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Breaking News Concerning Fantasy Sports Betting

March 18, 2013 by David Klein

Today is a big day for fantasy sports betting in New Jersey. On Friday, it was announced that Atlantic City casinos would be allowed to offer fantasy sports betting and this morning the State’s Division of Gaming Enforcement released its temporary fantasy sports regulations. While we will have to wait for the complete regulations to be handed down, the temporary regulations contain several important features:

Fantasy sports tournaments will not be considered “gaming” or “gambling” under New Jersey law. This carve out is consistent with the regulatory trend to categorize fantasy sports as games of skill based on the sports knowledge of each player, thereby exempting them from most gambling laws, which are premised on chance or luck.
Players will be permitted to place wagers and collect their winnings in any manner approved by the New Jersey Division of Gaming Enforcement, including mobile wagering and deposit account systems. This provision appears to allow players to place bets and receive payouts online, as opposed to requiring players to be physically present in Atlantic City casinos.
Players will only be able to place wagers on the statistical performance of their fantasy team, not on the performance of individual athletes or on the outcome of games. This regulation stems from the on-going federal lawsuit brought by New Jersey Governor Chris Christie to allow point-spread sports betting in New Jersey’s casinos and race tracks. Last month, U.S. District Court Judge Michael Shipp struck down a New Jersey statute allowing point-spread betting, ruling that it conflicted with federal law, specifically the Professional and Amateur Sports Betting Act of 1992. Governor Christie has filed a notice of appeal and it is expected to be heard by the U.S. Circuit Court of Appeals for the 3^rd District in Philadelphia later this year.
Atlantic City casinos can offer the fantasy sports games themselves or partner with companies who have already been offering fantasy sports betting in other parts of the country/world. Any such casino partners will have to register as vendors pursuant to N.J.S.A. 5:12-92c.
Players have to be 21 years of age or older to partake in fantasy sports betting.

For those reading this and already planning to make some quick money on college basketball’s March Madness tournament, we have some bad news… the regulations will not become effective until April 22, 2013. However, that will be just in time for the NBA playoffs and the MLB season.

This New Jersey Division of Gaming Enforcement development 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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What to Do When a State Attorney General Contacts You

March 15, 2013 by David Klein

Almost everyone working in the Internet marketing space, whether providing marketing services or selling products, has heard the horror stories of peers and competitors (or worse yet their principals) that have been subjected to investigations or lawsuits by various states’ attorneys general. Those who address these investigations or actions properly have the best chance of obtaining a positive outcome. An attorney general investigation can come in many forms, from a simple letter to a Civil Investigative Demand (“CID”) or subpoena. Sometimes, however, the first time one hears from an attorney general is after a lawsuit has been filed. The first steps you take after hearing from an attorney general are critical.

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First, do not panic. You will get through the ordeal, and get the best possible result, if you stay calm and take the appropriate steps. Many companies and individuals have been down this road before you. Your fate will often be determined by your initial response.

Second, resist the temptation to create or destroy documents. In our digital age, document tampering or spoliation will generally be uncovered during the discovery portion of the action. Not only will this dramatically increase the attorney general’s interest in the underlying case, but such activities can create an entirely distinct and additional basis for the attorney general to pursue the company as well as the individuals involved. The cover-up often is worse than the crime.

Third, contact experienced counsel immediately. Attorneys general commence investigations for a wide variety of reasons. Perhaps they are seeking information about, or are investigating, your industry generally. Perhaps they are seeking information about a third-party with whom you do business. Experienced counsel can help determine what is at the core of the investigation and who the real targets are – which can help limit the investigation or point it in the proper direction. If the investigation does in fact target your business, experienced counsel can help prevent an investigation from turning into a lawsuit. If a lawsuit has been commenced, the goal is to get the quickest, most cost effective and painless resolution. If the resolution involves a written settlement, it is critical that the injunctive provisions therein be narrowly crafted, not only to allow for lawful business, but also to contemplate future technologies, business models and business interests. Unfortunately, there are countless examples of attorneys who, through the wrong tactics or lack of industry knowledge, turn winnable cases into nightmares.

Finally, a penny of prevention is worth a pound of cure. The best way to succeed in an attorney general investigation is to never appear on their radar screen in the first place. Retaining counsel that is knowledgeable and experienced in Internet practices and online marketing, that knows the red flags Attorneys general will look for, could save you substantial time and money, as well as allow you to avoid the distraction of dealing with a regulatory inquiry or action.

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This topic should be of interest to any company or individual engaging in a commercial venture within the United States, especially those involved in the online and offline marketing, data collection and/or consumer product industries.

If you are interested in ensuring that you are compliant with current regulations or if you are facing an investigation from a state attorney general or other regulatory agency, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

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How Can Employers Implement an Effective Social Media Policy?

