A09049 Summary:

BILL NOA09049B
 
SAME ASSAME AS S05302-D
 
SPONSORPretlow
 
COSPNSR
 
MLTSPNSR
 
Add Art 14 1400 - 1405, RWB L; amd 225.00, add 225.36, Pen L
 
Allows certain interactive poker games be considered games of skill rather than games of luck; includes definitions, authorization, required safeguards and minimum standards, the scope of licensing review and state tax implications; makes corresponding penal law amendments.
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A09049 Actions:

BILL NOA09049B
 
01/19/2016referred to racing and wagering
05/11/2016amend and recommit to racing and wagering
05/11/2016print number 9049a
06/09/2016amend and recommit to racing and wagering
06/09/2016print number 9049b
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A09049 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                         9049--B
 
                   IN ASSEMBLY
 
                                    January 19, 2016
                                       ___________
 
        Introduced  by M. of A. PRETLOW -- read once and referred to the Commit-
          tee on Racing and Wagering  --  committee  discharged,  bill  amended,
          ordered  reprinted  as  amended  and  recommitted to said committee --
          again reported from said committee with amendments, ordered  reprinted
          as amended and recommitted to said committee
 
        AN  ACT  to  amend the racing, pari-mutuel wagering and breeding law and
          the penal law, in relation to allowing certain interactive poker games
 
          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
 
     1    Section  1.  The  racing,  pari-mutuel  wagering  and  breeding law is
     2  amended by adding a new article 14 to read as follows:
     3                                 ARTICLE 14
     4                             INTERACTIVE GAMING
     5  Section 1400. Legislative findings and purpose.
     6          1401. Definitions.
     7          1402. Authorization.
     8          1403. Required safeguards/minimum standards.
     9          1404. Scope of licensing review.
    10          1405. State tax.
    11    § 1400. Legislative findings and purpose. The legislature hereby finds
    12  and declares that: 1. Under the New York penal law a person  engages  in
    13  gambling  when  he  or  she  stakes or risks something of value upon the
    14  outcome of a contest of chance or a future contingent  event  not  under
    15  his or her control or influence, upon an agreement or understanding that
    16  he  or  she  will  receive  something of value in the event of a certain
    17  outcome.
    18    2. A contest of chance is defined as any contest, game, gaming  scheme
    19  or  gaming device in which the outcome depends in a material degree upon
    20  an element of chance, notwithstanding that skill of the contestants  may
    21  also  be a factor therein. (Subdivision 1 of section 225.00 of the penal
    22  law). Thus, games of chance may involve some skill, but in  those  games
    23  the  level  of  skill  does  not determine the outcome regardless of the
    24  degree of skill employed. See People v. Turner, 165 Misc. 2d  222,  224,
    25  629  N.Y.S.2d  661,  662  (Crim.  Ct.  1995). On the other hand, where a
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD02917-13-6

