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GAMING LAWS OF NJ & NV.
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Legalization of casino gambling, regulation, organized crime, licensing requirements & disqualification, enforcement.... More...
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Paper Abstract:
Legalization of casino gambling, regulation, organized crime, licensing requirements & disqualification, enforcement.

Paper Introduction:
Comparison of New Jersey and Nevada Gaming Laws This paper will look at the development of gaming law in New Jersey since the legalization of casino gambling in 1976. The paper will compare these developments to the law in Nevada concerning casino gambling. The first part of the paper will discuss the general policy considerations underlying the legalization of gambling in both states. The second and third parts of the paper will examine the licensing requirements and procedures in both states. The fourth part of the paper will briefly look at the agencies charged with enforcing the laws in both states. The fifth part of the paper will discuss the developments in New Jersey since the legalization of gambling. Casino gambling was legalized in New Jersey in 1976 in an effort to revitalize the decaying urban environment in the state. Legislato

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[vi]§ 5:12-1(8). Gambling waslimited to hotels in Atlantic City with at least 5 sleeping units.[vii]Legislators enacted this requirement in order to connect gambling with theresort industry, rather than allowing it in any establishment whose ownerqualified for a license. [lvii]§ 5:12-16 a. [xlix]§ 5:12-64. [xlvii]§ 5:12-87(a). [liii]§ 463.17 (3)(b). Stat.Ann. [xxi]Hicks, supra note 9, at 6 3 (conversation with the formerdirector of the New Jersey Division of Enforcement, 1978). Ann. [xii]N.J. [xliv]§ 5:12-86(f). These organizations are required to provide the Commission withlists of personnel who perform these functions.[xxxi] The Commission isauthorized to investigate the backgrounds of these individuals and todisqualify those who have been convicted of crime involving dishonesty or"moral turpitude,"[xxxii] who have made any false or misleading statementsto the board or its agents,[xxxiii] who are members or associates oforganized criminal elements,[xxxiv] or whose "moral character and integrity... [l]§ 463.17 (2)(a). Finally, an individual may be disqualified forthe "[c]ontumacious defiance ... 721, 736 (1985). The management of the resorts themselves has becomeprofessionalized, with management personnel holding business degrees frommajor universities. The othertwo agencies, however, possess enormous powers. [iv]§ 5:12-1(4). § 5:12-9. These two bodies havealmost unlimited discretion in their respective areas of responsibilitiesand have been accused of wielding this power in a sometimes arbitrarymanner.[liv] Changes in New Jersey Law since the Middle Part of the 198 s The changes in New Jersey's Casino Control Act have mostly to do withthe policies which underlay the legalization of gambling in the firstplace. [xxiv]"Casino service industries" include any entity "offering goodsor services on a regular basis which directly relate to casinos or gamingactivity" such as gaming equipment manufacturers, suppliers, andmaintenance services, gaming schools, and casino security services." § 5:12-92. StatutesNevada Revised Statutes Annotated Chapter 463 (Michie 1994).New Jersey Statutes Annotated Title 5, Chapter 12 (West 1988 and Supplement 1994).----------------------- [i]N.J. 2D. Theseentities include: businesses that operate, lease, or manage casinos;[xxiii]businesses that provide goods or services directly related to gamingactivities;[xxiv] and unions that represent employees licensed under theAct.[xxv] Nevada has generally similar requirements as to who must be licensed. [liv]Rose, supra note 1 , at 181-82. Unlike legitimate corporateentities, organized crime groups still revolve around the powerfulindividuals in them. [xlii]See §§ 5:12-86(c)-(d), (g). Hollywood, Gambling Times, Inc., 1986. At the sametime, legislators and various private interests worried about thehistorical connection between gambling and organized crime, recalling themajor influence of organized crime in the casino resorts of Nevada and themajor presence of organized crime in New Jersey. As a result of this history, licensing requirements are meant toensure that individuals involved in the casino business are not affiliatedwith organized crime and have good overall reputations. TheBoard carries out most of the daily administrative functions and hastremendous law enforcement and investigatory powers. [xvi]§ 5:12-85(c). U.L. Instead, it has allowed casino gamblingto operate with fewer restrictions than New Jersey and regulators haveconcentrated their efforts overwhelmingly upon restricting the influence oforganized crime. It was no secret that the profits fromLas Vegas and Reno casinos were used to fund illicit activities throughoutthe United States. Gambling and the Law. Ann. The fourth