S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  9509

                          I N  A S S E M B L Y

                               May 5, 2014
                               ___________

Introduced  by M. of A. PRETLOW -- read once and referred to the Commit-
  tee on Racing and Wagering

AN ACT to amend the racing, pari-mutuel wagering and  breeding  law  and
  the penal law, in relation to allowing certain interactive poker games

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. The  racing,  pari-mutuel  wagering  and  breeding  law  is
amended by adding a new article 14 to read as follows:
                               ARTICLE 14
                       CERTAIN INTERACTIVE GAMING
SECTION 1400. LEGISLATIVE FINDINGS AND PURPOSE.
        1401. DEFINITIONS.
        1402. AUTHORIZATION.
        1403. REQUIRED SAFEGUARDS/MINIMUM STANDARDS.
        1404. SCOPE OF LICENSING REVIEW.
        1405. STATE TAX.
  S 1400. LEGISLATIVE FINDINGS AND PURPOSE. THE LEGISLATURE HEREBY FINDS
AND DECLARES THAT:
  1.  UNDER  THE  PENAL  LAW A PERSON ENGAGES IN GAMBLING WHEN HE OR SHE
STAKES OR RISKS SOMETHING OF VALUE UPON THE  OUTCOME  OF  A  CONTEST  OF
CHANCE  OR  A  FUTURE  CONTINGENT  EVENT NOT UNDER HIS OR HER CONTROL OR
INFLUENCE, UPON AN AGREEMENT  OR  UNDERSTANDING  THAT  HE  OR  SHE  WILL
RECEIVE  SOMETHING OF VALUE IN THE EVENT OF A CERTAIN OUTCOME. A CONTEST
OF CHANCE IS DEFINED AS ANY  CONTEST,  GAME,  GAMING  SCHEME  OR  GAMING
DEVICE IN WHICH THE OUTCOME DEPENDS IN A MATERIAL DEGREE UPON AN ELEMENT
OF  CHANCE,  NOTWITHSTANDING THAT SKILL OF THE CONTESTANTS MAY ALSO BE A
FACTOR THEREIN;
  2. A CONTEST OF CHANCE IS DEFINED AS ANY CONTEST, GAME, GAMING  SCHEME
OR  GAMING DEVICE IN WHICH THE OUTCOME DEPENDS IN A MATERIAL DEGREE UPON
AN ELEMENT OF CHANCE, NOTWITHSTANDING THAT SKILL OF THE CONTESTANTS  MAY
ALSO  BE  A  FACTOR  THEREIN. PL S 225.00(1).  THUS, GAMES OF CHANCE MAY
INVOLVE SOME SKILL, BUT IN THOSE GAMES  THE  LEVEL  OF  SKILL  DOES  NOT
DETERMINE  THE  OUTCOME  REGARDLESS OF THE DEGREE OF SKILL EMPLOYED. SEE
PEOPLE V. TURNER, 165 MISC. 2D 222, 224, 629 N.Y.S.2D  661,  662  (CRIM.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
              

