The Pennsylvania Supreme Court is ready to make a big decision about whether electronic gaming terminals, commonly found in bars and convenience stores, should be considered illegal gambling machines. 

Pennsylvania Lottery and Casino Industry Blames Skill Games for Revenue Losses

The decision comes after an appeal by the attorney general’s office challenged a lower court ruling that said these “skill games” depend on a player’s ability rather than chance — making them different from traditional slot machines.

For years, the state has argued that these games operate illegally without a gambling license and can be seized by law enforcement. Manufacturers, distributors and operators of the games say they are legal under state law and do not fall under the definition of regulated gambling. This ruling could provide clarity on how those machines should be treated under the law for the first time, said Jeffrey Rosenthal, an attorney representing Parx Casino in Philadelphia, reported the Associated Press.

Courts and lawmakers have wrestled with their status or years. Texas, Virginia and Kentucky have had similar fights over them. 

The Pennsylvania Lottery and the state’s casino industry blame skill games for major revenue losses. Casinos pay out roughly 54% of slot machine revenues in taxes to the state government. Operators say skill games compete against slots tax-free. There are at least 67,000 such terminals in Pennsylvania — more than any other state, according to American Gaming Association estimates.

Pennsylvania Supreme Court to Decide Fate of Skill Games

Attorney General Michelle Henry’s office emphasized in its brief to the court that these devices are all over the place and need clear legal guidance. The justices will study whether these electronic devices with supposed “skill” components are gambling devices by definition under the law. 

Commonwealth Court Judge Lori Dumas noted previously that though they start off looking like slot machines, they include a memory game element that makes them different.

The case started off in Dauphin County in 2019 when state police confiscated Pennsylvania Skill-branded machines from Champions Sports Bar in Highspire.

No criminal charges were filed, but the bar was given an administrative citation. Champions and Capital Vending Company, which owns the machines, sued for their return and won in county court, a decision later upheld by the Commonwealth Court.Pending legislation would ban or regulate these terminals — with the industry pushing for regulation to prevent seizures of its machines.

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A pivotal lawsuit in Germany aimed at reimbursing gambling losses has been referred to the European Court of Justice (ECJ). The Federal Court of Justice of Germany (BGH) was initially scheduled to decide on whether unregulated operators should refund player losses earlier this month. However, this hearing was canceled after the defendant, an Austria-based sports betting operator, withdrew its appeal.

Last week, a regional court decision on player reimbursement lawsuits mandated that all German civil courts, including the BGH, must either suspend proceedings or submit them for review. This action, spearheaded by the German law firm Hambach & Hambach, ensures that online sports betting and casino issues related to EU law will now be heard by the ECJ. The European court will ultimately make the final ruling on these cases.

The BGH has faced criticism for its perceived reluctance to refer cases to the ECJ. During a March ruling on a sports betting case, the BGH neither suspended nor submitted a referral, which some saw as a hesitation to seek an overarching EU law decision. This could have led to ongoing legal confusion without a decisive EU court ruling until regional courts intervened.

Potential Precedent of Reimbursement Rulings

Claus Hambach, partner at Hambach & Hambach, along with senior associate Phillip Beumer, cautioned that a decision to reimburse players could establish a problematic precedent in Germany.

“Mass media reports have already picked up on the above note by the Federal Court of Justice,” stated Hambach & Hambach. “According to representatives of the ‘player claim industry’, this might now result in a deluge of complaints and court cases.”

They warned that such an outcome could be driven by significant advertising and media coverage, indicating that financiers appear ready to continue backing these claims, potentially extending to sports betting losses, not just casino losses.

Hambach & Hambach expressed concern that reimbursing players might inadvertently bolster the black market. “Germany’s massive black market will even grow further. If players are reimbursed for losses with unlicensed operators, this will only incentivise them to bet with unlicensed operators as the case law basically established betting without a risk of loss.”

Challenges with the Black Market in Germany

A 2023 study by the University of Leipzig highlighted the prevalence of offshore operators in Germany’s online gambling market, revealing that nearly half of all online gambling occurs with these unlicensed entities. The channelisation rate in Germany’s online gambling space stands at just 50.7%, with the study estimating that the black market accounts for three-quarters of online revenue. This situation results in the state missing out on hundreds of millions in tax revenue.

