Legalized casino gambling and sports wagering are approaching the finish line in Virginia following the recent passage of two bills by the Virginia General Assembly. Senate Bill 36 and House Bill 896, both awaiting the signature of Virginia Governor Ralph Northam, would permit five land-based casinos, online sports betting and up to 2,000 additional historical horse racing machines.
In the midst of the COVID-19 pandemic, casinos and racetracks have become the next domino to fall. Ohio, Indiana, Massachusetts, Illinois, Rhode Island, and parts of Pennsylvania have been required to shut down their facilities or keep the total number of individuals present under a designated limit. These announcements came late Friday afternoon after many of the states enforced limiting the number of public gatherings.
Ohio’s four casinos and seven racetracks have been ordered to shut down or limit the total number of people in their buildings, including employees, to under 100. The order came from Ohio Governor Mike DeWine as part of the state’s effort to contain the spread of COVID-19. The Indiana Gaming Board has suspended all casino operations for 14 days beginning Monday, March 16. The Massachusetts Gaming Commission also has voted to shut down casino operations. Massachusetts will reevaluate the decision in two weeks, but all gaming floors are set to be closed to patrons at 5:59 a.m. Sunday. Like Massachusetts, Illinois’ ten casinos will close for at least 14 days, and Rhode Island’s two casinos are being required to close for at least a week. Lastly, four of Pennsylvania’s twelve casinos have closed temporarily for 14 days.
States such as New Jersey have not yet shut down, and according to New Jersey’s Governor Phil Murphy, there is no plan for New Jersey casinos to shut down. Also, in Las Vegas, Wynn Resorts and MGM Resorts International are temporarily closing to stop the spread of the virus.
Although casinos are closing, online casino gaming will not be affected. Moreover, online casino gaming can potentially grow during the 14 days shutdown. In states like New Jersey, where there is no shutdown, many people may stay away from casinos and decide to play online.
Sports wagering has also been affected by COVID-19, and is essentially shut down nationwide with no sports available to bet on. This comes at a time where states such as Michigan, Indiana, and Illinois have just begun to accept sports wagers.
The casinos that are facing shut down are also taking the initiative to provide for their workers. Penn National Gaming and Wynn Resorts have stated it plans to continue to pay its employees full wages and benefits while the suspension period is in place. Penn National has also stated it plans to continue its deep cleaning efforts to prepare to welcome back its customers when the pandemic ends.
We will continue to follow this situation closely and provide any additional updates.
Updated on 3/16/2020.
In two decisions issued in the last few months, the Commonwealth Court of Pennsylvania has established conclusively that the state’s Gaming Act is inapplicable to so-called “skill-based” video game machines that are ubiquitous in taverns, restaurants, and other liquor-licensed establishments in the Commonwealth. After a comprehensive discussion of the rules of statutory construction and the Gaming Act’s legislative history, the Court reasoned that the Gaming Act applies only to legal gambling devices operated in licensed establishments, and not to unlicensed or illegal slot machines, which remain governed by the Crimes Code. Therefore, the Court also held, the games and those who manufacture, distribute and operate them are not subject to regulation by the Pennsylvania Gaming Control Board.
In a January 22, 2020 article, the Delco Times declared the decision a “decisive win” for the game’s proponents. But was it? Continue reading PA Court Rules that Pennsylvania Skill Games are Neither Governed by the Gaming Act nor Regulated by the Pennsylvania Gaming Control Board. So What?
In a decision released today by the Supreme Court, Appellate Division (New York’s intermediate appellate court) in White v. Cuomo, the Appellate Division concluded that New York’s daily fantasy sports authorization law is unconstitutional because DFS meets the definition of gambling under New York law. As a result, according to the Court, a constitutional amendment would be required in order to authorize a form of gambling. The 4-1 decision will in all likelihood be appealed to New York’s Court of Appeals, and it is likely that the decision will be stayed and have no immediate effect. The long range consequences for DFS in New York, though, are far less certain.
