GPSOLO, a publication of the American Bar Association March 1, 2013
The term “gaming law” touches many areas of practice. Among the many applications, there are poker clubs, charitable bingo, sweepstakes, essay contests, casinos, dog racing, horse racing, sports betting, raffles, Internet gaming, and lotteries. Guidelines on gaming law are chiefly at the state or tribal jurisdictional level, leading to a wide variation in permissible practices and pitfalls for each jurisdiction. Aside from the jurisdictional patchwork, a federal level of oversight covers some interstate activities such as nationwide sweepstakes, interstate Internet-based gaming operations, and Indian gaming. Federal agencies including the Federal Trade Commission (FTC) and Federal Communications Commission (FCC) have particular registration requirements for some operations that may be otherwise unregulated.
Given the number of states and tribes with some form of authorized gaming, there are more than 170 separate jurisdictions with some form of authorized gaming within the United States alone. Within a particular state or jurisdiction, more than a dozen governmental entities may be connected with gaming enterprises, including the state attorney general, lottery agency, casino agency, horse racing agency, and local authorities. Leaving aside the question of regulation, enforcement can be a blurry area that requires good communication with state and local law enforcement officials, particularly for smaller-scale activities such as social poker or charitable raffles.
Gambling consists of three elements: chance, consideration, and a prize. States define chance in substantially different ways, meaning that what constitutes illegal gambling in one state with a strict definition of chance will be legal in another state with a more lenient definition of chance. For example, legislature and courts in different states disagree on whether a game of poker is a game of skill rather than a game of chance, and therefore on whether participants’ wagers on poker are permissible where other forms of gaming are banned.
Types of Gaming Operations
“Gaming” can include a wide variety of activities. The most common are discussed below.
Amusement gaming generally exists in conjunction with other entertainment and is characterized by for-profit arcade games or not-for-profit social games. This type of gaming is sometimes unregulated but is sometimes banned outright. Amusement gaming operators may offer claw machines, skee ball, pinball machines, and whack-a-mole type games for cash or merchandise prizes. Amusement gaming also covers some legal gray areas such as March Madness office betting tournaments, and social poker, which are not conducted for the operator’s profit but are also not conducted by a qualified charity.
Charitable gaming is available as a fund-raiser for some nonprofits in some jurisdictions. Charitable gaming may include raffles, traditional bingo, instant bingo (“pull-tabs”), and other forms of gaming. Some form of charitable gaming is authorized for the District of Columbia and all states except for Hawaii and Utah.
Contests are games that depend on skill rather than on chance. Some examples of contests include essay writing contests, photography contests, and athletic contests such as sharpshooting or arm wrestling. Contests where an entry fee is required are permitted in some form in nearly all states. Some states have particular categories of authorized contests. Some forms of contests or skill games may be seen as disguised gambling and therefore banned. Jurisdictions also vary on whether participants wagering on the outcome of a contest (i.e., a wager by a participant that she can beat someone at a game of chess) is permissible.
Horse and dog racing (pari-mutuels) are authorized in some states. Some race tracks are also authorized to offer other gaming operations such as video lottery terminals (VLTs) or table games. States can authorize wagering on simulcast races broadcast from other states as well.
Indian gaming is a well-established industry in 28 states. Under the 1988 Indian Gaming Regulatory Act, federally recognized tribes are permitted to operate Class II gaming, including traditional bingo, instant bingo, and some card games on tribal land without obtaining authorization from the state. Tribes must enter into a compact with the state in order to conduct Class III, or casino, gaming.
Internet gaming is likely the hottest emerging topic in the gaming industry. A December 2011 reversal in position from the U.S. Department of Justice has paved the way for states to authorize intrastate Internet gaming. Many online gaming operators are already active in Europe where Internet gaming is permissible. Some U.S. land-based gaming operators are partnering with Internet gaming operators to offer free play as a marketing tool. Several states are now selling lottery tickets online in intrastate transactions. Other states are moving forward with legislation authorizing intrastate Internet gaming. As with online lottery ticket sales, states may negotiate interstate compacts to create a larger pool of available online players for player-to-player games such as poker.
Lotteries are a common form of state-licensed gaming in about 40 states. Depending on the jurisdiction, the lottery agency may authorize paper lottery tickets for drawings and for instant prizes as well as electronic video lottery terminals. As noted above, one emerging topic is the online sale of lottery tickets. Some states have already authorized the online sale of tickets, and many other states with lotteries are promulgating regulations to introduce online lottery sales. It is likely that states will enter into interstate compacts to create lottery programs mimicking interstate lottery paper ticket games Mega Millions and Powerball.
Sports betting is one of the most restricted forms of gaming owing to federal prohibition. Currently only about five states have authorized some form of sports betting, and some of these authorizations have been challenged by sports leagues such as the National Football League.
State-licensed casinos, slot parlors, and card rooms are typified by Las Vegas–style casinos. This industry is the most heavily regulated in gaming law. Licenses are required for casino operators, gaming vendors, and employees. In some jurisdictions, non-gaming vendors are also required to obtain a license, meaning that non-gaming companies such as construction contractors or food suppliers must be licensed in order to do business with a casino.
