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A09591 Summary:

Add Art 14 SS1400 - 1405, RWB L; amd S225.00, add S225.36, Pen L
Allows certain interactive poker games that are consider to be 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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A09591 Text:

                STATE OF NEW YORK
                   IN ASSEMBLY
                                       May 9, 2014
        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
        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
    26  contest pits the skill levels of the players  against  each  other,  New
    27  York courts have found a game to be one of skill rather than chance. See
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.

        A. 9591--A                          2
     1  People  v.  Hunt,  162 Misc. 2d 70, 72, 616 N.Y.S.2d 168, 170 (Crim. Ct.
     2  1994) ("Played fairly, skill rather than chance is the  material  compo-
     3  nent of three-card monte.");

     4    3.  Poker  in many instances has been defined as a game of skill and a
     5  New York federal court in U.S. v. DiCristina, 886 F. Supp. 2d 164,  224,
     6  assessed that under federal law poker was predominantly a game of skill;
     7    4.  New  York  courts  have  interpreted  New York law to apply a more
     8  rigorous test in identifying a "contest of chance" than  is  applied  by
     9  most  states  in  this  nation  and  the  courts have found that where a
    10  contest pits the skill levels of the players against each  other,  those
    11  games  are  games  of  skill  and  not games of chance. Furthermore, the
    12  courts have not limited the  legislature's  ability  to  determine  that
    13  certain  forms  of  poker  should fall outside the general definition of

    14  gambling since those games are games of skill;
    15    5. Texas Hold'em poker involves two cards  dealt  face  down  to  each
    16  player  and  then  five  community cards placed face-up by the dealer, a
    17  series of three, then two additional single cards, with  players  deter-
    18  mining  whether  to  check,  bet,  raise  or fold after each deal. Omaha
    19  Hold'em poker is a similar game, in which  each  player  is  dealt  four
    20  cards  and  makes  his  or her best hand using exactly two of them, plus
    21  exactly three of the five community cards. These games are considered to
    22  be complex forms of poker which involve player  strategy  and  decision-
    23  making and which pit the skill levels of the players against each other.

    24  As games of skill, these forms of poker do not fall under the definition
    25  of gambling as prohibited by the penal law;
    26    6.  The  legislature  further finds that as the internet has become an
    27  integral part of society, and internet poker  a  major  form  of  enter-
    28  tainment  for  many  consumers,  any  interactive gaming enforcement and
    29  regulatory structure must begin from the bedrock  premise  that  partic-
    30  ipation  in a lawful and licensed gaming industry is a privilege and not
    31  a right, and that regulatory oversight  is  intended  to  safeguard  the
    32  integrity of the games and participants and to ensure accountability and
    33  the public trust; and
    34    7.  With the passage of the Unlawful Internet Gambling Enforcement Act

    35  of 2006, issues concerning the scope and interpretation  of  state  law,
    36  including the importance of the location of the wager, wagering activity
    37  and  website,  were  clarified.  Those  persons  that  provided goods or
    38  services related to internet gambling involving New York citizens  prior
    39  to  the  enactment of that statute, including, at the time, poker, which
    40  was until the adoption of this act unlawful,  but  exited  in  an  expe-
    41  ditious  fashion after its enactment should be regarded differently from
    42  those that continued to flout U.S. federal and New York  law  thereafter
    43  for  purposes of suitability for licensing under this article.  Granting
    44  those persons licensing privileges or allowing the use of the assets  of

    45  such  persons  in  connection  with interactive gaming in this state, if
    46  those assets were used unlawfully, would reward unlawful  gaming  activ-
    47  ity,  would  permit  manifestly  unsuitable persons to profit from their
    48  unlawful gaming activity and would create unfair competition with licen-
    49  sees that respected federal and state law.
    50    § 1401. Definitions. As used in  this  article,  the  following  terms
    51  shall have the following meanings:
    52    1.  "Authorized  game" means Omaha Hold'em and Texas Hold'em poker, as
    53  well as any other poker game that the commission determines is the mate-
    54  rial equivalent of either of those, whether in a cash  game  or  tourna-
    55  ment.

