One Nevada tavern operator finds a loophole as competition sees slot machines silenced By Howard Stutz, Executive Editor, CDC Gaming Reports July 14, 2020 at 8:30 pm Legislating in the midst of a nationwide pandemic can lead to unintended consequences. That might be one explanation why Nevada’s governor did a favor for a gaming company he was at loggerheads with during his time as chairman of the Clark County Commission. A large segment of Nevada’s restricted gaming industry was sidelined last weekend when Gov. Steve Sisolak ordered stand-alone bars and bar top areas inside restaurants and taverns closed due to Nevada’s recent surge in COVID-19 cases. The vast majority of the state’s 2,000 restricted gaming locations closed their slot machines because those locations are required to embed their 15 or fewer games into bar tops. Slot machines inside grocery stores, convenience stores, and drug stores were not affected. Operators of the Dotty’s chain of taverns, however, were able to keep the bulk of their gaming business active. Why? Many of the slot machines in the company’s more than 160 locations are upright-style games, similar to those found in casinos. Nevada Gaming Control Board Chairwoman Sandra Douglass Morgan said in a text message Monday following the governor’s directive, “We answered the following question as follows: ‘Can restricted locations with free standing machines remain open if they are licensed as taverns or bars in the county or in a city? Yes. However, bar top machines and bars must be closed.’” The shutdowns took another turn Tuesday when attorneys representing 37 Clark County-area bars and taverns filed a lawsuit seeking to overturn the directive by claiming the locations were being unfairly singled out. “You would think it was strange because Dotty’s was such a thorn in (Sisolak’s) side for so long,” said Roger Sachs, operator of Steiner’s – A Nevada Style Pub. Sachs was one of the original plaintiffs in the lawsuit, which quickly drew additional petitioners. Two of Sachs’ three Las Vegas taverns are still open and providing food service, but for limited hours. Steiner’s is normally open 24 hours, which is typical of the state’s tavern industry as long as the slot machines are operating. Dotty’s, which began in Oregon and now operates in Illinois, has been a Nevada gaming industry enigma since the mid-2000s, primarily over its business model, which offers minimal food and beverage choices with a heavy focus on gambling. Casino companies and traditional tavern businesses complained that Dotty’s skirted regulations covering restricted locations by operating as glorified slot machine parlors. A 2006 voter-mandated statewide ban on smoking in locations where food is served — except casinos — forced taverns to either eliminate food service or wall off its restaurant areas from its bars and slot machines. Dotty’s closed its kitchens in response, although the locations continued to offer snack items. When the economy soured and tavern businesses closed, Dotty’s jumped in and acquired numerous locations. The company’s model ultimately spurred knock-off businesses, such as Jackpot Joanie’s. Its privately held parent company, Nevada Restaurant Services, also launched four sibling brands and bought two casinos in Boulder City and Laughlin. In South Lake Tahoe, the Dotty’s along Highway 50, near Harrah’s, has nearly 100 gaming machines. In light of this rapid expansion, government bodies and state gaming regulators enacted laws and regulations aimed at slowing the company’s growth. Taverns were required to add full kitchens and to place more than half of their slot machines into a bar top, which led to a number of lawsuits from Nevada Restaurant Services. On its website – a simple landing page and a Google map of its locations – Dotty’s states, “Per Governor’s order, our bar top locations are closed.” The company gave a phone number for finding a nearby Dotty’s that was still open. Nevada Gov. Steve Sisolak Nevada taxes restricted gaming locations differently than casinos, which pay 6.75 percent monthly on taxable gaming revenue in excess of $134,000. Restricted locations pay an annual fee of $250 per machine and quarterly fees based on the number of games. As of March 31, there were 19,054 restricted slot machines in the state. For the first five games, the quarterly fee paid to the state is $81 per machine. The locations pay $141 per quarter for each of the next 10 machines. Under the formula, the total annual tax for a location with 15 slot machines is $11,010. State gaming regulators consider revenues from slot machines “incidental” to a restricted gaming location’s primary business, although a percentage figure outlining what precisely constitutes “incidental” in this context has never been established. Tavern owners filed the lawsuit not just because they felt singled out, but due to concerns about their livelihood. Along with casinos, restricted gaming was closed for 78 days in the initial days of the pandemic. The bars and taverns saw 37 days of gaming revenues before the hammer came down once again. Sisolak’s press spokeswoman did not return an email seeking clarification on the issue. In 2016, when he was Clark County Commission chair, Sisolak told Nevada Public Radio that Dotty’s wouldn’t exist without slot machines, unlike a traditional tavern. No one could be reached for comment at Nevada Restaurant Services, either. That’s not surprising. History has shown Marcel Marceau to be more talkative than the Dotty’s folks. Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at email@example.com. Follow @howardstutz on Twitter.