Gaming, Gambling & Licensing 2018 Comparisons

Last Updated March 07, 2018

Contributed By Jones Walker LLP

Law and Practice

Authors



Jones Walker LLP 's Gaming Practice offers full-spectrum legal, dispute resolution, government relations and legislative advocacy services to clients in every sector of the gaming industry. To help owners, operators, investors, lenders, tribes and charitable organisations minimise risks and maximise emerging opportunities, lawyers draw on our industry leadership, effective relationships with government regulators and tax authorities across the south-eastern United States, and the firm's roster of highly experienced corporate, regulatory, finance and trial attorneys. The team provides value-added solutions to almost every business and legal challenge, from licensing and financing to compliance and litigation.

Gambling is prohibited by the Alabama Constitution. However, certain activities are exempt from this general prohibition, including charitable bingo contests and pari-mutuel wagering on horse and dog races. Charitable bingo operations are regulated by local authorities as defined in various constitutional amendments. These local authorities are generally either the county sheriff or the county commission. With respect to pari-mutuel wagering, there are four pari-mutuel locations and each is governed by its own local racing commission. The local racing commissions are responsible for permitting and overseeing the facilities.

Section 13A-12-20, et seq., of the Code of Alabama defines gambling and gambling devices and provides the criminal statutes relative to gambling in Alabama. Under Alabama law, it is illegal both to conduct gambling operations and to participate in gambling operations. The possession of gambling devices and gambling records is prohibited, and such devices are subject to forfeiture. Slot machines are specifically prohibited; under Section 13A-12-20(10) of the Code of Alabama, the definition of a slot machine includes any device that is “readily adaptable or convertible” to a slot machine, even if it is not working. Additionally, any vehicles used to transport illegal gambling devices, and any money obtained through illegal gambling activities, are subject to forfeiture.

Illegal gambling activity includes all forms of gambling activity, including non-house banked card games. A player is subject to criminal charges for participating in illegal gambling activity, but may assert a defence to a charge of simple gambling if they were engaged in a social game in a private place. See Ala. Code § 13A-12-21(b).

Section 65 of the Official Recompilation of the Constitution of Alabama of 1901 prohibits the Alabama Legislature from passing any laws to authorise lotteries or gift enterprises, and requires the Legislature to pass laws “to prohibit the sale in this state of lottery or gift enterprise tickets, or tickets in any scheme in the nature of a lottery.” Section 65 has been interpreted broadly to prohibit all forms of lottery and gambling schemes.

Charitable Bingo

In order to avoid the constitutional prohibition against gambling and allow for charitable bingo operations, 18 constitutional amendments have been passed. These constitutional amendments are not uniform. Each amendment concerns a specific county or municipality within Alabama, empowering a specific local official or governing body with the responsibility to license and regulate the charitable bingo activity in that county. The local jurisdictions, and their corresponding amendments, are as follows:

  • Calhoun County – Official Recompilation of the Constitution of Alabama of 1901, Local Amendments, Calhoun County § 1;
  • Covington County – Official Recompilation of the Constitution of Alabama of 1901, Local Amendments, Covington County § 1;
  • Etowah County – Official Recompilation of the Constitution of Alabama of 1901, Local Amendments, Etowah County § 2;
  • Greene County – Official Recompilation of the Constitution of Alabama of 1901, Local Amendments, Greene County § 1;
  • Houston County – Official Recompilation of the Constitution of Alabama of 1901, Local Amendments, Houston County § 1;
  • Jefferson County – Official Recompilation of the Constitution of Alabama of 1901, Local Amendments, Jefferson County § 2;
  • Limestone County – Official Recompilation of the Constitution of Alabama of 1901, Local Amendments, Limestone County § 1;
  • Macon County – Official Recompilation of the Constitution of Alabama of 1901, Local Amendments, Macon County § 1;
  • Madison County – Official Recompilation of the Constitution of Alabama of 1901, Local Amendments, Madison County § 1;
  • Mobile County – Official Recompilation of the Constitution of Alabama of 1901, Local Amendments, Mobile County § 1;
  • Montgomery County – Official Recompilation of the Constitution of Alabama of 1901, Local Amendments, Montgomery County § 1;
  • Morgan County – Official Recompilation of the Constitution of Alabama of 1901, Local Amendments, Morgan County § 1;
  • Russell County – Official Recompilation of the Constitution of Alabama of 1901, Local Amendments, Russell County § 1;
  • St Clair County – Official Recompilation of the Constitution of Alabama of 1901, Local Amendments, St. Clair County § 2;
  • Walker County – Official Recompilation of the Constitution of Alabama of 1901, Local Amendments, Walker County § 1;
  • City of Jasper – Official Recompilation of the Constitution of Alabama of 1901, Local Amendments, Walker County § 12;
  • Town of White Hall – Official Recompilation of the Constitution of Alabama of 1901, Local Amendments, Lowndes County § 3; and
  • Town of White Hall – Official Recompilation of the Constitution of Alabama of 1901, Local Amendments, Lowndes County § 4 (this section has been declared void as improperly ratified by the Lowndes County Circuit Court).

