|SAME AS||No same as|
|Add Art 14 SS1400 - 1405, RWB L; amd S225.00, add S225.36, Pen L|
|Relates to allowing certain interactive poker games.|
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STATE OF NEW YORK ________________________________________________________________________ 9509 IN ASSEMBLY May 5, 2014 ___________ Introduced by M. of A. PRETLOW -- read once and referred to the Commit- tee on Racing and Wagering 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 CERTAIN 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: 13 1. Under the penal law a person engages in gambling when he or she 14 stakes or risks something of value upon the outcome of a contest of 15 chance or a future contingent event not under his or her control or 16 influence, upon an agreement or understanding that he or she will 17 receive something of value in the event of a certain outcome. A contest 18 of chance is defined as any contest, game, gaming scheme or gaming 19 device in which the outcome depends in a material degree upon an element 20 of chance, notwithstanding that skill of the contestants may also be a 21 factor therein; 22 2. A contest of chance is defined as any contest, game, gaming scheme 23 or gaming device in which the outcome depends in a material degree upon 24 an element of chance, notwithstanding that skill of the contestants may 25 also be a factor therein. PL § 225.00(1). Thus, games of chance may 26 involve some skill, but in those games the level of skill does not 27 determine the outcome regardless of the degree of skill employed. See 28 People v. Turner, 165 Misc. 2d 222, 224, 629 N.Y.S.2d 661, 662 (Crim. EXPLANATION--Matter in italics (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD14952-01-4A. 9509 2 1 Ct. 1995). On the other hand, where a contest pits the skill levels of 2 the players against each other, New York courts have found a game to be 3 one of skill rather than chance. See People v. Hunt, 162 Misc. 2d 70, 4 72, 616 N.Y.S.2d 168, 170 (Crim. Ct. 1994) ("Played fairly, still rath- 5 er than chance is the material component 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. 2nd 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; 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; and 36 7. With the passage of the Unlawful Internet Gambling Enforcement Act 37 of 2006, issues concerning the scope and interpretation of state law, 38 including the importance of the location of the wager, wagering activity 39 and website, were clarified. Those persons that provided goods or 40 services related to internet gambling involving New York citizens prior 41 to the enactment of that statute - including, at the time, poker, which 42 was until the adoption of this act unlawful - but exited in an expe- 43 ditious fashion after its enactment should be regarded differently from 44 those that continued to flout U.S. federal and New York law thereafter 45 for purposes of suitability for licensing under the Unlawful Internet 46 Gambling Enforcement Act of 2006. Granting those persons licensing 47 privileges or allowing the use of the assets of such persons in 48 connection with interactive gaming in this state, if those assets were 49 used unlawfully, would reward unlawful gaming activity, would permit 50 manifestly unsuitable persons to profit from their unlawful gaming 51 activity and would create unfair competition with licensees that 52 respected federal and state law. 53 § 1401. Definitions. As used in this article: 54 1. "Authorized game" means Omaha Hold'em and Texas Hold'em poker, as 55 well as any other poker game that the commission determines is the mate-A. 9509 3 1 rial equivalent of either of those, whether in a cash game or tourna- 2 ment. 3 2. "Authorized participants" means persons who are either physically 4 present in this state when placing a wager or who otherwise are permit- 5 ted by applicable law, as determined by the commission, to place a 6 wager. The intermediate routing of electronic data in connection with 7 interactive gaming shall not determine the location or locations in 8 which a wager in initiated, received or otherwise made. 9 3. "Core function" means any of the following: (a) the management, 10 administration or control of wagers on interactive gaming; (b) the 11 management, administration or control of the games with which those 12 wagers are associated; or (c) the development, maintenance, provision or 13 operation of an interactive gaming platform. 14 4. "Covered asset" means any of the following categories of asset if 15 used in connection with the knowing and willful acceptance of any wager 16 from persons located in the United States on any form of interactive 17 gaming (including but not limited to poker) after December thirty-first, 18 two thousand six, that has not been affirmatively authorized by law of 19 the United States or of each state in which persons making such wager 20 were located: (a) any trademark, trade name, service mark or similar 21 intellectual property that was used to identify any aspect of the inter- 22 net website or of the operator offering the wagers or games to its 23 patrons; (b) any database or customer list of individuals residing in 24 the United States who placed such wagers; (c) any derivative of a data- 25 base or customer list described in paragraph (b) of this subdivision; or 26 (d) an asset used to provide a core function. 