|SAME AS||No Same As|
|Add Art 15 §§1500 - 1506, 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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STATE OF NEW YORK ________________________________________________________________________ 3898--A Cal. No. 895 2017-2018 Regular Sessions IN SENATE January 27, 2017 ___________ Introduced by Sens. BONACIC, AVELLA -- read twice and ordered printed, and when printed to be committed to the Committee on Racing, Gaming and Wagering -- reported favorably from said committee and committed to the Committee on Finance -- reported favorably from said committee, ordered to first and second report, ordered to a third reading, amended and ordered reprinted, retaining its place in the order of third reading 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 15 to read as follows: 3 ARTICLE 15 4 INTERACTIVE GAMING 5 Section 1500. Legislative findings and purpose. 6 1501. Definitions. 7 1502. Authorization. 8 1503. Required safeguards/minimum standards. 9 1504. Scope of licensing review. 10 1505. State tax. 11 1506. Disposition of taxes. 12 § 1500. Legislative findings and purpose. The legislature hereby finds 13 and declares that: 1. Under the New York penal law a person engages in 14 gambling when he or she stakes or risks something of value upon the 15 outcome of a contest of chance or a future contingent event not under 16 his or her control or influence, upon an agreement or understanding that 17 he or she will receive something of value in the event of a certain 18 outcome. 19 2. A contest of chance is defined as any contest, game, gaming scheme 20 or gaming device in which the outcome depends in a material degree upon 21 an element of chance, notwithstanding that skill of the contestants may 22 also be a factor therein. (Subdivision 1 of section 225.00 of the penal 23 law). Thus, games of chance may involve some skill, but in those games EXPLANATION--Matter in italics (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD04134-07-7S. 3898--A 2 1 the level of skill does not determine the outcome regardless of the 2 degree of skill employed. See People v. Turner, 165 Misc. 2d 222, 224, 3 629 N.Y.S.2d 661, 662 (Crim. Ct. 1995). On the other hand, where a 4 contest pits the skill levels of the players against each other, New 5 York courts have found a game to be one of skill rather than chance. See 6 People v. Hunt, 162 Misc. 2d 70, 72, 616 N.Y.S.2d 168, 170 (Crim. Ct. 7 1994) ("Played fairly, skill rather than chance is the material compo- 8 nent of three-card monte."); 9 3. Poker in many instances has been defined as a game of skill and a 10 New York federal court in U.S. v. DiCristina, 886 F. Supp. 2d 164, 224, 11 assessed that under federal law poker was predominantly a game of skill; 12 4. New York courts have interpreted New York law to apply a more 13 rigorous test in identifying a "contest of chance" than is applied by 14 most states in this nation and the courts have found that where a 15 contest pits the skill levels of the players against each other, those 16 games are games of skill and not games of chance. Furthermore, the 17 courts have not limited the legislature's ability to determine that 18 certain forms of poker should fall outside the general definition of 19 gambling since those games are games of skill; 20 5. Texas Hold'em poker involves two cards dealt face down to each 21 player and then five community cards placed face-up by the dealer, a 22 series of three, then two additional single cards, with players deter- 23 mining whether to check, bet, raise or fold after each deal. Omaha 24 Hold'em poker is a similar game, in which each player is dealt four 25 cards and makes his or her best hand using exactly two of them, plus 26 exactly three of the five community cards. These games are considered to 27 be complex forms of poker which involve player strategy and decision- 28 making and which pit the skill levels of the players against each other. 29 As games of skill, these forms of poker do not fall under the definition 30 of gambling as prohibited by the penal law; and 31 6. The legislature further finds that as the internet has become an 32 integral part of society, and internet poker a major form of enter- 33 tainment for many consumers, any interactive gaming enforcement and 34 regulatory structure must begin from the bedrock premise that partic- 35 ipation in a lawful and licensed gaming industry is a privilege and not 36 a right, and that regulatory oversight is intended to safeguard the 37 integrity of the games and participants and to ensure accountability and 38 the public trust. 39 § 1501. Definitions. As used in this article, the following terms 40 shall have the following meanings: 41 1. "Authorized game" means Omaha Hold'em and Texas Hold'em poker, as 42 well as any other poker game that the commission determines is the mate- 43 rial equivalent of either of those, whether in a cash game or tourna- 44 ment. 45 2. "Authorized participants" means persons who are either physically 46 present in this state when placing a wager or who otherwise are permit- 47 ted by applicable law, as determined by the commission, to place a 48 wager. The intermediate routing of electronic data in connection with 49 interactive gaming shall not determine the location or locations in 50 which a wager is initiated, received or otherwise made. 51 3. "Core function" means any of the following: (a) the management, 52 administration or control of wagers on interactive gaming; (b) the 53 management, administration or control of the games with which those 54 wagers are associated; or (c) the development, maintenance, provision or 55 operation of an interactive gaming platform. 