casino lawyer spring-2013

8/10/2019 Casino Lawyer SPRING-2013

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CasinoLawyerSHAPING THE FUTURE OF GAMING LAWSHAPING THE FUTURE OF GAMING LAW VOLUME 9 NO. 1

SPRING 2013

INTERNATIONALMASTERS

OFGAMING LAWPUBLICATION

TheCompulsive GamblerWorkingin the Gaming Industry

GamingLawyers&Ethics:Current EthicalIssues for the

In-house GamingAttorney

Ethical Musings ofa Casino Lawyer

TRIBAL GAMING:Effects of Patchak Indian Gaming Looking Up

PLUS:

The state of Gamblingin the United States,

United Kingdom, Greece,the EU and beyond

NEW

DEVELOPMENTSGLOBALGAMING

IN


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IMGLOfficers

J. Kelly Duncan President

Jones Walker, LLPNew Orleans, Louisiana, USA+1 504 582 8218

[email protected]

Joerg Hofmann Vice President

MELCHERS law firmHeidelberg, Germany

+49 6221 1850 [email protected]

Jamie Nettleton Secretary

Addisons Commercial LawyersSydney, Australia

+612 8915 [email protected]

Michael E. Zatezalo Treasurer

Kegler, Brown, Hill & Ritter Co., L.P.A.Columbus, Ohio, USA


Douglas Florence Sr. Vice President,

Affiliate Members

AvigilonLas Vegas, Nevada, USA

T: +1 702 683 6016

[email protected]

Keith C. Miller Vice President,

Affiliated Educators

Drake University Law SchoolDes Moines, Iowa, USA


Tony Coles Immediate Past President

Jeffrey Green Russell LimitedLondon, United Kingdom


Melissa Triplett Executive Director

International Masters of Gaming LawBoulder, Colorado, USA


J. Kelly DuncanPresident

www.gaminglawmasters.com

Joerg HofmannVice President

Jamie NettletonSecretary

Michael E. ZatezaloTreasurer

Douglas Florence Sr.VP Affiliate Members

Keith C. MillerVP Affiliated Educators

Tony ColesImmediate Past President

Melissa TriplettExecutive Director

INTERNATIONAL MASTERS OF GAMING LAW


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Contents

Features

SPRING 2013VOLUME 9 ISSUE 1

About the Cover:New Developments

in Global Gaming

4 Message fromthe President

By J. Kelly Duncan

6 Letter from the EditorBy Sue McNabb

34

The Compulsive GamblerWorking in the Gaming Industry

By Arnie and Sheila Wexler

5 Members in the News

Gaming Law & Regulators

7 IAGR Creating Multi-JurisdictionalBusiness Form to Streamline

Application Process

By Susan Hensel

New Developmentsin Jurisdictions:

International

8 European Commission

Is There Regulatory Change

Ahead?By Tony Coles

12 UK Reforms

Proposed

changes in

gambling law

may yield

unintended

consequences

By Thomas

Logan

United States

14 Kentucky Update:Instant Racing

By Kerry O. Irwin

and Laura DAngelo

16 New Jersey:

Lets Make A Deal

By Cory Aronovitz,

Robert Foltman and

Keenan Ballo

Native American Gaming

18 Update:Effect of Patchak on

Tribal Trust Lands

By Heidi McNeil Staudenmaier

and Harsh P. Parikh

20 Indian Gaming Looking Up

By Alan P. Meister, Ph.D.

Gaming Lawyers & Ethics

23 Current Ethical Issues for the

In-house Gaming Attorney

By Barth F. Aaron

28 Ethical Musings

of a Gaming Lawyer

By Cristina Romero de Alba

Departments

Columns

4

6

30

31

30

Casinos In Greece:Where the games began

By William Thompson, Ph.D.

34

12

16


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Message from the President

4 CASINO LAWYER SPRING 2013

>>

On The Forefront of Gaming Law

S

haping the Future of Gaming Law is not just a

slogan. The members of the International Mas-

ters of Gaming Law are on the forefront of de-

velopments in gaming law as the gaming industrycontinues to evolve throughout the world far beyond the tradi-

tional bricks and mortar casinos of twenty-five years ago. Cur-

rently with 285 members from thirty-eight countries and

thirty-three states and territories of the United States, the

IMGL, as the preeminent gaming law education and network-

ing organization in the world, continues to grow. The IMGL

Membership Committee currently is in the process of vetting

applications of strong candidates from around the world who

wish to join our roster of distinguished members.

PAST EVENTS

IMGL Autumn Conference in LondonLast October, the IMGL hosted 167 delegates from twenty-fourcountries (Australia, Bulgaria, Canada, Curacao, Cyprus, Den-mark, France, Germany, Greece, Italy, Ireland, Isle of Man,Luxembourg, Malta, Netherlands, Norway, Singapore, Slove-nia, Spain, South Africa, Sweden, Taiwan, United Kingdom,United States). The conference offered a stimulating exchangeof ideas by our distinguished panelists and moderators fromthirteen countries, as well as those in the audience, with respect

to topics ranging from online gaming and social gaming to theimportance of branding in driving consumer interest and en-hancing outside investment in the gaming industry.

IMGL Member Reception at ICECo-hosted with Jeffrey Green Russell Limited

An important benefit of being a member of IMGL is the manyevents that the organization hosts for its members and guestsat international gaming expositions around the world. The im-mensely popular IMGL Member Reception at ICE, co-hostedwith Jeffrey Green Russell Limited and the future receptionsdescribed below are ones not to be missed if possible.

As I mentioned in my January message, invitations to thejoint IMGL - JGR reception in connection with ICE are highlysought after. This years reception at the Haymarket Hotel wasno exception with over two hundred guests from many of thetwenty-four countries represented at the London Autumn Con-ference as well as Aruba, Belgium, Gibraltar, Israel, Mexico,Netherlands Antilles and Peru.

FUTURE EVENTS

IMGL Spring Conference in MontrealMay 8-10 at the InterContinental Montreal

Conference Co-Chairs, Cookie Lazarus of Lazarus Charbon-neau and Murray Marshall, General Counsel, Kahnawake Gam-ing Commission and the planning committee are actively

engaged in developing what promises to be an outstanding con-ference with speakers from around the world. I am pleased thatIMGL will be returning to Canada for its Spring Conference. Ialso am excited about the host hotel. Located in historic andbeautiful Old Montreal, the InterContinental Montreal was thewinner of the Ulysses Trophy for best hotel in Montreal in2010 and 2011.

IMGL Member Reception at G2E AsiaMay 22 from 5:30 pm7:00 pm at the Portofino Restaurant

at the Venetian MacauCo-hosted with GLI

Co-hosted with Gaming Laboratories International (GLI), all

IMGL members and their guests are invited to attend our re-ception at the Portofino Restaurant at the Venetian Macau. Thisreception has proven to be an excellent means to enhance thereach of IMGL in this part of the world where the gaming in-dustry has experienced unprecedented growth.

IMGL Member Reception at G2E Las VegasSeptember 24

An always festive and well-attended event, the IMGL receptionduring G2E provides an excellent venue for leaders in the gam-ing industry to get together.

J. Kelly Duncan

By J. Kelly Duncan


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CASINO LAWYER SPRING 2013 5

IMGL Autumn Conference in OsloOctober 1-4 . Co-located at the Grand Hotel with the International

Association of Gaming Regulators (IAGR)

At the request of the International Association of Gaming Regulators(IAGR), IMGL will be co-locating its conference with that of the IAGRAnnual Conference in Oslo, Norway. The IMGL Autumn Conferencewill immediately follow the IAGR Annual Conference and will take placefrom October 1 - 4, 2013. Both the IMGL Autumn Conference and theIAGR Annual Conference will be held at themajestic Grand Hotel in Oslo,which is the site of the annual awarding of the Nobel Peace Prize. TheIMGL Autumn Conference, whose Co-Chairs are Joakim Marstrander ofDeloitte in Oslo, Norway and Henrik Hoffman of Anderson Partners inDenmark, willprovide its attendees an unprecedentedopportunity to meetwith gaming regulators from around the world in both social settings andduring conference sessions.

IMGL Member Reception at EiGOctober 8, 2013. Co-hosted with GamingLaw.EU

IMGL once again will co-host in Barcelona with members ofGamingLaw.EU a reception in connection with the European iGamingCongress & Expo (EiG). This an nual reception closely follows ourAutumn Conference, thereby facilitating attendance by IMGL mem-

bers from around the world.

IMGL PublicationsAnother significant benefit afforded the members of IMGL is theopportunity to publish in and receive the following IMGL publica-tions: UNLV Gaming Law Journal, Casino Lawyer, European GamingLawyer, La Ley del JuegoandCanadian Gaming Lawyer. These outstand-ing publications target gaming jurisdictions globally and each provide avehicle by which our distinguished members further gaming educationwhile enhancing their own reputations in the gaming industry.

IMGL Website

Finally, I would be remiss if I did not talk about the robust IMGLWebsite found at: www.gaminglawmasters.com. This is an importantresource for anyone involved in the gaming industry. Please make surethat you send to our Executive Director ([email protected])your profile and photo for posting on your individual member listing aswell as articles you have written and information about your practice andactivities for posting in our Member News section. I encourage you toexplore our Website. You will find it most useful and, with initiativescurrently in the works, it will only be getting better.

I look forward to seeing many of you in May at our Spring Confer-ence in Montreal.