In addition to the aforementioned local amendments, the Alabama Legislature has passed local legislation in support of some of the constitutional amendments. These local laws further define, clarify and restrict charitable bingo operations in those specific jurisdictions. The state is still in the process of codifying the local laws for each county. The counties that have been completed are as follows:

  • Calhoun County – Section 45-8-150, et seq., Code of Alabama;
  • Covington County – Section 45-20-150, et seq., Code of Alabama;
  • Etwoah County – Section 45-28-150, et seq., Code of Alabama;
  • Greene County – Section 45-32-150, et seq., Code of Alabama; and
  • Houston County – Section 45-35-150, et seq., Code of Alabama.

Recently, attempts have been made to test the scope of charitable bingo contests offered in some of the locations. For example, several jurisdictions have attempted to offer bingo in an electronic format, similar to the electronic bingo devices utilised in many Class II Native American facilities. In 2009,the Alabama Supreme Court issued its opinion in Barber v Cornerstone Community Outreach, Inc., 42 So. 3d 65, 86 (Ala. 2009), which restricted the characteristics of bingo to include the following:

  • Each player uses one or more cards with spaces arranged in five columns and five rows, with an alphanumeric or similar designation assigned to each space.
  • Alphanumeric or similar designations are randomly drawn and announced one by one.
  • In order to play, each player must pay attention to the values announced; if one of the values matches a value on one or more of the player’s cards, the player must physically act by marking his or her card accordingly.
  • A player can fail to pay proper attention or to properly mark his or her card, and thereby miss an opportunity to be declared a winner.
  • A player must recognise that his or her card has a “bingo,” ie a predetermined pattern of matching values, and in turn announce to other players and the announcer that this is the case before any other player does so.
  • The game of bingo contemplates a group activity in which multiple players compete against each other to be the first to properly mark a card with the predetermined winning pattern and announce that fact.

This test applies to whether bingo may be played on an electronic device under the various constitutional amendments. 

Pari-Mutuel Wagering

In 1971, the Alabama Supreme Court determined that pari-mutuel wagering on horse and dog races did not violate the constitutional ban on lotteries. See Opinion of the Justices No. 205, 251 So. 2d 751 (Ala. 1971). Following this declaration, the state passed laws establishing the parameters for the creation of local racing commissions, horse and dog racing facilities, and the limitations for conducting pari-mutuel wagering activities. These laws have been codified into Section 11-65-1, et seq., of the Code of Alabama.

Games of Skill

Section 13A-12-76 of the Code of Alabama regulates the operation and transportation of devices used to play skill-based games, referred to as “bona fide coin operated amusement machines.” This section is commonly referred to as the “Chuck-E-Cheese Law.” Under this section, only games in which skill predominates over chance may be operated. Further, prizes must be limited to non-cash merchandise with a wholesale value of not more than USD5 or to free replays, not to exceed 25 free replays.

