The Legal Side of the Casino Floor: Navigating the Regulatory Maze

Kyle McEntee:

We are joined today by Ed Winkofsky, a shareholder at the multinational firm Greenberg Traurig and the chair of its gaming practice group. When people hear that you practice gaming law, I'm sure many picture flashing lights in a casino and the excitement of slot machines, although I personally don't love slots. How do you describe what you do?

Ed Winkofsky:

Well, the first thing I do is dissuade people of how sexy it is to be a gaming attorney. It's really a regulatory practice and I explain that I have a lot of interaction with state regulators, tribal regulators, and I help companies in the gaming industry get their licenses and try to help them stay out of trouble. I've been very fortunate to have clients that are interested in doing things the right way, and so sometimes that's an easy job, but sometimes it's a bit more complex.

Kyle McEntee:

We've been using the word “gaming” pretty loosely here. Can you define that term?

Ed Winkofsky:

I understand when a lot of people hear that term, they think “video gaming”. But I use it to capture all sorts of gambling and gambling-adjacent activity. A lot of our advice is geared towards how do you make sure you're not engaging in gambling? And so we use gaming most of the time as a broader term. I also think it's probably a term that people are less threatened by if they have moral objections to gambling.

Kyle McEntee:

So I think the goals of your clients are probably pretty clear. Can you explain a little bit about the goals that the regulators have?

Ed Winkofsky:

Yeah, people spend a lot of time talking about the differences among the different regulatory jurisdictions. Each state is really the driver for regulation of commercial gaming within that state. Certainly Illinois is different from New Jersey, which is different from Nevada. And there's some truth to the fact that the regulators in each state take a unique approach to regulation. But there's a lot of baseline similarities.

The regulators are really trying to not be embarrassed by events in the industry. They're trying to be good stewards of the statutes that they have inherited and the regulations that are already in place. And utilize what resources they have to get good outcomes for the state. At the end of the day, this is revenue generation for the state. And they certainly take the protective side of this seriously. They want to keep bad people out of the industry. They want to make sure that industry operators are doing things the right way. But they want to be successful and encourage investment and tax revenue and return to the state. And the best regulators throughout all the states are very cognizant of that day in and day out.

Kyle McEntee:

Can you talk a little bit about the bad actors? What are the kinds of things that they're doing or have done in the past that the regulators really want to ensure doesn't happen and protect consumers?

Ed Winkofsky:

There's a lot of truth in the movie Casino. Organized crime was a considerable player in the birth of gambling in the United States and elsewhere. And so we want to take steps to make sure that organized crime is not involved in this industry. So that's the context in which gambling regulation was born. And today there's big corporations that are involved by and large, multinational corporations.

I would say the goal has kind of shifted a bit. It's not as punitive generally as it once was, and the focus is really on compliance. Are you disclosing to us all the things that you need to disclose? Are you keeping in place all the protections that you need to keep in place? So sometimes bad actors are just from an organizational or systemic perspective. A company may not have in place certain safeguards that they need to have in order to operate successfully in a jurisdiction. And for the most part, the burden is placed on the operator to know that ahead of time and to do things the right way. And so there is an element of sort of owning the mistakes and owning the bad actions and taking steps to remedy that and not make the same mistakes over again.

When I was a young attorney getting into this space, I had a boss who encouraged me to follow the money. And so I spent time learning about the flow of money through, at that time it was at a casino. And I think the regulators want to know where the money's coming from and where the money's going. Who's profiting from this? And are they the type of people or organizations that we would feel comfortable as a state that is authorizing this industry, benefiting or being in a partnership with those types of people? And so then that's what all the regulations are around trying to figure out what that is and making sure they know the answer to those questions.

Kyle McEntee:

So you have a new client comes to you and they say, I want to open up, let's say a casino in some state. What does that initial conversation look like?

Ed Winkofsky:

Nowadays the people coming to us are people who have opened up these casinos in other states. We helped open a couple of the casinos here in Illinois for the recent casino expansion. And we had a new client come to us for one of those projects. They lean on us to say, help us understand the regulatory landscape. We want to know what the rules are so that we can be successful within those rules. And so there's back and forth. That's the role that I want to play as a practice leader. And I want to have clients that have that type of approach and attitude towards regulation.

And really try to leverage that as a competitive advantage. Say, look, we're gonna know the ins and outs of this better than everybody else, and we're gonna use compliance and regulation to our advantage. And make sure we're building that relationship with the regulators. That's another big piece for me, just philosophy of the practice, is to really make it a partnership between our clients and the regulators.