MEMBERSIN THE NEWS

Santiago Asensi

Santiago Asensi of Asensi Abogados in Spain washonored at the IMGL Autumn Conference in London

on 12 October. He was presented with the PresidentsAward by J. Kelly Duncan. The Presidents award is

given by the IMGL President to an individual who is

not an IMGL officer in recognition of the awardeesoutstanding service to the IMGL. Mr. Asensi chaired

the Madrid Autumn Conference in 2010 and is the

co-editor of IMGLs Spanish language magazineLa Ley del Juego. He has also assisted in the planning

of numerous IMGL Member Receptions at EiG as a

member of both IMGL and GamingLaw.eu. Uponreceiving the award, Mr. Asensi thanked Mr. Duncan

and also Dr. Wulf Hambach of Hambach & Hambachin Germany for being his mentor and encouraginghim to join the IMGL.

Galanda Broadman, PLLCGalanda Broadman, PLLC, has received a prestigious

Tier 1 ranking in the 2013 Edition ofU.S. News-Best LawyersBest Law Firms, in the arena of Native

American Law, a ranking determined from a combina-

tion of Galanda Broadmans clients impressivefeedback and the high regard that lawyers in other

firms in the same practice area have for [the] firm.

In addition, named partner Gabriel S. Galanda

was named toThe Best Lawyers in Americain thepractice areas of both Gaming Law and Native

American Law, based on an exhaustive and rigorouspeer-review survey comprised of more than 4 million

confidential evaluations by the top attorneys in the

country. Gabe has now been selected toThe BestLawyers in Americafrom 2007 to 2013.

Todd F. McTavishTodd F. McTavish, the former General Counsel of

Video Gaming Technologies, Inc., has moved to

Multimedia Games, Inc. in January 2013 and is now

Multimedia Games Senior Vice President, GeneralCounsel & Chief Compliance Officer. In his new role,

Mr. McTavish will oversee the companys legal affairs,licensing function and all compliance matters.

Roger ParkesRoger Parkes left his position as Betfairs director of

group compliance to establish a consultancy business

with former colleague Malcolm Bruce. The two haveset up Gambling Integrity Services to provide advice,

expertise and training in all aspects of consumer

protection, including compliance, AML and corporateresponsibility.

Continued on page 13


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Letter from the Editor>>

New Developments in Jurisdictions

International Masters of Gaming Law andthe editor ofCasino Lawyerthank its mem-bers and others who support IMGL publica-tions with timely and educational articles, as

well as through advertisements. With your con-tributions, our stellar publications continue to pro-

vide information and updates to the gamingcommunity on important legislation, jurisprudenceand market developments.

The gaming world recently lost a leadingscholar and dear friend, Professor William Ead-ington. Professor Eadingtons contributions tothe gaming industry are immense. Notably, he de-veloped the University of Nevadas InternationalConference on Gambling and Risk Taking, a gath-ering of scholars from around the world on rele-vant issues in gaming jurisdictions. ProfessorEadington will be missed, but his legacy in the ac-ademic studies of gaming will continue.

The spring issue features jurisdiction profilesfrom the United States, Europe, and Indian gam-ing. A pair of articles addresses ethical issues facedby gaming lawyers. The first article includes anexcellent and thought-provoking discussion ofethical issues faced by in-house gaming counsel.The second article has an international bent, con-sisting of personal reflections on ethical issues en-countered by a gaming practitioner in LatinAmerica and Spain.

Continuing with international topics, imme-diate past IMGL president Tony Coles provides anupdate on the European Commission and regula-

tion of online gaming. Casino Lawyerincludes an-other excellent article on reforms in the UnitedKingdom related to remote gambling regulationsand consequences of abolishing certain jurisdic-tional exemptions afforded to licensees. ProfessorWilliam Thompson continues the internationalvoyage with an historic overview of gambling de-velopments in Greece, where the games began.

Returning to the United States, the springissue includes two articles relevant to Indian Coun-try. The recent Supreme Court decision inPatchakhas considerable impact on efforts to take land intotrust for Indian Tribes. The Patchakdecision is the

subject of an article by IMGL past president Heidi

McNeil Staudenmaier. Dr. Alan Meister offers areport on his popular yearly economic study of In-dian gaming.

Casino Lawyeralso has a thought-provokingarticle on a creative means to transfer a right toallow sports betting from a jurisdiction that pos-

sesses an exemption from the federal ban on sportsbetting to a jurisdiction that wishes to use that ex-emption. As they say in the industry, the proposaloffers a win-win alternative.

A feature article from the International Asso-ciation of Gaming Regulators for the spring issuediscusses IAGRs efforts to streamline the applica-tion forms for gaming licenses in multiple jurisdic-tions. IAGR will also provide an update on thisprocess at its September conference in Oslo, Nor-way, which is immediately followed by the IMGLautumn conference.

Finally, IMGL members Arnie and Sheila

Wexler discuss the challenges facing industry em-ployees who have or develop a gambling problem.Editors note: The information in the Wexler article isbased on the diagnostic criteria in DSM-IV, soon to bereplaced in May of 2013 by DSM-V which will add anew category of behavioral addictions, comprised solelyof gambling disorders. The effects- if any- of thischange to the diagnostic manual on suits filed againstthe industry by gamblers who have behavioral addictionsremain to be seen.

Again, the editor ofCasino Lawyerappreci-ates the contributions to the spring issue andwelcomes future articles and advertisements in your

continuing support of IMGLs publications.

Sue McNabb

Sue McNabb has worked with the Louisiana legislature, servedas an Assistant Attorney General for the Louisiana Departmentof Justice and currently works with state government. She hasan extensive background in corporate law in the private sectorwhere she worked as General Counsel of an INC 500 Companyand as Vice President of Administration with a national not-

for-profit corporation. Prior to that, she taught at LouisianaState University in Baton Rouge.

She has served as vice chair of the Governmental Sectionof the American Bar Association and served on multiple com-mittees with the Baton Rouge Bar Association. She served on theboard ofdirectors of the National Council on Problem Gambling.

She can be reached at [email protected]

By Sue McNabb


SHAPINGTHE FUTURE

OF GAMING LAW

Casino Lawyeris published two tima year by the International Masters

of Gaming Law. It is distributedto more than 25,000 gaming

professionals around the world.

VOLUME 9 ISSUE 1

2013 International Masters of Gaming Law.All Rights Reserved. Casino Lawyer is a regis-tered trademark of the IMGL. No portion of thispublication may be reproduced without ex-pressed written permission of the Publisher.Not responsible for typographical errors.

I M G L O F F I C E R S

J. Kelly DuncanPresident

Joerg HofmannVice President

Jamie NettletonSecretary

Michael E. ZatezaloTreasurer

Douglas Florence Sr.

VP Affiliate MembersKeith C. Miller

VP Affiliated Educators

Tony ColesImmediate Past President

www.gaminglawmasters.com

INTERNATIONAL MASTERS OF GAMING LAW

CasinoLawyer

EXECUTIVE DIRECTORMelissa Triplett

EDITORSue McNabb

CONTRIBUTING WRITERS

Barth Aaron

Cory Aronovitz

Keenan BalloTony Coles

Laura DAngelo

Robert Foltman

Susan Hensel

Kerry O. Irwin

Thomas Logan

Alan P. Meister, Ph.D

Harsh P. Parikh

Cristina Romero de Alba

Heidi McNeil Staudenmaier

William N. Thompson, Ph.D.

Arnie Wexler

Sheila Wexler

DISTRIBUTION

AD SPACE RESERVATIONS

Contact Melissa Triplett at

[email protected] or

+1.303.449.9955


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GAMING REGULATORS

Business entities often find themselves facinga myriad of application forms to be filedwith various gaming jurisdictions whenapplying for gaming-related licenses.

To streamline the application process for busi-ness entities, in early 2012, the International Associ-ation of Gaming Regulators (IAGR) established a

Multi-Jurisdictional Business Form (MJBF) Work-ing Group to develop a form whichwould standardize the categories ofinformation to be provided by busi-ness entities. Once the MJBF is im-plemented, we envisage thatbusiness entities will only need tocomplete a single form (with rele-vant riders that are specific to par-ticular jurisdictions) for submissionto IAGR member jurisdictions thataccept the MJBF.

The MJBF initiative builds on

Multi-Jurisdictional Personal His-tory Form that is currently availableon the IAGR website atwww.iagr.org. That form is com-monly used by numerous gaming

jurisdictions throughout the world.One of the most frequent re-

quests I have received from our members and the in-dustry is for the creation of a Multi-JurisdictionalBusiness Form, said Susan Hensel, President ofIAGR and Licensing Director, Pennsylvania GamingControl Board. We have made great progress towardthatgoal inthe last year and are looking forward to in-

troducing a form that will improve the application ex-perience for both the business entity submitting thedocument and the regulator receiving it.

The working group, which is led by Lau PeetMeng, IAGR Vice-President and Chief Executive,Singapore Casino Regulatory Authority, has devel-oped the current draft of the MJBF as an electronicsmartform which allows the applicant to completethe form at any stage without the need for Internetaccess. The draft MJBF will allow applicants toprovide new information where required, and hasan encryption feature ensuring that confidential

information within the form remains secure.