56 4. "Commission" means the New York state gaming commission.S. 3898--A 3 1 5. "Covered asset" means any of the following categories of assets if 2 used in connection with the knowing and willful acceptance of any wager 3 from persons located in the United States of any form of interactive 4 gaming (including but not limited to poker) after December thirty-first, 5 two thousand six, that has not been affirmatively authorized by law of 6 the United States or of each state in which persons making such wager 7 were located: (a) any trademark, trade name, service mark or similar 8 intellectual property that was used to identify any aspect of the inter- 9 net website or of the operator offering the wagers or games to its 10 patrons; (b) any database or customer list of individuals residing in 11 the United States who placed such wagers; (c) any derivative of a data- 12 base or customer list described in paragraph (b) of this subdivision; or 13 (d) an asset used to provide a core function. 14 6. "Division" means the division of gaming, established under para- 15 graph (c) of subdivision two of section one hundred three of this chap- 16 ter. 17 7. "Interactive gaming" means the conduct of games through the use of 18 the internet or other communications technology that allows a person, 19 utilizing money, checks, electronic checks, electronic transfers of 20 money, credit cards, debit cards or any other instrumentality, to trans- 21 mit to a computer information to assist in the placing of a wager and 22 corresponding information related to the display of the game, game 23 outcomes or other similar information. The term does not include the 24 conduct of (a) non-gambling games that do not otherwise require a 25 license under state or federal law; or (b) games that occur entirely 26 among participants who are located on a licensed casino premises. For 27 purposes of this provision, "communications technology" means any method 28 used and the components employed by an establishment to facilitate the 29 transmission of information, including, without limitation, transmission 30 and reception by systems based on wire, cable, radio, microwave, light, 31 optics or computer data networks, including, without limitation, the 32 internet and intranets. 33 8. "Interactive gaming gross revenue" means the total of all sums paid 34 to a licensee from interactive gaming involving authorized participants, 35 less only the total of all sums paid out as winnings to patrons and 36 promotional gaming credits; provided, however, that the cash equivalent 37 value of any merchandise or other non-cash thing of value included in a 38 contest or tournament shall not be included in the total of all sums 39 paid out as winnings to players for purposes of determining interactive 40 gaming gross revenue. 41 (a) Neither amounts deposited with a licensee for purposes of interac- 42 tive gaming nor amounts taken in fraudulent acts perpetrated against a 43 licensee for which the licensee is not reimbursed shall be considered to 44 have been "paid" to the licensee for purposes of calculating interactive 45 gaming gross revenue. 46 (b) "Promotional gaming credit" includes bonuses, promotions and any 47 amount received by a licensee from a patron for which the licensee can 48 demonstrate that it or its affiliate has not received cash. 49 9. "Interactive gaming platform" means the combination of hardware, 50 software and data networks used to manage, administer or control wagers 51 on interactive gaming or the games with which those wagers are associ- 52 ated. 53 10. "Internet" means a computer network of interoperable packet- 54 switched data networks. 55 11. "Licensee" means a person who is licensed by the commission to 56 offer interactive gaming, using an interactive gaming platform toS. 3898--A 4 1 authorized participants. A licensee may utilize multiple interactive 2 gaming platforms provided that each platform is approved by the commis- 3 sion. 4 12. "Omaha Hold'em poker" means the poker game marketed as Omaha 5 Hold'em poker or Omaha poker in which each player is dealt four cards 6 and must make his or her best hand using exactly two of them, plus 7 exactly three of the five community cards. 8 13. "Significant vendor" means any person who offers or who proposes 9 to offer any of the following services with respect to interactive 10 gaming: (a) a core function; (b) sale, licensing or other receipt of 11 compensation for selling or licensing a database or customer list of 12 individuals residing in the United States selected in whole or in part 13 because they placed wagers or participated in gambling games with or 14 through an internet website or operator (or any derivative of such a 15 database or customer list); (c) provision of any trademark, tradename, 16 service mark or similar intellectual property under which a licensee or 17 significant vendor identifies interactive games to customers; or (d) 18 provision of any product, service or asset to a licensee or significant 19 vendor in return for a percentage of interactive gaming revenue (not 20 including fees to financial institutions and payment providers for 21 facilitating a deposit or withdrawal by an authorized participant). The 22 term "significant vendor" shall not include a provider of goods or 23 services to a licensee that are not specifically designed for use and 24 not principally used in connection with interactive gaming. 