Court Issues TRO Against California Tribe’s Online Bingo Efforts

Following up on our coverage here, on December 12 the US District Court for the Southern District of California issued a temporary restraining order against the IIpay Nation of Santa Ysabel’s internet bingo system.  The Tribe’s system sought to offer online bingo to customers located off of tribal lands.  Both the State of California and the DOJ have sued.  California has moved for an injunction, and it was only California’s request that the Court has acted on. California argued that the Tribe’s online bingo platform violates both the tribal-state compact and UIGEA.

The Court found that California has a likelihood of success on the merits of both of these claims.  As to the tribal-state compact claim, the Court analyzed whether the online bingo was considered Class II or Class III gaming under the Indian Gaming Regulatory Act.  IGRA defines bingo as a Class II game, and Class II games are regulated by the National Indian Gaming Commission and can be operated by a tribe without a tribal-state compact.  However, other gaming is Class III gaming and is allowed only under compact. The Tribe argued that its online bingo was a Class II game – bingo – using a technological aid.  The court noted that there is an analytical distinction between a technological aid for a Class II game or an “electronic facsimile” of a game – which would make the game a Class III game.  The Court rejected the tribe’s argument that online bingo constitutes a technological aid for a Class II game, instead concluding that the game being offered by the Tribe is a Class III game, which is not permitted by compact.

The Court concluded that although the breach of compact claim was enough to demonstrate that the state had a likelihood of success on the merits, it would still analyze UIGEA.  The Court noted that UIGEA requires consideration of the law both where a bet is made and where it was received.   The Court concluded that Indian gaming is permitted only on Indian lands, and therefore, reaching outside Indian lands would violate UIGEA.

The Court therefore enjoined the Tribe from offering any gambling game to anyone over the internet who is not present on the Tribe’s lands.  The Court further ordered the parties to confer as to expedited briefing as to whether a full preliminary injunction should be granted.

DOJ Seeks UIGEA Injunction Against California Indian Tribe

In early November 2014, the Iipay Nation of Santa Ysabel, an Indian tribe in California, began offering internet bingo over a website to patrons age 18 and older, regardless of whether they were located on tribal lands.  The State of California sued, claiming that the authority to offer online bingo off of tribal lands was not within the scope of the compact between the tribe and the state, was not permitted under California law, and violated UIGEA.  The tribe has stated its intention to expand beyond bingo and into poker.   The tribe has justified its activities by stating that it is authorized by IGRA to offer and regulate Class II gaming (poker and bingo) from its tribe.

Today, the Department of Justice filed its own lawsuit against the tribe, alleging that the tribe is violating UIGEA and seeking an injunction.  The DOJ argues in its complaint that the tribe is necessarily “engaged in the business of betting or wagering,” which is a UIGEA predicate.  As a result, the DOJ argues, when someone places a wager from outside tribal lands, the tribe is participating in “unlawful Internet gambling” as defined in UIGEA.  The DOJ argues that lotteries and bingo games are prohibited by California law unless authorized for charitable purposes, and that the bingo offered by the tribe is not a bingo game authorized for charitable purposes.  Accordingly, according to the DOJ, because the tribe’s gaming activities are not authorized by law, any gaming activity that crosses tribal lines violates UIGEA.

Because UIGEA relates primarily to payment processing, the DOJ seeks an injunction prohibiting the tribe from accepting any credit, EFTs, checks, or proceeds of other financial transactions to be used in any online bingo account by any patron.

This matter could ultimately be consolidated with the State of California’s lawsuit.  That case is set for a hearing on California’s motion for a temporary restraining order today (12/4) at 2:00pm Pacific.

Series Of Bills Introduced Regarding AC’s Future

New Jersey’s political and business leaders have been engaged in vigorous discussion lately about the future of New Jersey’s gaming industry and Atlantic City in particular.  Yesterday, New Jersey Senate President Stephen Sweeney introduced several bills as part of these ongoing efforts to address the transitions in Atlantic City and New Jersey’s gaming industry.  I’ve summarized each of them below.