                                                           LBD14952-01-4

A. 9509                             2

CT.  1995).  ON THE OTHER HAND, WHERE A CONTEST PITS THE SKILL LEVELS OF
THE PLAYERS AGAINST EACH OTHER, NEW YORK COURTS HAVE FOUND A GAME TO  BE
ONE  OF  SKILL RATHER THAN CHANCE. SEE PEOPLE V.  HUNT, 162 MISC. 2D 70,
72, 616 N.Y.S.2D 168, 170 (CRIM. CT.  1994) ("PLAYED FAIRLY, STILL RATH-
ER THAN CHANCE IS THE MATERIAL COMPONENT OF THREE-CARD MONTE.");
  3.  POKER  IN MANY INSTANCES HAS BEEN DEFINED AS A GAME OF SKILL AND A
NEW YORK FEDERAL COURT IN U.S. V. DICRISTINA, 886 F.SUPP. 2ND 164,  224,
ASSESSED THAT UNDER FEDERAL LAW POKER WAS PREDOMINANTLY A GAME OF SKILL;
  4.  NEW  YORK  COURTS  HAVE  INTERPRETED  NEW YORK LAW TO APPLY A MORE
RIGOROUS TEST IN IDENTIFYING A "CONTEST OF CHANCE" THAN  IS  APPLIED  BY
MOST  STATES  IN  THIS  NATION  AND  THE  COURTS HAVE FOUND THAT WHERE A
CONTEST PITS THE SKILL LEVELS OF THE PLAYERS AGAINST EACH  OTHER,  THOSE
GAMES  ARE  GAMES  OF  SKILL  AND  NOT GAMES OF CHANCE. FURTHERMORE, THE
COURTS HAVE NOT LIMITED THE  LEGISLATURE'S  ABILITY  TO  DETERMINE  THAT
CERTAIN  FORMS  OF  POKER  SHOULD FALL OUTSIDE THE GENERAL DEFINITION OF
GAMBLING SINCE THOSE GAMES ARE GAMES OF SKILL;
  5. TEXAS HOLD'EM POKER INVOLVES TWO CARDS  DEALT  FACE  DOWN  TO  EACH
PLAYER  AND  THEN  FIVE  COMMUNITY CARDS PLACED FACE-UP BY THE DEALER--A
SERIES OF THREE, THEN TWO ADDITIONAL SINGLE CARDS, WITH  PLAYERS  DETER-
MINING  WHETHER  TO  CHECK,  BET,  RAISE  OR FOLD AFTER EACH DEAL. OMAHA
HOLD'EM POKER IS A SIMILAR GAME, IN WHICH  EACH  PLAYER  IS  DEALT  FOUR
CARDS  AND  MAKES  HIS  OR HER BEST HAND USING EXACTLY TWO OF THEM, PLUS
EXACTLY THREE OF THE FIVE COMMUNITY CARDS. THESE GAMES ARE CONSIDERED TO
BE  COMPLEX  FORMS  OF  POKER  WHICH   INVOLVE   PLAYER   STRATEGY   AND
DECISION-MAKING  AND  WHICH  PIT THE SKILL LEVELS OF THE PLAYERS AGAINST
EACH OTHER. AS GAMES OF SKILL, THESE FORMS OF POKER DO  NOT  FALL  UNDER
THE DEFINITION OF GAMBLING AS PROHIBITED BY THE PENAL LAW;
  6.  THE  LEGISLATURE  FURTHER FINDS THAT AS THE INTERNET HAS BECOME AN
INTEGRAL PART OF SOCIETY, AND INTERNET POKER  A  MAJOR  FORM  OF  ENTER-
TAINMENT  FOR  MANY  CONSUMERS,  ANY  INTERACTIVE GAMING ENFORCEMENT AND
REGULATORY STRUCTURE MUST BEGIN FROM THE BEDROCK  PREMISE  THAT  PARTIC-
IPATION  IN A LAWFUL AND LICENSED GAMING INDUSTRY IS A PRIVILEGE AND NOT
A RIGHT, AND THAT REGULATORY OVERSIGHT  IS  INTENDED  TO  SAFEGUARD  THE
INTEGRITY OF THE GAMES AND PARTICIPANTS AND TO ENSURE ACCOUNTABILITY AND
THE PUBLIC TRUST; AND
  7.  WITH THE PASSAGE OF THE UNLAWFUL INTERNET GAMBLING ENFORCEMENT ACT
OF 2006, ISSUES CONCERNING THE SCOPE AND INTERPRETATION  OF  STATE  LAW,
INCLUDING THE IMPORTANCE OF THE LOCATION OF THE WAGER, WAGERING ACTIVITY
AND  WEBSITE,  WERE  CLARIFIED.  THOSE  PERSONS  THAT  PROVIDED GOODS OR
SERVICES RELATED TO INTERNET GAMBLING INVOLVING NEW YORK CITIZENS  PRIOR
TO  THE ENACTMENT OF THAT STATUTE - INCLUDING, AT THE TIME, POKER, WHICH
WAS UNTIL THE ADOPTION OF THIS ACT UNLAWFUL - BUT  EXITED  IN  AN  EXPE-
DITIOUS  FASHION AFTER ITS ENACTMENT SHOULD BE REGARDED DIFFERENTLY FROM
THOSE THAT CONTINUED TO FLOUT U.S. FEDERAL AND NEW YORK  LAW  THEREAFTER
FOR  PURPOSES  OF  SUITABILITY FOR LICENSING UNDER THE UNLAWFUL INTERNET
GAMBLING ENFORCEMENT ACT OF 2006.    GRANTING  THOSE  PERSONS  LICENSING
PRIVILEGES  OR  ALLOWING  THE  USE  OF  THE  ASSETS  OF  SUCH PERSONS IN
CONNECTION WITH INTERACTIVE GAMING IN THIS STATE, IF THOSE  ASSETS  WERE
USED  UNLAWFULLY,  WOULD  REWARD  UNLAWFUL GAMING ACTIVITY, WOULD PERMIT
MANIFESTLY UNSUITABLE PERSONS  TO  PROFIT  FROM  THEIR  UNLAWFUL  GAMING
ACTIVITY  AND  WOULD  CREATE  UNFAIR  COMPETITION  WITH  LICENSEES  THAT
RESPECTED FEDERAL AND STATE LAW.
  S 1401. DEFINITIONS. AS USED IN THIS ARTICLE:
  1. "AUTHORIZED GAME" MEANS OMAHA HOLD'EM AND TEXAS HOLD'EM  POKER,  AS
WELL AS ANY OTHER POKER GAME THAT THE COMMISSION DETERMINES IS THE MATE-

