FCC Decides Publication of Rules via the Internet is Sufficient Disclosure for Radio and Television Contests

The Federal Communications Commission last week adopted an amendment to its Contest Rules (Section 73.1216) requirements for broadcast licensees.

Under the amendment, television and radio licensees can now meet obligations for disclosing contest rules by posting such rules on the Internet.  This revision changes a longstanding requirement that material contest terms be disclosed on air.  Broadcasters can still choose to disclose rules on air but now have the option of posting the rules online instead.

Under the new amendment, broadcasters who choose to disclose contest rules via the Internet will be required to (i) broadcast the relevant website address periodically with information sufficient for a consumer easily to find material contest terms online; (ii) establish a link or tab to material contest terms on the website’s home page; (iii) maintain contest terms online for a period of at least thirty days after the contest has ended; and (iv) announce on air that the material terms of a contest have changed since the contest was first announced, where that is the case, and direct participants to the website to review the changes.

Prior to the FCC’s order last week many broadcasters already used the Internet as a way to supplement the FCC’s on air material disclosure requirement.

The move is meant to “modernize [the FCC’s] rules to reflect how Americans access and consume information in the 21st century.” A complete copy of the FCC’s Report and Order is available here.

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.

More Video Gaming Bills Introduced in Pennsylvania

By my count, this week saw the introduction of Video Gaming bills five and six of the current legislative session.

HB 1458 and HB 1462 both would call for the Department of Revenue to administer the law with licensing of machine vendors (commonly referred to as route operators), manufacturers and distributors. The bills are nearly identical with the major difference coming in the form of the distribution of proceeds.

Distribution of Proceeds:

HB 1458: 33% to the establishment; 27% to the vendor/route operator; 30% to the Commonwealth’s Property Tax Relief Fund; 5% to the host municipality for each machine; 5% to licensed casinos in Pennsylvania (although no specifics on how this 5% is distributed among the casinos).

HB 1462: 33% to the establishment; 27% to the vendor/route operator; 30% to the Public School Employees’ Retirement Contribution Restricted Account; 5% to the host municipality for each machine; 5% to licensed casinos in Pennsylvania (again, no specifics on how this 5% is distributed among the casinos).

Other Important Notes Regarding HB 1458 and HB 1462:

Residency Requirements: Route operators would have a 2 year residency requirements (10%+ owners of corporate vendors would be required to meet the 2 year residency requirement. Distributors would be subject to a 1 year residency requirement whereas manufacturers would not be subject to any residency requirement.

Advertising Restriction: Both bills propose a complete ban on all advertising of the video gaming machines.

Limited Number of Machines: These bills limit all establishments, regardless of size, to three machines.

Max Bet and Payout: The max bet is limited to $2.50 and the maximum payout is $1,000 with a minimum payout percentage of 85% per machine.

Stay tuned here as we track these and the previously introduced video gaming bills. For detailed information on these other bills, check my blog entries here, here and here.

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.




Pennsylvania Senators to Introduce Internet Gaming Legislation

Four Pennsylvania Republican State Senators filed a Co-Sponsorship Memoranda outlining their plan to introduce legislation in the near future to permit existing casinos to offer Internet gaming to individuals physically located in the Commonwealth.

The full details of the proposal were not yet made available, however, the Memoranda does contemplate the development of expanded compulsive and problem gambling programs specifically related to Internet gaming by the Pennsylvania Gaming Control Board and the Department of Drug and Alcohol Programs.

This is the first measure put forth in Pennsylvania’s Senate this session.  You can view our detailed analysis of the multiple Internet gaming bills introduced in the Assembly here, here and here.

Stay tuned here for full details on the legislation once it is formally introduced.

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.

Flurry of Gaming-Related Legislation Introduced in Pennsylvania

A lot of activity in Pennsylvania yesterday with legislators dropping a flurry of gaming-related legislation. Here’s the breakdown of the action in SportsCenter fashion..da na na da na na:

HB 986 – This bill is the fourth Video Gaming bill to be introduced in this session. The measure would limit video lottery terminals to clubs having a liquor license whereas every other measure allows for restaurants, bars, taverns and hotels as well. This bill would also bring the regulation of VLTs within the purview of the Pennsylvania Gaming Control Board.

HB 990 – This bill would prevent any Category of slot machine license from being issued within 10 miles of a national military park or a post-9/11 national memorial.

