Internet Gambling

Proposed Gambling Law Revision Aimed at Protecting Washington State Gaming Industry

January 30, 2020 by David Klein

January 30th, 2020

This month, the Washington State Senate and House of Representatives each released separate proposed bills – House Bill 2720 and Senate Bill 6568 – aimed at changing Washington’s gambling law. In response to the Ninth Circuit’s 2018 decision in Kater v. Churchill Downs Inc., Washington State’s legislature is attempting to redefine what constitutes “illegal gambling games” within the meaning of the State’s Recovery of Money Lost at Gambling Act (“RMGLA”). Through this proposed measure, the Legislature hopes to prevent Washington’s booming gaming industry from leaving the State.

How would this gambling law change protect Washington State’s burgeoning gaming industry?

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Iowa Fantasy Sports Bill Gets a Second Chance

January 28, 2014 by David Klein

In March of 2013, we wrote about Iowa’s attempt to pass legislation that would legalize and regulate fantasy sports gambling within its borders. Despite gaining early traction in the legislative subcommittees to which it was assigned, the proposed Iowa fantasy sports bill died before it could reach the House floor for a vote. However, a new Iowa fantasy sports bill is currently being drafted by Rep. Jake Highfill (R-Johnston) and Sen. Jeff Danielson (D-Cedar Falls) and may stand a better chance of making it through the legislative process.

Iowa Fantasy Sports Law

While winning monetary prizes from fantasy sports betting in Iowa has been considered illegal by the Iowa Attorney General and the fantasy sports industry generally, there is no law that explicitly addresses fantasy sports. Rather, the notion came from a 1931 case (Parker-Gordon Importing Co. v. Benakis), which categorizes all monetary gaming activities based on chance to be illegal. Iowa’s current law based on the court case is drafted so broadly that fantasy sports gambling is widely construed to be included within the meaning of “gaming activity based on chance.” And even though no Iowa citizens have been prosecuted for playing in online fantasy sports leagues, the Iowa Attorney General has made clear that any fantasy sports league that requires an entry fee or offers participants the chance to win a prize is illegal. Therefore, many fantasy sports sites refrain from paying out winnings to Iowa State residents. This could change in upcoming months.

Iowa Fantasy Sports Bill

According to Sen. Danielson, the forthcoming Iowa fantasy sports bill will not attempt to nullify or replace Iowa’s current gambling statute. Instead, the bill will categorize fantasy sports as a game based predominantly on skill, thereby removing it from the scope of Iowa’s gambling law, which only applies to games that are based on chance. Sen. Danielson’s approach appears to mirror New Jersey’s fantasy sports law, which went into effect last year.

The final adjudication of this law should be of interest to all gaming attorneys and those interested in fantasy sports law in general. If you are interested in learning more about this topic or are contemplating starting an online fantasy sports venture, please e-mail us at info@kleinmoynihan.com or call us at (212) 246-0900.

The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

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Newest Federal Online Poker Bill Includes Mandatory Tax

November 20, 2013 by David Klein

Currently there are several Online Poker bills pending before the United States Congress. There is the bill introduced by Rep. Peter King (R-NY), which is limited to legalizing online poker and contains provisions allowing greater participation from state lotteries. Another pending bill, sponsored by Rep. Joe Barton (R-TX), also only authorizes online poker, and not other casino games. Apart from this limitation, Rep. Barton’s bill is otherwise almost identical to the bill Senators Harry Reid (D-NV) and Jon Kyl (R-AZ) introduced last year, which failed to gain any traction in the United States Senate.

New Online Poker Bill

The newest federal online bill was introduced last week by Rep. Jim McDermott (D-WA) and is meant to coincide and be adopted alongside Rep. King’s bill. In essence, Rep. McDermott’s bill, entitled the Internet Gambling Regulation and Tax Enforcement Act of 2013, proposes that online poker operators pay a mandatory tax of 12 cents on every dollar deposited with their sites by users. The tax money collected would be shared by the federal government and the state in which the user is playing online poker. Rep. McDermott’s new online poker bill is not the only one in the pipeline, and it is rumored that Senator Reid is drafting a new version of his failed online poker bill, which may be introduced shortly.

The State Race

The resurgence of interest in online poker legislation is not surprising. Earlier this year, Nevada and Delaware began accepting online poker wagers and New Jersey is poised to do the same on November 26^th, 2013. These events may be providing federal lawmakers with a renewed sense of urgency to pass some form of federal legislation, rather than let the states create a patchwork of regulation. It remains to be seen how any prospective federal legislation will interact with state laws that have legalized online poker in Delaware, Nevada and New Jersey.

The legislative process on the federal level, and the potential impact on applicable state laws, will be worth keeping an eye on for gambling attorneys and those interested in Internet poker law in general. If you are interested in learning more about this topic, please e-mail us at info@kleinmoynihan.com or call us at (212) 246-0900.

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Expansive Online Gambling Bill Introduced in Pennsylvania

April 22, 2013 by David Klein

Following the lead of Delaware, New Jersey, Nevada, Illinois, New York, California, Massachusetts and several other states, today the Pennsylvania legislature introduced House Bill 1235, which would effectively legalize online gambling within the Commonwealth’s borders. The online gambling bill has already been assigned to a legislative committee, which will soon determine if the bill will be heard and voted on by the Pennsylvania House of Representatives.

