Bill S6913A-2013

Relates to allowing certain interactive poker games

Allows certain interactive poker games that are consider to be games of skill rather than games of luck; includes definitions, authorization, required safeguards and minimum standards, the scope of licensing review and state tax implications; makes corresponding penal law amendments.

Details

Actions

  • May 22, 2014: PRINT NUMBER 6913A
  • May 22, 2014: AMEND AND RECOMMIT TO RACING, GAMING AND WAGERING
  • Mar 28, 2014: REFERRED TO RACING, GAMING AND WAGERING

Memo

BILL NUMBER:S6913A

TITLE OF BILL: An act to amend the racing, pari-mutuel wagering and breeding law and the penal law, in relation to allowing certain interactive poker games

PURPOSE:

To authorize the New York State Gaming Commission to license certain entities to offer for play to the public certain variants of internet poker which require a significant degree of skill, specifically "Omaha Hold'em" and "Texas Hold'em."

SUMMARY OF PROVISIONS:

Section 1:Amends the Racing, Pari-Mutual Wagering and Breeding Law to create a new Article 14 which authorizes the New York State Gaming Commission to license certain entities to offer online poker as provided below:

Section 1400. Legislative findings and purpose. Provides for legislative findings.

Section 1401. Definitions. Provides definitions.

Section 1402. Authorization. Authorizes the New York State Gaming Commission promulgate regulations in order to implement interactive gaming and to offer up to 10 licenses to operate interactive gaming. Each license fee shall be in the amount of $10,000,000 and the license shall be in effect for 10 years.

Section 1403. Required Safeguards/minimum standards. Provides that the New York State Gaming Commission shall require licensees to implement certain standards to protect the public against underage gaming, fraud and compulsive gambling.

Section 1404. Scope of licensing review. Provides that the New York State Gaming Commission shall thoroughly review the background of any applicant seeking a license to provide interactive gaming to the public.

Section 1405. State tax. This section provides that internet poker licensees shall pay a tax of 15% of their interactive gaming gross revenue to the state.

Section 2:Amends Penal Law section 225.00(1) as to the definition of a contest of chance.

Section 3:Amends the Penal Law by adding a new section 225.36 known as the Interactive gaming offenses and exceptions.

Section 4:Effective date.

EXISTING LAW:

Under 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. Games of skill are not considered games of chance under the current penal law definitions.

JUSTIFICATION:

Presently, numerous New York residents are participating in illegal, unregulated and unsafe gaming operations which offer games of chance over the Internet. This bill will allow the state to license operators that meet the high standards set by the state and offer limited games of poker which require a high level of skill. This bill will require such operators to take steps to protect consumers, combat compulsive gaming, and prevent minors from accessing online gaming sites. In addition, this legislation would create additional revenue for the State of New York by clearly defining certain variants of poker, "Omaha Hold' em" and Texas "Hold'em," as games of skill and thus allowing licensed interactive gaming operators to offer these games to the public. Thus, not only this will help New York regulate an industry that is present operating without oversight in New York State, but also generate additional revenue from taxes and licenses fees associated with a licensed online poker system in New York State.

LEGISLATIVE HISTORY:

New bill.

FISCAL IMPLICATIONS:

Increased tax revenue to the state through taxing interactive gaming as well as up to $100,000,000 generated from the licensing of up to 10 interactive gaming operators.

EFFECTIVE DATE:

This act shall take effect on the one hundred eightieth day after it shall have become a law.


