Legalize Online Poker

Section 1. The racing, pari-mutuel wagering and breeding law is amended by adding a new article 15 to read as follows:

ARTICLE 15

INTERACTIVE GAMING Section 1500. Legislative findings and purpose.

1501. Definitions.

1502. Authorization.

1503. Required safeguards/minimum standards.

1504. Scope of licensing review.

1505. State tax.

1506. Disposition of taxes.

§ 1500. Legislative findings and purpose. The legislature hereby finds and declares that: 1. Under the New York penal law a person engages in gambling when he or she stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under his or her control or influence, upon an agreement or understanding that he or she will receive something of value in the event of a certain outcome.

2. A contest of chance is defined as any contest, game, gaming scheme or gaming device in which the outcome depends in a material degree upon an element of chance, notwithstanding that skill of the contestants may also be a factor therein. (Subdivision 1 of section 225.00 of the penal law). Thus, games of chance may involve some skill, but in those games the level of skill does not determine the outcome regardless of the degree of skill employed. See People v. Turner, 165 Misc. 2d 222, 224,

EXPLANATION--Matter in italics (underscored) is new; matter in brackets

[ ] is old law to be omitted.

LBD05499-02-9

A. 4924 2

629 N.Y.S.2d 661, 662 (Crim. Ct. 1995). On the other hand, where a contest pits the skill levels of the players against each other, New York courts have found a game to be one of skill rather than chance. See People v. Hunt, 162 Misc. 2d 70, 72, 616 N.Y.S.2d 168, 170 (Crim. Ct. 1994) ("Played fairly, skill rather than chance is the material component of three-card monte.");

3. Poker in many instances has been defined as a game of skill and a New York federal court in U.S. v. DiCristina, 886 F. Supp. 2d 164, 224, assessed that under federal law poker was predominantly a game of skill;

4. New York courts have interpreted New York law to apply a more rigorous test in identifying a "contest of chance" than is applied by most states in this nation and the courts have found that where a contest pits the skill levels of the players against each other, those games are games of skill and not games of chance. Furthermore, the courts have not limited the legislature's ability to determine that certain forms of poker should fall outside the general definition of gambling since those games are games of skill;

5. Texas Hold'em poker involves two cards dealt face down to each player and then five community cards placed face-up by the dealer, a series of three, then two additional single cards, with players determining whether to check, bet, raise or fold after each deal. Omaha Hold'em poker is a similar game, in which each player is dealt four cards and makes his or her best hand using exactly two of them, plus exactly three of the five community cards. These games are considered to be complex forms of poker which involve player strategy and decisionmaking and which pit the skill levels of the players against each other. As games of skill, these forms of poker do not fall under the definition of gambling as prohibited by the penal law; and

6. The legislature further finds that as the internet has become an integral part of society, and internet poker a major form of entertainment for many consumers, any interactive gaming enforcement and regulatory structure must begin from the bedrock premise that participation in a lawful and licensed gaming industry is a privilege and not a right, and that regulatory oversight is intended to safeguard the integrity of the games and participants and to ensure accountability and the public trust.

§ 1501. Definitions. As used in this article, the following terms shall have the following meanings:

1. "Authorized game" means Omaha Hold'em and Texas Hold'em poker, as well as any other poker game that the commission determines is the material equivalent of either of those, whether in a cash game or tournament.

2. "Authorized participants" means persons who are either physically present in this state when placing a wager or who otherwise are permitted by applicable law, as determined by the commission, to place a wager. The intermediate routing of electronic data in connection with interactive gaming shall not determine the location or locations in which a wager is initiated, received or otherwise made.

3. "Core function" means any of the following: (a) the management, administration or control of wagers on interactive gaming; (b) the management, administration or control of the games with which those wagers are associated; or (c) the development, maintenance, provision or operation of an interactive gaming platform.

4. "Commission" means the New York state gaming commission.

A. 4924 3

5. "Division" means the division of gaming, established under paragraph (c) of subdivision two of section one hundred three of this chapter.

6. "Interactive gaming" means the conduct of games through the use of the internet or other communications technology that allows a person, utilizing money, checks, electronic checks, electronic transfers of money, credit cards, debit cards or any other instrumentality, to transmit to a computer information to assist in the placing of a wager and corresponding information related to the display of the game, game outcomes or other similar information. The term does not include the conduct of (a) non-gambling games that do not otherwise require a license under state or federal law; or (b) games that occur entirely among participants who are located on a licensed casino premises. For purposes of this provision, "communications technology" means any method used and the components employed by an establishment to facilitate the transmission of information, including, without limitation, transmission and reception by systems based on wire, cable, radio, microwave, light, optics or computer data networks, including, without limitation, the internet and intranets.

7. "Interactive gaming gross revenue" means the total of all sums paid to a licensee from interactive gaming involving authorized participants, less only the total of all sums paid out as winnings to patrons and promotional gaming credits; provided, however, that the cash equivalent value of any merchandise or other non-cash thing of value included in a contest or tournament shall not be included in the total of all sums paid out as winnings to players for purposes of determining interactive gaming gross revenue.

