Tuesday, March 3, 2015

Nevada Legislature to Consider Multiple Gaming Bills

By Kate Lowenhar-Fisher, Jennifer Gaynor, and Greg Gemignani

The 78th Session of the Nevada Legislature began on February 2, 2015. Regular sessions of the Nevada Legislature are held biennially in odd-numbered years. As of the date of this article, the following bills related to gaming have been introduced:

Assembly Bill 40 provides that certain actions and proceedings of the Gaming Control Board are not subject to certain provisions of the Open Meeting Law.

Senate Bill 9 requires the Nevada Gaming Commission to adopt regulations that encourage manufacturers to develop and deploy gaming devices that incorporate innovative, alternative and advanced technology.

Senate Bill 38 imposes licensing requirements on manufacturers and distributors of associated equipment. This bill removes the licensing requirement for cash access and wagering instrument service providers and providers of certain intellectual property or information via a database or customer list. The bill also repeals the provisions authorizing the Commission to license manufacturers of equipment associated with interactive gaming.

Senate Bill 40 expressly criminalizes unlicensed sports book activities and providing assistance to unlicensed sports books to provide a clear predicate offense for federal law prosecutions.

Senate Bill 98 amends Nevada’s public policy concerning the gaming industry by adding that the purpose of the gaming industry is to generate revenue and create jobs for the inhabitants of Nevada.

Senate Bill 124 authorizes the Board to allow a licensee to move the location of its establishment and transfer its nonrestricted license to a location within one mile of the existing location if the move is necessary because the existing location of the establishment is adjacent to a military installation and has been designated by the Federal Government as necessary for the expansion of the military installation.

There are additional Bill Draft Requests (“BDRs”) related to gaming that have not yet been introduced as written bills, including BDR 83, which creates “slot parlors” as a new category of gaming license for operators with 15 or fewer machines whose primary business is gaming, increases the tax rate for slot parlors to 15% and makes various other changes related to gaming.

Tuesday, February 24, 2015

Gaming Lawyers Join Dickinson Wright’s Las Vegas Office

Dickinson Wright has expanded its Las Vegas presence with the addition of three gaming practice lawyers and five additional lawyers focusing on commercial litigation, probate, trusts and estates. With a total of 14 lawyers on site, Dickinson Wright has a full-service presence in Nevada that is supported by over 375 lawyers providing legal expertise in over 40 practice areas.

Dickinson Wright’s Gaming Practice Group is pleased to announce that Kate Lowenhar-Fisher, Jennifer Gaynor and Greg Gemignani have joined the firm’s gaming practice in the Las Vegas office.

Kate Lowenhar-Fisher frequently represents businesses and individuals before the Nevada Gaming Control Board and the Nevada Gaming Commission and has extensive experience counseling clients in all aspects of gaming law and regulation, including Internet gaming, social gaming, fantasy sports and online promotions, as well as liquor licensing. Kate also practices before the Clark County Liquor and Gaming Licensing Board and the Las Vegas City Council. Kate is licensed to practice law in both Nevada and California.

Jennifer Gaynor specializes in government relations, with a particular focus on gaming issues. She is a full-time resident of Carson City while the Nevada legislature is in session. When the legislature is not in session, Jennifer focuses on gaming industry-specific issues, including licensing, findings of suitability, employee registration, advertising, the manufacture and shipment of gaming equipment, charitable gaming, online promotions, taxation and special events.

Greg Gemignani counsels domestic and international gaming clients on regulatory and intellectual property issues. His background in systems engineering and systems architecture enables him to stand in the forefront of representing clients on matters relating to gaming technology systems, interactive gaming and intellectual property protection, including social gaming, online contests, fantasy sports, pari-mutuel wagering, sports wagering and sweepstakes.

The Las Vegas office is a full-service office that includes expertise in commercial litigation, government relations, intellectual property, real estate, liquor licensing, probate, trusts and estates, tax and corporate, as well as all aspects of gaming law and regulation.

Dickinson Wright has offices in six states (Nevada, Arizona, Tennessee, Kentucky, Ohio and Michigan), the District of Columbia and Toronto, Canada. The firm also has cooperation agreements with independent law firms with gaming and commercial law expertise located in Macau, Malta, Peru and Bulgaria.

Tuesday, February 17, 2015

Idaho Tribes and Community Leaders Seek to Limit “Instant Racing” Gaming Machines

By Patrick Sullivan

A popular and profitable form of gaming has sparked a controversy in Idaho between the state’s Indian tribes and horse racetracks. “Instant Racing” video slot machines replay the last seconds of horse races run in the past, but with identifying marks eliminated from the horses and riders. Players bet on the outcome of the race. Proponents also refer to the new games as “historical horse racing.” The machines were legalized in 2013 by an Idaho law intended to revitalize the declining Idaho horse racing industry. The traditional pari-mutuel horse racing industry has experienced serious declines in revenue in the past years, and racetrack owners argue that Instant Racing is a lifeline saving them from otherwise inevitable closure. At Boise’s Les Bois Park racetrack alone, players wagered over $40 million in only seven months in 2014, bringing the racetrack into the black after years of shortfalls.