March 14, 2013 by David Klein

The National Labor Relations Board (“NLRB”) has made it extremely difficult for employment lawyers to advise their clients on social media usage policies. Over the last two (2) years, the NLRB has been aggressive in its regulation of employers’ social media policies. The rulings by the NLRB, however, have been inconsistent. In particular, the NLRB has focused on the precise wording and language used in employment handbooks. The stated goal of the NLRB is to ensure that employers are not violating Section 8(a)(1) of the National Labor Relations Act (the “Act”) by implementing a work rule that would “reasonably tend to chill employees in the exercise of their Section 7 rights.” Although the NLRB’s yardstick in this area is apparently flexible rather than rigid, a careful understanding of its opinions can help employers regulate social media usage more effectively.

Inconsistent NLRB Rulings on Social Media Policies

The Act prohibits employers from infringing on employees’ rights to discuss their employment including, but not limited to, wages and working conditions. The Act further protects the right of employees to engage in “concerted activity” with respect to wages and working conditions. With the foregoing in mind, it is important to understand that the NLRB’s review of social media usage policies tends to be subjective. Clearly, if a social media policy is developed in response to union activity or is applied in such a way as to restrict employees from engaging in concerted activities or discussing their wages and/or conditions of employment, the NLRB will view the policy to be violative of the Act. The NLRB’s rulings become unclear when it assesses whether “employees would reasonably construe the language [of the social media use policy] to prohibit Section 7 activity.” For example, the NLRB has found that the following language could be reasonably interpreted by employees as prohibiting them from discussing or criticizing the employer’s labor practices:

If you engage in a discussion [on social media websites] related to [employer] . . . you must also be sure that your posts are completely accurate and not misleading . . . .

The NLRB declared the above provision unlawful. However, the NLRB approved the following language in a later action:

Make sure you are always honest and accurate when posting information or news, and if you make a mistake, correct it quickly.

Although these provisions appear to be similar, the NLRB has struck one while allowing the other. Similarly, the NLRB has found the following provision to be unlawful:

You are encouraged to resolve concerns about work by speaking with co-workers, supervisors, or managers. [Employer] believes that individuals are more likely to resolve concerns about work by speaking directly with co-workers, supervisors or other management-level personnel than by posting complaints on the Internet.

However, the NLRB later found the following to be lawful:

[K]eep in mind that you are more likely to resolved [sic] work-related complaints by speaking directly with your co-workers or by utilizing our Open Door Policy than by posting complaints to a social media outlet.

Additionally, simply including a blank “savings clause” in an employee handbook will not be enough to save your social media usage policies from running afoul of the Act. A recent action before the NLRB dealt with review of an employee handbook that contained the following language:

[Employer’s] Social Media Policy will be administered in compliance with applicable laws and regulations (including Section 7 of the National Labor Relations Act).

The NLRB concluded that this language was insufficient to “cure the ambiguities in the [social media] policy’s overbroad rules.

As demonstrated by the above discussion, it is important that employers exercise considered judgment in implementing or revising a company’s social media usage policy. The NLRB has created a minefield for employers seeking to regulate their employees’ social media usage, and without a thorough understanding of NLRB rulings, an employer may inadvertently run afoul of the law trying to control employee social media usage.

Protecting Employers

It is critical that employers seek legal counsel before introducing or revising social media usage policies. If you are interested in learning more about this topic or crafting a social media policy, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

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Will Online Poker Be New York’s Next Cash Cow?

March 13, 2013 by David Klein

It is an exciting time for online poker in the U.S. As we have posted, several states including Illinois, Iowa and Texas have introduced new legislation within the last 30 days to legalize some form of Internet gambling ranging from fantasy sporting leagues to poker tournaments. It now appears that New York may be considering the legalization of Internet poker, and possibly other online games of skill, within its borders.

While no bill has been introduced to the State legislature, on Monday the New York Senate wrote in a resolution addressing budgeting negotiations, that it “supports authorizing and regulating Internet gaming for games of skill, including poker, to reflect recent changes in the classification of these games.” The State Senate was most likely referring to an August 2012 New York federal court case, U.S. v. DiCristina, in which the judge overruled the defendant’s conviction, finding that poker is a game of skill and thereby not regulated by the Illegal Gambling Business Act of 1955. The DiCristina case is the first time a federal court has recognized poker as a game of skill, rather than a game of luck or chance.

With New York’s budget deadline of March 31 rapidly approaching, it is unlikely that an encompassing bill will be a proposed before then, but lawmakers have made it clear that they recognize and consider online poker to be a potentially major revenue-generating industry for the State. New York Governor, Andrew Cuomo, stated that he is looking into the legality of online poker and considering the effect it would have on upstate brick and mortar casinos.

The development and progression of New York’s stance on Internet poker is a significant topic for all gaming attorneys and those interested in online 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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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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