Featured Article in Gaming.com on sports betting, featuring speech made by Steve Geller at National Conference of Legislators from Gaming States (NCLGS) Conference; That speech is published in full in prior blog post
Below is an article by Ryan Butler. It was the Featured Article on Gaming.com, and was published on July 12, 2019. I have boldfaced the parts where I am quoted or referred to in the article. This article references the remarks which I made at the NCLGS conference on July 12. I published the text of my speech on this blog less than an hour ago, and they appear directly below this article. Please view the speech in my prior blog post.
US Sports Betting Future, Legality Remain Largely Undefined
MINNEAPOLIS — More than a year after the Supreme Court struck down the federal ban on sports betting, nine states are taking legal wagers and 30 or more could do so within the next few years. But as more and more states embrace legal wagering, major questions remain about taxation, implementation and even the legal basis for the nascent industry overall.
Speaking at a conference of state lawmakers Friday, a group of gaming lawyers reiterated the myriad legal and regulatory challenges that remain even after the landmark Supreme Court decision opened widespread sports betting outside of Nevada. Questions and court battles over federal and state laws have loomed over the industry since its inception, but the complexities and possible impacts of these interpretations are even less certain than originally believed.
New Jersey led the legal challenge that ultimately resulted in the Supreme Court ruling and was the first state outside Nevada to implement a regulated online market, but even that intrastate array of internet-based offerings may run afoul of federal statute, argued Geller Law Firm’s Steve Geller. The former Florida state Senator and gaming lawyer said he didn’t believe New Jersey law wasn’t in compliance, but said it wouldn’t be hard for an opposing legal view to take shape.
That dichotomy served as a microcosm of the entire debate.
“The short answer as an attorney is I can make a convincing argument for whichever side hired me,” Geller said.
Geller and other speakers at a session during this weekend’s National Council of Legislators from Gaming States (NCLGS) meeting tried to address these questions over legality, but largely acknowledged one of the few definitive in U.S. sports betting was uncertainty.
Legislative Restrictions Remain Unclear
Questions over legality are nothing new to gambling stakeholders, but Friday’s NCLGS meeting only opened up more fronts in the ongoing developments, and challenges, for legal gaming.
Much of the meeting, and debate across the gaming industry, centers on the Wire Act of 1961. Enacted as a means to combat organized crime and legalized decades before the commercial internet was publicly accessible, there has been ongoing debate, and reinterpretations, over its effect on online gaming.
In 2011, the Obama administration answered a question from a state lottery by ruling the Wire Act didn’t apply to online gaming. This helped a handful of states pursue or expand internet lottery offerings, iCasino games and online poker.
That was revised in 2018 by the Trump administration, which ruled the law prohibited all forms of internet gaming in a move that sent shockwaves across the multi-billion dollar industry and threatened to cripple the fledgling U.S. market. The ruling was challenged in court soon after it was issued, and gaming advocates scored a significant victory earlier this year when a New Hampshire court ruled the new interpretation was invalid.
Still the matter remains far from settled, and even the presiding judge in the New Hampshire court believes the case will be challenged all the way to the U.S. Supreme Court. The fallout from this looming court battle remains the central concern of the industry, and gaming observers at NCLGS and across the country still remain unsure how it will end.
Under either interpretation, the law explicitly prohibits sports betting across state lines, but Geller opened up the possibility that intrastate markets conducted online may still be in violation.
Though New Jersey requires its internet servers for online gaming be located in Atlantic City, and bettors must be within state lines to place a bet, it still could be in violation of the Wire Act’s sports betting provisions against interstate communication. Any information, payment processing or other component inherent in online communication that is transmitted through any out-of-state location (or even a satellite in outer space) could, by technical definition, be in violation.
Geller also said a clause in existing New Jersey sports betting regulations prohibiting bets on in-state college teams could also violate federal statutes. The ban on bets could favor the integrity protections of an in-state team at the expense of an out-of-state team, which Geller said could violate the dormant commerce clause of the Constitution.
The veteran gaming lawyer didn’t say he necessarily agreed with that interpretation, but told attendees this is just one of a myriad of ways a law could be viewed, and how it could impact gaming.
During a question-and-answer portion of the seminar, Kentucky Rep. Adam Koenig asked panelists what to look for when interpreting these laws. A leader in Frankfort for his state’s sports betting expansion efforts, Koenig wanted to prepare for future legalization efforts when the federal laws remain so poorly defined.
The answer, panelists said, lies largely in the federal and state authorities who have the ability to interpret such laws.
Federal Inaction Continues as Lone Constant
If it’s any consolation, the actions – or inactions – toward gaming legislation on the federal level remains one of the few constants in the ongoing gaming debate.
The federal government has taken no significant move on gaming laws since the ban was overturned in May of last year and industry observers, stakeholders and consumers have largely believed that pattern will continue. The panelists during the NCLGS session reaffirmed that, with officials from law offices, sports betting data services platform Sportradar and even representatives from the National Basketball Association all agreeing that no move was likely.
Though a federal law could clarify many of the aforementioned legal question marks, this national-level ambivalence is a welcome development for much of the industry.
National advocacy groups like the American Gaming Association as well as commercial stakeholders and state-level officials have all preferred the current state-by-state approach to gaming legislation. Though it lacks a federal-level baseline that could potentially alleviate many of the concerns facing the industry, these stakeholders largely believe that any national-level action would be even more detrimental than the current hands-off approach.
In an address to NCLGS attendees later in the afternoon Friday, Penn National CEO Tim Wilmott didn’t mince words when asked about federal intervention.
“We believe gaming is a states’ rights issue and we’re going to fight that to the death,” Wilmott said. “Any involvement from the federal government will be something that we’ll put all our energies and resources against.”