Text

STATE OF NEW YORK ________________________________________________________________________ 6913--A IN SENATE March 28, 2014 ___________
Introduced by Sens. BONACIC, LARKIN -- read twice and ordered printed, and when printed to be committed to the Committee on Racing, Gaming and Wagering -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee AN ACT to amend the racing, pari-mutuel wagering and breeding law and the penal law, in relation to allowing certain interactive poker games THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. The racing, pari-mutuel wagering and breeding law, is amended by adding a new article 14 to read as follows: ARTICLE 14 INTERACTIVE GAMING SECTION 1400. LEGISLATIVE FINDINGS AND PURPOSE. 1401. DEFINITIONS. 1402. AUTHORIZATION. 1403. REQUIRED SAFEGUARDS/MINIMUM STANDARDS. 1404. SCOPE OF LICENSING REVIEW. 1405. STATE TAX. S 1400. 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, 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 COMPO- NENT 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 DETER- MINING 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 DECISION-MAKING 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; 6. THE LEGISLATURE FURTHER FINDS THAT AS THE INTERNET HAS BECOME AN INTEGRAL PART OF SOCIETY, AND INTERNET POKER A MAJOR FORM OF ENTER- TAINMENT FOR MANY CONSUMERS, ANY INTERACTIVE GAMING ENFORCEMENT AND REGULATORY STRUCTURE MUST BEGIN FROM THE BEDROCK PREMISE THAT PARTIC- IPATION 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; AND 7. WITH THE PASSAGE OF THE UNLAWFUL INTERNET GAMBLING ENFORCEMENT ACT OF 2006, ISSUES CONCERNING THE SCOPE AND INTERPRETATION OF STATE LAW, INCLUDING THE IMPORTANCE OF THE LOCATION OF THE WAGER, WAGERING ACTIVITY AND WEBSITE, WERE CLARIFIED. THOSE PERSONS THAT PROVIDED GOODS OR SERVICES RELATED TO INTERNET GAMBLING INVOLVING NEW YORK CITIZENS PRIOR TO THE ENACTMENT OF THAT STATUTE, INCLUDING, AT THE TIME, POKER, WHICH WAS UNTIL THE ADOPTION OF THIS ACT UNLAWFUL, BUT EXITED IN AN EXPE- DITIOUS FASHION AFTER ITS ENACTMENT SHOULD BE REGARDED DIFFERENTLY FROM THOSE THAT CONTINUED TO FLOUT U.S. FEDERAL AND NEW YORK LAW THEREAFTER FOR PURPOSES OF SUITABILITY FOR LICENSING UNDER THIS ARTICLE. GRANTING THOSE PERSONS LICENSING PRIVILEGES OR ALLOWING THE USE OF THE ASSETS OF SUCH PERSONS IN CONNECTION WITH INTERACTIVE GAMING IN THIS STATE, IF THOSE ASSETS WERE USED UNLAWFULLY, WOULD REWARD UNLAWFUL GAMING ACTIV- ITY, WOULD PERMIT MANIFESTLY UNSUITABLE PERSONS TO PROFIT FROM THEIR UNLAWFUL GAMING ACTIVITY AND WOULD CREATE UNFAIR COMPETITION WITH LICEN- SEES THAT RESPECTED FEDERAL AND STATE LAW. S 1401. 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 MATE- RIAL EQUIVALENT OF EITHER OF THOSE, WHETHER IN A CASH GAME OR TOURNA- MENT.
