Tag: gaming

Google Modifies Ad Policy to Benefit Daily Fantasy Sports and Lottery Couriers

Google has set the stage for a transformative change slated for July 15, 2024, providing a roadmap to extend Google Ads to daily fantasy sports (“DFS”) operators and lottery courier services across numerous U.S. states. A significant shift in the search engine’s Google Ads gambling and games policy, this move is indicative of the company’s responsiveness to the evolving legal landscape surrounding online gaming and lottery courier services. Industry stakeholders must navigate this new advertising landscape mindfully, seizing its potential within regulatory bounds. Legal advice and assistance may be needed to address the new policies and understand the new Google environment.

Google announced that it would permit these businesses to advertise on a state-by-state basis.

  • Approved for DFS Advertising: Alaska, California, Florida, Georgia, Kentucky, Minnesota, Nebraska, New Mexico, North Carolina, North Dakota, Oklahoma, Rhode Island, South Dakota, Utah, West Virginia, Wisconsin, and Wyoming.
  • Approved for Lottery Courier Advertising: Alaska, Arkansas, Colorado, District of Columbia, Idaho, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Missouri, Montana, Nebraska, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Vermont, West Virginia, and Wyoming.

If advertisers are targeting their ads in a state that does not require a license to conduct DFS or lottery courier service, they must be licensed in at least one other U.S. state that mandates such a license.

The Legal Context of the Updated Google Ads Policy

Usually circumspect when it comes to gambling-related content, Google’s policy update marks a notable departure. Traditionally, its stringent restrictions limited advertising to state-run lotteries and horse racing only. The historical context here is important as this shift from Google’s previously conservative policy marks a wider change in the digital advertising of gaming activities. Now, licensed lottery courier services will be able to market themselves through Google Ads in 40 states, excluding California due to specific state restrictions. The revised guidelines correspond with the expanding endorsement and enactment of governance over online gaming and lottery operations. Nonetheless, this update enforces rigorous procedural rules and criteria for advertising compliance, encompassing adherence to both individual state regulations and the certification processes established by Google.

This paradigm shift in Google’s policy echoes their latest requirements for advertisers, who are compelled to demonstrate compliance not just through licensing but also through the integrity of their ad content and search positioning efforts, reflecting a commitment to consumer trust and regulatory adherence.

Daily Fantasy Sports Advertising: A New Playing Field

On the DFS front, Google’s policy expansion allows operators to advertise in 17 states, including jurisdictions where online sports betting remains unlegislated. DFS operators in states which currently do not permit online sports betting will remain at liberty to run Google ads. This reflects Google’s nuanced approach to advertising within the gaming industry, ensuring that ads from entities that have met state-imposed standards are available to users. DFS providers can enter new markets at the rollout, subject to regulatory compliance, including state licensing. In states without such licensing requirements, operators must nonetheless hold a valid license from another state that does enforce scrutiny of operators, underscoring Google’s effort in promoting only legitimate, reputable services.

Lottery Courier Advertising: Riding the Wave of Legalization

Entities such as Jackpocket and Lotto.com, acting as intermediaries, can now increase their visibility and customer base through Google Ads. Among other recent developments, DraftKings’ recent acquisition of Jackpocket for $750 million showcases the growing economic significance of lottery courier services. This growing market, while gaining popularity for convenience, is also varied in acceptance across states; advertisers must navigate diverse regulations and be keenly aware of states like California, where the State lottery commission has expressed restrictions and presently takes a dim view of courier operations.

Understanding Compliance: Standing At the Gate of Certification

Google’s guidelines mandate advertisers provide evidence of all aspects of their operation, from licensing to customer data protection and legal compliance. Certification thus becomes synonymous with service integrity, with Google’s policy now establishing this as a prerequisite. To synchronize with this directive, advertisers must:

  • Hold an official license in one state, considering the dynamics of interstate variances in regulation.
  • Target ads with precision, respecting the complexities of state-specific legal frameworks.
  • Engage diligently with Google’s certification process, indicative of an advertiser’s adherence to compliance and transparency.

Advertisers seeking certification need to demonstrate compliance with rigorous legal standards, including the authentication of tickets and adherence to regulations. The process calls for delivering not just proof of licensing where required, but also extensive details pertaining to their business operations. The intent behind this comprehensive evaluation is to safeguard consumers by preventing untrustworthy services from gaining approval to advertise.

