New Jersey Senate and Assembly Reach Compromise on North Jersey Casino Expansion

Under a compromise reached by the New Jersey Senate and Assembly leadership the proposed state Constitutional amendment will be put to a vote in both bodies which would allow two additional casinos in the northern part of the state.   Under the compromise current  Atlantic City casino license holders would have and inside track and have six months to submit proposals to build the new casinos, and their plans must call for investing at least $1 billion in each facility.

If that criteria isn’t met, those without Atlantic City licenses can bid to build the new North Jersey casinos.  They would also be required to invest at least $1 billion for each facility

It appears the proposed amendments will not be voted on in this current legislative session which ends on Tuesday, January 12, 2016 and 12:00 noon, but rather in the new session which begins thereafter.  As such both the Assembly and Senate will be required to pass the amended proposal with 3/5th majorities for the proposed amendment to be on the November, 2016 ballot.

 

New Jersey Assembly Offers its Version of North Jersey Casino Expansion

Just days following a proposed amendment to the New Jersey State Constitution proposed in the State Senate and as detailed here , the New Jersey Assembly offered its own proposed Amendment to the Constitution which would also authorize up to two additional casinos in North Jersey.

Both Amendments propose no more the two casinos, each located in different counties and outside a 75 mile radius of Atlantic City.  The 75 mile radius restriction eliminates Monmouth Park Racetrack as a possible site for casino expansion.

The primary differences are as follows;

    • Applicant eligibility:  The Assembly version of the proposed amendment allows one of the two licenses to be awarded to an applicant with no current ownership or ties to an existing Atlantic City casino.  The Senate version of the amendment limits eligibility to (1) a currently licensed Atlantic City casino operating as of December 11, 2015; or (2) any person licensed as a principal owner (yet undefined) of a holder of a New Jersey casino license that was operating a casino which was conducting gambling on December 11, 2015 if that principal owner also holds a valid license to own and operate a casino in another jurisdiction with licensing standards similar to those in New Jersey.  The Assembly version only applies the Senate version’s proposed eligibility requirements to the “initial license.”  The current Atlantic City casino tie-in eligibility requirement presumably does not apply to the second license awarded.
    • Tax Allocation to Atlantic City.  The Assembly version of the proposed Constitutional Amendment allocates 35% of state tax revenuers from the two new casinos for purposes if the recovery, stabilization or improvement of Atlantic  City.  The Senate version  allocate 49% of such tax revenue for the recovery, stabilization or improvement of Atlantic  City.

The Senate and Assembly must agree on an identical version of the proposed Amendment which would have to be approved with 3/5 votes by both houses of the NJ Legislature or majority votes, twice over two years.  The votes have to be completed at least 90 days before going on the ballot of a state-wide referendum to amend the NJ State Constitution.

New Jersey Legislature Takes First Step To Authorize North Jersey Casinos

A Proposed Amendment to the New Jersey State Constitution will authorize two additional casinos in the State. The details of the Proposed Amendment are as follows:

  • No more than 2 casinos, each one to be located in different counties in State
  • New casinos must be located  outside a 75 mile radius from Atlantic City.
  • Eligibility for the license is limited to:
    • (1) a currently licensed Atlantic City casino operating as of December 11, 2015; or
    • or (2 ) any person licensed as a principal owner (yet undefined) of a holder of a New Jersey casino license that was operating a casino which was conducting gambling on December 11, 2015 if that principal owner also holds a valid license to own and operate a casino in another jurisdiction with licensing standards similar to those in New Jersey
  • Tax rate to be determined in subsequent legislation. 49% of such tax revenue for 15 years is dedicated for recovery , stabilization or improvement of Atlantic City.  2% of tax revenue dedicated to thoroughbred and standardbred  horsemen.
  • The Resolution has to be approved with 3/5 votes by both houses of the NJ Legislature or majority votes twice over two years. The votes have to be completed at least 90 days before going on the ballot of a state-wide referendum to amend the NJ State Constitution.

A copy of the proposed amendment can be read here: SCR 185.

Duane Morris Receives Corporate LiveWire’s 2016 Excellence in Gaming New Jersey Law Firm Award

Duane Morris LLP has received the 2016 Corporate LiveWire Excellence in Gaming Law Firm Award for New Jersey. The gaming awards look at the gaming sector as a whole and cover casinos, online and mobile gaming, as well as championing firms involved in
gaming law and regulatory compliance.

“We’re honored to receive this award,” said Hersh Kozlov, head of the firm’s Gaming Law Practice Group and managing partner of the Cherry Hill office. “We strive to provide our gaming industry clients with top-notch service and it’s gratifying to be recognized for the work we do.”

