6 CASINO LAWYER • AUTUMN 2014

>>NEW DEVELOPMENTS IN JURISDICTIONS: UNITED STATES

By Roger M. Morris and Sean M. McGuinness GAMING IN COLORADO: Then and Now

Colorado has several gaming venues that range from intimate parlors to luxurious resorts, such as those inCentral City and Black Hawk. Less than an hour’s scenicdrive from Denver, both have done an excellent job ofincorporating casinos and gaming with its historic goldmining origins. Farther south, Cripple Creek, anothergold-mining-turned-gambling town, is tucked in themountains an hour from Colorado Springs.

As the gaming industry proliferates, it also evolves. InJurisdictions such as Colorado, which have permittedcasino gambling for more than twenty years, material

changes to the gaming paradigm have occurred; thesechanges reflect the impact gaming has had in both the privateand public sectors of society. Also, in terms of an economicdriving force, legalized gaming has grown from Goldilocks toGodzilla. Vast amounts of investment dollars are at work eachday in the gaming industry in Colorado. It is therefore critical

that investors, the public, gaming employees and manage-ment, and industry cognoscenti become informed about thepast and present nature of Colorado gaming including theregimen of regulation by the Colorado Gaming authorities.Awareness of what has changed can help in predicting whatcan change in the future.The authors are hopeful that their summary of Colorado

gaming assists in fostering such awareness.

Blackhawk

Central City

Map of Colorado circa 1880

CASINO LAWYER • AUTUMN 2014 7

Colorado was one of a handful of states at thefront of the pack when gaming expansion in theUnited States started in the early 1990s. Subse-quent to Colorado’s entry as a gaming jurisdiction,several other gaming jurisdictions came online.Many of these other jurisdictions did not have the“limited gaming” moniker that has been associatedwith Colorado over the years. That said, there havebeen recent developments that have transformedColorado into a jurisdiction with larger facilitiesthan originally envisioned. This article first outlinesthe history of gaming in Colorado, then addresses thescope of the industry today in Colorado. Finally,the article discusses a unique aspect of Colorado’sregulatory structure that allows applicants to fileand go through the investigatory process withoutnecessarily having a firm transaction in place.

Origins of Colorado GamingIn November 1990, the qualified voters of the State ofColorado voted in a statewide general election to ap-prove an amendment to Article 18, section 9, ofthe Colorado Constitution to permit limited-stakesgaming in three mountain towns: Cripple Creek,Black Hawk, and Central City. That amendment le-galized the games of poker, blackjack, and slot ma-chines in licensed casinos located only in thedesignated commercial districts of those three cities.The amendment also limited bets to a maximum of$5 each. Significantly, however, the amendment leftit to the General Assembly to determine which stateagency would be charged with the responsibility toregulate limited-stakes gaming in Colorado.

Shortly after the constitutional amendment was

approved, legislation was introduced into theColorado House of Representatives and the ColoradoSenate. This legislation sought to create a regulatory

framework for the oversight of gaming inColorado. After numerous hearings, and withthe suggestions and testimony of the gamingindustry, the Colorado Chiefs of Police, theColorado Sheriffs Association, the DistrictAttorneys Association, the Governor of Colorado,and various departments of state and local gov-ernments, the General Assembly, in May 1991,passed the Limited Gaming Act of 1991 (“Gam-ing Act”). That Act provided for oversight ofgaming in the state to be provided by a five-member Colorado Limited Gaming ControlCommission (“Commission”), appointed by theGovernor, and with the assistance of a newfull-time agency named the Colorado Division

of Gaming (“CDOG”). CDOG was established as anew Division within the existing ColoradoDepartment of Revenue.

CDOG was organized without the benefit oflegislative funding and consequently began its opera-tions in a long-abandoned state drivers licensingfacility. CDOG’s forms were drafted and policydecisions undertaken, which served as the foundationfor the regulation of the gaming industry, once thegaming legislation was agreed-upon by the GeneralAssembly. Indeed, even before the final version of theGaming Act had been promulgated and the Commis-sion appointed, CDOG began work on potential reg-ulations that would be necessary for the successfulimplementation of gaming in Colorado. Those reg-ulations provided the framework for gamingoperations and set forth the multiple responsibilities

From these humble beginnings the Colorado gaming industry and its regulatory counterparts

(CDOG and the Commission) have grown significantly. As of June 2013, there were thirty-six licensed casinos in the three mountain towns and approximately 14,405

gaming devices.