S2572 – Major Changes to Casino Property Taxes

Atlantic City’s casinos pay the lion’s share of property taxes, and those property taxes are calculated based on the assessed value of the property.  Over the last several years, many casinos have successfully appealed the assessed value of their properties, based on the downturn in Atlantic City’s gaming market.  As a result, the amount of tax dollars paid to the City of Atlantic City (which then must distribute a share to the School District and Atlantic County) has declined.

S2572 would dramatically change the property tax structure for Atlantic City casinos.  First, the bill provides that every casino property in Atlantic City is exempt from traditional property taxes.  Instead, the casinos will be organized into the Casino Operator’s PILOT Council (PILOT standing for Payment In Lieu Of Taxes).  The members of the Council will agree to make a PILOT payment to the City of $120 million in 2015, and adjusted for inflation thereafter.  However, if annual gross gaming revenue is between $2.6 billion and $3 billion, the PILOT increases to $130 million; $150 million if revenue is between $3 billion and $3.4 billion; and $165 million if revenue is between $3.4 billion and $3.8 billion.  If revenue falls below $2.2 billion, the amount will be proportionally decreased.

Each casino’s share of the payment is to be calculated by a formula that takes into account, in equal parts, (a) the amount of land in acres owned by the casino; (b) the number of hotel rooms and (c) the property’s gross gaming revenue.  For 2015 and 2016 only the casinos will be obligated to pay an additional $30 million per year.  If new casinos open or existing casinos close, the formula will be adjusted to reflect that.

S2573 – Mandatory Health Benefits for Casino Employees

S2573 is a short bill requiring that a casino licensee submit proof to the Division of Gaming Enforcement that “all agreements it has entered into with each majority representative of its employees for collective bargaining purposes provide for suitable health care benefits and suitable retirement benefits for all full-time employees covered by such agreements.”

A casino that fails to do so would be subject to license revocation.

S2574 – Aid to Schools

S2574 would create a new form of state aid called Commercial Value Stabilization Aid.  This aid would be made available to the Atlantic City school district.  If the Commissioner of Education determines based on a needs assessment that the aid is warranted, then the Commissioner can authorize state aid to defer the school portion of the municipal tax levy.  This aid would only be available until such time as assessed values in Atlantic City return to the levels they were at in 2008.

S2575 – Reallocation of Investment Alternative Tax

In addition to an 8% gross revenue tax, Atlantic City casinos pay 1.25% of gross gaming revenue to the Casino Reinvestment Development Authority (CRDA).  Until 2011, the funds collected by CRDA were used to invest in various projects around the state.  Since that time, the funds are to be used exclusively to fund projects in Atlantic City.  This bill would reallocate all CRDA funds paid by casinos to the City of Atlantic City for the next 15 years and would require that the City use those funds exclusively to pay down its municipal debt.

S2576 – Elimination of the Atlantic City Alliance

The Atlantic City Alliance is a non-profit corporation funded by the casinos to serve as a public-private partnership to market Atlantic City.  This bill would essentially eliminate the Atlantic City Alliance.

It remains to be seen whether any of these bills will pass and what other ideas may become part of the discussion.  Each bill would have to pass both the Assembly and the Senate by the end of the 2015 legislative year, and be signed by Governor Christie, in order to become law.

 

Global Gaming Business Emerging Leader: Eric Frank

Eric Frank in Cherry Hill is featured in the Global Gaming Business Magazine as being an emerging leader. Frank has also been highlighted in South Jersey Biz magazine’s list of “Best Attorneys in Business” in the gaming industry and was selected as one of the “New Leaders” of the New Jersey Bar.

To read the full article, please visit the Global Gaming Business Magazine website.

NJ Sports Betting Enjoined – Court Finds PASPA Preempts State Law

Although commenting that “the present case is not nearly as clear as the Leagues or the defendants assert,” US District Judge Michael Shipp granted summary judgment in favor of the professional sports leagues and enjoined New Jersey from implementing sports betting pursuant to the legislation it enacted in September 2014.  It is widely expected that this case is again headed to the US Court of Appeals for the Third Circuit.

