Q&A: Representative Dan Winslow

Posted on May 4, 2012 by j.yarker

Rep. Dan Winslow, MA.

eGR North America talks to Rep. Dan Winslow, of Massachusetts about the potential of regulated online gambling in the state, and how close it is to becoming reality

What prompted you to become interested in introducing online gambling legislation?

Recently, and after much debate, Massachusetts decided to stick its toe in the gambling water and legalised casino and slot gaming. Around that time in November 2011 we had a budget debate and I filed an amendment for internet poker as part of the state’s budget. The state budget debate order precludes any amendments affecting gaming. So I simply filed it to get it noticed and start conversations about internet poker as an opportunity for Massachusetts.

The amendment was ruled ‘out of order’ but it gave me the opportunity to have some very significant discussions about the issue. Soon after was the Department of Justice opinion of the 1961 Wire Act, the first positive signal by the federal government that intrastate gaming opportunities could exist in the US. My hope now is that the House will include this in an economic development bill, which would be a huge step forward. If not, I plan to file it as an amendment and that would be done some time in the next few months. The biggest barrier would have been the decision whether or not to have gaming at all.

What is the size of the potential egaming market in Massachusetts?

Massachusetts is the number one state for lottery sales. For a very small state with a population of just over six million people we make almost US$4bn of lottery revenue a year, so clearly this is a state of people that are willing to take a chance on games of chance. We have a lot of potential in terms of talent here, with a great wealth of high-tech talent in the state.So, there are significant revenue and job opportunities as well as consumer protection provisions that we aren’t taking full advantage of to the fullest extent now allowed under federal law.

Do you favour a state-by-state approach, or see opportunity to create state compacts?

I think state-by-state is the best way to do it. This is because the barriers to entry are much lower. I absolutely believe that we will see intrastate compacts, like we have seen with lotteries, because the precedent is there and it seems like a logical extension.

How soon could online poker sites be up and running in the state?

The treasurer’s internet gaming taskforce intends to have its report done by 1 December of this year. The legislative session begins anew in January 2013. I wouldn’t be surprised to see legislation considered now but ultimately it takes these things a while to go through legislative processes. Intrastate internet poker on the table in Massachusetts next year wouldn’t be a surprise.

What form would the licensing procedure take in Massachusetts?

There are two possible models. One would be regulation through the state lottery commission. The proposal that I put into play is under the Massachusetts Gaming Commission, which is the agency that overlooks casino and slots where there are currently rigorous standards for assuring integrity and in-depth background checks. Because of that I prefer to see the Gaming Commission do that role, because they will be equipped to do the exact same level of scrutiny as they currently do for casinos and slots.

The licensing costs are all subject to future discussions. For purposes of my amendment I propose three ‘Class 3’ internet licences with a minimum fee of $10m, minimum duration of ten years and a 25% gross gaming revenue tax but to have that offset from the licensing fee. So the first $10m of revenue would be tax free until you got your licensing fee back.

Ohio could add black period to internet sweepstake cafe legislation

Posted on May 1, 2012 by j.yarker

Lawmakers have the option of adding moratorium to block new venues opening for one year.

Ohio lawmakers are considering introducing a delay on new internet sweepstake cafes opening, as legislation that would see the gaming businesses become state-regulated is considered in the Senate.

The delay – that would forbid any new cafes opening for a year – could be added to House Bill 386 that was introduced by state Senator Joe Schiavoni in an effort to regulate existing cafes. If successful, the legislation would see such cafes placed under the oversight of the Ohio Gaming Commission.

Currently operating outside of state regulations, the cafes allow customers to take part in online sweepstakes games in exchange for purchasing ‘internet time’ or phone cards.

Internet cafes have become an increasingly prominent issue in the states with regards to online gambling, with venues in Michigan shut down earlier this month.

A yearlong moratorium would allow authorities more time to pass separate legislation regulating the cafes, but Senator Schiavoni has expressed opposition, saying: “It’s frustrating for me because it means we’re saying we’re not ready to do this so we’re just going to push it off until later.”

Social gaming and regulated gambling: a good fit?

Posted on May 1, 2012 by j.yarker

By Behnam Dayanim is a partner with the law firm of Axinn, Veltrop and Harkrider LLP, and co-chairs its litigation and regulatory practice.

