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)
NEWS PROVIDED BY
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.
Two days ago I predicted that there would not be a Special Session on Gaming in Florida. I said that the issues were too complex, that the House and Senate were too far apart, and that the Seminole Tribe would have to pay less or nothing in taxes to the State, depending on how much exclusivity they still had.
Yesterday evening, the Legislature declared that they had reached an impasse, and would not be holding a Special Session on gaming. According to the Tampa Bay Times, “The decision came after weeks of backroom diplomacy between Sen. Bill Galvano, R-Bradenton, the incoming Senate president and Rep. Jose Oliva, R-Miami, the incoming House speaker. ” An additional reason that was stated for not calling a Special Session was fears that other things might get added, and that the Session would get pout of control.
I had warned in my last post that the House wanted to oppose expansion of gambling, while the Senate was willing to expand it. I also commented on the discussions about “designated player” or “player banked” card games.
According to the Tampa Bay Times “Among the proposals under consideration between the House and Senate was a plan to allow the tribe to reduce its payments to the state by about $160 million a year. To make up the lost revenue, lawmakers proposed allowing the lucrative “designated player” card games, such as Three-Card poker and Ultimate Texas Hold ’em, at parimutuels and applying a tax to those proceeds.
Designated player card games have become the latest opportunity to breathe new life into ailing dog tracks around the state. Melbourne Greyhound Park and the Jacksonville Kennel Club, for example, have been able to hire dozens of new employees because of the revenue. But a federal court has declared the games also violate the compact because they play like banked card games, and the tribe has threatened to withhold payments to the state if regulators don’t halt those games by May 2019.
However, in order for many in the House to claim success in the chamber that opposes gambling, they needed to be able to say there has been significant gaming reduction in the state’s gaming footprint. Oliva had proposed requiring the parimutuels that add slot machines to obtain a gaming license from an existing brick and mortar operation, including cardrooms.
[Senate President Joe] Negron said that proposal, however, was objectionable to many in the Senate, where legislators representing rural areas expressed concern about losing jobs.”
The link to the Tampa Bay Times Article can be found here: http://www.tampabay.com/florida-politics/buzz/2018/04/26/expand-gambling-in-florida-lawmakers-fold-will-let-voters-decide/
Now we’ll have to see what happens with Amendment Three, the proposed Amendment to the Florida Constitution on voter approval of gambling changes.
Will the Florida Legislature Call a Special Session in the near future to try and pass a gambling bill?
There has been discussion of whether we will have a Special Session in Tallahassee to discuss and hopefully pass comprehensive gambling legislation. I will discuss the possibility of whether a Special Session will be called, and, if so, whether or not it will result in actual legislation.
During the twenty years that I served in the Florida House and Senate, I learned the most basic rule of Special Sessions: “Don’t call one until you have an agreement on what the Legislature will pass.” I can say definitively as of today that the Legislature has not reached an agreement (yet), so as of today, they will not be calling a Special Session.
There are reasons why a Special Session may be called. There is a proposed amendment to the Florida Constitution known as Amendment Three which would take away from the Legislature most authority to amend gambling legislation and would instead require voter approval of any changes. This Legislation has been largely funded by the state Amusement Park industry (especially Disney), and has also received substantial support from the Seminole Indian Tribe. I will write more about Amendment Three in a future blog post, but it is sufficient for now to say that many in the Legislature think that a Special Session may be their last chance to make major revisions to the gambling laws of Florida.
Another reason to call a Special Session is more basic politics: Money. Fundraising. The Florida Legislature has finished its Regular Session and is not scheduled to meet again until after the November elections. The current Speaker of the House, Richard Corcoran, is widely believed to be running for Governor of Florida, although he hasn’t formally filed yet for that position. His best remaining chance of substantial fundraising is from the Gambling industry, if there are discussions of having a Special Session. The two negotiators from the House and Senate on gambling are Speaker-Designate Jose Oliva, and President-Designate Bill Galvano. Their duties as Speaker/President Designates are to raise money for their candidates in their respective Chambers. I regard all three people I’ve mentioned as honorable people, but the ability to raise some additional money for their caucuses should not be overlooked.
I have been told that the current President of the Florida Senate, Joe Negron, who is not running for anything and who has even discussed resigning his seat in the Senate when his term as President is up, has given a deadline to reach an agreement, as he doesn’t want this issue lingering. I was told that the original deadline expired last week, and that the Designates have a short time remaining to reach an agreement. As an aside, I must add an editorial comment that I think Joe Negron has been a great Senate President, and I personally would hate to see him resign and miss his last two years in office.
At the end of the day, I believe that there either will be no Special Session, or the Special Session will be unsuccessful. They’re simply too far apart. The Speaker, who certainly has been sounding like he’s running for Governor, needs to try and be the most conservative guy in the room to do well in a Republican primary. That means he needs to at least sound like he’s passed a conservative bill, reducing gambling. The Senate has been in favor of permitting slot machines in the approximately eight other counties where referendums have passed permitting slot machines, and the Senate has also been in favor of continuing “designated player games”, also known as “player-banked games”, as opposed to House-banked games. Those at least sound like expansions of gambling, and the proposed compromise of closing down some dormant pari-mutuel permits sounds like an insufficient reduction to be seen as a reduction in gambling, if the other items are added.
Many legislators don’t seem to understand the concept of exclusivity under the Indian Gambling Regulatory Act (IGRA). The Seminoles are currently paying the State of Florida nearly three hundred million dollars per year. In exchange for this, the Seminoles have been given statewide exclusivity on house-banked card games, and regional exclusivity on slot machines. Some legislators seem to think that slot machines can be expanded statewide without affecting the regional exclusivity, and thus the required payments under the existing Seminole Compact. I believe that they’re wrong.
When considering how far apart the House and Senate are, and when further adding in the affect that offering additional slot machines to pari-mutuels throughout the State would have on the Seminole Compact, I believe that there either will be no Special Session on Gambling, or, if there is, it will be unsuccessful.
My former Law Firm, Greenspoon Marder (GM), urged me to discontinue my blog in 2015, so I did. GM is a National Law Firm, and I was their Government Affairs Director and Chaired their Gaming Law Practice Group. When I was elected to the Broward County Commission in November of 2016, representing about 250,000 people in 7 cities, I reluctantly had to resign from GM because of conflicts with them appearing frequently in front of the Broward County Commission. I still have great respect and affection for GM, and still think that they’re a great firm.
Since November of 2016, I’ve had my own law firm, named, not surprisingly, Geller Law Firm. I continue to do a substantial practice in Gaming Law, and continue to speak and be interviewed on Gaming Law issues. For example, last weekend I spoke at the American Bar Association Business Law Section Spring Meeting. The topic was Indian Gaming Law in general, and the Seminole Indian Gaming Compact in particular. I will be speaking at the next National Council of Legislators from Gaming States (NCLGS) conference in July in Cleveland. I’ve continued to advise national Banking and Investment houses on gaming issues, and have continued to offer advice and legal opinions to clients and the media.
My new website should be completed within the next few weeks, and I’ll give the website address when it’s finalized. In the meantime, anyone that needs to reach me can reach me at Steve@gellerlawfirm.com .
I will be starting to blog again, and should have a gaming-specific article posted by next week.
Feel free to contact me.