Saturday, July 25, 2009

MLB, NFL, NBA, NHL and NCAA Sue Delaware to Stop Sports Betting

Yesterday, the major sports leagues (MLB, NFL, NBA, NHL) and the NCAA sued Delaware in an attempt to block the state from offering single-game sports wagers, and keep Delaware limited to offering only parlay sports wagers. The USA Today article has more information on the history and quotes from the various parties as well as a link to the actual pleading.

This blog has previous posts which discuss issues with the Delaware effort, particularly the problems with the government tax structure and the parlay-only offering. Those posts can be found here and here.

The leagues can't stop Delaware from offering parlays, as even the federal law, the Professional and Amateur Sports Protection Act (PASPA), allowed Delaware as one of the four states grandfathered (the others being Nevada, Oregon and Montana) to offer sports betting. Delaware, having offered parlays before, can resume that game whenever they wish. Offering single-game betting is being viewed as an expansion of previously offerings.

From the lawsuit, the leagues claim single-game sports betting in Delaware "would irreparably harm professional and amateur sports by fostering suspicion and skepticism that individual plays and final scores of games may have been influenced by factors other than honest athletic competition." OK...but Nevada's been doing this since like...the 1940s. If any harm would have occurred, wouldn't it have occurred by now?

Besides, the leagues know gambling is an important component to their games' popularity. Why are point spreads published in just about every newspaper in the country, even though sports betting only happens (legally) in Nevada? Why does the NFL publish their injury reports publicly and not just send them confidentially to the various teams? Because they want information in the hands of sports bettors, both legal and illegal.

According to the federal law, the sports leagues have the authority to seek an injunction against operators of sports betting operations - those that aren't grandfathered in. Since Delaware is looking to expand, this might appear to fall outside the grandfathered area. Until now, the leagues have never tried to exercise the law. This is where the situation could get very interesting, and very dangerous for the leagues.

PASPA had some very strong arguments during its deliberation that it is unconstitutional. In essence, the argument was that you can't say 4 states can do something the other 46 can't. Also, since when does the goverment say a private entity has the authority to enforce federal law? States generally have sovereign immunity, so by and large they are immune from being sued unless they allow it. That immunity could be an easy defense. New Jersey has recently challenged the constitutionality of PASPA. A post discussing that case is here, which I recommend reading to learn more of the flaws in this law.

It is in Delaware's interest to keep PASPA in place so that Delaware would have a competitive advantage over neighboring states. It could have sports betting where the others could not. With the New Jersey suit challenging PASPA, Delaware was not likely going to join in as it would not be in its best interest. With the leagues going after Delaware, Delaware will have to fight back. If successful, it will be able to allow single-game sports betting. If unsuccessful, it will only be able to allow parlays.

Here's something very interesting. What if Delaware was too successful in its defense? What if it succeeded in throwing out PASPA? If that happened, every state could offer sports betting if it wanted and Delaware's current advantage would disappear. How Delaware responds to the lawsuit will be telling. They may use the sovereign immunity defense as well as use their constitution saying that a single-game sports bet is basically a one-game parlay. They may not challenge PASPA, or if they do, limit the challenge to the ability of private entities to enforce federal law...not challenge the law in its entirety. Delaware wants the competitive advantage. For that to be maintained, PASPA needs to stay in force.

It will be very interesting to see how this case turns out.

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Thursday, July 9, 2009

Some Advantages of Online Casinos

The convenience of online casinos is well known. Where else can, in theory, you can hang out in your pajamas and play slots, blackjack or poker? Or, if you're the boss, play the same at work (I do not recommend this if you are NOT the boss). What you don't get online is the true feel of the crowd and the gaming experience. But that may actually be an advantage.

The Casino Journal reports that casinos and bingo parlors in several provinces in Argentina have been closed due to fears over the Swine Flu. Apparently that government has just publicly declared a health emergency for the month of July, due to the flu. Those brick and mortar operations are closed, not generating a dime of revenue. Online casinos are still open! Can you get sick from a person sitting next to you in an online poker game? Not likely. Advantage online casino!

That's not all. cites a news item from the Remote Gambling Association, referencing a study from MHA Consulting of money laundering in online gambling operations. The essence of the study that "the absence of cases and examples of money laundering and terrorist financing within the remote gambling industry indicated that the risks were low, highlighting a strong commitment within the industry to prevent and detect any occurrences, to comply with the various legislative and regulatory requirements, and to co-operate with the authorities."