Wilmott and other industry leaders don’t appear to have much to worry about. Congressional gridlock has become a punchline for even the nation’s most pressing issues, leaving most observers to believe gaming has little chance of being further regulated by a highly partisan and divided federal legislature.
“I think it would be a waste of time,” Geller said of a push for federal regulation. “The current Congress, I don’t think could pass gas, much less legislation.”
Text of Steve Geller’s remarks to NCLGS on Sports Gambling. Discussion and case law of legality of Internet Sports; Does the Dormant Commerce Clause affect Sports Integrity laws?; What are appropriate tax rates for Sports Betting?
Below are the lightly edited remarks which I made at the National Council of Legislators from Gaming States (NCLGS) conference in Minneapolis on July 12. I was the Founder of NCLGS in 1995, served as its first President, and currently serve as General Counsel of NCLGS. I have added some case citations and slightly expanded one or two topics.
I have 5-7 minutes to discuss “Sports Betting – The results and lessons after one year.” There were several things I wanted to discuss, and realized that I didn’t have the time. So, instead of discussing one item, I’ll raise questions about 3 items. Most of this Session will be the Q & A, and I’ll be happy to elaborate on the questions I’ve raised in the Q & A.
First, let’s talk about the legality of internet sports wagering. Many states have permitted this, mostly through affiliations with land-based sports gambling sites. In some cases, actual physical registration at a land-based site is required. A different model, however, is the legislation which Maine Governor Janet Mills just vetoed which would not have required any affiliation with a land-based entity.
Many people think that when the US Supreme Court threw out PASPA in Murphy v. NCAA (832 F. 3d 389, 2018) that this meant that states could legalize sports betting, including internet sports betting. I disagree. The Wire Act (18 U.S.C 1084) is still valid law. There have been recent court challenges to the November 2018 OLC opinion that the Wire Act applies to types of gambling other than sports betting; in fact a Federal District Court in New Hampshire (New Hampshire Lottery Commission V. William Barr, opinion 2019 DNH 091P) recently ruled against the OLC opinion, but there has never been any question that the Wire Act applies to Sports Wagering.
Section 1084 (a) of the Wire Act creates criminal liability for using a “Wire Communication” for the transmission of bets or wagers in Interstate or Foreign commerce. Section 1084 (b) creates a “safe harbor” for transmitting information “assisting in the placing of bets… on a sporting event… from a State… where wagering on that sporting event or contest is legal into a State… in which such wagering is legal”.
There have been a series of cases that hold that the Internet is a wire communication, and further that even if a signal starts and ends in the same state, but has been transmitted through a hub, exchange, or server in another state, that means that it’s been used in Interstate Commerce. I have a series of cases which show this. (See, for example, U.S. v. Yaquinta, 204 F.Supp 276; U.S. v. Kammersell, 196 F.3d 1137 10th Cir, 1999; U.S. v. Cohen, 260 F.3d 68 2d Cir, 2001; U.S. v. Lyons, 740 F.3d 702, 1st Cir, 2014) Many people have claimed that the Wire Act didn’t apply in their cases because they were in locations where Internet gambling was legal, or for other reasons. They continued these arguments while they were serving their sentences in Federal Prisons. My advice is not to argue with the people with guns and badges.
Reading all of this together, it seems that there are two serious issues here.
First, it appears to me that unless a completely in-state based system is set up, and that’s what wireless gambling is based on, any type of internet or wireless gambling that goes out over existing systems is probably in violation of the Wire Act. Understand that geofencing is probably not sufficient, that the system would need to be set up in a fashion that ensures that no part of the signal ever leaves the state.
Second, even in land-based casinos, if information on a sporting event is transmitted from a state that hasn’t adopted sports betting, is that legal? Remember that the “Safe Harbor” applies to information on wagering “from a State… where wagering on that sporting event or contest is legal into a State… in which such wagering is legal”. If the Utah Jazz is playing a basketball game against Portland Trail Blazers, and the game is occurring in Utah, where all types of gambling are illegal, can a wager be placed on that game in California, assuming that sports betting is legal in California? I offer no opinion; I merely raise the question.
Second Topic – One that will really excite you – The Dormant Commerce Clause!! Simply put, this Constitutional interpretation says that a law can’t discriminate against out-of-state actors or have the effect of favoring in-state economic interests over out-of-state interests. Several states, for example Delaware, New Jersey, Illinois, and others permit wagering on sporting events in other states, but make them illegal or illegal for college sports in the state where the wagering takes place for integrity reasons. Does this mean that the states are protecting their own sports teams from improper acts, but don’t care about the integrity of sports teams in other states? If so, it probably violates the Dormant Commerce Clause.
Last Topic – What’s an appropriate tax rate?
Let me begin by saying that I don’t know, and I believe that no one else does. Tax rates on Sports Gambling are all over the map. Literally. Nevada is 6.75 %, New Jersey is 8.5% for land based, and up to 14.25% for racetrack based online, Mississippi is 12%, West Virginia is 10%, Delaware and Rhode Island are trickier to figure out because they’re Revenue Sharing models but appear to be 50 and 51%, and Pennsylvania is at 36%, plus very high licensing fees ($10 million).
Everyone thought that if the tax rate was too high on Sports Betting, that the Bookies would have an advantage, and cut into legal gambling. I believe that the Jury is still out on this, and that it’s too early to tell.
The next question in determining tax rates is the question of why you’re having the Sports Betting. In Nevada, where they have a very low tax rate, it seems that the main reason for Sports Betting is to attract people to their casinos and hotels, generating other tax dollars and jobs. In Pennsylvania, the reason appears to be primarily about generating tax dollars. Both are valid, but very different reasons. Understanding this dichotomy, it appears that it may make sense to have different, higher rates for online sports betting, assuming that the online sports betting is set up in a legal manner. I say this because generally online sports betting doesn’t generate the same amount of jobs or economic activity in a state that gambling at bricks and mortar locations generate.