2. "AUTHORIZED PARTICIPANTS" MEANS PERSONS WHO ARE EITHER PHYSICALLY PRESENT IN THIS STATE WHEN PLACING A WAGER OR WHO OTHERWISE ARE PERMIT- TED 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. "COVERED ASSET" MEANS ANY OF THE FOLLOWING CATEGORIES OF ASSET IF USED IN CONNECTION WITH THE KNOWING AND WILLFUL ACCEPTANCE OF ANY WAGER FROM PERSONS LOCATED IN THE UNITED STATES OF ANY FORM OF INTERACTIVE GAMING (INCLUDING BUT NOT LIMITED TO POKER) AFTER DECEMBER THIRTY-FIRST, TWO THOUSAND SIX, THAT HAS NOT BEEN AFFIRMATIVELY AUTHORIZED BY LAW OF THE UNITED STATES OR OF EACH STATE IN WHICH PERSONS MAKING SUCH WAGER WERE LOCATED: (A) ANY TRADEMARK, TRADE NAME, SERVICE MARK OR SIMILAR INTELLECTUAL PROPERTY THAT WAS USED TO IDENTIFY ANY ASPECT OF THE INTER- NET WEBSITE OR OF THE OPERATOR OFFERING THE WAGERS OR GAMES TO ITS PATRONS; (B) ANY DATABASE OR CUSTOMER LIST OF INDIVIDUALS RESIDING IN THE UNITED STATES WHO PLACED SUCH WAGERS; (C) ANY DERIVATIVE OF A DATA- BASE OR CUSTOMER LIST DESCRIBED IN PARAGRAPH (B) OF THIS SUBDIVISION; OR (D) AN ASSET USED TO PROVIDE A CORE FUNCTION. 5. "COMMISSION" MEANS THE NEW YORK STATE GAMING COMMISSION. 6. "DIVISION" MEANS THE DIVISION OF GAMING, ESTABLISHED UNDER PARA- GRAPH (C) OF SUBDIVISION TWO OF SECTION ONE HUNDRED THREE OF THIS CHAP- TER. 7. "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 TRANS- MIT 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. 8. "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 INTERAC- TIVE 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. 9. "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 ASSOCI- ATED. 10. "INTERNET" MEANS A COMPUTER NETWORK OF INTEROPERABLE PACKET-SWITCHED DATA NETWORKS. 11. "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 COMMIS- SION. 12. "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. 13. "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 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. 14. "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. S 1402. 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 TEN LICENSES TO OPERATE INTERACTIVE GAMING INVOLVING AUTHORIZED PARTIC- IPANTS, SUBJECT TO THE PROVISIONS OF THIS ARTICLE AND OTHER APPLICABLE PROVISIONS OF LAW. 2. 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. 3. NO PERSON MAY OPERATE, MANAGE OR MAKE AVAILABLE AN INTERACTIVE GAMING PLATFORM OR ACT AS A SIGNIFICANT VENDOR WITH RESPECT TO INTERAC- TIVE 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. 