Nevada is considering a bill that would significantly increase the penalties for illegal online gambling operators. The bill would allow for the “disgorgement of any profits, gains, gross receipts, or other benefits relating to illegal gaming activities.”
Senate Bill 256 was introduced on Feb. 27 and referred to the Senate Judiciary Committee. On Wednesday, the Senate Judiciary Committee held a public hearing to discuss the bill’s goal to ramp up the penalties for illegal online gambling operators.
Nevada has a robust regulatory framework tackling in-state, illegal, gambling. SB 256 would strengthen the state’s hand when illegal offshore gambling sites target Nevada residents. Although not explicitly stated, the bill would also apply to so-called “sweepstakes casinos.”
Other states also struggle with the prevalence of illegal online gambling. Most lack the statutes and enforcement budgets to contend with the growing problem. If Nevada were to pass SB 256, however, it might encourage other states to add similar provisions to their regulatory toolkit.
Enforcement: The logical next step
When the U.S. Supreme Court lifted the sports betting ban in 2018, states rushed to legalize the activity. Back then, the focus was on crafting the rules and regulations needed to legalize sportsbooks. The debates revolved around tax rates, licensing fees, and how tax revenues would be allocated. Less emphasis was placed on tackling illegal gambling.
Illegal online gambling is a problem that, admittedly, predates the legalization era. Illegal online gambling, however, has grown, taking advantage of the normalization and prevalence of legal online gambling. As a result, states need to step up their enforcement game. SB 256 is Nevada’s attempt to do just that.
During Nevada’s Senate Judiciary Committee hearing, Janice Wong, an intern for the bill’s sponsor, Sen. Rochelle Nguyen, discussed the bills goals. “SB 256 directly targets illegal online gaming operators by implementing stronger penalties and financial consequences.
“It does three key things, Wong explained. “First, this bill mandates the disgorgement of profits. Any online gaming app or operator found guilty of illegal gaming activities must forfeit all profits, gross receipts, and benefits obtained from these activities. That money will go into the state general fund. Second, it increases criminal penalties. The bill increases fines and turns some offenses from misdemeanors into felonies, meaning serious legal consequences for the violators. Third, this bill extends liability beyond state borders. Even if an illegal gaming app operates outside of Nevada, it can still be prosecuted if it takes bets from people within the state.”
Beyond the cease-and-desist era
States have very few tools to combat illegal offshore operators. Although one tool – the cease-and-desist letter – has been effective in some cases. Michigan was the first to use this legal strategy against Bovada, an unlicensed sports betting operator. Colorado followed suit. And it worked. Bovada blocked residents of those states from accessing its site. Soon, Bovada was flooded with cease-and-desist letters from states seeking to curtail the operator’s access.
Not all unlicensed operators, however, are as obliging as Bovada – especially when there are huge profits at stake. A cease-and desist letter carries a lot more weight if the penalties for non-compliance are prohibitive. And that’s the intent of Nevada’s SB 256. By upping the penalties from simple fines to essentially all the illegal operator’s profits, Nevada is hoping to deter more bad actors – and protect Nevada’s residents, legal operators, and the tax revenue they generate.
Needless to say, SB 256 has the support of Nevada’s gambling community. The Association of Gaming Equipment Makers, the Vegas Chamber, the Nevada Resort Association, and the Nevada Gaming Control Board, all spoke in support of the bill.
