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The U.S. gaming industry continues to face competition from unregulated skill-game machines and sweepstakes casinos, but what tackling the grey market involves differs from regulator to regulator.
David Murley, deputy director of the Michigan Gaming Control Board (MGCB), said in Michigan sweepstakes-based online casinos and sports-betting platforms have defined the grey market.
In January, the MGCB announced it had sent cease-and-desist letters to PredictionStrike, Stake.us and VGW LuckyLand Inc., operator of leading sweepstakes casinos including Chumba Casino and LuckyLand Slots.
The notices were sent between October and December last year, and the MGCB has confirmed that all three companies have since taken steps to prevent Michigan residents from using their websites.
“Our thought was instead of worrying about the perfect solution that probably as a state we are never going to get, let’s take our victories where we can,” Murley said of the decision to target online sweepstakes sites.
“Look, it may be illegal for them to operate in Michigan but maybe it is okay for them to operate in a different state,” Murley said. “Well, the last thing they need is a declaration that they were involved in criminal gambling.”
“That cuts down their options in the future, likewise with the vendors,” he added.
Murley discussed the MGCB’s recent effort to tackle grey-market offerings in Michigan during a panel discussion on Monday (March 4) at the Gaming Law, Compliance and Integrity Bootcamp hosted by Seton Hall Law School in Newark, New Jersey.
Murley was joined by Kevin O'Toole, executive director of the Pennsylvania Gaming Control Board; Cathy Judd-Stein, chair of the Massachusetts Gaming Commission; Lou Rogacki, deputy director of the New Jersey Division of Gaming Enforcement; and Dan Gerber, general counsel with the Illinois Gaming Board (IGB).
Murley admitted that Michigan's ability to deal with sweepstakes-based online casinos and sports betting was made easier by the broad authority granted to the MGCB and other law enforcement by the state’s gaming law.
“Our act says any gambling done online that’s not specifically exempt, like internet lottery, is against the law,” Murley said. “It is a crime to do it and so generally speaking we do a lot of the leg work to prove these cases and then work with the attorney general.”
“It has worked very well,” he added. “I think you’ll see more of it.”
Rogacki said jurisdictional issues are pivotal in enforcement against unregulated operations, which can either involve state gaming authorities or a criminal enforcement agency.
In New Jersey, for a state criminal agency to get involved in a case the illegal gambling operator needs to be located in the state.
“When I’m looking at PredictionStrike or any of these companies, all I need to know is that there are players in the state of New Jersey that they are taking wagers from, whether they want to claim it is skill-based,” he said of regulatory action.
Regulators can send a cease-and-desist letter to an unlicensed operator saying that to conduct internet gambling in New Jersey they need to contract with a casino as per the state's 2013 iGaming law.
Where enforcement becomes tougher, Rogacki said, is if the operator does not comply with the cease-and-desist letter, especially if they are not located in New Jersey.
As for the Illinois Gaming Board, Gerber said the regulator has more limited powers and is unable to issue cease-and-desist letters to tackle illegal online casinos or grey-market gambling.
“We don’t have a broad statute,” Gerber explained. “Our enabling statute covers three specific types of gambling: video gaming or distributed gaming, sports betting and casino gambling.”
“We don’t even have an enforcement mechanism where we could get them to pay attention to us, but what we are seeing (with skill-based gaming machines) is that our criminal code is broad enough that being a skill-based operator is not a defense for gambling,” he said.
Gerber said the IGB has recently seen skill-game machines come into the Illinois market as a “substitute for our legitimate distributed gaming market.”
The Illinois regulator also noted the series of lawsuits involving unregulated gaming operations, such as against skill-game machine manufacturers in Pennsylvania.
“This litigation is all designed to seek clarity,” Gerber said.
“I would love more litigation on these issues because, at the end of the day, that’s how we are going to get clarity, whether it is, 'these are legal and outside of your purview, let them operate', or whether it is going to be, these are illegal.”
“We can start working with people to get rid of them as opposed to this grey area we are in now,” he added.
