Gaming Law "In the News" ...

A Catania Consulting Group Client Newsletter May 13, 2008

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

Congressmen Express Opposition to UIGEA Regulations

House Financial Services Committee Chairman Barney Frank, along with Subcommittee on Domestic and International Monetary Policy Chairman Luis V. Gutierrez and Ranking Member Ron Paul, and Rep. Peter King, former Chairman of the Homeland Security Committee, sent letters to Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke, regarding the regulations of the Unlawful Internet Gambling Enforcement Act (UIGEA).

The letters follow an April hearing held by the Subcommittee on Domestic and International and Monetary Policy examining the proposed UIGEA regulations, where representatives from the Federal Reserve, the Treasury and the industry made clear that regulations from the UIGEA are vague, confusing, burdensome, and generally unworkable. As a result, Chairman Frank along with Rep. Ron Paul, introduced new legislation, H.R. 5767, which would prohibit the implementation of UIGEA regulations and which has recently obtained a number of new co-sponsors. The members wrote: “We believe it would be imprudent for you to devote additional agency resources to this Sisyphean task, especially as we intend to vigorously pursue legislation to prevent the implementation of these regulations.”

Casinos Have Valid Creditor Status in Bankruptcy

In In re Jafari, (2008 U.S. Dist. LEXIS 28913, April 7, 2008) the federal district court of Western Wisconsin concluded that a high-rolling gambler, who filed bankruptcy, could not set aside over a million dollars in gambling debts to Caesar’s Palace and Wynn Las Vegas. The federal court concluded that Nevada, the casino’s location, and not Wisconsin, the debtor’s domicile, had the most significant relationship with the gambling transactions. Thus, Nevada law applied.

The federal court reversed the decision of the bankruptcy court which held that under Wisconsin law gambling debts were unenforceable. The court also concluded “….it is neither necessary or appropriate for this court to venture into that tangled thicket of moral judgment and public policy. The thorny questions presented in this case relate not to gambling, but to federal and state choice-of-law principles.” Interestingly the bankruptcy decision had cited Catania Consulting associate, Professor Joseph M. Kelly’s article, “Caught in the Intersection Between Public Policy and Practicality: A Survey of the Legal Treatment of Gambling Related Obligations in the United States”, 5 Chap. L. Rev § 7, 122 (Spring 2002)

Tax Charges against BetonSports Founder May Be Dismissed

A federal Magistrate Judge in Missouri has recommended that the District Court dismiss a number of tax evasion and obstruction charges against the founder of BetonSports, Gary Kaplan. Kaplan was indicted in 2006 by a federal grand jury in Missouri for racketeering, conspiracy and fraud arising from the operation of the Costa Rica-based business. Kaplan was later arrested in the Dominican Republic.

The grounds for the recommended dismissal of Kaplan’s tax charges are fairly technical, dealing with the specific wording of the relevant tax statutes. Significant charges against Kaplan still remain, however. As stated by Joe Kelly, professor of business law at SUNY College in Buffalo, New York, and an Associate of Catania Consulting: “The federal magistrate recommended counts 14-22 of the indictment be dismissed - but that still leaves important counts of RICO, Internet gambling and conspiracy.” Kaplan’s legal team has filed motions to dismiss the more serious charges as well, but those motions have not yet been resolved.

Article Worth Reading

One of the best recent articles on U.S. Internet gambling was written by Jacob Sullum in the libertarian journal, REASON, June 2008. In his thorough analysis, Sullum interviewed leading Internet gambling experts, including Joseph Kelly of Catania Consulting. Sullum concludes that the Unlawful Internet Gambling Enforcement Act (Oct.2006) is both an absurd and unenforceable piece of congressional legislation. More importantly, perhaps, federal prosecution attempts for the last several years have tended to discourage reputable financial providers from accepting U.S. customers which "increases the potential for fraud and money laundering". The article also refers to a recent Harvard Medical School study that concluded that less than 1% of sports bettors were "heavily involved bettors with large losses". Thus, the doomsday warnings of Internet gambling opponents are unfounded.

Some Bets Are Off
The strangely selective and self-defeating crackdown on Internet gambling
Jacob Sullum
reason | June 2008 |

Tropicana Entertainment Files for Bankruptcy

Tropicana Entertainment, the parent company of the Tropicana gaming properties, has filed a petition in federal court for Chapter 11 bankruptcy protection. This follows the loss of the company’s New Jersey license late last year, and comes as the New Jersey casino is being offered for sale by its conservator. The bankruptcy does not involve the New Jersey casino, but includes the parent company’s casinos in other states. Some of Tropicana’s bondholders are calling for the ouster of William Jung and the installation of a professional manager.

Canadian Gaming Summit: Frank Catania on Future of Online Gambling Regulation

Frank Catania appeared on an expert panel with regard to online gambling at the Canadian Gaming Summit on May 1st. The recent interest in the subject of online gambling throughout Canada provided an opportunity to address various regulatory models available to policy makers and gaming regulators, if they intend to move forward with regulation of the online gaming space.

The presentation, prepared on behalf of the Interactive Gaming Council, www.igcouncil.org, considered the potential regulation of online gaming as well as the technology available to assist in effective regulation. The panel discussion also addressed concerns with regard to a regulatory model that would adopt a system reliant on state run monopolies, the existing gaming model in Canada.

Washington State Gubernatorial Candidate Opposes Online Poker Ban

Washington State Democratic gubernatorial candidate Dino Rossi expressed his strong opposition to that state's felony law banning online poker in comments made during a recent radio interview. "I never would have signed that bill," said Rossi. "Because actually, they made it a crime for someone playing poker online on their computer. They made it a crime that's equal with child pornography. Now, a felony will mess up your life for a very long time. You have some college kid that's playing poker online and you're giving him a felony for that? It doesn't make sense. It doesn't fit the crime." When asked whether he would support a measure reversing the ban, Rossi also noted that he "would sign legislation that would overturn it, certainly."

VLTs in New York City Soon?

VLTs at racetracks in New York State will be taking a major step forward when the State decides on who will be granted the go ahead to build a major entertainment center, including a racino with over 4000 VLTs at Aqueduct Racetrack. The decision is expected shortly and will be one of three competitors, Hard Rock owned by the Seminole’s of Florida, Delaware North Companies, or the Mohegan’s of the Connecticut Mohegan Sun Casino. This will bring legal gambling to the Big Apple in the Borough of Queens. VLTs are not slot machines, but who knows what the Empire State has in store for gamblers in the future. Professor Joseph Kelly, an associate of CCGI says, “Who ever gets the bid will make an absolute fortune.”

Canadian Policy Maker Shows Interest in Online Gambling

Roy Cullen - the federal Member of Parliament (MP) for Etobicoke North – has publicly expressed his interest in a Private Member Bill (PMB) that would appear to coincide with the goals of the United States Congress’ Unlawful Internet Gaming Enforcement Act (UIGEA).

While a PMB would have the ability to amend the criminal code if passed, PMBs are scheduled using a lottery-type system with every member of Parliament assured an opportunity to introduce a bill before any member would have the opportunity to introduce a second PMB. Under the parliamentary system, a PMB is unlikely to reach Third Reading to get passed into law. That being said, Mr. Cullen is a respected member of the Liberal caucus, and should not be underestimated. Cullen’s interest in Internet gaming is driven by an interest in protecting the Canadian horse racing industry, with Woodbine racetrack being within his voting district.

Interestingly, Mr. Cullen has also announced that he will not seek re-election, and therefore is less likely to be a successful shepherd of any prohibitory legislation.