It will be particularly interesting to understand how Google enforces its ”licensing” requirement for vendors, such as marketing affiliates, which promote lottery/fantasy sports services indirectly. Unlike B2C fantasy sports operators or couriers, these B2B entities traditionally not providing consumer-facing services may not be subject to the same state licensing demands, yet they must still navigate the intricacies of Google’s policy in their marketing efforts.

Implications for Advertisers: A Forward-Looking Approach

In navigating Google’s updated advertising framework, adherence to its detailed certification process is paramount to successful marketing. A failure to meet Google’s more robust standards could lead to advertising restrictions on its platform and related services—underscoring the need for meticulous strategy alignment and transparent operations.

The alterations to Google’s policy demand substantial attention to detail and legal compliance. These policy changes necessitate careful scrutiny and a proactive stance from advertisers to ensure alignment with new advertising avenues. On July 15, 2024, Google’s updated advertising policies will come into effect, after which the related policy page will be updated to reflect these changes.

Google’s revisions to its policies underscore the company’s pragmatic response to the dynamic realm of Internet-based lottery-related and gaming services. Notably, Google’s decision enables lottery courier advertising in a majority of states, acknowledging the sector’s growth. It is highly likely that other social media platforms will soon follow suit, thereby setting new standards for these business to adhere to if they want to take advantage of these powerful tools.

© 2024 Blank Rome LLP

Mid-Year Recap: Think Beyond US State Laws!

Much of the focus on US privacy has been US state laws, and the potential of a federal privacy law. This focus can lead one to forget, however, that US privacy and data security law follows a patchwork approach both at a state level and a federal level. “Comprehensive” privacy laws are thus only one piece of the puzzle. There are federal and state privacy and security laws that apply based on a company’s (1) industry (financial services, health care, telecommunications, gaming, etc.), (2) activity (making calls, sending emails, collecting information at point of purchase, etc.), and (3) the type of individual from whom information is being collected (children, students, employees, etc.). There have been developments this year in each of these areas.

On the industry law, there has been activity focused on data brokers, those in the health space, and for those that sell motor vehicles. The FTC has focused on the activities of data brokers this year, beginning the year with a settlement with lead-generation company Response Tree. It also settled with X-Mode Social over the company’s collection and use of sensitive information. There have also been ongoing regulation and scrutiny of companies in the health space, including HHS’s new AI transparency rule. Finally, in this area is a new law in Utah, with a Motor Vehicle Data Protection Act applicable to data systems used by car dealers to house consumer information.

On the activity side, there has been less news, although in this area the “activity” of protecting information (or failing to do so) has continued to receive regulatory focus. This includes the SEC’s new cybersecurity reporting obligations for public companies, as well as minor modifications to Utah’s data breach notification law.

Finally, there have been new laws directed to particular individuals. In particular, laws intended to protect children. These include social media laws in Florida and Utah, effective January 1, 2025 and October 1, 2024 respectively. These are similar to attempts to regulate social media’s collection of information from children in Arkansas, California, Ohio and Texas, but the drafters hope sufficiently different to survive challenges currently being faced by those laws. The FTC is also exploring updates to its decades’ old Children’s Online Privacy Protection Act.

Putting It Into Practice: As we approach the mid-point of the year, now is a good time to look back at privacy developments over the past six months. There have been many developments in the privacy patchwork, and companies may want to take the time now to ensure that their privacy programs have incorporated and addressed those laws’ obligations.

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Copyright © 2024, Sheppard Mullin Richter & Hampton LLP.
For more on Privacy, visit the NLR Consumer Protection section.

