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North Carolina Court Rules Against Video Sweepstakes Games

Over the years, Gambling law has been relatively strict in the state of North Carolina, prohibiting almost all forms of gambling with the exception of a few casinos in operation on Indian reservations. Despite these limitations, video game sweepstakes have been available to the public at convenience stores, bars, and standalone sweepstakes cafes for some time. However, a new court ruling that came this past Tuesday could mean the end for many of these operations. The latest decision in the ongoing back and forth between vendors and state legislators claims that these sweepstakes games are in violation of North Carolina law.

Video sweepstakes games located throughout the state have operated like any
games found at a brick and mortar or online casino; customers pay money to play these games of chance in order to win money or other items of value. The decision to ban these games is indicative of a constant back and forth between the vendors and the state legislation about whether or not the games require skill. Over the years, as new laws have been put in place to prohibit the machines, vendors have adapted and adjusted the rules for the games in order to remain in operation. The court’s most recent ruling adds a new chapter to this ongoing saga.

History Behind the Recent Ruling

For years, the Sandhills Amusements of Southern Pines has collaborated with Gift Surplus LLC, an Arizona-based company, to operate gaming kiosks throughout North Carolina, but not without facing some form of persistent opposition. In 2013, the Onslow County Sheriff’s Office seized gaming machines throughout their jurisdiction on the grounds that the machines violated the state’s gambling laws. Similar situations cropped up throughout the state, resulting in machines being removed and employees being arrested. As a result, Sandhills Amusements and Gift Surplus sued the sheriff and the state, claiming that their games were legal.

The initial case won in favor of the two gaming companies, but it eventually reached the N.C. Supreme Court, who, in 2015, said the machines violated the law and that all video sweepstakes machines should be prohibited. In response, Sandhills and Gift Surplus changed the way the games worked and replaced the old machines with new ones that met the requirements laid out by the state. The new machines were designed to involve an element of skill, as players had to try and stop the rotating slot machine images on screen with hand-eye coordination.

In 2017, the Superior Court Judge ruled in favor of the gaming companies, stating that North Carolina allows for the operation of promotional sweepstakes games. The changes made to games, the judge said, met federal and state regulations for promotional sweepstakes and did in fact include elements of skill and dexterity. On Tuesday, however, a three-judge panel of the Court of Appeals overturned this decision, adding to the ongoing confusion surrounding this style of gaming.

Differing Opinions

The panel may have agreed to overturn the decision, but they differed in their explanations for overturning it. As the Fayetteville Observer reported, Judge Hunter Murphy claimed that the slot-machine style games offered an “entertaining display,” which is specifically prohibited by state law. However, Judge Wanda Bryant contested that the term “entertaining display” offers an interpretation that is much too broad to truly outlaw these games. Bryant felt that the games violated the sweepstakes law due to the fact that chance, not skill, determined the outcome of the games. Judge Allegra Collins agreed with both Murphy and Bryant, stating that the games do have an entertaining display and depend largely on chance, not skill.

Over the years, the sweepstakes gaming terminals have been through many ups and downs resulting in the most recent ban. It seems that the only constant throughout the games’ history is the differing of opinions about whether or not they do violate gambling laws in North Carolina. For the time being, businesses operating sweepstakes games will have to head back to the drawing board in hopes of altering the rules of their games to meet state regulations or hope that the recent court ruling will be revisited and overturned once more.

Florida Considers Gambling Changes

After losing $350 million to the Seminole Tribe of Florida due to a breach in their gambling compact, House and Senate leaders are considering a new approach to gambling law within the state. Over the years, gambling laws in the state of Florida have caused some confusion due to their complexity. A compact that was established in 2010 between the state and the Seminole Tribe granted the Seminoles exclusive rights to operate banked card games, such as blackjack at its casinos in exchange for a payment of $350 million a year. Meanwhile, pari-mutuel-style casinos have been operating throughout the state while offering similar card games to their customers, resulting in conflict between the state and the tribe.

