April 30 was an historic day for online poker players in the United States. Just a bit more than two years after the indictment and civil cases that were termed “Black Friday” shut down the industry, Ultimate Poker became the first live real-money online poker site in the United States after Black Friday.
Nevada became the first state to legalize online poker in June 2011, and the regulations governing online gaming were issued in December 2011. Nevada gaming authorities granted Ultimate Poker a license in October and last week signed off last week on Ultimate Poker’s technology, which allowed them to launch.
Ultimate Gaming, a majority-owned subsidiary of Station Casinos, LLC, is operating UltimatePoker.com. Station Casinos owns sixteen casinos in Las Vegas. Ultimate Poker is the exclusive online gaming partner of the Ultimate Fighting Championship.
Right now, Ultimate Poker is only available to people who are over the age of 21 and are located in Nevada, though you do not have to be a Nevada resident to participate. Players can register and deposit money into their accounts from anywhere in the world, but can only play when they are physically in Nevada. Players can also make deposits and withdrawals at any of Station Casinos’ locations in Las Vegas.
To verify location, Ultimate Poker will triangulate a customers’ cell phone signal, though some cell phone carriers are not participating in the plan yet. Some players reported difficulty when they tried to play on Ultimate Poker on the first day, including issues with the geo-location services and players being unaware that their cell phone carrier was not participating.
Nevada recently passed a bill that would authorize the state to enter into interstate gaming compacts with other states, a reality that became possible after the U.S. Department of Justice released an opinion in December 2011 stating that the Wire Act applied only to sports betting. Liquidity could become an issue for a state with a relatively small population such as Nevada, so interstate compacts could become vital to the long term success of the state’s online gaming industry.
Online gaming is legal in both New Jersey and Delaware, though those states have yet to go live. Nearly a dozen other states have at least considered some form of online gaming legislation in the past year.
We are very happy to see online poker back online again. Some hurdles remain for companies to assure that their products operate smoothly and efficiently, but it is a good day for the industry and players that real money poker is back online.
The state of New Jersey filed its opening brief on April 29 in the U.S. Court of Appeals for the 3rd Circuit, in a case that could ultimately decide the fate of sports betting in the United States.
In February, U.S. District Court Judge Michael Shipp struck down New Jersey’s new sports betting law, finding it invalid as conflicting with federal law. The federal law at issue is the Professional and Amateur Sports Betting Act of 1992 (PASPA), which prohibits any state from offering sports betting unless the state had a sports betting scheme in place between 1976 and 1990.
In 2011, New Jersey voters approved a referendum by a 2-1 margin to amend the state’s constitution to allow sports betting in the state’s casinos and racetracks. The state legislature then passed a bill legalizing sports betting in the state and it was signed into law by Gov. Chris Christie (R). The New Jersey law would allow wagering on all major professional and collegiate sporting events, except collegiate sporting events involving New Jersey colleges, and on all sporting events, professional or collegiate, taking place in the state.
In August, the four major professional sports leagues and the National Collegiate Athletic Association (NCAA) filed suit against New Jersey arguing that the sports gambling law violated federal law. The U.S. Department of Justice (DOJ) later intervened as a plaintiff in the suit, joining the leagues.
The district court agreed with the plaintiffs and held that PASPA was a rational exercise of congressional power.
There have been prior challenges to PASPA in federal court, but none of those cases directly addressed the constitutionality of the statute, which the Third Circuit is being asked to do in this case.
New Jersey argues that PASPA is unconstitutional because it violates the anti-commandeering principle that Congress may not “require the States in their sovereign capacity to regulate their own citizens.” The Third Circuit’s view on the application of the anti-commandeering principle to PASPA is likely the key to this case for both sides. The district court held that PASPA did not violate the anti-commandeering principle because the doctrine is limited to laws that require some affirmative act by a state, and here New Jersey does not have to affirmatively take any action under the law.