While many IAGR member jurisdictions havecontributed to the form and some industry feedbackhas been provided, in order for the MJBF to beaccepted and used, it will be crucial for regulators inadditional gaming jurisdictions to work together onthe information to be presented in the MJBF. We arealso seeking to obtain expanded feedback from

industryrepresentatives on the usability of the form.To that end, we would like to inviteall interested parties to email theCasino Regulatory Authority ofSingapore which is consolidatingfeedback on behalf of IAGR [email protected] to obtain acopy of the current draft of the MJBF and to provide yourcomments.

Once a final draft has beencompleted and adopted by regula-tory jurisdictions, IAGR plans to

develop an independent, confiden-tial database system which IAGRwill make available to operators tosecurely hold the operator datanecessary to generate applicationforms. Operators would have solecontrol of access to their own data.

We envision creating a system that will allowa company to generate a customized application formfor different jurisdictions using the data it has lodgedin the various data categories specified in the MJBFand any jurisdictional riders. Equally important, thecreation of the database will enable operators to keepregulators up to date with relevant changes auto-matically rather than more cumbersome individualnotifications jurisdiction by jurisdiction each time,for example, there is a change in key shareholders orpersonnel. said Hensel. We are working to havethe MJBF operational by 2014 and the database inplace shortly thereafter so that countries such asGreat Britain can use the MJBF and database as anintegral part of their proposed remote gamblinglicensing reforms.

An updated version of the form will bepresented for discussion at the IAGR Conference

in Oslo, Norway, in September 2013.

>>

IAGR Creating Multi-Jurisdictional BusinessForm to Streamline Application ProcessBy Susan Hensel

We envisioncreating a system

that will allow a companyto generate a customized

application form fordifferent jurisdictionsusing the data it haslodged in the various

data categories specifiedin the MJBF and any

jurisdictional riders.

Susan HenselPresident of IAGR

and Licensing Director,Pennsylvania Gaming

Control Board


Susan Hensel

Susan Hensel is the Director,

Bureau of Licensing,

Pennsylvania Gaming

Control Board, & President,

IAGR; and Birgitte Sand is

Director, Danish Gambling

Authority, & Trustee, IAGR


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By Tony Coles


>

BackgroundIt may be useful, especially for readersunfamiliar with the structures of theEuropean Union, to set the scene. Thescene involves the twenty-seven MemberStates of the European Union, each ofwhich is a sovereign nation in its ownright. It also involves the relationshipsbetween those twenty-seven MemberStates as governed by the Treatiesestablishing the European Union and the

directives and other utterances emanatingfrom the European Commission, let alonethe jurisprudence of the Court of Justiceof the European Union (see CJEU).Thus, it is not surprising that the scene isa complicated one. As the Commissionitself writes in its paper, each of theMember States is, in principle, free to setits own regulatory policies for onlinegambling, but these policies must alwayscomply with EU law and InternalMarket principles and rules. This

freedom arises as a consequence of theTreaties establishing the European Union,and in particular Article 56 of the Treatyon the Functioning of the EuropeanUnion (which relates to the freemovement of services across theEuropean Union) and Article 49 (whichcovers the freedom for businesses toestablish themselves throughout the EU).

The development of online gamblinghas imposed significant pressures on the

relationship between Member States owndesires for control over gamblingregulation, and their desires for controlover gambling taxation, and their Treatyobligations as members of the EU. Thishas resulted in significant jurisprudencefrom the CJEU where, in a variety ofcases initiated in a number of individualMember States, the compatibility of aMember States national rules with theTreaty obligations of that State has beenchallenged. In a series of judgments, the

CJEU has provided general guidance on

the interpretation of the fundamentalprinciples of the EU Internal Market, sothat the national courts in the relevantMember States can then assess what theCommission describes in its paper as thecircumstances under which restrictivenational gambling laws are justified ongrounds related to the general interest.

Given these EU pressures, and giventhe fast pace of the development of onlinegambling, and the fact that sites can easilyoperate from the EU, with consumers/

players reaching across nationalboundaries to identify sites which attractthem both in terms of the products onoffer and the potential economic benefits,it is not surprising that the EuropeanCommission is involved.

Thus, as stated above, theCommission adopted a Green Paper in theSpring of 2011 which was followed by aperiod of public consultation so as toenable it to seek to understand both theexisting situation in the industry, the way

in which Member States seek to regulateonline gambling, and how the individualpublic policy objectives of each MemberState can be reconciled with its obligationsto the EU so as not to undermine theInternal Market. The Commission hasalso sought to identify whether differingnational regulatory models could co-exist,or whether action is needed at the EUlevel. Because, interestingly, although theonline gambling industry is one of thefastest growingserviceactivities in theEU

European CommissionIs There Regulatory Change Ahead?

NEW DEVELOPMENTS IN JURISDICTIONS: EUROPEAN UNION

EUROPEAN UNION

In October of last year the European Commission issued its paper

on the regulation of online gambling under the title Towards aComprehensive European Framework for Online Gambling. This

paper was eagerly awaited by many in the online gambling industry

and followed the Commissions Green Paper consultation document which

was published in March 2011. Since the release of the Commissions paper

there has been much industry comment on the initiative, along with an

opportunity to reflect on what might happen in the future and what, if any-

thing, this Commission initiative will really mean for the industry.


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it, unlike other service activities, has not hitherto

been the subject of specific pan-EU regulation. Thatthere may be a number of reasons to explain this didnot deter the Commission from grappling with theproblem and proposing what it sees as the wayforward.

The European Commissions Action PlanIn its October 2012 paper, the Commission

identified the need for an improved regulatoryframework governing online gambling serviceswithin the EU as well as the need for greater co-operation between Member States and between EU

institutions. The Commission accepted that issuesraised in online gambling cross Member Statesborders and need to be addressed by harmonisedregulation, but not necessarily by regulation at theEU level.

Thus the Commissions paper, issued with anaccompanying Commission Staff WorkingDocument, identified the key challenges posed bythe co-existence of national regulatory frameworkswithin the Internal Market and answered thosechallenges by identifying five priority areas where itsays that action is required.

Broadly put those six initiatives are:

Ensuring compliance of Member States

regulatory frameworks with EU law.

The Commission is to seek, or perhaps morecorrectly will continue to seek, to ensure that theregulation in each Member State complies with EUlaw. To achieve this objective the Commission plansto take enforcement action against those MemberStates which in its opinion do not currently comply,and it will do this by continuing, or initiating,infringement proceedings. Such infrequent

proceedings are, of course, taken by the Commission

itself where it believes that an individual MemberState is not complying with EU law. The processcan be time consuming since it involves theCommission requesting an individual Member Stateto provide information regarding its regulatory lawand an explanation of justification where there isapparent inconsistency with EU law. Often thisprocess can lead to a reconciliation between theCommissions views and those of the Member State,with changes to its regulations being instituted bythe Member State without further formality. But, inthose cases where exchanges between the

Commission and the Member State result in animpasse, the Commission may take proceedingsagainst the Member State in the Court of Justice ofthe European Union and seek a ruling. Failure by aMember State to comply with a CJEU ruling isexpensive both in terms of the financial penaltiesimposed on a Member State by the Court and also interms of that Member States loss of face with itsEU partners as a good European.

In regard to online gambling regulation theCommission currently has a number ofinfringements proceedings outstanding against

Member States, including Sweden, Germany, theNetherlands, Finland, Hungary and Greece. Itproposes to further accelerate its investigations intothe complaints it receives and to take enforcementaction before the CJEU where necessary.

In its paper the Commission says that it willundertake an on-going review of Member Stateslicensing systems to gauge their transparency so asto ensure the absence of any discrimination againstoperators from outside that State.

Establishing an expert group on gambling.

The Commission is creating an expert group ongambling with representatives from all MemberStates. The plan is for those experts to share theirexperiences, to identify what are the best practicesand to provide advice and expertise on futureinitiatives which may emanate from the Commission.

Enhancing supervision, administrative

co-operation and enforcement.

The Commission regards as a priority theenhancement of co-operation between EU Member

Tony Coles

[email protected]

Tony Coles is a consultant inJeffrey Green Russells Gamingand Betting Department.He is well-known in the leisureindustry for his specialistknowledge of gaming andbetting law. He enjoys aninternational reputation for thestrength of his practice. Clientsspan a range of sizes andsectors and include a number ofinternational household namesin the leisure industry.

Tony regularly lectures toan international audience on

gaming issues and is a frequentcontributor to gaming law

periodicals and journals.He is immediate past presidentof the International Masters of

Gaming Law as well as being amember of the InternationalAssociation of GamingAdvisors, The Society for theStudy of Gambling and theEuropean Association for theStudy of Gambling.

He is a respectedauthority on gaming issues andis the author of the UK and thebetting exchange sections of thewell-knownInternet GamingReport. He is also a memberof the Editorial Board ofGaming Law Review.

Tony Coles can becontacted at [email protected]

The Commission identified theneed for an improved regulatoryframework governing online gamblingservices within the EU as well asthe need for greater co-operationbetween Member States and betweenEU institutions.

Continued on next page


10/36


>NEW DEVELOPMENTS IN JURISDICTIONS: EUROPEAN UNION

States and, especially, between thegambling regulatory authorities in eachof the States. The Commission considersit essential that its policies be successfullyimplemented at both Member State andEU level by the development of closerworking relations between thoseregulatory authorities.

The Commission also proposes toinvestigate the benefits and limitations ofresponsive enforcement measures,including website and financial

transaction blocking, and procedureswhich may require online intermediariesto remove what are identified as illegalgambling offers or to block access tothose offers.

The Commission has said that itconsiders that the possible use of theInternal Market Information System maybe beneficial in this objective.