Section 13A-12-20, et seq., of the Code of Alabama defines gambling and gambling devices and provides the criminal statutes relative to gambling in Alabama. Under Alabama law, it is illegal both to conduct gambling operations and to participate in gambling operations. The possession of gambling devices and gambling records is prohibited, and such devices are subject to forfeiture. Slot machines are specifically prohibited; under Section 13A-12-20(10) of the Code of Alabama, the definition of a slot machine includes any device that is “readily adaptable or convertible” to a slot machine, even if it is not working. Additionally, any vehicles used to transport illegal gambling devices, and any money obtained through illegal gambling activities, are subject to forfeiture.

Illegal gambling activity includes all forms of gambling activity, including non-house banked card games. A player is subject to criminal charges for participating in illegal gambling activity, but may assert a defence to a charge of simple gambling if they were engaged in a social game in a private place. See Ala. Code § 13A-12-21(b).

Limiting the balance of the responses to pari-mutuel wagering on horse and dog races and charitable bingo contests, the following licensing standards apply in the State of Alabama.

With respect to pari-mutuel wagering, operators must obtain a licence to conduct horse or dog racing and must obtain a separate licence to operate a pari-mutuel wagering operation. Apart from operators, permits issued by local racing commissions are required for any person, firm or corporation seeking to enter a racetrack enclosure, other than as a spectator. This includes horse owners, greyhound owners, trainers, jockeys, exercise boys, groomers, stable foremen, kennel foremen, valets, veterinarians, agents, pari-mutuel employees, concessionaires or employees thereof, or employees of the operator. To obtain these permits, the person, firm or corporation must submit an application to the appropriate local racing commission, on forms approved by that commission. Each local commission is allowed to charge a fee for filing the application in an amount up to USD1,000 per year for corporations or firms, and up to USD50 per year for individuals. Additionally, stewards and judges of races must obtain licences from the local racing commission.

With respect to charitable bingo, each bingo operator must obtain a licence or permit from a local jurisdiction in order to conduct a bingo contest within that jurisdiction. The requirements vary by jurisdiction.

There are four types of licences for pari-mutuel facilities: a horse racing facility licence; a dog racing facility licence; an operator’s licence for pari-mutuel wagering on horse races; and an operator’s licence for pari-mutuel wagering on dog races.

To obtain a facility licence, prospective licensees are required to submit an application to the appropriate local racing commission. Under Section 11-65-15 of the Code of Alabama, the application fee is USD15,000, and the applicant is required to disclose the following information:

  • The name and address of such person; if a corporation, the state of its incorporation and the full name and address of each officer and director thereof; if a foreign corporation, whether it is qualified to do business in the state; and if a partnership or joint venture, the name and address of each general partner thereof;
  • The name, and every address for the period of five years immediately preceding the date of such application, of each stockholder or member of such corporation, or each general partner of such partnership or joint venture, and of each person who has contracted for a financial interest in the applicant or the horse racing facility to be licensed, whether such interest will be an ownership or a security interest, and the nature and value of such interest, and the name and address of each person who has agreed to lend money to the applicant; provided that if the applicant proposes to arrange further financing, subsequent to the award of a horse racing facility licence, through a sale of stock, partnership interests or other equity interests, the issuance of debt securities, the entering into of financing leases, or otherwise borrowing money, then, in such a case, such commission may grant a horse racing facility licence which sets forth conditions to be met in arranging such further financing, or which reserves to such commission the right to approve any or all aspects of such further financing;
  • Such information as the commission deems appropriate regarding the character and responsibility of an applicant and the members, partners, stockholders, officers and directors of the applicant;
  • With respect to any racing facility that is not at the time subject to a horse racing facility licence, the location and description of the horse racing facility for which an applicant proposes to obtain a licence; provided that the commission may require such information about such facility and the location thereof, including preliminary architectural plans, as it deems necessary and appropriate to determine whether such facility is suitable and complies with the standards established by the commission pursuant to this chapter, and whether the conduct of horse racing and pari-mutuel wagering thereon at such location would be in the best interests of the people of the state;
  • Such information relating to the financial responsibility of an applicant as the commission deems appropriate;
  • If the horse racing facility to be licensed, or any part thereof, is to be leased or the use thereof to be made available to any person other than the applicant under a contract or other legal arrangement, the terms of such lease, contract or other legal arrangement; and
  • Any other information which the commission in its discretion deems appropriate.