        A. 9591--A                          3

     1    2.  "Authorized  participants" means persons who are either physically
     2  present in this state when placing a wager or who otherwise are  permit-
     3  ted  by  applicable  law,  as  determined  by the commission, to place a
     4  wager. The intermediate routing of electronic data  in  connection  with
     5  interactive  gaming  shall  not  determine  the location or locations in
     6  which a wager is initiated, received or otherwise made.
     7    3. "Core function" means any of the  following:  (a)  the  management,
     8  administration  or  control  of  wagers  on  interactive gaming; (b) the
     9  management, administration or control of  the  games  with  which  those
    10  wagers are associated; or (c) the development, maintenance, provision or

    11  operation of an interactive gaming platform.
    12    4.  "Covered  asset" means any of the following categories of asset if
    13  used in connection with the knowing and willful acceptance of any  wager
    14  from  persons  located  in  the United States of any form of interactive
    15  gaming (including but not limited to poker) after December thirty-first,
    16  two thousand six, that has not been affirmatively authorized by  law  of
    17  the  United  States  or of each state in which persons making such wager
    18  were located:  (a) any trademark, trade name, service  mark  or  similar
    19  intellectual property that was used to identify any aspect of the inter-
    20  net  website  or  of  the  operator  offering the wagers or games to its

    21  patrons; (b) any database or customer list of  individuals  residing  in
    22  the  United States who placed such wagers; (c) any derivative of a data-
    23  base or customer list described in paragraph (b) of this subdivision; or
    24  (d) an asset used to provide a core function.
    25    5. "Commission" means the New York state gaming commission.
    26    6. "Division" means the division of gaming,  established  under  para-
    27  graph  (c) of subdivision two of section one hundred three of this chap-
    28  ter.
    29    7. "Interactive gaming" means the conduct of games through the use  of
    30  the  internet  or  other communications technology that allows a person,
    31  utilizing money, checks,  electronic  checks,  electronic  transfers  of

    32  money, credit cards, debit cards or any other instrumentality, to trans-
    33  mit  to  a  computer information to assist in the placing of a wager and
    34  corresponding information related to  the  display  of  the  game,  game
    35  outcomes  or  other  similar  information. The term does not include the
    36  conduct of (a) non-gambling  games  that  do  not  otherwise  require  a
    37  license  under  state  or  federal law; or (b) games that occur entirely
    38  among participants who are located on a licensed  casino  premises.  For
    39  purposes of this provision, "communications technology" means any method
    40  used  and  the components employed by an establishment to facilitate the
    41  transmission of information, including, without limitation, transmission

    42  and reception by systems based on wire, cable, radio, microwave,  light,
    43  optics  or  computer  data  networks, including, without limitation, the
    44  internet and intranets.
    45    8. "Interactive gaming gross revenue" means the total of all sums paid
    46  to a licensee from interactive gaming involving authorized participants,
    47  less only the total of all sums paid out  as  winnings  to  patrons  and
    48  promotional  gaming credits; provided, however, that the cash equivalent
    49  value of any merchandise or other non-cash thing of value included in  a
    50  contest  or  tournament  shall  not be included in the total of all sums
    51  paid out as winnings to players for purposes of determining  interactive
    52  gaming gross revenue.

    53    (a) Neither amounts deposited with a licensee for purposes of interac-
    54  tive  gaming  nor amounts taken in fraudulent acts perpetrated against a
    55  licensee for which the licensee is not reimbursed shall be considered to

        A. 9591--A                          4
     1  have been "paid" to the licensee for purposes of calculating interactive
     2  gaming gross revenue.
     3    (b)  "Promotional  gaming credit" includes bonuses, promotions and any
     4  amount received by a licensee from a patron for which the  licensee  can
     5  demonstrate that it or its affiliate has not received cash.
     6    9.  "Interactive  gaming  platform" means the combination of hardware,
     7  software and data networks used to manage, administer or control  wagers