New Jersey argues in its brief that there is no doctrinal basis for this requirement of affirmative conduct for “commandeering,” and that PASPA’s requirement to maintain existing laws is indistinguishable from a requirement to pass new laws. New Jersey cites case law stating that the anti-commandeering precedent turns on whether a law seeks “to control or influence that manner in which States regulate private parties.”
New Jersey also argues that PASPA violates the principle of equal sovereignty, which requires any discrimination among the states to be justified by “a showing that a statute’s geographic coverage is sufficiently related to the problem that it targets.” New Jersey argues that PASPA plainly discriminates among the states and that sports wagering is not the type of “local problem” that justifies different treatment among them. The justification in PASPA for the different treatment of the states was that some states already permitted sports wagering, a difference that does not justify the different treatment between the states.
New Jersey also challenged the leagues’ standing to bring the suit, arguing that although PASPA granted the leagues a right of action to enforce PASPA, “that act does not alter Article III’s jurisdictional requirements.” A separate hearing on just the standing issue was held by the district court in December, and the court found that the leagues did have standing to bring the suit. New Jersey argued that the district court relied on the general harm caused by illegal sports wagering, but that this harm was not traceable to the legalization of sports wagering in New Jersey. New Jersey also noted that the district court placed heavy emphasis on the 3rd Circuit decision in Office of the Commissioner of Baseball v. Markell, a decision that did not address the issue of standing.
The state argues that the standing of DOJ to enforce the law is irrelevant here because “intervention will not be permitted to breathe life into a ‘nonexistent’ law suit.” The court will sometimes treat the pleadings of an intervenor such as DOJ as a separate action, but New Jersey argues that this would not be justified here since DOJ’s intervention cannot be construed as a separate action because it did not sue to enforce the law; rather, DOJ intervened to defend PASPA’s constitutionality.
Intervenor defendants, the New Jersey Thoroughbred Horseman’s Association, Inc. as well as State Senate President Stephen Sweeney and Speaker of the New Jersey General Assembly Sheila Y. Oliver, also filed briefs arguing that PASPA is unconstitutional.
The deadline for the response from the leagues is May 23 and New Jersey will have an opportunity to file a reply brief by May 30. Oral arguments are scheduled in the appeals court on June 26.
The ruling in this case will have very far-reaching implications. A decision in favor of New Jersey will allow states to offer sports betting within their borders. It was not surprising that the district court ruled that New Jersey’s sports wagering law was invalid, but the law may have a different fate in the 3rd Circuit. New Jersey has some very compelling arguments that PASPA is unconstitutional and later this year we will find out if the appeals court agrees.
Justice may or may not be blind; but she can buckle under pressure. It may take years, millions of dollars and armies of attorneys, but if you have the resources to test her mettle, you too may tip the balance in your favor.
Almost seven years after his conviction on fraud and other charges, former Enron executive Jeffrey Skilling may finally be succeeding in his effort to cut down his prison sentence that was originally set at more than 24 years. His investment in his battle is nothing short of impressive. He apparently spent some $70 million on his defense in the underlying trial that ended in 2006 … and that doesn’t include the subsequent seven years of activity, which involves more than 1300 docket entries as of March 2013.
Skilling’s persistence may be paying off. The Department of Justice recently issued a notice on a proposed sentencing agreement with Skilling. (The notice provided that victims have until April 17, 2013, to express their views on the prospective agreement. No further timetables have been officially set.)
It may seem surprising that the Justice Department would consider entering a sentencing agreement with someone who has already been convicted and sentenced and is serving time. But this is a product of Skilling’s aggressive efforts since his conviction, which have resulted in several appearances before the U.S. Court of Appeals for the Fifth Circuit and in one successful trip to the U.S. Supreme Court.
In 2009, the Fifth Circuit vacated Skilling’s sentence – which is where the recently announced sentencing agreement comes into play. In 2010, the Supreme Court ruled that one of the legal theories behind Skilling’s conviction (the honest-services fraud theory) was unconstitutionally vague and remanded the case to the Fifth Circuit to decide whether any of the charges should be invalidated.