The Corporate LiveWire Awards represent the pinnacle of business achievement, recognizing the best in their respective fields. The awards cover the most important sectors of business, from finance advisories and funding providers to law firms and specialist advisory companies that deal with mergers and acquisitions.

For the full story, please see the press release on the Duane Morris website.

NJ Gets Another Chance In Sports Betting Litigation

Three sentences set the sports betting world afire this morning when the US Court of Appeals for the Third Circuit issued an order granting New Jersey’s petition for rehearing en banc in the most recent round of sports betting litigation.  In simple terms, this means that the case will be heard anew by the active judges of the Third Circuit plus the two senior judges who participated in the case – the final count will be an oral argument in front of a total of about 11 judges at once – more than the Supreme Court.

As we’ve covered here, this case centered around what it means to “authorize.”  Previously, New Jersey challenged the constitutionality of the Professional and Amateur Sports Protection Act (“PASPA”) on the grounds that it commandeered the states to maintain a federal prohibition.  As has been written before, PASPA does not prohibit sports betting – it prohibits a state from authorizing sports betting by law.  But the courts found PASPA constitutional because it gave the states a choice:  keep sports betting prohibitions in place, or repeal them.  That choice saved the constitutionality of PASPA.  New Jersey, seizing on this language, partially repealed its prohibitions on sports betting.  The sports leagues argued that  partial repeal amounts to an “authorization,” which violates PASPA.   The court agreed.

Judge Julio Fuentes wrote the court’s 2013 opinion on constitutionality – finding the statute to be constitutional.  He was again on the panel in 2015.  This time, he dissented, writing that a partial repeal was permissible under PASPA because there is a difference between authorizing and repealing.

The Court of Appeals grants rehearing en banc when either a question of exceptional importance is involved or is there is a need to reconcile precedents of the court.  Needless to say, Judge Fuentes’ view that the 2015 opinion was not consistent with the 2013 opinion probably triggered some of the judges on the court to want to take a close look at the consistency of the two cases.  It is also the case that a prior precedential opinion of the Court can only be overruled en banc – so it is possible that the Court wants to take a closer look at the constitutionality of PASPA as addressed in Christie I.  There is no guarantee, however, that the Court will reach a different result this time around.  Because rehearing en banc has been granted, however, the court’s August 2015 opinion is vacated.

The fact that the court granted en banc review does mean that some of the judges may be inclined to reach a different result.  The logic there is that if the judges were satisfied with the result, they would have simply let the underlying decision stand.  That too is no guarantee of a different result – they may, after examination, reach the same result but based on different reasoning.  Of course, the en banc review could lead to a different result or to a modification of Christie I.

Thus far it is not known when the en banc hearing will be scheduled.  No new briefs will be filed.  Typically the Court schedules a number of en banc cases on the same day for convenience.  The case will be orally argued and voted on by the judges who hear it; one will be assigned to write an opinion, which will have to receive a vote of a majority of the judges who hear the case in order to become the opinion of the court.

One thing is clear – unless rehearing was granted, New Jersey’s only remaining shot under the partial repeal legislation was the extremely unlikely chance that the Supreme Court would take the case after once declining to do so.  New Jersey’s chances of success have increased significantly as a result of this order.

 

 

Third Circuit Continues NJ Sports Betting Prohibition

In a much anticipated, closely watched decision, today the US Court of Appeals for the Third Circuit held that New Jersey’s 2014 efforts to implement sports betting at casinos and racetracks violates federal law.  The 2-1 majority decision was authored by Judge Marjorie O. Rendell joined by Judge Maryann Trump Barry; Judge Julio Fuentes dissented.

How did we get here?   The federal Professional and Amateur Sports Protection Act (PASPA), enacted in 1991, prohibits states from authorizing sports betting.  In 2012, New Jersey challenged the constitutionality of PASPA, but the Third Circuit held that the statute was constitutional.   The Supreme Court declined to hear the case.  Sports betting is a crime in New Jersey.  Seizing on language in the Third Circuit’s opinion, however, New Jersey enacted a statute in 2014 that simply stated that any state law that would prohibit sports betting at a casino or racetrack was repealed – i.e., that activity was no longer a crime.  It did not explicitly say that casinos or racetracks could offer sports betting.

The sports leagues, however, took the position that this limited repeal amounted to an “authorization” by another name.  And, “authorizations” are prohibited by federal law.  This dispute – what does it mean “to authorize” – is at the base of the decision that was issued this morning.

The court held:  “We conclude that the 2014 Law violates PASPA because it authorizes by law sports gambling.”  The court cited three reasons for its holding.  First, the court stated that absent the 2014 law, sports gambling prohibitions would apply to casinos and racetracks; therefore, repealing those prohibitions must amount to an authorization.  “The 2014 law provides the authorization for conduct that is otherwise clearly and completely legally prohibited.”