Colorado House Bill 1327, titled “Proposition DD: Legalization and Taxation of Sports Betting” was put to voters in a ballot measure and was narrowly approved on Tuesday, November 5. Colorado Governor, Jared Polis, signed Proposition DD into law in May 2019 and Colorado voters decided its final, successful outcome making Colorado the 19th state to legalize sports betting. The law will permit land-based sports betting at Colorado’s 33 casinos, as well as state-wide mobile betting. Notably, Proposition DD does not permit proposition bets for college sports.
The Colorado Division of Gaming is charged with regulating the new market which will allow three types of licenses to be submitted for approval. Each casino will be limited to a single online/mobile platform or “skin.” A master license will be issued to an operator that holds a retail gaming license in the state prior to May 1, 2020, or has obtained one through the purchase of an ownership interest in a casino that was in operation prior to May 1, 2020. A sports betting operator license or an internet license sport betting operator license will be allowed to contract with a master licensee to operate sports betting in person or online. The bill sets the maximum license fee at $125,000 and each license must be renewed every two years.
Proposition DD’s passing will allow legal bets to be placed as early as May, 2020 and will tax a casino’s net sports-betting proceeds at a 10% rate. This tax revenue will be used to pay for regulating sports betting in Colorado, a hold harmless fund, gambling addiction services, water projections, and other obligations. According to Colorado’s fiscal impact statement, lawmakers expect around $10 million in tax revenue in the first year based on the expectation that Colorado sports betting licensees would take between $1.3 billion to $1.5 billion in bets. We will continue to monitor this topic and provide updates on this legislation.
On September 24, 2019, the Third Circuit Court of Appeals found in favor of the New Jersey Thoroughbred Horsemen’s Association (“NJTHA”) and ruled that the NJTHA is entitled to recover the bond it posted as the result of a temporary restraining order (“TRO”) and subsequent preliminary injunction against the NJTHA in the 2014 case, National Collegiate Athletic Association v. Christie. The issue of recovering posted bond was a matter of first impression in the Third Circuit. The majority opinion, written by the Honorable Marjorie Rendell, concluded “wrongfully enjoined” under Federal Rule of Civil Procedure 65(c) can only be determined after a final judgment on the merits. Moreover, the court found a party is “wrongfully enjoined” when the final judgment concludes that party had a right all along to do what it was enjoined from doing. Also, in accordance with the majority of other circuits, the court found there is a rebuttable presumption that a wrongfully enjoined party is entitled to recover damages up to the bond amount.
On August 13, Financial Crimes Enforcement Network (“FinCEN”) Director Kenneth Blanco addressed the 12th Annual Las Vegas Anti-Money Laundering Conference and provided insights on his agency’s expectations for the ever-evolving gaming industry.
The following are some key takeaways:
Cost Cutting Poses National Security Threat. Director Blanco stressed that reports of compliance budget cuts by casinos looking to trim costs and retain gamblers is seen by FinCEN as a national security issue and not something the agency takes lightly. Further, despite FinCEN not publicizing any enforcement actions against a casino during the last year, it is continually looking at compliance across all financial institutions and will not hesitate to act if it identifies violations of the Bank Secrecy Act (“BSA”). It is also important to note that not all enforcement actions are public—FinCEN often closes cases with warning letters sent to financial institutions or refers cases to our delegated examiners for additional review.
Casino Industry Trends. In terms of suspicious activity being reported in 2019, Minimal Gaming with Large Transactions is the highest reported activity with more than 5,000 Suspicious Activity Reports (“SAR”) reflecting this activity. Reports of Chip Walking have dramatically increased since this was added to the SAR form in the summer of 2018. Chip Walking is now the second most selected suspicious activity on the SAR form, with more than 4,400 reports being cited this year to date.