part of the paper will briefly lookat the agencies charged with enforcing the laws in both states. It was not until Howard Hughes brought corporateAmerica into Las Vegas in the middle part of the 196 s that organized crimelost its control over legal gambling in Nevada. [xiii]A casino key employee is "[a]ny natural person employed in theoperation of a licensed casino in a supervisory capacity or empowered tomake discretionary decisions which regulate casino operation. The restrictive regulations resulted inrelatively few licensed casinos through the 198 s. More attention was then shifted to restrictingcriminal control of the casinos. Legal casino gambling has not proved to be the panacea itsproponents had bargained for. of any legislative investigatory body orother official investigatory body of any state or of the United States"involved in the investigation of criminal activity in gaming, officialcorruption, or organized criminal activity.[xlv] "Contumacious defiance"has been interpreted as "an improper, willful refusal to obey a lawfulrequest or order of such an investigatory body."[xlvi] A hearing is required before a license is issued.[xlvii] The licensemay be issued by the Commission after the Division of Gaming Enforcementcompletes an investigation.[xlviii] The Commission has the power to denyany application or restrict any license for any reasonable cause.[xlix] There are no specific affirmative qualification criteria in Nevada,beyond the general statement that an applicant be of "good character,honesty, and integrity."[l] Instead, the qualifications of applicants arebased solely upon the disqualification criteria listed in the statute.Applicants must not pose a threat to the public interest or create a dangerof unsuitable practices in the conduct of gaming.[li] In addition, theapplicant must prove to the commission that he or she has "adequatebusiness probity, competence and experience, in gaming or generally"[lii]and that the operation will be adequately financed from a "suitablesource."[liii] Enforcement of Laws New Jersey has divided responsibilities in gaming law between twoagencies: the Casino Control Commission and the Division of GamingEnforcement. Casino gambling is the most important industry inNevada and has long been tolerated by the state's residents. The statute does not provide for the mandatoryand systematic licensing of all employees in the industry, although theCommission may require that any person affiliated with the casino operationbe licensed.[xxvi] All persons directly involved in a gambling activity,such as dealers, boxmen, and cashiers, and those in supervisory positions,are required to obtain work permits.[xxvii] They are only required to belicensed, however, if they are key employees.[xxviii] Another difference in Nevada law is that it provides that allofficers and directors of a corporation seeking a license must be licensedindividually and if, in the judgment of the commission, the public interest will be served by requiring any or all of the corporation's individual stockholders, lenders, holders of evidence of indebtedness, underwriters, key executives, agents or employees to be licensed, the corporation shall require such persons to apply for a license....[xxix]Nevada further requires the licensing of any person who controls more thanten percent of a corporation's voting securities.[xxx] In 1986, Nevadaenacted a set of provisions which allow the Commission to "disqualify" thepersonnel of gaming employee labor organizations from performing certainduties. Code tit. Nelson. [xxii]§ 5:12-1 6. [xlviii]§§ 5:12-76, -77. [iii]§ 5:12-1(1) and (3). [xxxv]§ 463A. The Gaming Commission hasthe final authority on licensing and may adopt disciplinary action. [lv]Act of June 29, 1991, 1991 N.J. As apractical result, there are relatively few casino hotels operating inAtlantic City, compared with Las Vegas.[x] Although Nevada developed largely as a result of organized crime-controlled gambling, it shook off these influences in the 196 s and 197 s,when large, publicly-held corporations began buying into resorts in LasVegas. [ix]Hicks, No Longer the Only Game in Town: A Comparison of the Nevadaand New Jersey Regulatory Systems of Gaming Control, 12 Sw. [xix]§ 5:12-85. Casino gambling was legalized in New Jersey in 1976 in an effort torevitalize the decaying urban environment in the state. Asa result, most of the disciplinary actions taken by the Nevada GamingCommission since 197 have involved smaller casino operations locatedoutside the main tourist areas.[xi] The Licensing Requirements and Process One of the most important aspects of casino regulation is thelicensing process. [xxxvii]N.J. The fifthpart of the paper will discuss the developments in New Jersey since thelegalization of gambling. Thecasino industry is not viewed as a solution to urban problems, mainlybecause little of Nevada is urbanized.