A. 9509                             3

RIAL  EQUIVALENT  OF  EITHER OF THOSE, WHETHER IN A CASH GAME OR TOURNA-
MENT.
  2.  "AUTHORIZED  PARTICIPANTS" MEANS PERSONS WHO ARE EITHER PHYSICALLY
PRESENT IN THIS STATE WHEN PLACING A WAGER OR WHO OTHERWISE ARE  PERMIT-
TED  BY  APPLICABLE  LAW,  AS  DETERMINED  BY THE COMMISSION, TO PLACE A
WAGER.  THE INTERMEDIATE ROUTING OF ELECTRONIC DATA IN  CONNECTION  WITH
INTERACTIVE  GAMING  SHALL  NOT  DETERMINE  THE LOCATION OR LOCATIONS IN
WHICH A WAGER IN INITIATED, RECEIVED OR OTHERWISE MADE.
  3. "CORE FUNCTION" MEANS ANY OF THE  FOLLOWING:  (A)  THE  MANAGEMENT,
ADMINISTRATION  OR  CONTROL  OF  WAGERS  ON  INTERACTIVE GAMING; (B) THE
MANAGEMENT, ADMINISTRATION OR CONTROL OF  THE  GAMES  WITH  WHICH  THOSE
WAGERS ARE ASSOCIATED; OR (C) THE DEVELOPMENT, MAINTENANCE, PROVISION OR
OPERATION OF AN INTERACTIVE GAMING PLATFORM.
  4.  "COVERED  ASSET" MEANS ANY OF THE FOLLOWING CATEGORIES OF ASSET IF
USED IN CONNECTION WITH THE KNOWING AND WILLFUL ACCEPTANCE OF ANY  WAGER
FROM  PERSONS  LOCATED  IN  THE UNITED STATES ON ANY FORM OF INTERACTIVE
GAMING (INCLUDING BUT NOT LIMITED TO POKER) AFTER DECEMBER THIRTY-FIRST,
TWO THOUSAND SIX, THAT HAS NOT BEEN AFFIRMATIVELY AUTHORIZED BY  LAW  OF
THE  UNITED  STATES  OR OF EACH STATE IN WHICH PERSONS MAKING SUCH WAGER
WERE LOCATED: (A) ANY TRADEMARK, TRADE NAME,  SERVICE  MARK  OR  SIMILAR
INTELLECTUAL PROPERTY THAT WAS USED TO IDENTIFY ANY ASPECT OF THE INTER-
NET  WEBSITE  OR  OF  THE  OPERATOR  OFFERING THE WAGERS OR GAMES TO ITS
PATRONS; (B) ANY DATABASE OR CUSTOMER LIST OF  INDIVIDUALS  RESIDING  IN
THE  UNITED STATES WHO PLACED SUCH WAGERS; (C) ANY DERIVATIVE OF A DATA-
BASE OR CUSTOMER LIST DESCRIBED IN PARAGRAPH (B) OF THIS SUBDIVISION; OR
(D) AN ASSET USED TO PROVIDE A CORE FUNCTION.
  5. "COMMISSION" MEANS THE NEW YORK STATE GAMING COMMISSION.
  6. "DIVISION" MEANS THE DIVISION OF GAMING,  ESTABLISHED  UNDER  PARA-
GRAPH  (C) OF SUBDIVISION TWO OF SECTION ONE HUNDRED THREE OF THIS CHAP-
TER.
  7. "INTERACTIVE GAMING" MEANS THE CONDUCT OF GAMES THROUGH THE USE  OF
THE  INTERNET  OR  OTHER COMMUNICATIONS TECHNOLOGY THAT ALLOWS A PERSON,
UTILIZING MONEY, CHECKS,  ELECTRONIC  CHECKS,  ELECTRONIC  TRANSFERS  OF
MONEY, CREDIT CARDS, DEBIT CARDS OR ANY OTHER INSTRUMENTALITY, TO TRANS-
MIT  TO  A  COMPUTER INFORMATION TO ASSIST IN THE PLACING OF A WAGER AND
CORRESPONDING INFORMATION RELATED TO  THE  DISPLAY  OF  THE  GAME,  GAME
OUTCOMES  OR  OTHER  SIMILAR  INFORMATION. THE TERM DOES NOT INCLUDE THE
CONDUCT OF (A) NON-GAMBLING  GAMES  THAT  DO  NOT  OTHERWISE  REQUIRE  A
LICENSE  UNDER  STATE  OR  FEDERAL LAW; OR (B) GAMES THAT OCCUR ENTIRELY
AMONG PARTICIPANTS WHO ARE LOCATED ON A LICENSED CASINO PREMISES.
  8. "COMMUNICATIONS TECHNOLOGY" MEANS ANY METHOD USED  AND  THE  COMPO-
NENTS  EMPLOYED  BY  AN  ESTABLISHMENT TO FACILITATE THE TRANSMISSION OF
INFORMATION, INCLUDING, WITHOUT LIMITATION, TRANSMISSION  AND  RECEPTION
BY  SYSTEMS  BASED  ON  WIRE,  CABLE, RADIO, MICROWAVE, LIGHT, OPTICS OR
COMPUTER DATA NETWORKS, INCLUDING, WITHOUT LIMITATION, THE INTERNET  AND
INTRANETS.
  9. "INTERACTIVE GAMING GROSS REVENUE" SHALL MEAN THE TOTAL OF ALL SUMS
PAID  TO A LICENSEE FROM INTERACTIVE GAMING INVOLVING AUTHORIZED PARTIC-
IPANTS, LESS ONLY THE TOTAL OF ALL SUMS PAID OUT AS WINNINGS TO  PATRONS
AND  PROMOTIONAL GAMING CREDITS; PROVIDED, HOWEVER, THAT THE CASH EQUIV-
ALENT VALUE OF ANY MERCHANDISE OR OTHER NON-CASH THING OF VALUE INCLUDED
IN A CONTEST OR TOURNAMENT SHALL NOT BE INCLUDED IN  THE  TOTAL  OF  ALL
SUMS  PAID OUT AS WINNINGS TO PLAYERS FOR PURPOSES OF DETERMINING INTER-
ACTIVE GAMING GROSS REVENUE.
  (A) NEITHER AMOUNTS DEPOSITED WITH A LICENSEE FOR PURPOSES OF INTERAC-
TIVE GAMING NOR AMOUNTS TAKEN IN FRAUDULENT ACTS PERPETRATED  AGAINST  A