(a) Neither amounts deposited with a licensee for purposes of interactive gaming nor amounts taken in fraudulent acts perpetrated against a licensee for which the licensee is not reimbursed shall be considered to have been "paid" to the licensee for purposes of calculating interactive gaming gross revenue.

(b) "Promotional gaming credit" includes bonuses, promotions and any amount received by a licensee from a patron for which the licensee can demonstrate that it or its affiliate has not received cash.

8. "Interactive gaming platform" means the combination of hardware, software and data networks used to manage, administer or control wagers on interactive gaming or the games with which those wagers are associated.

9. "Internet" means a computer network of interoperable packetswitched data networks.

10. "Licensee" means a person who is licensed by the commission to offer interactive gaming, using an interactive gaming platform to authorized participants. A licensee may utilize multiple interactive gaming platforms provided that each platform is approved by the commission.

11. "Omaha Hold'em poker" means the poker game marketed as Omaha Hold'em poker or Omaha poker in which each player is dealt four cards and must make his or her best hand using exactly two of them, plus exactly three of the five community cards.

12. "Significant vendor" means any person who offers or who proposes to offer any of the following services with respect to interactive gaming: (a) a core function; (b) sale, licensing or other receipt of compensation for selling or licensing a database or customer list of individuals residing in the United States selected in whole or in part because they placed wagers or participated in gambling games with or

A. 4924 4

through an internet website or operator (or any derivative of such a database or customer list); (c) provision of any trademark, tradename, service mark or similar intellectual property under which a licensee or significant vendor identifies interactive games to customers; or (d) provision of any product, service or asset to a licensee or significant vendor in return for a percentage of interactive gaming revenue (not including fees to financial institutions and payment providers for facilitating a deposit or withdrawal by an authorized participant). The term "significant vendor" shall not include a provider of goods or services to a licensee that are not specifically designed for use and not principally used in connection with interactive gaming.

13. "Texas Hold'em poker" means the type of poker marketed as Texas Hold'em poker that involves two cards being dealt face down to each player and then five community cards being placed face-up by the dealer, a series of three then two additional single cards, with players having the option to check, bet, raise or fold after each deal.

§ 1502. Authorization. 1. The commission shall, within one hundred eighty days of the date this article becomes law, promulgate regulations to implement interactive gaming in this state and shall authorize up to eleven licenses to operate interactive gaming involving authorized participants, subject to the provisions of this article and other applicable provisions of law.

2. Applicants eligible to apply for a license pursuant to this article shall be those entities:

(a) licensed by the state pursuant to section sixteen hundred seventeen-a of the tax law to operate video lottery gaming and has experience in the operation of interactive gaming by being licensed in a state with comparable licensing requirements or guarantees acquisition of adequate business competence and experience in the operation of interactive gaming; or

(b) licensed by the state to operate a class III gaming facility pursuant to article thirteen of this chapter and has experience in the operation of interactive gaming by being licensed in a state with comparable licensing requirements or guarantees acquisition of adequate business competence and experience in the operation of interactive gaming.

3. The commission shall, to the extent practicable, issue licenses to multiple applicants no sooner than one hundred eighty days after the promulgation of regulations in order to ensure a robust and competitive market for consumers and to prevent early licensees from gaining an unfair competitive advantage.

4. No person may operate, manage or make available an interactive gaming platform or act as a significant vendor with respect to interactive gaming that is offered to persons located in this state unless licensed by the commission pursuant to this article and only those games authorized by the commission shall be permitted.

5. License applicants may form a partnership, joint venture or other contractual arrangement in order to facilitate the purposes of this article.

6. Any person found suitable by the commission may be issued a license as an operator or significant vendor pursuant to this article. In determining suitability, the commission shall consider those factors it deems relevant in its discretion, including but not limited to:

(a) Whether the applicant is a person of good character, honesty and integrity;

(b) Whether the applicant is person whose prior activities, criminal record, if any, reputation, habits and associations do not:

A. 4924 5

(i) pose a threat to the public interest or to the effective regulation and control of interactive gaming; or

(ii) create or enhance the dangers of unsuitable, unfair or illegal practices, methods and activities in the conduct of interactive gaming or in the carrying on of the business and financial arrangements incidental to such gaming;

(c) Whether the applicant is capable of and likely to conduct the activities for which the applicant is licensed in accordance with the provisions of this article, any regulations prescribed under this article and all other applicable laws;

(d) Whether the applicant has or guarantees acquisition of adequate business competence and experience in the operation of licensed gaming or of interactive gaming in this state or in a state with comparable licensing requirements; and

(e) Whether the applicant has or will obtain sufficient financing for the nature of the proposed operation and from a suitable source.

7. The commission further shall develop standards by which to evaluate and approve interactive gaming platforms for use with interactive gaming. Interactive gaming platforms must be approved by the commission before being used by a licensee or significant vendor to conduct interactive gaming in this state.