In response, both the German Online Casino Association (DOCV) and the German Sports Betting Association (DSWV) have urged the German gambling regulator (GGL) to make onshore operators more attractive to bettors. By improving the appeal of regulated platforms, these associations hope to draw players away from the black market and ensure that gambling activities contribute to the national economy.

As this lawsuit progresses to the European Court of Justice, its outcome could significantly impact the regulatory landscape for online gambling in Germany and potentially across the European Union. The final decision by the ECJ will be crucial in shaping the future of player reimbursements and the fight against the black market in the gambling industry.

Source: “Germany loss reimbursements lawsuit to be sent to European court”. iGamingBusiness. May 20, 2024.

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The Ontario Superior Court of Justice has rendered its judgment on the contentious issue of online gaming regulations in the province. The court dismissed an application by the Mohawk Council of Kahnawà:ke (MCK) challenging the Ontario government’s decision to permit online gaming within its borders. This ruling solidifies the legitimacy of Ontario’s iGaming Ontario (iGO) framework, marking a significant milestone in the province’s regulatory landscape.

Ontario’s Approach to Online Gaming Regulation

iGaming Ontario collaborates with the Alcohol and Gaming Commission of Ontario (AGCO) and the provincial government to oversee the online gaming industry. The framework aims to regulate the sector, safeguard consumer interests, particularly in responsible gambling practices, and diversify digital gaming options for Ontarians. Gaming operators are required to register with the AGCO and enter into operating agreements with iGO before launching their products. iGaming Ontario assumes responsibility for managing and conducting the industry within the province, as outlined by its mandate.

Legal Dispute and Court’s Decision

The Mohawk Council of Kahnawà:ke (MCK) has been a vocal opponent of the legislative changes, particularly C-218, which decriminalized new forms of sports gambling in Canada in June 2021. MCK argued that Ontario’s shift in gaming management infringed upon existing laws and constitutional principles. However, the Ontario Superior Court ruled that iGaming Ontario’s model aligns with the Criminal Code, affirming the legality of the province’s approach.

Martha Otton, Executive Director of iGaming Ontario, expressed confidence in their regulatory framework, emphasizing the court’s validation of their model. She highlighted the framework’s focus on player protection, data security, and economic contributions to Ontario.

Impact on Kahnawàke and Online Gaming Industry

For 25 years, the Mohawk Council of Kahnawà:ke has played a pivotal role in the online gaming industry, licensing operators on behalf of the Mohawks of Kahnawake. The council raised concerns that Ontario’s regulatory changes disregard their expertise and jeopardize revenue streams vital to the Kahnawake community. Despite their assertions, the court determined that iGaming Ontario maintains significant control over operators, cementing its position as the guiding force behind the province’s online gaming landscape.

The Ontario Superior Court’s ruling marks a decisive moment in the ongoing debate over online gaming regulations. With the legality of Ontario’s framework affirmed, the province can continue to enforce its regulatory measures, ensuring a secure and responsible gaming environment for Ontarians.

Source: “Court Decision Upholds iGaming Ontario’s Model”. igamingontario.ca. May 13, 2024.

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The Spanish Digital Gaming Association (Jdigital), announced that the country’s Supreme Court has partially upheld the association’s appeal against Royal Decree 958/2020, a piece of legislation which introduced several restrictions for the industry. However, Jdigital called for more dialogue with the Spanish regulator in order to put the country’s iGaming market on the right path.

The Spanish Supreme Court decided to partially uphold an appeal lodged by Jdigital and annulled several measures stipulated in the Royal Decree 958/2020, which came into effect in November 2020. Almost four years later the Supreme Court ruled that several articles in that decree lacked legal basis.

One of the annulled bits of legislation was article 13, which was related to targeted advertisements towards new customers. Following the Supreme Court’s decision iGaming operators in Spain will once again be able to advertise their products to players who have held an account for less than 30 days. Moreover, they will be able to advertise in venues with public accessibility which sell lottery games.

