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Gambling regulations show conflicts of interest

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It’s like having Donald Trump govern the Taj Mahal Casino

When Sen. John Arthur Smith, vice-chairman of the Legislative Finance Committee, said that the New Mexico Gaming Control Board has a “mess on its hands,” he said about the kindest thing that could be said about the relationship between tribal gambling and the state agency

On page 50 of the report it says, ” By the express terms of the New Mexico Gaming Control Act and the Compacts, the State of New Mexico is permitted to monitor and inspect the Tribal Gaming Operations but is not permitted to audit the tribal operation.”

The “audit” team can count the machines, see if health regulations are being followed, etc., but they have no access to live data on net profit from the gambling operations, therefore no way to accurately calculate revenue sharing to the state, possibly costing the state millions each year. The LFC calls the risk “underpayment of revenue share.”

Veteran and fraternal gambling venues are subject to surprise inspections of their records at any time they are open. The tribal casino “audits” are scheduled months in advance. The track and nonprofit casinos have their slot machines hard-wired into the central computer at the office of the Gaming Control Board, but they have no access to live tribal gambling data. The tribes give the “audit” team a periodic aggregate report on net profit. This is all pretty much on the honor system, where the state representative is expected to believe the report without being able to verify it.

The tribes complain that they are the most regulated type of gambling, because they have federal, state and tribal regulation, as follows:

Federal Regulation: The National Indian Gaming Commission had definite regulatory powers over tribal gambling. They had over 80 pages of Minimum Internal Control Standards covering nearly every aspect of tribal gambling operations. The commission had dozens of regulators enforcing those standards and had authority to shut down non-compliant operations.

In October, 2006, an appeals court ruled the commission had no authority to regulate Class III (casino style) gambling on the reservation. It ruled that the Indian Gaming Regulatory Act left Class III regulation to the states and the tribes. Combined federal/state standards dropped from over 86 pages to about 9 state Minimum Internal Control Standards. Shortly after the court ruled, Chairman Phil Hogan of the National Indian Gaming Commission warned that, “Without independent oversight, he fears the growing gaming industry could become fraught with corruption.”

State Regulation: The Gaming Control Board has one gaming representative and five auditors for 26 tribal casinos with no regulatory or enforcement power over tribal gambling.

There are states that have much more regulatory power over tribal gambling. The LFC report mentions that, “AZ Enforcement Officers are required to review surveillance systems, security protocols and operations for 21 tribal casinos,… The NM Enforcement Officers have no ability to review these systems or operations in the NM Tribal Gaming facilities.”

According to Arizona tribal compacts, during an active investigation enforcement officers can carry out surprise inspections of casino records and can shut down operations. The New Mexico board has none of that authority.

Tribal Regulation: The tribes insist that despite federal regulation being absent, and state regulation being minimal, they are perfectly well prepared to regulate tribal gambling themselves. The problem with that preposterous proposition is that you have the same people who are profiting from gambling do the regulating.

That is a perfect example of conflict of interest. This is like having Donald Trump regulate the Taj Mahal Casino.

The real cure would be to shut down all the tribal and racetrack casinos, as well as the nonprofit mini-casinos. Short of that, the compacts should be renegotiated to emulate something like the Arizona model with a high degree of accurate reporting and enforcement power.

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