I feel very comfortable in saying that we still don’t know what the effect of higher tax rates will be on promoting illegal gambling, and that states need to look carefully at what their goals are when they set tax rates for sports betting. Is it to maximize gambling tax dollars, or to create jobs, tourism, and overall business taxes?
Discussion of last Florida Legislative Session and prediction for next Session; Geller speaks at NCLGS Conference in Minneapolis on Sports Gaming
I haven’t posted for a while because the Legislature was in Committee Meetings or Session, and I didn’t want to write anything that could conflict with the positions of any clients or potential clients. I’ve still been active, and I’ll bring you up to date now.
The Florida Legislature last year tried to pass comprehensive gambling legislation, with the emphasis on Sports Betting. Senate President Bill Galvano was once again the main driver of gambling legislation, based on his outstanding knowledge in this area. Remember that Galvano is a former President of the National Council of Legislators from Gaming States (NCLGS), an organization where I also served as President. Galvano prepared the legislation, and then largely turned it over to one of his closest confidants, Senator Wilton Simpson, who is scheduled to succeed Galvano as Senate President. President Galvano consulted with me on his proposed Legislation, and told several reporters and editors that I was his chief advisor on this Legislation.
The passage of comprehensive gambling legislation is always difficult, and this year was no exception. There were too many competing interests (as usual), and, as I predicted, it’s been made more complicated by the passage of the Constitutional Amendment last November (Amendment Three, Voter Control of Gambling). It’s still not clear what’s the actual effect of Amendment Three . The Seminole Tribe has suspended their payments to the State of Florida while indicating a willingness to continue talking. It’s still unclear if the Florida Legislature will sue the Governor based on the last Governor’s entering into a Compact with the Tribe without Legislative approval. Remember that the Florida Supreme Court ruled in Rubio vs. Crist that Indian Gaming Compacts could be negotiated by a Governor, but require ratification by the Legislature. Former Governor Scott entered into a compact with the Seminole Tribe through the process of resolving litigation between the State and the Tribe. This settlement has never been approved by the Legislature, and I believe that this renders any agreement at least subject to question. One of the biggest issues in the Litigation was over “designated player games”, and that remained among the most contentious issues in last year’s proposed Legislation.
This year the Session begins in January instead of March, with Committee meetings beginning in September. I’m sure that there will once again be gambling legislation, with Sports betting at the center of any such legislation. I last spoke on the topic of Sports Gambling Legislation in Minneapolis on July 12 at a NCLGS conference. I will publish my slightly edited remarks in the next day or two. I also would like to invite anyone with an interest in the Seminole Gambling Compact to view my remarks in Gaming Law Review, Economics, Regulation, Compliance and Policy Volume 22, Issue 8, October 2018, pages 469-484. https://www.liebertpub.com/toc/glr2/22/8 . This is the text of a panel discussion for a meeting of the American Bar Association Business Law Section.
Those of you who have looked at my website www.gellerlawfirm.com have seen that the three areas of expertise listed on the website are Florida Legislative issues, gambling law and zoning law. I recently had the opportunity to combine all of these areas by testifying to a City Commission as an expert on them.
I was hired as an expert witness in a case involving a pari-mutuel which had applied for a new pari-mutuel permit. As part of the application process, a zoning verification letter was sent from the City where the new permit would be located, verifying that the zoning would permit a pari-mutuel. After this occurred, and after the permit was issued by the Florida Division of Pari-Mutuel Wagering, the city decided to change its zoning code. This would change zoning for pari-mutuels from a permitted use to a use that would require a 4/5 vote. I proffered my credentials as an expert and was accepted as an expert by the city. My testimony was that the pari-mutuel gambling is a different statute than slot machines, and is pari-mutuel as opposed to house-banked gambling. I testified that the only types of new pari-mutuels available in that city would be Summer Jai Alai permits, and that I didn’t believe that the Legislature would create new pari-mutuels. I testified that I believed that the pari-mutuel had reasonably relied on the approval letter from the city, that there was either detrimental reliance or estoppel here, and that the City was changing its zoning code in an ex post facto impermissible manner, after the applicant had received the initial approval from the City, been granted a permit by the state, and had applied for the final zoning approval.
I enjoyed the opportunity to use all three of these areas of expertise in the same case. The matter is currently on appeal.
Steve Geller named General Counsel of the National Counsel of Legislators from Gaming States (NCLGS); Speaks at NCLGS Winter Conference on casino saturation and what states can realistically expect in terms of Tourism from new casinos.
I attended the NCLGS Winter Conference in New Orleans, which was held from January 4-6. NCLGS is the only organization of State lawmakers that meets on a regular basis to discuss issues in regard to gaming. Members of NCLGS chair or are members of Legislative committees that are responsible for the regulation of gaming in their states. NCLGS does not promote or oppose gaming, but is primarily concerned with proper regulation of the gambling industry.
I was the founder of NCLGS in 1995 and was its long-time first President. I have remained very active in NCLGS, and was named its General Counsel at the Winter meeting.
On Sunday, January 6, I spoke on a NCLGS panel discussion. The topic for the panel was “When developing gaming public policy, legislators often envision casino out-of-state patrons who will do more than gamble in the casino. But with more than 1,000 casinos in 42 states, and with new casinos generally being built to smaller scale due to their proliferation, is it realistic to expect them to be tourism magnets? Are there many markets remaining where destination resorts could be developed to attract tourists? In this panel, operators will provide insight into what states can realistically expect, and what they must do to meet the goal of tourism promotion.”
In my remarks, I discussed the history of recent gaming expansion nationally. This included Indian casinos, “riverboats gambling” (which is generally not conducted on what most people would consider to be “riverboats”, racinos, and commercial casinos. The most common thread on the expansion of all of these except for Indian gambling is the desire for one state not to see its gambling dollars go to another state. Once one state starts a type of gambling, there is increased pressure on neighboring states to have similar types of gambling.