The other frequently cited suspicious activities include:
- Transactions below CTR Threshold
- Unknown Source of Chips
- Two or More Individuals Working Together
- Alteration or Cancelation of Transactions to Avoid CTR Requirement
- Suspicion Concerns on the Source of Funds
Additional analysis of trends reported by casinos checking the “other” box on the SAR form includes reports of suspicious activity involving sports betting, abandoned jackpot, and bill stuffing.
Sports Betting and Mobile Gaming. Casinos and card clubs must integrate sports betting and mobile gaming products into their existing AML programs. FinCEN expects casinos and card clubs to collect cyber-related indicators through their mobile gaming or betting applications in order to monitor and report potentially suspicious activity. Examples of such cyber-indicators include: source and destination information, file information, subject user names, system modifications, and account information.
Relevance of Convertible Virtual Currency (CVC) Advisory to Casinos. There are generally two areas where CVC will intersect with casinos and card clubs: so-called CVC casinos on the internet, and physical casinos and card clubs that accept CVC for gaming.
As FinCEN’s CVC guidance points out, internet gaming sites that operate online without licensure from a state or tribal gaming regulator are not “casinos” for purposes of regulations implementing the BSA. However, they are likely operating as money transmitters. Money transmitters have their own obligations under the BSA and its implementing regulations, which includes a formal registration with FinCEN.
Casinos and card clubs that accept CVC from customers either on location or through mobile applications, need to ensure that CVCs are accounted for in policies, procedures, internal controls and risk assessments. This includes developing processes for reviewing and conducting due diligence on transactions in CVC, for conducting blockchain analytics to determine the source of the CVC, and incorporating CVC-related indicators into SAR filings.
Culture of Compliance. Critical to fostering a culture of compliance is utilizing enterprise-wide information and ensuring such information gets into the hands of compliance personnel. For example, information developed by casinos for business and marketing, as wells as information developed by casino security departments for combating and preventing fraud should be used by casino compliance personnel to monitor customers for suspicious activity. Similarly, a casino’s legal department should alert compliance personnel when a subpoena is received as it could trigger reviews of customer risk ratings and account activity. Moreover, larger casinos may have multiple affiliated casinos that could benefit from the sharing of information across the organization.
Innovation and BSA Value. In January 2019, FinCEN began an ambitious project to catalogue the value of BSA reporting across the entire value chain of its creation and use. The project will result in a comprehensive and quantitative understanding of the broad value of BSA reporting and other BSA information to all types of consumers of that information.
As an example, given the current state of the opioid epidemic, something a minor as the mobile phone number of a suspect from a casino SAR could be vitally important to a DEA agent since the suspect would provide a real phone number to ensure he is called when his winnings are wired out to a bank account. Using that mobile number, the agent can build out a communication tree and identify new individuals, entities, addresses or accounts. A DEA agent can also use this information to seek legal approval to wiretap or track the movement of the phone, identify potential informants, and build out a network of associates.
Samantha L. Haggerty practices in the areas of litigation and gaming law. Ms. Haggerty has represented gaming industry clients in the licensing and regulatory process, including online gaming and sports betting clients. She has assisted with internal investigations of gaming companies and advising clients with respect to compliance and control enhancements. She contributes regularly to the Duane Morris LLP Gaming Law Blog and serves as secretary to the New Jersey State Bar Association’s Casino Law Section.
On June 3, 2019, Judge Paul Barbadoro for the District of New Hampshire concluded in a 63-page Memorandum Opinion that the purview of the Wire Act is limited to sports wagering. The effect of the Court’s opinion, however, may be limited in states other than New Hampshire.
After determining that the plaintiffs in the case, the New Hampshire Lottery Commission and NeoPollard Interactive LLC, new Hampshire’s iLottery vendor, have standing to challenge the DOJ’s 2018 Wire Act Opinion because they have established a threat of imminent injury, the Court addresses whether the Wire Act applies beyond sports wagering.