Last time around, the question hinged on whether the Professional and Amateur Sports Protection Act (“PASPA”) was constitutional.  This time, however, Judge Shipp’s opinion focuses almost entirely on “preemption” – the question of whether a federal statute precludes a state from legislating or regulating contrary to a federal statute. 

The Court rejected New Jersey’s argument that the Third Circuit’s opinion in NCAA v. Christie allows the state to partially repeal its prohibition on sports betting.  Instead, the Court held that the Third Circuit gave New Jersey two (and only two) options:  leave its ban on sports betting in place or repeal it entirely – not a partial repeal as New Jersey has done.  The Court dismisses New Jersey’s reading of the Third Circuit’s opinion by stating that “although some portion of the court’s opinion, read in isolation, may suggest a contrary position,” the opinion as a whole stands for the proposition that states only have two options.

The Court looked to the legislative intent behind PASPA, holding that Congress intended to ban sports wagering authorized pursuant to a state scheme.  The Court conclued that “PASPA preempts the type of partial repeal New Jersey is attempting to accomplish in the 2014 Law, by allowing some, but not all, types of sports wagering in New Jersey, thus creating a label of legitimacy for sports wagering pursuant to a state scheme.”  The Court hold that any other option other than a full repeal of a sports wagering ban or a full ban would leave the states “too much room” to circumvent the intent of Congress.  The Court held that putting age restrictions on the repeal, for example, puts too much of a state imprimatur on sports betting and thus the state’s statute is preempted.

The matter is ripe for Third Circuit review, as that Court can then decide whose interpretation of its prior opinion – the Leagues or the State’s – is correct.

 

UPDATE: Pennsylvania Governor Signs Into Law Measure to Prohibit Sale of Internet Instant Games by State Lottery

Pennsylvania Governor Tom Corbett has signed HB 2110 into law.  The law prohibits the State Lottery from offering “Internet instant games” or Keno unless the Legislature provides the go-ahead.

Additionally, the law now changes the the apportioned revenue for property tax relief and reduced fare transit service for the elderly.  The percentage goes from 27% to 25%. 

I previously blogged about this bill here and here.

Duane Morris’ Eric Frank Featured in Class of 40 Under 40

Duane Morris gaming attorney Eric Frank of the firm’s Cherry Hill office was feautured in Global Gaming Business Magazine under the Class of 40 under 40 for 2015 as number 37.

The “40 under 40″ list was made by the Global Gaming Business Editorial Advisory Board and the Innovation Group and honors top leaders in the Gaming industry.

UPDATE: Pennsylvania House Approves Measure to Prohibit Sale of Internet Instant Games by State Lottery

This entry is an update to a story I previously blogged about here. Yesterday the Pennsylvania House approved an amended bill that would prevent the State Lottery from offering “Internet instant games” without prior approval from the state legislature.

The language regarding “Internet instant games” was first added by the Senate two weeks ago. The bill, as originally passed by the House back in April was limited in scope to changes in the apportionment of revenue lottery sales.

The legislation is now before Governor Corbett.

No More Bets? Leagues Seek Restraining Order Against NJ Sports Betting

In light of Monmouth Park’s stated intention to accept sports wagers beginning October 26, today the professional sports leagues filed an application for a temporary restraining order and preliminary injunction stopping New Jersey from implementing the sports wagering law signed on October 16.

The Leagues’ brief accuses New Jersey of “attempting to devise a way” to get around PASPA’s prohibitions on the regulation of sports betting. The brief reiterates the argument set forth in the Complaint that the sports betting law is an authorization, not a repeal. The Leagues argue that New Jersey has not actually repealed anything – it has “exempted from these laws two narrow groups,” “in a clear effort to authorize and promote sports wagering that is authorized and regulated by the state.”

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Deja Vu All Over Again – Sports Leagues Sue To Stop NJ Sports Betting

In the words of well respected sports figure Yogi Berra, “it’s like deja vu all over again.”

In the wake of Friday’s enactment of a new sports wagering law in New Jersey, today the NCAA, NBA, NFL, NHL, and MLB filed a Complaint for Declaratory and Injunctive Relief against New Jersey seeking to enjoin the implementation of the new bill approved by the Governor on October 17. We covered that here.

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