“Ego trip: A journey to nowhere.”—Robert Half
In 2011, I was appointed by the governor of California to become a commissioner on the California Gambling Control Commission. It was a bit of an unusual appointment because I had extensive experience in casino operations, starting as a dealer and progressing to a CEO of a Las Vegas casino company.
People appointed to regulatory agencies rarely have any experience in the industry, and in this day and age, that is ridiculous. But that is the way it is, and I have told that story elsewhere.
After serving eight months as a regulator in California, I received a call from Bob Faiss telling me he was nominating me for the Regulator of the Year Award—an award given out by an association primarily comprised of lawyers – many of whom practice before gaming regulatory agencies.
By way of background, Bob Faiss was a legend in Nevada gaming. Nevada was the only state with casino gaming for many years and Bob was the dean of gaming lawyers in the state. In other words, he was a big deal and many aspects of gaming law can be traced to his origin or influence.
I was overwhelmed that Bob wanted to single me out for this honor. I immediately set out to secure letters of support from people like the California Commission’s chairperson, the governor’s aide on gaming, and others within my orbit.
What was a bit strange about my excitement is that while studying economics in graduate school, I spent over two years working on a dissertation addressing gaming regulation, which involved researching regulation in numerous industrial and commercial settings. And the almost universal concern of most thought leaders in the field of regulation is that the regulatory agency normally ends up being captured by the industry they are supposed to be regulating.
My favorite capture quote of all time (and there are an incredible array of options) was by the economist John Kenneth Galbraith:
“… regulatory bodies, like the people who comprise them, have a marked life cycle. In youth they are vigorous, aggressive, evangelistic, and even intolerant. Later they mellow, and in old age—after a matter of ten or fifteen years—they become, with some exceptions, either an arm of the industry they are regulating or senile.”
What my ego did not allow me to understand at the time about this nomination was that I was involved in something that looked like a duck, waddled like a duck, quacked like a duck, and yet I did not perceive it to be part of the capture process. I was flying blind as a result of an overly engaged ego.
I am not suggesting any evil intent on the part of the late Mr. Faiss. I would guess that his nomination was based on my long gaming operations tenure. Part of his enthusiasm about nominating me may have been related to him being pleased that someone who understood the industry was going to be involved in regulating it. Who knows?
It did work out that Mr. Faiss, a few months after this nomination, informed me that the powers that be in the association thought any candidate should have at least one year of experience as a regulator before being considered as the regulator of the year, and so he withdrew my name from consideration.
It seems in my life that as I have gotten older, I have gotten a bit wiser, and as I now look back at that time, I wish I had had the strength of character and insight to graciously thank Bob… and decline the nomination. One can quickly become a slave to their ego and often neglect larger issues. And there are larger issues here.
The larger issue is that the optics given off by a regulated group or those supporting the regulated group, which bestows honors upon regulators, carries a certain odor as well as other risks. The odor is that it can look like an act of attempted cooption and capture. It can also be found to have possibly missed the mark when publicly available information suggests that the selection process may be curious—like when the award is on the heels of a bad regulatory audit.
This was well demonstrated when the New York Times, a newspaper with a subscriber base of over 9 million and which generates multiple impressions beyond that base, noted that a state gaming regulatory agency had been noticed for an appreciable lack of oversight of the state’s sports betting industry in an audit by the state. Just a few months later, the head of the regulatory agency that was the subject of this audit was named Regulator of the Year. The New York Times essentially turned this into a mocking punchline in the story it produced; a story that did not shine a favorable light on the regulation of the industry, and as noted, a story that generated many millions of impressions across the U.S.
When something like this becomes public knowledge, it depreciates the perceived competence and integrity of the jurisdiction’s regulatory assets, and this lawyer’s group needs to understand its role in depreciating the brand of the industry when such a thing happens.
There have been other misses as well, albeit much less publicized.
This lawyer’s association awarded an individual with an Outstanding Achievement Award in 2018. Curiously, this outstanding achiever flew to Las Vegas with the regulatory agency’s general counsel—both as the guest and in the company of the largest casino owner in the regulator’s jurisdiction. It is also interesting to note that the press has reported this outstanding achiever had spent over €500,000 traveling with his general counsel on 38 trips paid for by the government when they both worked for the regulatory agency. The general counsel of the gaming authority also apparently ghostwrote a letter (with a cc to the outstanding achiever traveling buddy) for that same largest casino owner in the jurisdiction. The casino owner copied her letter onto the casino company’s stationery and sent it back to the regulatory agency to secure a license.
