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.

Bill Calling for Special Lottery for Funds for Repayment of Bond Indebtedness for Mass Transit Introduced in Pennsylvania…Again

A new bill would authorize a minimum of 12 special purpose lotteries in Pennsylvania “for the purpose of providing a source of funds for the repayment of indebtedness on bonds issued for the development of mass transit as economic development projects” in the Commonwealth.

Under HB 799, introduced yesterday and referred to the Pennsylvania House Gaming Oversight Committee, the funds from the special lotteries would be placed in a special fund known as the Economic Development Fund for Mass Transit. The special lotteries would be earmarked for specific projects and advertising and tickets associated with each special lottery would identify which project that lottery benefits.

This is not the first time this bill has been introduced…or the second. The bill’s sponsor, Representative Harry Readshaw, is making his third attempt with the bill. In each of the previous two sessions, Representative Readshaw’s special lottery bill has died in committee. Could budget woes make this third time a charm? We’ll keep you updated here if this bill moves. Stay tuned.

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.

 

UPDATE: Pennsylvania Internet Gaming

  • This is an update to the Duane Morris Client Alert issued here.

A second poker-only bill (HB 695) was introduced and referred to the House Gaming Oversight Committee for review.  The two bills contain many similar provisions but there are two key distinctions in HB 695:

(1)  Unlike the previous bill (HB 649), HB 695 is a poker-only bill authorizing “any interactive poker game approved” by the Pennsylvania Gaming Control Board.

(2)  HB 695 contains a “bad actor” provision.  The bill calls for a presumption of unsuitability for any licensee or significant vendor who has:

(1) At any time, either directly or through a third party whom it controlled or owned in whole or in significant part, knowingly or willfully: (i) accepted or made available wagers on interactive games using the Internet from persons located in the United States after December 31, 2006, unless licensed by a Federal or State authority to engage in such activity; or (ii) facilitated or otherwise provided services with respect to wagers or interactive games using the Internet involving persons located in the United States for a person described in subparagraph (i), if such activities or services would cause such person to be considered a significant vendor if those activities or services were provided with respect to interactive games pursuant to this chapter, and if such person acted with knowledge of the fact that such wagers or interactive games involved persons located in the United States.

(2) Purchased or acquired, directly or indirectly, in whole or in significant part, a third party described in paragraph (1) or will use that third party or a covered asset in connection with interactive gaming.

“Covered asset” is defined under the bill as

Any of the following categories of assets, if specifically designed for use and knowingly and willfully used in connection with wagers or gambling games, using the Internet and involving customers located in the United States after December 31, 2006, unless licensed by a Federal or State authority to engage in such activity: (1) any trademark, trade name, service mark or similar intellectual property that is used to identify any aspect of the Internet website or the operator offering the wagers or interactive games to its customers; (2) any database or customer list of individuals residing in the United States who placed wagers or participated in interactive games with or through an Internet website or operator not licensed by a Federal or State authority to engage in such activity; (3) any derivative of a database or customer list described in paragraph (2); or (4) software, including any derivative, update or customization of such software, or hardware relating to the management, administration, development, testing or control of the Internet website, the interactive games or wagers offered through the website or the operator.

Pennsylvania House Gaming Oversight Committee Introduces Bill That Would Allow Existing Casinos to Offer Internet Gaming

On February 25, 2015, John Payne, Chairman of the Pennsylvania House Gaming Oversight Committee, introduced a bill that would allow existing Pennsylvania casinos to offer Internet gaming to patrons in Pennsylvania. The Pennsylvania Gaming Control Board (PGCB), which currently regulates casino gaming in the Commonwealth, would be responsible for licensing and regulating Internet gaming, as well. Under the bill, only existing casino licenses, or their affiliates, will be eligible to offer poker and other casino style games over the Internet. The proposed legislation also calls for the licensing of “significant vendors,” which would include operators of interactive gaming systems on behalf of the existing licensees. Importantly, the proposed legislation does not include a “bad actor” provision that would bar individuals or entities previously associated with illegal Internet gaming activities from being licensed by the PGCB. However, applicants would still be required to satisfy Pennsylvania’s suitability requirements, and it remains to be seen what view the PGCB will take of applicants who may have previously engaged in unlawful Internet gaming activities.

Subject to the limits under federal law, the bill limits participation in Internet gaming to those physically present in Pennsylvania, or from states with which Pennsylvania negotiates an Internet gaming agreement. The bill contemplates a rapid implementation cycle by requiring the PGCB to decide a licensing application within 120 days of a proper application being submitted. The PGCB may also grant temporary authorization to any vendor upon the filing of a complete application.

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

Duane Morris Attorney Adam Berger Writes About the P.A. Gaming Industry

Associate Adam Berger in the Cherry Hill office wrote an article for the Philadelphia Business Journal titled “P.A. Gaming Industry at a Crossroads: Lessons from Atlantic City.”

As the song goes, Atlantic City didn’t know what it had until it was gone. In 2006, the city’s casinos brought in more than $5.2 billion in gaming revenue. In 2014, that number was down almost 50 percent, to $2.7 billion, and expected to fall even further in 2015, the first full year of operations following the closures of four casinos – Atlantic Club, Revel, Showboat and Trump Plaza.

Pennsylvania casinos, on the other hand, experienced their highest total gaming revenue of $3.15 billion in 2012. Gaming revenues declined slightly in the Keystone State during each of the next two years, down to just over $3 billion in 2014, but despite the recent declines, Pennsylvania remains the second largest gaming market in the nation, next to Nevada. It is from this point of strength that Pennsylvania needs to recognize what it’s got and not repeat the mistakes of its neighbor to the east.

So how did New Jersey allow its casino market to fall so far? Clearly the loss of New Jersey’s East Coast monopoly on gaming — as a result of the advent of casino gaming in Connecticut, Delaware, Maryland, New York and Pennsylvania — did not help. But this increased competition did not seal Atlantic City’s fate; rather, its fate was sealed during the preceding decades when Atlantic City casino operators failed to improve their properties and make Atlantic City a true and viable destination. Instead of making necessary capital expenditures and adding resort amenities, casino owners upstreamed profits while their properties slowly became outdated. The result was a city full of mostly unexciting casinos that offered little more than the slots-in-box style options found in neighboring states.

To read the full article, please visit the Philadelphia Business Journal website.