The ruling by the Supreme Court also allows celebrities to appear in gaming advertising again, while the ban on gambling ads on video sharing platforms was overturned as well. This means that iGaming operators can advertise their products to social media users, but only to those above 18 years of age.

Very Positive News

A previous appeal by Jdigital was rejected by Spain’s constitutional court in November 2023. The victory at the Supreme Court was described by Jdigital in a statement as “very positive news for the online gaming sector.”

However, the Spanish Digital Gaming Association argued that the measures that remain in place still impose several limitations that are considered too restrictive by the industry. For example, the ban on advertising between 1am and 5am both on radio and television remains in place, as it is covered by the General Law of Audiovisual Communication.

Moreover, Article 12 of the Royal Decree 958/2020 was not annulled, which means that iGaming operators still can not use branding for events that minors can see or sponsor sporting events or broadcasts. That said, Jdigital called for increased dialogue between the iGaming industry and the regulatory authorities in order to boost responsible gambling efforts while also allowing sustainable growth for the industry.

Source:

“Jdigital labels Spain ad restrictions annulments “very positive” but urges caution“, igamingbusiness.com, April 11, 2024.

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Spanish gambling law is rapidly changing, and a lot of efforts have been made in order for the state to find a solution that works for everyone. The most recent step towards gambling ad regulations was made when the Supreme Court partially approved the appeal against Royal Decree 958/2020, placed by the Spanish Digital Gaming Association (Jdigital).

Some of the bans previously incorporated into the law, including bans on celebrity ads, were discharged.

Changes in regulations

Since Royal Decree 958/2020 was approved in November 2020, the Spanish operators worked on preventing minors from being exposed to ads through various prohibitions, including sponsorship deals.

However, Jdigital was against it and amended it for the first time in November 2023, when the amendment was rejected. Since then, the Constitutional Court changed its decision, so some of the regulations were annulled.

Among the measures that have been lifted is Article 13, which focuses on targeting new customers. From now on, the operators will have a chance to target the players who created the accounts less than 30 days before the ad starts running. On top of that, they can run ads for lottery games.

On top of that, Article 15 has been annulled. It is related to the appearance of celebrities in ads – now both fictional and real characters are allowed to be included in gambling advertisements.

Thanks to changing the first section of Article 23 and the third section of Article 25, the operators can run their ads on video-sharing platforms, including YouTube. Article 26 has also undergone some changes, so since sections 2 and 3 were annulled, the operators will be allowed to target all users over 18 years old on social media.

According to Spain’s Supreme Court, these regulations didn’t have a great legal basis, so the overturn is natural.

Among the rules that were prescribed by the Decree, all ads on TV, radio, and YouTube were restricted to a period from 1 am to 5 am, and only operators’ social media followers were allowed to be targeted. On top of that, the restrictions were related to the age of users and promotion of the bonuses, except for the verified players.

Since the law passed back in October 2022, various bans have taken place, including all references to social status, health, and economic stability. On top of that, putting gambling in the first place compared to friends and family in ads is prohibited, as well as mentioning money or luxury goods.

Sports sponsorships are still banned in Spain, as well as sponsoring sports events and broadcasts.

Good news for Spanish operators

As iGaming Business reports, the Supreme Court commented: “The ruling considers that advertising is part of the freedom of business and is subject to limits. However, such limits and prohibitions, insofar as they also affect the exercise of a lawful business activity, must have sufficient legal coverage, without being able to be regulated by independent regulatory standards unrelated to the criteria and limits set by the legislator.”

Operators are satisfied with the decision since it will make the customer acquisition a lot easier for them. According to Patricia Lalanda, a partner in a law firm specializing in gaming, LOYRA Abogados, the news was unexpected. She said: “When we received the judgment, the ruling of partial upholding of the appeal, annulling some of the most relevant articles of Royal Decree 958/2020 on commercial gaming communications, we were very surprised. After the order of the Constitutional Court basically saying that with the reform of Law 13/2011 on the regulation of gambling, the object of the question of constitutionality had disappeared, everything indicated that the Supreme Court would go along the same line. But nothing could be further from the truth; the sentence is conclusive.”

