatic growth over time, proving that, given enough time, politicians and regulators can be most inventive in ensuring that regulation failure occurs in new, unique, and exciting ways. 

Captivity and failure

One of the better-known types of regulatory failure is the capture theory, which states that the industry ultimately controls the regulatory apparatus. I have published articles on capture here, here, here, and here.

There are other roads that lead to the regulatory failure. Examples include lack of staffing, poor compliance and safety testing, corruption, antiquated measuring tools, and on and on the list grows. 

In looking at the reason for Nevada’s regulatory failure, I would argue it is based on competition between incompetence and stupidity. Whenever I look at the recent failings of the Board, my first response is, “What were they thinking?” I generally conclude that they were not thinking.

Gov. Lombardo also needs to figure out how to convince the leadership of the board not to think of it as a drive-thru. The current chair was appointed until 2027, and he clearly wants to leave skid marks out of his board parking space.

Gov. Lombardo will need to appoint the person who will be the replacement to the chair when Brittnie Watkins leaves at the end of this month. That person can then become chair when Kendrick leaves at the end of the legislative session (Junish). At least, that is my theory, so at least the new chair apparent (clever) can get a feel for the job from Kendrick before he leaves. The governor could appoint Board Member George Assad to the chair, but that would make little sense, and provide Lombardo with even more problems. The main advantage of Assad being appointed chair is that it would give me another opportunity to write an opinion piece detailing that Lombardo has now clearly lost his mind.

All this matters because the feds have already set up camp in Las Vegas because of the Scott Sibella-related scandals. The feds have every reason to believe that the Nevada regulators are either in the bag or incompetent to miss all of that — especially after they were given a roadmap that they and MGM leadership appear to have ignored. 

Now, suffering a significant shakeup with 66% of the board leaving only adds fire to the suggestion that Nevada is in over its head and that the feds not only need to stay involved — but increase their presence. And trust me, that will not be good for Nevada or the gaming industry.

The current situation in Nevada regarding its efforts to regulate gaming will become case studies for regulatory failure for future economists. Not only will this destroy the efforts of many generations of Nevadans who worked so hard to build a well-respected regulatory edifice, but it will hurt the image of the state and the gaming industry.

My advice to the state and Gov. Lombardo is that the bleeding needs to stop, and he needs to find qualified adult supervision for the Gaming Control Board. It is clearly needed, for Nevada must earn back the respect it worked so hard to earn. 

The clown car act needs to end, and it needs to end now. 

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Richard Schuetz entered the gaming industry working nights as a blackjack and dice dealer while attending college and has since served in many capacities within the industry, including operations, finance, and marketing. He has held senior executive positions up to and including CEO in jurisdictions across the United States, including the gaming markets of Las Vegas, Atlantic City, Reno/Tahoe, Laughlin, Minnesota, Mississippi, and Louisiana. In addition, he has consulted and taught around the globe and served as a member of the California Gambling Control Commission and executive director of the Bermuda Casino Gaming Commission. He also publishes extensively on gaming, gaming regulation, diversity, and gaming history. Schuetz is the CEO American Bettors’ Voice, a non-profit organization dedicated to giving sports bettors a seat at the table.