        A. 9049--B                          2
 
     1  contest pits the skill levels of the players  against  each  other,  New
     2  York courts have found a game to be one of skill rather than chance. See
     3  People  v.  Hunt,  162 Misc. 2d 70, 72, 616 N.Y.S.2d 168, 170 (Crim. Ct.
     4  1994)  ("Played  fairly, skill rather than chance is the material compo-
     5  nent of three-card monte.");
     6    3. Poker in many instances has been defined as a game of skill  and  a
     7  New  York federal court in U.S. v. DiCristina, 886 F. Supp. 2d 164, 224,
     8  assessed that under federal law poker was predominantly a game of skill;
     9    4. New York courts have interpreted New  York  law  to  apply  a  more
    10  rigorous  test  in  identifying a "contest of chance" than is applied by
    11  most states in this nation and  the  courts  have  found  that  where  a
    12  contest  pits  the skill levels of the players against each other, those
    13  games are games of skill and  not  games  of  chance.  Furthermore,  the
    14  courts  have  not  limited  the  legislature's ability to determine that
    15  certain forms of poker should fall outside  the  general  definition  of
    16  gambling since those games are games of skill;
    17    5.  Texas  Hold'em  poker  involves  two cards dealt face down to each
    18  player and then five community cards placed face-up  by  the  dealer,  a
    19  series  of  three, then two additional single cards, with players deter-
    20  mining whether to check, bet, raise  or  fold  after  each  deal.  Omaha
    21  Hold'em  poker  is  a  similar  game, in which each player is dealt four
    22  cards and makes his or her best hand using exactly  two  of  them,  plus
    23  exactly three of the five community cards. These games are considered to
    24  be  complex  forms  of poker which involve player strategy and decision-
    25  making and which pit the skill levels of the players against each other.
    26  As games of skill, these forms of poker do not fall under the definition
    27  of gambling as prohibited by the penal law; and
    28    6. The legislature further finds that as the internet  has  become  an
    29  integral  part  of  society,  and  internet poker a major form of enter-
    30  tainment for many consumers,  any  interactive  gaming  enforcement  and
    31  regulatory  structure  must  begin from the bedrock premise that partic-
    32  ipation in a lawful and licensed gaming industry is a privilege and  not
    33  a  right,  and  that  regulatory  oversight is intended to safeguard the
    34  integrity of the games and participants and to ensure accountability and
    35  the public trust.
    36    § 1401. Definitions. As used in  this  article,  the  following  terms
    37  shall have the following meanings:
    38    1.  "Authorized  game" means Omaha Hold'em and Texas Hold'em poker, as
    39  well as any other poker game that the commission determines is the mate-
    40  rial equivalent of either of those, whether in a cash  game  or  tourna-
    41  ment.
    42    2.  "Authorized  participants" means persons who are either physically
    43  present in this state when placing a wager or who otherwise are  permit-
    44  ted  by  applicable  law,  as  determined  by the commission, to place a
    45  wager. The intermediate routing of electronic data  in  connection  with
    46  interactive  gaming  shall  not  determine  the location or locations in
    47  which a wager is initiated, received or otherwise made.
    48    3. "Core function" means any of the  following:  (a)  the  management,
    49  administration  or  control  of  wagers  on  interactive gaming; (b) the
    50  management, administration or control of  the  games  with  which  those
    51  wagers are associated; or (c) the development, maintenance, provision or
    52  operation of an interactive gaming platform.
    53    4. "Commission" means the New York state gaming commission.
    54    5.  "Division"  means  the division of gaming, established under para-
    55  graph (c) of subdivision two of section one hundred three of this  chap-
    56  ter.

        A. 9049--B                          3

     1    6.  "Interactive gaming" means the conduct of games through the use of
     2  the internet or other communications technology that  allows  a  person,
     3  utilizing  money,  checks,  electronic  checks,  electronic transfers of
     4  money, credit cards, debit cards or any other instrumentality, to trans-
     5  mit  to  a  computer information to assist in the placing of a wager and
     6  corresponding information related to  the  display  of  the  game,  game
     7  outcomes  or  other  similar  information. The term does not include the
     8  conduct of (a) non-gambling  games  that  do  not  otherwise  require  a
     9  license  under  state  or  federal law; or (b) games that occur entirely
    10  among participants who are located on a licensed  casino  premises.  For
    11  purposes of this provision, "communications technology" means any method
    12  used  and  the components employed by an establishment to facilitate the
    13  transmission of information, including, without limitation, transmission
    14  and reception by systems based on wire, cable, radio, microwave,  light,
    15  optics  or  computer  data  networks, including, without limitation, the
    16  internet and intranets.
    17    7. "Interactive gaming gross revenue" means the total of all sums paid
    18  to a licensee from interactive gaming involving authorized participants,
    19  less only the total of all sums paid out  as  winnings  to  patrons  and
    20  promotional  gaming credits; provided, however, that the cash equivalent
    21  value of any merchandise or other non-cash thing of value included in  a
    22  contest  or  tournament  shall  not be included in the total of all sums
    23  paid out as winnings to players for purposes of determining  interactive
    24  gaming gross revenue.
    25    (a) Neither amounts deposited with a licensee for purposes of interac-
    26  tive  gaming  nor amounts taken in fraudulent acts perpetrated against a
    27  licensee for which the licensee is not reimbursed shall be considered to
    28  have been "paid" to the licensee for purposes of calculating interactive
    29  gaming gross revenue.
    30    (b) "Promotional gaming credit" includes bonuses, promotions  and  any
    31  amount  received  by a licensee from a patron for which the licensee can
    32  demonstrate that it or its affiliate has not received cash.
    33    8. "Interactive gaming platform" means the  combination  of  hardware,
    34  software  and data networks used to manage, administer or control wagers
    35  on interactive gaming or the games with which those wagers  are  associ-
    36  ated.
    37    9.  "Internet"  means  a  computer  network  of  interoperable packet-
    38  switched data networks.
    39    10. "Licensee" means a person who is licensed  by  the  commission  to
    40  offer  interactive  gaming,  using  an  interactive  gaming  platform to
    41  authorized participants. A licensee  may  utilize  multiple  interactive
    42  gaming  platforms provided that each platform is approved by the commis-
    43  sion.
    44    11. "Omaha Hold'em poker" means  the  poker  game  marketed  as  Omaha
    45  Hold'em  poker  or  Omaha poker in which each player is dealt four cards
    46  and must make his or her best hand  using  exactly  two  of  them,  plus
    47  exactly three of the five community cards.
    48    12.  "Significant  vendor" means any person who offers or who proposes
    49  to offer any of the  following  services  with  respect  to  interactive
    50  gaming:    (a)  a core function; (b) sale, licensing or other receipt of
    51  compensation for selling or licensing a database  or  customer  list  of
    52  individuals  residing  in the United States selected in whole or in part
    53  because they placed wagers or participated in  gambling  games  with  or
    54  through  an  internet  website  or operator (or any derivative of such a
    55  database or customer list); (c) provision of any  trademark,  tradename,
    56  service  mark or similar intellectual property under which a licensee or

