My Look Back at 2023

written by I. Nelson Rose

Gaming law is becoming more and more interesting, and international.

The big boom in the U.S. is sports betting, and not just for the 35+ states that have legalized in the last few years. I have advised nearly a dozen professional bettors, all winners, on such diverse topics as taxes and whether they can form syndicates to place more bets in more states than they would otherwise be allowed to make.

Less well recognized is the growing business of skill games and other forms of non-gambling “gambling.”

I was deposed in a case in Virginia where an operator offered a machine that the state said was illegal. It took me about three plays to realize that I could beat the game every time. If you can win literally every time you play, it is hard to see how the game could be considered a form of gambling.

And I continue to be asked to evaluate Internet games. The Unlawful Internet Gambling Enforcement Act allows operators to get “reasoned legal opinions” that they are not violating any federal or state law. Usually, the game developers want an opinion that they are not violating any anti-gambling law because the game is predominantly skill. Occasionally, creative entrepreneurs come up with ways around the requirement that gambling requires “consideration,” meaning a bet. Sweepstakes casinos are the most recent near-gambling that allows players to make bets without anyone actually being required to pay anything to participate.

In September, I testified as an expert witness in a criminal trial involving true Internet gambling in Paris, France. A payment processor for online betting from the U.S. used a French bank occasionally while moving hundreds of millions of dollars. The French prosecutors charged him with money laundering.

Under French law, as under American law, money laundering requires that the money being transferred must be derived from criminal activity. I showed that the payment processor could not be guilty of money laundering unless the prosecutors could prove where, when, and how each of the bets were made, and specifically, what U.S. federal or state anti-gambling law was violated. The judged agreed and found him not guilty.

In October, I spoke at the International Association of Gaming Regulators annual conference in Gaborone, Botswana; right after His Excellency Dr. Mokgweetsi E. K. Masisi, the President of Botswana! They gave him a red carpet and he brought a military band. Besides the national anthem, they played a jazzy version of “Yellow Bird.”

Quite a show to try to top.

My presentation was on the meaning of “best practices” and a couple of cases where I testified as an expert witness.

I had testified remotely in the Bergin Inquiry in New South Wales, Australia. A few years earlier, an outside consultant had convinced the regulators that “best practices” basically meant casinos should be self-regulating. The idea of casino self-regulation received a fatal blow when the Crown Resorts chair admitted that its casinos laundered money, allegedly due to lack of oversight. Crown’s failure to carry out due diligence on high-rollers, some with ties to organized crime, resulted in a fine of $450 million.

In World Capital Ventures Cyprus Ltd. v. The Czech Republic, I testified in a $100-million-dollar international arbitration in Paris. Operators and suppliers of gaming devices wanted compensation from the national government after it and local governments ordered half of all video gaming machines in the country removed. The industry expert testified that “best practices” meant the minimum amount of regulation needed to create the maximum amount of gaming revenue. And, because “best practices” had not been put in place, he concluded that all government actions had to be reversed.

I testified that “best practices” is not a legal standard. No statute, regulation or court decision has ever ruled that a government decision had to be overturned because it wasn’t the “best practices.” And, of course, legal gambling is regulated to protect the public, especially the “vulnerables,” children and problem gamblers, and not to maximize revenue for slot machine operators and suppliers.

This fall the International Association of Gaming Regulators and the International Masters of Gaming law will hold a joint conference in Rome, Italy. I have proposed a presentation on what I see as a growing problem: state licensed gaming companies involved in taking bets from gray and even black markets. [Link to Blogs 2023-1 and 2023-2].

Part of the problem is differing definitions of what constitutes a gray market. But there is also a surprising lack of regulatory interest in gaming companies that present themselves as merely being suppliers. State regulators often seem reluctant to investigate applicants and licensees, as long as the operation isn’t actually taking bets from players in that state.

Gaming regulators may be unable to stop illegal foreign operators. But they can, and should, prevent the companies they themselves have licensed from taking wagers from countries where gambling is a crime.

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I. Nelson Rose

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