27 5. "Commission" means the New York state gaming commission. 28 6. "Division" means the division of gaming, established under para- 29 graph (c) of subdivision two of section one hundred three of this chap- 30 ter. 31 7. "Interactive gaming" means the conduct of games through the use of 32 the internet or other communications technology that allows a person, 33 utilizing money, checks, electronic checks, electronic transfers of 34 money, credit cards, debit cards or any other instrumentality, to trans- 35 mit to a computer information to assist in the placing of a wager and 36 corresponding information related to the display of the game, game 37 outcomes or other similar information. The term does not include the 38 conduct of (a) non-gambling games that do not otherwise require a 39 license under state or federal law; or (b) games that occur entirely 40 among participants who are located on a licensed casino premises. 41 8. "Communications technology" means any method used and the compo- 42 nents employed by an establishment to facilitate the transmission of 43 information, including, without limitation, transmission and reception 44 by systems based on wire, cable, radio, microwave, light, optics or 45 computer data networks, including, without limitation, the internet and 46 intranets. 47 9. "Interactive gaming gross revenue" shall mean the total of all sums 48 paid to a licensee from interactive gaming involving authorized partic- 49 ipants, less only the total of all sums paid out as winnings to patrons 50 and promotional gaming credits; provided, however, that the cash equiv- 51 alent value of any merchandise or other non-cash thing of value included 52 in a contest or tournament shall not be included in the total of all 53 sums paid out as winnings to players for purposes of determining inter- 54 active gaming gross revenue. 55 (a) Neither amounts deposited with a licensee for purposes of interac- 56 tive gaming nor amounts taken in fraudulent acts perpetrated against aA. 9509 4 1 licensee for which the licensee is not reimbursed shall be considered to 2 have been "paid" to the licensee for purposes of calculating interactive 3 gaming gross revenue. 4 (b) "Promotional gaming credit" includes bonuses, promotions and any 5 amount received by a licensee from a patron for which the licensee can 6 demonstrate that it or its affiliate has not received cash. 7 10. "Interactive gaming platform" shall mean the combination of hard- 8 ware, software and data networks used to manage, administer or control 9 wagers on interactive gaming or the games with which those wagers are 10 associated. 11 11. "Internet" means a computer network of interoperable packet- 12 switched data networks. 13 12. "Licensee" shall mean a person who is licensed by the commission 14 to offer interactive gaming using an interactive gaming platform to 15 authorized participants. A licensee may utilize multiple interactive 16 gaming platforms provided that each platform is approved by the commis- 17 sion. 18 13. "Omaha Hold'em poker" shall mean the poker game marketed as Omaha 19 Hold'em poker or Omaha poker in which each player is dealt four cards 20 and must make his or her best hand using exactly two of them, plus 21 exactly three of the five community cards. 22 14. "Significant vendor" means any person who offers or who proposes 23 to offer any of the following services with respect to interactive 24 gaming: (a) a core function; (b) sale, licensing or other receipt of 25 compensation for selling or licensing a database or customer list of 26 individuals residing in the United States selected in whole or in part 27 because they placed wagers or participated in gambling games with or 28 through an internet website or operator (or any derivative of such a 29 data base or customer list); (c) provision of any trademark, tradename, 30 service mark or similar intellectual property under which a licensee or 31 significant vendor identifies interactive games to customers; or (d) 32 provision of any product, service or asset to a licensee or significant 33 vendor in return for a percentage of interactive gaming revenue (not 34 including fees to financial institutions and payment providers for 35 facilitating a deposit or withdrawal by an authorized participant). The 36 term "significant vendor" shall not include a provider of goods or 37 services to a licensee that are not specifically designed for use and 38 not principally used in connection with interactive gaming. 39 15. "Texas Hold'em poker" shall mean the type of poker marketed as 40 Texas Hold'em poker that involves two cards being dealt face down to 41 each player and then five community cards being placed face-up by the 42 dealer--a series of three then two additional single cards, with players 43 having the option to check, bet, raise or fold after each deal. 44 § 1402. Authorization. 