Continued on next page

“

”Roger M. Morris is a Senior Partner in the Denver office of LewisRoca Rothgerber LLP.Roger was the first directorof the Colorado Divisionof Gaming. He is licensedto practice law in Colorado.RMorris@lrrlaw.com

Sean M. McGuinness isa Partner at Lewis RocaRothgerber LLP, practicingout of its Reno, Las Vegas,and Denver offices. Sean islicensed to practice law inColorado, Iowa, Mississippiand Nevada. SMcguinness@lrrlaw.com

Roger M. Morris

Sean M. McGuinness

Cripple Creek

8 CASINO LAWYER • AUTUMN 2014

>>NEW DEVELOPMENTS IN JURISDICTIONS: COLORADO

that would be required for every gaminglicense. Colorado’s licensing scheme initiallyconsisted of the following types of gaminglicenses for businesses: slot machine manu-facturer and distributor; operator; and retailgaming (casino). Additionally, individualswere eligible to hold support and keyemployee licenses. On the opening day ofgaming in October 1991, there were ninelicensed casinos.

The Gaming Act and the relatedregulations together provided additionalduties and responsibilities for gaminglicensees. Among such requirements is themandate that every casino adopt a compre-hensive system of internal control proce-dures. These procedures provide a minimumset of standards for accounting and formaintenance of effective internal controls;the complete set of such standards for eachcasino is commonly known as the InternalControl Minimum Procedures (“ICMPs”).

From the outset, Colorado also hadgreat concerns about preserving the integrityof the gaming industry in the state. TheCommission and CDOG determined thatone of their most important tasks was toinvestigate the fitness of applicants for gam-ing licenses in a thorough and equitablemanner. CDOG was tasked with the primaryjob of investigating applicants for licenses,and CDOG hired experienced investiga-tors, provided training in suitability inves-tigations, and developed standards for theexamination of applicants’ backgrounds—whether such applicants were from theUnited States or from anywhere else in theworld. Borrowing knowledge and expert-ise from Nevada, New Jersey, and SouthDakota, forms and protocols for applicantswere rapidly developed and licenses expedi-tiously processed. Colorado thus gained areputation as having a thorough but fairgaming investigatory agency with lawenforcement and intelligence relationshipsaround the globe.

Colorado Gaming TodayFrom these humble beginnings the Coloradogaming industry and its regulatory coun-terparts (CDOG and the Commission) havegrown significantly. As of June 2013, there

were thirty-six licensed casinos in the threemountain towns and approximately 14,405gaming devices. Due to a 2008 constitu-tional amendment, the $ 5 limit wasraised to $100. Additionally, gaming isnow permitted twenty-four hours per day,seven days per week. Equally significant isthe fact that the menu of available casinogames has been expanded, by constitutionalamendment, to include the games of crapsand roulette, as well as the initially-autho-rized (in 1991) games of poker, blackjack, andslot machines.

The expansion of the gaming industryto include gaming around the clock, betlimitations of $100 per bet, and the additionof craps and roulette, have necessitatedadditional personnel and expertise for theproper oversight of these operations byCDOG. Today, CDOG employs approxi-mately ninety-one persons. Those employ-ees are divided into seven different sections:Accounting; Administration; Audit; Investi-gations, Licensing, Technical SystemsGroup and Field Operations. CDOGfurther divides its work among three differ-ent office locations: one location each inGolden, Black Hawk/Central City, andCripple Creek.

Licensing in ColoradoIn many jurisdictions, as in Colorado, acomprehensive background investigation isrequired prior to any form of gaming licen-sure. Depending upon a number of variables,including the size and experience of theorganization applying for licensure, CDOGmay require six months to a year, or more, toprocess an application for a license. Thattime-frame probably is somewhere in themiddle of the pack when comparing licens-ing times among recognized gaming juris-dictions. That does not, however, mean thatpotential license applicants must wait until afinal contract or arrangement to own oroperate a casino has been worked out beforethe applicants can get the six-month-to-a-year licensing process underway. Unlikemany other jurisdictions, not all ofColorado’s licenses are property-specific: theOperator license and the individual key andsupport licenses “float.” This fact permits thediligent license applicant to get its applica-tion “in the queue” ahead of time and reducesthe dead time in the application process.

Colorado provides for an “Operator”license for potential slot route operators,including casinos who may desire such priv-ileges. For this license, as for key employeeand support licenses, there is no require-ment that the applicant possess or controlany real property. Consequently, those com-panies who wish to obtain a head start inthe licensing process should consider apply-ing for an Operator license while they arestill investigating gaming opportunities inColorado and elsewhere. Once this licensehas been approved, the subsequent applica-tion for a retail gaming (casino) licensebecomes much quicker and easier toprocess—the applicant background investi-gation has already been done. In addition,because of Colorado’s reputation forthorough and accurate investigations, othergaming jurisdictions performing their ownbackground checks often give substantialweight to the results of any Colorado inves-tigation. This can result in faster licensingtiming elsewhere. For these reasons, a num-ber of European and domestic gaming com-panies have chosen Colorado as their entrypoint into gaming in the United States. �

Continued from previous page

Because of Colorado’s reputation for thorough andaccurate investigations, other gaming jurisdictions

performing their own background checks often give substantial weight to the results of any Colorado investigation. This can result in faster licensing

timing elsewhere. ”

“