Nevada gaming regulators start work on skill-based slot machine rules

For more than an hour Wednesday, state gaming regulators and gambling equipment company representatives discussed a proposed draft of new rules governing development and use of slot machines that include a skill-based element.

Additional workshops are expected this summer before the regulations are finalized.

But the magnitude of the hearing in Las Vegas was made clear from the outset.

“This is the most important regulation I’ve worked on in 17 years,” Gaming Control Board Chairman A.G. Burnett told a packed hearing room. “This is a turning point that could reinvigorate the slot machine floor.”

The workshop followed passage of Senate Bill 9, which was backed by the Association of Gaming Equipment Manufacturers. The association wants to see arcade-style video components added to traditional slot machines.

Attorney Dan Reaser of Fennemore Craig, who represented the association, said that “old notions” have to be tossed aside in drafting the Nevada regulations because of competition for gaming customers from markets, a decline in slot machine revenue, a generational shift in the casino customer and new technology.

Reaser said the regulations must take into account a range of payback systems, platforms for multiple players on a single slot machine and slot machines taking in new elements, such as social networking.

“The game may not look like a slot machine,” Reaser said, holding up a tablet computer for emphasis.

Reaser said the regulations should also cover electronic commerce transactions.

Skill-based slot machines, he said, aren’t being created to “cannibalize” the existing market. Instead, the goal is attract new customers to the slot machine floor.

“It’s about bringing the ‘next big thing’ to the gaming market,” Reaser said.

SB9 called for the Control Board and Nevada Gaming Commission to adopt rules approving skill-based and arcadelike features. Slot machines in the United States are now based on chance.

Reaser said the association’s suggested regulations define game of skill, a game of chance, and a hybrid game that incorporates both elements.

Gamblit Gaming CEO Eric Meyerhofer, whose company is developing skill-based slot machines, told the Control Board the market is rapidly changing — current machines don’t attract younger players.

Others are watching how Nevada handles the skill-based gaming component.

In a report to investors this week, Moody’s Investors Service said slot machine companies, such as Scientific Games Corp. and International Game Technology, have to provide a more innovative product to entice younger customers.

“We believe a skill-based slot product is a positive development for Nevada, the U.S. gaming sector overall and slot manufacturers,” Moody’s gaming analyst Pete Trombetta said in the report. “The real test will be whether or not a skill-based slot product will be enough to encourage a younger demographic, a consumer group that is showing less interest to spend their time and income on casino games of pure chance, like slot machines, than previous generations.”

In February, New Jersey adopted regulations allowing skill-based gaming.

Moody’s said Nevada’s decision was significant because it demonstrated a willingness of both casino operators and regulators to create an environment to accommodate new product innovation. Other jurisdictions may play off what Nevada decides.

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