It seems clear that the proliferation of casinos is generally reaching saturation in most areas. For example, in the Northeastern United States, there appears to be a situation where new casinos are cannibalizing revenue from existing casinos. Total gaming revenue may go up, but revenue per casino appears to be going down. I gave quotes from both Moody’s and the American Gaming Association (AGA) discussing that while this appears to be most acute in the Northeast, it is a national issue.
It appears that building casinos by itself is no longer sufficient to attract new tourism. It is unclear if casinos by themselves have been enough to attract tourists in recent years, or if casinos were only helpful as part of a general resort that attracted people. Today, however, there is so much availability of casino gambling without the necessity of travelling that just providing additional opportunities for gambling will not attract tourism.
Many casinos today are being built on a smaller scale, and are designed to attract primarily local patrons as opposed to tourists. It seems that the new casinos that are attracting tourists are the “hubs” of the “hub and spoke” model. This seems to work better with large casino chains with robust loyalty programs where casino patrons can gamble locally, and then cash in player rewards at larger resorts, where casino gambling is only part of the attraction.
Food and beverage, shows, and other diversions are a must to attract tourism dollars. Las Vegas and Atlantic City have recognized this. For example, in Las Vegas in the 1990’s, over ½ of the casino revenue came from gambling, while today it’s down to about 1/3. As younger people lose interest in slot machines, which have traditionally been and remain the biggest gambling money-makers for casinos, casinos will need to do other things to attract people and remain relevant. Some things being discussed are sports gambling, skill-based gaming, E-sports, and even virtual reality gaming.
The most important thing to remember is that the tax rate set by a state will determine what type of gambling takes place in that state. Legislators will need to decide what is most important to them in their states. Hub resort casinos require a lower tax rate to be successful than does a “slots barn”. A state can make money on casino gambling with most tax rates, but lower tax rates result in more investment and jobs, while a higher tax rate can result in more total gambling-exclusive revenue. A tax rate of 6% may get a state a Wynn or Bellagio-style luxury resorts, a tax rate of 25% may get a state a nice hotel franchise casino, a tax rate of 60% may get a state slot machines at convenience stores. All may be viable models; all result in completely different outcomes based on the tax rate.
Proposed Amendment Three to the Florida Constitution (Voter Control of Gambling) is misleading and far more expansive than most people believe. The exact impact of the Amendment is unknown, and it may have an unintended impact on Florida’s two Indian tribes. If it is passed now, it will be extremely difficult to undo.
Summary: Proposed Amendment Three to the Florida Constitution (Voter Control of Gambling) is misleading and far more expansive than most people believe. The exact impact of the Amendment is unknown, and it may have an unintended impact on Florida’s two Indian tribes. If it is passed now, it will be extremely difficult to undo.
The Seminole Indian Tribe of Florida and Walt Disney World have been the two main funders of proposed Amendment Three to the Florida Constitution. This Amendment, entitled “Voter Control of Gambling in Florida”, takes away from the Legislature much of the Legislature’s authority to amend gambling laws in Florida (the extent of which is uncertain), and instead requires a “citizens’ initiative pursuant to Article XI, section 3, in order for casino gambling to be authorized under Florida law.”
Many people mistakenly believe that the “casino gambling” referred to in Amendment Three is limited to bringing in big new casinos. The wording of the Amendment cross-references 25 CFR 502.4, and includes
(a) Any House banking game, including but not limited to –
(1) Card games such as baccarat, chemin de fer, blackjack (21) and pai gow (if played as house banking games;
(2) Casino games such as roulette, craps, and keno
(b) Any slot machines as defined in 15 U.S.C. 1171(a)(1) and electronic or electromechanical facsimiles of any game of chance
(c) Any sports betting and pari-mutuel wagering, including but not limited to wagering on horse racing, dog racing or jai alai; or
The wording of the amendment specifically exempts pari-mutuel wagering by stating “As used herein, ‘casino gambling’ does not include pari-mutuel wagering on horse racing, dog racing, or jai alai exhibitions.” Note that there is no exemption in Amendment Three for the lottery language listed in 25 CFR! Depending on how Amendment Three is interpreted, this could have a significant negative effect on the Florida Lottery.
It is unclear what the actual effect of Amendment Three would be if it passes. This could be the Gaming Attorney/Administrative Law Attorney/Appellate Attorney full employment act. The Amendment may or may not be retroactive, meaning that it may or may not prevent types of gambling that are already legal in Florida. As the Florida Supreme Court determined when they ruled that the language could go on the ballot:
“The opponents primarily argue that the Initiative should not be placed on the ballot because it is unclear whether, if passed, the amendment would apply retroactively and what effect, if any, the amendment would have on gambling that is currently legal in Florida—including gambling that was previously authorized by general law rather than by citizens’ initiative. However, as the sponsor points out, the opponents’ arguments concern the ambiguous legal effect of the amendment’s text rather than the clarity of the ballot title and summary.” (Florida Supreme Court SC16-778, SC16-871)
Thus, the Florida Supreme Court specifically stated that the Amendment has “an ambiguous legal effect” and declined to rule whether or not the amendment is retroactive. If they haven’t determined if it’s retroactive, and say it’s ambiguous , how can voters know what it will do?
The wording of Amendment Three states that “Florida Voters shall have the exclusive right to decide whether to authorize casino gambling in the State of Florida.” What does that mean? Slot machines at Pari-Mutuels in Miami-Dade and Broward Counties are authorized by the Florida Constitution. Would it require a new Constitutional amendment to authorize it in different Counties, or at locations other than Pari-Mutuels? The Florida Lottery has certain types of games. Would a new Constitutional Amendment be required to change the tickets, add locations, or sell the tickets in a new style? Could the Florida Lottery use its existing authority to add keno? Would “skill-based gaming” be permitted as a variation on slot machines, or would they require a new constitutional amendment? Can slot machine manufacturers even bring out new styles or themes of slot machines? There are far more questions than answers.