5 Trends to Watch: 2024 Emerging Technology

  1. Increased Adoption of Generative AI and Push to Minimize Algorithmic Biases – Generative AI took center stage in 2023 and popularity of this technology will continue to grow. The importance behind the art of crafting nuanced and effective prompts will heighten, and there will be greater adoption across a wider variety of industries. There should be advancements in algorithms, increasing accessibility through more user-friendly platforms. These can lead to increased focus on minimizing algorithmic biases and the establishment of guardrails governing AI policies. Of course, a keen awareness of the ethical considerations and policy frameworks will help guide generative AI’s responsible use.
  2. Convergence of AR/VR and AI May Result in “AR/VR on steroids” The fusion of Augmented Reality (AR) and Virtual Reality (VR) technologies with AI unlocks a new era of customization and promises enhanced immersive experiences, blurring the lines between the digital and physical worlds. We expect to see further refining and personalizing of AR/VR to redefine gaming, education, and healthcare, along with various industrial applications.
  3. EV/Battery Companies Charge into Greener Future. With new technologies and chemistries, advancements in battery efficiency, energy density, and sustainability can move the adoption of electric vehicles (EVs) to new heights. Decreasing prices for battery metals canbatter help make EVs more competitive with traditional vehicles. AI may providenew opportunities in optimizing EV performance and help solve challenges in battery development, reliability, and safety.
  4. “Rosie the Robot” is Closer than You Think. With advancements in machine learning algorithms, sensor technologies, and integration of AI, the intelligence and adaptability of robotics should continue to grow. Large language models (LLMs) will likely encourage effective human-robot collaboration, and even non-technical users will find it easy to employ robotics to accomplish a task. Robotics is developing into a field where machines can learn, make decisions, and work in unison with people. It is no longer limited to monotonous activities and repetitive tasks.
  5. Unified Defense in Battle Against Cyber-Attacks. Digital threats are expected to only increase in 2024, including more sophisticated AI-powered attacks. As the international battle against hackers wages on, threat detection, response, and mitigation will play a crucial role in staying ahead of rapidly evolving cyber-attacks. As risks to national security and economic growth, there should be increased collaboration between industries and governments to establish standardized cybersecurity frameworks to protect data and privacy.
©2023 Greenberg Traurig, LLP. All rights reserved.
For more news on emerging technologies, visit the NLR Communications, Media & Internet section.

NetEase Wins 50 Million RMB & Injunction on Appeal in Minecraft Infringement Litigation at the Guangdong Higher People’s Court

On November 30, 2022, the Guangdong Higher People’s Court announced that NetEase was awarded 50 million RMB (over $7 million USD) and an injunction in an unfair competition case against Shenzhen Mini Play Company (深圳迷你玩公司) involving Minecraft and Mini Play’s similar sandbox game Mini World (迷你世界).  NetEase has the exclusive right to operate Minecraft in China since 2016.  This is believed to be the highest damages award in China for game infringement.

 

 

 

 

Minecraft on left versus Mini World on right.

Minecraft (我的世界) is a sandbox game developed by the Swedish company Mojang Studios in 2009. In May 2016, NetEase announced that it had obtained the exclusive right to operate the game in China, and had the right to enforce any intellectual property infringement and unfair competition claims. In the same month, Shenzhen Mini Play Company launched “Mini World” on Android , and then launched the iOS version and the computer version successively. In 2019, NetEase filed a lawsuit with the Shenzhen Intermediate People’s Court, accusing multiple core elements of the game Mini World of plagiarizing Minecraft. Specifically, NetEase alleged that the overall screens of the two games are highly similar, which constitutes copyright infringement and unfair competition. The court ordered Mini Play to stop the unfair competition, eliminate the impact, and pay 50 million RMB in compensation. The Shenzhen Intermediate People’s Court also determined that “Mini World” was infringing the copyright in Minecraft, and ordered Mini Play to delete the infringing game elements and compensate NetEase more than 21.13 million RMB. Subsequently, both parties appealed to the Guangdong High Court.

The Guangdong Higher Court found that the two games involved in the case are sandbox games, which only set basic game goals and rules, and provided players with basic game resources or elements such as wood, food, creatures, etc. Players freely explore and interact in the virtual world. Players can use the basic game resources preset in the game to create virtual objects, buildings, landscapes, and even game worlds by destroying, synthesizing and building using the basic game resources. Minecraft mainly makes profits through user charges with the cumulative number of downloads from various channels exceeding 3.36 billion with more than 400 million registered users since its launch.

The Guangdong High Court held that the overall screens of the two games constitute electronic works, that is, “audio-visual works” under the newly amended copyright law, but the similarity between the two lies in the design of the game elements rather than the screens of the games. Therefore, it rejected NetEase’s claim of copyright infringement. At the same time, the court held that Mini World and Minecraft are highly similar in terms of gameplay rules, and there are many overlaps in the details of game elements that have exceeded the limit of reasonable reference. By plagiarizing the design of game elements, Mini Play directly seized the key and core personalized commercial value of other people’s intellectual achievements, and seized business opportunities by improperly obtaining other people’s business benefits, which constituted unfair competition.