     8  on  interactive  gaming or the games with which those wagers are associ-
     9  ated.
    10    10. "Internet" means  a  computer  network  of  interoperable  packet-
    11  switched data networks.
    12    11.  "Licensee"  means  a  person who is licensed by the commission to
    13  offer interactive  gaming,  using  an  interactive  gaming  platform  to
    14  authorized  participants.  A  licensee  may utilize multiple interactive
    15  gaming platforms provided that each platform is approved by the  commis-
    16  sion.
    17    12.  "Omaha  Hold'em  poker"  means  the  poker game marketed as Omaha
    18  Hold'em poker or Omaha poker in which each player is  dealt  four  cards
    19  and  must  make  his  or  her  best hand using exactly two of them, plus

    20  exactly three of the five community cards.
    21    13. "Significant vendor" means any person who offers or  who  proposes
    22  to  offer  any  of  the  following  services with respect to interactive
    23  gaming:  (a) a core function; (b) sale, licensing or  other  receipt  of
    24  compensation  for  selling  or  licensing a database or customer list of
    25  individuals residing in the United States selected in whole or  in  part
    26  because  they  placed  wagers  or participated in gambling games with or
    27  through an internet website or operator (or any  derivative  of  such  a
    28  database  or  customer list); (c) provision of any trademark, tradename,
    29  service mark or similar intellectual property under which a licensee  or

    30  significant  vendor  identifies  interactive  games to customers; or (d)
    31  provision of any product, service or asset to a licensee or  significant
    32  vendor  in  return  for  a percentage of interactive gaming revenue (not
    33  including fees to  financial  institutions  and  payment  providers  for
    34  facilitating  a deposit or withdrawal by an authorized participant). The
    35  term "significant vendor" shall not  include  a  provider  of  goods  or
    36  services  to  a  licensee that are not specifically designed for use and
    37  not principally used in connection with interactive gaming.
    38    14. "Texas Hold'em poker" means the type of poker  marketed  as  Texas
    39  Hold'em  poker  that  involves  two  cards being dealt face down to each

    40  player and then five community cards being placed face-up by the dealer,
    41  a series of three then two additional single cards, with players  having
    42  the option to check, bet, raise or fold after each deal.
    43    §  1402.  Authorization.   1. The commission shall, within one hundred
    44  eighty days of the date this article becomes law, promulgate regulations
    45  to implement interactive gaming in this state and shall authorize up  to
    46  ten  licenses to operate interactive gaming involving authorized partic-
    47  ipants, subject to the provisions of this article and  other  applicable
    48  provisions of law.
    49    2.  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    3.  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 unless

        A. 9591--A                          5
     1  licensed by the commission pursuant to this article and only those games
     2  authorized by the commission shall be permitted.
     3    4. Any person found suitable by the commission may be issued a license
     4  as an operator or significant vendor pursuant to this article. In deter-

     5  mining suitability, the commission shall consider those factors it deems
     6  relevant in its discretion, including but not limited to:
     7    (a)  Whether  the applicant is a person of good character, honesty and
     8  integrity;
     9    (b) Whether the applicant is person whose prior  activities,  criminal
    10  record, if any, reputation, habits and associations do not:
    11    (i)  pose  a  threat  to the public interest or to the effective regu-
    12  lation and control of interactive gaming; or
    13    (ii) create or enhance the dangers of unsuitable,  unfair  or  illegal
    14  practices,  methods  and activities in the conduct of interactive gaming
    15  or in the carrying on of the business and financial  arrangements  inci-
    16  dental to such gaming;

    17    (c)  Whether  the  applicant  is  capable of and likely to conduct the
    18  activities for which the applicant is licensed in  accordance  with  the
    19  provisions  of this article, any regulations prescribed under this arti-
    20  cle and all other applicable laws;
    21    (d) Whether the applicant has or guarantees  acquisition  of  adequate
    22  business  competence  and experience in the operation of licensed gaming
    23  or of interactive gaming in this state or in  a  state  with  comparable
    24  licensing requirements;
    25    (e)  Whether the applicant has or will obtain sufficient financing for
    26  the nature of the proposed operation and from a suitable source; and
    27   (f) Whether the applicant has disclosed to  the  commission  all  known

    28  affiliations  or relationships, whether direct or indirect, with persons
    29  and assets of persons described by subdivision three of section fourteen
    30  hundred four of this article.
    31    5. The commission further shall develop standards by which to evaluate
    32  and approve  interactive  gaming  platforms  for  use  with  interactive
    33  gaming.  Interactive gaming platforms must be approved by the commission
    34  before being used by a licensee or significant vendor to conduct  inter-
    35  active gaming in this state.
    36    6.  The  commission shall require all licensees to pay one-time fee of
    37  ten million dollars.
    38    7. Licenses issued by the commission shall remain in  effect  for  ten
    39  years.