It is also interesting to note that the largest casino owner in the jurisdiction who paid for the gaming authority’s general counsel and the outstanding achiever to visit Las Vegas has been in jail since he was intercepted by the navy of the regulator’s jurisdiction as he was slipping away from the island nation on his yacht in 2019, and he still sits in jail without bail awaiting trial on a charge of complicity in the car bombing murder of a reporter who was covering corruption within the jurisdiction.
If this is an outstanding achiever, one would hate to see the underperformers.
I guess it is cool for the lawyers to get together with the regulators at a great invitation-only awards party. This makes it possible for them to do some bonding and that is important when they later see them at conferences and the like where they can introduce their clients to the regulator. This also impresses the client for the perception is clear the lawyer is tight with the regulator.
As I am writing this piece, I just noted an article in the Los Angeles Times with the title: “Emails reveal Sam Bankman-Fried’s courtship of federal regulators.” I guess he was not the unorganized nerd he has been portrayed to be. This headline made me laugh for it seems he knew an important tactic in grifting the system is to coopt the regulators.
Since the repeal of PASPA, the U.S. has seen an unprecedented increase in gaming in the United States. This is being overseen by regulatory agencies that have never before regulated sports betting and are not overly fluent in virtual distribution channels for gaming products. Moreover, they have been rushed by the industry, legislators and lobbyists.
There now seems to be a second growth industry exploding across the U.S. and that is major news organizations generating stories that fault a great many aspects of the modern U.S. gaming scene. These articles also include huge amounts of reader comments at the end of the story and these comments are extensive and highly critical of today’s gaming controls and practices.
It also seems that the industry and its lobbying entities are rather slow on the uptake of this building groundswell against much of what is taking place in gaming. This is a serious shift to miss and if the industry continues to miss it, there will be a huge price to pay.
To get to the point, while all is well in the echo chamber, gaming is developing a serious image problem in the real world of the United States and the press has recognized this reality. It sells papers, and the readers seem to be totally on board with these criticisms. The sooner the industry quits playing the victim and recognizes that it is developing a serious image problem—and begins to solve it—the better it is for everyone.
I would suggest having Mr. Portnoy as the poster boy of the new gaming world probably will not be cited as a stroke of brilliance by the industry when the history of this period is written. He may be worth it to Penn, but the rest of the industry is being branded by him being front and center of so many discussions. And seldom are those discussions positive.
Moreover, the main lobbying group seems to be copying the operators involved in favoring Proposition 27 in California by developing a message that entirely misses the point. Maybe I am just unusual, but I know of no one losing sleep over the offshore sites. It is going to cost the industry an absolute fortune to build this straw man, and by then, the press will have taken a serious toll on the industry. There are real problems and issues right here in this country that can be addressed—and the best thing you could do is get to it.
To the rest of you, quit honoring regulators unless you are a society of regulators. You may think these awards are nifty, but they are low-hanging fruit to the critics of the industry and trust me, the critics of this industry are growing and it is going to make you a target.
Finally, to you regulators out there… one of the life experiences I have had the opportunity to experience was being one of the few people in government in the state of California who knew anything about gaming, back when there was an initial effort to get iPoker and iGaming in the state. Also remember, this was a state of almost 40 million people and the fifth-largest GDP in the world. The gaming world viewed it as the center of the universe.
During this time, I became Richard from California and I was incredibly popular. I was invited to speak everywhere and everyone with a stake in gaming wanted to be my new best friend. This involved bonding rituals like wanting to treat me to meals, lots of accolades and introductions, and just being bros. Later, however, when I left California and I became Just Richard, many of my new bros seemed to disappear.
In other words, to all of you regulators, there is a lot of stroking going on out there and the sooner you recognize that reality, the better you will feel about yourself. I know those ego strokes are nice, but also just executing the job you have been given with a high level of character, honesty, and integrity will be very important to you someday.
And by the way, it was never really about you. It was all about the Benjamins.