Pennsylvania Assembly Passes Sweeping Expansion of Gambling

On June 22, 2016 the Pennsylvania General Assembly passed a sweeping expansion of gambling .   The bill, which must be passed by the state’s Senate and signed by the Governor, would allow for internet based gambling, daily fantasy sports, slot machines at off-track betting parlors (“OTBs”), slot machines at airports and even paves the way for legalized sports betting, if, and when that is allowed under federal law.

Internet Gambling

  • Pennsylvania would be the fourth state to allow legal internet gambling (Internet gambling is currently legal in New Jersey, Delaware and Nevada);
  • Internet gambling would be offered through the Commonwealth’s current, licensed casinos with each casino paying an $8 million license fee to offer internet gaming;
  • Age and geo-location controls will be required – players must open an account, be 21 or over and must be located within PA while participating in internet gambling;
  • The tax rate on internet gambling revenue would total 16%;
  • Participating casinos would not be allowed to reduce their number of slots machines their existing b casinos

Daily Fantasy Sports

  • Bill allows current DFA operators like FanDuel and Draft Kings to obtain a license to offer DFS without partnering with a PA casino; DFS operators would pay 5% of its revenues ( after player payouts) to the state;
  • DFS players must be 18 yo or older;

Slots at OTBs

  • PA’s 5 racetrack casinos would each be permitted to have up to 4 off-track betting parlors with up to 250 slot machines per OTB;
  • Each such OTB must be outside a 50 mile radius of an established PA casino;
  • There is a $5 million licensee fee for each OTB with slots;

Slots at Airports

  • Casinos can seek permission to install slot machines at airports; the PA Gaming Control Bd can set limits on the number of slot machines l allowed;
  • License fees for such operations would be $5 million in Philadelphia; $2.5 million in Pittsburgh; and $1 million a each at the four other international airports in PA;

Expansion of Current Resort Casinos

  • Current Category III casinos in PA can expand their max slot machines counts from 600 to 850 and table games from 50 to 65;
  • There is also a relaxation in the requirement that casino patrons be customers of other amenities;
  • If a current Category III casino and all three changes it so would requires $4.5 million is additional license fees.

Sports Wagering

  • The bill instructs the PA Gaming Control Bd to develop regulations to allow for sports wagering if, and when the federal government permits such sport betting

Duane Morris Attorney Adam Berger Presented on Daily Fantasy Sports at Jeffrey S. Moorad Sports Law Journal Symposium

Duane Morris associate Adam Berger of the firm’s Cherry Hill office spoke at the 2016 Jeffrey S. Moorad Sports Law Journal Symposium, held earlier this month in Villanova, Pennsylvania. Mr. Berger participated in a panel discussion on “Daily Fantasy Sports: A Legal View.”  This year’s symposium, A Changing Game: Challenging the Status Quo in Sports Law, analyzed the hard-hitting legal and business issues in sports today.

Daily fantasy sports—a hot-button issue from a legal, regulatory and business perspective—was the headline topic for the roster of industry leaders. The discussion also included the evolution of the NCAA’s legal and business landscape and a view of pro sports from one of the nation’s top agents and a two-time Super Bowl champion.

To view the Sports Law Symposium program, please visit YouTube.com.

 

Can You Get Busted for Your Bracket? Duane Morris Partner Christopher Soriano on Office Pools, Fantasy Sports and All Things Gaming Law

Duane Morris partner Christopher Soriano of the firm’s Cherry Hill office appeared on a recent broadcast of the “Wagner & Winick on the Law” radio program, during which he joined co-hosts Dean Mitchel Winick and Professor Stephen Wagner, both of Monterey College of Law, to discuss the interplay of federal and state laws in the United States related to regulating gambling and how many of these laws are outdated. A sampling of the topics discussed include Internet gaming, office brackets, fantasy sports, casinos and the lottery.

Within the context of the NCAA March Madness Tournament, Mr. Soriano provided insights on the gaming law implications of office bracket tournaments, which, as in most instances where people put in money on the results of a sporting event, are illegal for the most part. Mr. Soriano also commented on the developing area of fantasy sports and the important distinction to be drawn between games of skill and games of chance. For example, the traditional season-long fantasy sports contests are considered legal because skill is involved; while daily fantasy contests have been viewed as being illegal games of chance. Therefore, where is the line between when something is a contest of skill and when it is a contest of chance?

To listen to the radio program in its entirety, please visit the Recent Podcasts, Webcasts and Audio section on the Duane Morris website.