Idaho’s largest Indian tribe, the Coeur d’Alene Tribe, along with the Kootenai, Shoshone-Bannock and Shoshone-Paiute Tribes, opposes the machines and has succeeded in introducing legislation in the Idaho Senate to repeal the 2013 legalization and prohibit the games throughout Idaho. A separate bill seeks to limit the gaming to three racetrack locations. The Tribes claim that the games are actually slot machines, which are illegal under Idaho’s Constitution. The Tribes argue that Instant Racing threatens tribal gaming conducted pursuant to Class III gaming compacts with the State and that the games have nothing to do with true pari-mutuel wagering.

Instead, the Tribes allege the games are an “illegal hoax” slipped past the Idaho legislature as a revived form of horse racing. Opponents and tribal representatives claim the industry represented that “historical horse racing” would be identical to live horse racing but using previously run races. Instead, opponents allege the machines require no skill and do not even require that the player select any horse to play and win the game. Nor are the bets pooled and the odds adjusted as in true pari-mutuel racing. Even some Idaho legislators say the legislature was duped when it legalized the machine in 2013 and did not realize the games were pure games of chance disguised as horse racing terminals.

The Tribes sent a unified letter to Idaho Governor “Butch” Otter demanding the games be prohibited. Similarly, “Stop Instant Racing Casinos in Idaho,” a group of non-Indian business and community leaders, mayors and sheriffs, issued a statement opposing the machines. The group called the machines “Vegas-style casino gaming” and “nothing more than illegal video slot machines attempting to pass as horse racing.” The leaders pointed out that the machines threatened the gaming operations of the Coeur d’Alene Tribe, which employs 2,000 people in Northern Idaho and enjoys strong community support as a major contributor to the Northern Idaho economy by providing millions of dollars of donations each year and supporting transportation infrastructure and healthcare needs in the community.

In a Senate hearing on the legality of the machines earlier this month, developer Race Tech LLC sought to distinguish Instant Racing from illegal slot machines. According to the manufacturer, the games are not slot machines because the outcome of the game is not determined by a random number generator but by the outcome of the race itself. Idaho senators questioned this theory and focused on whether Instant Racing is a game of chance or a game of skill. Unlike true pari-mutuel betting, in which a knowledgeable bettor has an advantage, these games eliminate the possibility of any advantage from skill by removing identifying marks. The Senate committee is expected to vote on the bills this week, paving the way for a floor vote.

Tuesday, December 30, 2014

Department of Justice Files Suit Against Santa Ysabel Tribe’s “Desert Rose Bingo” Site

By Patrick Sullivan

On December 3, United States Department of Justice attorneys filed a complaint in federal court seeking to prevent the Iipay Nation of Santa Ysabel, a federally recognized Indian tribe near San Diego, from continuing to operate an online bingo site by enjoining its acceptance of any electronic payments under the Unlawful Internet Gambling Enforcement Act (“UIGEA”). California Attorney General Kamala Harris had filed a similar suit in late November alleging that operation of the site violated the Tribe’s gaming compact with the state.

UIGEA prohibits electronic financial transactions in connection with “unlawful Internet gambling.” UIGEA’s definition of “unlawful Internet gambling” includes any wager placed using the Internet when that wager would be unlawful on the federal, state or tribal lands where the wager is initiated or received. The Department alleges that, because California law prohibits non-charitable bingo off tribal land, Desert Rose Bingo equates to unlawful Internet gambling and UIGEA prohibits any electronic financial transactions made in connection with the site.

Desert Rose Bingo is limited to California residents. Those visiting the site from outside California are greeted with a message inviting them to register for the future but that non-residents “will not be able to participate in our games until further notice.” This geo-location technology, ensuring players are within California, is meant to avoid the application of federal law prohibiting online gaming across state borders such as the Interstate Wire Act of 1961. The Wire Act imposes criminal penalties for the interstate and foreign transmission of wagers and wagering information using a “wire communication facility.”

Nevertheless, Indian tribes have been diligently preparing for this perceived threat to their brick-and-mortar casinos. Santa Ysabel’s Desert Rose Bingo demonstrates the tribal determination to be at the forefront of Internet gaming and maintain a seat at the table.

The Santa Ysabel Tribe rejects the allegations of the state and federal officials, and even launched an online poker site, privatetable.com, earlier this month, which, according to the site, allows “real money games and poker tournaments.” The Santa Ysabel Gaming Commission website states that by offering online poker and bingo, “the Tribe is exerting its sovereign right under the Indian Gaming Regulatory Act (IGRA) to regulate and conduct Class II gaming from the tribe’s reservation.”