4. ANY PERSON FOUND SUITABLE BY THE COMMISSION MAY BE ISSUED A LICENSE AS AN OPERATOR OR SIGNIFICANT VENDOR PURSUANT TO THIS ARTICLE. IN DETER- MINING 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: (I) POSE A THREAT TO THE PUBLIC INTEREST OR TO THE EFFECTIVE REGU- LATION 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 INCI- DENTAL 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 ARTI- CLE 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; (E) WHETHER THE APPLICANT HAS OR WILL OBTAIN SUFFICIENT FINANCING FOR THE NATURE OF THE PROPOSED OPERATION AND FROM A SUITABLE SOURCE; AND (F) WHETHER THE APPLICANT HAS DISCLOSED TO THE COMMISSION ALL KNOWN AFFILIATIONS OR RELATIONSHIPS, WHETHER DIRECT OR INDIRECT, WITH PERSONS AND ASSETS OF PERSONS DESCRIBED BY SUBDIVISION THREE OF SECTION FOURTEEN HUNDRED FOUR OF THIS ARTICLE. 5. 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 INTER- ACTIVE GAMING IN THIS STATE. 6. THE COMMISSION SHALL REQUIRE ALL LICENSEES TO PAY ONE-TIME FEE OF TEN MILLION DOLLARS. 7. LICENSES ISSUED BY THE COMMISSION SHALL REMAIN IN EFFECT FOR TEN YEARS. 8. THE COMMISSION, BY REGULATION, MAY AUTHORIZE AND PROMULGATE ANY RULES NECESSARY TO IMPLEMENT AGREEMENTS WITH OTHER STATES, OR AUTHORIZED AGENCIES THEREOF (A) TO ENABLE PATRONS IN THOSE STATES TO PARTICIPATE IN INTERACTIVE GAMING OFFERED BY LICENSEES UNDER THIS ARTICLE OR (B) TO ENABLE PATRONS IN THIS STATE TO PARTICIPATE IN INTERACTIVE GAMING OFFERED BY LICENSEES UNDER THE LAWS OF THOSE OTHER STATES, PROVIDED THAT SUCH OTHER STATE OR AUTHORIZED AGENCY APPLIES SUITABILITY STANDARDS AND REVIEW MATERIALLY CONSISTENT WITH THE PROVISIONS OF THIS ARTICLE, INCLUDING BUT NOT LIMITED TO THE REQUIREMENTS SET OUT IN SUBDIVISION THREE OF SECTION FOURTEEN HUNDRED FOUR OF THIS ARTICLE. 9. ANY REGULATIONS ADOPTED PURSUANT TO SUBDIVISION EIGHT OF THIS SECTION MUST SET FORTH PROVISIONS THAT ADDRESS: (A) ANY ARRANGEMENTS TO SHARE REVENUE BETWEEN NEW YORK AND ANY OTHER STATE OR AGENCY WITHIN ANOTHER STATE; AND (B) ARRANGEMENTS TO ENSURE THE INTEGRITY OF INTERACTIVE GAMING OFFERED PURSUANT TO ANY SUCH AGREEMENT AND THE PROTECTION OF PATRONS LOCATED IN THIS STATE.
10. THE COMMISSION MAY DELEGATE ITS RESPONSIBILITIES TO ADMINISTER THE PROVISIONS OF THIS ARTICLE TO THE DIVISION, AS IT SEES FIT, EXCEPT FOR ITS RESPONSIBILITIES TO APPROVE LICENSES AND TO CONDUCT THE PROCEEDINGS REQUIRED UNDER SUBDIVISION FOUR OF SECTION FOURTEEN HUNDRED FOUR OF THIS ARTICLE. S 1403. REQUIRED SAFEGUARDS/MINIMUM STANDARDS. 