A. 9509                             4

LICENSEE FOR WHICH THE LICENSEE IS NOT REIMBURSED SHALL BE CONSIDERED TO
HAVE BEEN "PAID" TO THE LICENSEE FOR PURPOSES OF CALCULATING INTERACTIVE
GAMING GROSS REVENUE.
  (B)  "PROMOTIONAL  GAMING CREDIT" INCLUDES BONUSES, PROMOTIONS AND ANY
AMOUNT RECEIVED BY A LICENSEE FROM A PATRON FOR WHICH THE  LICENSEE  CAN
DEMONSTRATE THAT IT OR ITS AFFILIATE HAS NOT RECEIVED CASH.
  10.  "INTERACTIVE GAMING PLATFORM" SHALL MEAN THE COMBINATION OF HARD-
WARE, SOFTWARE AND DATA NETWORKS USED TO MANAGE, ADMINISTER  OR  CONTROL
WAGERS  ON  INTERACTIVE  GAMING OR THE GAMES WITH WHICH THOSE WAGERS ARE
ASSOCIATED.
  11.   "INTERNET"   MEANS   A   COMPUTER   NETWORK   OF   INTEROPERABLE
PACKET-SWITCHED DATA NETWORKS.
  12.  "LICENSEE"  SHALL MEAN A PERSON WHO IS LICENSED BY THE COMMISSION
TO OFFER INTERACTIVE GAMING USING  AN  INTERACTIVE  GAMING  PLATFORM  TO
AUTHORIZED  PARTICIPANTS.  A  LICENSEE  MAY UTILIZE MULTIPLE INTERACTIVE
GAMING PLATFORMS PROVIDED THAT EACH PLATFORM IS APPROVED BY THE  COMMIS-
SION.
  13.  "OMAHA HOLD'EM POKER" SHALL MEAN THE POKER GAME MARKETED AS OMAHA
HOLD'EM POKER OR OMAHA POKER IN WHICH EACH PLAYER IS  DEALT  FOUR  CARDS
AND  MUST  MAKE  HIS  OR  HER  BEST HAND USING EXACTLY TWO OF THEM, PLUS
EXACTLY THREE OF THE FIVE COMMUNITY CARDS.
  14. "SIGNIFICANT VENDOR" MEANS ANY PERSON WHO OFFERS OR  WHO  PROPOSES
TO  OFFER  ANY  OF  THE  FOLLOWING  SERVICES WITH RESPECT TO INTERACTIVE
GAMING:  (A) A CORE FUNCTION; (B) SALE, LICENSING OR  OTHER  RECEIPT  OF
COMPENSATION  FOR  SELLING  OR  LICENSING A DATABASE OR CUSTOMER LIST OF
INDIVIDUALS RESIDING IN THE UNITED STATES SELECTED IN WHOLE OR  IN  PART
BECAUSE  THEY  PLACED  WAGERS  OR PARTICIPATED IN GAMBLING GAMES WITH OR
THROUGH AN INTERNET WEBSITE OR OPERATOR (OR ANY  DERIVATIVE  OF  SUCH  A
DATA  BASE OR CUSTOMER LIST); (C) PROVISION OF ANY TRADEMARK, TRADENAME,
SERVICE MARK OR SIMILAR INTELLECTUAL PROPERTY UNDER WHICH A LICENSEE  OR
SIGNIFICANT  VENDOR  IDENTIFIES  INTERACTIVE  GAMES TO CUSTOMERS; OR (D)
PROVISION OF ANY PRODUCT, SERVICE OR ASSET TO A LICENSEE OR  SIGNIFICANT
VENDOR  IN  RETURN  FOR  A PERCENTAGE OF INTERACTIVE GAMING REVENUE (NOT
INCLUDING FEES TO  FINANCIAL  INSTITUTIONS  AND  PAYMENT  PROVIDERS  FOR
FACILITATING  A DEPOSIT OR WITHDRAWAL BY AN AUTHORIZED PARTICIPANT). THE
TERM "SIGNIFICANT VENDOR" SHALL NOT  INCLUDE  A  PROVIDER  OF  GOODS  OR
SERVICES  TO  A  LICENSEE THAT ARE NOT SPECIFICALLY DESIGNED FOR USE AND
NOT PRINCIPALLY USED IN CONNECTION WITH INTERACTIVE GAMING.
  15. "TEXAS HOLD'EM POKER" SHALL MEAN THE TYPE  OF  POKER  MARKETED  AS
TEXAS  HOLD'EM  POKER  THAT  INVOLVES TWO CARDS BEING DEALT FACE DOWN TO
EACH PLAYER AND THEN FIVE COMMUNITY CARDS BEING PLACED  FACE-UP  BY  THE
DEALER--A SERIES OF THREE THEN TWO ADDITIONAL SINGLE CARDS, WITH PLAYERS
HAVING THE OPTION TO CHECK, BET, RAISE OR FOLD AFTER EACH DEAL.
  S  1402.  AUTHORIZATION. 1.   THE COMMISSION SHALL, WITHIN ONE HUNDRED
EIGHTY DAYS OF THE EFFECTIVE DATE  OF  THIS  ARTICLE,  PROMULGATE  REGU-
LATIONS  TO IMPLEMENT INTERACTIVE GAMING IN THIS STATE AND SHALL AUTHOR-
IZE UP TO TEN LICENSES TO OPERATE INTERACTIVE GAMING  INVOLVING  AUTHOR-
IZED  PARTICIPANTS,  SUBJECT TO THE PROVISIONS OF THIS ARTICLE AND OTHER
APPLICABLE PROVISIONS OF LAW.
  2. THE COMMISSION SHALL, TO THE EXTENT PRACTICABLE, ISSUE LICENSES  TO
MULTIPLE  APPLICANTS  NO  SOONER  THAN ONE HUNDRED EIGHTY DAYS AFTER THE
PROMULGATION OF REGULATIONS IN ORDER TO ENSURE A ROBUST AND  COMPETITIVE
MARKET  FOR  CONSUMERS  AND  TO  PREVENT EARLY LICENSEES FROM GAINING AN
UNFAIR COMPETITIVE ADVANTAGE.
  3. NO PERSON MAY OPERATE, MANAGE  OR  MAKE  AVAILABLE  AN  INTERACTIVE
GAMING  PLATFORM OR ACT AS A SIGNIFICANT VENDOR WITH RESPECT TO INTERAC-