Future of North Jersey Casinos Now In Voters’ Hands

On Monday, three-fifths of each house of the New Jersey legislature passed resolutions that will put a question on the ballot in November asking voters if they want to expand casino gaming outside of Atlantic City.  As we previously posted here and here, the North Jersey casino proposal will allow for two casinos to be located at least 72 miles from Atlantic City, in separate counties.  The minimum investment required for a North Jersey casino will be $1 billion.  Current Atlantic City casino owners will be given an exclusive period of 60 days to submit bids for the two North Jersey casino licenses before bidding is opened up broadly.  Current owners of Atlantic City casinos may partner with other investors/developers to submit a bid for a North Jersey casino license.

If New Jersey voters pass the referendum in November, the legislature will then need to adopt enabling legislation.  This legislation will provide the details for the bidding process and the tax rate for North Jersey casinos.  Atlantic City casinos currently pay an effective tax rate of 9.25% on gross gaming revenue.  North Jersey casinos likely will be required to pay a significantly higher rate, perhaps in excess of 50%.

We will provide updates as developments occur.

Duane Morris Partner Christopher Soriano Quoted in Law360

Duane Morris partner Christopher Soriano in the firm’s Cherry Hill office was quoted in a February 18, 2016 Law360 article (“3rd Circ. Puts Gambling Ban Constitutionality Back On Table“) detailing the 12-judge Third Circuit panel hearing discussing New Jersey’s efforts to legalize sports betting. This is the third time the appeals court has looked at the issue. Mr. Soriano discussed three possible outcomes: 1) the court could hold that the Professional and Amateur Sports Protection Act (PASPA) is constitutional and N.J.’s partial repeal violates it, resulting in no sports betting; 2) the court could find PASPA constitutional but that the state has complied with the act in its partial repeal, resulting in unregulated sports betting in N.J. casinos and racetracks; or 3) the court could determine that PASPA is unconstitutional and therefore regulated sports betting would be allowed in the state.

Mr. Soriano’s blog post on the hearing can also be found here.

Repealing vs Authorizing, Part 2 – The Third Circuit’s Hearing on Sports Betting

Today marked another installment in New Jersey’s efforts to implement sports betting at its casinos and racetracks. The United States Court of Appeals for the Third Circuit heard an en banc argument in NCAA v. Christie.  This is the third time that the question of sports betting has been in front of the Third Circuit in the last several years, with the sports leagues winning the last two battles.

To simplify, the Professional and Amateur Sports Protection Act (“PASPA”) prohibits a state from, including other things, “licensing” or “authoriz[ing] by law” sports betting.  It does not prohibit sports betting in its own right.  New Jersey initially challenged the constitutionality of PASPA, arguing that it violated the Tenth Amendment of the United States Constitution.  The Court of Appeals disagreed, holding that PASPA gave the states a choice between continuing their existing criminal prohibitions on sports betting or repealing those prohibitions.  While an unattractive choice, the Court reasoned, it was not a circumstance where a state had no choice at all, which would violate the Tenth Amendment.

Acting on this, New Jersey then partially repealed its prohibitions on sports betting to the extent that they applied to casinos, racetracks, and former racetracks.  After a challenge by the leagues, the courts concluded that this narrow repeal amounted to authorizing sports betting by law, which was prohibited by PASPA.

Today the Court focused on two issues:  how much of a repeal is necessary before the repeal no longer constitutes an authorization by law, and is PASPA constitutional on an overall basis.  The state’s argument is that the limited repeal, because it is a repeal and not an affirmative act, is consistent with PASPA.  The leagues conceded that PASPA gives the state more than two options and the DOJ noted that states could “tinker” with their sports betting provisions.  One example that the leagues stated would comply with PASPA is a repeal of state criminal laws to the extent that they prohibit bets of under $1,000 between acquaintances on sporting events.  The question the court struggled with is where, then, is the line – if some partial repeal complies with PASPA, how much of a repeal is necessary?  There was no clear answer at the end of the hearing.

The other question raised by the Court is whether the constitutionality of PASPA should be revisited.  Several judges had questions about whether PASPA, as construed, essentially commandeers the states and forces them to implement a federal policy.  While many thought this issue was closed after Christie I, several judges seemed interested in it today.

It’s always difficult to tell where a court may be headed, but it seems that the Court had more difficult questions for the state than for the leagues.  That said, there seems to be three camps on the Court:  those who believe PASPA is unconstitutional (and thus NJ gets regulated sports betting);  those who believe PASPA is constitutional but NJ has complied with PASPA in its partial repeal (and thus NJ gets unregulated sports betting in casinos and racetracks) and those who believe PASPA is constitutional and that NJ’s partial repeal violates it (and thus no sports betting).  How the votes ultimately shake out, and whether there is a compromise position, may make the result of this case interesting indeed.

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.