Second, the court stated that the selectiveness of the repeal – limited to racetracks and casinos – “constitutes specific permission and empowerment.”  The court distinguished its holding in the 2013 decision that saved the constitutionality of PASPA.  The court notes that “had the 2014 Law repealed all prohibitions on sports gambling, we would hard pressed…to find an ‘authorizing by law’ in violation of PASPA.”  In other words, the Court has essentially held that the only repeal that would pass  muster under PASPA is a complete repeal – i.e., allowing anyone in the state to offer sports betting.

Third, the court held that because Congress gave New Jersey one year to opt out of PASPA initially, Congress must have concluded at the time that sports betting in New Jersey casinos would violate PASPA.  “If sports gambling in New Jersey’s casinos does not violate PASPA, then PASPA’s one year exception for New Jersey would have been superfluous.”

Judge Fuentes – who wrote the Court’s 2013 opinion finding PASPA to be constitutional – dissented.  He notes that “the 2014 Law renders previous prohibitions on sports betting non-existent” and then criticizes the majority for taking issue with the “selective” nature of the repeal.  “As I see it, the issue is whether a partial repeal amounts to authorization.  Because this logic rests on the same false equivalence we rejected in Christie I, I respectfully dissent.”

Judge Fuentes notes that to repeal a statute is to make it as though the statute never existed.  “A partially repealed statute is treated as if only the remaining part exists…after the repeal, it is as if New Jersey never prohibited sports gambling in casinos, gambling houses, and sports racetracks.”    How, therefore, Judge Fuentes asks, can a repeal be an authorization?

Judge Fuentes says that there is no explicit grant of permission under the statute for anyone to engage in sports betting.  Second, Judge Fuentes argues that there is a logical flaw in the argument:  if withdrawing some prohibitions amounts to an authorization, then withdrawing all prohibitions must also amount to an authorization, which means that New Jersey has no choice at all, which means that PASPA is unconstitutional.  This is particularly striking reasoning from the author of the 2013 decision holding PASPA to be constitutional.

It remains to be seen whether New Jersey will seek review in the Supreme Court, or whether some other legislative solution – either on the state or federal level – may be forthcoming.  For now, though, New Jersey will still not be able to offer sports betting in its casinos and racetracks.

Latest PA Internet Gaming Bill Goes Beyond Internet Gaming

As my colleague Eric Frank previewed here, a bill has been introduced in the Pennsylvania Senate regarding internet gaming.   The latest bill, SB 900, was introduced on June 9 sponsored by Senators Ward, Tomlinson, Vogel, Scarnati, Bartolotta, and Stefano.  The bill goes beyond just internet gaming, though, and it remains to be seen whether this bill is the result of a compromise among various interests or is too broad to pass.

Internet Gaming

As with the several other bills we have covered, this bill would allow Pennsylvania casino licensees to offer internet gaming.  However, Category 3 facilities – the two smaller facilities (Valley Forge and Nemacolin) that are part of resorts – would not be authorized to offer internet gaming.  An internet gaming permit would have a $10 million fee attached with a $1 million renewal due every five years.

Servers used for internet gaming must be located within the casino’s facility in a secure space; there is no provision for the use of off-site data sites, except for back-up servers which may be located at another site in Pennsylvania only.  Platform and software providers would have to be licensed by the PGCB as a manufacturer.

Gross internet gaming revenue would be taxed at 54%.

Interestingly, if a person lives within 20 miles of a casino that offers internet gaming, that person must open an account in person and may not do so online.  If implemented, this would be unique to Pennsylvania, as other internet gaming states allow accounts to be opened online regardless of the proximity of a patron to a facility.

But Wait – There’s More

This bill contains two key provisions that would significantly alter the dynamic of land-based casinos in Pennsylvania.  The first change would be to Category 3 casinos.  These casinos are not open to the general public unless a patron either utilizes other amenities of the resort, such as restaurants or hotel rooms, or purchases a membership.  Needless to say, this requirement affects the number of customers who might visit a Category 3 facility.  This bill would allow Category 3 facilities to escape the membership requirement, provided that the casino pays a fee of $5 million if the facility is located in a first through third class county and $2.5 million in any other county.  This would significantly change the dynamics of Category 3 casinos.

Second, the bill allows the establishment of “nonprimary locations” and “ancillary facilities” – essentially, satellite casinos limited to 250 slot machines each.  Category 1 facilities (racetracks) would be allowed to open four such facilities each and Category 2 facilities would be allowed to open two.  There are geographic restrictions as to where these facilities may be opened – no closer than 20 miles to another facility, except for within the City of Philadelphia, where that restriction is 10 miles.  These facilities would have a $5 million license fee.  This, too, would change the overall dynamics of casino location in Pennsylvania.

It remains to be seen whether this legislation advances through the Senate, and how it will reconcile with the several bills that have been introduced in the House.