The Heart of the Problem

While pari-mutuels throughout the state may not go toe-to-toe in revenue with the Seminole’s Hard Rock facility in Tampa, the offering of designated player card games is a clear breach of the compact that was established between the state and the tribe. The violation denied the Seminole Tribe the exclusive rights to these types of games in the state, and thus gave them grounds to deny the state the $350 million payment that the compact guaranteed. This past spring, Gov. Ron DeSantis sought to come to an agreement that would resolve this issue, however, a federal judge ruled that the games being offered by pari-mutuels in the state did in fact violate the compact, giving the Seminoles the right to deny payment.

This court ruling resulted in a new deal proposed by Sen. Wilton Simpson, who will take over as Senate President in the upcoming year. Under the new deal, the state would agree to shut down any pari-mutuels who were offering designated player games. In return, the Seminole Tribe would pay the state at least $500 million a year. Despite the attractive figures, DeSantis refused to sign off on the deal, suggesting that more time was needed to properly review the issues surrounding the state’s complex gambling laws. The result, of course, was the Seminole’s refusal to pay the state until the issue was resolved.

A Shift in Thinking

Current Senate President Bill Galvano told the Orlando Sentinel that the state has “moved on from the tribe.” The annual payment that the tribe has committed to since the compact was established in 2010 was not included in the state’s $92 billion budget this year, and Galvano, as well as others, believe that the state can live without it, while exploring other gambling options. The shift in the approach to gambling in the state is good news for pari-mutuels, who could see a number of changes in the coming years, as officials examine ways to increase revenues from these businesses. Potential changes would include an increase in the offering of designated player games, an increase in bet limits, as well as the authorization of sports betting and fantasy sports. These changes would deny the Seminole tribe exclusive rights to designated player games, while exploring and promoting privately run gaming institutions.

Challenges to Inevitable Change

It is clear that the pressure for change to gambling law in Florida is mounting, but the timetable for this change remains unclear. A new compact between the state and the Seminole Tribe seems unlikely, as a number of state representatives have issued statements that suggest they are moving on to explore further options. A new gambling bill could be introduced during the upcoming legislative session in January, but the likelihood that it would be passed is slim, as many representatives have yet to come to a consensus on how to approach these issues.

Another hurdle that Florida faces stems from a newly approved constitutional amendment, which requires statewide votes on future gambling expansions. This power was previously held by state legislators, but now any casino gambling expansion, including sports betting, must be voted on by the citizens. The new amendment has been the topic of some debate, as Galvano has suggested lawmakers have the ability to repeal the amendment and restore the legislature’s ability to expand gaming, while proponents of the constitutional amendment have argued the opposite. While the details of Florida’s gambling expansion remain unclear, it seems that the mounting pressure will yield some significant changes to the gambling landscape in the coming months.

Ukraine Approves Gambling Legalization

On September 29th, the Cabinet of Ministers of Ukraine announced that the country approved the legalization of gambling. The draft of the law to legalize gambling states that all gambling will be conducted at hotels throughout the country, rather than brick-and-mortar casinos. Additionally, these new gaming sites must use equipment with software that adheres to international standards. The announcement is an indication of Ukraine’s willingness to introduce gambling via electronic gaming terminals to the nation in the near future, but the details of how this will be completed remain somewhat unclear.

What We Know

The announcement to legalize gambling in Ukraine came as a side-note in the statement released by the government for their new Action Program. The Action Program also detailed legal changes to mining activities, the State Regional Development Fund, and credit instruments for the purchase of agricultural land. Although the legalization of gambling was a minor point in this statement, it marks a significant change from the country’s stance on gambling over the past decade. These changes are a reflection of the evolving Ukrainian government, led by its new President Vladimir Zelensky, a former comedian who was inaugurated in May.

Zelenksy first mentioned a plan to establish casino’s in the nations five-star hotels in areas of the country that are best known for their tourism. The decision to legalize gambling in areas such as Odessa and the Black Sea suggests that tourists, rather than citizens of Ukraine would be the primary target audience for future gambling establishments. By establishing casinos in the hotels that are located in these locations, Ukraine could benefit from the gaming revenue, while also rebuilding and strengthening tourism in these areas.