If Amendment Three is construed broadly, so as to require an initiative for any new types of gambling in Florida, I believe that would eventually bring gambling at Florida’s pari-mutuels to an end. A few decades ago, slot machines were electromechanical. Today they are electronic, and video poker, video blackjack, etc. have been determined to be slot machines because they contain random number generators. I can’t predict what new types of gambling will occur in the decades to come, but I do know that there will be new types of gambling, and if the Seminoles and/or the rest of the U.S. can keep up, but the Florida pari-mutuels and Florida Lottery can’t, then the pari-mutuels and Lottery will fall by the wayside. Would any significant number of people gamble today at a quasi-casino that only had electromechanical games?
Amendment Three could be construed more narrowly and be interpreted as saying that this would only prevent new people from entering legal gambling in Florida. It could be interpreted as saying that because Florida’s current Constitution specifically permits casino gambling at pari-mutuels and specifically permits the Lottery, that casino gambling is already permitted at those locations (maybe just in Miami Dade and Broward, maybe not). Therefore, while no other new operators can be permitted to operate places where casino gambling as defined above occurs, any type of casino gambling would be permitted at the current locations authorized in Florida’s Constitution. It is impossible to tell at this time what the Amendment actually does.
Also, the wording of the amendment seems perhaps intentionally confusing. As a County Commissioner in Broward County, Florida, and a former State Senator, I am frequently asked questions about the proposed amendments. Broward has generally been supportive of casino gambling. Many people seem to be supporting this amendment because they are supportive of expanded gambling in Florida, frustrated with the inability of the Florida Legislature to expand this gambling, and therefore believe that passing this will give more local control, enabling the voters of Broward to pass expanded gambling.
The summary of the Amendment says that “Florida voters shall have the exclusive right to decide whether to authorize casino gambling”, but unless you follow the cross-reference to Article XI, section 3 of the Florida Constitution, the summary never explains whether the vote is a local vote or a Statewide vote. For example, the Platform Subcommittee of the Broward Democratic Party voted to support Amendment Three, because “#Homerule. Gives citizens the right to decide on casinos being built in their cities, instead of Tallahassee”. That is almost exactly the opposite of what the Amendment does. When I explain that Amendment Three requires a statewide petition drive, followed by a statewide vote (not a local vote) and passage by 60%, Broward voters seem horrified, and then oppose it. Please note that the Supreme Court ruling permitting the existing wording was approved by a vote of 4-2. Two Supreme Court Justices ruled that the Ballot Title and Summary were misleading.
In order to begin the initiative required by Amendment Three, it would require signatures from 8 percent of the voters in each of ½ of the state’s Congressional districts, and 8% of the total voters statewide, based on the number of votes cast in the last Presidential election. This is an amazingly high bar, and normally requires an extremely high expenditure of funds for paid petition gatherers. The Supreme Court of Florida would have to approve the wording of the proposed Petition. If all of this occurs, the proposed initiative would need 60% of the votes cast in order to pass. It is worth noting that many experts believe that Amendment Three will pass despite these obstacles. As of the date that I write this, it is estimated that the supporters of Amendment Three have raised over $27 million dollars, without any well-funded opposition thus far.
It seems quite clear that if Amendment Three does pass, it would be extremely difficult and expensive to try and rewrite the Constitution again to undo or amend this language to permit additional types of “casino gambling” in Florida. It is clear that an investment of tens of millions of dollars would be required to attempt to change the gambling laws, with no guarantee of success. Few if any companies would be willing to make that commitment. It may make sense for the Seminole Tribe to invest over ten million dollars because if Amendment Three passes, they believe that they would have a monopoly on all new types of gambling on Florida, including Sports Betting. It would make far less economic sense for any one company, which would be one of many companies engaging in gambling in Florida, to put up similar dollars without the same exclusivity that the Seminoles (and potentially the Miccosukees) would enjoy.
Finally, one of the biggest questions remaining is whether or not the Seminole Tribe of Florida may suffer from the law of Unintended Consequences. The Seminole Tribe clearly intended Amendment Three to not apply to Seminole Gambling. The wording of the Amendment states “In addition, nothing herein shall be construed to limit the ability of the State to negotiate gaming compacts pursuant to the Federal Indian Gaming Regulatory Act…”(emphasis added) However, because of the wording that is used in the Amendment (and in a twist that only Lawyers can love), this may not be sufficient.
On November 14, 2007, and against my advice, Governor Charlie Crist signed a “Compact” with the Seminole Tribe of Florida. Former Governor Crist is a close friend, and I warned him in advance that the Governor does not have the authority to enter into a compact under the Indian Gaming Regulatory Act (IGRA). The Governor has the authority to negotiate a compact, but he does not have the authority to execute the compact without Legislative approval. When Crist signed the Compact, he was sued five days later by the Florida House of Representatives. The Florida Supreme Court decided this issue in Florida House of Representatives v. The Honorable Charles J. Crist, Jr., (999 So. 2d 601). The Court chose not to take up the general question of whether the Governor has the authority to enter into a Compact with Florida Indian tribes under any circumstances without Legislative approval, although they cited to several other State and Federal decisions, and in each cited case, the Governor was ruled not to have such authority. Following judicial principles of deciding cases on narrow grounds when possible, the Supreme Court ruled that it would violate the Constitutional Separation of Powers for the Governor to enter into a compact with the Indian Tribes when the compact gives the Indians a type of gambling otherwise illegal in Florida. The Court stated at page 613:
“The House claims that the Compact violates the separation of powers on a number of grounds.8 We find one of them dispositive. The Compact permits the Tribe to conduct certain Class III gaming that is prohibited under Florida law. Therefore, the Compact violates the state’s public policy about the types of gambling that should be allowed. We hold that, whatever the Governor’s authority to execute compacts, it does not extend so far. The Governor does not have authority to agree to legalize in some parts of the state, or for some persons, conduct that is otherwise illegal throughout the state.”
