I-Gaming: Part II (Licensing)

The licensing provisions and suitability standards contained in the Frank bill are relatively straightforward and will not shock anyone who has applied for a gaming license in most jurisdictions. The only significant wrinkle in the plain-vanilla flavor of the requirements can be found in an amendment offered by Representative Sherman of California. The so-called “bad actors” amendment requires applicants to certify, under penalty of perjury, that the applicant and all affiliated business entities have not committed an intentional felony violation of Federal or State gambling laws and have used “due diligence” to prevent any U.S. person from placing a bet on an internet site in violation of Federal or State gambling laws.
If enacted, this could prove to be a major hurdle for existing internet gambling sites that previously accepted bets from U.S. players, at least since passage of the Unlawful Internet Gambling Enforcement Act of 2006. The provision is also a potentially fertile ground for litigation, given the value of an internet gambling license. Additionally, establishing that a company did, or did not, use due diligence to prevent U.S. wagers can pose a unique challenge in the internet's largely anonymous and ephemeral electronic environment.
One other licensing provision is of some interest. As amended, the bill would essentially require the Secretary to rely on suitability determinations and related investigations of “qualified” state and tribal regulatory bodies. Given the likelihood that large, well-established gaming enterprises with existing licenses in a number of jurisdictions will apply for internet licenses, it makes perfect sense to avoid redundant and costly re-investigations where appropriate. Most regulatory bodies do an excellent job of vetting their licensees and it is doubtful that new, ground-up investigations would ferret out any significant new negative information. As we have long contended, a degree of reciprocity in the area of licensing can conserve scarce regulatory resources without compromise of essential protections. We do believe, however, that the language should be discretionary and not mandatory. Even if the jurisdiction to be relied on is “qualified,” not all investigations are entirely current and, even where the licensee is in “good standing” in another jurisdiction, their may be pending issues that deserve independent scrutiny.