Gambling was abolished in Ukraine in 2009, with the exception of state-run lotteries. The push to legalize gambling has been developing or some time, and in 2015 a legislation draft was approved for land-based casinos, sports betting shops, and online gambling sites. Despite the approval, the plans never led to any action, even after an attempt to readdress the draft in 2017. Meanwhile, internationally licensed gambling sites have been the source of illegal gambling for Ukrainian citizens, and authorities have repeatedly blocked land-based operations.

Future Expectations

In an interview with Ukrainian Media, Prime Minister Alexey Goncharuk discussed how the legalization of gambling could lead to the closure of illegal gambling halls that have popped up over the past ten years. The goal of the draft of legislation to legalize gambling is to establish businesses that operate under rules and regulations that make it safe for customers, while benefiting from the revenue earned. Goncharuk cited gambling addiction as one of the major problems with the existing illegal gambling halls, suggesting that regulating gaming in Ukraine would give those struggling with gambling addiction the opportunity to be identified and seek help.

In addition to the benefits that come from regulation, Goncharuk suggested that the legalization of gambling could bring in anywhere from $83 million to $103 million annually. That being said, there is much to consider in terms of establishing the guidelines and laws for the proposed gambling sites located at the aforementioned hotels. While the legalization may help quell the issues with illegal gaming halls, the hotel-style gaming establishments may not provide the silver bullet the government hopes for.

While there is no timeline for the formal establishment of official legislation for these new gaming institutions, it is expected that Zelensky will finalize something before the end of the year. The proposals of legalization in 2015 and 2017 included online options, but for the time being it appears that Zelensky’s administration is focused on land-based options.

Norfolk City Council Approves Land Deal for Casino Resort

On Tuesday, the Norfolk City Council authorized a land deal that would allow for the construction of a new casino resort in the state of Virginia. The deal between the city and the Pamunkey Indian Tribe was met with some pushback at a public hearing, where a number of people tried to postpone the decision to a later date, as reported by The Virginia Pilot.

The deal was passed with a convincing vote of 7 to 1 and allows the city to sell the land near Harbor Park for roughly $10 million. The sale of the land comes with the promise of a casino that offers a combination of both gaming machines and tables. Councilwoman Andria McClellan, who was the sole vote against the deal, expressed her concerns about the casino’s economic impact on the city. Others suggested that the deal felt rushed without the proper research to support the casino resort’s construction.

Details of the Deal

Mayor Alexander released a statement about the casino and resort on Tuesday, offering details about the proposed land deal and construction. The statement reveals that the Pamunkey Indian Tribe will be using the land to construct much more than just a stand-alone gaming facility; The $700 million project will be a resort hotel casino and spa with a minimum of 75- gaming machines, 25 gaming tables, a luxury hotel, upscale restaurants, a 750-seat entertainment facility, and a waterfront promenade. Depending on the types of games available, the proposed project could be a Class 2 gambling facility, rather than a Class 3, which would be more comparable Las Vegas-style table games and slots. The land that the Pamunkey Indian Tribe purchased to construct this casino and resort covers 13.4 acres.

It is expected that the Tribe will ask the federal government to put the newly purchased land into trust, which would make the property part of the Pamunkey’s reservation lands. Doing so would give the Tribe the opportunity to build a tax-exempt tribal casino, assuming an agreement with the state could be reached. Upon the sale of the land, it was announced that the Tribe would be responsible for all costs of construction. This includes the infrastructure, flood mitigation, parking, and utility improvements. Even before the casino resort opens, the Tribe will be responsible for paying the city $125,000 per year. Once the casino is in operation, they will be responsible for paying 4% of net gaming revenues with a minimum payment of $3 million annually.

Concerns of Costs and Rights to the Land

Despite the payments to the city, the deal has done little to ease the concerns of some members of the City Council and residents. As with most casino projects, the overwhelming concern comes from the fear that the expected revenue may fall short of its original projections. Part of this concerns stems from the fact that the city has not conducted a study about the economic impact, and one will not be published until November. Max Shapiro, a resident who attended the public hearing, expressed concerns about the project’s cost to the city and said that he would be preparing a petition for a referendum on the vote by Wednesday morning.

