Gaming labs ready as Net poker nears; Nevada outsources testing to GLI, BMM

A move by Nevada gaming regulators to have independent testing laboratories certify gambling equipment could result in new technology reaching casino floors more quickly.

It also could mean the state's move into Internet poker might happen on a faster pace.

Last week, slot machine makers Bally Technologies, Inc. and International Game Technology (IGT) were licensed by the Nevada Gaming Commission to supply potential Internet casino operators with the systems to conduct, manage and monitor online gambling.

The technology Bally and IGT executives said they would use in Nevada is already in use in Europe, where online gaming is already legal in some jurisdictions. However, the technology still needs Nevada certification. The systems should be familiar to Gaming Laboratories International and BMM International, the two private labs registered by the Gaming Control Board on Thursday to test equipment for Nevada.

Gaming Laboratories Chief Executive Officer James Maida said that if a gaming device or the technology for a gaming system is used somewhere in the world, it has already been certified by one of the company's engineers. He said the company has completed more than 1.6 million certifications globally in the past 20 years.

Gaming Laboratories has 20 laboratory locations around the world to serve more than 500 gaming jurisdictions. Similarly, BMM has labs in 12 countries and certifies gaming equipment in more than 400 jurisdictions.

Maida said Nevada gaming companies' impending move into Internet poker by will require certifications that are new to state gaming regulators.

"These systems that have been written about recently have already been tested by GLI," Maida said. "We don't have to retest and do the same process all over again. Our next step is to certify the equipment based on the standards set by Nevada."

A LEGISLATIVE PUSH

During the 2011 legislative session, lawmakers approved Assembly Bill 279, which Gov. Brian Sandoval signed into law. The language allowed the Nevada Gaming Commission to adopt regulations for registration of independent testing labs.

The labs would replace the duties by the Gaming Control Board's testing facility to certify gaming devices, equipment and systems, which in turn frees gaming agents within the technology division to focus on establishing policy, certifying the labs, and expanding its resource base with respect to new technologies.

"The state's staff will now be on the forefront of new technology," Gaming Control Board Chairman Mark Lipparelli said. "The best-case scenario is that our staff will be able to keep ahead of the innovation taking place in the gaming industry. It's a much better use of the state's resources."

Union Gaming Group Managing Director Bill Lerner told investors that the manufacturing industry is applauding Nevada's change. Slot machine giant WMS Industries, for example, had to revise earnings downward over several quarters in recent years, which the company blamed on delayed approvals of gaming equipment in several jurisdictions, not just Nevada.

"Historically, gaming equipment suppliers were at the whim of a budget-constrained testing lab," Lerner said in research note Friday. "This from time to time would cause delays of approvals for gaming launches. The news is a positive for the equipment companies, in our view, due to speed to market."

The move to the new testing begins July 1. The control board technology division will turn over preapproval of new games, gambling devices, associated equipment, cashless wagering systems, mobile gaming systems, and interactive gaming systems to the labs.

Approval of Gaming Laboratories and BMM followed a comprehensive investigation by gaming control agents. The testing labs will certify gaming equipment based on uniform procedures and protocols established by the control board.

The cost for testing the equipment is paid for by the manufacturers, who also play approval fees to the state.

Gaming Laboratories and BMM work as the middleman between the manufacturers and Nevada gaming regulators. Manufacturers hire the testing labs to ensure the equipment meets state technical standards.

There's been a 10 percent to 15 percent failure rate with equipment brought to the state's testing lab, Lipparelli said. With independent labs handling the testing, Nevada in theory should see only products that have been successfully certified.

"I am confident the framework for our registered independent test labs will serve to uphold our high standards," Lipparelli said.

LABS ADD STAFF

Gaming Laboratories and BMM, in anticipation of being certified by Nevada gaming regulators, have been expanding their staff and headquarters.

At Gaming Laboratories' 80,000-square-foot headquarters in Las Vegas, the company has upgraded its facility and is expected to hire roughly 100 new employees by September, a 30 percent increase in staff.

"This is a significant change, and we are ready and available to help suppliers and operators understand how they can benefit from the efficient consideration of new technology," Maida said. "GLI has been preparing for this since the passage of AB 279."

BMM is moving to a new Las Vegas headquarters roughly four times as large as its current building. The company also expects to add more than 100 new employees in the next 18 to 24 months.

"This is a significant paradigm shift for Nevada" BMM CEO Martin Storm said. "BMM will do everything we can to support the control board and Nevada licensees through this process."

The key catalyst for the change is Nevada's move into Internet poker.

Nearly three dozen manufacturers and casino operators have applied to the state for interactive gaming licenses. The approvals of Bally and IGT kicked off the process, and approvals for at least three more companies could be on the control board and gaming commission agendas in July.

The technology and systems, however, must be certified and approved before any Nevada-based Internet poker site can go live.

"Many of these Internet platforms are not new," Maida said. "The good thing is for a company like us, we don't have to start from scratch because we have seen this technology before."