Protecting consumers, citizens,

minors and vulnerable groups.

The Commission states that it is eager toensure greater protection for consumerswho access online gambling sites,particularly minors (an expression used bythe Commission to refer to those undereighteen years of age, even though incertain Member States young adults abovethat age may also be covered by theregulatory regime applicable to children)and other vulnerable people. TheCommission intends to preparerecommendations for the establishment ofa common set of consumer protectionprinciples which would apply across thesector. It also considers that responsiblegambling advertisements must makeconsumers aware of age restrictions, thefact that gambling can be harmful whennot pursued responsibly, and that risks toplayers can be financial, social and healthrelated. To this end, during 2013 theCommission will prepare recommend-ations for minimum requirements forgambling advertising across the EU.

The Commission also intends toreview recommendations from specialistresearch groups and says that it willconsider initiatives for further researchinto pathological gambling.

Preventing fraud and money

laundering.

Although its assertion may be challengedby many in the industry, the Commissionsays that it associates online gamblingwith online fraud, credit card fraud,identity theft and money laundering. Itregards these problems as beingtransnational and requiring significant co-operation between Member States. It is

therefore considering the possible

extension of the current Anti-MoneyLaundering Directive, which at presentapplies only to casino gaming, so that infuture it would cover all forms ofgambling.

Given that in a number of MemberStates certain issues are addressed by aregulatory requirement that onlinegambling equipment and software becertified, the Commission is to seek toensure consistent standards across the EUand to aim to reduce the administrativeburden which currently arises from theneed for operators to obtain certificationin each Member State, often to differentstandards.

The European Commissionsets standards in the regulationof online gaming

Continued from previous page


11/36

Safeguarding the integrity of sportsand preventing match fixing.

In recognising that match fixing is a threatto the integrity of sporting events, theCommission acknowledges this threat canarise both with and without theinvolvement of sports betting operators.It is well-known that many leading onlinesports betting operators currently havewell established reporting arrangementsin place with the authorities in manysports. These arrangements have led to

the identification of wrong-doing, and theconviction of the wrong-doers concernedwhether sportsmen, administrators orthose accessing a betting site. To expandon this, the Commission intends in 2014 topublish its recommendations for EU-wideanti-match fixing measures and will alsoassist the Council of Europe, theInternational Olympic Committee andother sports bodies to encourage andpromote international co-operation so asto aim to prevent match fixing.

The Way ForwardIn its paper, the Commission says that itintends the actions it has identified andwhich are summarised above to beimplemented promptly. Thus, withintwo years it will produce a reportdetailing whether or not those actionshave proved sufficient to address thechallenges which the Commissionregards as facing online gambling. Ifnot, the Commission is likely to propose

that additional measures are taken.Meanwhile there are on-goingopportunities for those involved in theonline gambling industry, and for thosefrom outside the industry who areinterested in the way in which it develops,to engage with the Commission.Although its paper sets out its currentplans, it would be fair to say that theCommission has not turned its faceagainst any particular solution to on-going issues in the industry.

ConclusionMany have said that the publication of theCommissions paper will not have anyimmediate impact, and it seems to be clearthat this initiative will not result in any, orat least any immediate, pan-Europeangambling regulation. If that evermaterializes, it will be some while hence

and will only arise as a result of muchgreater work at the EU level. However,the continuation of the infringementproceedings against individual MemberStates is likely to ensure that, within aperiod of a few years, those States whichare seriously out of step with EU law willbe found to have adopted new regulatoryregimes. With more than a dozen MemberStates having laws that are almostcertainly out of step with their EU Treatyobligations, it is certain that the

Commission has much work to do inpursuing its infringement proceedings.And the involvement of the Court ofJustice of the European Union is not at allunlikely before this process ends.

Upon the publication of the paper,Michel Barnier, the EU Commissioner forthe Internal Market, promised that theCommission would fulfil its role asguardian of the EU Treaty. But where aMember State indicates plans to change itslaws, and then begins to implement those

plans, the Commission is likely to allowtime for the change. For example, thereare currently infringement proceedingsunderway against the Netherlands, butwith the new Dutch Governments plansto implement changes to the regulationsfor online gambling, it is likely that theCommission will allow opportunities forthese changes to be introduced in a way itregards as satisfactory and only then willit review the changed regime.

Of course, one significant, but not

unexpected, omission from the Commis-sions paper is tax harmonisation. Thelevel of individual gambling taxes in eachMember State is, generally speaking, notan issue to be determined at EU level, butnonetheless it continues to represent asignificant issue for online gamblingoperators. In the writers view any moveto tax harmonisation is a long way off, if itwere ever to appear.

On publication, the paper was greetedby many as representing a significant step

forward towards ending the discrimin-atory regimes in a number of MemberStates, but by others as a bigdisappointment. With the great range ofoperations within the online gamblingindustry, and with the pressures tomaintain existing benefits at one end ofthat range and the entrepreneurialpressures for change and modernisation atthe other, that divergence of opinion canonly be expected. Furthermore one mustnot overlook the significant tax benefits

which gambling provides for the revenuesof many, if not all, Member States, as wellas the political nature of the EUinstitutions.

It may therefore be not at all unlikelythat, five years hence, we will be lookingback at this paper to remind ourselves ofwhat was proposed to happen but which isstill awaited.


Many have said thatthe publication of theCommissions paper

will not have anyimmediate impact,

and it seems to be clearthat this initiative will notresult in any, or at least

any immediate,pan-European gambling

regulation.


12/36


>NEW DEVELOPMENTS IN JURISDICTIONS: UNITED KINGDOM

The rationale for the proposedchanges is stated as being consumer pro-tection and simplification, allowing UKconsumers to deal with UK licensed en-tities and with recourse to the UK regu-latory body. If the UK regulated entityis not operating in a manner that the UKregulator deems appropriate, its licensesand ability to do business in the UKcould be stopped. However, as with all

legislative and policy changes, there areintended and unintended consequences.This article examines the proposedchanges and some of those conse-quences.

Abolition of the white listOne important change proposed by theBill is to phase out the white list and Eu-ropean Economic Area (EEA) exemp-tions. The Act currently prohibitsadvertising services to the UK unless the

operator is based in the EEA (including

Gibraltar) or in the following WhiteListed jurisdictions: Alderney, Antiguaand Barbuda, the Isle of Man and Tas-mania. The proposed changes in the Billwould require all EEA or white list op-erators servicing the UK market to ob-tain a UK operating license. The UKgovernment is looking to provide someprovisional operating licenses to enableEEA and white listed operators to tran-

sition smoothly into the new regime, butno details have been released.In principle, EU law permits an au-

thorised operator in one Member Stateto provide remote gambling services toconsumers based in another MemberState. Member States are still fully enti-tled to opt out on the grounds of pub-lic policy, as we have seen across Europeand require remote operators from otherMember States to obtain a local license.

Ostensibly, the Bill appears to fall

in-line with EU law, as the foundation

for imposing such a restriction is basedon consumer protection and publicorder. The Bill is consistent with theapproach other EU jurisdictions such asBelgium, France and Italy have taken,which all require local licenses to serv-ice their market.

The shift from point of supplyto point of consumptionThe other main change proposed by theBill is a shift from point of supply regu-

lation (i.e. where the remote gamblingoperator is located) to point of con-sumption (i.e. where the consumer is lo-cated). If this comes into force,unamended, all overseas operators willneed a UK operating license in order totransact with, and advertise to, Britishconsumers. This also has a knock-on ef-fect on software providers that serviceremote gambling operators. If their soft-ware is being used by an entity servicingthe UK market, they will require a UK

software operating license.

UK ReformsProposed changes in gambling law may yieldunintended consequencesBy Thomas Logan

UNITED KINGDOM

The Department for Culture, Media and Sport is currently conduct-

ing a review of the Gambling Act 2005 (the Act). The Draft Gam-

bling (Advertising and Licensing) Bill (the Bill) was published in

December 2012 and proposes radical reforms to the current re-

mote gambling regulations in the UK, affecting operators, suppliers and

affiliates. The Bill is currently progressing through Pre-Legislative Scrutiny

by Commons Select Committee with the most recent hearing being held

on February 12. With the coalition government having the majority in the

House of Commons, and the likelihood that the bill will receive support

from opposition too, it is likely that the Bill will come into force without sig-

nificant amendments.


13/36


For UK players,helpfully there is noindication that the player pool will be re-quired to be segregated.

Licensing and compliance costsAnnual UK licensing fees are relativelyconsistent with other white list opera-tors. According to the Bill, operators al-ready in well-regulated jurisdictionsthat can provide the necessary compli-ance information ... will not face signifi-cant increases in licensing costs. The

same cannot be said of current remoteoperators not in white-list jurisdictions.Revenues from licensing fees are ex-pected to only increase by two millionpounds annually; notwithstanding thisthe Gambling Commission has alreadybeen accused of Empire Building byConservative MP, Phillip Davies.

Gambling Duty and TaxSeparately to the Bill, the UK govern-ment has introduced a point of con-

sumption tax for offshore gamblingoperators. This will mean, by Decem-ber 2014, any remote operator servic-ing the UK market will be required topay gambling duty, at 15% on all grossprofits. Under these changes, HMRCwill have new powers to impose crimi-nal sanctions and/or revoke an operat-ing licence for non-payment. As a resultof the duty change, HMRC anticipatesa revenue boost of 70 million in thefirst year, rising up to 270 million in

the following years.Additionally, UK companies aresubject to UK corporation tax on theirprofits, levied at 23% for 2013. This ad-ditional cost would make a major dif-ference to online poker providers costbase unless it can be minimized. Struc-tures where the profits are effectivelyoffshored have however come undersignificant scrutiny recently, and theUK Government is exploring optionsto close these loopholes.