In addition, "online gambling is not a likely accessible avenue for money laundering because the identities of the gamblers are known, the financial transactions between the bettors and operators are all in electronic format, and all of the wagering is recorded." Again, advantage online casino!

If you wanted to launder money in small amounts over a period of time, you likely could do that anonymously in a brick and mortar casino. If you didn't sign up for a Players Club card, used cash, and kept your wagers under a few thousand per day, it is possible that you would not attract much attention, particularly if you did not frequent the same property.

So for a player at an online casino, you get convenience, some protection from disease transmission and knowledge that the site has the capability to hinder the improper use of the facility for money laundering for nefarious purposes. All that and entertainment! Woo Hoo!

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Friday, July 3, 2009

Losing Money at Montana Sports Action? Can You File a Lawsuit to Get Your Money Back?

The Montana Lottery and the Montana Board of Horse Racing have been fighting off questions and complaints about the new sports wagering game, Montana Sports Action, for almost a year - even before the game was commercially launched. In 2007, Montana passed a law legalizing pari-mutuel wagering on fantasy sports in an attempt to help put more funds into the declining Montana horse racing industry. There are related posts regarding Montana Sports action in this blog, with the three most recent being found here, here and here.

One of the key issues that is brought up against the Lottery running this game, in addition to the pathetically poor revenue, is the issue of the legal authority the Lottery has to run a game of this nature. Montana law is that gambling is prohibited unless specifically authorized. Article III, Section 9 of the Montana constitution states:

Section 9. Gambling. All forms of gambling, lotteries, and gift enterprises are prohibited unless authorized by acts of the legislature or by the people through initiative or referendum.

Following the constitution, Montana code Title 23-5-151 states:

23-5-151. Gambling prohibited. Except as specifically authorized by statute, all forms of public gambling, lotteries, and gift enterprises are prohibited; and,

23-5-111. Construction and application. In view of Article III, section 9, of the Montana constitution, parts 1 through 8 of this chapter must be strictly construed by the department and the courts to allow only those types of gambling and gambling activity that are specifically and clearly allowed by those parts.

Now a lottery is authorized, but only under certain parameters. Montana code Title 23-7-102 states:

23-7-102. Purpose.
(1) The purpose of this chapter is to allow lottery games in which the player purchases from the state, through the administrators of the state lottery, a chance to win a prize. This chapter does not allow and may not be construed to allow any game in which a player competes against or plays with any other person, including a person employed by an establishment in which a lottery game may be played.
(2) The administration and construction of this chapter must comply with Article III, section 9, of the Montana constitution, which mandates that all forms of gambling are prohibited unless authorized by acts of the legislature or by the people through initiative or referendum. Therefore, this chapter must be strictly construed to allow only those games that are within the scope of this section and within the definition of "lottery game".
(3) The state lottery may not:
(a) operate a slot machine or carry on any form of gambling prohibited by the laws of this state; or
(b) carry on any form of gambling permitted by the laws of this state but which is not a lottery game within the scope of this section and within the definition of "lottery game".

The Lottery Commission has restrictions on what games it can operate. Montana code Title 23-7-302 states, in part:

23-7-202. Powers and duties of commission. The commission shall:
(1) establish and operate a state lottery and may not become involved in any other gambling or gaming.

So, what's a "lottery game?" Remember Montana authorized a lottery in 1985, so the concept of a lottery at the time was a game such that each entry had the same chance of winning as any other entry, where the winner was determined at random. No skill is involved - a game of chance.

Montana code Title 23-7-103 states, in part:

23-7-103. Definitions. As used in this chapter, the following definitions apply:
(4) (a) "Lottery game" means any procedure, including any online or other procedure using a machine or electronic device, by which one or more prizes are distributed among persons who have paid for a chance to win a prize and includes but is not limited to weekly (or other, longer time period) winner games, instant winner games, daily numbers games, and sports pool games.

It may be problematic for the Lottery Commission to claim that fantasy sports wagering doesn't fall into the "any other gambling or gaming" category. Or does it? Doesn't the law allow sports pool games? Wouldn't Montana Sports Action fit into this category? Assuming yes, then why does the Lottery claim to be running the game in accordance with the pari-mutuel fantasy sports wagering law passed for the benefit of the Board of Horse Racing? That law specifically is not designed to be a game of chance, but of skill. Besides, as stated during a legislative hearing, if the Legislature intended for the Lottery to run this game, they would have made that clear.