After more yo-yoing between courts (the Fifth Circuit upheld the conviction in 2011, the Supreme Court declined to hear a second subsequent appeal in 2012, and Skilling renewed his request for a new trial based on new evidence after the failed Supreme Court appeal), the Justice Department may be raising a white flag of sorts and opting to settle upon a sentence that is mutually acceptable to Skilling and prosecutors. The DOJ may be unwilling to spend more public resources on a man who won’t go away until he gets his way.
It is hard to say what the sentencing agreement will provide. We previously opined that in resentencing, the judge could sentence Skilling to somewhere between 15 and 30 years under the sentencing guidelines. Obviously a more stringent sentence than the previous 24-year sentence is not going to be the result of the prospective agreement between Skilling and the DOJ. Regardless of the terms, the agreement will need to be approved by the sentencing judge. And he will invariably have to balance, along with the scales of justice, the public outcry if the sentence is too light and the costs of continuing to do battle with Skilling.
Earlier this year, the Department of Justice announced an initiative to step up its enforcement of trade secret theft. In a February 20 press conference, Attorney General Eric Holder announced that the Obama administration aimed to make it a top priority to prosecute intellectual property crimes. At the press conference, the DOJ unveiled a report titled, “Administration Strategy on Mitigating the Theft of U.S. Trade Secrets,” which focuses largely on how to prevent and remedy trade secret theft by foreign governments and foreign corporations.
Only two days later, however, a development in one of the DOJ’s highest-profile trade secrets cases demonstrated the difficulties of prosecuting foreign defendants. On February 22, a federal judge in the Eastern District of Virginia determined that, despite eight attempts, the DOJ had not properly served Kolon Industries Inc, a South Korean company accused of stealing trade secrets from duPont, a U.S. company. The DOJ’s criminal case follows a civil trial that returned a $919.9 million judgment against Kolon for stealing 149 trade secrets related to Kevlar, a synthetic fiber used in body armor. Kolon used those trade secrets to create its own competing fabric, Heracron.
The difficulties the DOJ encountered in bringing the overseas perpetrators to justice is especially relevant because the report indicates that most secret theft is committed by foreign nationals, especially in China. According to the report, “Chinese actors are the world’s most active and persistent perpetrators of economic espionage. US private sector firms and cybersecurity specialists have reported an onslaught of computer network intrusions that have originated in China, but the [intelligence community] cannot confirm who was responsible.” The vast majority of cases highlighted in the report involve Chinese nationals or Chinese firms.
The difficulties in bringing foreign nationals to justice only emphasize the need for corporations to take stronger precautions to prevent their trade secrets from being stolen in the first place. The “Administration Strategy” document recognized this need and proposed that companies work cooperatively to develop best practices for trade secret protection in areas such as research and development compartmentalization, information security policies, physical security policies, and human resources policies.
The “Administration Strategy” document notes that companies suffering from trade secret theft may be hesitant to come forward for fear of how it could affect the company and its stakeholders. However, the document encourages them to do so, both in order to bring the perpetrator to justice and to allow the government to collect information that could help to identify patterns in trade theft and prevent similar events in the future.
The DOJ has demonstrated its commitment to trade secret enforcement by continuing to pursue the Kolon case despite the February setback. The DOJ filed a superseding indictment on March 19 and must now serve Kolon in accordance with the judge’s February 22 order. Given the fanfare with which the DOJ announced its trade secret agenda, there is no doubt that the government will continue to doggedly pursue this and other trade secret cases.
We support the DOJ’s effort to protect corporate trade secrets so that companies can benefit from the innovation that they work so hard to develop. As always, we also remain on the lookout for indications of overzealous prosecution in instances where it does not appear that confidential proprietary information has been stolen.