And then to not stand in the way of that relationship. So I may know many of the people at the Illinois gaming board or at any of the other regulatory authorities, but I can make those introductions. I can put those people together. But at the end of the day, if you're going to be an operator operating in a state, you got to have that direct relationship with your regulator. So I try to put people in a position where they can succeed but not be a buffer.

Kyle McEntee:

One of the complicated features of your clients is that this is a really big business, so there's a lot of investors. How do you navigate all the different interests that are kind of animating the choices any particular client is making?

Ed Winkofsky:

Yeah, it's really something you have to handle upfront. Going back to your question about what's that initial conversation. You got to be really clear on who the client is and who's engaging you and where your obligations lie. Because it is a niche practice and there is some synergy and most of the time the ownership or investment group is aligned with the operating entity, we will represent the project, but we're very clear on who our engagement is with, who's paying our bills, and make sure that our engagement letter is in place and our waivers are in place so that it's clear on who that is.

So most of the time it's, it is not an issue, but certainly there are times where you have activist investors, who have their own agenda. You also have lending groups that can be aggressive. But our role being regulatory by and large, you want to get the license, keep the license maybe where it becomes a bit more complicated is around issues of disclosure. The operator will go to its ownership group and say, look, we need to get this license. Here are the things you need to disclose. And the ownership group will say, we're really not that interested in disclosing that information. You have conversations with them about, at some point, if you want to get the license, you've got to provide the information. We can be creative about how we do that. We can try to provide some of the information and have some of those conversations with the regulators. But ultimately, this is what the rules are and we have to comply with those.

Kyle McEntee:

How did you learn to be creative?

Ed Winkofsky:

You know, I think being creative to solve some of those problems, knowing the rules is your baseline. You always got to go back to the law and to the statute, to the regulations, try to look at intent, but then also having relationships with the people that are enforcing these laws and rules. I see people make mistakes about their relationships with regulators. I like a lot of the regulators that I interact with, but when we're working on a project, they're not my friends.

They are people that have a role to play and I have a role to play. I think it's more successful when we're all honest about what those roles are. My approach is very direct. When I have an issue like the one I just described where ownership doesn't want to disclose, oftentimes I'll take that to the regulator and say, “Here's the situation we're in. Here's what their position is. Here's why I think that I can provide you this limited subset of information, and it will solve your regulatory concerns.” And encourage them to think about that and see it from the industry's perspective. Sometimes that works. Sometimes that doesn't.

But I don't think that hiding the ball is ever useful. If I have a good working relationship with that regulator, it becomes a working group session where you sort of roll up your sleeves and say, “Look, let's get to the right outcome. Here's what we have to deal with. Would this work? No. Would this work? No. Would this work? Well, this maybe will work if we do it this way.Okay, great. And then we're off to the races a little bit and we have something to work with.”

And so I think there's creativity in that. But you need somebody on the other side who's willing to have that honest conversation. You don't always get that. So sometimes you're approaching this a little bit more on your own. But if you have somebody you can work with on the regulatory side, then I think you really have an opportunity to A, be creative and B solve problems.

Kyle McEntee:

It sounds like you have quite a bit of sympathy for the kind of role that the regulator is trying to serve. And I would imagine that sympathy probably only grows over time as you develop that relationship. But what happens when the client is being unreasonable and your sympathies might lie with the regulator, but your client who's paying you and whom you owe an obligation is being difficult. How do you go back to them and tell them, no, you're being unreasonable here. This is what they're trying to do and do so without completely losing their trust.

Ed Winkofsky:

Yeah, it's a hard thing. And sometimes I'm not successful. I will go back to the client and say, this is a bad idea. And here's why, or here's something else that I would advise. And like you said, the client doesn't always take my advice or the group's advice. And in those cases, sometimes they'll say, we want you to go back and we want you to say this and we want you to try this. And then you have to do that. You're obligated to be a zealous advocate for your client. So I would go back to the regulators and take that position.

I certainly have limits to that. I would not go before a regulator, nor am I permitted to, and say something that I know to be untrue. But I would do everything I could to present my client in the best light possible, even if I disagree with what their approach is in a situation. And I've had some experience with that over the past couple of years. Sometimes that's at a public meeting where you got to stand up and do your best to be an advocate for your client that you may really not believe in at the moment, but you got to put that aside and I think that's part of being a professional.

Kyle McEntee:

I'm going to take a guess here and say that sometimes when the regulator comes back and says, no, we need some information that your client's not willing to provide, restructuring, how investment works might be one of the tactics you take to avoid that obligation of disclosure. If that happens, are you bringing in other people from within the firm? I mean, I know you have a very niche practice, but Greenberg has such a wide variety of expertise.