    40    8.  The  commission,  by  regulation, may authorize and promulgate any
    41  rules necessary to implement agreements with other states, or authorized
    42  agencies thereof (a) to enable patrons in those states to participate in
    43  interactive gaming offered by licensees under this  article  or  (b)  to
    44  enable  patrons  in  this  state  to  participate  in interactive gaming
    45  offered by licensees under the laws of those other states, provided that
    46  such other state or authorized agency applies suitability standards  and
    47  review  materially  consistent  with  the  provisions  of  this article,
    48  including but not limited to the requirements  set  out  in  subdivision
    49  three of section fourteen hundred four of this article.

    50    9.  Any  regulations  adopted  pursuant  to  subdivision eight of this
    51  section must set forth provisions that address:
    52    (a) Any arrangements to share revenue between New York and  any  other
    53  state or agency within another state; and
    54    (b) Arrangements to ensure the integrity of interactive gaming offered
    55  pursuant  to any such agreement and the protection of patrons located in
    56  this state.

        A. 9591--A                          6
     1    10. The commission may delegate its responsibilities to administer the
     2  provisions of this article to the division, as it sees fit,  except  for
     3  its  responsibilities to approve licenses and to conduct the proceedings

     4  required under subdivision four of section fourteen hundred four of this
     5  article.
     6    §  1403.  Required  safeguards/minimum  standards.   1. The commission
     7  shall require licensees to implement measures to meet the standards  set
     8  out in this section, along with such other standards that the commission
     9  in its discretion may choose to require.
    10    (a)  Appropriate  safeguards  to  ensure,  to  a  reasonable degree of
    11  certainty, that participants in interactive gaming are not younger  than
    12  twenty-one years of age.
    13    (b)  Appropriate  safeguards  to  ensure,  to  a  reasonable degree of
    14  certainty,  that  participants  in  interactive  gaming  are  physically

    15  located  within the state or such other jurisdiction that the commission
    16  has determined to be permissible.
    17    (c) Appropriate safeguards to  protect,  to  a  reasonable  degree  of
    18  certainty,  the  privacy and online security of participants in interac-
    19  tive gaming.
    20    (d) Appropriate safeguards  to  ensure,  to  a  reasonable  degree  of
    21  certainty,  that  the  interactive  gaming  is  fair and honest and that
    22  appropriate measures are in place to deter, detect and,  to  the  extent
    23  reasonably  possible,  to prevent cheating, including collusion, and use
    24  of cheating devices,  including  use  of  software  programs  (sometimes
    25  referred to as "bots") that make bets or wagers according to algorithms.

    26    (e)  Appropriate  safeguards  to  minimize  compulsive  gaming  and to
    27  provide notice to participants of resources to help problem gamblers.
    28    (f) Appropriate safeguards to ensure participants' funds are  held  in
    29  accounts  segregated  from  the  funds  of  licensees  and otherwise are
    30  protected from corporate insolvency, financial risk or criminal or civil
    31  actions against the licensee.
    32    § 1404. Scope of licensing review.  1. In connection with any  license
    33  issued  pursuant  to  this  article, the licensee, significant vendor or
    34  applicant shall identify and the commission shall review the suitability
    35  of such licensee's, significant vendor's  or  applicant's  owner,  chief