In determining the amount of compensation, the court held that Mini Play, as the infringing party, should have on hand relevant data of its business income, but refused to provide it to the court without justified reasons, and should bear the legal consequences of adverse presumption.  According to evidence from a third-party platform, the profits of infringement by Mini Play far exceeded the amount of compensation requested by NetEase and therefore the upheld the award of 50 million RMB in compensation for unfair competition.  The Court further ordered Mini Play to delete 230 game elements from Mini World that infringed.

The original announcement from the Guangdong Higher People’s Court can be found here (Chinese only).

Article By Aaron Wininger of Schwegman, Lundberg & Woessner, P.A.

For more intellectual property legal news, click here to visit the National Law Review.

© 2022 Schwegman, Lundberg & Woessner, P.A. All Rights Reserved.

Union Launches National Organizing Effort in Gaming and Tech Industries

The Communications Workers of America (CWA) has begun a nationwide union-organizing campaign targeting game and tech industry employees, in partnership with Game Workers Unite! (GWU), a so-called “grass-roots” worker group founded in Southern California in 2018 to spur unionization in the gaming industry. As here, such groups typically are founded and funded by established labor organizations.

The idea for the organizing effort is the result of discussions between the CWA and GWU over the past months. In addition, CWA Canada is partnering with the GWU chapter in Toronto. The CWA has used similar partnerships with other activist groups, most recently teaming up with the Committee for Better Banks to attempt to organize banking sector employees.

Organizing is being spearheaded by Emma Kinema, a co-founder of GWU, and Wes McEnany, a former organizer with the Service Employees International Union and leader of the “Fight for 15” effort. Kinema will lead the organizing on the West Coast, McEnany will focus on the East Coast. Organizers from CWA locals across the country will populate the teams. According to Kinema, the issues on which the union will focus are: “crunch,” or long hours for weeks or months to meet launch deadlines; cyclical layoffs; harassment; misogyny; gender-based pay discrimination; values and ethical issues, such as working with Immigration and Customs Enforcement (ICE); climate change; AI ethics; and pay, severance, and benefits. According to Tom Smith, CWA’s lead organizer, “For a lot of folks, that’s what led them to do this work in the first place, and people are feeling a disconnect between their personal values and what they’re seeing every day in the working lives.”

With the moniker CODE – Campaign to Organize Digital Employees – the ambitious initiative seeks to organize employees across the industry, typically at individual shops or employers. According to Kinema, “We believe workers are strongest when they’re together in one shop in one union, so the disciplines can’t be pitted against each other – none of that’s good for the workers. I think in games and tech, the wall-to-wall industrial model is the best fit.” Smith said the CWA would be open to craft-based organizing – where the focus is industry-wide bargaining units composed of employees performing similar work at different employers – if that is what employees want. In an industry where workers frequently move from employer to employer, portable benefits can be attractive.

An annual survey by the International Game Developers Association, an industry group, found that gaming worker interest in unions had increased to 47 percent by 2019. Indeed, a representation petition is pending at the Brooklyn office of the National Labor Relations Board on behalf of the employees at a gaming company. About 220,000 employees work in the two-billion-dollar gaming industry.

The union has established a website — www.code-cwa.org – as well as a presence on other social media platforms such as Facebook and Twitter.

As most union organizing is based on the presence in the workplace of unresolved employee issues, a comprehensive analysis of such matters may be valuable to employer. Also, supervisors and managers often interact frequently with employees when organizing is afoot or underway. Training regarding their rights and responsibilities under the labor laws often is essential.

Jackson Lewis P.C. © 2020

For more on unionizing news, see the National Law Review Labor & Employment law page.

Gaming Industry Associations Agree on Universal Esports Principles

Earlier this month, a set of gaming industry representatives agreed upon and released a set of unifying esports principles. These representatives include the Entertainment Software Association (ESA), as well as associations from Canada, Australia and New Zealand, the UK, and Europe. These “Principles of Esports Engagement” were developed in a collaborative effort and form a set of values applicable in all aspects of the global esports environment.