OK, so then let's take another viewpoint and state that the Lottery is merely donating money to the Board of Horse Racing and is actually operating a sports pool. Will that excuse fly? Maybe not. If you look at sports pools in Montana and how they operate, they appear to be different from how Montana Sports Action operates.

Here are pertinent excerpts from the Montana code regarding sports pools:

23-5-501. Definitions. As used in this part, unless the context clearly requires otherwise, the following definitions apply:
(1) "Sports pool" means a gambling activity, other than an activity governed under chapter 4 or chapter 5, part 2, of this title, in which a person wagers money for each chance to win money or other items of value based on the outcome of a sports event or series of sports events wherein the competitors in the sports event or series of sports events are natural persons or animals; and,

23-5-503. Rules.
(3) (a) Except as provided in subsection (3)(b), the winners of any sports pool must receive a 100% payout of the value of the sports pool. The winner of a sports tab game must receive at least 90% of the total cost of the 100 sports tabs. The operator of the sports tab game may retain the remaining money for administration and other expenses.
(b) A nonprofit organization that maintains records and opens the records to inspection upon reasonable demand to verify that the retained portion is used to support charitable activities, scholarships or educational grants, or community service projects may retain up to 50% of the value of a sports pool or sports tab game; and,

23-5-512. Sports pool design -- department rules.
(1) A sports pool must be designed to ensure that:
(a) there is at least one winner from among the participants in the pool; and
(b) each participant has an equal chance to win the pool.
(2) Competitors in a sports event or series of sports events must be randomly assigned to each participant in the sports pool.

So, for a sports pool, outcomes of sporting events are the basis of the game, 100% of the proceeds are paid out in prizes (except if run by non-profits), each participant has an equal chance to win the pool and competitors in the event(s) must be randomly assigned to each participant. This isn't at all like Montana Sports Action. I think that it would be difficult to prove that Montana Sports Action is a sports pool game envisioned by the language that authorizes what games the Montana Lottery can operate.

If Montana Sports Action falls outside those boundaries, then the Lottery could be considered to be offering a game outside its charter and the Lottery Commission could be considered to being involved with another gambling game in violation of its powers and duties. This might be construed to find that the Montana Lottery is operating an illegal gambling game. Not that another party could operate the same game legally, but the Lottery has certain restrictions, which according to Montana law, must be STRICTLY construed.

What does all this have to do with anything, you may ask? Maybe plenty, if you have bet money on Montana Sports Action and lost, or you are an attorney with some time on your hands. If the Lottery is not specifically allowed by statute to operate Montana Sports Action, it might be considered to be an illegal gambling enterprise, even if it is a state agency.

Montana code Title 23-5-112 states, in part:

23-5-112. Definitions. Unless the context requires otherwise, the following definitions apply to parts 1 through 8 of this chapter:
(18) "Illegal gambling enterprise" means a gambling enterprise that violates or is not specifically authorized by a statute or a rule of the department.

Here's where it gets interesting to the losing bettor or attorney with time on their hands. Montana code Title 23-5-121 states:

23-5-131. Losses at illegal gambling may be recovered in civil action. A person, or his dependent or guardian, who, by playing or betting at an illegal gambling device or illegal gambling enterprise, loses money, property, or any other thing of value and pays and delivers it to another person connected with the operation or conduct of the illegal gambling device or illegal gambling enterprise, within 1 year following his loss, may:
(1) bring a civil action in a court of competent jurisdiction to recover the loss;
(2) recover the costs of the civil action and exemplary damages of no less than $500 and no more than $5,000; and
(3) join as a defendant any person having an interest in the illegal gambling device or illegal gambling enterprise.

To date, approximately $150,000 has been wagered on Montana Sports Action games. Not a lot, but in this economy, if you've spent some money and lost on this, maybe you might want your money back? If you were an attorney and could say the phrase "class action," maybe 1/3 of $150,000, or $50,000 is a nice payday? With the size and scope of the entities involved in offering Montana Sports Action, perhaps it might be viewed as a "target-rich environment" to an attorney?

Not that I foresee any lawsuits being filed along these lines anytime soon, but who knows? If it did occur, it would definitely stir up the government types and bring even more negative publicity to something that had the promise of helping the horse racing industry in Montana, but appears to be failing in that promise.

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