The U.S. Court of Appeals for the 3rd Circuit is set to become the first federal appellate court to answer the question left open by the Supreme Court in United States v. Jones. Last year, the Court held in Jones that a Fourth Amendment “search” occurs, and a warrant is required, when a GPS tracking device is attached by law enforcement to a person’s vehicle and then used to track its movements. The Court did not consider when, if ever, that type of search would be exempt from the Constitution’s warrant requirement.
Last month, the 3rd Circuit heard oral arguments on that question. It is expected to issue its decision later this year.The appeal relates to the prosecution of Harry, Michael, and Mark Katzin — three brothers charged with the burglary of a Rite Aid pharmacy in Pennsylvania. In 2009, authorities began investigating a rash of pharmacy burglaries in the Northeast. Most of the crimes targeted Rite Aid stores and appeared related because each occurred after someone had cut the wires to the pharmacy’s alarm system. Eventually, authorities identified Harry Katzin as a person of interest. He had been implicated in suspicious activities involving other Rite Aid pharmacies and was known to keep electrician’s tools, gloves and ski masks in his van.
Initially, agents physically tracked Katzin’s movements. Then they decided more comprehensive surveillance was needed, so they attached a GPS tracking device to Katzin’s bumper and waited. Two or three days later, the tracking device showed that the van had stopped at a Rite Aid store in Hamburg, Pa. After the van left, one agent drove to the store to confirm it had been burglarized while state troopers followed the van onto the highway. When the burglary was confirmed, troopers stopped the van and arrested the Katzins. Only then did authorities obtain a search warrant, which led to their discovery of merchandise from the Rite Aid store, parts of the pharmacy’s alarm system, and Schedule II drugs.
In April 2011, the brothers were charged with pharmacy burglary and possession of Schedule II drugs with intent to distribute. They filed a pretrial motion to suppress the evidence found in the van. At that time, neither the 3rd Circuit nor the Supreme Court had decided whether the attachment and use of an external GPS tracking device constitutes a Fourth Amendment search. In early 2012, the Jones Court made clear that it does. Applying Jones, the trial judge granted the Katzins’ motion, and the government appealed.
On appeal, the government argues that the search in question, i.e., the attachment and use of the GPS device, falls within one of two exceptions to the warrant requirement. Under the “reasonable suspicion” exception, a warrantless search may be conducted under limited circumstances if the minimal intrusion on the individual’s privacy is outweighed by a legitimate government interest. In this case, the government contends, the “trespass” to Katzin’s van was minimal because it involved the placement of a magnetic GPS device on the bumper. Subsequent monitoring of the device was minimally intrusive because it revealed only the location of the van — information that could be obtained by physical surveillance. In the government’s view, these minimal intrusions were outweighed by the government’s interests in investigating crime.
The government also argues that the search falls within the “probable cause” exception. Under that exception, officers may conduct a warrantless search of an automobile if there is probable cause to believe it contains contraband or if exigent circumstances make a warrant application impractical. The government claims that no warrant was required in this case because officers had probable cause to believe that Katzin would use his van to burglarize another Rite Aid pharmacy.
The Katzin brothers counter that neither exception applies. First, the “reasonable suspicion” exception does not apply because the officers installed the device without a reasonable, articulable suspicion that criminal activity was afoot at the time of installation. Instead, the officers proceeded on a hunch that turned out to be right. The Constitution requires more than that.
The “probable cause” exception does not apply because, when the officers installed the device, they had no reason to believe there was contraband in the van or that the van was readily mobile, which might have made a warrant application impractical. As the Katzins point out, the officers attached the device in the dead of night on a deserted street. If the officers had evidence to support probable cause under those circumstances, they should have applied for a warrant.
Our sense is that the trial court will be upheld. The Fourth Amendment’s baseline requirement is that searches be conducted pursuant to a valid warrant supported by probable cause. These facts do not appear to support an exception. As the trial judge noted, the government argues for application of the “reasonable suspicion” exception based on its general interest in efficient law enforcement. The government did not prove that the special needs of this case required the warrantless intrusion visited on the defendants.
