Gaming Law "In the News" ...

A Catania Consulting Group Client Newsletter January 20, 2009

Integrity, Leadership, Experience ...

Frank Catania, Esq. President, former Assistant Attorney General, Director NJ Division of Gaming Enforcement,   VP Compliance Players International.  frank@cataniaconsulting.com

Gary Ehrlich, Esq. VP, former Assistant Attorney General, Deputy Director NJ Division of Gaming Enforcement.  gary@cataniaconsulting.com

Keith Furlong, VP, former Public Information Officer & Legislative Liaison NJ Division of Gaming Enforcement. keith@cataniaconsulting.com

Joseph Kelly, Esq., Associate, Professor of Business Law, SUNY College Buffalo. jkelly@cataniaconsulting.com

A Kentucky Court of Appeals Reverses Lower Court Ruling Allowing Internet Domain Seizures

The Kentucky Court of Appeals in a ruling yesterday reversed a lower court ruling that allowed seizure of 141 Internet domain names. Kentucky Governor Stephen Beshear had sought to seize the gaming domain names alleging it was to protect Kentucky’s gaming industry.

In a 2-to-1 majority opinion, the court over ruled lower court Judge Thomas D. Wingate by blocking the seizure orders issued by the Judge Wingate for the Internet gambling domain names. Judge Michelle M. Keller, in her majority opinion, found that Internet domain names for online gambling web sites were not illegal "gambling devices" as defined by Kentucky law, as had been claimed by attorneys representing the Kentucky, in their attempt to take control of the domain names from their owners. Judge Keller stated “[I]t stretches credulity to conclude that a series of numbers, or Internet address, can be said to constitute a "machine or any mechanical or other device...designed and manufactured primarily for use in connection with gambling." Judge Keller further stated. "We are thus convinced that the trial court clearly erred in concluding that the domain names can be construed to be gambling devices."

Judge Jeff S. Taylor, also writing for the majority, added that the Commonwealth could not seek a civil forfeiture based on a criminal statute when there had been no criminal proceeding. Since there had been no criminal proceeding or conviction against any of the Internet domain name owners, the Commonwealth could not take control of their property.

Plaintiffs in the action were iMEGA and the Interactive Gaming Council. John Fitzgerald, executive director of the Interactive Gaming Council said, “As a result of the appeals process an informed and judicious decision has been made, which confirms our original views on these proceedings. IGC members are pleased and we stand committed to continuing our advocacy of a regulated online gaming industry.”

After Multiple Delays, A Watered Down UIGEA is in Effect

A Quick Look Back

President George Bush made it official on Oct. 13, 2006, when he signed the Port Security Bill. The Senate majority leader at the time, Bill Frist (Republican-Tennessee), had attached anti-Internet gambling language to the port security measure several hours before Congress adjourned on Sept. 30 for its election recess. The language generally followed the language of the Unlawful Internet Gambling Enforcement Act (UIGEA) that had been passed by the House in July 2006. But the Senate had not even held hearings on the measure.

What Now?

The fact remains that most members of Congress do not count Internet gambling as a top priority. And, there is consensus among many legal experts that the act has not prohibited anything that was not already illegal. Nonetheless, UIGEA regulations take effect January 19, 2009. And needless to say the timing couldn’t be worse as American Banks are in no position to take on unfunded mandates for the Federal government.

While credit card companies and financial institutions are now required by UIGEA to begin designing systems and implementing controls to block illegal internet gambling transactions, many legal experts agree that what is “illegal” has not been clearly defined. The American banking institutions have until December 1st to finalize these new controls.

Huge Budget Deficit Spawns More Proposals for Expanded Gambling in New York

As noted in our December newsletter, New York’s $15 billion budget deficit has already spawned proposals from representatives of both political parties for expanded gambling. The latest such proposal is embodied in a bill (A00219) which, if passed by both houses of the Legislature, would authorize up to three privately owned casinos in Sullivan County (the Catskill area). Authorization would require local approval, and distribution of the proceeds would be determined by the Legislature, except that the local governments affected would be reimbursed for reasonable costs “attributable to the conduct of casino gaming.”

