Dotty’s casino business plan stalled by regulation changes

The debate over Nevada's rules for slot machines in taverns nearly turned into a bar fight Thursday.

Following a seven-hour hearing, the Nevada Gaming Commission voted 4-1 in favor of several amendments to Regulation 3.015, adding a new definition of a tavern. The revisions effectively eliminate the business model for Dotty's Gaming & Spirits, which has been accused of skirting state law by offering mostly slot machine play without the usual trappings of a tavern.

Only Gaming Commission Chairman Pete Bernhard voted against the changes, saying the revisions "do not encourage economic growth, they discourage economic growth."

Bernhard said there's no need to change the long-standing regulation, and any concerns about a restricted license applicant such as Dotty's could already be handled on a case-by-case basis.

"The proposed regulations will have an adverse impact on business of various sizes and an adverse impact on small communities," Bernhard said.

Despite Bernhard's impassioned defense, four commissioners favored a proposal by panelist Tony Alamo Jr. that took into account suggestions from the Nevada Resort Association, the Nevada Tavern Operators Association and the Gaming Control Board.

The resort association, spurred into action by Station Casinos, thought the proliferation of Dotty's throughout Las Vegas was taking away customers from the locals gaming market.

Under the new regulations, new taverns must have at least 2,000 square feet of public space, a bar that seats nine patrons and a kitchen that operates at least half the time the business is open if they want to also have slot machines. Taverns operating since Feb. 1, 2000, must add a nine-seat bar. Waivers may be granted on a case-by-case basis to older businesses or to those in rural communities, which would allow the Dotty's business model to continue in some places.

Dotty's, which started in 1995 and has grown to more than 60 locations statewide, was the crux of the debate. The resort association and tavern owners believed the business did not qualify as a tavern under state law because they didn't believe gaming was incidental to the primary business.

Each Dotty's location has 15 slant-top-style slot machines with cushioned chairs and a counter for the sale of packaged foods and drinks, both alcoholic and nonalcoholic.

Dotty's officials said the regulation would force them to add bars at 53 locations, at a cost of about $6 million.

Dotty's Chief Operating Officer Mike Eide, declined comment after the vote.

"We're not sure what was approved," Eide said. "We're not going to comment until we see the entire regulation."

Alamo and commissioner John Moran Jr. said they were clearly uncomfortable with the Dotty's business model and wanted to see the company comply with state law.

Bernhard, however, said he didn't understand why Dotty's was being targeted. Much of his ire was saved for resort association attorney Todd Bice and tavern owners attorney Sean Higgins. The three had several heated exchanges during the public hearing.

"Tell me how the Dotty's-style business model has hurt the state of Nevada," Bernhard angrily asked Bice. "There has not been a public outcry against Dotty's except by the people in front of me. You don't use a sledgehammer to solve this ant of a problem."

Higgins said the tavern owners and the resort operators, "put together what most people believe is an appropriate definition for a tavern. It gives us clarity."

Bernhard, however, said the commission didn't need to define a tavern, and commissioners could act on a case-by-case basis on individual gaming licenses.

At one point, Bernhard became incensed at Bice and Higgins when they suggested Dotty's should never have been licensed at all.

"You claim we've abdicated our duties to the state over the last 20 years?" Bernhard asked.

Dotty's attorney Patricia Becker also drew the ire of the commission when she all but suggested the current members were against the company because it markets to women.

When Moran pointedly asked if she was accusing the commission of gender discrimination, she said "no."

But representatives of the statewide tavern operator told gaming commissioners the company had been treated differently by the regulators. Becker said the company has been subjected to "unequal enforcement" in recent months, though regulators had approved Dotty's model for more than 50 locations since 2000.

Becker named every present and past Gaming Control Board and Nevada Gaming Commission member who had voted for the Dotty's licenses. Several former members were in the hearing room at the Sawyer Building representing one of the sides taking part in the hearing.

Becker said Dotty's has invested $60 million in its operations, and markets primarily to women. Showing copies of ads for taverns that feature attractive women, she noted that Dotty's meets all of the objective criteria to be considered a tavern, just with a different style than traditional sports bars or other restricted gaming locations.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871. Follow @howardstutz on Twitter.