Source:

Spain Supreme Court overturns gambling ad restrictions, igamingbusiness.com, April 10, 2024.

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A New Jersey Appellate Court panel recently heard arguments in two cases concerning amendments to the state governing how much money casinos pay in lieu of property taxes. The cases, brought by Atlantic County and the nonprofit Liberty and Prosperity, revolve around changes made in 2021 that excluded internet gaming and online sports betting revenues from the calculations of casino payments.

The State Argues Casinos Require Special Treatment

In Superior Court in 2022, Atlantic County and Liberty and Prosperity prevailed in their lawsuits, contending that the amendments violated a 2018 consent agreement and the state Constitution. They argued that the changes resulted in a loss of approximately $5 million per year for county taxpayers, benefiting an industry detrimental to public health.

Despite the initial victory, the New Jersey Attorney General’s Office argued in favor of the amendments, emphasizing the need for changes to ensure a predictable revenue stream for casino taxes and to prevent potentially ruinous tax hikes. During the appellate court hearing, Tim Sheehan, representing the state, argued that the amendments were necessary to safeguard the financial stability of casinos and prevent closures.

The Legislature acted to exclude internet gaming and (online) sports gaming revenues … to ensure casino taxes continued in a predictable revenue stream.

Tim Sheehan, New Jersey Attorney General’s Office representative

Sheehan highlighted the rationale behind the amendments, citing concerns that a significant portion of internet gaming and online sports betting revenues went to third parties rather than the casinos themselves. He added the amendments were vital to avoid potential tax hikes, which could be disastrous for the broader sector and damage a leading contributor to the local economy.

The Amendments May Just Spread the Financial Burden

Despite the state’s concerns, Appellate Judge Francis J. Vernoia questioned whether the amendments effectively rescued casinos from ill-conceived business deals at the expense of other property owners. Seth Grossman of Liberty & Prosperity echoed this sentiment, arguing that the burden had unfairly shifted from casinos to non-casino property owners, adding the gambling sector did not need such a safety net.

So the amendment was to make sure the casinos kept more of the money? Aren’t we just rescuing a bad business deal?

Appellate Judge Francis J. Vernoia

The crux of the dispute revolves around whether the amendments violated the terms of the 2018 consent agreement and encroached upon judicial authority. While Sheehan contended that the Legislature had the authority to change laws at any time, Ronald Riccio, representing Atlantic County, argued that such changes cannot alter court orders.

The outcome of the appellate court’s decision is eagerly awaited, with Riccio acknowledging the unpredictability of judicial rulings based on judges’ questions during the hearing. The court should settle on a decision in the coming weeks, potentially impacting the tax obligations of New Jersey casinos and other property owners.

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In a significant legal victory for the city, Norfolk has successfully fended off a $100 million lawsuit filed by Cordish Companies, the developer of Waterside District. The lawsuit claimed that Cordish should have had the first right to develop a casino in Norfolk and sought damages over the city’s casino plans with the Pamunkey Indian Tribe.

Norfolk’s Partnership with Pamunkey Tribe Prevails in Casino Lawsuit Appeal

The Court of Appeals of Virginia, in a 12-page ruling issued on February 27, upheld the lower court’s decision to dismiss Cordish’s lawsuit against Norfolk, Norfolk Redevelopment and Housing Authority (NRHA), and city attorney Bernard Pishko, as reported by The Virginian-Pilot. 

Cordish Companies, a Baltimore-based developer that revitalized Waterside in 2013, argued that it should have exclusive rights to develop and operate a casino based on its Waterside development agreement and lease.

Norfolk’s decision to move forward with the Pamunkey Indian Tribe for the HeadWaters Resort and Casino, located less than a mile from Waterside, triggered the legal dispute. Norfolk District Associates, a Cordish-owned LLC, sued in 2021, alleging breach of contract and an active attempt to exclude Waterside from casino site considerations.