There's probably a lot of people for you to tap into.

Ed Winkofsky:

So we have like a core regulatory group within our gaming practice that is really five, six, seven individuals that just really approach the industry from the regulatory side. But then, around us, there's 30 people that we tap regularly to be our go-to litigator or IP or tax or corporate or whatever the case may be. And so over time, they've developed experience within the industry and understand our regulatory perspective.

Kyle McEntee:

So it's a pretty rapidly transforming area of law. How do you stay up to date on that? And for the new associates that come in, how do you get them up to speed?

Ed Winkofsky:

Yeah, it's hard. I would say there's a balance. You certainly want to be an expert within Illinois is where we're based so you got to know the statutes and the rules pretty cold. And then from there, use that as your platform and your template so that when we're having a conversation in another jurisdiction, , we've got that background and over time, when you work on these large transactions, you develop, just experience and it just takes time. The learning curve is steep.

We had a young associate come over from the Pennsylvania Gaming Control Board a couple years back and he brought that experience. But even he saw in coming here to the Chicago office, working in private practice, there's a lot to learn about not only the law, but client management and the resources of the firm. Any one of those things is a full-time job and you're trying to do all of them at once.

Kyle McEntee:

And also trying to understand the business objectives of these clients. That's a very different point of view than the regulator.

Ed Winkofsky:

Yeah, for sure. And it changes client to client. Initially, we spent a lot of time with traditional casino operators. And as you would imagine, now everyone is a sports wagering operator. And we spent a lot of time in that space. I would say, five years from now, iGaming will be in more states in the US. And we're going to spend more and more time with that and it just continues to evolve.

Kyle McEntee:

And probably 30 years ago, it was state lotteries and scratch offs.

Ed Winkofsky:

Right. State lotteries continue to make a lot more money than when you look at how much press sports wagering gets versus return of revenue to the state. Lottery does not get a lot of press, but the amount of revenue that they're returning to the state continues to be substantial.

Kyle McEntee:

Why do you think that is? How do they stay under the radar?

Ed Winkofsky:

Well, part of it is the model for sports wagering is to get out and touch as many users as you can, because the return per user is just not. And so there's, there's all this focus on user acquisition and the way you do that is advertising. So they're in your face a lot. It's why when you're watching the football games this weekend, the DraftKings and FanDuel's of the world are on your television set.

And the state lotteries have traditionally not spent as much money in the marketing space. And I think some of that is traditional thoughts about every dollar we bring in, we want to give to the state. So if we can keep our costs low, then that's better for us. I could see that changing, especially now the model is in most states is to have a third party operator. And as those third party operators continue to push the states to evolve a bit, we could see lottery sort of making a comeback and making a bigger splash.

Kyle McEntee:

I guess there's probably also some political winds. The common criticism of the lottery is that it's a regressive tax. So the poor pay the highest percentage of that state revenue and driving that revenue, it's kind of a balancing act between enough to make a difference to the bottom line for the state and generate that revenue without being so in your face and offensive that you risk the whole thing blowing up in your face.

Ed Winkofsky:

That's a great point because generally people don't think of and they don't think of the state as running sportsbooks, right? It's private companies that are doing that. But the state's active role in running lotteries, it does bring in that “the good of the people” type concept into that operation. So it changes how you think about it, for sure.

Kyle McEntee:

So one of the things I think about when I think of the gaming industry is the lobbying that happens of the state and of the regulators. Are you involved at all in the lobbying aspects?

Ed Winkofsky:

So we have a government affairs practice and from time to time we engage them in gaming related issues or they get approached. They're well-known lobbyists within their jurisdiction so somebody will come to them. Historically, as a practice, we've had some challenges with that just because there's not uniformity in the industry. So what a Caesars or Bally's or Las Vegas Sands may want is not what a FanDuel or DraftKings or PointsBet or anybody else may want. We also have a true tribal law practice within the firm. And not tribal gaming, but true tribal law run out of our Denver office. Interests of various tribes, it's just not going to be uniform. It does become a challenge to get active on the lobbying side. And I think we are able to stay much more agnostic by focusing on the regulatory side once the legislation, the authorizing legislation, has passed.

Kyle McEntee:

And by agnostic, you mean it says what it says, and I'm going to tell you what it says. I'm going to help you navigate it, but I'm not going to try to influence it.

Ed Winkofsky:

Yeah, I'm here to help you get your license based on what the rules are. I'm here to help you stay out of trouble and stay compliant. And I can do that even if there's not a true conflict in most cases, if I'm doing that for competitors within the space. And generally the industry agrees to that. And sometimes it's not appropriate for them to agree to it. And sometimes there are clients who don't like that. But it is easier from a conflict perspective.

