David Klein

If Congress Allows Online Poker, So Will Texas

March 12, 2013 by David Klein

In a blog posted in January, we detailed a bill introduced in the Texas State legislature which, if approved, would legalize poker in physical, brick and mortar locations. The bill was careful not to address the more controversial topic of Internet poker, leading many to believe that Internet poker would not be legalized in the State in the near future. This week, however, Texas State Senator Leticia Van de Putte introduced a bill that specifically addresses the issue of online poker in Texas and, if approved, would require Texas to “opt into” a federal Internet poker bill, should one pass. The Texas bill specifies that it would create a law that tracks the approved federal Internet poker bill, verbatim, and give the Texas Lottery the authority to license online poker rooms. Additionally, the bill does not attempt to create any restrictions on what would be allowed under a potential federal law.

It is important to note that the entire Texas bill is prefaced upon Congress passing a national bill to legalize Internet poker, which is no small feat. While new legislation addressing Internet poker is likely to be introduced in the U.S. House of Representatives this Spring, there is no way to predict whether it will be approved. Several attempts to create a federal framework for the legalization of Internet poker have fallen short, including attempts in 2011 and 2012. The hotly contested issue is split between those who believe that a federal Internet poker law will create uniformity and curtail fraud and those who believe that a federal law would encroach on state sovereignty and send the wrong message about a morally ambiguous industry.

The development of federal and state interpretations of Internet gambling remains a significant topic for all gaming attorneys and those interested in Internet poker and gambling in general.

If you are interested in learning more about this topic or pursuing a venture in this area, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

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Iowa and Hawaii Scrap Online Poker Legalization

March 12, 2013 by David Klein

Despite the surge in momentum created by New Jersey passing a law legalizing online poker in late February, two online poker bills have just died in committee this week in the states of Hawaii and Iowa, respectively.

While a similar bill was defeated in the Hawaiian House last March, some lawmakers had hoped that attitudes toward online poker – a potential boon to Hawaii’s tourism industry – had changed. However, there was a bi-partisan lack of support for the most recent bill.

In Iowa, the public announcement in January by the chairman of the Iowa Racing & Gaming Commission that his department was ready to regulate online poker should the legislature enact such a law, led some to believe that the time was right to push a bill through the Iowa legislature. However, although the bill passed two State Senate committees, it was voted down in the third.

While these two outcomes represent setbacks for proponents of legalized online poker, the legislative process in Hawaii, Iowa and in countless other states remains a work in progress. The ongoing legislative process nationwide should be of interest to all gaming attorneys and those interested in Internet poker law in general.

If you are interested in learning more about this topic or pursuing a venture in this area, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

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New FDA Regulations Coming Soon for E-Cigarettes?

March 12, 2013 by David Klein

While electronic cigarettes, or E-cigarettes, have been available for almost a decade, the industry has faced little marketing, labeling or other regulations. According to a Food and Drug Administration (FDA) spokesperson, that may change in April.

In September 2009, the FDA conducted a study of the health effects associated with E-cigarettes and based on its findings, banned E-cigarette imports on the grounds that they were unregulated medical devices. Amid backlash from the E-cigarette industry, the FDA was forced by a federal court to reverse the import restrictions and regulate the devices as tobacco products. Since the court’s ruling, the FDA has faced problems regulating the E-cigarette industry mainly due to the difficulty in classifying the product. For example, if E-cigarettes are not explicitly marketed as a tobacco alternative product, then they’re not required to face the same regulations as nicotine patches or gum. Likewise, some E-cigarettes are advertised to contain 0 milligrams of nicotine and thereby avoid regulations targeted at tobacco and tobacco alternative products.

In the past several months, E-cigarettes have again come under fire for needing more regulation by the FDA, due to a documented increase in the number of users. A study by the Center for Disease Control has found that about 21 percent of adults who smoke tobacco have also used E-cigarettes. On the heels of the CDC study, several organizations, including the American Cancer Society Cancer Action Network, have called for tighter FDA regulations.

In response, the FDA spokesperson has indicated that the agency wants to place E-cigarettes in a new subcategory of tobacco products, which will allow the FDA to apply new regulatory rules. The FDA may issue a new proposal for public commentary as soon as April of this year.

The development of the FDA’s new E-cigarette regulations should be of interest to anyone involved in the E-cigarette industry and those interested in online or digital marketing in general.

