Gaming Law "In the News" ...
A Catania Consulting Group Client Newsletter July 21, 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
Catania Gaming Consultants Associated with New Law Firm
Catania Gaming Consultants will henceforth be associated with a new law firm, Catania, Ehrlich & Suarez (CES). In addition to Frank Catania and Gary Ehrlich, both of whom are with Catania Consultants, the members of the firm will include Frank Catania, Jr., who, prior to joining was the senior partner in the law firm of Catania and DiBrino and Esther Suarez, who has represented several county and municipal bodies.
CES will be a full-service law firm in New Jersey, and will assist Catania Gaming Consultants as required.
iMEGA Challenge to UIGEA Heard by U.S. Court of Appeals
iMEGA’s challenge to the Unlawful Internet Gambling Enforcement Act (UIGEA) was argued before the U.S. Court of Appeals for the Third Circuit in Philadelphia. The lower court had granted standing to iMEGA to represent the interests of its members, but upheld UIGEA against all constitutional attacks.
Based on the argument, especially the questions asked by the court, legal observers expect that UIGEA will be upheld. The judges appeared skeptical about the argument that UIGEA is unconstitutionally vague, and even more resistant to the claim that iMEGA could assert the rights of players or that such players have any First Amendment rights of association or privacy in gambling. The most telling sign that the argument did not go well for iMEGA is that the U.S. attorney ended his argument early, in the absence of any further questions from the court.
Payment Processor Challenges U.S. Government Freeze of Accounts Paying Winnings To Poker Players
As noted in our June newsletter, federal prosecutors in New York had asked four American banks to freeze accounts in excess of $30 million containing payments owed to online poker players. The accounts belonged to two companies, Allied Systems and Account Services, which process payouts on behalf of the poker sites.
Account Services has now filed an action in federal court in San Diego, seeking return of all funds seized with and without warrants from the company’s California bank accounts. The government has never fully explained the basis or timing of the seizures, and has yet to lodge any civil or criminal charges against Account Services.
The Poker Players Alliance, an advocacy group for online poker and poker players, indicated that it planned to file a motion with the court to participate in the case on the side of Account Services.
Comprehensive Problem Gambling Act Introduced in U.S. Congress
Rep. Jim Moran (D-VA) has introduced legislation to address problem gambling in the United States. The bill, H.R. 2906, is called the Comprehensive Problem Gambling Act of 2009. One of the co-sponsors of the bill is Rep. Barney Frank (D-MA).
The bill would allocate $71 million over five years for problem gambling public awareness, research, and treatment. The Substance Abuse and Mental Health Services Administration would be charged with overseeing the program. The National Council on Problem Gambling supports the legislation, which is among the first of its kind. H.R. 2906 was referred to the House Committee on Energy and Commerce.
Hearings on Internet Gambling Bill Face Delay in U.S. Congress
Hearings on H.R. 2267, the bill introduced by Rep. Barney Frank (D-MA) to legalize and regulate Internet gaming in the U.S., have been delayed due to the press of other business related to the economic crisis. It appears now that the bill will not be discussed until September at the earliest.
Rep. Frank has received growing support for his online gambling legislation. To date, he has thirty-five co-sponsors for the bill, from both sides of the aisle.
No Clarity on Potential Licensure for Former U.S.-Facing Online Gaming Operators
In our April newsletter, we noted that a non-prosecution agreement entered into “by PartyGaming may pave the way for more such deals by other publicly traded Internet gambling companies which have done business in the US previously, but which may be seeking to ‘clear their records’ in anticipation of the potential future legalization of one or more forms of Internet gambling in the US.” But in public statements, industry executives disagree on whether licensure for former U.S.-facing operators is a realistic possibility, even assuming settlements with the government.
H.R. 2267 contains a cryptic provision (§ 5383(d)(3)(D)) which seems to mandate licensure denial to any applicant that “is delinquent in filing any applicable Federal or State tax returns or in the payment of any taxes, penalties, additions to tax, or interest owed to a State or the United States.” Although the meaning and intent of this provision are not entirely clear, it is possible that government licensing agencies could conclude that an operator that had U.S. players at any time was doing business here, and should have been paying federal, and possibly state, taxes. Such a construction would favor U.S. license applicants over foreign operators.
Moody's Negative on U.S. Casino Industry Recovery
In a report on the American gaming industry, the bond rating service Moody’s told clients it had a negative outlook for the U.S. casino business over the next 12 to 18 months. Moody's said trends that began in 2008 have not shown any "tangible signs" of stabilization, and that gaming's biggest risk is the possibility that consumers will further reduce discretionary spending over the next 18 months. "We do not assume that because gaming demand declined along with the economy, it will return to pre-recession levels once the economy improves," the company said.
European Commission Rejects Belgian Online Casino Regulations
In a case that illustrates the pitfalls of protectionism in a global, borderless industry, a review by the European Commission (EC) of proposed online casino regulations in Belgium found the measures in violation of EU trade agreements and standards. The review was conducted at the request of the European Gaming and Betting Association.
The EC found Belgium’s new online gambling laws invalid in a number of areas, particularly insofar as the regulations would require all online casino operators to be established within the country. Other problems found by EC during its review include the imposition of criminal sanctions against patrons of foreign Internet casinos licensed in the European Union, a restriction on services, and an unjustified cap on licenses.
Belgium was also prepared to enforce its nationalistic policy by requiring Internet service providers to block foreign online gambling sites, a procedure already rejected by the EC in its decision against France's proposed online gaming laws. Both Belgium and France must submit replies to the EC regarding the disputed regulations before enacting the proposed laws. If the EC concerns are not addressed, the EC has the right to begin the process of seeking infringement penalties.
Slot Machine Legalizations in Midwest States May Spur More
Legislation has been enacted in two states in the Midwestern U.S. which will legalize and authorize the operation of slot machines. In Illinois, bars and taverns throughout the state will be allowed to add three video poker and video blackjack machines, which would add up to anywhere from 25,000 to 50,000 games by next year. In Ohio, each of the state's seven racetracks will be permitted to add up to 2,500 video lottery terminals, for a total of 17,500 machines.
This is good news for slot machine manufacturers and related businesses, and may spur more legalization in neighboring states seeking to prevent the outflow of gaming and tax revenue.