    36  executive  officer,  chief  financial  officer  and any other officer or
    37  employee who the commission  deems  is  significantly  involved  in  the
    38  management  or  control of the licensee, significant vendor or applicant
    39  or of the interactive gaming platform.   "Owner" for  purposes  of  this
    40  provision  means any person who directly or indirectly holds any benefi-
    41  cial or ownership interest in the applicant of five percent  or  greater
    42  or  any amount of ownership that the commission determines to be signif-
    43  icant ownership of the licensee, significant vendor, or applicant.
    44    2. Institutional investors are subject to the provisions  set  out  in
    45  this section.
    46    (a) An institutional investor holding under twenty-five percent of the

    47  equity  securities  of  a  licensee's or significant vendor's (or appli-
    48  cant's) holding or intermediary companies, shall be granted a waiver  of
    49  any investigation of suitability or other requirement if such securities
    50  are  those  of a corporation, whether publicly traded or privately held,
    51  and its holdings  of  such  securities  were  purchased  for  investment
    52  purposes  only  and it files a certified statement to the effect that it
    53  has no intention of influencing or affecting the affairs of the  issuer,
    54  the  licensee (or significant vendor or applicant, as applicable) or its
    55  holding or intermediary companies; provided, however, that it  shall  be
    56  permitted to vote on matters put to the vote of the outstanding security

        A. 9591--A                          7
     1  holders.  The  commission  may  grant  such a waiver to an institutional
     2  investor holding a higher percentage of such securities upon  a  showing
     3  of  good cause and if the conditions specified above are met. Any insti-
     4  tutional  investor  granted  a  waiver under this paragraph which subse-
     5  quently determines to influence or affect  the  affairs  of  the  issuer
     6  shall provide not less than thirty days' notice of such intent and shall
     7  file  with  the  commission  a  request for determination of suitability
     8  before taking any action that may influence or affect the affairs of the
     9  issuer; provided, however, that it shall be permitted to vote on matters
    10  put to the vote of the outstanding security holders. If an institutional

    11  investor changes its investment  intent,  or  if  the  commission  finds
    12  reasonable cause to believe that the institutional investor may be found
    13  unsuitable,  no  action  other  than  divestiture shall be taken by such
    14  investor with respect to its security  holdings  until  there  has  been
    15  compliance  with  any  requirements established by the commission, which
    16  may include the execution of a trust agreement. The licensee (or signif-
    17  icant vendor or applicant, as  applicable)  and  its  relevant  holding,
    18  intermediary  or  subsidiary  company  shall notify the commission imme-
    19  diately of any information about, or actions of, an institutional inves-
    20  tor holding its equity securities where such information or  action  may

    21  impact  upon the eligibility of such institutional investor for a waiver
    22  pursuant to this paragraph.
    23    (b) If at any time the commission finds that an institutional investor
    24  holding any security of a holding or intermediary company of a  licensee
    25  or  significant  vendor  or  applicant,  or,  where relevant, of another
    26  subsidiary company of a holding or intermediary company of a licensee or
    27  significant vendor or applicant which is  related  in  any  way  to  the
    28  financing  of  the licensee or significant vendor or applicant, fails to
    29  comply with the terms of paragraph (a) of this section,  or  if  at  any
    30  time the commission finds that, by reason of the extent or nature of its
    31  holdings,  an institutional investor is in a position to exercise such a

    32  substantial impact upon the  controlling  interests  of  a  licensee  or
    33  significant  vendor or applicant that investigation and determination of
    34  suitability of the institutional investor is necessary  to  protect  the
    35  public  interest, the commission may take any necessary action otherwise
    36  authorized under this article to protect the public interest.
    37    (c) For purposes of this section, an  "institutional  investor"  shall
    38  mean  any retirement fund administered by a public agency for the exclu-
    39  sive benefit of federal, state, or local  public  employees;  investment
    40  company registered under the Investment Company Act of 1940 (15 U.S.C. §
    41  80a-1  et  seq.);  collective  investment trust organized by banks under

    42  Part Nine of the Rules of the Comptroller of the  Currency;  closed  end
    43  investment  trust; chartered or licensed life insurance company or prop-
    44  erty and casualty insurance company;  banking  and  other  chartered  or
    45  licensed  lending  institution;  investment advisor registered under The
    46  Investment Advisors Act of 1940 (15 U.S.C. § 80b-1 et  seq.);  and  such
    47  other  persons  as  the  commission may determine for reasons consistent
    48  with the public interest.
    49    3. The commission shall not issue a license to or otherwise find suit-
    50  able any prospective licensee or significant vendor who:
    51    (a) Has at any time, either directly, or through another  person  whom
    52  it owned, in whole or in significant part, or controlled:

    53    (i)  knowingly  and  willfully  accepted  or  made available wagers on
    54  interactive gaming (including poker) from persons located in the  United
    55  States after December thirty-first, two thousand six, unless such wagers

        A. 9591--A                          8
     1  were  affirmatively  authorized  by  law of the United States or of each
     2  state in which persons making such wagers were located; or
     3    (ii) knowingly facilitated or otherwise provided services with respect
     4  to interactive gaming (including poker) involving persons located in the
     5  United  States  for a person described in subparagraph (i) of this para-
     6  graph and acted with knowledge of the fact that such wagers or  interac-

     7  tive gaming involved persons located in the United States.
     8    (b)  Has purchased or acquired, directly or indirectly, in whole or in
     9  significant part, a person described in paragraph (a) of  this  subdivi-
    10  sion  or  will  use  that  person  or a covered asset in connection with
    11  interactive gaming licensed pursuant to this article.
    12    4. A prospective licensee or significant vendor may appeal a  determi-
    13  nation  by  the  commission  that  it is within the scope of subdivision
    14  three of this section only in accordance with the  procedures  specified
    15  in this subdivision.
    16    (a)  The  commission  shall afford the prospective licensee or signif-
    17  icant vendor a hearing at which such  person  may  provide  evidence  to

    18  support  the  basis on which it seeks relief. The commission shall waive
    19  the prohibition if the prospective licensee or significant vendor demon-
    20  strates by clear and convincing evidence that its conduct in  connection
    21  with  interactive  gaming  and  wagers  involving persons located in the
    22  United States was not unlawful and,  if  applicable,  that  the  covered
    23  assets  to  be  used or that are being used by such person in connection
    24  with interactive gaming licensed pursuant to this article were not  used
    25  in a manner that was unlawful. The determination of the commission shall
    26  be  made  without regard to whether the person has been prosecuted under
    27  the criminal laws of any state, the United States or other  jurisdiction

    28  and  the proceeding terminated in a manner other than with a conviction.
    29  If the prohibition is waived, the prospective  licensee  or  significant
    30  vendor still must satisfy all otherwise applicable license and suitabil-
    31  ity requirements.
    32    (b)  The  commission  shall  preside over the hearing and shall act as
    33  finder of fact entitled to evaluate the credibility of the witnesses and
    34  persuasiveness of the evidence,  pursuant  to  whatever  procedures  the
    35  commission determines to be appropriate.
    36    §  1405.  State  tax.  Licensees engaged in the business of conducting
    37  interactive gaming pursuant to this article shall pay  a  privilege  tax
    38  based  on  the  licensee's interactive gaming gross revenue at a fifteen
    39  percent rate.

    40    § 2. Subdivision 1 of section 225.00 of the penal law  is  amended  to
    41  read as follows:
    42    1.  "Contest  of  chance"  means  any  contest, game, gaming scheme or
    43  gaming device in which  the  outcome  depends  [in  a  material  degree]
    44  predominantly  upon  an element of chance, notwithstanding that skill of
    45  the contestants may also be a factor therein.
    46    § 3. The penal law is amended by adding a new section 225.36  to  read
    47  as follows:
    48  § 225.36 Interactive gaming offenses and exceptions.
    49    1.  The  knowing and willful offering of unlicensed interactive gaming
    50  to persons in this state,  or  the  knowing  and  willful  provision  of
    51  services with respect thereto, shall constitute a gambling offense under
    52  this article.

    53    2.  Licensed  interactive  gaming  activities  under  section fourteen
    54  hundred two of the racing, pari-mutuel wagering and breeding  law  shall
    55  not be a gambling offense under this article.

        A. 9591--A                          9
     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. This act shall take effect on the one hundred eightieth day after
     9  it shall have become a law.
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