Residents and City Council members are not the only oneswho have expressed their concerns; the Nansemond Indian Tribe has spoken out against the deal, contesting the Pamunkey’s ancestral claim to land in Norfolk. The Nansemond requested the council delay the deal, in order to come to a consensus between other native groups about the history of land ownership. The Pamunkey Tribe has previously noted that throughout the state of Virginia had a lot of overlap between land ownership between tribes and does not claim to be the sole owner of the land they have purchased.

Regardless of concerns, the Pamunkey Tribe will begin preparing to start their project on the newly purchased land. There is no timetable for the start of construction or the completion of the project.

Illinois Undergoes Significant Gambling Expansion

In June, the General Assembly of Illinois passed a bill that legalized sports gambling, sanctioned six new casinos in the state, increased the number of video gambling machines, and brought casino operations to horse racing tracks across the state. These changes, when implemented, will make the state of Illinois one of the leading gambling destination in the Midwest. According to ProPublica Illinois, the new bill would leave the state with nearly 80,000 gambling positions, which is more than double what the state had previously and nearly four times the number of positions in any neighboring state.

Prior to the passing of the bill, Illinois was home to 10 casinos. The addition of six new casinos, including what is being referred to as “mega-casino” in Chicago, is certainly a significant increase that will change the gaming landscape of the state in the coming years. There is no time-table for the conclusion of the construction the Chicago casino, but policy makers have estimated that the casino could be up and running in two to three years. In addition to the mega-casino in Chicago, the Illinois Gaming Board (IGB) has issued a license for new casinos in Danville, Waukegan and Rockford, Williamson County, and one for Cook County. The license for Cook County will be issued in one of the suburban townships: Bloom, Bremen, Calumet, Rich, Thornton, or Worth.

In addition to the brick and mortar casino expansion, the new bill could bring more than 7,000 video gaming, establishments, 5,000 lottery-based sports betting kiosks, as well as access toonline sports gambling through mobile devices within the next two years. Under the current plan, online sports betting platforms like DraftKings and FanDuel would be barred from entering the market for the first 18 months, in order to give casinos priority. Aside from the sports betting opportunities, the bill also allows the establishment of video and slot poker machines at the O’Hare and Midway airports, located in Chicago.

Expected Returns from Extensive Expansion

The large gambling expansion is expected to bring in a substantial amount of revenue for the state. IllinoisPolicy.org projects the casino expansion could bring in $360 million from one-time license, application, and position fees in the fiscal year for 2020. After the expansion is completed, it is estimated that the recurring annual revenue would total nearly $470 million. Given the size of the expansion, it’s tough to say how accurate these estimates could be, especially given the fact that projections for past gaming expansions have proven to be overly optimistic.

During the recession in 2009, law makers made a similar move as they passed the Video Gaming Act in hopes of generating revenue to help support the state’s building program. The gambling expansion was expected to generate $300 million a year, but instead the state was forced to borrow hundreds of millions of dollars to support its programs. The passing of the act was unable to fund the building program, which eventually tallied more than $10 billion in debt. Some law makers and residents fear that the new gambling and casino expansion could lead to similar issues.

Regulations for Addressing Concerns

In an attempt to counteract some of these concerns, the IGB announced last week that it will be adopting new rules in order to maintain an ethical approach to the casino license selection process. The objective of these rules, as reported by the Daily Herald, is to allow for transparency in the issuing of licenses for the new casinos. The rules would require those applying for licenses to disclose any potential or actual violations in order to ensure that the newly erected gaming facilities will be operating under state law.

The new rules for this disclosure agreement were enacted under the IGB’s emergency rulemaking authority. The emergency rulemaking authority gives the IGB to make new gaming rules without following the typical lengthy process of public notice and hearings. However, the rule can only be instated for a maximum of 150 days before having to go through the regular process to make the rule permanent. For the time being, the rule acts as a safeguard against the construction of casinos and other gaming sites that could lead to a loss of revenue for the state. As the large expansion continues to develop, IGB will have to revisit the existing rules to ensure that their plans do not mirror the mistakes of previous gaming expansions.