A. 9509                             5

TIVE GAMING THAT IS OFFERED TO PERSONS  LOCATED  IN  THIS  STATE  UNLESS
LICENSED BY THE COMMISSION PURSUANT TO THIS ARTICLE AND ONLY THOSE GAMES
AUTHORIZED BY THE COMMISSION SHALL BE PERMITTED.
  4. ANY PERSON FOUND SUITABLE BY THE COMMISSION MAY BE ISSUED A LICENSE
AS AN OPERATOR OR SIGNIFICANT VENDOR PURSUANT TO THIS ARTICLE. IN DETER-
MINING SUITABILITY, THE COMMISSION SHALL CONSIDER THOSE FACTORS IT DEEMS
RELEVANT IN ITS DISCRETION, INCLUDING BUT NOT LIMITED TO:
  (A)  WHETHER  THE APPLICANT IS A PERSON OF GOOD CHARACTER, HONESTY AND
INTEGRITY;
  (B) WHETHER THE APPLICANT IS A PERSON WHOSE PRIOR ACTIVITIES, CRIMINAL
RECORD, IF ANY, REPUTATION, HABITS AND ASSOCIATIONS DO NOT:
  (I) POSE A THREAT TO THE PUBLIC INTEREST OR  TO  THE  EFFECTIVE  REGU-
LATION AND CONTROL OF INTERACTIVE GAMING; OR
  (II)  CREATE  OR  ENHANCE THE DANGERS OF UNSUITABLE, UNFAIR OR ILLEGAL
PRACTICES, METHODS AND ACTIVITIES IN THE CONDUCT OF  INTERACTIVE  GAMING
OR  IN  THE CARRYING ON OF THE BUSINESS AND FINANCIAL ARRANGEMENTS INCI-
DENTAL TO SUCH GAMING;
  (C) WHETHER THE APPLICANT IS CAPABLE OF  AND  LIKELY  TO  CONDUCT  THE
ACTIVITIES  FOR  WHICH  THE APPLICANT IS LICENSED IN ACCORDANCE WITH THE
PROVISIONS OF THIS ARTICLE, ANY REGULATIONS PRESCRIBED UNDER THIS  ARTI-
CLE AND ALL OTHER APPLICABLE LAWS;
  (D)  WHETHER  THE  APPLICANT HAS OR GUARANTEES ACQUISITION OF ADEQUATE
BUSINESS COMPETENCE AND EXPERIENCE IN THE OPERATION OF  LICENSED  GAMING
OR  OF  INTERACTIVE  GAMING  IN THIS STATE OR IN A STATE WITH COMPARABLE
LICENSING REQUIREMENTS;
  (E) WHETHER THE APPLICANT HAS OR WILL OBTAIN SUFFICIENT FINANCING  FOR
THE NATURE OF THE PROPOSED OPERATION AND FROM A SUITABLE SOURCE; AND
  (F)  WHETHER  THE  APPLICANT HAS DISCLOSED TO THE COMMISSION ALL KNOWN
AFFILIATIONS OR RELATIONSHIPS, WHETHER DIRECT OR INDIRECT, WITH  PERSONS
AND ASSETS OF PERSONS DESCRIBED BY SUBDIVISION THREE OF SECTION FOURTEEN
HUNDRED FOUR OF THIS ARTICLE.
  5. THE COMMISSION FURTHER SHALL DEVELOP STANDARDS BY WHICH TO EVALUATE
AND  APPROVE  INTERACTIVE  GAMING  PLATFORMS  FOR  USE  WITH INTERACTIVE
GAMING. INTERACTIVE GAMING PLATFORMS MUST BE APPROVED BY THE  COMMISSION
BEFORE  BEING USED BY A LICENSEE OR SIGNIFICANT VENDOR TO CONDUCT INTER-
ACTIVE GAMING IN THIS STATE.
  6. THE COMMISSION SHALL REQUIRE ALL LICENSEES TO PAY A ONE-TIME FEE OF
TEN MILLION DOLLARS.
  7. LICENSES ISSUED BY THE COMMISSION SHALL REMAIN IN  EFFECT  FOR  TEN
YEARS.
  8.  THE  COMMISSION,  BY  REGULATION, MAY AUTHORIZE AND PROMULGATE ANY
RULES NECESSARY TO IMPLEMENT AGREEMENTS WITH OTHER STATES, OR AUTHORIZED
AGENCIES THEREOF: (A) TO ENABLE PATRONS IN THOSE STATES  TO  PARTICIPATE
IN  INTERACTIVE GAMING OFFERED BY LICENSEES UNDER THIS ARTICLE OR (B) TO
ENABLE PATRONS IN  THIS  STATE  TO  PARTICIPATE  IN  INTERACTIVE  GAMING
OFFERED BY LICENSEES UNDER THE LAWS OF THOSE OTHER STATES, PROVIDED THAT
SUCH  OTHER STATE OR AUTHORIZED AGENCY APPLIES SUITABILITY STANDARDS AND
REVIEW MATERIALLY  CONSISTENT  WITH  THE  PROVISIONS  OF  THIS  ARTICLE,
INCLUDING  BUT  NOT  LIMITED  TO THE REQUIREMENTS SET OUT IN SUBDIVISION
THREE OF SECTION FOURTEEN HUNDRED FOUR OF THIS ARTICLE.
  9. ANY REGULATIONS ADOPTED  PURSUANT  TO  SUBDIVISION  EIGHT  OF  THIS
SECTION MUST SET FORTH PROVISIONS THAT ADDRESS:
  (A)  ANY  ARRANGEMENTS TO SHARE REVENUE BETWEEN NEW YORK AND ANY OTHER
STATE OR AGENCY WITHIN ANOTHER STATE; AND