Kyle McEntee:

So I don't imagine the world of gaming lawyers is terribly huge. But I'm also guessing that there's probably some alignment going on with certain lawyers have certain areas of the industry, because as you said before, the incentives for the large Vegas casinos and those who are operating them compared to the sports wagering startups, more or less, they're very different.

Are you seeing that kind of alignment among the lawyers or is it kind of all over the place?

Ed Winkofsky:

I would say it's more all over the place. I do think that there are some lawyers that align themselves with certain segments of the industry. And I think there's a larger group sort of in the middle that has evolved over time, that has done work within all of the different segments of the industry. And I think I'm probably in that group. I am in that group.

And I think a lot of the regulatory lawyers in the gaming space are also in that group. And Kyle, it is really very small. We run into the same, maybe 20 attorneys that are the gaming regulatory experts on every large, mid-size, small deal, any issue that comes up. Even national, international, you're running into the same people over and over again. I do think it's an opportunity for younger lawyers that are showing an interest in this industry.

Kyle McEntee:

Are most of the lawyers in private practice at larger firms or is that also kind of all over the place?

Ed Winkofsky:

I would say yes, most at larger firms. I think some are more regional firms like well-known in Philly, East Coast, well-known in New Jersey, well-known in Nevada, certainly. And then down south, Louisiana, Mississippi, those types of jurisdictions. But I think all of the firms that the regulatory lawyers are at are reasonably large firms.

Kyle McEntee:

Did you intend to get into this or did it kind of just happen?

Ed Winkofsky:

Yeah, it just happened. I'm a big fan of the one step plan. It's never more complicated than that for me, I think. I would play in the pickup game in law school with a couple of guys and one of them was clerking for a company that was related to Hyatt hotels, Hyatt Gaming. It was a company within Hyatt that managed the casinos in their international hotels and then also some casino-specific investments that the company had made. He was taking a job someplace else and I interviewed a clerk there and got the job. Martha Sable, who really established the practice here at Greenberg, she was general counsel of that company at the time. So I worked with her for a couple of years, learned the ropes a little bit from an in-house perspective, and then she brought me over to the firm. And that was nearing 15 years ago now.

Kyle McEntee:

So that's, that's kind of the opposite path that a lot of people take. They usually go from the big firm in-house rather than in-house to the big firm.

Ed Winkofsky:

Yeah, and I'll be honest Kyle, when I took the job at the firm, my thought was go get some big firm experience for a couple of years and then you go take an in-house job someplace. And that was 15 years ago. It was a bit unusual. I interviewed for a couple of jobs when I was still in-house. And it was definitely something I had to explain to people. “So wait, you just went in house right out of school, you didn't go to a firm?” And it was an obstacle, I think. The sense was that I got from the interviewers was they expect people to find their training at the big firms. And I didn't have that. So I had to demonstrate that I was receiving good training in-house. And that was sometimes successful and sometimes not.

Kyle McEntee:

So big firms are definitely known for their intensity in terms of hours worked, culture. I know there's variation among firms as well as within firms. But do you find that a regulatory practice is maybe slightly less intense compared to say transactional or litigation work?

Ed Winkofsky:

Yeah, I mean a lot of what we do these days is advising on transactions. So we have sort of that same transactional pressures. The pace of the transaction certainly is high-paced and then also once you sign up the deal, there's a lot of emphasis on moving swiftly to close the deal. And we play a role in that happening. There's certainly a lot of late nights and weekends.

The end of the year isn't crazy for me like it can be for some of the transactional attorneys. I don't have that experience of preparing for trial where you just move into the office for a couple of weeks to get that figured out. So some of that is better, and I think just take some more planning.

From a firm business perspective, the firm really likes the regulatory practice because of its consistency. So it's a little more of an annuity for the firm in that we bill monthly and we have an ongoing and active practice. And so it's not as cyclical, waiting for the transaction to close all the time or the case to settle or the outcome.

We still bill by the hour a lot, but we do try to get creative to support the client. Personally, I like caps and that way if we can manage it efficiently and come in under the cap, the client gets the benefit of that. My view on billing and fees, to go back to communication and honesty, you have to tell a client where you're at. If you said going into it that it was a $25,000 project and you're only a fifth of the way into it and you've already spent $20,000, then you have a problem and you have to have that hard conversation with the client and then be equitable in finding a solution.

I really do think it is a service industry. If the client is not finding value in your services, then you're not going to be successful. You could do very good work and get great outcomes, but if the client's perception is that's costing them way too much, then they're not going to see value in that.