Crist negotiated a Compact with the Seminoles, but it required Legislative approval or ratification. The wording of Amendment Three only exempts negotiation of a Compact from Amendment Three. Of course, the New Governor of Florida will be able to negotiate a compact with the Seminole or Miccosukee tribes, as Governor Crist did. However, there is nothing in the language of Amendment Three that appears to exempt Legislative approval or ratification from Amendment Three. I believe that it would have been far clearer if Amendment Three said ““In addition, nothing herein shall be construed to limit the ability of the State to negotiate and ratify gaming compacts pursuant to the Federal Indian Gaming Regulatory Act…”(emphasis added). The word ratification is missing from Amendment Three. I know that the Seminoles feel that the wording of Amendment Three is sufficient to cover both negotiations and ratification. I know that other Lawyers who I respect have a different opinion. I offer no conclusion here, but I believe that this is another ambiguity which may need to be decided by the Florida Supreme Court, if Amendment Three passes by the required 60% vote.
Geller speaks at NCLGS on the potential effect of Sports Betting on Pari-mutuels (summary below) and Webinar for GiGse on Sports betting
Since my last Post, I’ve spoken to the National Council of Legislators from Gaming States (NCLGS) on July 13 in Cleveland, Ohio, on “the potential impact of Sports Betting on Pari-mutuels”. On July 26 I was a panelist on a GiGse webinar entitled “U.S. Sports Betting & Wire Act – addressing key issues and questions for a successful regulation and operation of sports betting roll-out across states.”. It seems that sports betting is the flavor of the day in Gambling seminars. This post will deal with my NCLGS comments. I intend to post soon on my GiGse webinar comments.
At NCLGS, I pointed out that the absolute fiscal impact of sports betting at the Pari-Mutuels is likely to be negligible, but that the opportunity is great. Let me elaborate.
Nobody knows what is the total amount of wagering that currently occurs on sports betting. The most common numbers I’ve seen are between $100 and $300 billion, so let’s assume it’s $200 billion. Much of that is “sticky” meaning it will stay where it is, with illegal bookies and in office pools, etc. This is even more likely to occur if there are high taxes on sports betting. On the other hand, there may be large untapped demand, which would expand if sports betting is legalized. Anyone that pretends to know what the actual number is probably is just making it up…, excuse me, I meant to say is simply doing exact calculations on an inexact number, to come up with an educated projection. In other words, making it up. However, most of that expansion would occur in Internet sports betting, which, as I will explain in my comments on the GiGse webinar, is probably illegal. Since I can make up numbers as well as anyone else, my scientific calculation is that there will be approximately $150 billion in Sports betting. Just guessing.
The takeout (Gross Gaming Revenue, or GGR) on sports betting is generally around 4-7% in Las Vegas casinos. Let’s assume 5%. 5% of $150 billion is $7.5 billion. If states increase the takeout much more than that, too much of the gambling will stay illegal. If states raise tax rates above a certain unknown number (10-20%??), they will make it unprofitable for operators. Let’s just assume that the state tax rate is 12%, the Federal excise tax rate is .25% of the wagering (not the GGR), the sports leagues and individual teams ask for their percentage (either of GGR or wagering), and we see that there’s not a lot left for the operators to make money on. In Nevada, the expenses for running sports gambling before taxes and the other issues I’ve discussed approach 50%. Further assume that Nevada will continue to attract most big rollers for sports wagering, and we can see that there isn’t much left to spread around as profit for individual operators in the rest of the Country.
However, there is some good news for pari-mutuel operators, if they take advantage of it. I believe that at least initially, most states will restrict sports betting to their existing licensed gambling facilities. I think that this will occur because the existing facilities have substantial political clout in their states, because Internet sports wagering may be illegal (because of the Wire Act, which wasn’t thrown out when PASPA was), and because of a desire to at least start in a more conservative fashion. In Las Vegas, we’ve seen that sports betting isn’t that big of a revenue generator for the casinos. The casinos use sports betting to attract customers to their casinos, and they do this well. If pari-mutuels around the country take advantage of this, upgrade their facilities, diversify their gambling base, and use sports betting to attract new customers, then sports betting may indeed be a huge boost to pari-mutuels. I won’t hold my breath.
I was the Founder and National President of the National Council of Legislators from Gaming States (NCLGS), and I remain as Senior Adviser and Special Counsel to NCLGS today. I will be speaking on Pari-Mutuels and Sports Betting at their upcoming summer conference in Cleveland. Enclosed below is a Press release with the details of this meeting.
Legislators from Gaming States Announces Roster of Expert Speakers for July 13-15 Summer Meeting in Cleveland
(PRNewsfoto/National Council of Legislators)
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National Council of Legislators from Gaming States
Apr 24, 2018, 11:15 ET
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CLEVELAND, April 24, 2018 /PRNewswire/ — The National Council of Legislators from Gaming States (NCLGS) today announced the roster of speakers for its Summer Meeting that takes place July 13-15 in Cleveland. Registration is open to the public.
“Our slate of speakers includes many of the most respected and thought-provoking experts from different fields, including regulators, gaming operators, attorneys, financial analysts, problem-gambling specialists, and other gaming-related professionals,” said incoming NCLGS President William Coley, a senator from Ohio. “Everyone with a stake in the future of legalized gambling – in any form – should join dozens of state legislators and attend our Cleveland meeting.”