The Tribe’s position that it retains the sovereign right to conduct online poker and bingo echoes the opinion of many Indian tribes, and even some gaming regulators, that such “Class II” Internet gaming may be operated by Indian tribes free of state regulation under the Indian Gaming Regulatory Act of 1988. Clearly the Department of Justice does not agree.

Tuesday, December 16, 2014

Amendments to British Columbia Gaming Control Act – Suspension and Cancellation of Gaming Registrations

By Michael D. Lipton, Q.C. and Kevin J. Weber

In October, the Government of British Columbia introduced Bill 4, Miscellaneous Statutes Amendment Act (No. 2), 2014 (“Bill 4”). Bill 4 amends a number of statutes, including section 69 of the Gaming Control Act of that province (the “Act”).

In 2010, amendments to the Act were enacted which created some confusion as to the authority of the gaming regulatory authorities to cancel, suspend, impose conditions upon, or vary the conditions upon the registration of a gaming services provider or gaming worker. As section 69(1) of the Act presently reads, it appears that the regulator may cancel or suspend a registration, or impose conditions upon or vary the conditions on such a registration, only “in relation to one or more gaming premises of a registrant.” Not every gaming services provider has a “gaming premises” in the province of British Columbia, making the section confusing as to the authority of the regulator. Prior to 2010, section 69(1) of the Act contained no reference to “premises.”

Bill 4 proposes that section 69(1) of the Act be struck out and in its place, the following would be enacted:

“…the general manager may do any of the following:

(a) issue a warning to a registrant;

(b) cancel a registrant’s registration;

(c) suspend a registant’s registration for a period of time;

(d) impose new conditions on a registrant’s registration, either generally or for a period of time;

(e) vary existing conditions of a registrant’s registration, either generally or for a period of time.”

As well, Bill 4 proposes that a new section 69(3) be added to the Act. This new section would make clear that the conditions that may be imposed or varied upon the registration of a gaming services provider may be applied specifically with reference to the premises at which the registrant carries on business, as follows:

“In the case of a registrant that is a gaming services provider, conditions may be imposed or varied under subsection (1) (d) or (e) in relation to one or more premises at which the registrant carries on the business of providing gaming services and, without limiting this, the conditions imposed or varied may do any of the following:

(a) prohibit the registrant from selling lottery tickets at a premises and require the registrant to ensure that no lottery tickets are sold, by any person, at the premises;

(b) prohibit the registrant from providing one or more other gaming services at a premises and require the registrant to ensure that the prohibited gaming services are not provided, by any person, at the premises;

(c) require the registrant to post the conditions in public view at the premises to which the conditions relate.”

As Bill 4 is currently only at First Reading stage, its provisions are still subject to amendment during the Second Reading process before being given Royal Assent and enacted into law. At present, the amendments appear to simply write into the statute the interpretation which the British Columbia regulators have placed on the Act since 2010. Should any amendments be suggested at further readings which add controversial provisions to the Act, we will report them to our readers at the earliest opportunity.

Tuesday, December 2, 2014

The Recommendations of Québec’s “Working Group on Online Gambling”

By Michael D. Lipton, Q.C. and Kevin J. Weber

Last month, the Government of Québec released its long-awaited report on online gaming (“iGaming”). The Working Group on Online Gambling was struck in February 2010 to analyze the social impact of iGaming in Québec, and measures that might be used to block “allegedly illegal” iGaming. The particular focus of the Working Group was the lawful iGaming carried out in Québec through Espacejeux.com (“Espacejeux”), whose operations are conducted and managed by the Government of Québec through its wholly owned Crown corporation, Loto-Québec.

The report of the Working Group criticized the ability of Loto-Québec to provide measurably effective measures to ensure Espacejeux is operated consistent with social responsibility, security, and integrity. The conflict or appearance of a conflict between its two mandates, profitability on the one hand and social responsibility on the other, was cited. The final recommendations of the report accordingly focused upon the creation of an independent authority to oversee the activities of Loto-Québec, rather than allowing Loto-Québec to self-regulate on these matters.

The report of the Working Group goes on to note that the availability of Espacejeux has not curtailed Québecers’ use of “allegedly illegal” iGaming websites. The Working Group was not critical of the lack of concrete measures implemented by the Government of Québec to crack down on such websites. Rather, it noted the obstacles to such a crackdown, citing (i) police action, (ii) the ambiguity of legislation governing gaming, (iii) the fact that many “allegedly illegal” websites hosted outside Canada are legal in their home jurisdictions, and (iv) the presence of private iGaming operators offering their iGaming services to the world from Québec territory, specifically from the Territory of Kahnawà:ke near Montreal.

