Interim Regulatory Guidelines Preclude Gaming Businesses from Receiving Support Under the CARES Act Paycheck Protection Program

Much of the U.S. casino industry is currently ineligible to benefit from the Paycheck Protection Program portion of the newly enacted Coronavirus Aid, Relief and Economic Security Act (CARES Act). As articulated by Congress, under the CARES Act, the Paycheck Protection Program provides loans to any small business, nonprofit organization, veterans’ organization, and/or tribal business as long as the business has less than 500 employees. The Paycheck Protection Program is one of several tools to provide much needed support for small businesses and their employees experiencing economic distress caused by the COVID-19 crisis.

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

Massachusetts Sports Wagering Bill Expected to Be Approved by July

From the spate of competing sports betting bills filed since 2019, House Bill 4559 has emerged as the frontrunner and is poised for passage. On March 12, 2020, the Joint Committee on Economic Development and Emerging Technologies submitted H.4559, as amended, to the House Ways and Means Committee with its recommendation for approval. Massachusetts Governor Charlie Baker has expressly supported the authorization of sports betting, which now is expected to pass during the current legislative session.

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

Virginia General Assembly Passes Expansive Gambling Legislation

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.

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

Virginia Legislature Passes Bills to Expand Gambling in the Commonwealth

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.

View the full Alert on the Duane Morris LLP website.

States Shutting Casinos Down to Combat COVID-19

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.

 

 

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 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?”

Colorado Voters Cover the Spread and Approve Sports Betting Bill

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.

FinCEN Director Addresses Gaming Industry

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 Haggerty Named to South Jersey Biz 20 Under 40 Young Professionals List

Congratulations to Samantha Haggerty on being named to the South Jersey Biz 20 Under 40 Young Professionals List – 20 Young Minds that Are Changing the Way We Do Business.

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.