 

 

 

Duane Morris Partner Christoper Soriano to Speak at the 6th Forum on US Online Gaming

Duane Morris partner Christopher Soriano will be a speaker at the 6th Forum on US Online Gaming to be held on May 12-14, 2015, at the DoubleTree Suites by Hilton in New York City. Mr. Soriano will be a speaker for the “Pre-Forum Master Class: Interstate Gaming: How Can Cross-Border Capability Improve Liquidity?” on May 12 from 3 p.m. to 6 p.m.

Video Gaming Bill Reintroduced in Pennsylvania

Pennsylvania House Bill 808, introduced this week, would authorize video gaming machines for video poker, bingo, keno and other games in establishments with valid liquor licenses, such as restaurants, bars, taverns, hotels or clubs, in Pennsylvania. Similar legislation was introduced last year, and we provided an analysis of that bill here. In addition to providing an overview of the legislation, this Alert highlights the many similarities and distinct differences between House Bill 808 and last year’s legislation.

What’s Authorized

Licensed establishments with less than 2,500 square feet would be permitted up to five video gaming terminals. One additional terminal would be permitted for every additional 500 square feet, up to a maximum of 10 terminals. In comparison, last year’s legislation authorized up to only three machines at an establishment.

Maximum wagers are held to $2.50 with a maximum payout of $500 and a payout percentage of 85 percent. The only change from last year’s legislation is a reduction from $1,000 to $500 on the maximum payout.

To read the full text of this Alert, please visit the Duane Morris website.

Oral Argument on NJ Sports Betting – What Does “Authorize” Mean?

Today’s oral argument in the United States Court of Appeals for the Third Circuit, on whether New Jersey’s partial repeal of its prohibitions on sports betting, repeatedly came around to one question:  what does it really mean to “authorize” something?  No clear answer was apparent by the end of the argument.

To put the importance of this concept into context, it’s important to look at the Professional and Amateur Sports Protection Act (“PASPA”).  That statute makes it unlawful for a governmental entity to “sponsor, operate, advertise, promote, license, or authorize by law or compact” sports betting.  New Jersey’s first challenge to PASPA was its constitutionality – that it violated the Tenth Amendment to the United States Constitution because it commandeered the legislative power of the state.  The courts rejected that challenge, finding that the state was not commandeered because “we do not read PASPA to prohibit New Jersey from repealing its ban on sports wagering” and determining “what the exact contours of the prohibition will be.”

Against this backdrop, New Jersey repealed its criminal sports betting prohibitions to the extent that they prohibited sports betting at casinos, racetracks, or the sites of former racetracks operational within the last fifteen years.  The sports leagues sued, claiming that this partial repeal amounted to an authorization of sports betting at these facilities – which are heavily regulated by the State already.

Today’s argument centered around that point-  what does it mean to authorize, and is there a distinction between authorizing something and repealing a prohibition on it?  The state argued that it was simply following the Third Circuit’s prior decision that said that the state was free to set the contours of its prohibition on sports betting.  The state also argued that there is a distinction between authorizing something by law and repealing a criminal prohibition on that activity.  Former Solicitor General Theodore Olson, on behalf of the state, said that the Court’s prior opinion said that to “authorize” requires some affirmative act, but the panel seemed to suggest that that statement was dicta and the precise question of whether authorizing requires an affirmative act was not before the Court at that time.

Interestingly, Judges Rendell and Fuentes observed that of all the things prohibited by PASPA, “regulating” is not one of them.  Judge Fuentes suggested that if the state prevails in this case, perhaps the state could still regulate sports betting and be consistent with PASPA, rather than have sports betting operate in an unregulated space.

Former Solicitor General Paul Clement, on behalf of the Leagues, also confronted the question of what it means to authorize, with Judge Rendell pressing him on whether “authorizing” required the implementation of some sort of scheme, or required the state to do more than just repeal a prohibition.  The leagues cited to the legislative history of PASPA, saying that Congress was concerned with stopping casino-style sports betting, and that New Jersey’s partial repeal does exactly that.  The leagues argued that a partial repeal that keeps the vast majority of the statute in place amounts to a state authorization.  Judge Fuentes asked how far the repeal had to go in order to comport with PASPA.  The leagues argued that the repeal cannot be limited to just a few licensed venues in the state.  The leagues suggested that it would be acceptable to repeal the sports betting prohibition to permit wagers under $100, limited to family members or acquaintances.  The leagues further suggested that at least half of a statute needs to be repealed in order for it to be a true partial repeal rather than an implicit authorization.

Despite the thorough, spirited argument, it was very difficult to predict which way this decision might go.  Each side can probably point to different comments by the panel to suggest leanings, but we won’t know the final outcome until the decision comes out – probably in several months.