Likewise, the government argues for application of the “probable cause” argument based on the officers’ general suspicion that Katzin would use his van to commit a crime in the coming days, weeks, or months. The government did not prove that the officers had probable cause to believe that a crime was in progress when the device was attached. If courts do not hold the line on these exceptions, the Fourth Amendment will be eviscerated.
We have written previously about Bitcoin, the new form of “peer-to-peer” currency whose proponents expect to be a game-changer in the world financial markets. It’s not clear yet what Bitcoin’s ultimate destination will be, as the currency has had a lot of scrutiny, and undergone a tremendous amount of volatility, lately.
In a recent 24-hour period, the value of a single Bitcoin on the largest Bitcoin exchange, Mt. Gox, was high as $266 and as low as $105. It’s hard to sustain a business model with that incredibly high volatility factor.
However, according to TechCrunch, angel investors and venture capitalists remain “hungry to invest in the ecosystem surrounding the decentralized digital currency.” In other words, investors want to create a different, and possibly superior, Bitcoin.
That currency is known as OpenCoin, which wants to create a decentralized global currency yet prefers to stay away from the moniker of “another Bitcoin.” The company behind OpenCoin has raised an undisclosed amount of venture-capital money to expand the open-source code behind Ripple, which is a virtual currency and payment system that aims to make it easy and affordable for anyone to trade any amount in any currency.
OpenCoin hopes to clear its transactions within minutes; to handle dollars, euros, and other currencies seamlessly; and to solve BitCoin’s security issues.
Some observers think OpenCoin has a greater chance of success than Bitcoin because it has been carefully conceived rather than just springing up from the minds of a few hackers, and because it doesn’t have a history of volatility and of facilitating illegal payments.
But it’s still a very long way before any of these artificial currencies catches on. We will be watching them carefully. We hope that financial regulators, both in the United States and world-wide, realize that these currencies can do a great deal of good, and that the Treasury Department doesn’t conclude that they are nothing more than vehicles for money laundering. Treasury’s recent announcement that dealers in Bitcoin-like currencies must obey money-laundering laws seems like an acceptably moderate approach.
Last December, we wrote about the U. S. Securities and Exchange Commission’s issuance of so-called “Wells” notices indicating that the agency was considering whether to bring enforcement proceedings against Netflix and its CEO, Reed Hastings. The SEC’s ire was aroused by a posting by Hastings on his personal Facebook page about Netflix’s success. The agency was concerned about whether such statements in social media complied with disclosure requirements known as “Regulation Fair Disclosure” or “Reg FD.”
In general, Reg FD requires that, when an issuer discloses material, nonpublic information to certain individuals or entities – generally, securities market professionals such as stock analysts or holders of the issuer’s securities who may well trade on the basis of the information – the issuer must make public disclosure of that information. The purpose of these restrictions is to prevent issuer companies from disclosing material information preferentially to certain traders or securities market professionals.
On April 2, 2013, the SEC issued a report that made clear that companies that use social media outlets like Facebook and Twitter to announce key information are in compliance with Reg FD so long as investors have been alerted about which social media will be used to disseminate such information. In approving the use of social media (with the stated proviso), the SEC reinforced that Reg FD applies to the use of what it characterized as “emerging means of communication” the same way that it applies to company websites, and referenced the SEC’s 2008 guidance regarding the use of websites.
The SEC’s conclusion should be no surprise. On the one hand, it reinforces the widely recognized and increasing use of social media as a source of information by a growing segment of the population. On the other hand, it serves as a reminder to companies that they need to make sure that all investors know and have access to the channels that the companies use to issue important information.
The likelihood, for now, is that companies will continue to use a variety of means to issue information to the public – including social media, websites and more old-school methods such as press releases. But the acceptance of social media as an appropriate means of disclosure for publicly owned companies is an important step forward in the evolution of social media from a means of friendly banter to an important information channel for businesses and investors alike.