The case was initially dismissed by a Richmond Circuit Court judge in 2022, leading Cordish to appeal. In the ruling from February 27, the Court of Appeals affirmed the lower court’s decision, stating that the 2013 lease agreement did not obligate the city and NRHA to use Norfolk District Associates to develop a casino.

Judge AtLee: Casino Deal Unenforceable

Judge Richard Y. AtLee, representing the three-judge panel, explained that they concluded section 10.2.1 of the agreement could not be enforced because it was essentially an agreement to agree, and the agreement did not allow for a casino. This, he said, supported the circuit court’s decision to uphold the demurrers.

Cordish Companies refrained from providing a comment regarding the ruling. In contrast, city attorney Bernard Pishko conveyed satisfaction, expressing that they were pleased with the court’s confirmation that Cordish and John Lynch had filed the lawsuit against the city, city attorney, and NRHA without a basis.

The appeal process included two rounds, with the second round featuring oral arguments in December 2023 after one judge had to recuse themselves due to a conflict of interest.

The judges who participated in the final round of oral arguments and made the ruling were AtLee, Haley, and Dominique A. Callins, with Causey recusing.The legal victory solidifies Norfolk‘s position in moving forward with the HeadWaters Resort and Casino alongside the Pamunkey Indian Tribe.

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Michael Z. Hermalyn, Fanatics VIP president and former SVP of growth at DraftKings, was temporarily prohibited from disclosing any sensitive information obtained from his former employer to his new employer. The temporary restraining order was issued on Thursday and while it restricted Hermalyn from using any confidential information or soliciting with DraftKings employees or clients, he was not prohibited from working at Fanatics.

Last week, Hermalyn, filed a lawsuit against his former employer. In his legal claim, the executive challenged a non-compete policy he signed off on with DraftKings. Hermalyn alleged that the policy was overly restrictive and unenforceable for California where he currently resides. The legal action was filed after he resigned from the leading betting and gaming operator.

Responding to the claim, DraftKings alleged that its former employee conspired with his new employer, agreeing to obtain insider information. Allegedly, this information was related to the upcoming Super Bowl and contained marketing plans that may benefit Fanatics and negatively impact DraftKings. Not unexpectedly, Fanatics VIP denied those allegations, labeling them “false and fabricated,” as well as “wrong and disappointing.”

Hermalyn’s Defense Denies Wrongdoing

The latest part of the legal saga effectively restricts Hermalyn from sharing any confidential information with Fanatics. The order came from US District Judge Julia Kobick after an hour-long hearing in Boston, Massachusetts. Justifying her decision, the Judge explained that there was sufficient evidence for the need for such a temporary restraining order, adding that she wanted “to preserve the status quo until more of the facts can be determined,” as announced by The Boston Globe.

Under the order, Hermalyn was also directed to return any confidential information belonging to DraftKings within three days and submit in written form details regarding any confidential information belonging to the company that may have been disclosed to third parties.

During the latest hearing, Hermalyn’s defense layer, Russell Beck, rejected claims of any wrongdoing. He added that his client returned all computer equipment belonging to his former employer. The temporary restraining order is likely to remain in effect through April when a hearing for DraftKings is scheduled.

“We are pleased that the judge granted a temporary restraining order in favor of DraftKings ordering Mr. Hermalyn not to solicit DraftKings employees or customers, and not to use any confidential company information,“

explains a spokesperson for DraftKings

A spokesperson for DraftKings revealed that the company is pleased with the recently granted temporary restraining order for Hermalyn. They acknowledged the importance of the order that would prevent the former employee from using any confidential information or soliciting with DraftKings’ current customers or employees.

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A former DraftKings executive is challenging non-compete agreements he signed with his employer. The legal case, filed by Michael Z. Hermalyn, Fanatics VIP’s president and former senior vice president of growth at DraftKings, was filed Thursday. In his lawsuit, the executive argues that the non-compete policies he agreed to with his former employer are unenforceable and overly restrictive in California.

Hermalyn initially joined DraftKings back in September 2020. His former employer learned about the lawsuit shortly after he submitted his resignation recently. Per Hermalyn’s non-compete agreement with DraftKings, he is not allowed to engage in employment within the gaming and betting vertical, an industry where he spent nearly two decades, a report released by Daily Journal reveals.

