Just to Annoy You…the debate on the disconnect between regulators and operators continues

Just to Annoy You…the debate on the disconnect between regulators and operators continues

While a commissioner with the California Gambling Control Commission, I was on the distribution list for appointments made by the governor for the many boards, commissions, and like organizations throughout the state. And as I reviewed those appointments it was generally the case that there was logic between the background of the individual being appointed and the position for which he or she was being appointed. That is, if the appointed position addressed education, the biography of the appointed person had a strong connection to educational matters, and if the position involved regulating construction, then the biography generally contained a connection to the design or building of things. There was one notable exception, and that was in gambling regulation.

In gambling regulation, it was rare if the person being appointed had any insight whatsoever as to what gambling was about. And if one looks at regulatory agencies throughout the world, it is rare if the enabling acts or regulations mandate or suggest that the person should have experience in gambling.  In fact, in states like California and New Jersey, one cannot serve on a gambling commission if they have worked within the industry for the prior two years (California) or three years (in New Jersey).  I was able to navigate through this two year “clean period” in California because I was not working in the industry per se, for prior to my appointment I was a consultant to the state of Kansas assisting that state as it introduced casinos, and teaching casino management and regulation in the US, China, and Europe. Furthermore, if one looks at the biographies of those presently regulating the industry, it is rare to find an individual who actually worked in the industry.

I believe one of the primary reasons that people who have worked within the industry are often not sought out to help regulate the industry is that many feel that the people who are in the industry are in some sense tainted, and to have them involved in regulation somehow lowers the credibility and integrity of the regulatory process. I have always wondered if these same people would feel more comfortable if people who had never worked in medicine regulated the doctors who were treating them, or the people regulating the bridges they drove over or sailed under had never built anything. Regardless, it is rare in the gambling business for regulators to have any experience in the business they are regulating, and I think this is an enormous weakness in gambling regulation. I believe that this is a weakness in regulation because when regulators have little insight into the reality of what they are regulating there is a risk that many of their decisions will be driven by fear or ignorance, and fear and ignorance often leads to excessive regulation that inhibits industry investment and employment. It also increases the risk profile for failure to detect all types of misbehavior within the industry.

I suspect I should mention that prior to becoming a regulator that I had worked in the gambling industry for more than 35 years. I had dealt dice and cards, worked the floor, and been a shift boss and casino manager. I had worked in a finance department for a large casino company, ran several casino marketing departments, was a VP of casino operations, and eventually became a CEO of a casino company. I have worked in numerous jurisdictions throughout the US and the world, and have been on the board of directors for a manufacturer. I had extensive experience in both the commercial sector and the US tribal sector, and had been a consultant to numerous governments on gaming issues. 

Furthermore, I had been regulated, and this is best reflected in the fact that I have been subjected to over 100 licensing suitability investigations. Trust me, I know what it means to be regulated, and I will submit that I learned a great deal more about regulation by being regulated than I did from being a regulator. And one of the things that I learned about regulation from being regulated was that many regulators had no earthly idea what they were doing, and imposed a bunch of stupid and costly regulations on the industry.  Furthermore, often times these regulators, fueled by the substantial power they were granted over the industry by law, assumed an air of self-importance by acting as if they were the world’s smartest authorities about an industry in which they knew little about. I have also learned that generally when I make this point I annoy regulators and send them into a defensive frenzy. Such is life. And to double-down on this annoyance I will suggest that it has been my observation that generally the regulators have, at best, no better an ethical compass than their counterparts in the industry. Just sayin’.

I bring all of this up for one important reason and that is that regulations that are imposed by people who do not understand the reality of the industry they are regulating run the risk of imposing unnecessary costs on that industry, and those costs mean lower tax revenues, investment, and employment. In order to mitigate this risk regulators need to constantly enhance their understanding of the industry, and this is best accomplished by interacting with the participants of that industry. Is one to believe that our medical system will have greater integrity if our surgeons are not allowed to interact with the people who regulate them? Should medical regulators not tour hospitals and discuss the challenges of serving the medical needs of a community with the staff of that hospital? To suggest such a position is to introduce serious risk that the people that regulate the industry will be making decisions based on a fundamental lack of understanding of the world they are trying to regulate. So too, I believe, it is in gambling. 

In California I once had a Chairman who entered the gaming regulatory space from law enforcement. He knew little about gambling.  He immediately began touring all of the facilities under his remit, including working at night following about a casino shift boss as he performed his duties. This experience made him, in my opinion, a better regulator for he gained valuable insight into the realities of the industry he was regulating. I maintain that like this gentleman, regulators need to climb out of their ivory towers, roll up their sleeves, and get to know and understand the industry they are regulating.   

And I am sorry for being so annoying….


Richard Schuetz is the Executive Director of the Bermuda Casino Gaming Commission, and was formerly a Commissioner for the California Gambling Control Commission. The opinions expressed in this article are his alone, and do not necessarily reflect the position of the Government of Bermuda, the Bermuda Casino Gaming Commission, or any other entities or individuals within that country. The author is also sincerely appreciative of the help he received from his friends and colleagues throughout the gaming world in developing this article, understanding that any and all errors are his own.

Read Ewa Bakun's lead blog post "It's good to talk!" on the disconnect between regulators and operators.  Tina Thakor-Rankin's response 'Blurred Lines: Regulators and Operators – the balance between interaction and independence'  and  “ Ensuring Integrity”  the follow up by Al Baldoz of Mashantucket Pequot Gaming Commission

Do you have an opinion to share? Contact hello@totallygaming.com

The theme of Regulators & Industry Disconnect will be discussed at EiG in Berlin (18-20 October 2016) with Francesco Rodano, former Italian regulators, Chief Policy Officer, Playtech, Jenny Williams, former UKGC CEO, Andre Wilsenach, Executive Director, UNLV International Center for Gaming Regulation, Claire Pinson, European and International Affairs Officer, ARJEL and Wendy Zitzman, Head of Compliance Consultancy and Training, iGaming Academy, as part of the session ‘It’s good to talk’, moderated by Ewa Bakun, Head of Content, Gaming, Clarion Events. Click here for more details.

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