25 14. "Texas Hold'em poker" means the type of poker marketed as Texas 26 Hold'em poker that involves two cards being dealt face down to each 27 player and then five community cards being placed face-up by the dealer, 28 a series of three then two additional single cards, with players having 29 the option to check, bet, raise or fold after each deal. 30 § 1502. Authorization. 1. The commission shall, within one hundred 31 eighty days of the date this article becomes law, promulgate regulations 32 to implement interactive gaming in this state and shall authorize up to 33 eleven licenses to operate interactive gaming involving authorized 34 participants, subject to the provisions of this article and other appli- 35 cable provisions of law. 36 2. Applicants eligible to apply for a license as an operator pursuant 37 to this article shall be those entities: 38 (a) licensed by the state pursuant to section sixteen hundred seven- 39 teen-a of the tax law to operate video lottery gaming and has experience 40 in the operation of interactive gaming by being licensed in a state with 41 comparable licensing requirements or guarantees acquisition of adequate 42 business competence and experience in the operation of interactive 43 gaming; or 44 (b) licensed by the state to operate a class III gaming facility 45 pursuant to article thirteen of this chapter and has experience in the 46 operation of interactive gaming by being licensed in a state with compa- 47 rable licensing requirements or guarantees acquisition of adequate busi- 48 ness competence and experience in the operation of interactive gaming. 49 3. The commission shall, to the extent practicable, issue licenses to 50 multiple applicants no sooner than one hundred eighty days after the 51 promulgation of regulations in order to ensure a robust and competitive 52 market for consumers and to prevent early licensees from gaining an 53 unfair competitive advantage. 54 4. No person may operate, manage or make available an interactive 55 gaming platform or act as a significant vendor with respect to interac- 56 tive gaming that is offered to persons located in this state unlessS. 3898--A 5 1 licensed by the commission pursuant to this article and only those games 2 authorized by the commission shall be permitted. 3 5. License applicants may form a partnership, joint venture or other 4 contractual arrangement in order to facilitate the purposes of this 5 article. 6 6. Any person found suitable by the commission may be issued a license 7 as an operator or significant vendor pursuant to this article. In deter- 8 mining suitability, the commission shall consider those factors it deems 9 relevant in its discretion, including but not limited to: 10 (a) Whether the applicant is a person of good character, honesty and 11 integrity; 12 (b) Whether the applicant is person whose prior activities, criminal 13 record, if any, reputation, habits and associations do not: 14 (i) pose a threat to the public interest or to the effective regu- 15 lation and control of interactive gaming; or 16 (ii) create or enhance the dangers of unsuitable, unfair or illegal 17 practices, methods and activities in the conduct of interactive gaming 18 or in the carrying on of the business and financial arrangements inci- 19 dental to such gaming; 20 (c) Whether the applicant is capable of and likely to conduct the 21 activities for which the applicant is licensed in accordance with the 22 provisions of this article, any regulations prescribed under this arti- 23 cle and all other applicable laws; 24 (d) Whether the applicant has or guarantees acquisition of adequate 25 business competence and experience in the operation of licensed gaming 26 or of interactive gaming in this state or in a state with comparable 27 licensing requirements; 28 (e) Whether the applicant has or will obtain sufficient financing for 29 the nature of the proposed operation and from a suitable source; and 30 (f) Whether the applicant: 31 (i) has at any time, either directly, or through another person whom 32 it owned, in whole or in significant part, or controlled: 33 (A) knowingly and willfully accepted or made available wagers on 34 interactive gaming (including poker) from persons located in the United 35 States after December thirty-first, two thousand six, unless such wagers 36 were affirmatively authorized by law of the United States or of each 37 state in which persons making such wagers were located; or 38 (B) knowingly facilitated or otherwise provided services with respect 39 to interactive gaming (including poker) involving persons located in the 40 United States for a person described in clause (A) of this subparagraph 41 and acted with knowledge of the fact that such wagers or interactive 42 gaming involved persons located in the United States; or 43 (ii) has purchased or acquired, directly or indirectly, in whole or in 44 significant part, a person described in subparagraph (i) of this para- 45 graph or will use that person or a covered asset in connection with 46 interactive gaming licensed pursuant to this article. 47 7. The commission further shall develop standards by which to evaluate 48 and approve interactive gaming platforms for use with interactive 49 gaming. Interactive gaming platforms must be approved by the commission 50 before being used by a licensee or significant vendor to conduct inter- 51 active gaming in this state. 