[ix] In legalizing casino gambling, New Jersey legislators were primarilyworried about the influence of organized crime. In addition, the usual practice in the past was for acrime family to infiltrate a legitimate business through individuals.These individuals would become minority stockholders in the legitimatebusiness entity, owning a small share in the business but theoretically notexercising any control. 19, §§ 41-3.1 to 3.3, 7.1 (1988); O'Brien & Flaherty,Regulation of the Atlantic City Casino Industry and Attempts to Control ItsInfiltration by Organized Crime, 16 Rutgers L.J. [xxvii]§ 463.335(1)(a). §§ 5:12-1 to 5:12-21 (West 1988,Supp. Rev. 1123, 1146(1993). 7 1,71 -13 (1991). [xlvi]In re Application of Resorts Int'l Hotel, Inc., for a CasinoLicense, 79-CL-1, at 19, cited in O'Brien & Flaherty, supra note 36, at74 . Nev. Gambling in Nevada has been legal for anumber of decades. Ann. Const. The licensing requirements in both New Jersey and Nevada targetindividuals, rather than business entities. 11 . Nevada, on the other hand, neverconcerned itself with community redevelopment, largely because it neverexperienced urban blight problems. Thefirst part of the paper will discuss the general policy considerationsunderlying the legalization of gambling in both states. It was never a secret that Las Vegas was developed into a gamblingresort by Benjamin "Bugsey" Seigal, who was financially supported byvarious organized crime "families" in New York and by Meyer Lansky. [lii]§ 463.17 (3)(a). [xx]§ 5:12-85(d)(1). [xviii]§ 5:12-85(d). Regulation of the Atlantic City Casino Industry and Attempts to Control Its Infiltration by Organized Crime. [xxiii]§ 5:12-82. This emphasis has weakened, however, as this goalwas never realized. The second andthird parts of the paper will examine the licensing requirements andprocedures in both states. [xiv]§ 5:12-7. 4 (4). The main reason for its continuing legality is that ofgeneral economics. [xxix]§ 463.53 . Rev. 583,587-88 (1981). Legislators hopedthat the legalization of casino resort hotels would draw large numbers oftourists, pumping money into the local economy and creating a large serviceindustry which would employ large numbers of local residents. Ann. Although theywere either dead or retired by the time New Jersey voters approved theconstitutional amendment legalizing casino gambling, their successors inorganized crime were still active in the state and their reputations werealive and well. Although both states require business entities to qualify forlicenses, much of the statutory and investigatory emphasis is placed uponthe individuals who own and operate these entities. Notes BibliographyComment, The States Ante Up: An Analysis of Casino Gaming Statutes. Nevada has created threeagencies in this area: the Gaming Policy Commission, the Nevada GamingCommission, and the State Gaming Control Board. [vii]§ 5:12-27 (West 1988). [lvi]Rose, supra note 1 , at 188. [xxviii]Regs. [xxxii]§ 463A. Almostall of these individuals and organizations had also been prominent in NewJersey, where they controlled a considerable amount of the profitablecriminal activity and exerted influence in the government. [xxx]§ 463.643. L. Stat. This will be basedupon information concerning "family, habits, character, criminal and arrestrecord, business activities, financial affairs, and business, professionaland personal associates covering at least the 1 -year period immediatelypreceding the filing of the application."[xxxviii] More direct are the disqualification criteria. are such as to create a reasonable belief that his performance of thespecified function would not be consistent with the policy of this statethat gaming be conducted freely and honestly or with the welfare of theemployees of the gaming industry."[xxxv] Qualification and Disqualification for Licenses New Jersey requires that applicants satisfy certain affirmativecriteria by clear and convincing evidence in order to obtain alicense.[xxxvi] The first criterion is that the applicant must demonstratefinancial solvency or soundness, honesty, and forthrightness in businessdealings.[xxxvii] The second criterion is that the applicant have areputation for good character, honesty, and integrity. Comparison of New Jersey and Nevada Gaming Laws This paper will look at the development of gaming law in New Jerseysince the legalization of casino gambling in 1976. Legal slot machines can be found inalmost every commercial establishment from restaurants to laundromats. [xv]§ 5:12-91. [xi]Hicks, supra note 9, at 586-87. This act required the newly-created Casino Reinvestment Development Authority (CRDA) to "directlyfacilitate the redevelopment of existing blighted areas and to address thepressing social and economic needs of the residents of the city of Atlanticcity and the State of New Jersey."[lvii] The revenues for these actionscame from increases in the alternative tax and investment obligationsimposed upon the casinos.[lviii] Conclusion Both New Jersey and Nevada base their licensing requirements upon thenegative attributes of applicants which will disqualify them from obtaininglicenses. As a result, some ofthe aesthetic and facility restrictions were loosened in 1991.