When will this happen?The question is when the Bill will hit thestatute books. It cannot be feasible forHMRC to revoke offshore remotelicenses; therefore, we can only assumethat these new powers are meant to workin parallel to the Bill. It follows that theBill should become law before theDecember 2014 cut-off, if not earlier.Remarkably, a separate Private MembersBill introduced in June last year (Off-shore Gambling [Amendment] Bill),

which seeks to achieve similar objectivesto the Draft Gambling (Licensing andAdvertising) Bill, aims for a much moreambitious deadline: April 2013.

SummaryThe major impact of the Bill and taxreforms will be to repatriate tax revenuesand remote operators, those who mayhave previously fled to the white listjurisdictions for tax reasons, back to theUK and to widen the net to crack down

on offshore gambling operations.And while operators and software

providers currently servicing the UKmarket should consider the implicationsof these changes and whether or not toobtain a UK operating or softwarelicense in advance, affiliates too need toconsider their own responsibilities in en-suring that the partners they promoteare fully compliant with the new regula-tions, once in place. Affiliates and adver-tising agents of white list and offshore

operators need to add in a layer of duediligence to check that their operatorshave the requisite license in the UK.

Thomas Logan is the Group GeneralCounsel and Legal Director at TotalCompliance. Thomas advises clients in theonline gambling industry in relation tolicensing, business structuring, corporatetransactions, compliance and intellectual

property matters. You can contact Mr

Logan at [email protected]

MEMBERSIN THE NEWS

Britt SingletaryBritt Singletary of Singletary Thrash in Biloxihas been appointed by US District Judge

Carl Barbier in New Orleans to serve as anAppeal Panellist for the final review of allclaims related to the BP Deepwater Horizonoil disaster. Sixteen attorneys from Texasaround the Gulf to Florida were selected.Only two came from Mississippi. BP or theClaimants have the right to appeal an awardfrom the Claims Administrator to the Panel.The Panel decision is final unless JudgeBarbier accepts review. Britt is listed in the2013 Best Lawyers for Gaming and Alterna-tive Dispute Resolution. As a former USMagistrate he has conducted thousands ofsettlement conferences. This appointmentwill be challenging but is also an opportunityto serve the Court in resolving the largestclass action in Americas history.

2013 Edition ofIndian GamingIndustry ReportReleasedIn February, Alan P. Meister, Ph.D., Principal

Economist with Nathan Associates and aCalifornia-based member of IMGL, released

the new edition of his annual Indian gaming

study, theIndian Gaming Industry Report.In its eleventh year of publication, the study

continues to provide comprehensive and up-to-date nationwide and state-by-state dataand analysis on Indian gaming in the United

States. A summary of the studys findings is

included in Dr. Meisters article starting onpage 20 of this issue ofCasino Lawyer.

Recovery Road ExpandsTreatment ServicesRecovery Road has announced its expansionto include treatment of gambling addiction,

providing those living with the illness an

opportunity for recovery. Recovery Road has

leveraged its current model for addictiontreatment and services and added key

personnel, including Arnie and Sheila Wexler,two of the countrys pioneers in treating

compulsive gambling.

The Wexlers bring more than 40 yearsof experience working with compulsive

gamblers and their families to Recovery

Road. Both are Certified Compulsive Gam-bling Counselors (CCGC) and will be instru-

mental in the success of Recovery Roads

gambling addiction program, as well as in thehiring of other certified gambling counselors,

therapists and staff.

Continued from page 5


14/36


NEW DEVELOPMENTS IN JURISDICTIONS: UNITED STATES>

While the Kentucky legislaturecontinues to debate the issue ofexpanded gaming withoutprogress,1 two Kentucky horse

racing tracks Kentucky Downs and EllisPark offer their patrons Instant Racing,or wagering on historical horse races. The

tracks Instant Racing software is housedin a slot machine-like terminal, and thebettor wagers on historical horse racesprovided with limited pastperformance in-formation which does not identify the date,the horse or the track. After placing awager, the bettor is given the option ofwatching the race or immediately viewingthe results and moving quickly to the nextwager. The revenue generated by InstantRacing is substantial from September2011 to December 31, 2012, approximately$228 million has been wagered throughthe machines2 but the legality of thegame in Kentucky remains in question.

Generally, gambling devices like slotmachines are prohibited by Chapter 528 ofthe Kentucky Revised Statutes, but underKy. Rev. Stat. 436.480, the prohibitionsfound in Chapter 528 shall not apply topari-mutuel wagering authorized underthe provisions of Chapter 230, Ken-tuckys horse racing laws. The genesis ofInstant Racing in Kentucky came in late2009 when State Senator Damon Thayer

(R) submitted a request to Attorney Gen-eral Jack Conway (D) to determine the le-

gality of Instant Racing in Kentucky,citing in his request that a 2007 OaklawnPark racetrack report indicated that $17.7million was wagered each month throughits Instant Racing system, and that theamount of wagering had nearly tripledfrom 2004-2006.3 In the resulting Opinion,Attorney General Conway found that In-stant Racing did not qualify as pari-mutuelwagering under then-current Kentuckyracing regulations (which contemplatedlive racing), but suggested that the Com-

mission had the statutory authority toamend its regulations to include InstantRacing in its definition.4

Under Kentucky law, the KentuckyHorse Racing Commission (the RacingCommission) has the authority to prom-ulgate administrative regulations govern-ing and regulating wagering on horseraces under the pari-mutuel system.5 Fol-lowing the Attorney Generals Opinion,the Racing Commission drafted amendedregulations authorizing pari-mutuel wa-gering on both live and historical horseracing.6 In July of 2010, the Racing Com-mission, the Kentucky Department ofRevenue, and a group of Kentucky racetrack associations then brought a declara-tory judgment action in the Franklin Cir-cuit Court asking the court to adjudicatethe legality of the proposed regulations.7

The Family Foundation of Kentucky, avigorous opponent of expanded gaming inKentucky, intervened as Respondent, ar-guing that Instant Racing is not pari-mutuel wagering and thus is illegal

gambling under Chapter 528.After taking judicial notice of the

struggles of, and importance of, the horseindustry in Kentucky, as well as the poten-tial legal and economic harm that could be-fall the racetrack associations should theyproceed without an adjudication of theregulations propriety, Judge Thomas D.Wingate of the Franklin Circuit Court setan expedited briefing schedule.8 Followinghearings on the merits of the case, on De-cember 29, 2010, the Franklin CircuitCourt ruled that the Instant Racing regu-lations were a lawful exercise of the Rac-

ing Commissions authority to regulatepari-mutuel wagering on horse racing andthat the licensed operation of wagering onhistorical horse races was pari-mutuel.Thus, Instant Racing does not contravenethe statutory prohibitions on gamblingfound in Chapter 528 of the Kentucky Re-vised Statutes.9

The Family Foundation appealed, andon June 15, 2012, in a 2-1 decision, theKentucky Court of Appeals reversed thecircuit court, holding that the question ofwhether Instant Racing was truly pari-mutuel wagering was a question of fact,not law (as the circuit court had held), andremanded the case to the circuit court fora hearing and findings of fact.10 The orig-inal Petitioners appealed, and on January11, 2013, the Supreme Court of Kentuckygranted discretionary review.11 Advocatesof Instant Racing have taken the SupremeCourts interest as a positive sign, but, fornow, the legality of Instant Racing in Ken-tucky remains in limbo.

Because Instant Racing in Ken-

Kentucky Update:

InstantRacing

UNITED STATES

By Kerry O. Irwin

and Laura DAngelo


15/36


tucky is only authorized by regula-

tion, not by statute, a legislative en-actment could clarify the legality ofwagering on historical races. In Feb-ruary 2013, House Speaker GregStumbo (D) introduced House Bill416, which was in part designed topay for pension reform for the stateretirement system by utilizing rev-enue from Instant Racing.12 The bill,which passed the House on Febru-ary 27th, has a definition that in-cludes Instant Racing as a type of

pari-mutuel wager.13

Family Foun-dation of Kentucky spokesman Martin Cothran saidTuesday that the language appears to be an attemptto resolve the legality of Instant Racing.14

While the bill passed the House, the Senate hasindicated that it traditionally does not act on anyissue that is currently before the courts.15 And notevery advocate of expanded gaming is in favor ofthe bill, in part because it would cap the revenue that

horse racing would receive from

Instant Racing at $300 million intotal wagers. Representative DavidOsborne (R), who earlier in the ses-sion introduced a constitutionalamendment that would establishseven casino locations and provideup to $100 million a year for anEquine Excellence Fund intendedto support the horse industry inKentucky, expressed such doubts.16

My interest in expanded gamblinghas never been about state coffers,

Osborne stated.17

Its about whatit does for the horse industry.18

Meanwhile, facing legislative indecision on ex-panded gaming, the Kentucky horse racing indus-try in particular Kentucky Downs and Ellis Park has placed a sizable wager on the legality of In-stant Racing. The industry is receiving a payout, butthe results of the race are yet to be determined.19

Kerry O. Irwin is an associate

and Laura DAngelo is a

Partner in the Lexington,

Kentucky, office of Dinsmore

& Shohl, LLP. Both practice inthe areas of equine, gaming

and general corporate law.