The problematic practice of robosigning – whereby banks and other lenders improperly foreclosed on properties through formulaically processing foreclosure documents – has been much in the news over the past couple of years. The feds have been investigating banks and individuals; state attorneys general have joined forces in pursuit of robosigners; and, unsurprisingly, there have been a number of class actions filed by consumers whose homes were foreclosed.
The fallout of these actions has been somewhat inconsistent. On the settlement side, banks and individuals are facing hefty penalties: Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally entered into a massive $25 billion settlement with the Justice Department and state attorneys general (of 49 states) in early 2012. The mortgage servicing firm, Lender Processing Services (LPS), recently entered into a $120 million settlement with a coalition of state attorneys general (of 45 states). A founder of one of LPS’s subsidiaries, Lorraine Brown, pleaded guilty to federal conspiracy charges and Missouri state charges and faces not less than two years imprisonment.
Those defendants who have not settled may be faring better. In early March, a Nevada district judge threw out an entire case against two title officers of LPS who faced more than 100 felony counts. (The judge’s ruling was not merits-based but rather based upon prosecutorial misconduct.) A New Jersey federal judge recently dismissed a putative class action against Bank of America, noting the plaintiff’s failure to prove that robosigning constituted fraud.
Part of the challenge for cases that don’t settle out may be proving damages to homeowners who lost their homes: If a home was foreclosed on deadbeats, where are the damages in rapid-fire paper pushing? Some banking experts have found that, between 2009-2012, mortgage servicers created some 800,000 foreclosures that could have been avoided through loan modification programs. And foreclosure practices at BofA and Morgan Stanley subsidiaries were found to have violated the Servicemembers Civil Relief Act, which provides active servicemembers financial protection in matters such as civil proceedings, income tax disputes and foreclosures. But these two categories are only a small subset of foreclosures, which have amounted to between one million and four million each year for the last six years.
One lesson from these matters may be that settling is not always the best option. But another take-away that hasn’t come up is how banks and mortgage servicers got into the practice of robosigning in the first place. The issue faced by the banks and lenders was a glut of foreclosures and a related mountain of paperwork to process those foreclosures. How could they effectively address the problem and the dead weight on their ledgers? The answer was to institute an efficient, and automated, process. The problem with automation, though, is a lack of oversight or subjective inquiry – the very purpose behind much of the required foreclosure documents.
While the banks and processors are certainly to blame for false certifications and notarizations, their actions are not as nefarious as many make them out to be. How often are we all guilty of “robosigning” the terms and conditions for a new software program or credit card application? How often do we read all the new disclosures that financial institutions are required to send with each statement or loan request? Part of the problem is that we are faced with a mass of disclosures resulting from both regulation and excess litigation. The information overload is part of what has played out in the robosigning scandal.
The Government Accountability Office just released a report criticizing the Federal Reserve’s review of the robosigning matter, saying that the review itself has become cumbersome and inconsistent. The only problem is that there is no realistic resolution to the problem. Until we can devise a way to be both thorough and totally efficient in processing information, we will inevitably face new versions of the robosigning scandal.
In a recent decision, U.S. District Judge Susan Illston of the Northern District of California struck down the FBI’s use of National Security Letters (NSLs) as unconstitutional. Unbeknownst to most Americans, the FBI has been issuing thousands of NSLs every year. The letters demand that recipients, such as banks and telephone companies, provide customers’ information such as their transactional records, phone numbers dialed, and email addresses mailed to and from. This doesn’t involve the content of the phone calls or emails but does involve the names of addressees or participants. One reason most Americans didn’t know about these letters is because more than 95 percent of them contain gag orders, barring the recipient from disclosing their content or even their existence.