        A. 9049--B                          4
 
     1  significant vendor identifies interactive games  to  customers;  or  (d)
     2  provision  of any product, service or asset to a licensee or significant
     3  vendor in return for a percentage of  interactive  gaming  revenue  (not
     4  including  fees  to  financial  institutions  and  payment providers for
     5  facilitating a deposit or withdrawal by an authorized participant).  The
     6  term  "significant  vendor"  shall  not  include  a provider of goods or
     7  services to a licensee that are not specifically designed  for  use  and
     8  not principally used in connection with interactive gaming.
     9    13.  "Texas  Hold'em  poker" means the type of poker marketed as Texas
    10  Hold'em poker that involves two cards being  dealt  face  down  to  each
    11  player and then five community cards being placed face-up by the dealer,
    12  a  series of three then two additional single cards, with players having
    13  the option to check, bet, raise or fold after each deal.
    14    § 1402. Authorization.  1. The commission shall,  within  one  hundred
    15  eighty days of the date this article becomes law, promulgate regulations
    16  to  implement interactive gaming in this state and shall authorize up to
    17  eleven licenses  to  operate  interactive  gaming  involving  authorized
    18  participants, subject to the provisions of this article and other appli-
    19  cable provisions of law.
    20    2. Applicants eligible to apply for a license pursuant to this article
    21  shall be those entities:
    22    (a)  licensed  by the state pursuant to section sixteen hundred seven-
    23  teen-a of the tax law to operate video lottery gaming and has experience
    24  in the operation of interactive gaming by being licensed in a state with
    25  comparable licensing requirements or guarantees acquisition of  adequate
    26  business  competence  and  experience  in  the  operation of interactive
    27  gaming; or
    28    (b) licensed by the state to  operate  a  class  III  gaming  facility
    29  pursuant  to  article thirteen of this chapter and has experience in the
    30  operation of interactive gaming by being licensed in a state with compa-
    31  rable licensing requirements or guarantees acquisition of adequate busi-
    32  ness competence and experience in the operation of interactive gaming.
    33    3. The commission shall, to the extent practicable, issue licenses  to
    34  multiple  applicants  no  sooner  than one hundred eighty days after the
    35  promulgation of regulations in order to ensure a robust and  competitive
    36  market  for  consumers  and  to  prevent early licensees from gaining an
    37  unfair competitive advantage.
    38    4. No person may operate, manage  or  make  available  an  interactive
    39  gaming  platform or act as a significant vendor with respect to interac-
    40  tive gaming that is offered to persons  located  in  this  state  unless
    41  licensed by the commission pursuant to this article and only those games
    42  authorized by the commission shall be permitted.
    43    5.  License  applicants may form a partnership, joint venture or other
    44  contractual arrangement in order to  facilitate  the  purposes  of  this
    45  article.
    46    6. Any person found suitable by the commission may be issued a license
    47  as an operator or significant vendor pursuant to this article. In deter-
    48  mining suitability, the commission shall consider those factors it deems
    49  relevant in its discretion, including but not limited to:
    50    (a)  Whether  the applicant is a person of good character, honesty and
    51  integrity;
    52    (b) Whether the applicant is person whose prior  activities,  criminal
    53  record, if any, reputation, habits and associations do not:
    54    (i)  pose  a  threat  to the public interest or to the effective regu-
    55  lation and control of interactive gaming; or