Kerry O. Irwin

Laura DAngelo

1 See, e.g., Gregory A. Hall, Casino Bill Filed in Kentucky House, THE COURIER-JOURNAL, February 20, 2013, available athttp://www.courier-journal.com/article/20130219/NEWS0101/302190079/Casino-bill-filed-Kentucky-House (last visited March 1, 2013).2 Tom LaMarra, KY Lawmaker Questions Raid on Instant Racing, THE BLOOD-HORSE, February 28, 2013, available athttp://www.bloodhorse.com/horse-racing/articles/76540/ky-lawmaker-questions-raid-on-instant-racing?source=rss (last visited February 28, 2013).3 Laura DAngelo, Kentucky Update: Instant Racing, CASINO LAWYER, May 2011 (citing Marr, Esther, Kentucky Senator Suggests InstantRacing, THE BLOOD-HORSE, available at http://www.bloodhorse.com/horse-racing/articles/50324/ky-senator-suggests-instant-racing,April 22, 2009 (last visited February 28, 2013)).4 10 Ky. Op. Atty Gen. 001 (January 5, 2010), available at http://ag.ky.gov/civil/opinions/Pages/2010.aspx (last visited February 28, 2013).5 Ky. Rev. Stat. 230.361(1).6 The only wagering permitted on a live or historical horse race shall be under the pari-mutuel system of wagering. 810 Ky. Admin. Regs. 1:011Section 1.7 The Kentucky Horse Racing Commission, et al. v. The Family Foundation of Kentucky, Inc. Civil Action No. 10-CI-1154 (Franklin Cir. Ct.).8 Order Scheduling Briefing at 5,Kentucky Horse Racing Commission et. al v. The Family Trust Foundation of Kentucky, Inc. d/b/a The Family Foundation,No. 10-CI-01154 (Franklin Cir. Ct. July 26, 2010).9 Opinion and Order,Kentucky Horse Racing Commission et al. v. The Family Foundation of Kentucky, Inc., Civil Action No. 10-CI-1154 (Franklin Cir. Ct.,December 29, 2010), available at http://www.bloodhorse.com/pdf/10-CI-1154OpinionandOrder.pdf (last visited February 28, 2013).10 Opinion Vacating and Remanding,The Family Trust Foundation of Kentucky, Inc. d/b/a The Family Foundation v. The Kentucky Horse RacingCommission, et al., No. 2011-CA-000164 (Ky. Ct. App. June 15, 2012).11 Gregory A. Hall, Kentucky Supreme Court to Hear Instant Racing Case, THE COURIER-JOURNAL, January 11, 2013, available athttp://www.courier-journal.com/article/20130111/BUSINESS/301110116/Kentucky-Supreme-Court-hear-Instant-Racing-case(last visited February 28, 2013).12 Gregory A. Hall, Does Stumbo Bill Resolve Instant Racing Court Case? THE COURIER-JOURNAL, February 27, 2013, available athttp://blogs.courier-journal.com/horsebiz/2013/02/27/does-stumbo-bill-resolve-instant-racing-court-case/ (last visited February 28, 2013).13 Id.14 Id.15 Tom LaMarra, KY Lawmaker Questions Raid on Instant Racing, THE BLOOD-HORSE, February 28, 2013, available athttp://www.bloodhorse.com/horse-racing/articles/76540/ky-lawmaker-questions-raid-on-instant-racing?source=rss (last visited February 28, 2013).16 Id.17 Id.18 Id.19 Seemingly in anticipation of a favorable decision on the legality of Instant Racing either in the courts or in the legislature Keeneland RacingAssociation has teamed with Nevada-based Full House Resorts to purchase the Thunder Ridge harness track in Eastern Kentucky. The partnersplan to reinvent the track as a boutique Quarter Horse racetrack with purses boosted by simulcast wagering and Instant Racing. SeeJanet Patton,Keeneland aims to build prime Quarter Horse racetrack near Corbin, THE HERALD-LEADER, February 14, 2013, available at

http://www.kentucky.com/2013/02/14/2517437/exclusive-keeneland-to-build-prime.html (last visited March 1, 2013).

The tracksInstant Racing

software is housedin a slot machine-liketerminal, and thebettor wagers on

historical horse racesprovided with limited

past performanceinformation whichdoes not identify

the date, the horseor the track.


16/36


NEW DEVELOPMENTS IN JURISDICTIONS: UNITED STATES>

The premise is simple enough: Some-

one has an asset that it undervaluesand doesnt use. Someone else cov-ets that asset but has no way of ob-

taining it. The solution, of course, is forthe party that covets the asset to try to buyit from the party that possesses it. Trans-actions such as this happen on a regularbasis in a free-market society. Its consid-ered healthy for business.

Now tweak the scenario. New Jersey,California, New York, even Minnesota,covet an asset that only four states cur-

rently possess: the exemption that wasgranted in the 1992 federal ban on sportsbetting.

The law has been in the news recentlysince the state of New Jersey, under the di-rection of governor and former U.S. At-torney Chris Christie, announced in early2012 that it would allow the states casinosand horse race tracks to accept wagers onsporting events, in direct violation of thefederal ban. The Professional Sports Pro-tection Act, also known as PASPA, is the

legislation that formally bans states other than Nevada, Delaware, Oregon andMontana from allowing wagers on pro-fessional or collegiate sporting events. Atthe time the legislation was passed, theaforementioned four states had some sortof sports wagering scheme already inplace and Congress granted those statesan exemption. The laws primary sponsor,ironically, was former New Jersey senatorBill Bradley, a former collegiate and pro-fessional basketball player.

In order to appease the Atlantic City

casinos, Congress gave

New Jersey one year to im-plement a sports wageringscheme and thus be eligiblefor the PASPA exemption.But the state, thanks tosome maneuvering by Sen-ator Bradley, was unable tooverturn its own law ban-ning sports betting andended up joining the forty-six other states that weresubject to PASPA.

Twenty years later,New Jersey voters over-whelmingly approved ameasure to allow sports betting, and thestate announced its intentions to pressahead despite the federal ban. The statewas promptly sued by the four professionalsports leagues and the governing body ofcollegiate athletics, the NCAA, and onFebruary 28, a U.S. District Court ruledagainst New Jersey, saying the states ini-tiative was in violation of PASPA. The

legal theory that New Jersey was unableto overcome is simple and powerful: theSupremacy Clause. Under the SupremacyClause Article VI, clause 2 of the Con-stitution a state may not enact legisla-tion that is in violation of federallegislation. New Jerseys legislation al-lowing sports betting is in direct violationof PASPA; hence, it violates the Su-premacy Clause and was, correctly underthe letter of the law, struck down.

New Jersey argued that PASPA is un-constitutional for a variety of reasons, al-

leging it violates the Tenth

Amendments state sover-eignty provision, that Con-gress abused its CommerceClause powers and the lawcommands the state toenact or comply with a fed-eral initiative. Those argu-ments were dismissed at thedistrict court level but willlikely be raised again whenthe state formally appeals tothe 3d Circuit Court of Ap-

peals. New Jerseys odds maynot be much better at the ap-pellate level considering that

in 2009 that same court denied Delaware(which, remember, already has an exemp-tion) its plan of expanding its sports wa-gering scheme from a parlay system tosingle-game wagering.

So if New Jersey loses again in the 3dCircuit is it just out of luck?

The state still has two avenues avail-able to it. First, it can lobby Congress to

repeal or amend PASPA. There are twopieces of legislation currently in commit-tee in the House of Representatives thatwould amend the law. One would giveNew Jersey an exemption, the other wouldcreate a window for any state to enactsports betting if it chooses.

At a time in which taxes and tryingto find additional revenue is an obsessionin Washington, framing a repeal oramendment of PASPA on purely economicgrounds as a revenue enhancement hasnthappened. PASPA results in hundreds of

New Jersey:

Lets Make A Deal

UNITED STATES

By Cory Aronovitz, Robert Foltman

and Keenan Ballo

NJ Gov. Chris Christiesays he isnt throwing inthe towel in the fight to

legalize sports gamblingin New Jersey.


17/36


millions of potential tax dollars not beingcollected, not to mention the additional

costs of enforcing the law.The Gaming industry may be among

the few, if only, industries that would wel-come government regulation and taxationif it meant legalized sports wagering. Andyet, the economic impact of moving for-ward has been muzzled by the antiquatedarguments put forth by the sports leaguesin defense of PASPA. Barring a Congres-sional repeal or amendment of PASPA,New Jersey, and any other state that wantedto get into the sports wagering business,

still has another card it could play: BuyOregons or Montanas exemption, or haveeither of those states assign the right toPASPAs exemption to New Jersey.

Under this theory, the exemption thatCongress granted Nevada, Delaware, Ore-gon and Montana in the PASPA legislationis considered a contractual right. Thefour states have a contractual right tooffer sports betting. Contractual rights canbe assigned from one party to another. Aparty can either completely assign the

right or partially assign a right. Under ourexample, Oregon and Montana could sellits PASPA exemption completely, or par-tially assign, or lease it to another state.

Selling or leasing the PASPA exemp-tion would not result, technically, in an in-crease in sports betting, since only fourstates would still be legally entitled to offerit. From that standpoint, it should mattervery little to the federal government whichfour states are exempt. The state acquiringthe exemption would be bound to imple-

ment only the betting scheme that the as-signing state could implement. It could bethat New Jersey would not be able to offersingle-game wagering but instead just aparlay system similar to Delaware. How-ever, a limited version of sports betting ismore than what it can currently offer.

