September 28, 2020

Volume X, Number 272

September 25, 2020

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Private Equity Investments in the Nevada Gaming Industry

The state of Nevada has historically been receptive to establishing the regulatory means for new capital to flow into the state’s primary industry.

To foster opportunities for new market entrants to invest in the Nevada gaming industry, the Nevada Gaming Control Act (Act) provides a regulatory approach for private equity funds that started in 2004 and continues to today.

Under the Act, there are different categories of licensure for holders of voting stock and non-voting stock.  Generally speaking, the holder of non-voting stock may be able to invest in the industry without having to be fully investigated and licensed by the Nevada Gaming Commission (Commission). 

As an example, a Nevada gaming licensee (NevadaCo) would create two classes of securities: voting stock and non-voting stock.  The voting stock would have voting rights but no economic benefits, while the non-voting stock would have no voting rights but all the economic benefits of stock ownership. As the holders of the voting stock are in a control position, such individuals would be licensed by the Commission.  As the holders of the non-voting stock have no ability to control NevadaCo, the holders of the non-voting stock would not be in a mandatory licensing position.

Using this model in the context of a private equity fund, the fund’s principal(s) would nominally purchase NevadaCo’s voting stock and the fund would invest in NevadaCo’s non-voting stock.  Under this structure, the fund’s principal(s) would apply to, and be licensed by, the Commission.  However, the fund and its investors, would not have to go through the licensing process.  This allows for alignment in that the fund’s principals will have control through voting stock, which also allows them to oversee the fund’s investment in NevadaCo’s non-voting stock.

The exact licensing structure will vary given the circumstances, such as whether NevadaCo is privately or publicly held, but each approach is well-established and the route to licensing has been well-tested. Each approach may result in the Commission imposing certain reporting, notification, and/or approval requirements.

In sum, the Act provides flexibility for new market entrants looking to invest in the Nevada gaming industry. Potential investors should work with experienced gaming counsel to explore alternative structures to meet licensing requirements while achieving investment goals.

©2020 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume X, Number 128

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About this Author

Mark Clayton, Greenberg Traurig Law Firm, Las Vegas, Gaming Law Attorney
Shareholder, Practice Co-Chair

Mark A. Clayton is an attorney the Global Gaming Practice and has wide-ranging experience in the gaming industry and focuses his practice on gaming operational and regulatory matters, including those related to land-based gaming, internet gaming and the manufacturing and distribution of gaming equipment. He also focuses on legislation and regulatory projects and represents clients with gaming matters in U.S. and international jurisdictions. Prior to joining the firm, Mark served as counsel for three casino corporations. He is a former member of the Nevada Gaming Control...

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 Erica L. Okerberg Greenberg Traurig Las Vegas Associate Gaming Marketing, Advertising, Sweepstakes  Promotions Law Regulatory & Compliance Video Games  Esports
Associate

Erica L. Okerberg focuses her practice on gaming law, including licensing and regulatory work; and promotional law, including sweepstakes and social gaming. Erica's experience includes: assisting U.S. and international clients with regulatory and operational matters; representing clients in connection with gaming applications; researching and analyzing a variety of gaming-related topics – from state and federal sports wagering requirements to the application of anti-gambling laws; preparing materials for and assisting with sweepstakes, contests, and other promotional offers; and counseling clients regarding social gaming and skill games.

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