This case began nearly two years ago, in May 2011, when a nonprofit advocacy group, the Electric Frontier Foundation (EFF), filed suit on behalf of an unnamed telecom company that had received an NSL. In defense of the NSLs, the government argued that this level of secrecy is necessary to protect the nation against potential security threats. NSLs were designed in the 1970s as a means to gather information on suspected foreign spies during terrorism and espionage investigations. However, the Patriot Act greatly expanded their reach to allow the FBI to secretly compel companies to provide data on American citizens.
The constitutionality of NSLs is dubious for two distinct reasons. Not only does the nondisclosure clause infringe on their recipients’ free speech, but, unlike a standard subpoena or search warrant, the NSLs do not have to be authorized by a judge. Accordingly, Illston concluded that NSLs and their nondisclosure provisions violate the First Amendment and separation of powers principles, and she ordered the FBI to stop issuing NSLs and cease enforcing all gag provisions. That said, we are uncertain whether Illston’s order will ever go into effect. Due to the gravity of the First Amendment and national security issues at stake, Illston issued a 90-day stay, giving the government time to appeal her decision to the U.S. Court of Appeals for the 9th Circuit.
Although the lawsuit was filed anonymously, various media sources have suggested that the unnamed defendant may be Credo Mobile, a phone provider that supports progressive causes. The day after the ruling was released, Credo’s CEO Michael Kieschnick released the following statement:
“This decision is notable for its clarity and depth. From this day forward, the US government’s unconstitutional practice of using national security letters to obtain private information without court oversight and its denial of the first amendment rights of national security letter recipients have finally been stopped by our courts.”
According to Matt Zimmerman, an EFF attorney, the NSL gags “have truncated the public debate on these controversial surveillance tools,” and his unnamed client “looks forward to the day when it can publicly discuss the issue.”
As we await the higher court’s ruling, which we hope leaves Illston’s decision in place, one thing has already been accomplished of a positive nature. A federal district judge has shined some light on a little-known and highly dubious federal law enforcement technique.
On March 19, 2013, the New Jersey Office of the Attorney General, Division of Gaming Enforcement (DGE), announced that it has adopted temporary regulations authorizing the state’s casinos to offer fantasy sports tournaments to their patrons. The regulations permit casinos, on their own or in partnership with fantasy sports providers, to offer fantasy sports tournaments or contests.
The temporary regulations will remain in effect for a period of 270 days. During that time, the DGE will propose the regulations for final adoption. The text of the regulations could change from their current form to the form that is eventually adopted. The regulations will become effective on April 22, 2013. The minimum age for participation in fantasy sports tournaments at casinos is 21. Full text of the temporary regulations is available here.
A fantasy sports tournament is a simulated game in which a player manages an imaginary sports team and competes for a monetary prize against teams managed by other players. Since fantasy sports involve considerable skill in the selection of teams and players, they are widely considered not to constitute gambling. Fantasy sports can involve season-long or single-day tournaments.
The New Jersey temporary regulations clearly define that all prizes and awards must be made known to all participants prior to the start of the tournament. The winning outcome of a fantasy sports tournament shall reflect the relative skill of the participants and the outcome cannot be determined solely on the performance of any individual athlete or on the score, point spread, or performance of any single real world team or combination of teams.
The temporary regulations authorize casinos to utilize the casino cage to accept entry fees and pay out winnings from fantasy sports tournaments in the casino. Under the temporary regulations, fantasy sports are not considered to be gambling under state law. Therefore, revenue generated from these games is not subject to the same taxes as revenue generated from table games and other games offered in casinos.
This announcement on fantasy sports is part of a flurry of activity in New Jersey dealing with the state’s gaming industry. Last month, New Jersey became the third state to legalize online gaming within its borders, and games could be online by the end of the year. Earlier this month, a federal judge in New Jersey struck down the state’s sports betting law and the decision has been appealed by the state to the U.S. Court of Appeals for the Third Circuit.
We are very happy to see New Jersey add fantasy sports offerings in its casinos. This will be a boost for the state as well as for patrons who will soon be able to play these games in casinos.