To obtain an operator’s licence to conduct pari-mutuel wagering operations, prospective licensees are required to submit an application to the appropriate local racing commission. Under Section § 11-65-18 of the Code of Alabama, the application fee is USD10,000, and the applicant is required to disclose the following information:

  • A statement identifying the kind of licence for which an application is being made, whether for horse racing and pari-mutuel wagering thereon or greyhound racing and pari-mutuel wagering thereon, which statement may simply result from the use of the application form prescribed by the commission for the licence in question;
  • The name and address of the applicant; if a corporation, the state of its incorporation and the full name and address of each officer and director thereof; if a foreign corporation, whether it is qualified to do business in the state; and if a partnership or joint venture, the name and address of each general partner thereof;
  • The name, and every address for the period of five years immediately preceding the date of such application, of each stockholder or member of such corporation, or each general partner of such partnership or joint venture, and of each person who has contracted for a financial interest in the applicant or the racing facility where the racing and wagering activities of the applicant will be conducted, whether such interest will be an ownership or a security interest, and the nature and value of such interest, and the name and address of each person who has agreed to lend money to the applicant; provided that if the applicant proposes to arrange further financing, subsequent to the award of an operator’s licence, through a sale of stock, partnership interests, or other equity interest, the issuance of debt securities, the entering into of financing leases, or otherwise borrowing money, then, in such case, the commission may grant an operator’s licence which sets forth conditions to be met in arranging such further financing or which reserves to such commission the right to approve any or all aspects of such further financing;
  • Such information as the commission deems appropriate regarding the character and responsibility of the applicant and the members, partners, stockholders, officers and directors of the applicant;
  • The location and description of the racing facility where the applicant proposes to conduct the activity covered by the operator’s licence for which an application is being made; provided that the commission may require such information about such a facility and the location thereof, including preliminary architectural plans, as it deems necessary and appropriate to determine whether such facility is suitable and complies with the standards established by the commission pursuant to this chapter, and whether the conduct of horse racing and pari-mutuel wagering thereon or greyhound racing and pari-mutuel wagering thereon, as the case may be, at such a location would be in the best interests of the people of the state;
  • Such information relating to the business experience and financial responsibility of the applicant as the commission deems appropriate; and
  • Any other information which the commission in its discretion deems appropriate.

With respect to charitable bingo operations, each local jurisdiction in which charitable bingo contests are permitted has specific requirements for obtaining a licence.

With respect to pari-mutuel wagering, the disclosure requirements for obtaining a licence are set forth above, under 3.2 Applying for a Gaming Licence.

With respect to charitable bingo operations, each local jurisdiction in which charitable bingo is permitted has specific disclosure requirements for licensure.

There are no specific limits on the number of pari-mutuel facility, operator licences or charitable bingo licences available in Alabama.

However, with respect to pari-mutuel wagering on horse and dog racing, a local racing commission may not issue a second licence to operate a pari-mutuel wagering facility without the consent of the existing licensee (seeAla. Code § 11-65-20(f)).

There are no broad social responsibility requirements in Alabama.

Operators must obtain licences to conduct horse or dog racing and must obtain separate licences to conduct pari-mutuel wagering operations. Apart from operators, permits issued by local racing commissions are required for any person, firm or corporation seeking to enter a racetrack enclosure, other than as a spectator. This includes horse owners, greyhound owners, trainers, jockeys, exercise boys, groomers, stable foremen, kennel foremen, valets, veterinarians, agents, pari-mutuel employees, concessionaires or employees thereof, or employees of the operator. To obtain these permits, the person, firm or corporation must submit an application from the appropriate local racing commission, on forms approved by that commission. Each local commission is allowed to charge a fee for filing the application in an amount up to USD1,000 per year for corporations or firms, and up to USD50 per year for individuals. Additionally, stewards and judges of races must obtain a licence from the local racing commission.

The licensing of employees of charitable bingo operators is governed by the laws of the local jurisdiction in which the bingo contest is set to take place. Most jurisdictions require charitable bingo operators to, at the very least, disclose the names and addresses of the officers of the licensee — if the licensee is a corporation, association or other similar legal entity.

