New York Poker Bill Drops Bad Actor Clause

pokerState Senator John Bonacic has reintroduced a bill to authorize online poker in the Empire State, but dropped a “bad actor” clause that would have prevented PokerStars from applying for one of ten available licenses.

Senator Bonacic’s bill would authorize the New York State Gaming Commission to award a total of ten online poker licenses, each valid for ten years and subject to a $10m fee.

“New Yorkers are today spending millions on overseas, illegal gaming sites that have no consumer protections or effective restrictions to keep minors from playing,” Bonacic, the Republican chairman of the Senate’s gaming committee, told GamblingCompliance in a statement.

“I believe we need to start having a discussion on addressing this issue,” he said. “That is why I have introduced legislation which would regulate online poker here in New York to protect consumers, prevent underage gaming, and combat problem gaming.”

Although Bonacic’s bill is similar to the version he previously introduced in 2014, it notably removes a so-called “bad actor” provision prohibiting licensing of entities that continued to accept or facilitate online wagers after the federal Unlawful Internet Gambling Enforcement Act (UIGEA) was enacted in 2006.

“I felt that it would be best for the gaming commission, when performing the proposed suitability review, to determine whether or not certain organizations should be authorized to conduct online poker based upon their previous actions,” Bonacic said.

Observers said Bonacic likely decided to drop the requirement to allow the world’s largest online poker operator a chance to enter the market.

“PokerStars is the entity that seems to create the market,” said Joseph Kelly, a professor of business law at SUNY College Buffalo and an expert on New York gaming policy.

Although Bonacic’s bill lacks a bad actor restriction, it would still require regulators to perform strict due diligence on license applicants, said David Klein, managing partner of law firm Klein, Moynihan and Turco in New York City.

“All of the licensees will have to go through a process to get approved,” Klein told GamblingCompliance. “They have to demonstrate that all of the principals are persons of good
character, honesty and integrity and their activities will not pose a threat to the public interest in any way.”

To maximize the amount of possible revenues, Klein said it would make sense to allow PokerStars, now owned by Canada’s Amaya, to compete in the market.

Bonacic’s bill would require operators to pay a 15 percent tax on poker revenues.

“New York wants to bring in as much money as possible and to compete with neighboring states like New Jersey and potentially Pennsylvania,” he said. “If they are going to roll this out, they want to make this a success.”

The bill would also allow New York to participate in interstate compacts like the agreement between Nevada and Delaware.

“The interstate compact clause allows New York to plan into the future to have deals with Nevada and New Jersey so respective state residents can play on each other’s platforms,” said Klein.

Klein estimates that Bonacic’s bill has no better than a 50-50 chance of passing this year due to the competing gaming interests in the state.

“You are dealing with the tribes and you have to take into consideration the pari-mutuel operations at the racinos,” he said.

Given the process to license New York’s first commercial casinos was recently extended, Kelly said online poker may be unlikely to move forward for several years.

Kelly also noted that Bonacic’s current proposal contrasts with the licensing approach taken by New Jersey and other states that have already approved online gaming.

“If and when it picks up any traction, there will probably be an amendment to the bill to only allow the land-based casinos and racinos to operate online poker,” Kelly predicted.

New York’s 2015 legislative session concludes on June 19, but bills introduced this year are allowed to carry over into 2016.

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Source: GamblingCompliance, May 15, 2015 Issue

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