The principles include the following:

  • Safety and Well-Being
    • All esports community members deserve to participate in and enjoy esports in safe spaces and to be free from threats and acts of violence and from language or behavior that makes people feel threatened or harassed.
  • Integrity and Fair Play
    • Cheating, hacking, or otherwise engaging in disreputable, deceitful, or dishonest behavior detracts from the experience of others, unfairly advantages teams and players, and tarnishes the legitimacy of esports.
  • Respect and Diversity
    • Esports promotes a spirit of healthy competition. Whether in person or online, all members of the esports community should demonstrate respect and courtesy to others, including teammates, opponents, game officials, organizers, and spectators. 
    • Esports is truly global and brings together players from different backgrounds, cultures, and perspectives. We believe the broad and diverse player base of esports contributes to its success. We support an open, inclusive, and welcoming environment for all, no matter one’s gender identity, age, ability, race, ethnicity, religion, or sexual orientation.
  • Positive and Enriching Game Play
    • Esports can help build self-confidence and sportsmanship and boost interpersonal communication and teamwork skills. Esports brings players and fans together to problem solve through strategic play, collaboration, and critical thinking. Participation in esports can also lead to the development of new and lasting friendships among teammates, competitors, and members of the broader esports community.

The goal of these organizations in releasing this set of principles is to foster an esports community that is responsible, welcoming, engaging, and of course, fun. Notably, in ESA’s press release announcing these principles, the association highlighted the growth of esports, citing research that estimates that, in 2019, global esports viewership will hit nearly 500 million and revenues will exceed $1 billion USD. With this level of growth, the esports community has a vested interest in supporting the best conditions for play and ensuring esports remains an exciting and inclusive activity and industry at all levels.

Copyright © 2019, Sheppard Mullin Richter & Hampton LLP.

For more video gaming issues, see the National Law Review Entertainment, Art & Sports law page.

Game Over: Obviousness Can Be Based on a Single Prior Art Reference

The US Court of Appeals for the Federal Circuit affirmed a Patent Trial and Appeal Board (PTAB) obviousness decision, finding that obviousness can be based on a single prior art reference if modifying that prior art reference is found to be obvious. Game and Technology Co., Ltd. v. Activision Blizzard Inc., Case No. 18-1981 (Fed. Cir., June 21, 2019) (Wallach, J).

Game and Technology (GAT) owns a patent directed to a method for generating a “gamvatar” by combining game items with layers of an avatar in online games. Activision Blizzard and Riot Games sought and were granted inter partes review of the patent. During the proceeding, the PTAB construed the term “gamvatar” to be a combination of an avatar with a game item function, and construed the term “layers” to mean display regions. The PTAB issued a final written decision finding the challenged claims obvious based on a user manual for a video game called Diablo II. GAT appealed.

On appeal, GAT argued that the PTAB erred in construing the terms “gamvatar” and “layers,” and further argued that the PTAB erred in its determination that the claimed method would have been obvious over the Diablo II manual.

Addressing claim construction, GAT argued that the PTAB’s construction of “gamvatar” was broader than the broadest reasonable interpretation BRI, and argued that “gamvatar” should mean “concurrently usable online and in the game.” The Federal Circuit rejected GAT’s argument, finding that the PTAB did not err in construing the term “gamvatar” because the claims and specification both showed that “gamvatar” is a combination of an avatar with a game item function and is not limited to “concurrently useable online and in the game.” As to the term “layers,” GAT argued that the term should be construed as regions for displaying graphical objects where the layers are displayed on the avatar. The Court disagreed, finding that the claim and the specification supported the PTAB’s construction of the term “layers” to mean display regions.

Turning to obviousness, GAT argued that the PTAB erred in using the user manual to find obviousness because a “a single reference . . . cannot support obviousness.” The Federal Circuit rejected GAT’s argument as a matter of law, finding that a patent can be obvious based on a single prior art reference if it would have been obvious to modify the reference to arrive at the claims invention. Applying that standard here, the Federal Circuit found that the PTAB did not err in its obviousness decision because the PTAB’s finding that the Diablo II manual teaches the “gamvatar” and the “layers” limitations was supported by substantial evidence.

 

© 2019 McDermott Will & Emery
For more in PTAB cases, please see the Intellectual Property type of law page on the National Law Review.

Betting Big on Blockchain

Blockchain and sports gambling seem to be a natural fit. Sports gambling has been at the forefront of the news cycle since the U.S. Supreme Court struck down a federal statute that banned states from authorizing sports gambling in Murphy v. NCAA. Since then, New Jersey, Delaware, Mississippi and West Virginia have passed laws allowing wagering on the results of certain sporting events. New York, Pennsylvania and Rhode Island are quickly moving towards the legalization of sports gambling and a number of other states are expected to follow.

