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S03898 Summary:

BILL NOS03898A
 
SAME ASNo Same As
 
SPONSORBONACIC
 
COSPNSRAVELLA
 
MLTSPNSR
 
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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S03898 Actions:

BILL NOS03898A
 
01/27/2017REFERRED TO RACING, GAMING AND WAGERING
02/14/2017REPORTED AND COMMITTED TO FINANCE
05/09/20171ST REPORT CAL.895
05/10/20172ND REPORT CAL.
05/15/2017ADVANCED TO THIRD READING
06/05/2017AMENDED ON THIRD READING 3898A
06/13/2017PASSED SENATE
06/13/2017DELIVERED TO ASSEMBLY
06/13/2017referred to racing and wagering
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S03898 Text:



 
                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.
                                                                   LBD04134-07-7

        S. 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  to

        S. 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 unless

        S. 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  or

        S. 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.
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