The federal Criminal Code (the “Code”) prohibits any entity other than the provincial government from acting as the “operating mind” of iGaming made available to Québecers. Without explicitly saying so, the Working Group concluded that enforcement of the Code in this respect is practically impossible. Accordingly, it recommends a solution best described using the old maxim: “if you can’t beat ‘em, join ‘em”: petitioning the federal government to amend the Code to allow the provincial governments to license private sector iGaming operators to legally offer their services within Canada.

We will continue to monitor developments, most importantly whether the Government of Québec will explicitly adopt and endorse in part or all of the report and recommendations of the Working Group. To read more about the report, please click here.

Tuesday, July 8, 2014

Pojoaque’s Plan to Seek an Imposed Contract: Is Interior’s Process Consistent with IGRA?

By Dennis J. Whittlesey

The Pueblo of Pojoaque needs a new Class III gaming compact by June 2015 in order to continue operating its casinos which are located north of Santa Fe. However, the Pueblo objected to the financial concessions being demanded by New Mexico’s Governor Susana Martinez, concessions similar to those previously accepted by a number of other Pueblos in the state that also were facing the June 2015 expiration date for their compacts.

Pojoaque’s refusal to make financial concessions beyond those in its current compact led to a collapse of the negotiations, with each side accusing the other of failure to negotiate in good faith. With that, Pojoaque filed suit in federal court alleging that the Governor had failed to negotiate in good faith in what appeared to be the initial step in a statutory process through which a compact could be imposed on the State. The statutory process is established by the Indian Gaming Regulatory Act at 25 U.S.C. §2710(d)(7) (“IGRA”).

New Mexico responded to the federal action by moving to dismiss due to the state’s 11th Amendment sovereign immunity that was not waived for the purposes of that action. Following well-established law, the federal court granted New Mexico’s motion to dismiss.

The Pojoaque complaint in the federal suit strongly suggests that the tribe knew full well that the action would be dismissed for the reasons cited by the State. However, it also makes clear that Pojoaque already was invoking administrative procedures created through an Interior regulation that would impose a compact on the Tribe and State when negotiations failed. That regulation was promulgated in 1999 and is published at 25 CFR Part 291 – “Class III Gaming Procedures.” While some states may not oppose the administrative process, it is significant that Texas did oppose the process and won the legal challenge. That decision was rendered in 2007 by the 5th Circuit Court of Appeals and concluded that Interior did not have legal authority to administratively impose a compact on Texas. See Texas v. United States, 497 F.3d 491 (5th Cir. 2007).

The Pojoaque dispute may soon be coming to a head. The Pueblo’s Governor announced only a few days ago that the Department of the Interior has determined that his tribe is eligible for the administrative process under which the Pueblo will submit its draft compact to which the State has 60 days in which to respond. If the State proposes an alternative draft, then a mediator would select one of the two submitted drafts, with the mediator’s decision subject to final Secretary approval.

Without regard to the Texas litigation in 2007, the question will certainly arise as to whether the Interior Department’s “solution” to an impasse in compact negotiations is lawful. The matter almost certainly will be decided by carefully following the specific language in IGRA, just as Supreme Court Justice Elena Kagan did in the recent Bay Mills Indian Community case involving a tribal gaming facility in Michigan. And special attention will be paid to the statute’s apparent requirement that no process for imposing a compact can proceed until a “[federal] court finds that the State has failed to negotiate in good faith with the Indian tribe,” according to express factors specified in the law.

That states can cite sovereignty to defeat legal challenges to their failure to negotiate is settled law. See Seminole Tribe of Florida v. Florida, 517 U.S. 44 (1996). While the regulation in large part follows the IGRA process, it problematically ignores IGRA’s predicate for invoking the subsequent administrative process that a federal court must first have adjudicated the State’s failure to negotiate in good faith. Moreover, the Secretary’s regulations did not resolve the potentially fatal barrier identified by the Supreme Court in Seminole Tribe that the 11th Amendment precludes any adjudication as to “good faith” by the State without consent by the State.

When Interior was drafting the regulation, there was a great deal of debate within Indian Country and the federal government about this matter. In light of this, it must be accepted that attorneys at Interior, Justice, and the National Indian Gaming Commission carefully assessed how best to confront the problem when states simply refuse to deal and then invoke state sovereign immunity to defeat the federal courts’ jurisdiction to hear any legal challenge and, consequently, to render any decision as to whether the state’s actions were not in good faith.

Despite the ruling in Texas v. United States, there almost certainly are good legal arguments in favor of the regulations. How the issues are resolved will be closely watched. In the meantime, the Pojoaque have about 12 months in which to secure a new compact through some process. Litigation can be time consuming, and the Pojoaque clock is ticking.