Blockchain has already proven to be a reliable partner for online casino gambling. In the past few years, a fruitful relationship between online casino gambling platforms and blockchain technologies has developed. Satoshi Dice, which first gained popularity in 2012, allows users to gamble their cryptocurrency through a blockchain-based, peer-to-peer dice prediction game. Virtue Poker, a ConsenSys-backed, decentralized poker platform, uses blockchain to ensure that casino operators (the “house”) cannot tamper with the integrity of a wager. And ZeroEdgeuses smart contracts and blockchain to eliminate the “house” fee that is typically passed on to gamblers.

Thus, given the opening for sports gambling, it is easy to imagine a relationship forming between sports betting and blockchain technologies. Blockchain may allow casino operators and other entities to reduce transaction fees, speed up payment processing, increase gambler anonymity and flag problematic transactions. Some sports betting entities, such as daily fantasy sports behemoth FanDuel, have already begun exploring such opportunities.

However, even within states that have already legalized sports gambling, there are still a number of factors to consider for those aiming to utilize blockchain technologies within their sports betting platforms. Such considerations include, for example:

  • Licensing: Companies using blockchain technologies will have to work with the licensed casino operators within each state. For example, in New Jersey, online sports betting may only be conducted by a licensed casino/racetrack. Each individual licensee is limited to working with three individually branded websites, each of which must obtain a separate license from the state. Thus, for blockchain to play a role, incumbent casino operators will likely need to understand blockchain and its functionality.

  • Federal Wire Act: The Federal Wire Act effectively prohibits individuals from using the Internet to transmit sports wagers across state lines, even if the casino operator and the bettor are in separate states that each individually allow sports betting. Such a limitation is in conflict with the distributed nature of blockchain networks. However, even if, as some commentators have hypothesized, Murphy re-interpreted the Federal Wire Act to only prohibit interstate sports betting to the extent that sports betting is illegal under the state or local law of any of the transaction’s participants, it remains unclear how this interpretation applies to actors such as node operators or validators on a blockchain network who may be located across any number of states or foreign jurisdictions.

  • Taxation: While blockchain applications may be able to facilitate trust-minimized peer-to-peer sports betting, there would need to be proper safeguards in place to ensure that each sports bet is properly taxed. In New Jersey, the state charges 13% for online wagers run by casinos and 14.25% for online wagers run by racetracks. While blockchain may enable bettors to avoid the “house” fee, it cannot circumvent state taxation on sports betting. It will be interesting to see if taxing authorities encourage the use of blockchain, on the theory that they, as a “supernode” on the network, could have a window into all winnings. This could potentially result in more complete and efficient tax collections.

  • Anti-Money Laundering: Currently, casino operators must comply with certain federal and state regulatory schemes that aim to prevent money laundering. Given that anti-money laundering laws will be a primary concern as legalized sports gambling proliferates, companies utilizing blockchain technologies must be able to comply with the Bank Secrecy Act and similar state anti-money laundering laws. However, it is also worth noting that blockchain technologies may be able to aid in preventing money laundering and other illicit financial transactions (e.g., through real-time tracking of suspicious betting patterns).

  • Congress & Further Legislation: The Supreme Court was clear that Congress may regulate sports gambling directly if it elects to do so. While the decentralized nature of blockchain technology is typically deemed to be one of its strengths, lawmakers may be wary of the lack of accountability that blockchain-based platforms may present. As a result, it is possible that Congress or individual states could enact additional legislation that impedes the proliferation of blockchain-based sports betting.

© 2018 Proskauer Rose LLP.
This post was written by Brett Schwab of Proskauer Rose LLP.

Mississippi Has a Passed a Lottery Bill: Now What?

On August 31, 2018, Governor Phil Bryant signed legislation authorizing a lottery, removing Mississippi from the list of states without a lottery (now down to five jurisdictions).

So, when will Mississippians be able to buy a lottery ticket? Through close analysis of the statute and anticipated procedure, it is possible to get some sense of the potential timeline.

The bill establishes the Mississippi Lottery Corporation, run by a five-member Board of Directors. The Board members are appointed by the Governor with the advice and consent of the Mississippi Senate. Once confirmed, the Board members will have five-year rotating terms, with no member able to serve more than two terms.

The Board is authorized to hire a full-time President of the Corporation to oversee the day-to-day affairs of the lottery, subject to the approval of the Governor. Once constituted, the Board will determine the process for solicitation of applicants for President and make a selection subject to the Governor’s approval. This process should take several months, even under the best of circumstances.