If you are interested in learning more about this topic or pursuing a venture in this area, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

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FTC and Text Message Marketers

March 8, 2013 by David Klein

As detailed in this Tuesday’s blog post, the FTC recently filed a lawsuit against SubscriberBASE, All Square and several other defendants for using unsolicited text message marketing services to drive consumers to their websites. It is now clear that in addition to suing the parties operating the websites, the FTC is targeting the third party text message marketers utilized by the websites.

New Lawsuits

In 7 new complaints filed against 19 alleged senders of unsolicited text message spam, the FTC alleges that the defendants sent more than 180 million unwanted text messages to randomly selected consumers, 12% of whom had to pay to receive the texts. The text messages promise consumers free prizes for clicking on the link included within the message. Once the consumer follows the link, they are taken to a website and through an elaborate process in which they are asked to provide personal information or sign up for other services before receiving the promised prize. According to the FTC, because the text message marketers were paid by the website operators based on how many consumers entered their information and failed to disclose the conditions of receiving the prizes, they should be held liable for deceptive advertising practices, along with the website operators. Additionally, the FTC claims that the text message marketers should be held directly liable for the consumers being charged a fixed fee for receiving the text messages.

Same Consequences

The FTC is seeking similar relief to that sought from SubsriberBASE and All Square, namely to rescind any consumer contracts and reimburse their out-of-pocket expenditures; disgorge the defendants of all ill-gotten monies; and recover the FTC’s costs of investigating and bringing the action in Federal Court.

The final outcome of these cases should be of interest to text message marketing companies and those generally interested in the Internet and mobile marketing spaces.

If you are interested in learning more about this topic or pursuing a text message-based advertising campaign, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

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Online Gambling May Soon Be Legal in Illinois

March 7, 2013 by David Klein

If you have been following our blog, you will be familiar with the evolution of laws relating to online gambling in the U.S. and know that Illinois was the first state to operate an online lottery ticket program. It now appears that Illinois may soon take the next step to legalizing Internet poker and other online monetary-based games within its borders.

Yesterday, a bill was introduced and approved by an Illinois Senate Committee which, if fully enacted, would authorize online gambling in many forms and double the number of brick and mortar casinos within the State. According to Sen. Terry Link (D), the sponsoring Senator behind the bill, a full Senate vote could come as soon as this afternoon. However, several Republican senators, including Senate Minority Leader Christine Radogno (R), have voiced their objections to the bill moving so quickly through the Senate Committee and would like more time to review the bill before putting it to a vote.

According to Senator Link, the bill would generate yearly Internet gambling revenues of $150 million and increase the overall revenues of brick and mortar casinos to $1 billion. Except for $10 million allocated to Gamblers Anonymous, the bill specifies that all proceeds from Internet gambling would go towards the State’s pension fund. Likewise, the proceeds from brick and mortar casinos would be used for education, which will be desperately needed after Illinois Governor Pat Quinn’s $400 million education budget cut announcement earlier this week.

While it appears likely that the bill will be passed in some form, Governor Quinn stated that the gambling industry, both Internet-based and brick and mortar, will be heavily regulated with “strong ethical standards [and] comprehensive oversight.”

The development of federal and state interpretations of Internet gambling remains a significant topic for all gaming attorneys and those interested in Internet poker and gambling in general.

If you are interested in learning more about this topic or pursuing a venture in this area, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

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Iowa Set to Legalize Fantasy Sports Gambling?

March 6, 2013 by David Klein

Individuals have been engaging in Internet-based fantasy sports leagues since 2006, when the Federal Government created a specific carve-out for fantasy sports in the Unlawful Internet Gaming Enforcement Act. However, the ability to collect monetary prizes was left to the discretion of the individual states. While the vast majority of states allow residents to collect their monetary prizes from fantasy sports sites, Iowa’s current law, based on a case from 1931 (Parker-Gordon Importing Co. v. Benakis), categorizes all monetary gaming activities based on chance to be illegal. It should be noted that Iowa operates lottery programs and monetary bingo games within the State, both of which are largely based on chance. While fantasy sports are not explicitly cited as illegal, the ambiguity has caused many fantasy sports sites to refrain from paying out winnings to Iowa State residents. This could change in upcoming months.

On February 28, 2013, a bill was introduced in the Iowa House of Representatives, which would allow residents to place wagers and collect up to $500.00 per day from Internet-based fantasy sports sites. Additionally, the bill will not authorize business entities to engage in Internet-based fantasy sports, only individuals.