        A. 9049--B                          5
 
     1    (ii) create or enhance the dangers of unsuitable,  unfair  or  illegal
     2  practices,  methods  and activities in the conduct of interactive gaming
     3  or in the carrying on of the business and financial  arrangements  inci-
     4  dental to such gaming;
     5    (c)  Whether  the  applicant  is  capable of and likely to conduct the
     6  activities for which the applicant is licensed in  accordance  with  the
     7  provisions  of this article, any regulations prescribed under this arti-
     8  cle and all other applicable laws;
     9    (d) Whether the applicant has or guarantees  acquisition  of  adequate
    10  business  competence  and experience in the operation of licensed gaming
    11  or of interactive gaming in this state or in  a  state  with  comparable
    12  licensing requirements; and
    13    (e)  Whether the applicant has or will obtain sufficient financing for
    14  the nature of the proposed operation and from a suitable source.
    15    7. The commission further shall develop standards by which to evaluate
    16  and approve  interactive  gaming  platforms  for  use  with  interactive
    17  gaming.  Interactive gaming platforms must be approved by the commission
    18  before being used by a licensee or significant vendor to conduct  inter-
    19  active gaming in this state.
    20    8. The commission shall require all licensees to pay a one-time fee of
    21  ten million dollars.  Such fee paid by each licensee shall be applied to
    22  satisfy,  in  whole or in part, as applicable, that licensee's tax obli-
    23  gation pursuant to section fourteen hundred  five  of  this  article  in
    24  sixty  equal  monthly installments, allocated to each of the first sixty
    25  months of tax owed after the licensee has  begun  operating  interactive
    26  gaming  pursuant  to this article. No amounts not required to be used to
    27  satisfy such tax obligation during that period  shall  be  allocated  to
    28  payment of such tax obligation after that period.
    29    9.  Licenses  issued  by the commission shall remain in effect for ten
    30  years.
    31    10. The commission, by regulation, may authorize  and  promulgate  any
    32  rules necessary to implement agreements with other states, or authorized
    33  agencies thereof (a) to enable patrons in those states to participate in
    34  interactive  gaming  offered  by  licensees under this article or (b) to
    35  enable patrons in  this  state  to  participate  in  interactive  gaming
    36  offered by licensees under the laws of those other states, provided that
    37  such  other state or authorized agency applies suitability standards and
    38  review materially consistent with the provisions of this article.
    39    11. Any regulations  adopted  pursuant  to  subdivision  ten  of  this
    40  section must set forth provisions that address:
    41    (a)  Any  arrangements to share revenue between New York and any other
    42  state or agency within another state; and
    43    (b) Arrangements to ensure the integrity of interactive gaming offered
    44  pursuant to any such agreement and the protection of patrons located  in
    45  this state.
    46    12. The commission may delegate its responsibilities to administer the
    47  provisions  of  this article to the division, as it sees fit, except for
    48  its responsibilities to approve licenses.
    49    § 1403. Required safeguards/minimum standards.   The commission  shall
    50  require licensees to implement measures to meet the standards set out in
    51  this section, along with such other standards that the commission in its
    52  discretion may choose to require.
    53    (a)  Appropriate  safeguards  to  ensure,  to  a  reasonable degree of
    54  certainty, that participants in interactive gaming are not younger  than
    55  twenty-one years of age.