52 8. The commission shall require all licensees to operate interactive 53 gaming to pay a one-time fee of ten million dollars. Such fee paid by 54 each licensee shall be applied to satisfy, in whole or in part, as 55 applicable, that licensee's tax obligation pursuant to section fifteen 56 hundred five of this article in sixty equal monthly installments, allo-S. 3898--A 6 1 cated to each of the first sixty months of tax owed after the licensee 2 has begun operating interactive gaming pursuant to this article. No 3 amounts not required to be used to satisfy such tax obligation during 4 that period shall be allocated to payment of such tax obligation after 5 that period. 6 9. Licenses to operate interactive gaming issued by the commission 7 shall remain in effect for ten years. 8 10. The commission, by regulation, may authorize and promulgate any 9 rules necessary to implement agreements with other states, or authorized 10 agencies thereof (a) to enable patrons in those states to participate in 11 interactive gaming offered by licensees under this article or (b) to 12 enable patrons in this state to participate in interactive gaming 13 offered by licensees under the laws of those other states, provided that 14 such other state or authorized agency applies suitability standards and 15 review materially consistent with the provisions of this article. 16 11. Any regulations adopted pursuant to subdivision ten of this 17 section must set forth provisions that address: 18 (a) Any arrangements to share revenue between New York and any other 19 state or agency within another state; and 20 (b) Arrangements to ensure the integrity of interactive gaming offered 21 pursuant to any such agreement and the protection of patrons located in 22 this state. 23 12. The commission may delegate its responsibilities to administer the 24 provisions of this article to the division, as it sees fit, except for 25 its responsibilities to approve licenses. 26 § 1503. Required safeguards/minimum standards. The commission shall 27 require licensees to implement measures to meet the standards set out in 28 this section, along with such other standards that the commission in its 29 discretion may choose to require. 30 (a) Appropriate safeguards to ensure, to a reasonable degree of 31 certainty, that participants in interactive gaming are not younger than 32 twenty-one years of age. 33 (b) Appropriate safeguards to ensure, to a reasonable degree of 34 certainty, that participants in interactive gaming are physically 35 located within the state or such other jurisdiction that the commission 36 has determined to be permissible. 37 (c) Appropriate safeguards to protect, to a reasonable degree of 38 certainty, the privacy and online security of participants in interac- 39 tive gaming. 40 (d) Appropriate safeguards to ensure, to a reasonable degree of 41 certainty, that the interactive gaming is fair and honest and that 42 appropriate measures are in place to deter, detect and, to the extent 43 reasonably possible, to prevent cheating, including collusion, and use 44 of cheating devices, including use of software programs (sometimes 45 referred to as "bots") that make bets or wagers according to algorithms. 46 (e) Appropriate safeguards to minimize compulsive gaming and to 47 provide notice to participants of resources to help problem gamblers. 48 (f) Appropriate safeguards to ensure participants' funds are held in 49 accounts segregated from the funds of licensees and otherwise are 50 protected from corporate insolvency, financial risk or criminal or civil 51 actions against the licensee. 52 § 1504. Scope of licensing review. 1. In connection with any license 53 issued pursuant to this article, the licensee, significant vendor or 54 applicant shall identify and the commission shall review the suitability 55 of such licensee's, significant vendor's or applicant's owner, chief 56 executive officer, chief financial officer and any other officer orS. 3898--A 7 1 employee who the commission deems is significantly involved in the 2 management or control of the licensee, significant vendor or applicant 3 or of the interactive gaming platform. "Owner" for purposes of this 4 provision means any person who directly or indirectly holds any benefi- 5 cial or ownership interest in the applicant of five percent or greater 6 or any amount of ownership that the commission determines to be signif- 7 icant ownership of the licensee, significant vendor, or applicant. 8 2. Institutional investors are subject to the provisions set out in 9 this section. 10 (a) An institutional investor holding under twenty-five percent of the 11 equity securities of a licensee's or significant vendor's (or appli- 12 cant's) holding or intermediary companies, shall be granted a waiver of 13 any investigation of suitability or other requirement if such securities 14 are those of a corporation, whether publicly traded or privately held, 15 and its holdings of such securities were purchased for investment 16 purposes only and it files a certified statement to the effect that it 17 has no intention of influencing or affecting the affairs of the issuer, 18 the licensee (or significant vendor or applicant, as applicable) or its 19 holding or intermediary companies; provided, however, that it shall be 20 permitted to vote on matters put to the vote of the outstanding security 21 holders. The commission may grant such a waiver to an institutional 22 investor holding a higher percentage of such securities upon a showing 23 of good cause and if the conditions specified above are met. Any insti- 24 tutional investor granted a waiver under this paragraph which subse- 25 quently determines to influence or affect the affairs of the issuer 