Also, it would be difficult for one ofthe professional sports leagues to challengethe transfer because, again, there wouldntbe a net increase in states thatwould be ex-empt from PASPA. It would still be four.

Most importantly, however, allowing

New Jersey or anotherstate to negotiate with ei-

ther Oregon or Montanato acquire its exemptionwould result in the assetbeing used, unlike the cur-rent situation. It can be ar-gued that by granting theexemptions in the firstplace, Congress did so inorder for the beneficiarystates to use, or continue touse, them. In fact, another argument canbe made that it would be more economi-

cally beneficial for Oregon and Montana tolease the exemptions than to use themwithin their own borders. If either statewas able to negotiate a deal in which itwould receive a percentage of the tax rev-enues generated by sports betting beingoffered at Atlantic City or throughoutCalifornia, the revenue would likely be farhigher than if it offered sports betting it-self, based on larger populations and po-tential customers in New Jersey andCalifornia.

Any income that Oregon or Mon-tana would derive would be pure profitand free from all expenses of regulationand oversight that would be required bylicensing casinos within its borders.Every dollar the states generated by leas-ing its exemptions would be more thanwhat it is currently generating by lettingthe exemption sit idle.

Allowing this sort of transaction be-tween willing parties (in this case sover-eign states) benefits both parties. The

acquiring party is able to obtain an asset ithad little opportunity to acquire by othermeans (barring unlikely Congressional orjudicial action), and the selling party is ableto monetize an asset that was being wasted.

One argument against this proposal isthat states should not be allowed to sell, orlease, rights granted to them by Congress.That, however, is a far grayer area than thebattle New Jersey is currently fighting byenacting a law that is in direct conflict witha federal law. And if selling the exemption

is considered against public policy, then

Congress should revokethe exemptions granted to

Oregon and Montana forlack of use and offer themto states that would makeuse of them.

As much as New Jer-sey wants to claim (cor-rectly)about the unfairnessof PASPA, there is very lit-tle wiggle room for a judgewhen the Supremacy

Clause is so clear and established. It is alsoextremely difficult to get a court to declare a

law unconstitutional that has been on thebooks for as long as PASPA has.

Congress rarely enacts broad, nation-wide legislation while concurrently grant-ing exemptions from that legislation to aselect few states, as was the case withPASPA. That was one of the theories ad-vanced by New Jersey in district court andwill likely reprise before the court of appeals.

By not enforcing PASPA in all fiftystates, Congress is discriminating againststates in favor of the four that were

granted exemptions. The federal govern-ment should not be allowed to further dis-criminate against the states, this time allfifty, who want to negotiate for the sale oruse of that exemption.

Since amending the law does not ap-pear to be on Congress agenda in the com-ing months, and a Constitutional challengeto PASPA appears difficult to establish (andeven if it was established, would only bebinding in the 3d Circuit), allowing the saleor lease of the PASPA exemption from

Oregon and Montana to a willing state notonly is sound business, but a common-sense solution to make use of a law thatreally no longer makes much sense.

Cory Aronovitz is a founding member of the InternationalMasters of Gaming Lawyers, founder of the Casino LawGroup and an adjunct professor of Gaming Law at the JohnMarshall Law School in Chicago.

Robert Foltman is a third-year law student at TheJohn Marshall Law School and a sportswriter and assistantsports editor at the Chicago Tribune.

Keenan Ballo is a third year law student at The JohnMarshall Law School. He is legal intern with The CasinoLaw Group and the host/creator of EverythingGaming/Casino Law Blog.

As much asNew Jersey wants

to claim (correctly)about the unfairnessof PASPA, there is

very little wiggle roomfor a judge when

the Supremacy Clauseis so clear and

established.


18/36


>

L

ast years decisive (8-1) decision bythe United States Supreme Courtin Match-E-Be-Nash-She-Wish

Band of Pottawatomi Indians v.Patchak, 132 S. Ct. 2199 (2012) appearedto be a major blow to tribal gaming.Patchakseemed to open up challenges tofee-to-trust transfers to a broader groupof plaintiffs and significantly extend the

time for filing such suits. Most gamingobservers at the time agreed thatPatchak

would certainly delay development onnewly acquired tribal lands.

Not necessarily. The Secretary of

the Department of Interior (Secretaryor DOI) has indicated a major shift infederal policy to foster tribal economic

development on newly acquired trustlands. Even without Congressional ac-

tion to addressPatchak, the Secretary andthe Bureau of Indian Affairs (BIA) areprimed to continue to transfer land into

trust at a rapid pace. The Courts deci-sion inPatchak, when combined with theSupreme Courts 2009 decision inCarcieriv. Salazar,129 S. Ct. 1058, raises several

complex issues, including (1) whether thelitigation floodgates were opened to ques-

tion newly acquired Indian land trust ac-quisitions, and (2) whether the trust

transfers would remain in limbo duringthe pendency of litigation.

These questions may have been an-

swered by the Secretarys recent attemptsto assuage the detrimental impact ofPatchakon tribal gaming developments.

On June 18, 2012, the SupremeCourt determined that an individual

property owner (plain-

tiff David Patchak) nearthe Gun Lake Bands

Casino had standing tochallenge the Secre-tarys acquisition of

land into trust for theTribe. The SupremeCourts decision con-

sisted of two parts.First, the eight-

justice majority held

that Patchaks claimunder the Administra-tive Procedures Act (APA), 5 U.S.C.

701et seq., was not barred by the QuietTitle Acts Indian lands exception.

The Court determined that Patchak wasnot claiming a right, title or interest inthe land, but rather that the government

was not entitled to any such right, titleor interest in that land. The Quiet TitleAct was therefore not applicable and did

not void the APAs sovereign immunitywaiver. Second, the Court determined

that Patchak had prudential standing to

challenge the Secretarys trust acquisi-tion because Patchaks alleged economic,

environmental, and aesthetic harmsfallwithin the zone ... protected orregulated by the contention that the Sec-

retary violated the Indian ReorganizationAct. At the time, many tribal gamingscholars viewed this decision as a game

changer. Patchakwas initially feared tohinder tribal gaming and economic de-

velopment on newly acquired trust lands.However, the Secretary has attempted to

mitigate some of these harsh effects

through reversal of certain long-stand-ing DOI policies. Prior to the ruling inPatchak, the Secretary would publish anotice of a final decision to take land intotrust for a tribe at least thirty days before

the date of the transfer. If any litigationwas commenced within this thirty-daywindow, the DOIs internal policies en-

couraged it to self-stay any fee-to-trusttransfers until resolution of the pending

litigation.

Based on actions in late 2012 andearly 2013, the DOI may have already

eliminated its self-stay policy. On De-cember 3, 2012, the DOI published itsthirty-day notice in the Federal Register

of its intent to take into trust: (1) a 305-acre parcel on behalf of the North ForkBand of Mono Indians in Madera

County (North Fork Transfer), and (2)a 40-acre parcel on behalf of the Enter-

prise Rancheria of Maidu Indians, inYuba County (Enterprise Transfer).

NEW DEVELOPMENTSIN NATIVE AMERICAN GAMING

By Heidi McNeil Staudenmaier

and Harsh P. Parikh

Effect of Patchak on Tribal Trust LandsUpdate:

Heidi McNeil Staudenmaier Harsh P. Parikh


19/36


Following the public notice,nearby citizens and Indian tribesaffected by the fee-to-trust trans-

fers timely filed separate lawsuitschallenging the Secretarys deci-sion under the APA. Unlike past

practice, the Secretary refused toself-stay either transfer. TheSecretary asserted that his princi-

pal reason for self-stay in priorcases was no longer extant and de-

termined that it was not necessaryto consult the Departments inter-nal procedures set forth in the BIA

Handbook. Specifically, in theSecretarys view, sincePatchakal-lowed suit under the APA even

after land was taken into trust, aself-stay was no longer necessary.

As a result of the Secretarys

change in policy, the plaintiffs inboth cases sought to enjoin the

trust transfers. In both cases, thejudges separately concluded that the land couldbe taken into trust. The courts opined that the

Secretary could unwind the transfer if later or-dered to do so, and therefore the plaintiffs were notirreparably harmed. Nevertheless, the beneficiary

Tribes and the Government are required in bothcases to provide certain notice before undertaking

any physical alteration of the land at issue. Thecourts further warned that the beneficiary tribes

could proceed moving forward with planning theirgambling facilities at their own risk.

The Secretary also has indicated reconsidera-tion of the 30-day public notice requirement.

Earlier this year, the Assistant Secretary of theBIA publicly commented that the DOI is consider-

ing doing away with the 30-day review period tonotify the public of land-into-trust decisions.

While these post-Patchakdevelopments may

mitigate some uncertainties created by thePatchak

ruling, other concerns remain. For instance, eventhough the land will be transferred into trust, the

tribe must determine whether tomove forward with constructionand development on its newly

acquired trust lands or delay majorfinancial investments until the six-year statute of limitation expires.