In addition to legislators who will chair Committee sessions, the following experts will speak in Committee and general sessions:
Andy Abboud, VP, Government Relations & Community Development, Las Vegas Sands
Joe Asher, CEO, William Hill US
Karl Bennison, Chief, Enforcement Division, Nevada Gaming Control Board
Dennis Berg, Director, Ohio Lottery
Byron Boothe, Vice President, Government Relations, Intralot
Michael Burke, Executive Director, Michigan Association on Problem Gambling
Anthony Cabot, Distinguished Fellow, University of Nevada-Las Vegas, William S. Boyd School of Law
Richard Carter, CEO, SBTech
Heather Chapman, Supervisory Psychologist/Director Gambling Program, Louis Stokes Cleveland VA Medical Center
Andy Cunningham, Director Global Strategy Integrity Services, Sportradar
Brian Egger, Senior Gaming & Lodging Analyst, Bloomberg Intelligence
Steve Geller, Esquire, Geller Law Firm
Ken George Jr., Chair, Forest County Potawatomi Gaming Commission
Will Green, Senior Director, Research, American Gaming Association
Becky Harris, Chair, Nevada Gaming Control Board
Mark Hemmerle, VP, Legal and Compliance, Worldpay Gaming
Jeremy Kleiman, Member, Saiber LLC
Derek Longmeier, The Problem Gambling Network of Ohio, Executive Director
Tim Lowry, Partner, DLA Piper
John Maddox, Vice President Government Relations & Development, Caesars Entertainment
Art Manteris, Vice President, Race & Sports Operations, Station Casinos
Stephen Martino, Senior Vice President & Chief Compliance Officer, MGM Resorts International
Christopher McErlean, Vice President – Racing, Penn National Gaming
Dan Metelsky, Public Gaming Strategist and Public Policy Leader, Public Gaming Creative Strategies
Kevin Mullally, Vice President of Government Relations & General Counsel, GLI
Dave Payton, Vice President of Sales, AmTote International
Michael Pollock, Managing Director, Spectrum Gaming Group
F. Douglas Reed, Senior Pari-Mutuel Associate, Spectrum Gaming Group
Tim Richards Chief Product Strategy Officer, Everi
Lindsay Slader, Operations Manager, Geocomply
Ernie Stevens Jr., Chair, National Indian Gaming Association
Lovell Walker, Executive Director of Interactive Gaming Development, MGM Resorts International
Daniel Wallach, Shareholder, Becker & Poliakoff
Joseph Weinert, Executive Vice President, Spectrum Gaming Group
The NCLGS Summer Meeting agenda includes:
Six legislative committee sessions: Casinos, Emerging Forms of Gaming, Lotteries, Pari-Mutuels, Responsible Gaming, and State-Federal Relations
Two Masterclass panels conducted by the International Masters of Gaming Law focusing on sports betting and online gaming
Special general session panel examining the economic impacts of gaming
Friday evening welcome reception
Saturday afternoon tour of Intralot’s facility serving the Ohio Lottery
Optional Saturday night baseball game (via separate registration fee at special group rate): New York Yankees at Cleveland Indians
To view the agenda, register, and book hotel rooms at the host Marriott at special attendee rates, visit http://www.nclgs.org/meetings.html.
For sponsorship information, contact Dawn Wagner at firstname.lastname@example.org. Legislators and others seeking NCLGS membership information should contact Wayne Marlin at email@example.com.
NCLGS is the only organization of state lawmakers that meets on a regular basis to discuss issues relating to gaming. Members of NCLGS serve as chairpersons or members of state legislative committees responsible for the regulation of gaming in their state legislative houses. NCLGS does not promote or oppose gaming but is primarily concerned with the regulation and economic and social impacts of the industry. The NCLGS Foundation is the educational and research arm of NCLGS. The 501(c)(3) non-profit is a source of non-partisan data on issues of gaming legislation and regulation.
Spectrum Gaming Group, which has performed advisory and consulting work for gaming operators, regulators and legislatures in 36 US states and territories and in 47 countries on six continents, serves as the Executive Director of NCLGS.
SOURCE National Council of Legislators from Gaming States
On May 31, 2018, I spoke at the GigSe conference in Miami on the topic of Sports Betting after the recent Supreme Court ruling invalidating PASPA. My comments reflected the same position that I made in my last blog post, that the Wire Act still appeared to prohibit Sports betting, even from states where such gambling is legal to states where such gambling is legal. During the Question and Answer period, one person asked me if I was familiar with Former U.S. Solicitor General Ted Olson’s remarks that because PASPA was gone, that meant that Sports Betting among states could be legalized, and therefore the Wire Act would no longer apply. I advised that I had not heard that Olson had made these remarks, but that I’d check.
I cannot find anywhere that Olson has flatly come out and said that the Wire Act doesn’t apply any longer. I have located articles where he has questioned whether the Wire Act still applies. I have reviewed the literature on this, and I have reached several conclusions. These conclusions are my current opinion, are based upon my own knowledge and the opinions that I have read from or discussed with other experts in the field. They are still preliminary, and are subject to change, as I have not researched this area as thoroughly as I would if I was representing a client in this area. With all of those caveats, here is my opinion.
The majority of the opinions from people that I respect seem to range between saying that the Wire Act still applies to saying that the Wire Act may still apply, but that they have some questions. The majority seem to believe that the “safe harbor” section of the Wire Act would permit sharing of information from a state where sports betting is legal to a state where sports betting is legal, although it would not permit the actual betting over the internet, even if sports betting is legal in that state.
I have largely ignored the many articles written by non-lawyers, who appear to believe that if they want it to be legal, it must be legal, or whose major source of information is what they read in a general purpose newspaper. In reading articles, papers, and presentations written by attorneys, the predominant position seems to be “that’s a good question.”, or “The Wire Act currently seems to prohibit it, but it would require litigation or a ruling from the USDOJ to conclusively respond”, or some variation thereof.