1. The commission shall, within one hundred 45 eighty days of the effective date of this article, promulgate regu- 46 lations to implement interactive gaming in this state and shall author- 47 ize up to ten licenses to operate interactive gaming involving author- 48 ized participants, subject to the provisions of this article and other 49 applicable provisions of law. 50 2. The commission shall, to the extent practicable, issue licenses to 51 multiple applicants no sooner than one hundred eighty days after the 52 promulgation of regulations in order to ensure a robust and competitive 53 market for consumers and to prevent early licensees from gaining an 54 unfair competitive advantage. 55 3. No person may operate, manage or make available an interactive 56 gaming platform or act as a significant vendor with respect to interac-A. 9509 5 1 tive gaming that is offered to persons located in this state unless 2 licensed by the commission pursuant to this article and only those games 3 authorized by the commission shall be permitted. 4 4. Any person found suitable by the commission may be issued a license 5 as an operator or significant vendor pursuant to this article. In deter- 6 mining suitability, the commission shall consider those factors it deems 7 relevant in its discretion, including but not limited to: 8 (a) Whether the applicant is a person of good character, honesty and 9 integrity; 10 (b) Whether the applicant is a person whose prior activities, criminal 11 record, if any, reputation, habits and associations do not: 12 (i) pose a threat to the public interest or to the effective regu- 13 lation and control of interactive gaming; or 14 (ii) create or enhance the dangers of unsuitable, unfair or illegal 15 practices, methods and activities in the conduct of interactive gaming 16 or in the carrying on of the business and financial arrangements inci- 17 dental to such gaming; 18 (c) Whether the applicant is capable of and likely to conduct the 19 activities for which the applicant is licensed in accordance with the 20 provisions of this article, any regulations prescribed under this arti- 21 cle and all other applicable laws; 22 (d) Whether the applicant has or guarantees acquisition of adequate 23 business competence and experience in the operation of licensed gaming 24 or of interactive gaming in this state or in a state with comparable 25 licensing requirements; 26 (e) Whether the applicant has or will obtain sufficient financing for 27 the nature of the proposed operation and from a suitable source; and 28 (f) Whether the applicant has disclosed to the commission all known 29 affiliations or relationships, whether direct or indirect, with persons 30 and assets of persons described by subdivision three of section fourteen 31 hundred four of this article. 32 5. The commission further shall develop standards by which to evaluate 33 and approve interactive gaming platforms for use with interactive 34 gaming. Interactive gaming platforms must be approved by the commission 35 before being used by a licensee or significant vendor to conduct inter- 36 active gaming in this state. 37 6. The commission shall require all licensees to pay a one-time fee of 38 ten million dollars. 39 7. Licenses issued by the commission shall remain in effect for ten 40 years. 41 8. The commission, by regulation, may authorize and promulgate any 42 rules necessary to implement agreements with other states, or authorized 43 agencies thereof: (a) to enable patrons in those states to participate 44 in interactive gaming offered by licensees under this article or (b) to 45 enable patrons in this state to participate in interactive gaming 46 offered by licensees under the laws of those other states, provided that 47 such other state or authorized agency applies suitability standards and 48 review materially consistent with the provisions of this article, 49 including but not limited to the requirements set out in subdivision 50 three of section fourteen hundred four of this article. 51 9. Any regulations adopted pursuant to subdivision eight of this 52 section must set forth provisions that address: 53 (a) Any arrangements to share revenue between New York and any other 54 state or agency within another state; andA. 9509 6 1 (b) Arrangements to ensure the integrity of interactive gaming offered 2 pursuant to any such agreement and the protection of patrons located in 3 this state. 4 10. The commission may delegate its responsibilities to administer the 5 provisions of this article to the division, as it sees fit, except for 6 its responsibilities to approve licenses and to conduct the proceedings 7 required under subdivision four of section fourteen hundred four of this 8 article. 9 § 1403. Required safeguards/minimum standards. The commission shall 10 require licensees to implement measures to meet the standards set out in 11 this section, along with such other standards that the commission in its 12 discretion may choose to require: 13 1. appropriate safeguards to ensure, to a reasonable degree of 14 certainty, that participants in interactive gaming are not younger than 15 twenty-one years of age. 16 2. appropriate safeguards to ensure, to a reasonable degree of 17 certainty, that participants in interactive gaming are physically 18 located within the state or such other jurisdiction that the commission 19 has determined to be permissible. 20 3. appropriate safeguards to protect, to a reasonable degree of 21 certainty, the privacy and online security of participants in interac- 22 tive gaming. 