The Patchakdecision means there isa certain risk that the fee-to-trusttransfer could be undone through

litigation, almost six years later. Assuch, the tribe may opt to resolve

the pending litigation before invest-ing and expending major revenuesfor casino development. In this re-

gard, Patchakstill may mean thatthe time for getting a casino up andrunning is increased, and the costs

are considerably higher.California Senator Diane

Feinstein and Arizona Senator John

McCain remain outspoken critics ofoff-reservation gaming. In a Janu-

ary 31, 2012, letter to the Secretary,Senator Feinstein noted that the Secretarysabrupt change in [self-stay] policy has caught

manyby surprise. She posed several interest-ing questions regarding the DOIs decision toabandon its self-stay policy, including:

Federal liability and indemnity for invest-

ments made by tribe to trust lands

Procedures for unwinding the fee-to-trust

transfer

Consultation with tribes and other stake

holders

While the SecretarysPatchakpatch may

alleviate some of the initial concerns, it also raisesother legal complexities in an uncharted land.Litigation over fee-to-trust transfer is bound to

continue and may hinder economic developmenton newly acquired trust lands.

At the time,many tribal gamingscholars viewed this

decision as agame changer.

Patchakwas initiallyfeared to hinder

tribal gaming

and economicdevelopment onnewly acquired trust

lands. However,the Secretary has

attempted tomitigate some of

these harsh effectsthrough reversal

of certainlong-standing

DOI policies.

Heidi McNeil

Staudenmaier is a senior

partner in the law firm of

Snell & Wilmer LLP, based in

the Phoenix, Arizona office,where her practice emphasizes

Gaming, Federal Indian Law,

and Business Litigation. She is

listed in Best Lawyers in

America for Gaming Law,

Native American Law and

Commercial Litigation and was

named Best Lawyers Gaming

Lawyer of the Year for

Phoenix. She is also included in

Chambers USA for Americas

Leading Lawyers for Business

and Chambers Global for The

Worlds Leading Lawyers for

Business. She is a former

President of the

International Masters of

Gaming Law and holds

leadership positions in the

American Bar Association

Business Law Sections Gaming

Law Committee. She can

be reached at

[email protected]

or 602.382.6366.

Harsh P. Parikh is an

attorney in the law firm of

Snell & Wilmer LLP, basedin Costa Mesa, California.

His practice is concentrated in

commercial litigation, gaming

law and intellectual property

litigation. He represents indi-

viduals, businesses, institutional

and public entity clients in all

facets of litigation in state and

federal courts. Mr. Parikh has

been featured in Casino

Enterprise Management, the

Los Angeles Daily Journal and

the World Online Gambling

Law Report on gaming law

issues. He can be reached [email protected] or

714.427.7408.

Mr. Parikh is also available on

twitter@CAGamblingLawyer.


20/36

By Alan P. Meister, Ph.D.


Despite a sluggisheconomy in 2011,Indian gaming ex-

perienced its sec-ond straight year of growthfollowing its first and only

decline in 2009, which cameas a result of the Great Re-cession. So where does In-

dian gaming stand then interms of its recovery? How

is Indian gaming performing relative to

other gaming segments? And wheredoes Indian gaming go from here?

This article looks to data and find-ings from the recently released edition oftheIndian Gaming Industry Report(2013Edition) to answer these questions.

THE NATIONAL PERSPECTIVEIndian gaming sustained modest growthin 2011. With some gains in gross do-mestic product (GDP), per capita dispos-able personal income, and employment

nationwide and in every state, gamingrevenue grew 3.4% to approximately$27.4 billion.

While the 2011 gaming revenuegrowth rate was still below pre-recessiongrowth rates approximately 15% from2002 through 2005, 10.1% in 2006, and4.1% in 2007 gaming revenue roseabove its pre-recession level. In fact,gaming revenue was at an all-time highin 2011, eclipsing the former peak ofapproximately $26.6 billion from 2008.

Non-gaming rev-enue at Indian gamingfacilities also grew in2011. After two consec-utive years of decline,non-gaming revenuegrew 4.7% to approxi-mately $3.3 billion.Interestingly enough,non-gaming revenueactually outgrew gam-ing revenue in 2011.

This reflects the continuing trend ofadding, expanding, remodeling, andupgrading non-gaming amenities atIndian gaming facilities, and the move-ment continues to improve quality andincrease the breadth and depth ofIndian gaming facilities.

Other segments of the gamingindustry also continued to show signs ofrecovery in 2011 as well. At the nation-wide level, the commercial casino, racino,and card room segments all grew atfaster rates than they did in 2010. WhileIndian gaming grew at approximatelytwice the rate of the commercial casinosegment, which grew at 1.7%, Indiangaming was outgrown by both the racinoand card room segments, which grew ap-proximately 8.1% and 3.7%, respectively.

Amidst their relative performances,Indian gaming continued to gain groundon the commercial casino segment in2011. Indian gaming generated approx-imately 43.5% of all U.S. casino gamingrevenue (i.e., gaming revenue generatedat Indian gaming facilities, commercial

Indian Gaming Looking UpBoth gaming and non-gaming revenue sees secondstraight year of growth

>NEW DEVELOPMENTS

IN NATIVE AMERICAN GAMING


21/36


casinos, and racinos). This was only a slightlysmaller share than the commercial casino segment,which led the way with approximately 45% ofcasino gaming revenue. Racinos generated theother 11.5% of casino gaming revenue.

In addition to having a positive impact onNative American tribes, Indian gaming continuedto make significant contributionsto the U.S. economy. Indian gam-ing facilities, including their non-gaming operations, directlygenerated approximately $29.6 bil-lion in output, supported about339,000 jobs and $12.3 billion inwages, and made over $1.4 billionin payments to non-tribal gov-ernments in calendar year 2011.Indian gaming also led to sec-ondary impacts consisting ofpurchases by Native Americantribes, their casinos, and employ-ees households, as well as the it-eration of purchases by suppliersand their employees households.In 2011, it is estimated that directand secondary impacts of Indian gaming totaledapproximately:

$81.8 billion in output; 686,000 jobs; $26.8 billion in wages; $11.0 billion in federal, state, and local

tax revenue; and

$1.4 billion in direct payments by tribesto federal, state, and local governments.

STATE, FACILITY BREAKDOWNSWhile Indian gaming on a nationwide basis grewin 2011, it did not grow everywhere or grow uni-formly across the country. The performance of In-dian gaming varied widely across gaming facilities,states, and classes of gaming. At the gaming facil-ity level, approximately 65% of Indian gaming fa-cilities experienced growth in gaming revenue in2011, while about 35 percent experienced declines.On the positive side, about 23% of all gaming facil-ities grew 10% or more.

At the state level, gaming revenue growth var-

ied from +26% in Alabama to -3% in New York,with 75% of the states (21 of 28) experiencinggrowth over 2010. The fastest-growing statesafter Alabama were Mississippi, Montana, NorthCarolina, and Oklahoma. The fastest-decliningstates after New York were Oregon, NorthDakota, Connecticut, and Idaho.

The states that made the largest positive con-tribution to nationwide gaming revenue growth in2011 were large Indian gaming states with healthygrowth rates: Oklahoma, Arizona, Washington,and California. One relatively smaller state, Ala-bama, also made a strong contribution toward theoverall nationwide growth of Indian gaming withits continuing growth. The states that made thelargest negative contribution to nationwide Indiangaming growth in 2011 were: Connecticut, New

York, Oregon, Wisconsin, and North Dakota.While the nationwide supply of Indian gaming wassubstantial on the whole, it continued to be veryfragmented across the U.S. There were 242 NativeAmerican tribes operating over 341,000 gamingmachines and 7,700 table games in 460 gaming fa-cilities across 28 states.

Nonetheless, gaming revenue at Indian gam-ing facilities continued to be highly concentratedwithin certain states. In 2011, the largest state interms of gaming revenue at Indian gaming facili-

[email protected]

(949) 474-4955

Alan P. Meister, Ph.D.,

a Principal Economist at

Nathan Associates Inc.,

specializes in the application

of economic analysis to litiga-

tion, regulatory, public policy,and strategic business matters.

He leads the Gaming Industry

and Indian Gaming consulting

practices at Nathan Associates.

Dr. Meister has also conducted

years of independent, scholarly

research on Indian gaming and

authored a number of publica-

tions, most notably his annual

study, theIndian Gaming

Industry Report. His

gaming research and analyses

have been relied upon before the

United States Supreme Court

and a panel of the World

Trade Organization. He also

has been commissioned by the

National Indian Gaming

Commission to independently

analyze the economic effects of

proposed regulatory changes.

Dr. Meister can be reached

at (949) 474-4955 or

[email protected].

For more information on

Nathan Associates, please visit:

www.nathaninc.com.

For more information on

theIndian Gaming IndustryReport,please visit:

www.indiangamingreport.com

.

Continued on next page

Alan P. Meister, Ph.D.


22/36


>NEW DEVELOPMENTS

IN NATIVE AMERICAN GAMING

ties continued to be California, generat-ing $6.9 billion based upon approxi-mately 1.6% growth over 2010. It aloneaccounted for just over 25% of gamingrevenue at Indian gaming facilities na-tionwide. The top two states, Californiaand Oklahoma, generated a combined38% of gaming revenue. Meanwhile, thetop five states, which included Washing-ton, Florida, and Connecticut withCalifornia and Oklahoma, accounted forapproximately 61% of total gaming rev-enue. The level of concentration for the

top 10 states, which added Arizona,Michigan, Minnesota, Wisconsin, andNew York to the top five states, was 86%of total gaming revenue.

Gaming revenue also continued to behighly concentrated among a small per-centage of Indian gaming facilit

casino lawyer spring-2013

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