Everyone, it seems, believes that legalisation and regulation of internet gambling in the US lies just around the corner. Among those eyeing potential opportunities in the sector are social gaming companies. Social gaming’s creativity in developing attractive games for the mass public is unmatched, but the gambling sector presents a very different sort of challenge.

Here are four considerations that no doubt social media companies are considering carefully in determining whether to jump into the gambling market.

Innovation versus regulation. In their current environments, social gaming operators are free to innovate as they see fit, developing new and exciting games designed to entice ever-larger numbers of players. A regulated gambling operator, on the other hand, requires regulatory approval for new games. In many cases, the types of internet gambling that can be offered will be strictly limited. Social gaming’s ever-present desire to be first with the new twist to its existing offerings will run headlong into the need for regulatory examination.
Ease of play versus required identity verification. Again, in the social gaming world, a key concept is ease of play. It must be straightforward for a consumer to begin play, and all are welcome, generally regardless of age or location. By contrast, with regulated gambling, detailed identity, age and location verification will be required. A gambling operator also will need to keep tabs on players to protect against compulsive activity. All of these limitations are foreign to the social gaming company – and, in some cases, run counter to its corporate DNA.
Play money versus real money. Social gaming has very little to do with money. The player herself generally does not anticipate receiving her money back or winning new money as a result of play. Regulated gambling is all about money which carries with it a number of complications. A regulated operator must maintain a robust anti-money-laundering compliance programme, incur reporting obligations to state and federal authorities and implement a secure and reliable set of payment processing mechanisms.
Privacy versus scrutiny. A senior officer or director of a social gaming company today is not used to close governmental scrutiny. Oh, many social gaming companies have been subject to government scrutiny of their business activities. But few executives have endured searching scrutiny of their private lives – their financial histories, criminal records, personal habits and the like. That marijuana bust 20 years ago? It will be disclosed.

Do these considerations mean that social gaming companies ultimately won’t dip their collective toe into the regulated gambling waters? I don’t think so. The potential opportunities in regulated gambling are lucrative, and someone will make the attempt – either in partnership with a regulated operator or independently. But they should not underestimate the obstacles or believe that, because the games are similar, the business challenges will be as well.

Campos plea deal accepted

Posted on April 20, 2012 by t.washington

Motivations of US government in accepting misdemeanour plea had been queried by Judge Lewis Kaplan.

Utah banker John Campos, one of 11 individuals indicted on Black Friday, has had his guilty plea accepted by Judge Lewis Kaplan.

Campos (pictured) had initially pleaded guilty to a single misdemeanour charge, a deal accepted by the United States authorities, but Judge Kaplan had initially refused to accept it before receiving an explanation as to why the government was “walking away from the case”.

A former part-owner of SunFirst Bank in Utah, which entered receivership last November, Campos’ plea deal was submitted in the same week as that of fellow indictee Chad Elie, but only Elie’s was accepted at the time.

This week saw Preet Bharara, United States Attorney for the Southern District of New York, submit a letter to Judge Kaplan defending the government’s stance, stating that the misdemeanour relates to Campos “causing a bank… to process illegal gambling transactions,” and explaining “That is what the defendant principally did in this case.”

In the letter, published by Utah newspaper the Salt Lake Tribune, Bharara goes on to add that “The guidelines stipulated in the plea agreement is effectively the same as the range would have been had the defendant pled guilty to all five felony gambling charges against him in the original indictment.”

It also notes that Campos’ role was “fairly minor” and that “Unlike the other defendants, most of whom made millions from their illegal conduct, Campos received only $20,000 ($4,500 of which he kept) as a direct payment for poker processing.

Finally, it explains: “Unlike all but one of the other defendants, Campos was never charged with any bank or wire fraud offense relating to the disguising of gambling transactions.”

Following the acceptance of the agreement Campos has been barred from the banking industry for life, whereas such a ban would have otherwise required a separate proceeding from the Federal Deposit Insurance Corporation.

This is also cited in the letter from Bharara among the justifications for accepting the plea deal, as well as a “slightly more viable good faith agreement” than some other defendants on the grounds that he may have been “Plied…with multiple legal opinions regarding the alleged legality of poker processing” both by the poker companies and by their agents (such as Elie).

Campos had – along with Elie – been due to stand trial on 9 April but this trial was subsequently adjourned following the plea deals of the pair, even before that of the banker was accepted.

