On May 29, 2019, the Pennsylvania Gaming Control Board approved a Change of Control petition for the sale of Sands Bethlehem Casino Resort. Two days later, on May 31, 2019, Wind Creek Hospitality officially acquired the casino from Las Vegas Sands Corporation for $1.3 billion, as the transaction closed on Friday. The casino resort facility, which is located in the Lehigh Valley of Pennsylvania, will operate as Wind Creek Bethlehem, and will include amenities such as a 282-room AAA Four Diamond hotel, a 183,000 square foot casino floor featuring slots, table games, and electronic table games, numerous food and beverage outlets, a retail mail, and a multi-purpose event center.
The closing of the transaction comes after approximately fourteen months of regulatory review and, most recently, the PGCB’s approval of the transaction. Duane Morris represented Las Vegas Sands in the transaction, providing gaming regulatory and real estate guidance and assistance in other areas, including serving as co-counsel before the Board for Wind Creek Hospitality. Duane Morris attorneys who assisted on this matter include J. Scott Kramer, Greg Duffy, Frank DiGiacomo, Chris Soriano, and Adam Berger.
On May 29, 2019, at a special hearing convened for this purpose, the Pennsylvania Gaming Control Board approved a Change of Control Petition authorizing the transfer of the entirety of Las Vegas Sands Corporation’s interest in Sands Bethworks Gaming LLC’s to Wind Creek Hospitality, an instrumentality of the Poarch Band of Creek Indians. The Board’s Order, beyond approving the change in control, allows the casino facility to change its name to Wind Creek Bethlehem, reflecting the casino’s new ownership.
Subject to the Board’s conditions, Wind Creek Hospitality is able to acquire all of the interest in Sands, including its licenses, which include a Category 2 License, a Table Games Certificate, and Interactive Gaming Certificates. The Board’s decision comes after over a year of regulatory review.
Scott Kramer, Duane Morris, appeared for joint petitioner, Sands Bethworks Gaming LLC. Also, Duane Morris served as co-counsel before the Board for Wind Creek Hospitality.
Last week, the United States District Court for the Eastern District of Pennsylvania, Judge Jeffrey Schmehl, granted the Motions to Dismiss of Sands Bethlehem Casino Resort and other Pennsylvania casinos, which were alleged to have engaged in a retaliatory boycott impacting a mixed martial arts (MMA) promoter’s events. Sands Bethlehem was alleged to have engaged in a boycott of plaintiff’s events as a retaliation for a prior lawsuit promoter Ryan Kerwin filed against Valley Forge Casino and Harrah’s in Chester, Pennsylvania.
Sands, Parx and Sugarhouse Casinos and their respective event directors faced allegations that certain emails cited in the Complaint established a conspiracy. The plaintiff alleged that the defendants’ “horizontal group boycott” would put the plaintiff promoter out-of-business. The Court found the emails, at best, demonstrated nothing more than unilateral action by the individual casinos. There was no “plus factor” in the complaint’s allegation that would have shown a motive, actions that were against the individual casinos’ economic interests or, evidence that implied a traditional conspiracy. In the Sands instance, it was alleged that Sands actually emailed with plaintiff offering to contract for MMA events but plaintiff would not agree to Sands’ “inflated terms”.
Judge Schmehl found that nowhere in the Amended Complaint did there appear evidence of “a conspiracy that supports an inference of collusion.” The Court’s holding that plaintiff failed to plead an unlawful agreement precluded an analysis of the other elements of the Section I Sherman Act claim.
The Court also dismissed claims that the defendant casinos (and Harrah’s and Valley Forge) were collective monopolists by keeping essential facilities from the MMA promoter. The plaintiff’s own pleadings that MMA events were staged elsewhere in Pennsylvania, other than the casinos’ event centers, convinced the Court that defendants’ properties were not “essential facilities”.
Sands was represented by Duane Morris lawyers – Manly Parks and Sarah O’Laughlin Kulik.
On January 14, 2019, the U.S. Department of Justice published a legal opinion that may restrict online gambling. The opinion, dated November 2, 2018, (although only now published) reconsidered the DOJ’s 2011 opinion that declared the Wire Act (18 U.S.C. § 1084) only applied to sports gambling. After the release of the 2011 opinion, several states, including New Jersey, Delaware and Pennsylvania, launched or moved forward with intrastate online lottery, casino gaming and poker. The new opinion, however, somewhat clouds the landscape regarding these operations. Online gaming businesses would be well advised to quickly determine whether their operations comply with the DOJ’s new reading.