        A. 9049--B                          6
 
     1    (b)  Appropriate  safeguards  to  ensure,  to  a  reasonable degree of
     2  certainty,  that  participants  in  interactive  gaming  are  physically
     3  located  within the state or such other jurisdiction that the commission
     4  has determined to be permissible.
     5    (c)  Appropriate  safeguards  to  protect,  to  a reasonable degree of
     6  certainty, the privacy and online security of participants  in  interac-
     7  tive gaming.
     8    (d)  Appropriate  safeguards  to  ensure,  to  a  reasonable degree of
     9  certainty, that the interactive gaming  is  fair  and  honest  and  that
    10  appropriate  measures  are  in place to deter, detect and, to the extent
    11  reasonably possible, to prevent cheating, including collusion,  and  use
    12  of  cheating  devices,  including  use  of  software programs (sometimes
    13  referred to as "bots") that make bets or wagers according to algorithms.
    14    (e) Appropriate  safeguards  to  minimize  compulsive  gaming  and  to
    15  provide notice to participants of resources to help problem gamblers.
    16    (f)  Appropriate  safeguards to ensure participants' funds are held in
    17  accounts segregated from  the  funds  of  licensees  and  otherwise  are
    18  protected from corporate insolvency, financial risk or criminal or civil
    19  actions against the licensee.
    20    §  1404. Scope of licensing review.  1. In connection with any license
    21  issued pursuant to this article, the  licensee,  significant  vendor  or
    22  applicant shall identify and the commission shall review the suitability
    23  of  such  licensee's,  significant  vendor's or applicant's owner, chief
    24  executive officer, chief financial officer  and  any  other  officer  or
    25  employee  who  the  commission  deems  is  significantly involved in the
    26  management or control of the licensee, significant vendor  or  applicant
    27  or  of  the  interactive gaming platform.   "Owner" for purposes of this
    28  provision means any person who directly or indirectly holds any  benefi-
    29  cial  or  ownership interest in the applicant of five percent or greater
    30  or any amount of ownership that the commission determines to be  signif-
    31  icant ownership of the licensee, significant vendor, or applicant.
    32    2.  Institutional  investors  are subject to the provisions set out in
    33  this section.
    34    (a) An institutional investor holding under twenty-five percent of the
    35  equity securities of a licensee's or  significant  vendor's  (or  appli-
    36  cant's)  holding or intermediary companies, shall be granted a waiver of
    37  any investigation of suitability or other requirement if such securities
    38  are those of a corporation, whether publicly traded or  privately  held,
    39  and  its  holdings  of  such  securities  were  purchased for investment
    40  purposes only and it files a certified statement to the effect  that  it
    41  has  no intention of influencing or affecting the affairs of the issuer,
    42  the licensee (or significant vendor or applicant, as applicable) or  its
    43  holding  or  intermediary companies; provided, however, that it shall be
    44  permitted to vote on matters put to the vote of the outstanding security
    45  holders. The commission may grant such  a  waiver  to  an  institutional
    46  investor  holding  a higher percentage of such securities upon a showing
    47  of good cause and if the conditions specified above are met. Any  insti-
    48  tutional  investor  granted  a  waiver under this paragraph which subse-
    49  quently determines to influence or affect  the  affairs  of  the  issuer
    50  shall provide not less than thirty days' notice of such intent and shall
    51  file  with  the  commission  a  request for determination of suitability
    52  before taking any action that may influence or affect the affairs of the
    53  issuer; provided, however, that it shall be permitted to vote on matters
    54  put to the vote of the outstanding security holders. If an institutional
    55  investor changes its investment  intent,  or  if  the  commission  finds
    56  reasonable cause to believe that the institutional investor may be found