1. THE COMMISSION SHALL REQUIRE LICENSEES TO IMPLEMENT MEASURES TO MEET THE STANDARDS SET OUT IN THIS SECTION, ALONG WITH SUCH OTHER STANDARDS THAT THE COMMISSION IN ITS DISCRETION MAY CHOOSE TO REQUIRE. (A) APPROPRIATE SAFEGUARDS TO ENSURE, TO A REASONABLE DEGREE OF CERTAINTY, THAT PARTICIPANTS IN INTERACTIVE GAMING ARE NOT YOUNGER THAN TWENTY-ONE YEARS OF AGE. (B) APPROPRIATE SAFEGUARDS TO ENSURE, TO A REASONABLE DEGREE OF CERTAINTY, THAT PARTICIPANTS IN INTERACTIVE GAMING ARE PHYSICALLY LOCATED WITHIN THE STATE OR SUCH OTHER JURISDICTION THAT THE COMMISSION HAS DETERMINED TO BE PERMISSIBLE. (C) APPROPRIATE SAFEGUARDS TO PROTECT, TO A REASONABLE DEGREE OF CERTAINTY, THE PRIVACY AND ONLINE SECURITY OF PARTICIPANTS IN INTERAC- TIVE GAMING. (D) APPROPRIATE SAFEGUARDS TO ENSURE, TO A REASONABLE DEGREE OF CERTAINTY, THAT THE INTERACTIVE GAMING IS FAIR AND HONEST AND THAT APPROPRIATE MEASURES ARE IN PLACE TO DETER, DETECT AND, TO THE EXTENT REASONABLY POSSIBLE, TO PREVENT CHEATING, INCLUDING COLLUSION, AND USE OF CHEATING DEVICES, INCLUDING USE OF SOFTWARE PROGRAMS (SOMETIMES REFERRED TO AS "BOTS") THAT MAKE BETS OR WAGERS ACCORDING TO ALGORITHMS. (E) APPROPRIATE SAFEGUARDS TO MINIMIZE COMPULSIVE GAMING AND TO PROVIDE NOTICE TO PARTICIPANTS OF RESOURCES TO HELP PROBLEM GAMBLERS. (F) APPROPRIATE SAFEGUARDS TO ENSURE PARTICIPANTS' FUNDS ARE HELD IN ACCOUNTS SEGREGATED FROM THE FUNDS OF LICENSEES AND OTHERWISE ARE PROTECTED FROM CORPORATE INSOLVENCY, FINANCIAL RISK OR CRIMINAL OR CIVIL ACTIONS AGAINST THE LICENSEE. S 1404. SCOPE OF LICENSING REVIEW. 1. IN CONNECTION WITH ANY LICENSE ISSUED PURSUANT TO THIS ARTICLE, THE LICENSEE, SIGNIFICANT VENDOR OR APPLICANT SHALL IDENTIFY AND THE COMMISSION SHALL REVIEW THE SUITABILITY OF SUCH LICENSEE'S, SIGNIFICANT VENDOR'S OR APPLICANT'S OWNER, CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER AND ANY OTHER OFFICER OR EMPLOYEE WHO THE COMMISSION DEEMS IS SIGNIFICANTLY INVOLVED IN THE MANAGEMENT OR CONTROL OF THE LICENSEE, SIGNIFICANT VENDOR OR APPLICANT OR OF THE INTERACTIVE GAMING PLATFORM. "OWNER" FOR PURPOSES OF THIS PROVISION MEANS ANY PERSON WHO DIRECTLY OR INDIRECTLY HOLDS ANY BENEFI- CIAL OR OWNERSHIP INTEREST IN THE APPLICANT OF FIVE PERCENT OR GREATER OR ANY AMOUNT OF OWNERSHIP THAT THE COMMISSION DETERMINES TO BE SIGNIF- ICANT OWNERSHIP OF THE LICENSEE, SIGNIFICANT VENDOR, OR APPLICANT. 2. INSTITUTIONAL INVESTORS ARE SUBJECT TO THE PROVISIONS SET OUT IN THIS SECTION. (A) AN INSTITUTIONAL INVESTOR HOLDING UNDER TWENTY-FIVE PERCENT OF THE EQUITY SECURITIES OF A LICENSEE'S OR SIGNIFICANT VENDOR'S (OR APPLI- CANT'S) HOLDING OR INTERMEDIARY COMPANIES, SHALL BE GRANTED A WAIVER OF ANY INVESTIGATION OF SUITABILITY OR OTHER REQUIREMENT IF SUCH SECURITIES ARE THOSE OF A CORPORATION, WHETHER PUBLICLY TRADED OR PRIVATELY HELD, AND ITS HOLDINGS OF SUCH SECURITIES WERE PURCHASED FOR INVESTMENT PURPOSES ONLY AND IT FILES A CERTIFIED STATEMENT TO THE EFFECT THAT IT HAS NO INTENTION OF INFLUENCING OR AFFECTING THE AFFAIRS OF THE ISSUER, THE LICENSEE (OR SIGNIFICANT VENDOR OR APPLICANT, AS APPLICABLE) OR ITS HOLDING OR INTERMEDIARY COMPANIES; PROVIDED, HOWEVER, THAT IT SHALL BE PERMITTED TO VOTE ON MATTERS PUT TO THE VOTE OF THE OUTSTANDING SECURITY