Having now reviewed the literature, I slightly amend my prior position, from saying “it currently appears to me that the clear wording of the Wire Act and the December 2011 DOJ memo both, at a minimum, continue to prohibit internet wagering on sports betting” to saying that that “the clear wording of the Wire Act and the December 2011 DOJ memo both, at a minimum, appear to continue to prohibit internet wagering on sports betting but it would require litigation or a ruling from the USDOJ to conclusively respond”.
The United States Supreme Court has issued its ruling in Christie v. NCAA, Case 16-476, stating that the Professional and Amateur Sports Protection Act (PASPA) is unconstitutional. Many people mistakenly think that this has legalized Sports Betting. I expect the ruling to be far less consequential than many think, especially in Florida.
No one knows how much is wagered on illegal Sports Betting in the US today because it’s, well, …illegal. I’ve seen estimates ranging from $107 billion to $300 billion. I think that today’s accurate number is probably somewhere between $150 billion and $200 billion, based on averaging the numbers I’ve seen, even though they’re only guesstimates. Some people assume that all of those wagers and more will immediately go into legal Sports Betting. I disagree.
People enjoy the traditional Office Pool on things like the NCAA Basketball tournament, and other events. Most of those people won’t stop the pools to go wager at a casino. Some people wager on credit with illegal bookies who have “creative” ways of collecting debts. Those people will still go to bookies because of the credit issue. States will tax sports betting (some will do so with heavy taxes), private operators will want to make a profit, and the Sports Leagues have already demanded a cut. I think that the Sports Leagues and states are expecting a larger cut than will prove to be feasible. With all of those takeouts, a bookie should be able to offer better odds.
The biggest issue about the size of the market is whether or not Sports Betting will be able to be offered online. Most boosters say yes, but I don’t know why. I believe that Sports Betting will, at least initially, be limited to bricks and mortar casinos.
Many people think that the famous December 23, 2011 “Christmas Surprise” ruling from the United Stated Department of Justice, Office of Legal Counsel, authorized internet gambling, including Sports Betting. Incorrect. The OLC ruling was much more limited. It was based on an acknowledged conflict between the prior interpretation of the Wire Act of 1961, and the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA). The interpretation of the Wire Act had been that any type of Internet Gambling was illegal, but UIGEA specifically excluded Intrastate online gambling from penalties. OLC issued the Christmas Surprise ruling announcing that their longtime previous interpretation of the Wire Act was incorrect, and that the Wire Act should only apply to Sports Betting, and that only Sports Betting is illegal over the internet. Department of Justice Ruling December 2011 on Internet Gambling. Let me include quotes from that opinion:
“We conclude that interstate transmissions of wire communications that do not relate to a “sporting event or contest,” 18 U.S.C. § 1084(a), fall outside of the reach of the Wire Act. Because the proposed New York and Illinois lottery proposals do not involve wagering on sporting events or contests, the Wire Act does not, in our view, prohibit them.”
“The Criminal Division’s conclusion that the New York and Illinois lottery proposals may be unlawful rests on the premise that the Wire Act prohibits interstate wire transmissions of gambling-related communications that do not involve “any sporting event or contest.” See Crim. Mem. at 3; Crim. Supp. Mem. at 2. As noted above, both Illinois and New York dispute this premise, contending that the Wire Act prohibits only transmissions concerning sports-related wagering… We conclude that the Criminal Division’s premise is incorrect and that the Wire Act prohibits only the transmission of communications related to bets or wagers on sporting events or contests.”
This provision contains two broad clauses. The first bars anyone engaged in the business of betting or wagering from knowingly using a wire communication facility “for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest.” Id. The second bars any such person from knowingly using a wire communication facility to transmit communications that entitle the recipient to “receive money or credit” either “as a result of bets or wagers” or “for information assisting in the placing of bets or wagers.” Id.5”
“Reading the entire subsection, including its second clause, as limited to sports-related betting also makes functional sense of the statute. Cf. Corley v. United States, 129 S. Ct. 1558, 1567 n.5 (2009) (construing the statute as a whole to avoid “the absurd results of a literal reading”). On this reading, all of subsection 1084(a)’s prohibitions serve the same end, forbidding wagering, information, and winnings transmissions of the same scope: No person may send a wire communication that places a bet on a sporting event or entitles the sender to receive money or credit as a result of a sports-related bet, and no person may send a wire communication that shares information assisting in the placing of a sports-related bet or entitles the sender to money or credit for sharing information that assisted in the placing of a sports-related bet.”
Based on the DOJ opinion, a consensus has emerged among serious attorneys that the Wire Act prohibits interstate internet gambling, but permits intra-state internet gambling if authorized by the legislature of that state. It is not clear if interstate compacts are permitted. Information on shared pari-mutuel pools through the internet, although apparently otherwise prohibited by the Wire Act, are expressly permitted through the later Interstate Horse Racing Act.
It currently appears to me that the clear wording of the Wire Act and the December 2011 DOJ memo both, at a minimum, continue to prohibit internet wagering on sports betting. It is not clear to me at this time if even sports betting at local brick and mortar casinos in states that authorize sports betting would be permitted if that wagering is part of interstate pools. Remember that the Wire Act prohibits not only wagering on sport events, but also prohibits “ information assisting in the placing of bets or wagers.”
Finally, the prospects are even worse in Florida. Florida is unlikely to have an opportunity to have a Special Session of the Legislature prior to the elections. There will be a referendum on the November ballot pertaining to voter control of gambling that may or may not impact sports betting. It is also certainly possible that competition between the different gambling industries in Florida, and opposition from the same forces that are pushing the anti-gambling referendum (such as Disney) may result in an inability of Florida to pass any sports betting legislation.