CALIFORNIA v. IIPAY NATION OF SANTA YSABEL [re Internet Gaming – UIGEA]
Opinion by Judge Bea
The panel affirmed the district court’s summary judgment in favor of the State of California and the United States in their action seeking injunctive relief prohibiting Iipay Nation of Santa Ysabel from continuing to operate Desert Rose Casino.
Desert Rose Casino is exclusively a server-based bingo game that allows patrons to play computerized bingo over the internet. Iipay Nation is a federally recognized Indian tribe with tribal lands located in San Diego County, California.
The panel held that Iipay Nation’s operation of Desert Rose Casino violated the Unlawful Internet Gambling Enforcement Act (“UIGEA”). The panel held that the Indian Gaming Regulatory Act protected gaming activity conducted on Indian lands, but the patrons’ act of placing a bet or wager on a game of Desert Rose Casino while located in California, violated the UIGEA, and was not protected by the Indian Gaming Regulatory Act.
The panel further held that even if all of the “gaming activity” associated with Desert Rose Casino occurred on Indian lands, the patrons’ act of placing bets or wagers over the internet while located in a jurisdiction where those bets or wagers were illegal made Iipay Nation’s decision to accept financial payments associated with those bets or wagers a violation of the UIGEA.
Because Iipay’s operation of DRB violates the UIGEA, the Court of Appeals for the 9th Circuit AFFIRMED the district court’s order granting summary judgment to the Government.
IJI Law Comment —
However, the Court also noted the following: “[w]e take no position on whether Iipay would violate the UIGEA by accepting DRB bets or wagers exclusively from patrons located in jurisdictions where bingo is legal.” See, Footnote No. 15.
“States have traditionally handled regulation of gambling, supported by federal law in situations where an interstate of foreign element might otherwise frustrate the enforcement of state law,” posited the CRS report. “With respect to federal law, DFS may implicate at least four gambling-related statutes.”
Why Now? (Especially given the fact that FanDuel is — and has been for some time — a UK-based gaming company that has not ever previously offered its DFS services to customers / markets beyond the US and Canada) Because the US market has become increasingly cloudy on the legal and regulatory front – as simple as that.
While the US market for DFS has not and will not likely be entirely shut down, it is now abundantly clear that it’s going to be a potpourri of State-by-State regulations and with uncertainty as to ring-fenced intra-state gaming activity versus inter-state customer pooling and resulting liquidity via State to State compact, and all with the possibility of Federal Intervention lurking ominously in the background — currently during an election year in the US.
Of course, FanDuel could have made this move years ago. The same could be said for its chief competitor Draft Kings. But, as is the case in many an eCommerce industry (or brick and mortar for that matter), the threat of regulatory activity and possibility of legal enforcement often hastens the moves of companies who have yet to diversify, divest, and divulge.
Strategic business maneuvering is more art than science. Here the creativity, while somewhat tardy, is still artistic.
Changing Tack? A shift in Capitol Hill Internet gambling politics may be in the offing @CKrafik reported earlier today.
Sources told @GamblingCompliance a proposal that would (i) mandate a federal study on Internet gambling and (ii) impose a moratorium on Internet gambling expansion in states that have yet to legalize the activity is being discussed as a possible alternative to the prohibitions set out in S1668 and HR707.
They note that such a proposal would appear to be in line with the recommendations of the Clinton-era National Gambling Impact Study Commission.
It bears noting that a potential US iGaming moratorium on further real money online gaming in all but 3 States which currently have such activity should not be underestimated; to wit, even if New Jersey, Nevada (which is poker-only), and Delaware evolve and become more robust eCommerce markets (a proposition which is doubtful at best) – a moratorium stopping larger States like New York, Pennsylvania, Texas, Florida, Illinois, and other larger States (even California which has to date been quite effective stopping itself with online gaming stakeholder in-fighting), the anticipated impact of new credit card codes as well as the expected entry of Poker Stars into New Jersey would likely be greatly minimized.