HOLDERS. THE COMMISSION MAY GRANT SUCH A WAIVER TO AN INSTITUTIONAL INVESTOR HOLDING A HIGHER PERCENTAGE OF SUCH SECURITIES UPON A SHOWING OF GOOD CAUSE AND IF THE CONDITIONS SPECIFIED ABOVE ARE MET. ANY INSTI- TUTIONAL INVESTOR GRANTED A WAIVER UNDER THIS PARAGRAPH WHICH SUBSE- QUENTLY DETERMINES TO INFLUENCE OR AFFECT THE AFFAIRS OF THE ISSUER SHALL PROVIDE NOT LESS THAN THIRTY DAYS' NOTICE OF SUCH INTENT AND SHALL FILE WITH THE COMMISSION A REQUEST FOR DETERMINATION OF SUITABILITY BEFORE TAKING ANY ACTION THAT MAY INFLUENCE OR AFFECT THE AFFAIRS OF THE ISSUER; PROVIDED, HOWEVER, THAT IT SHALL BE PERMITTED TO VOTE ON MATTERS PUT TO THE VOTE OF THE OUTSTANDING SECURITY HOLDERS. IF AN INSTITUTIONAL INVESTOR CHANGES ITS INVESTMENT INTENT, OR IF THE COMMISSION FINDS REASONABLE CAUSE TO BELIEVE THAT THE INSTITUTIONAL INVESTOR MAY BE FOUND UNSUITABLE, NO ACTION OTHER THAN DIVESTITURE SHALL BE TAKEN BY SUCH INVESTOR WITH RESPECT TO ITS SECURITY HOLDINGS UNTIL THERE HAS BEEN COMPLIANCE WITH ANY REQUIREMENTS ESTABLISHED BY THE COMMISSION, WHICH MAY INCLUDE THE EXECUTION OF A TRUST AGREEMENT. THE LICENSEE (OR SIGNIF- ICANT VENDOR OR APPLICANT, AS APPLICABLE) AND ITS RELEVANT HOLDING, INTERMEDIARY OR SUBSIDIARY COMPANY SHALL NOTIFY THE COMMISSION IMME- DIATELY OF ANY INFORMATION ABOUT, OR ACTIONS OF, AN INSTITUTIONAL INVES- TOR HOLDING ITS EQUITY SECURITIES WHERE SUCH INFORMATION OR ACTION MAY IMPACT UPON THE ELIGIBILITY OF SUCH INSTITUTIONAL INVESTOR FOR A WAIVER PURSUANT TO THIS PARAGRAPH. (B) IF AT ANY TIME THE COMMISSION FINDS THAT AN INSTITUTIONAL INVESTOR HOLDING ANY SECURITY OF A HOLDING OR INTERMEDIARY COMPANY OF A LICENSEE OR SIGNIFICANT VENDOR OR APPLICANT, OR, WHERE RELEVANT, OF ANOTHER SUBSIDIARY COMPANY OF A HOLDING OR INTERMEDIARY COMPANY OF A LICENSEE OR SIGNIFICANT VENDOR OR APPLICANT WHICH IS RELATED IN ANY WAY TO THE FINANCING OF THE LICENSEE OR SIGNIFICANT VENDOR OR APPLICANT, FAILS TO COMPLY WITH THE TERMS OF PARAGRAPH (A) OF THIS SECTION, OR IF AT ANY TIME THE COMMISSION FINDS THAT, BY REASON OF THE EXTENT OR NATURE OF ITS HOLDINGS, AN INSTITUTIONAL INVESTOR IS IN A POSITION TO EXERCISE SUCH A SUBSTANTIAL IMPACT UPON THE CONTROLLING INTERESTS OF A LICENSEE OR SIGNIFICANT VENDOR OR APPLICANT THAT INVESTIGATION AND DETERMINATION OF SUITABILITY OF THE INSTITUTIONAL INVESTOR IS NECESSARY TO PROTECT THE PUBLIC INTEREST, THE COMMISSION MAY TAKE ANY NECESSARY ACTION