Nevada Protects Players' Funds

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The state of Nevada is proceeding with its plans to introduce legal and regulated intra state online poker as soon as possible. As a part of this process the state regulatory authority had recently released a set of rigorous requirements regarding the protection of the online player deposits and accounts. The strictness of these requirements no doubt stems from the recent debacles at Full Tilt, Purple Lounge and 5050 Poker, which are still fresh in public memory. That Nevada has gone way beyond anything else suggested so far will be lauded by the online gambling industry, especially the players. These regulations are likely to kindle fresh debate on the protection of players' funds.

One of the reasons for past failures was that regulatory authorities relied in good faith upon online gambling operator reportage that the requirements are being met. Obviously that has not been good enough. Nevada regulators have learnt through the mistakes of others that regulation is only as good as the diligence with which it is enforced. Therefore, Nevada is proposing the imposition of an oversight regime that is perhaps even stricter than what is prevalent for land casinos in the state. Land Casinos do not retain players' funds as deposits the way online poker rooms and online casinos do and therefore this proposal makes sense.

Most regulators of online gambling now insist that operators ring fence players' deposits in separate accounts. They also require their licensees to produce documents from the bank that this is being met. Nevada has gone one step further. Its licensees will be required to ring fence player funds in separate trusts, over which the operator will have no ownership, title or interest. The trusts will be audited by an independent monitoring system. This will not only ensure that player funds are totally segregated from the operational finances of the online gambling operator, but will also ensure that it is shielded from any temptation that an operator with a cash flow problem may have. If the licensee violates this requirement and dips into the players' funds then consequences would be serious. It goes without saying that the license would be cancelled forthwith and that operator will never get a license again, at least not in Nevada. But it is proposed to make such violation a criminal offence under law.

Because the trust that holds the funds is a separate legal entity and not linked to the company's assets and ownership, it remains protected even when the operator goes bankrupt. Even the secured and government creditors of the operator cannot touch those funds. The players can thus be paid in full and paid immediately, without having to go through prolonged angst, uncertainties and financial losses.

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