The reconsideration stems from one phrase in the Wire Act: “on any sporting event or contest.” In 2011, the DOJ opined that the Wire Act was ambiguous and “that the more logical result” was that the phrase “on any sporting event or contest” applied to the entirety of the Wire Act, thereby prohibiting only the transmission of “bets or wagers” or “information assisting in the placing of bets or wagers” across state lines, if the bet or wager were on a sporting event. This logic follows in part from the Act’s legislative history, which reveals that Congress’ overriding goal in passing the Wire Act was to stop the use of wire communications by organized crime for illegal sports gambling. In 2018, the Supreme Court of the United States, in Murphy v. Nat’l Collegiate Athletic Ass’n—a decision that paved the way for states to authorize sports betting, in dicta—noted Congress’ original intent in characterizing a general federal approach to gambling: Operating a gambling business violates federal law only if that conduct is illegal under state or local law.
Read the full Duane Morris Alert.
As a result of the previously reported reimposition of United States nuclear-related sanctions against Iran, on October 11, 2018, the Financial Crimes Enforcement Network (FinCEN) released an Advisory that provides casinos, and other financial institutions, updated guidance for identifying possible Iranian related criminal transactions.
Continue reading Preparing Your Casino For Iran Sanctions Compliance
Just as the growth of fantasy sports, sweepstakes and online poker were curtailed by the reach of gambling laws, the latest trends in the $138 billion video gaming industry are attracting an increasing level of unsolicited attention from gambling regulators across the globe. Much of this attention is focused on “loot boxes”.
Continue reading Loot Boxes: Gaming or Gambling?
Duane Morris’ Adam Berger, an associate in the firm’s Cherry Hill office, is featured in the July 2017 Global Gaming Business Magazine article, “The Art of Watching, Listening and Learning.”
Read Mr. Berger’s profile on the Global Gaming Business Magazine website.
On Monday, three-fifths of each house of the New Jersey legislature passed resolutions that will put a question on the ballot in November asking voters if they want to expand casino gaming outside of Atlantic City. As we previously posted here and here, the North Jersey casino proposal will allow for two casinos to be located at least 72 miles from Atlantic City, in separate counties. The minimum investment required for a North Jersey casino will be $1 billion. Current Atlantic City casino owners will be given an exclusive period of 60 days to submit bids for the two North Jersey casino licenses before bidding is opened up broadly. Current owners of Atlantic City casinos may partner with other investors/developers to submit a bid for a North Jersey casino license.
If New Jersey voters pass the referendum in November, the legislature will then need to adopt enabling legislation. This legislation will provide the details for the bidding process and the tax rate for North Jersey casinos. Atlantic City casinos currently pay an effective tax rate of 9.25% on gross gaming revenue. North Jersey casinos likely will be required to pay a significantly higher rate, perhaps in excess of 50%.
We will provide updates as developments occur.
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.
Last week, a Pennsylvania bill, which would restrict the hours of operation of Pennsylvania casinos, was referred to the House Committee on Gaming Oversight. Specifically, House Bill Number 165 would require casinos in the Commonwealth to close between the hours of 2 a.m. and 6 a.m. In a memorandum accompanying the legislation, State Representative Will Tallman, a co-sponsor of the bill, suggested that closing the casinos for a couple hours each day would reduce the prevalence of problem gambling.
If this legislation were to pass, Pennsylvania would be an outlier in the region as casinos in neighboring states – including New Jersey, Delaware, Ohio and Maryland – maintain 24 hour gaming operations. Additionally, New York recently selected three upstate applicants to develop full-scale resort casino facilities, which are expected to open in the next couple years. Once open, each of these facilities will offer 24-hour gaming to patrons.
It will be interesting to see if the Pennsylvania House committee charged with overseeing the Commonwealth’s gaming industry will support this legislation – and add another hurdle to a casino industry that is already struggling to keep gaming dollars away from rival gaming markets – or if the committee will determine that the existing regulatory safeguards to prevent problem gambling are sufficient. Stay tuned for updates on this and other legislation affecting the Pennsylvania gaming industry.