[lv] More importantly, the hoped for urban renewal never materialized.Casinos became oases in a desert of urban blight. of the Nevada Gaming Commission and State Gaming ControlBoard §§ 3.1 -.11 (1979), cited in Hicks, supra note 9, at 6 1 n. [xxxiv]§ 463A. [xxxi]§ 463A. 1994). Both New Jerseyand Nevada require pre-licensing investigations of persons and entitiesseeking involvement in the gaming industry.[xii] Certain categories ofindividuals are required by the New Jersey law to be licensed prior tobecoming involved in gaming activities and must be re-licensed annually:casino key employees;[xiii] employees of casinos;[xiv] casino hotelemployees;[xv] officers, directors, and persons having an interest in thesecurities of a corporation seeking a license;[xvi] persons having aninterest in any non-corporate applicant;[xvii] and persons affiliated withprivate and publicly traded holding companies.[xviii] Holding companiesmay obtain a waiver from the Casino Control Commission and the Director ofthe Division of Gaming Enforcement from any or all of the requirements forthe licensing of persons affiliated with corporations seeking a license.The reason for this is that the public corporation itself may be licensedin New Jersey and it would be impossible to have all shareholderslicensed.[xix] New Jersey requires the licensing of shareholders having"the ability to control the publicly-traded corporation or [to] elect oneor more directors thereof."[xx] This provision has been interpreted asrequiring the licensing of persons who control more than ten percent of acorporation's voting securities.[xxi] The casino licensee must also obtaina work permit for each person who will be employed, in addition to thelicense required for each relevant employee.[xxii] Besides licenses for individuals, the actual business entitiesseeking to operate a casino in New jersey must also be licensed. It was hoped that this would play an importantrole in revitalizing the resort industry and the local economy.[viii] In contrast, there are no such social policy considerationsunderlying Nevada's gambling laws. § 5:12-84(c). [x]I.N. § 5:12-8 requires applicants to satisfy allrequests for information pertaining to qualification; § 5:12-84 states thatofficials will look into the integrity of financial backers and theapplicant's own reputation for good character. Rev. Stat. It is the first line of defense against theinfiltration of organized crime figures and other persons of ill reputeinto the gaming business. 22 Rutgers Law Journal 7 1-25 (1991).O'Brien, Thomas, and Mary Jo Flaherty. [li]§ 463.17 (2)(b). The Casino Control Act[ii] listed the policy reasons for thelegalization of casino gambling in New Jersey and the policies behind theextensive regulation of this activity. Stat. §§ 463.165(1) and 463.53 (Michie 1994). 3 . 4 (1). Laws 182; see Comment, The StatesAnte Up: An Analysis of Casino Gaming Statutes, 38 Loy. Many morelicenses are granted in Nevada than in New Jersey, of which less than one-fourth belong to casino operators. All of the states which allow casino gambling ofsome sort have tried to prevent the recurrence of the situation whichexisted in Nevada until the 197 s. Stat. It specifically stated that thetourist and resort industry was a vital element of the state's economy andthat its rehabilitation could vastly improve the overall economic health ofthe state.[iii] Legalized gambling was part of an urban revitalizationeffort which was aimed at restoring blighted areas in and around AtlanticCity.[iv] At the same time, the law was intended to prevent the infiltration oforganized crime into the casino resort industry. 4 (3). art 4, § 7, para. These providespecific examples of what will disqualify an otherwise qualified individualfor a license. New Jersey also originally placed a heavy emphasis uponcommunity redevelopment. [xxxiii]§ 463A. Not only did they "skim" a very large portion of theprofits from the business, they also were able to control the decisions ofthe officers through the use of fear. Ann. The paper will comparethese developments to the law in Nevada concerning casino gambling. New Jersey is strict with regard tothe businesses which service casinos. Few who stay at thehotel casinos leave them, except to go to other casinos. The developmentof the hotel casinos raised property values to such an extent that there isa severe low-income housing shortage. Rose, Gambling and the Law 186-87 (1986). A large percentage of the visitorsare bused in for a single day, ruining the resort image the state plannershad hoped to restore.[lvi] The legislature tried to remedy this in the middle of the 198 s byenacting the Casino Reinvestment Act of 1984. The fear that organized crime figures would take controlof legal gambling in New Jersey was largely behind the severe restrictionswhich were placed upon licensing and location. § 463.14 similarly provides for the investigation into the qualifications of eachapplicant before a license is issued. Stat. In reality, the organized crime groups who"sponsored" these individuals exercised a great deal of control over thebusiness entity. [v]§ 5:12-1(7), (9), and (15). [xl]§ 5:12-86(b). The Division of GamingEnforcement is responsible for carrying out investigations and reporting tothe Commission in matters concerning licensing. Consequently, a minor stockholderwho might not attract the attention of law enforcement or other governmentofficials was the conduit for practical control by the organized crimegroups. 