23 4. appropriate safeguards to ensure, to a reasonable degree of 24 certainty, that the interactive gaming is fair and honest and that 25 appropriate measures are in place to deter, detect and, to the extent 26 reasonably possible, to prevent cheating, including collusion, and use 27 of cheating devices, including use of software programs (sometimes 28 referred to as "bots") that make bets or wagers according to algorithms. 29 5. appropriate safeguards to minimize compulsive gaming and to provide 30 notice to participants of resources to help problem gamblers. 31 6. appropriate safeguards to ensure participants' funds are held in 32 accounts segregated from the funds of licensees and otherwise are 33 protected from corporate insolvency, financial risk or criminal or civil 34 actions against the licensee. 35 § 1404. Scope of licensing review. 1. In connection with any license 36 issued pursuant to this article, the licensee, significant vendor or 37 applicant shall identify and the commission shall review the suitability 38 of such licensee's, significant vendor's or applicant's owner, chief 39 executive officer, chief financial officer and any other officer or 40 employee who the commission deems is significantly involved in the 41 management or control of the licensee, significant vendor or applicant 42 or of the interactive gaming platform. "Owner" for purposes of this 43 article means any person who directly or indirectly holds any beneficial 44 or ownership interest in the applicant of five percent or greater or any 45 amount of ownership that the commission determines to be significant 46 ownership of the licensee, significant vendor, or applicant. 47 2. Institutional investors are subject to the provisions set out in 48 this section. 49 (a) An institutional investor holding under twenty-five percent of the 50 equity securities of a licensee's or significant vendor's (or appli- 51 cant's) holding or intermediary companies, shall be granted a waiver of 52 any investigation of suitability or other requirement if such securities 53 are those of a corporation, whether publicly traded or privately held, 54 and its holdings of such securities were purchased for investment 55 purposes only and it files a certified statement to the effect that it 56 has no intention of influencing or affecting the affairs of the issuer,A. 9509 7 1 the licensee (or significant vendor or applicant, as applicable) or its 2 holding or intermediary companies; provided, however, that it shall be 3 permitted to vote on matters put to the vote of the outstanding security 4 holders. The commission may grant such a waiver to an institutional 5 investor holding a higher percentage of such securities upon a showing 6 of good cause and if the conditions specified in this paragraph are met. 7 Any institutional investor granted a waiver under this subdivision which 8 subsequently determines to influence or affect the affairs of the issuer 9 shall provide not less than thirty days' notice of such intent and shall 10 file with the commission a request for determination of suitability 11 before taking any action that may influence or affect the affairs of the 12 issuer; provided, however, that it shall be permitted to vote on matters 13 put to the vote of the outstanding security holders. If an institutional 14 investor changes its investment intent, or if the commission finds 15 reasonable cause to believe that the institutional investor may be found 16 unsuitable, no action other than divestiture shall be taken by such 17 investor with respect to its security holdings until there has been 18 compliance with any requirements established by the commission, which 19 may include the execution of a trust agreement. The licensee (or signif- 20 icant vendor or applicant, as applicable) and its relevant holding, 21 intermediary or subsidiary company shall notify the commission imme- 22 diately of any information about, or actions of, an institutional inves- 23 tor holding its equity securities where such information or action may 24 impact upon the eligibility of such institutional investor for a waiver 25 pursuant to this subdivision. 26 (b) If at any time the commission finds that an institutional investor 27 holding any security of a holding or intermediary company of a licensee 28 or significant vendor or applicant, or, where relevant, of another 29 subsidiary company of a holding or intermediary company of a licensee or 30 significant vendor or applicant which is related in any way to the 31 financing of the licensee or significant vendor or applicant, fails to 32 comply with the terms of paragraph (a) of this subdivision, or if at any 33 time the commission finds that, by reason of the extent or nature of its 34 holdings, an institutional investor is in a position to exercise such a 35 substantial impact upon the controlling interests of a licensee or 36 significant vendor or applicant that investigation and determination of 37 suitability of the institutional investor is necessary to protect the 38 public interest, the commission may take any necessary action otherwise 39 authorized under this article to protect the public interest. 