Pennsylvania Bill Not Limited to Online Poker

Spearheaded by Pennsylvania State Representative Tina Davis, the online gambling bill, like the law in New Jersey, will not be limited to Internet poker and defines “Internet Game” as “[a] table game, slot machine or any other game approved by regulation of the Pennsylvania Gaming Control Board to be suitable for use for Internet gaming activities . . . .” Representative Davis made clear that her motivation for drafting the bill with such an expansive stance on Internet gaming stemmed from the need to contend with the online gaming regimes of Pennsylvania’s bordering states, Delaware and New Jersey. While Pennsylvania has a highly successful brick-and-mortar casino industry, second only to Nevada, it has recognized the need to evolve and enter the online gaming arena.

Concessions to Make the Online Gambling Bill More Enticing to Licensees?

As reported by many gaming industry sources, Representative Davis made several last minute revisions to the bill, most notably lowering the licensing fee from $16.7 million to $5 million and reducing the taxable rate on returns from 43% to 28%. It is unclear why these changes were implemented, but the revisions bring the licensing fee scheme more in line and competitive with New Jersey and Delaware. Moreover, while the bill speaks to regulating intrastate gambling, Pennsylvania would not be limited from considering interstate compacts with other states, such as Nevada, in the future.

Benefits for the State of Pennsylvania

In addition to the obvious benefits associated with tax revenue and licensing fees to be received by the State (which could amount to over $100 million), Representative Davis expects that online gaming would create thousands of new jobs for Pennsylvanians and allow the State to keep players and the associated proceeds from leaking into New Jersey and Delaware.

The development of Pennsylvania’s online gaming regime is 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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Massachusetts to Allow Online Poker?

April 17, 2013 by David Klein

Today the Massachusetts legislature attached an addendum to its 2014 fiscal year budget proposal calling for the legalization and regulation of online poker. The addendum was sponsored by no less than 18 Massachusetts State Representatives and, like the law passed in Nevada, will be limited only to online poker. Other Internet gambling games, such as black jack and roulette, are not up for consideration.

Casinos Already Authorized in Massachusetts

As some of you may be aware, the Massachusetts legislature has already approved a bill that will authorize brick and mortar casinos beginning in 2016 and is currently vetting potential bidders for casino operator licenses. Given the fact that the bill only authorizes 3 casinos to operate within the State, you can expect the bidding war to be fierce.

Online Poker Proposed Licenses and Regulations

Despite the fact that brick and mortar casinos will not begin operations until 2016, according to the budget addendum, Massachusetts may be looking to allow Internet poker to go live early as next year. Consistent with the brick and mortar casinos to be authorized within the State, Massachusetts will only issue 3 online poker operator licenses. The licenses will be good for 10 years and the operators must have age verification systems in place to assure participants are over the age of 21. Moreover, the licensed operators will need to launch their operations within 30 days of receiving their respective licenses, or risk revocation and/or financial penalties for acting in bad faith.

While only 3 online poker operator licenses will be granted, the proposed addendum does not limit the amount of software providers, affiliate marketers and payment processors that will be licensed. Surprisingly, the addendum does state that all of the licensees, both operators and service providers, must be located within the State of Massachusetts, unless an out-of-state licensee is granted an exception and approved by the Massachusetts Gaming Commission.

The licensing fee for Internet poker operators is $10 million dollars, which will be credited towards the entity’s first 2 years of taxes. This appears to be the standard licensing fee structure for online poker operators, as already demonstrated by New Jersey, Delaware and Nevada.

Is Interstate Online Poker a Possibility for Massachusetts?

The easy answer to this question is: not at this time. However, Massachusetts has not directly given their opinion on interstate compacts and has thus far only addressed intrastate online poker. With Nevada authorizing and recently soliciting comments on their soon-to-be passed interstate poker compact bill, the addition of another viable and heavily populated state, such as Massachusetts, could have a significant impact on the future of online poker. Should Nevada’s interstate compact bill provide tax royalty incentives to foreign states, there is a good chance that states such as Massachusetts may be enticed to change their stance and allow their residents to participate in gambling outside their borders.

The development of Massachusetts’s online poker regime is 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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Kansas Attempts to Ban Online Gambling

April 8, 2013 by David Klein

Over the course of writing this blog, we have focused on several states that are exploring legislation to legalize online gaming, including New York, Delaware, Illinois, Iowa, New Jersey and Texas. Our post today looks at the only other state besides Utah that has attempted to ban all forms of Internet gambling within its borders: Kansas.

Specifics of Online Gambling Ban

Last week, the Kansas State legislature introduced House Bill 2055, which was publicized as a way to entice more brick and mortar casinos to set up operations in the State. The relevant changes sought by the Bill are as follows:

Participating in online gambling would be classified as a Class B nonperson misdemeanor, punishable by a $1000.00 fine and up to 6 months in jail;
The minimum management investment required to open a brick and mortar casino would be reduced from $225 million to $50 million;
The State’s racetracks would be prohibited from introducing electronic gaming machines on their premises until July 1, 2032; and
Receiving permits to build brick and mortar casinos within the State would be easier and cheaper to obtain.

Luckily for proponents of Internet gaming, the Kansas Senate voted the Bill down by a count of 24 to 15.

Online Gambling Future in Kansas

It should be noted that the Kansas legislature did not attempt to ban online gambling in the State forever, specifically stating that the passage of House Bill 2055 would not prohibit the State from allowing online gaming if a federal statute is passed in the future. It will be interesting to see how the State legislature will respond to the Bill dying in the Kansas Senate: will they attempt to scale back the civil and criminal penalties associated with online gambling and try to pass the Bill again or recognize the financial incentives associated with Internet gaming and entertain the idea of legalizing Internet gambling within its borders, as its fellow states have?

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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