The appointment and hiring process will be closely monitored by both the press and the public. All meetings of the Board are subject to the Mississippi Open Meetings Act. All records of the Corporation are deemed public records and thus open to public inspection, subject to certain statutory exceptions.

Once the President is selected, he or she will begin to staff the Corporation. All employees of the lottery will be subject to background investigations prior to hiring, and certain senior level administrative personnel must be investigated by the Mississippi Department of Public Safety. No person who has been convicted of a felony, bookmaking or other forms of illegal gambling, or a crime involving moral turpitude may be employed by the corporation. This investigation and vetting process will be time consuming and lengthy, and will delay all hiring several months.

Prior to any operations or procurements, the Board must adopt rules and regulations governing lottery operations in Mississippi. Once retained, staff will draft and revise proposed lottery regulations – another process that could take several months.

By law, the corporation has the option to purchase, lease or lease-purchase necessary goods or services. While the corporation is not able to contract out the total operation and administration of the lottery, it may make procurements for lottery game design, lottery ticket distribution to retailers, supply of goods and services, advertising and the like.

The Board must approve “major procurements”, which are for items, products or services of $1,000,000 or more, including major advertising contracts, annuity contracts, prizes, products and services unique to the lottery, and may enter into such contracts only after a formal bidding process. In bidding, the corporation may do its own procurement or may utilize the services of the Department of Finance and Administration, the Department of Information Technology Services, or other state agencies. Bidding and service procurement will be another time-consuming process; unsuccessful bidders may litigate over not being selected, resulting in even further delays.

Finally, the corporation must investigate, select and enter into agreements with hundreds of lottery retailers. The legislation sets minimum standards for such retailers, and it specifically authorizes Mississippi casinos to act as lottery retailers. This retailer investigation and retention process could also take months.

So, even with a lot of luck, the first Mississippi lottery ticket will likely not be sold until the last quarter of 2019 or first quarter of 2020.

 

© 2018 Jones Walker LLP
This post was written by Thomas B. Shepherd and Zachary W. Branson of Jones Walker LLP.
Read more about Mississippi legislation on our Mississippi Jurisdiction page.

Mississippi and Louisiana Attorneys General Among Those Filing Amicus Brief with Supreme Court in New Jersey Sports Wagering Case

Attorney General Jim Hood of Mississippi and Attorney GenerFantasy Sports, New Jersey, Sports Wageringal Jeff Landry of Louisiana joined their counterparts from West Virginia, Arizona, and Wisconsin in filing a brief of Amici Curiae in support of the State of New Jersey’s Petition for Writ of Certiorari in its sports wagering case. In the case styled Governor Christopher J. Christie, et al. v. National Collegiate Athletic Association, et al., an en banc panel of the Third Circuit Court of Appeals interpreted the Professional and Amateur Sports Act, 28 U.S.C. § 3702, as prohibiting States from modifying their existing laws to repeal prohibitions on sports wagering.  As a result of this interpretation, the Supreme Court has been petitioned for writ of certiorari in this case to determine whether the Act commandeers the regulatory authority of the States in violation of the Tenth Amendment.

The crux of Amici States’ argument focuses on the fact that federal law does not directly prohibit sports wagering when it takes place in a State in which such wagering is legal.  Rather, the Act makes it unlawful for a State, other than those that were grandfathered in at the time the Act was enacted, to license or authorize sports wagering.  As a result, the Amici States argue that the federal regulatory approach that currently exists amounts to unconstitutional commandeering instead of lawful preemption under the Supremacy Clause.  However, the Amici States explicitly assert that they take no position on the specific sport wagering laws at issue in this case.  Instead, the Amici States are not concerned in this instance with what Congress regulates but rather the manner in which Congress regulates.

It will be interesting to follow this case through this process to see what, if anything, Congress and the Amici States will do if New Jersey prevails.  Based on the Amici States arguments, Congress could still elect to directly regulate sports wagering, although it appears that the tide has turned and that such regulation would be disfavored by the majority of Americans.  In Mississippi, Mississippi Code § 75-76-101, which requires that all gaming be entirely located and conducted on the licensed premises, would have to be addressed, at a minimum, to implement sports wagering.  Similar laws would have to be addressed to permit sports wagering in Louisiana as well.  In any event, although the arguments in this case are focused primarily on States’ rights in relation to the federal government, the outcome could have interesting consequences in gaming jurisdictions around the nation.

ARTICLE BY Blake M. Fulton of Jones Walker LLP

© 2016 Jones Walker LLP