Six of the 11 Black Friday defendants have entered guilty pleas, with those yet to do so all tied to one of Full Tilt Poker, PokerStars and Absolute Poker. Brent Beckley, head of payments with Absolute, is the only individual directly tied to any of the three poker companies to have pleaded guilty.

Tom Victor

LGA signs MoU with Ontario regulator

Posted on April 18, 2012 by j.yarker

Malta’s LGA in memorandum of understanding with Ontario’s AGC

Malta’s Lotteries and Gaming Authority (LGA) has signed a bilateral memorandum of understanding with the Alcohol and Gaming Commission (AGC) of Ontario.

Under the terms of the agreement the two regulators will exchange information on eligibility assessments of applicants as well as compliance and regulatory assurance activities with respect to gaming.

The MoU also includes the possibility of joint, cooperative or collaborative inspections, investigations and enforcement activities.

The LGA said in a statement that “Malta and Ontario will contribute to the development of joint operational and technical standards for gaming, testing and certification of equipment and software”.

The MoU was signed by Reuben Portanier, CEO of the LGA and Jean Major, registrar of the AGC.

Cali Senators ready compromise bill

Posted on April 12, 2012 by t.washington

Lawmakers ready amendments as tribal groups argue for licence fee reduction and exclusion of racetracks

California Senators Rod Wright (pictured) and Darrell Steinberg will amend and re-introduce a compromise bill later this month in a bid to appease a number of powerful tribal casinos and card rooms, eGaming Review has learned.

A number of large tribal casinos and card rooms, as well as other interested parties, have voiced their concerns over Senate Bill 1463, including the type of organisation that would be allowed to obtain a licence, and the cost of the licence fee itself. As a result several Californian policy makers are known to be preparing a series of responses to these objections with amendments and a compromise bill set to be announced later this month.

The bill was introduced in February this year, stating that “eligible entities” would be entitled to apply for 10-year licences to offer online gambling, although this would be poker-only for the first two years.

A source close to the legislation told eGR that the bill authors will meet in the next two weeks to discuss potential amendments, and that while it is a “give and take process”, Senator Wright’s primary concern is “what benefits the State of California”.

“Some of the folks are pitching amendments that only benefit them – whether it’s to lower the licence fee or to extend the timeframe for the credit with respect of the fee,” the source said.

The legislative session in California ends on 31 August and if the bill has not been finalised and passed by that date it will have to begin the process again next year. Final amendments to the bill are likely to be announced towards the end of April, along with several non-contentious clarifications. “Some of these are easy fixes,” the source explained. “The main issues are where the bill’s authors are going to have to decide how far they are willing to go in terms of compromise.”

Several tribal casinos have claimed licence eligibility should be strictly limited to tribes and licenced card clubs. As it stands the bill also allows for racetracks and advance-deposit wagering providers, which some tribes claim do not have a place in the online poker market.

It is thought this is an issue that Senator Wright is unlikely to budge on, and is he likely to argue that racetracks are currently the only entities experienced in taking online bets and that they need the funds to compete with “racinos” – tracks in states that offer regulated gambling.

According to the source, one undisclosed interested party has requested an amendment to extend the existing three-year period in which the US$30m licence fee is paid to the state claiming this is too much of a financial burden, and asking for these payments to be spread over the length of the proposed 10 year licence.

“I can’t imagine [Senator Wright] would go for that, but he [Wright] may counter with some kind of proposal,” the source said. “He may feel that a five-year timeframe is more reasonable to allow the licensee sufficient time [to pay the fee]. This is a costly endeavour the operators are getting into and, if they are successful, then the state is going to be successful.”

Other interested parties are reportedly concerned about a provision in the bill which calls for a review of the terms of the licence after three years, arguing there should be no set review whatsoever. “Their feeling is that, as an operator, if things aren’t going as well as expected, and the state’s 10% gross revenue tax is proving too high – they will just go back to the legislature and ask for it to be lowered,” the source added.

Past efforts to legalise online gambling in California have failed, however SB 1463 is seen to have the right amount of political backing to prevail, while at the same time the state urgently needs to find additional revenue to plug its $9.2bn budgetary deficit.

Pennsylvania could privatise state lottery

Posted on April 3, 2012 by t.washington

Online ticket sales among measures considered by Governor Tom Corbett.