Thus, except for a few small States that would not be subject to the new prohibition, the moratorium on further online gaming expansion of any type into those populous US states with huge potential eCommerce markets and commensurate liquidity — particularly for peer to peer online poker activity — would largely accomplish the primary goals of a full-scale Restoration of Wire Act (RAWA) prohibition that is presently controversial and not able to gain critical mass for passage on Capitol Hill.
Could a US federal moratorium on expanded online gaming accomplish most of what a failed RAWA prohibition could not achieve? Stay tuned…!
Crosby, who until last week was the subject of a State Ethics Commission conflict-of-interest inquiry, made several indirect references to accusations against him in “the many twists and turns” in the commission’s years-old process of evaluating competing proposals for the limited number of casino licenses.
“Some of the challenges to the commission have been made in good faith, some sour grapes,” he said.
In a lawsuit filed on behalf of the city, Boston Mayor Martin Walsh has called for Crosby’s removal from the commission and a restart of the licensing process for a Greater Boston casino. The lawsuit portrays the Gaming Commission as having engaged in a pattern of making exceptions to the state casino law to benefit the Everett casino proposed by Wynn Resorts.
The Federal Reserve and Treasury Department announced on Monday, June 8, 2015 the renewal of a recordkeeping requirement intended to show that payment systems are implementing policies to “identify and block or otherwise prevent or prohibit transactions in connection with unlawful Internet gambling.”
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM DEPARTMENT OF THE TREASURY
“Agency Information Collection Activities; Renewal of a Currently Approved Collection; Comment Request; Prohibition on Funding of Unlawful Internet Gambling”
Board of Governors of the Federal Reserve System (“Board”) and Departmental
Offices, Department of the Treasury (“Treasury”) (collectively, the “Agencies”).
Joint notice and request for comment.
The Agencies are soliciting comments concerning the currently approved recordkeeping requirements associated with a joint rule , which is being renewed without change, implementing the Unlawful Internet Gambling Enforcement Act of 2006 (the “Act”).
This notice is published jointly by the Agencies as part of their continuing effort to reduce paperwork and respondent burden. The public and other Federal agencies
are invited to take this opportunity to comment on this information collection, as required by the Paperwork Reduction Act of 1995, Pub. L. 104 – 13 (44 U.S.C. 3506(c)(2)(A)).
This document is unpublished, but on 06/09/2015 it is scheduled to be published and available on the Federal Register web page. Until then, you can download the pre-publication attached PDF version.
The former gambling enforcement bureau official who wrote the memo, Robert E. Lytle, started his own successful business as a consultant to some 20 cardrooms around the state, with an ownership stake in two, after retiring from state work as the chief of the gambling enforcement division on Dec. 30, 2007.
Now, the California Attorney General accusation alleges that former enforcement head Robert Lytle arranged to go to work for a company that owned a San Jose cardroom while he was still on the state payroll in 2007. That cardroom is now at the center of an investigation by state regulators who say the current owners hid millions of dollars in profits through a maze of companies over the past several years.
Watchdog reporter for U T San Diego, Greg Moran, reports that the former head of gambling enforcement in California wrote a legal opinion letter to two Cardroom lobbying groups just 10 days before he left state employment — a letter that has purportedly proved to be a boon to Lytle’s forthcoming new clients as a consultant after leaving the bureau — the very cardrooms he previously regulated and oversaw regarding enforcement of California’s gambling rules and regulations.
The Lytle memo reportedly reinterpreted a requirement that games be operated as play among amateurs with rotating responsibility as dealers, as opposed to the faster play and higher stakes allowed by professionalized dealers serving as the bank. California law generally prohibits cardrooms from offering Las Vegas-style gambling or “banked games,” in which players place wagers against the house. State-licensed Cardrooms can only offer such games if the player-dealer position, known as the “bank,” is rotated among all players.