Details of the incident have not been released but it is believed Oakley is suspected of reducing his wager on a gambling table after the outcome was known. The casino's security reviewed the video footage and confirmed the basketball star had allegedly cheated.
Oakley was arrested by Nevada Gaming Control Board Enforcement agents at The Cosmopolitan, a popular hotel in Las Vegas.
Oakley played for the Knicks from 1988-98, helping them reach the NBA Finals. If convicted of a first offense, the violator is subject to a sentence of 1-6 years in a state prison and a fine of no more than $10,000.
Oakley was recently cleared of misdemeanor assault charges stemming from a scuffle with Madison Square Garden security guards a year ago in which he was violently ejected from the stadium during a game.
"This is an insignificant matter that will be quickly resolved", an unidentified source close to Oakley told TMZ.
The 19-year NBA veteran now is serving as head coach of the Killer 3s in the Big3 summer basketball league. Dolan suggested Oakley was drunk and heckling him, and Oakley was arrested for assault, harassment and trespassing.
Last year, he was escorted from his seats at Madison Square Garden and arrested after an altercation near team owner James Dolan.
In May 2011, Oakley filed a lawsuit against the Aria Resort & Casino in Las Vegas for an alleged "gang-style beat down" by security in 2010.
The six-foot-eight Oakley was a rugged enforcer playing alongside Patrick Ewing and has kept his tough-guy persona long after retirement, trading barbs with former rival Charles Barkley.
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