Pennsylvania Governor Tom Corbett is considering outsourcing the Keystone State’s lottery services to a private software supplier.

The Republican politician, who has been in office for little over a year, confirmed that the prospect of online ticket sales is included among measures the state is considering introducing later this year.

Pennsylvania’s lottery is the sixth largest in the United States based on revenue, and has been running since 1971.
Corbett’s comments come just weeks after Maine lawmakers introduced an online lottery bill of their own.

Meanwhile the Illinois lottery, which began online sales last month, announced that last week’s overall sales of more than $94m both online and offline broke the state’s 22-year record.

Bill to regulate internet cafe sweepstakes introduced in Ohio

Posted on March 30, 2012 by j.yarker

Bill would see cafes facing licence fees of more than US$25,000 a year

A bill to regulate sweepstake betting in internet cafes has been introduced by Ohio state senator Joe Schiavoni.

Schiavoni introduced the bill on 28 March, proposing to put internet cafes put under the oversight of the Ohio Gaming Commission.

Currently, customers in the cafes buy time on the computers and are given ‘sweepstake points’. Software on the computers resembles a slot machine, allowing them to win prizes or money.

The legislation would require inspections of the software and operators, licensing and regulation and prominent display of the game odds on the game terminals themselves. As one of the provision, licence fees can be expected to be more than US$25,000 a year.

Schiavoni told the TribToday.com – an Ohio online newspaper – that: “The purpose of the bill isn’t to shut these businesses down. It’s to regulate them like any other gaming facility.”

In April, state Representatives Nan Baker and Marlene Anielski targeted internet cafes with a bill that sought to eliminate the cash prize aspect of sweepstakes.

Schiavoni’s bill follows several other states South Carolina and Florida which have moved to outlaw gaming in internet cafes.

Interactive Gaming Council urges OLG to regulate online gambling

Posted on March 30, 2012 by j.yarker

Gaming body issues statement to Ontario Lottery and Gaming Corporation arguing the case for urgent egaming regulation

Canada’s Interactive Gaming Council has urged the Ontario Lottery and Gaming Corporation (OLG) to regulate online gambling, arguing it is needed to better protect players and boost tax revenue for the province.

All gambling in Ontario, which is facing a deficit of CA$15bn, is conducted and managed through the OLG.

However the popularity of online gambling, and lack of related regulation in the province, has seen it lose out on huge potential tax revenues. Canadians already gamble an estimated $1bn through offshore operators each year.

The OLG has declared its intentions to enter this space in 2013, issuing a $450m contract for private suppliers.

The IGC said in a statement that regulating Ontario’s egaming industry would “provide legal clarity for Canadian players and online gaming companies with Canadian customers, harmonise standards with other leading jurisdictions to enhance consumer protection and provide additional tax revenue opportunities for governments in these challenging economic times”.

It added: “Online gaming is an activity that people are enjoying in great numbers. The IGC is not advocating in favour of an expansion of gaming on the internet – that ship has sailed, so to speak, as it is an activity that is already being undertaken here in Canada, as it is around the world. Governments in other jurisdictions have embraced this market and have established successful open market regulatory regimes.”

The IGC also referred to the UK Chancellor’s budget announcement last week, in which the point of consumption tax was introduced, replacing a tax on the point of supply – in an effort to claw back revenue from offshore operators.

Sportingbet makes final payment to DoJ

Posted on March 27, 2012 by t.washington

Operator finishes up non-prosecution settlement with final US$6m payment

Sportingbet has made a final payment of US$6m to the US Justice Department (DoJ), as per a settlement reached in 2010 over alleged illegal internet gambling. With the announcement of the final payment, Sportingbet also declared that it was reviewing opportunities to re-enter the market.

In exchange for a settlement payment of US$33m, the DoJ had agreed not to prosecute the operator and its units for any crimes – apart from tax violations – concerning activity with US customers from 1998 to 2006.

Chief executive Andrew McIver (pictured) said in a statement: “This final payment formally closes any risk which the company may have faced from its former activities in the US.”

McIver also said that he saw several opportunities to re-enter the US market after the recent DoJ opinion concerning the Wire Act, and that they were reviewing these.

Last month saw the chief executive confirm to eGaming Review that Sportingbet was in “advanced discussions” with a potential US partner which, if completed, would prompt the operator to apply for relevant egaming licences stateside.