        A. 9049--B                          7
 
     1  unsuitable,  no  action  other  than  divestiture shall be taken by such
     2  investor with respect to its security  holdings  until  there  has  been
     3  compliance  with  any  requirements established by the commission, which
     4  may include the execution of a trust agreement. The licensee (or signif-
     5  icant  vendor  or  applicant,  as  applicable) and its relevant holding,
     6  intermediary or subsidiary company shall  notify  the  commission  imme-
     7  diately of any information about, or actions of, an institutional inves-
     8  tor  holding  its equity securities where such information or action may
     9  impact upon the eligibility of such institutional investor for a  waiver
    10  pursuant to this paragraph.
    11    (b) If at any time the commission finds that an institutional investor
    12  holding  any security of a holding or intermediary company of a licensee
    13  or significant vendor or  applicant,  or,  where  relevant,  of  another
    14  subsidiary company of a holding or intermediary company of a licensee or
    15  significant  vendor  or  applicant  which  is  related in any way to the
    16  financing of the licensee or significant vendor or applicant,  fails  to
    17  comply  with  the  terms  of paragraph (a) of this section, or if at any
    18  time the commission finds that, by reason of the extent or nature of its
    19  holdings, an institutional investor is in a position to exercise such  a
    20  substantial  impact  upon  the  controlling  interests  of a licensee or
    21  significant vendor or applicant that investigation and determination  of
    22  suitability  of  the  institutional investor is necessary to protect the
    23  public interest, the commission may take any necessary action  otherwise
    24  authorized under this article to protect the public interest.
    25    (c)  For  purposes  of this section, an "institutional investor" shall
    26  mean any retirement fund administered by a public agency for the  exclu-
    27  sive  benefit  of  federal, state, or local public employees; investment
    28  company registered under the Investment Company Act of 1940 (15 U.S.C. §
    29  80a-1 et seq.); collective investment trust  organized  by  banks  under
    30  Part  Nine  of  the Rules of the Comptroller of the Currency; closed end
    31  investment trust; chartered or licensed life insurance company or  prop-
    32  erty  and  casualty  insurance  company;  banking and other chartered or
    33  licensed lending institution; investment advisor  registered  under  The
    34  Investment  Advisors  Act  of 1940 (15 U.S.C. § 80b-1 et seq.); and such
    35  other persons as the commission may  determine  for  reasons  consistent
    36  with the public interest.
    37    §  1405.  State  tax.  Licensees engaged in the business of conducting
    38  interactive gaming pursuant to this article shall pay  a  privilege  tax
    39  based  on  the  licensee's interactive gaming gross revenue at a fifteen
    40  percent rate.
    41    § 2. Subdivision 1 of section 225.00 of the penal law  is  amended  to
    42  read as follows:
    43    1.  "Contest  of  chance"  means  any  contest, game, gaming scheme or
    44  gaming device in which  the  outcome  depends  [in  a  material  degree]
    45  predominantly  upon  an element of chance, notwithstanding that skill of
    46  the contestants may also be a factor therein.
    47    § 3. The penal law is amended by adding a new section 225.36  to  read
    48  as follows:
    49  § 225.36 Interactive gaming offenses and exceptions.
    50    1.  The  knowing and willful offering of unlicensed interactive gaming
    51  to persons in this state,  or  the  knowing  and  willful  provision  of
    52  services with respect thereto, shall constitute a gambling offense under
    53  this article.
    54    2.  Licensed  interactive  gaming  activities  under  section fourteen
    55  hundred two of the racing, pari-mutuel wagering and breeding  law  shall
    56  not be a gambling offense under this article.

        A. 9049--B                          8
 
     1    3.  A person offering unlicensed interactive gaming to persons in this
     2  state shall be liable for  all  taxes  set  forth  in  section  fourteen
     3  hundred five of the racing, pari-mutuel wagering and breeding law in the
     4  same  manner  and  amounts  as  if  such  person were a licensee. Timely
     5  payment  of such taxes shall not constitute a defense to any prosecution
     6  or other proceeding in connection with the interactive gaming except for
     7  a prosecution or proceeding alleging failure to make such payment.
     8    § 4. Severability clause. If any provision of this act or  application
     9  thereof  shall  for  any  reason  be  adjudged by any court of competent
    10  jurisdiction to be invalid, such judgment shall not affect,  impair,  or
    11  invalidate the remainder of the act, but shall be confined in its opera-
    12  tion  to  the  provision thereof directly involved in the controversy in
    13  which the judgment shall have been rendered.
    14    § 5. This act shall take effect on the one hundred eightieth day after
    15  it shall have become a law.
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