16 Rutgers Law Journal 721-58 (1985).Rose, I. Stat. [xxxvi]N.J. [lviii]§ 5:12-144.1; see also Note, New Jersey's Casino ReinvestmentDevelopment Authority: A Reassessment of Reinvestment, 22 Rutgers L.J. One difference is that Nevada does not require such an exhaustive range ofemployees to be licensed. [xliii]§ 5:12-86(e). Consequently, thelegalization of casino gambling in New Jersey was limited to the AtlanticCity area[i] and was accompanied by the enactment of a rather strict set ofstandards and regulations. §§ 5:12-8 (a), -84, -85, -89 to -92; N.J.Admin. Almost everyone connectedwith a casino, its hotels, its suppliers, or the unions which work for thesuppliers, must be licensed by the state gambling authorities. N.J. [xxxix]§ 5:12-86(a). 12 Southwestern University Law Review 583-626 (1981).In re Application of Resorts Int'l Hotel, Inc., for a Casino License, 79-CL- 1 (Casino Control Comm'n, May 22, 1979).Note, New Jersey's Casino Reinvestment Development Authority: A Reassessment of Reinvestment. Thus, persons who wereknown criminals or associates of known criminals were to be prevented fromobtaining licenses to operate casinos and casinos could be denied operatinglicenses if such persons were among their shareholders.[v] A license tooperate a casino was deemed a privilege, rather than a right, thus makingit possible for state authorities to easily revoke a license alreadygranted.[vi] The purpose behind New Jersey's legalization of casino gambling wasclearly evidenced by the limits placed on such activity. [xvii]§ 5:12-85(e). Laws and their enforcement tightened during this time; since then,there has been little evidence of organized crime presence in Nevada'scasino resorts. [xxv]§§ 5:12-92 and 5:12-93. The Gaming PolicyCommission is advisory in nature and wields little real power. [ii]Codified at N.J. [xxvi]Nev. [xlv]§ 5:12-86(h). The first important criterion is the failure of applicantto prove by clear and convincing evidence his or her qualifications underthe affirmative criteria.[xxxix] Another important criterion fordisqualification is the failure to provide truthful information required bythe act or requested by the Commission.[xl] Thus, an applicant will bedisqualified if he or she provides information which is misleading as to amaterial fact, or one which would be important to any evaluation of thequalifications of that person.[xli] Several disqualifying criteria relateto criminal conduct on the part of the applicant.[xlii] An applicant maybe disqualified if he or she pursued "economic gain in an occupationalmanner or context which is in violation of the criminal or civil publicpolicies of [New Jersey]...."[xliii] Further, an applicant will bedisqualified if he or she is identified as a career offender or a member of a career offender cartel or an associate of a career offender or career offender cartel in such a manner which creates a reasonable belief that the association is of such a nature as to be inimical to the policy of this act or to gaming operations.[xliv]This last section effectively prohibits members or associates of organizedcrime from being licensed. [xli]In re Application of Resorts Int'l Hotel, Inc., for a CasinoLicense, 79-CL-1, at 13 (Casino Control Comm'n, May 22, 1979), cited inO'Brien & Flaherty, supra note 36, at 738. 4 (2). §§ 5:12-84(a), -85(c), (d), -89(b)(1), -9 (b),-92(b), (c). This concern was basedupon the historical control over illegal gambling held by organized crimefamilies, the previous control organized crime families had over Nevadagambling activities, and the historical strength of organized crime in NewJersey. No Longer the Only Game in Town: A Comparison of the Nevada and New Jersey Regulatory Systems of Gaming Control. [xxxviii]N.J. New Jersey requiresthat all casino employees obtain individual licenses, while Nevada requirescertain types of employees to do so. Rev. Stat. [viii]§ 5:12-1(5). The Casino Control Commission is mainly responsible for thelicensing of casinos and their operators. The publicly-held status of these corporations meansthat managers and corporate officers must answer to many shareholders. Ann. Both states had placed a heavyemphasis upon protecting the gambling industry from infiltration byorganized crime. As a result, it placed severe restrictions on the locationswhere gambling would be allowed and on the facilities which would serve ascasinos. Unlike Nevada, which has maintained its traditional laissez faireapproach, New Jersey legalized gambling for the specific purpose ofimproving the urban economy of Atlantic City and financing urbanredevelopment. 38 Loyola Law Review 1123-57 (1993).Hicks, Alvin J.

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