Additionally, Hermalyn is prohibited from working in gaming and fantasy sports along with other related industries or communicating with former co-workers or clients under a 12-month non-compete clause in his contract. Ultimately, the plaintiff anticipates a court’s decision that would enable him to void the aforementioned non-compete clauses, allowing him to engage in further employment in the sector.

“These sweeping provisions purport to prohibit Mr Hermalyn from being employed in the betting and gaming space in which he has worked for 16 years, from engaging in any work pertaining to fantasy sports, betting and gaming, and other various industries, and from communicating with his former clients and co-workers,“

reads the lawsuit filed by Michael Hermalyn

Supporting his statement that the non-compete clause is unenforceable, Hermalyn explained that before filing the lawsuit, he relocated his domicile to Los Angeles, California, where he entered into a rental agreement for an apartment and purchased a car. Moreover, Hermalyn said he plans to relocate his children to Los Angeles.

The Betting and Gaming Giant Responds to the Lawsuit

The leading betting and gaming company argued that Hermalyn’s lawsuit wasn’t filed properly in California. DraftKings cited a clause in the former employee’s contract where he agreed that a Massachusetts court would be in charge of litigation of disputes.

As a result, the gambling operator moved the case to the federal court, the US District Court for the Central District of California. In its response to Hermalyn’s legal claim, DraftKings asked the court to deny the plaintiff’s request. Moreover, the operator disputed the former employee’s “factual allegations.”

Recently, a young adult who engaged in cyber fraud against DraftKings dating back to 2022 was sentenced to 18 months in prison. The sentence came after the 19-year-old male pleaded guilty.

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New Jersey’s Supreme Court has ruled against Ocean Casino Resort, stating that the Atlantic City casino is not entitled to payouts from business interruption insurance for losses during the COVID-19 outbreak. Despite the operator’s claims, it has enjoyed positive financial results, successfully rebounding from the pandemic and maintaining its position as one of Atlantic City’s leading venues.

The Operator Failed to Present a Convincing Argument

The case involved Ocean Casino Resort’s claims against three insurance companies: AIG Specialty Insurance Co., American Guarantee & Liability Insurance Co., and Interstate Fire & Casualty Co. These insurers mostly denied payouts, asserting that the casino did not suffer direct physical loss or damage due to the virus. Ocean Casino Resort initially defeated an attempt by insurers to dismiss the case, but an appellate court later reversed that decision.

The New Jersey Supreme Court subsequently took on the case to settle the legal question of what constituted loss or damage. According to its unanimous decision, the company had to demonstrate a direct physical loss or damage to its property, rendering it unusable or uninhabitable. Since the aftermath of COVID-19 failed to meet this criteria, Ocean Casino was not eligible for a payout.

At most, it has alleged that it sustained a loss of business… because it was not permitted to use its property as it would otherwise have done.

New Jersey Supreme Court statement

This ruling aligns with decisions in various state and federal courts nationwide, which denied insurance claims related to business interruptions during the COVID-19 pandemic. Similar cases involved movie theaters in California, a real estate firm in Los Angeles, hotels in Pennsylvania, and a law firm in New Jersey.

Atlantic City Has Largely Moved On from the Pandemic

Despite Ocean Casino Resort’s claims, the high-profile venue has mostly recovered from the pandemic and is enjoying an impressive resurgence. November 2023’s financial results revealed that the casino posted $48.1 million in total gaming revenue in October, up 52.6% compared to the same month in 2022. 

Even without the insurance funds, Ocean Casino Resort is well-positioned to capitalize on gambling’s growing popularity in the USA. The region has achieved an impressive balance between land-based and online operators, allowing physical venues to focus on bettors seeking a more comprehensive leisure experience, particularly the VIP crowd. 

The New Jersey Supreme Court’s decision can benefit the sector in the long term, reaffirming US regulators’ overall stance on this matter. It is high time operators moved on from the pandemic to focus on the future, seizing new opportunities and focusing on providing customers with the best possible experience.

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