40 (c) For purposes of this section, an "institutional investor" shall 41 mean any retirement fund administered by a public agency for the exclu- 42 sive benefit of federal, state, or local public employees; investment 43 company registered under the Investment Company Act of 1940 (15 U.S.C. § 44 80a-1 et seq.); collective investment trust organized by banks under 45 Part Nine of the Rules of the Comptroller of the Currency; closed end 46 investment trust; chartered or licensed life insurance company or prop- 47 erty and casualty insurance company; banking and other chartered or 48 licensed lending institution; investment advisor registered under The 49 Investment Advisors Act of 1940 (15 U.S.C. § 80b-I et seq.); and such 50 other persons as the commission may determine for reasons consistent 51 with the public interest. 52 3. The commission shall not issue a license to or otherwise find suit- 53 able any prospective licensee or significant vendor who: 54 (a) has at any time, either directly, or through another person whom 55 it owned, in whole or in significant part, or controlled:A. 9509 8 1 (i) knowingly and willfully accepted or made available wagers on 2 interactive gaming (including poker) from persons located in the United 3 States after December thirty-first, two thousand six, unless such wagers 4 were affirmatively authorized by law of the United States or of each 5 state in which persons making such wager were located; or 6 (ii) knowingly facilitated or otherwise provided services with respect 7 to interactive gaming (including poker) involving persons located in the 8 United States for a person described in subparagraph (i) of this para- 9 graph and acted with knowledge of the fact that such wagers or interac- 10 tive gaming involved persons located in the United States. 11 (b) has purchased or acquired, directly or indirectly, in whole or in 12 significant part, a person described in paragraph (a) of this subdivi- 13 sion or will use that person or a covered asset in connection with 14 interactive gaming licensed pursuant to this article. 15 4. A prospective licensee or significant vendor may appeal a determi- 16 nation by the commission that it is within the scope of subdivision 17 three of this section only in accordance with the procedures specified 18 in this subdivision. 19 (a) The commission shall afford the prospective licensee or signif- 20 icant vendor a hearing at which such person may provide evidence to 21 support the bases on which it seeks relief. The commission shall waive 22 the prohibition if the prospective licensee or significant vendor demon- 23 strates by clear and convincing evidence that its conduct in connection 24 with interactive gaming and wagers involving persons located in the 25 United States was not unlawful and, if applicable, that the covered 26 assets to be used or that are being used by such person in connection 27 with interactive gaming licensed pursuant to this article were not used 28 in a manner that was unlawful. The determination of the commission shall 29 be made without regard to whether the person has been prosecuted under 30 the criminal laws of any state, the United States or other jurisdiction 31 and the proceeding terminated in a manner other than with a conviction. 32 If the prohibition is waived, the prospective licensee or significant 33 vendor still must satisfy all otherwise applicable license and suitabil- 34 ity requirements. 35 (b) The commission shall preside over the hearing and shall act as 36 finder of fact entitled to evaluate the credibility of the witnesses and 37 persuasiveness of the evidence, pursuant to whatever procedures the 38 commissioner determines to be appropriate. 39 § 1405. State tax. Licensees engaged in the business of conducting 40 interactive gaming pursuant to article thirteen of this chapter shall 41 pay a privilege tax based on the licensee's interactive gaming gross 42 revenue at a fifteen percent rate. 43 § 2. Subdivision 1 of section 225.00 of the penal law is amended to 44 read as follows: 45 1. "Contest of chance" means any contest, game, gaming scheme or 46 gaming device in which the outcome depends [ in a material degree] 47 predominantly upon an element of chance, notwithstanding that skill of 48 the contestants may also be a factor therein. 49 § 3. The penal law is amended by adding a new section 225.36 to read 50 as follows: 51 § 225.36. Interactive gaming offenses and exceptions. 52 1. A person is guilty of an interactive gaming offense when he or she 53 knowingly and willfully offers unlicensed interactive gaming to persons 54 in this state, or the knowing and willful provision of services with 55 respect thereto.A. 9509 9 1 2. Licensed interactive gaming activities under section fourteen 2 hundred two of the racing, pari-mutuel wagering and breeding law shall 3 not be a gambling offense under this article. 4 3. A person offering unlicensed interactive gaming to persons in this 5 state shall be liable for all taxes set forth in section fourteen 6 hundred five of the racing, pari-mutuel wagering and breeding law in the 7 same manner and amounts as if such person were a licensee. Timely 8 payment of such taxes shall not constitute a defense to any prosecution 9 or other proceeding in connection with the interactive gaming except for 10 a prosecution or other proceeding alleging failure to make such payment. 11 § 4. This act shall take effect immediately.