A. 9509                             6

  (B) ARRANGEMENTS TO ENSURE THE INTEGRITY OF INTERACTIVE GAMING OFFERED
PURSUANT TO ANY SUCH AGREEMENT AND THE PROTECTION OF PATRONS LOCATED  IN
THIS STATE.
  10. THE COMMISSION MAY DELEGATE ITS RESPONSIBILITIES TO ADMINISTER THE
PROVISIONS  OF  THIS ARTICLE TO THE DIVISION, AS IT SEES FIT, EXCEPT FOR
ITS RESPONSIBILITIES TO APPROVE LICENSES AND TO CONDUCT THE  PROCEEDINGS
REQUIRED UNDER SUBDIVISION FOUR OF SECTION FOURTEEN HUNDRED FOUR OF THIS
ARTICLE.
  S  1403.  REQUIRED  SAFEGUARDS/MINIMUM STANDARDS. THE COMMISSION SHALL
REQUIRE LICENSEES TO IMPLEMENT MEASURES TO MEET THE STANDARDS SET OUT IN
THIS SECTION, ALONG WITH SUCH OTHER STANDARDS THAT THE COMMISSION IN ITS
DISCRETION MAY CHOOSE TO REQUIRE:
  1. APPROPRIATE  SAFEGUARDS  TO  ENSURE,  TO  A  REASONABLE  DEGREE  OF
CERTAINTY,  THAT PARTICIPANTS IN INTERACTIVE GAMING ARE NOT YOUNGER THAN
TWENTY-ONE YEARS OF AGE.
  2. APPROPRIATE  SAFEGUARDS  TO  ENSURE,  TO  A  REASONABLE  DEGREE  OF
CERTAINTY,  THAT  PARTICIPANTS  IN  INTERACTIVE  GAMING  ARE  PHYSICALLY
LOCATED WITHIN THE STATE OR SUCH OTHER JURISDICTION THAT THE  COMMISSION
HAS DETERMINED TO BE PERMISSIBLE.
  3.  APPROPRIATE  SAFEGUARDS  TO  PROTECT,  TO  A  REASONABLE DEGREE OF
CERTAINTY, THE PRIVACY AND ONLINE SECURITY OF PARTICIPANTS  IN  INTERAC-
TIVE GAMING.
  4.  APPROPRIATE  SAFEGUARDS  TO  ENSURE,  TO  A  REASONABLE  DEGREE OF
CERTAINTY, THAT THE INTERACTIVE GAMING  IS  FAIR  AND  HONEST  AND  THAT
APPROPRIATE  MEASURES  ARE  IN PLACE TO DETER, DETECT AND, TO THE EXTENT
REASONABLY POSSIBLE, TO PREVENT CHEATING, INCLUDING COLLUSION,  AND  USE
OF  CHEATING  DEVICES,  INCLUDING  USE  OF  SOFTWARE PROGRAMS (SOMETIMES
REFERRED TO AS "BOTS") THAT MAKE BETS OR WAGERS ACCORDING TO ALGORITHMS.
  5. APPROPRIATE SAFEGUARDS TO MINIMIZE COMPULSIVE GAMING AND TO PROVIDE
NOTICE TO PARTICIPANTS OF RESOURCES TO HELP PROBLEM GAMBLERS.
  6. APPROPRIATE SAFEGUARDS TO ENSURE PARTICIPANTS' FUNDS  ARE  HELD  IN
ACCOUNTS  SEGREGATED  FROM  THE  FUNDS  OF  LICENSEES  AND OTHERWISE ARE
PROTECTED FROM CORPORATE INSOLVENCY, FINANCIAL RISK OR CRIMINAL OR CIVIL
ACTIONS AGAINST THE LICENSEE.
  S 1404. SCOPE OF LICENSING REVIEW. 1. IN CONNECTION WITH  ANY  LICENSE
ISSUED  PURSUANT  TO  THIS  ARTICLE, THE LICENSEE, SIGNIFICANT VENDOR OR
APPLICANT SHALL IDENTIFY AND THE COMMISSION SHALL REVIEW THE SUITABILITY
OF SUCH LICENSEE'S, SIGNIFICANT VENDOR'S  OR  APPLICANT'S  OWNER,  CHIEF
EXECUTIVE  OFFICER,  CHIEF  FINANCIAL  OFFICER  AND ANY OTHER OFFICER OR
EMPLOYEE WHO THE COMMISSION  DEEMS  IS  SIGNIFICANTLY  INVOLVED  IN  THE
MANAGEMENT  OR  CONTROL OF THE LICENSEE, SIGNIFICANT VENDOR OR APPLICANT
OR OF THE INTERACTIVE GAMING PLATFORM.  "OWNER"  FOR  PURPOSES  OF  THIS
ARTICLE MEANS ANY PERSON WHO DIRECTLY OR INDIRECTLY HOLDS ANY BENEFICIAL
OR OWNERSHIP INTEREST IN THE APPLICANT OF FIVE PERCENT OR GREATER OR ANY
AMOUNT  OF  OWNERSHIP  THAT  THE COMMISSION DETERMINES TO BE SIGNIFICANT
OWNERSHIP OF THE LICENSEE, SIGNIFICANT VENDOR, OR APPLICANT.
  2. INSTITUTIONAL INVESTORS ARE SUBJECT TO THE PROVISIONS  SET  OUT  IN
THIS SECTION.
  (A) AN INSTITUTIONAL INVESTOR HOLDING UNDER TWENTY-FIVE PERCENT OF THE
EQUITY  SECURITIES  OF  A  LICENSEE'S OR SIGNIFICANT VENDOR'S (OR APPLI-
CANT'S) HOLDING OR INTERMEDIARY COMPANIES, SHALL BE GRANTED A WAIVER  OF
ANY INVESTIGATION OF SUITABILITY OR OTHER REQUIREMENT IF SUCH SECURITIES
ARE  THOSE  OF A CORPORATION, WHETHER PUBLICLY TRADED OR PRIVATELY HELD,
AND ITS HOLDINGS  OF  SUCH  SECURITIES  WERE  PURCHASED  FOR  INVESTMENT
PURPOSES  ONLY  AND IT FILES A CERTIFIED STATEMENT TO THE EFFECT THAT IT
HAS NO INTENTION OF INFLUENCING OR AFFECTING THE AFFAIRS OF THE  ISSUER,