OTHERWISE AUTHORIZED UNDER THIS ARTICLE TO PROTECT THE PUBLIC INTEREST. (C) FOR PURPOSES OF THIS SECTION, AN "INSTITUTIONAL INVESTOR" SHALL MEAN ANY RETIREMENT FUND ADMINISTERED BY A PUBLIC AGENCY FOR THE EXCLU- SIVE BENEFIT OF FEDERAL, STATE, OR LOCAL PUBLIC EMPLOYEES; INVESTMENT COMPANY REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940 (15 U.S.C. S 80A-1 ET SEQ.); COLLECTIVE INVESTMENT TRUST ORGANIZED BY BANKS UNDER PART NINE OF THE RULES OF THE COMPTROLLER OF THE CURRENCY; CLOSED END INVESTMENT TRUST; CHARTERED OR LICENSED LIFE INSURANCE COMPANY OR PROP- ERTY AND CASUALTY INSURANCE COMPANY; BANKING AND OTHER CHARTERED OR LICENSED LENDING INSTITUTION; INVESTMENT ADVISOR REGISTERED UNDER THE INVESTMENT ADVISORS ACT OF 1940 (15 U.S.C. S 80B-1 ET SEQ.); AND SUCH OTHER PERSONS AS THE COMMISSION MAY DETERMINE FOR REASONS CONSISTENT WITH THE PUBLIC INTEREST. 3. THE COMMISSION SHALL NOT ISSUE A LICENSE TO OR OTHERWISE FIND SUIT- ABLE ANY PROSPECTIVE LICENSEE OR SIGNIFICANT VENDOR WHO: (A) HAS AT ANY TIME, EITHER DIRECTLY, OR THROUGH ANOTHER PERSON WHOM IT OWNED, IN WHOLE OR IN SIGNIFICANT PART, OR CONTROLLED: (I) KNOWINGLY AND WILLFULLY ACCEPTED OR MADE AVAILABLE WAGERS ON INTERACTIVE GAMING (INCLUDING POKER) FROM PERSONS LOCATED IN THE UNITED STATES AFTER DECEMBER THIRTY-FIRST, TWO THOUSAND SIX, UNLESS SUCH WAGERS
WERE AFFIRMATIVELY AUTHORIZED BY LAW OF THE UNITED STATES OR OF EACH STATE IN WHICH PERSONS MAKING SUCH WAGERS WERE LOCATED; OR (II) KNOWINGLY FACILITATED OR OTHERWISE PROVIDED SERVICES WITH RESPECT TO INTERACTIVE GAMING (INCLUDING POKER) INVOLVING PERSONS LOCATED IN THE UNITED STATES FOR A PERSON DESCRIBED IN SUBPARAGRAPH (I) OF THIS PARA- GRAPH AND ACTED WITH KNOWLEDGE OF THE FACT THAT SUCH WAGERS OR INTERAC- TIVE GAMING INVOLVED PERSONS LOCATED IN THE UNITED STATES. (B) HAS PURCHASED OR ACQUIRED, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN SIGNIFICANT PART, A PERSON DESCRIBED IN PARAGRAPH (A) OF THIS SUBDIVI- SION OR WILL USE THAT PERSON OR A COVERED ASSET IN CONNECTION WITH INTERACTIVE GAMING LICENSED PURSUANT TO THIS ARTICLE. 4. A PROSPECTIVE LICENSEE OR SIGNIFICANT VENDOR MAY APPEAL A DETERMI- NATION BY THE COMMISSION THAT IT IS WITHIN THE SCOPE OF SUBDIVISION THREE OF THIS SECTION ONLY IN ACCORDANCE WITH THE PROCEDURES SPECIFIED IN THIS SUBDIVISION. (A) THE COMMISSION SHALL AFFORD THE PROSPECTIVE LICENSEE OR SIGNIF- ICANT VENDOR A HEARING AT WHICH SUCH PERSON MAY PROVIDE EVIDENCE TO SUPPORT THE BASIS ON WHICH IT SEEKS RELIEF. THE COMMISSION SHALL WAIVE THE PROHIBITION IF THE PROSPECTIVE LICENSEE OR SIGNIFICANT VENDOR DEMON- STRATES BY CLEAR AND CONVINCING EVIDENCE THAT ITS CONDUCT IN CONNECTION WITH INTERACTIVE