On Tuesday, the bill was approved by the House subcommittee and advanced to the House State Government Committee. According to the Iowa Legislative Office, the bill is set to take effect on July 1, 2013, if everything goes smoothly.

The final adjudication of this law should be of interest to all gaming attorneys and those interested in sports gambling law in general.

If you are interested in learning more about this topic or pursuing an online fantasy sports gaming venture, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

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Is It Illegal to Have Cash Prizes For Fantasy Sports Contests?

March 5, 2013 by David Klein

The short answer to the question posed in the title is, “it depends on the jurisdiction and the features of the fantasy sports game.”

In terms of federal law, the 2006 Unlawful Internet Gambling Enforcement Act (“UIGEA”) created a specific carve out for fantasy sports games that meet certain criteria. In order to fall within UIGEA’s exception provisions, the fantasy sports game must: (a) have an outcome that reflects the relative knowledge of the participants, but not chance (more on this below); (b) is determined predominantly by accumulated statistical results of multiple athletes participating in multiple real-world sporting events; and (c) offer prizes that are not influenced by the amount of fees paid by, or the number of, participants.

Some state laws, including one recently passed in Maryland, follow UIGEA’s lead in setting up the requisite criteria to determine legality. Other state attorneys general, such as in Florida and Louisiana, have issued specific opinions as to the illegality of fantasy sports contests played for money.

However, in those states where there is no specific legislation authorizing fantasy sports contests played for money, their legality depends on the state’s interpretation of the degree of “chance” vs. “relative knowledge” or “skill” involved in fantasy sports in general, and the games at issue in particular. If a state takes an expansive view of the influence of chance on a given fantasy game, the more likely that the state is to view the particular fantasy sports game as an illegal form of gambling. Even then, some states don’t allow pure games of skill to be played for cash prizes.

The duration of the fantasy sports game may also impact a given state court’s interpretation of its legality. In 2012, a little heralded lawsuit, Langone v. Kaiser & Fan Duel, was filed that might result in a landmark ruling for short term or “daily” fantasy sports contests. The issue that Langone may decide is whether daily fantasy sports contests involve a sufficient level of skill and knowledge, rather than chance, to satisfy the legal requirements of UIGEA and applicable state laws. While there is a general consensus that longer duration fantasy sports games that last for approximately a full season involve such levels of skill and knowledge, no court has directly addressed whether the much shorter duration daily fantasy sports games meet this test.

Thus, the particular features of a fantasy sports contest – and the states in which prospective contestants reside in – are essential to the initial determination of whether or not a fantasy sports contest with cash prizes is legal. The evolution of federal and state interpretations of fantasy sports gaming remains a significant topic for all gaming attorneys, fantasy sports lawyers and those interested in fantasy sports law in general.

If you are interested in learning more about this topic or pursuing a venture in this area, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

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FTC Goes After Text Message Fraud

March 5, 2013 by David Klein

Last week, the Federal Trade Commission (FTC) filed a complaint in the United States District Court for the Northern District of Illinois, targeting several prominent advertising companies, including SubscriberBASE and All Square, for what it alleges are deceptive and unfair advertising practices.

SubscriberBASE and All Square maintain several websites which advertise “free” merchandise to consumers and utilize unsolicited text message services of third parties to drive consumer traffic to their sites. Before receiving the promised free merchandise offered by SubscriberBASE and All Square, consumers must submit their personal information, and often times pay or sign up for other services offered by the defendants and third party advertisers.

The FTC alleges that the text message services and websites provided by SubscriberBASE and All Square do not clearly disclose the obligations to receive the free merchandise. The FTC also claims that consumer personal information is obtained under false pretenses and is being sold to third parties, unbeknownst to the consumers. Finally, the FTC alleges that consumers are charged a fixed fee for receiving the advertisers’ text messages and these fees cannot be reasonably avoided. In addition to enjoining these advertising practices, the FTC is seeking to freeze the defendants’ assets; rescind any consumer contracts and reimburse their out-of-pocket expenditures; disgorge the defendants of all ill-gotten monies; and recover the FTC’s costs of investigating and bringing the action in Federal Court.

The outcome of this case should be of interest to text message marketing companies and those generally interested in the Internet and mobile marketing spaces.

If you are interested in learning more about this topic or pursuing a text message-based advertising campaign, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

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