A. 9509                             7

THE  LICENSEE (OR SIGNIFICANT VENDOR OR APPLICANT, AS APPLICABLE) OR ITS
HOLDING OR INTERMEDIARY COMPANIES; PROVIDED, HOWEVER, THAT IT  SHALL  BE
PERMITTED TO VOTE ON MATTERS PUT TO THE VOTE OF THE OUTSTANDING SECURITY
HOLDERS.  THE  COMMISSION  MAY  GRANT  SUCH A WAIVER TO AN INSTITUTIONAL
INVESTOR HOLDING A HIGHER PERCENTAGE OF SUCH SECURITIES UPON  A  SHOWING
OF GOOD CAUSE AND IF THE CONDITIONS SPECIFIED IN THIS PARAGRAPH ARE MET.
ANY INSTITUTIONAL INVESTOR GRANTED A WAIVER UNDER THIS SUBDIVISION WHICH
SUBSEQUENTLY DETERMINES TO INFLUENCE OR AFFECT THE AFFAIRS OF THE ISSUER
SHALL PROVIDE NOT LESS THAN THIRTY DAYS' NOTICE OF SUCH INTENT AND SHALL
FILE  WITH  THE  COMMISSION  A  REQUEST FOR DETERMINATION OF SUITABILITY
BEFORE TAKING ANY ACTION THAT MAY INFLUENCE OR AFFECT THE AFFAIRS OF THE
ISSUER; PROVIDED, HOWEVER, THAT IT SHALL BE PERMITTED TO VOTE ON MATTERS
PUT TO THE VOTE OF THE OUTSTANDING SECURITY HOLDERS. IF AN INSTITUTIONAL
INVESTOR CHANGES ITS INVESTMENT  INTENT,  OR  IF  THE  COMMISSION  FINDS
REASONABLE CAUSE TO BELIEVE THAT THE INSTITUTIONAL INVESTOR MAY BE FOUND
UNSUITABLE,  NO  ACTION  OTHER  THAN  DIVESTITURE SHALL BE TAKEN BY SUCH
INVESTOR WITH RESPECT TO ITS SECURITY  HOLDINGS  UNTIL  THERE  HAS  BEEN
COMPLIANCE  WITH  ANY  REQUIREMENTS ESTABLISHED BY THE COMMISSION, WHICH
MAY INCLUDE THE EXECUTION OF A TRUST AGREEMENT. THE LICENSEE (OR SIGNIF-
ICANT VENDOR OR APPLICANT, AS  APPLICABLE)  AND  ITS  RELEVANT  HOLDING,
INTERMEDIARY  OR  SUBSIDIARY  COMPANY  SHALL NOTIFY THE COMMISSION IMME-
DIATELY OF ANY INFORMATION ABOUT, OR ACTIONS OF, AN INSTITUTIONAL INVES-
TOR HOLDING ITS EQUITY SECURITIES WHERE SUCH INFORMATION OR  ACTION  MAY
IMPACT  UPON THE ELIGIBILITY OF SUCH INSTITUTIONAL INVESTOR FOR A WAIVER
PURSUANT TO THIS SUBDIVISION.
  (B) IF AT ANY TIME THE COMMISSION FINDS THAT AN INSTITUTIONAL INVESTOR
HOLDING ANY SECURITY OF A HOLDING OR INTERMEDIARY COMPANY OF A  LICENSEE
OR  SIGNIFICANT  VENDOR  OR  APPLICANT,  OR,  WHERE RELEVANT, OF ANOTHER
SUBSIDIARY COMPANY OF A HOLDING OR INTERMEDIARY COMPANY OF A LICENSEE OR
SIGNIFICANT VENDOR OR APPLICANT WHICH IS  RELATED  IN  ANY  WAY  TO  THE
FINANCING  OF  THE LICENSEE OR SIGNIFICANT VENDOR OR APPLICANT, FAILS TO
COMPLY WITH THE TERMS OF PARAGRAPH (A) OF THIS SUBDIVISION, OR IF AT ANY
TIME THE COMMISSION FINDS THAT, BY REASON OF THE EXTENT OR NATURE OF ITS
HOLDINGS, AN INSTITUTIONAL INVESTOR IS IN A POSITION TO EXERCISE SUCH  A
SUBSTANTIAL  IMPACT  UPON  THE  CONTROLLING  INTERESTS  OF A LICENSEE OR
SIGNIFICANT VENDOR OR APPLICANT THAT INVESTIGATION AND DETERMINATION  OF
SUITABILITY  OF  THE  INSTITUTIONAL INVESTOR IS NECESSARY TO PROTECT THE
PUBLIC INTEREST, THE COMMISSION MAY TAKE ANY NECESSARY ACTION  OTHERWISE
AUTHORIZED UNDER THIS ARTICLE TO PROTECT THE PUBLIC INTEREST.
  (C)  FOR  PURPOSES  OF THIS SECTION, AN "INSTITUTIONAL INVESTOR" SHALL
MEAN ANY RETIREMENT FUND ADMINISTERED BY A PUBLIC AGENCY FOR THE  EXCLU-
SIVE  BENEFIT  OF  FEDERAL, STATE, OR LOCAL PUBLIC EMPLOYEES; INVESTMENT
COMPANY REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940 (15 U.S.C. S
80A-1 ET SEQ.); COLLECTIVE INVESTMENT TRUST  ORGANIZED  BY  BANKS  UNDER
PART  NINE  OF  THE RULES OF THE COMPTROLLER OF THE CURRENCY; CLOSED END
INVESTMENT TRUST; CHARTERED OR LICENSED LIFE INSURANCE COMPANY OR  PROP-
ERTY  AND  CASUALTY  INSURANCE  COMPANY;  BANKING AND OTHER CHARTERED OR
LICENSED LENDING INSTITUTION; INVESTMENT ADVISOR  REGISTERED  UNDER  THE
INVESTMENT  ADVISORS  ACT  OF 1940 (15 U.S.C. S 80B-I ET SEQ.); AND SUCH
OTHER PERSONS AS THE COMMISSION MAY  DETERMINE  FOR  REASONS  CONSISTENT
WITH THE PUBLIC INTEREST.
  3. THE COMMISSION SHALL NOT ISSUE A LICENSE TO OR OTHERWISE FIND SUIT-
ABLE ANY PROSPECTIVE LICENSEE OR SIGNIFICANT VENDOR WHO:
  (A)  HAS  AT ANY TIME, EITHER DIRECTLY, OR THROUGH ANOTHER PERSON WHOM
IT OWNED, IN WHOLE OR IN SIGNIFICANT PART, OR CONTROLLED:

A. 9509                             8

  (I) KNOWINGLY AND WILLFULLY  ACCEPTED  OR  MADE  AVAILABLE  WAGERS  ON
INTERACTIVE  GAMING (INCLUDING POKER) FROM PERSONS LOCATED IN THE UNITED
STATES AFTER DECEMBER THIRTY-FIRST, TWO THOUSAND SIX, UNLESS SUCH WAGERS
WERE AFFIRMATIVELY AUTHORIZED BY LAW OF THE UNITED  STATES  OR  OF  EACH
STATE IN WHICH PERSONS MAKING SUCH WAGER WERE LOCATED; OR
  (II) KNOWINGLY FACILITATED OR OTHERWISE PROVIDED SERVICES WITH RESPECT
TO INTERACTIVE GAMING (INCLUDING POKER) INVOLVING PERSONS LOCATED IN THE
UNITED  STATES  FOR A PERSON DESCRIBED IN SUBPARAGRAPH (I) OF THIS PARA-
GRAPH AND ACTED WITH KNOWLEDGE OF THE FACT THAT SUCH WAGERS OR  INTERAC-
TIVE GAMING INVOLVED PERSONS LOCATED IN THE UNITED STATES.
  (B)  HAS PURCHASED OR ACQUIRED, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN
SIGNIFICANT PART, A PERSON DESCRIBED IN PARAGRAPH (A) OF  THIS  SUBDIVI-
SION  OR  WILL  USE  THAT  PERSON  OR A COVERED ASSET IN CONNECTION WITH
INTERACTIVE GAMING LICENSED PURSUANT TO THIS ARTICLE.
  4. A PROSPECTIVE LICENSEE OR SIGNIFICANT VENDOR MAY APPEAL A  DETERMI-
NATION  BY  THE  COMMISSION  THAT  IT IS WITHIN THE SCOPE OF SUBDIVISION
THREE OF THIS SECTION ONLY IN ACCORDANCE WITH THE  PROCEDURES  SPECIFIED
IN THIS SUBDIVISION.
  (A)  THE  COMMISSION  SHALL AFFORD THE PROSPECTIVE LICENSEE OR SIGNIF-
ICANT VENDOR A HEARING AT WHICH SUCH  PERSON  MAY  PROVIDE  EVIDENCE  TO
SUPPORT  THE  BASES ON WHICH IT SEEKS RELIEF. THE COMMISSION SHALL WAIVE
THE PROHIBITION IF THE PROSPECTIVE LICENSEE OR SIGNIFICANT VENDOR DEMON-
STRATES BY CLEAR AND CONVINCING EVIDENCE THAT ITS CONDUCT IN  CONNECTION
WITH  INTERACTIVE  GAMING  AND  WAGERS  INVOLVING PERSONS LOCATED IN THE
UNITED STATES WAS NOT UNLAWFUL AND,  IF  APPLICABLE,  THAT  THE  COVERED
ASSETS  TO  BE  USED OR THAT ARE BEING USED BY SUCH PERSON IN CONNECTION
WITH INTERACTIVE GAMING LICENSED PURSUANT TO THIS ARTICLE WERE NOT  USED
IN A MANNER THAT WAS UNLAWFUL. THE DETERMINATION OF THE COMMISSION SHALL
BE  MADE  WITHOUT REGARD TO WHETHER THE PERSON HAS BEEN PROSECUTED UNDER
THE  CRIMINAL LAWS OF ANY STATE, THE UNITED STATES OR OTHER JURISDICTION
AND THE PROCEEDING TERMINATED IN A MANNER OTHER THAN WITH A  CONVICTION.
IF  THE  PROHIBITION  IS WAIVED, THE PROSPECTIVE LICENSEE OR SIGNIFICANT
VENDOR STILL MUST SATISFY ALL OTHERWISE APPLICABLE LICENSE AND SUITABIL-
ITY REQUIREMENTS.
  (B) THE COMMISSION SHALL PRESIDE OVER THE HEARING  AND  SHALL  ACT  AS
FINDER OF FACT ENTITLED TO EVALUATE THE CREDIBILITY OF THE WITNESSES AND
PERSUASIVENESS  OF  THE  EVIDENCE,  PURSUANT  TO WHATEVER PROCEDURES THE
COMMISSIONER DETERMINES TO BE APPROPRIATE.
  S 1405. STATE TAX. LICENSEES ENGAGED IN  THE  BUSINESS  OF  CONDUCTING
INTERACTIVE  GAMING  PURSUANT  TO ARTICLE THIRTEEN OF THIS CHAPTER SHALL
PAY A PRIVILEGE TAX BASED ON THE  LICENSEE'S  INTERACTIVE  GAMING  GROSS
REVENUE AT A FIFTEEN PERCENT RATE.
  S  2.  Subdivision  1 of section 225.00 of the penal law is amended to
read as follows:
  1. "Contest of chance" means  any  contest,  game,  gaming  scheme  or
gaming  device  in  which  the  outcome  depends  [in a material degree]
PREDOMINANTLY upon an element of chance, notwithstanding that  skill  of
the contestants may also be a factor therein.
  S  3.  The penal law is amended by adding a new section 225.36 to read
as follows:
S 225.36. INTERACTIVE GAMING OFFENSES AND EXCEPTIONS.
  1. A PERSON IS GUILTY OF AN INTERACTIVE GAMING OFFENSE WHEN HE OR  SHE
KNOWINGLY  AND WILLFULLY OFFERS UNLICENSED INTERACTIVE GAMING TO PERSONS
IN THIS STATE, OR THE KNOWING AND WILLFUL  PROVISION  OF  SERVICES  WITH
RESPECT THERETO.

A. 9509                             9

  2.  LICENSED  INTERACTIVE  GAMING  ACTIVITIES  UNDER  SECTION FOURTEEN
HUNDRED TWO OF THE RACING, PARI-MUTUEL WAGERING AND BREEDING  LAW  SHALL
NOT BE A GAMBLING OFFENSE UNDER THIS ARTICLE.
  3.  A PERSON OFFERING UNLICENSED INTERACTIVE GAMING TO PERSONS IN THIS
STATE SHALL BE LIABLE FOR  ALL  TAXES  SET  FORTH  IN  SECTION  FOURTEEN
HUNDRED FIVE OF THE RACING, PARI-MUTUEL WAGERING AND BREEDING LAW IN THE
SAME  MANNER  AND  AMOUNTS  AS  IF  SUCH  PERSON WERE A LICENSEE. TIMELY
PAYMENT OF SUCH TAXES SHALL NOT CONSTITUTE A DEFENSE TO ANY  PROSECUTION
OR OTHER PROCEEDING IN CONNECTION WITH THE INTERACTIVE GAMING EXCEPT FOR
A PROSECUTION OR OTHER PROCEEDING ALLEGING FAILURE TO MAKE SUCH PAYMENT.
  S 4. This act shall take effect immediately.