And the Same in New Jersey, as Proposal for Video Lottery Terminals at Race Tracks Is Resurrected Yet Again

Like the proverbial vampire that cannot be killed once and for all, the perennial proposal to introduce machine-based gaming into New Jersey’s four race tracks has been resurrected yet again. With some Republican support as well, Democratic State Senator Richard Codey is supporting a bid to place thousands of video lottery terminals (VLTs) at the tracks, as a means of saving the State’s $1.1 billion horse-racing industry. Not surprisingly, Atlantic City casinos are closely watching the debate. Under an agreement reached last year, Atlantic City casinos agreed to pay $90 million to New Jersey tracks over the next three years in exchange for keeping them out of the video slot business. Competition from race track VLTs could wipe out millions of dollars in profits at Atlantic City casinos, which could not come at a worse economic time for the casinos. The ultimate fate of the proposal remains unclear.

iMEGA Case, The US 3rd Circuit Court of Appeals, Possible Oral Arguments in April

The US 3rd Circuit Court of Appeals is asking the parties of their availability for oral arguments as early as April 2009. iMEGA, the original plaintiff, has appealed a US District Court’s ruling in which iMEGA challenged the constitutionality of the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA), which prohibits US financial institutions from processing illegal online gambling wagers. Judge Mary Cooper (US District Court, Trenton) accepted iMEGA's associational standing to challenge the UIGEA on the behalf of its members and the Internet gambling industry, but upheld UIGEA against the constitutional challenge.

Catania Gaming Consultants Associate Professor Joseph M. Kelly Fantasy Sports Expert

Professor Joseph Kelly, an associate of Catania Gaming Consultants will make a presentation at the annual meeting of the Fantasy Sports Trade Association in St. Petersburg Beach, Florida on January 27, 2009. Fantasy Sports, as the law of several countries including Germany, Israel, Great Britain, Australia, Sweden, Italy and other, applies will be the topic of his presentation. A copy of the presentation will be available on our website www.cataniagaming.com on January 27, 2009.

Senator Kyl Still Adamant About Prohibiting Online Gambling

At the confirmation hearing for Attorney General Designate Eric Holder before the Senate Judiciary Committee Sen. John Kyl (R-AZ) – who has long opposed all forms of Internet gaming in the United States - questioned Mr. Holder regarding his commitment to enforcing the UIGEA and supporting its implementing regulations. Alluding to the “pernicious nature of Internet gambling,” Kyl secured assurances from Holder that, if confirmed as Attorney General, Holder would aggressively enforce the UIGEA and oppose efforts to stop or modify the recently enacted UIGEA regulations.

Youbet Moves to Re-Enter US Market

The advanced deposit wagering site Youbet.com announced that it has made progress in regaining access to tracks across the US. For the first time since 2007, its customers will be able to wager on races at Gulfstream Park in Hallandale Beach, Fla., Laurel Park near Baltimore and Washington, D.C., and Oaklawn Park in Arkansas. The company also expects that its members will soon be able to wager on every major track in the US and Canada. Youbet also anticipates that, for the first time since 2006, members will be able to wager on all three Triple Crown races.

Pennsylvania Trial Court Holds That Texas Hold ‘Em Poker Is a Game of Skill

Dismissing a prosecution for violation of Pennsylvania’s gambling laws, a trial court has ruled that the very popular game of Texas Hold ‘Em poker constitutes a game in which skill predominates over chance (Commonwealth v. Dent (Ct. Common Pleas, Jan. 14, 2009)). The court applied a four prong “dominant factor test,” analyzing whether: (1) Each player had the possibility of exercising skill and sufficient data to make an informed judgment; (2) each player possessed the skill (even in varying degrees) and had the ability to exercise that skill; (3) each player’s skill and efforts sufficiently governed the results; and (4) the standard skill was known by the players. It is not known whether the government will appeal the decision, which is well-reasoned and based on substantial academic and mathematical analysis.