Sweepstakes parlors or Internet sweepstakes terminals are an emerging market in some jurisdictions. These operations are generally small, with fewer than 50 terminals in a parlor or several terminals in a convenience store or bar.
Sweepstakes promotions are permitted in some form in all states. Some states have prize limits or registration and bond requirements for sweepstakes. Courts have typically held that sweepstakes promotions with an appropriate alternative means of entry do not constitute gambling because there is no consideration for the chance to win a prize.
The first step in involvement with gaming practice is to obtain a comprehensive understanding of existing and developing laws and rules in one’s particular jurisdiction. Permissible gaming varies widely on a state-by-state basis and requires a full understanding of federal, state, and local legislation and regulation. In states with licensed forms of gaming, there are administrative proceedings to appeal license revocations or denials. Lawyers can represent individuals or businesses in license hearings.
Even within one jurisdiction, the volume of legislation and regulation varies widely depending on the type of gaming. The web of regulatory agencies and compliance requirements runs the gamut from comprehensive to nearly non-existent, with everything in between, including gray areas of legality. State agencies typically regulate the state’s lottery, horse and dog racing, and other legalized gaming. The state’s attorney general often has oversight for charitable gaming. The FTC and some state agencies have requirements for sweepstakes. The National Indian Gaming Commission, Department of the Interior, and sovereign Native American tribes are responsible for the framework under which tribes operate gaming operations on Indian land. Online skill-based contests may fall within regulations by governmental entities and also must comply with the websites used to promote the contests, such as Facebook’s code of conduct.
Possible clients range from individuals facing license discipline proceedings to casino operators running full resort hotels that offer gaming as one of their amenities to non-gaming businesses seeking advice on promotions. Gaming issues arise tangentially in many instances. For example, I handled a dispute between the holder of a winning lottery ticket and his coworkers with whom he pooled his lottery ticket chances. My firm has represented several online skill game wagering enterprises. Gaming employees and agents often require licenses, which lead to administrative hearings on license renewals and revocations. Many cold calls come from entrepreneurs who want to turn their poker prowess into an online poker website or a poker club with a physical location. Gaming law requires a nationwide practice for some areas because many clients are multi-jurisdictional. For example, some businesses supply casinos in multiple jurisdictions and must be licensed as a supplier in each jurisdiction. At the other end of the spectrum, some practice areas, such as sweepstakes parlors or independent poker clubs, are entirely local and based on one jurisdiction’s laws.
After gaining basic understanding of the permissible and impermissible gaming operation in the jurisdiction, the next step is to attend conferences, trade shows, and industry events to meet the regulators, operators, and vendors involved in the area. There are a number of industry publications. In part because of the jurisdiction-by-jurisdiction nature of gaming law, there are constantly new developments and new legislation and regulation requirements for the industry. The recent recession and budget crunches have fueled heavy expansion in state-licensed gaming and tribal gaming, leading to a number of emerging jurisdictions offering forms of gaming new to that area. Internet gaming is another booming area in nearly all jurisdictions that already have authorized forms of gaming.
As with all other practice areas, I have found that creative solutions to business ideas are in higher demand than dire prohibitions. Clients are highly entrepreneurial; finding a way to say yes to a client will engender loyalty and referrals. The creative solutions must still pass legal muster, of course. Regulatory authorities, local authorities, and courts are often split or unclear on whether operations at the forefront of the gaming industry in a particular jurisdiction are acceptable. The gaming industry is often on the forefront of uncharted territory and many currents, including political forces and shifts in permitted activity in adjacent jurisdictions, are constantly reshaping the horizon of acceptable business practice.
A Day in the Life
- Attend commission hearings and meetings.
- Attend legislative hearings for pending amendments to gaming-related law.
- Track pending court cases on developing areas such as sweepstakes parlors or constitutional challenges to gaming expansion.
- Respond to client inquiries—analyze changing legislation, regulation, case law, and agency rulings to determine how to accomplish a client’s goal.
- Draft terms and conditions for skill game wagering website.
- Analyze media restrictions for advertisement of gaming operations.
- Meet with entrepreneur who wants to open a poker club.
- Review lease documents for gaming equipment.
- Represent clients in licensing process before state agencies.
- Work with agencies to determine extent of public record laws as applied to gaming license applications.
- E-mail status updates on law to clients and blog about legislative and regulatory developments.
- Related fields that come up frequently: liquor law, zoning issues, employment law, charitable registration requirements, contract review.
How to Get in on the Game
- Join relevant industry groups and attend their conferences.
- Learn about a niche of gaming law in your jurisdiction that affects businesses that are not primarily gaming operations, such as sweepstakes or non-gaming vendors who are required to register in order to do business with licensed gaming operators.
- Explore the dynamics of the particular practice area. For example, vendors, operators, and employees often require different counsel. Find out who represents which type of clients.
- Develop a relationship with the regulators and a familiarity with the body of law for a particular agency. Attend agency meetings and hearings.
- Blog about developments in gaming in your jurisdiction or about practice pointers before a particular agency in your jurisdiction.
- Conduct seminars for non-gaming businesses and for general practice attorneys regarding gaming topics. Target gaming operations with seminars (e.g., charitable gaming boot camp or poker club boot camp).