26 shall provide not less than thirty days' notice of such intent and shall 27 file with the commission a request for determination of suitability 28 before taking any action that may influence or affect the affairs of the 29 issuer; provided, however, that it shall be permitted to vote on matters 30 put to the vote of the outstanding security holders. If an institutional 31 investor changes its investment intent, or if the commission finds 32 reasonable cause to believe that the institutional investor may be found 33 unsuitable, no action other than divestiture shall be taken by such 34 investor with respect to its security holdings until there has been 35 compliance with any requirements established by the commission, which 36 may include the execution of a trust agreement. The licensee (or signif- 37 icant vendor or applicant, as applicable) and its relevant holding, 38 intermediary or subsidiary company shall notify the commission imme- 39 diately of any information about, or actions of, an institutional inves- 40 tor holding its equity securities where such information or action may 41 impact upon the eligibility of such institutional investor for a waiver 42 pursuant to this paragraph. 43 (b) If at any time the commission finds that an institutional investor 44 holding any security of a holding or intermediary company of a licensee 45 or significant vendor or applicant, or, where relevant, of another 46 subsidiary company of a holding or intermediary company of a licensee or 47 significant vendor or applicant which is related in any way to the 48 financing of the licensee or significant vendor or applicant, fails to 49 comply with the terms of paragraph (a) of this section, or if at any 50 time the commission finds that, by reason of the extent or nature of its 51 holdings, an institutional investor is in a position to exercise such a 52 substantial impact upon the controlling interests of a licensee or 53 significant vendor or applicant that investigation and determination of 54 suitability of the institutional investor is necessary to protect the 55 public interest, the commission may take any necessary action otherwise 56 authorized under this article to protect the public interest.S. 3898--A 8 1 (c) For purposes of this section, an "institutional investor" shall 2 mean any retirement fund administered by a public agency for the exclu- 3 sive benefit of federal, state, or local public employees; investment 4 company registered under the Investment Company Act of 1940 (15 U.S.C. § 5 80a-1 et seq.); collective investment trust organized by banks under 6 Part Nine of the Rules of the Comptroller of the Currency; closed end 7 investment trust; chartered or licensed life insurance company or prop- 8 erty and casualty insurance company; banking and other chartered or 9 licensed lending institution; investment advisor registered under The 10 Investment Advisors Act of 1940 (15 U.S.C. § 80b-1 et seq.); and such 11 other persons as the commission may determine for reasons consistent 12 with the public interest. 13 § 1505. State tax. Licensees engaged in the business of conducting 14 interactive gaming pursuant to this article shall pay a privilege tax 15 based on the licensee's interactive gaming gross revenue at a fifteen 16 percent rate. 17 § 1506. Disposition of taxes. The commission shall pay into the state 18 lottery fund all taxes imposed by this article; any interest and penal- 19 ties imposed by the commission relating to those taxes; all penalties 20 levied and collected by the commission; and the appropriate funds, cash 21 or prizes forfeited from interactive gaming. 22 § 2. Subdivision 1 of section 225.00 of the penal law is amended to 23 read as follows: 24 1. "Contest of chance" means any contest, game, gaming scheme or 25 gaming device in which the outcome depends [ in a material degree] 26 predominantly upon an element of chance, notwithstanding that skill of 27 the contestants may also be a factor therein. 28 § 3. The penal law is amended by adding a new section 225.36 to read 29 as follows: 30 § 225.36 Interactive gaming offenses and exceptions. 31 1. The knowing and willful offering of unlicensed interactive gaming 32 to persons in this state, or the knowing and willful provision of 33 services with respect thereto, shall constitute a gambling offense under 34 this article. 35 2. Licensed interactive gaming activities under section fifteen 36 hundred two of the racing, pari-mutuel wagering and breeding law shall 37 not be a gambling offense under this article. 38 3. A person offering unlicensed interactive gaming to persons in this 39 state shall be liable for all taxes set forth in section fifteen hundred 40 five of the racing, pari-mutuel wagering and breeding law in the same 41 manner and amounts as if such person were a licensee. Timely payment of 42 such taxes shall not constitute a defense to any prosecution or other 43 proceeding in connection with the interactive gaming except for a prose- 44 cution or proceeding alleging failure to make such payment. 45 § 4. Severability clause. If any provision of this act or application 46 thereof shall for any reason be adjudged by any court of competent 47 jurisdiction to be invalid, such judgment shall not affect, impair, or 48 invalidate the remainder of the act, but shall be confined in its opera- 49 tion to the provision thereof directly involved in the controversy in 50 which the judgment shall have been rendered. 51 § 5. This act shall take effect on the one hundred eightieth day after 52 it shall have become a law.