HB 996 – This bill would ban smoking in casinos, adding the word “licensed facility” to the list of “public spaces” under the Commonwealth’s Clean Indoor Air Act.

HB 997 – This bill would require casinos to provide patrons with monthly statements showing winnings and losses equal to or greater than $500.

HB 1013 – This bill would prohibit the Pennsylvania Gaming Control Board from promulgating rules or regulations allowing for any form of Internet gaming. This bill would also make it a crime to organize any form of gambling over the Internet.

HB 1017 – This bill would require the Pennsylvania Gaming Control Board to require each casino to collect a $2 per-patron admission fee. The fees would be collected by the State and used to fund an Intellectual Disabilities and Autism Waiting List Account.

HB 1025 – This bill would require the Pennsylvania Gaming Control Board to require each casino to collect a $2 per-patron admission fee. The fees would be collected by the State and used as follows: (a) 50% to the State Employee’s Retirement System to satisfy mandatory contribution obligations of the Commonwealth; and (b) 50% to the Public School Employees’ Retirement System to satisfy mandatory contribution obligations of the Commonwealth.

UPDATE: Second Video Gaming Bill Introduced in Pennsylvania

A second Video Gaming bill was introduced yesterday in the Pennsylvania House. HB 901 has many similarities to HB 808 introduced last month (which I blogged about here).

But there are some key distinctions:

HB 901 would place control over VLTs in the hands of the Department of Revenue rather than the Pennsylvania Gaming Control Board (although the legislation does provide Revenue with the opportunity to partner with the PGCB for the limited purpose of developing and verifying specifications for the VLTs).

Additionally, HB 901 is silent regarding residency requirements and eliminates the “distributors,” combining that role with that of the “Operators,” who would “buy, sell, own, maintain, service or distribute video gaming machines for placement in licensed establishments.”

The net profits would be distributed: 40% to the General Fund; 30% to the licensed establishment; and 30% to the operator. Under HB 808, the General Fund would receive 34% and establishments and operators would each receive 33%.

So what’s next:

The introduction of a second VLT bill in less than a month is a positive sign for VLT proponents. If either bill is to survive, it likely won’t be done without heavy compromise and amendment, so neither bill is set in stone. The House Gaming Oversight continues to be very active on this issue and others – a hearing was held last week on this issue and a hearing scheduled next week on Internet gaming.

Stay tuned here as we track legislative progress on these gaming-related measures.

Constitutional Amendments for Vegas-Style Gaming get Traction in Georgia and Tennessee this Week

Some movement this week in Georgia and Tennessee on proposed constitutional amendments to authorize full casino gaming.  We break it down for you here:

HR 807 in Georgia

On Wednesday, Representative Ron Stephens (R-Savannah) introduced HR 807, a House Resolution proposing an amendment to the Georgia Constitution to permit the General Assembly to authorize through legislation up to six casinos in the state.

The amendment would require a local public referendum approving the resort facilities. Additionally, the resort facilities would be spread throughout the state in five distinct licensing regions. Two license may be permitted in one region (Atlanta) with a “primary casino gaming license” and a “secondary casino license.”

The secondary license would be limited to 2,000 total gaming positions while primary licenses would have no restriction on total gaming positions.

State revenue derived from gaming will go to fund educational programs, support operational expenses associated with regulation of the casinos, to support problem gambling initiatives and to host municipalities of the casinos.

Rep. Stephens simultaneously filed HB 677, the proposed 127-page gaming legislation to be implemented upon approval of the constitutional amendment. HB 677 outlines the capital investment requirements for the “primary casino gaming licenses” in the various regions: $1 billion in Region One (Atlanta) and $200 million in Regions 2 through 5. License fees are proposed at $25 million for the primary license in Region One, $10 million for the secondary license in Region One and $10 million for the primary licenses in Regions 2 through 5. The facilities would be subject to a 12% tax on gross gaming revenue.

HJR 87 in Tennessee

The Tennessee State Government Subcommittee received House Joint Resolution 87 this week. This constitutional amendment would permit the Legislature to authorize casino gaming in Tennessee. Unlike the Georgia proposal, HJR 87 does not limit the Legislature in the number of casinos it can authorize.

HJR 87 would require state revenue derived from gaming to be allocated to K-12 education or problem gaming programs, as well as to administer and regulate gaming operations in the state.

HJR 87 was before the State Government Subcommittee on Wednesday and was deferred to a summer study.

We’ll keep you updated here if there is any movement on these bills.

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.