GAMING AND WAGERS INVOLVING PERSONS LOCATED IN THE UNITED STATES WAS NOT UNLAWFUL AND, IF APPLICABLE, THAT THE COVERED ASSETS TO BE USED OR THAT ARE BEING USED BY SUCH PERSON IN CONNECTION WITH INTERACTIVE GAMING LICENSED PURSUANT TO THIS ARTICLE WERE NOT USED IN A MANNER THAT WAS UNLAWFUL. THE DETERMINATION OF THE COMMISSION SHALL BE MADE WITHOUT REGARD TO WHETHER THE PERSON HAS BEEN PROSECUTED UNDER THE CRIMINAL LAWS OF ANY STATE, THE UNITED STATES OR OTHER JURISDICTION AND THE PROCEEDING TERMINATED IN A MANNER OTHER THAN WITH A CONVICTION. IF THE PROHIBITION IS WAIVED, THE PROSPECTIVE LICENSEE OR SIGNIFICANT VENDOR STILL MUST SATISFY ALL OTHERWISE APPLICABLE LICENSE AND SUITABIL- ITY REQUIREMENTS. (B) THE COMMISSION SHALL PRESIDE OVER THE HEARING AND SHALL ACT AS FINDER OF FACT ENTITLED TO EVALUATE THE CREDIBILITY OF THE WITNESSES AND PERSUASIVENESS OF THE EVIDENCE, PURSUANT TO WHATEVER PROCEDURES THE COMMISSION DETERMINES TO BE APPROPRIATE. S 1405. STATE TAX. LICENSEES ENGAGED IN THE BUSINESS OF CONDUCTING INTERACTIVE GAMING PURSUANT TO THIS ARTICLE SHALL PAY A PRIVILEGE TAX BASED ON THE LICENSEE'S INTERACTIVE GAMING GROSS REVENUE AT A FIFTEEN PERCENT RATE. S 2. Subdivision 1 of section 225.00 of the penal law is amended to read as follows: 1. "Contest of chance" means any contest, game, gaming scheme or gaming device in which the outcome depends [in a material degree] PREDOMINANTLY upon an element of chance, notwithstanding that skill of the contestants may also be a factor therein. S 3. The penal law is amended by adding a new section 225.36 to read as follows: S 225.36 INTERACTIVE GAMING OFFENSES AND EXCEPTIONS. 1. THE KNOWING AND WILLFUL OFFERING OF UNLICENSED INTERACTIVE GAMING TO PERSONS IN THIS STATE, OR THE KNOWING AND WILLFUL PROVISION OF SERVICES WITH RESPECT THERETO, SHALL CONSTITUTE A GAMBLING OFFENSE UNDER THIS ARTICLE. 2. LICENSED INTERACTIVE GAMING ACTIVITIES UNDER SECTION FOURTEEN HUNDRED TWO OF THE RACING, PARI-MUTUEL WAGERING AND BREEDING LAW SHALL NOT BE A GAMBLING OFFENSE UNDER THIS ARTICLE.
3. A PERSON OFFERING UNLICENSED INTERACTIVE GAMING TO PERSONS IN THIS STATE SHALL BE LIABLE FOR ALL TAXES SET FORTH IN SECTION FOURTEEN HUNDRED FIVE OF THE RACING, PARI-MUTUEL WAGERING AND BREEDING LAW IN THE SAME MANNER AND AMOUNTS AS IF SUCH PERSON WERE A LICENSEE. TIMELY PAYMENT OF SUCH TAXES SHALL NOT CONSTITUTE A DEFENSE TO ANY PROSECUTION OR OTHER PROCEEDING IN CONNECTION WITH THE INTERACTIVE GAMING EXCEPT FOR A PROSECUTION OR PROCEEDING ALLEGING FAILURE TO MAKE SUCH PAYMENT. S 4. This act shall take effect on the one hundred eightieth day after it shall have become a law.

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