As noted above, Alabama law establishes state licensing requirements for operators to conduct onsite pari-mutuel wagering and to conduct onsite and simulcast horse and dog races. Licensees are restricted to conducting pari-mutuel activities only at the facility authorised under a licence. All offsite activities are permitted.

Bingo licences and permits, and the restrictions placed thereupon, vary from jurisdiction to jurisdiction. Generally, the restrictions on the conduct of charitable bingo include date, time and location restrictions on operations; who is permitted to conduct the bingo operations; and what percentage of the funds must be submitted to the charitable organisation.

Licences to operate pari-mutuel facilities and pari-mutuel wagering have terms of 20 years, with the local racing commission reviewing each licence annually. These licences may be suspended or revoked, or a fine of up to USD5,000 may be levied for any violation of a local racing commission’s regulations. Any suspension, revocation or fine requires a hearing before the local commission.

Bingo licences and permits, and the terms thereof, vary from jurisdiction to jurisdiction.

With respect to pari-mutuel facilities, any person aggrieved by the refusal of a local racing commission to issue any licence or permit, or by the suspension or revocation of a licence or permit, the imposition of a fine, the disapproval of a contract, or any other action or failure of action by that commission, may appeal to the circuit court for the host county within 60 days. If such court finds that the action of the local commission – or its failure to take action – was arbitrary, unreasonable or contrary to law, it must order the issuance or reinstatement of such licence or permit, the abatement of such fine, the approval of such contract, or such other remedial action as it deems appropriate under the circumstances.

With respect to charitable bingo, decisions of local authorities regarding the conduct of bingo or the licensure or permitting of bingo operators are appealable to the circuit court for the host county.

Only pari-mutuel wagering on horse and dog races, charitable bingo contests and certain games of skill, defined above under 2.1 Regulating Types of Permissable Gaming Activities, are permitted in Alabama.

The rules for charitable bingo contests are specified by the local jurisdiction in which the bingo contest is set to take place. With respect to pari-mutuel wagering on horse and dog races, Section 11-65-28 sets forth the pertinent governing rules and regulations. Additional rules may be prescribed by local racing commissions. 

Alabama law establishes state licensing requirements for operators to conduct onsite pari-mutuel wagering and to conduct onsite and simulcast horse and dog races. Licensees are restricted to conducting pari-mutuel activities only at the facility authorised under the licence. Furthermore, no programs of horse racing and pari-mutuel wagering nor programs of greyhound racing and pari-mutuel wagering may commence on any Sunday or Christmas Day or Thanksgiving Day.

Bingo licences or permits vary from jurisdiction to jurisdiction. Generally, the restrictions include date, time and location restrictions on operations; who is permitted to conduct the bingo operations; and what percentage of the funds must be submitted to the charitable organisation.

There are few physical requirements under Alabama law. With respect to horse racing facilities, for example, a facility must only meet the following minimum standards:

  • The facility must provide a track racing surface of at least one mile;
  • The facility must be appropriate for the conduct of horse racing year-round and at night; and
  • The facility must be located within the boundaries of the local racing commission’s municipal jurisdiction or located on land in the host county and annexed to the sponsoring municipality prior to the commencement of racing activities.

With respect to illegal gambling, Section 13A-12-22 of the Code of Alabama makes it a Class A misdemeanour to “promote gambling” and to profit therefrom. Specifically, Section 13A-12-22 states that a person commits the crime of promoting gambling if he knowingly advances or profits from unlawful gambling activity.

However, with respect to charitable bingo operations in the local jurisdictions authorising the same, the regulations prescribed by the local jurisdictions contain varying positions on the permissible scope of advertising in the context of bingo. The general trend appears to be that licensees are permitted to advertise bingo as permitted and authorised by the local sheriff.

With respect to pari-mutuel wagering on horse and dog races, Section 11-65-20 of the Code of Alabama contains certain regulations on advertising that is prohibited within the jurisdictions of local racing commissions.

Alabama law does not contain any rules regarding the issuance of credit to participants.

Licensees retain the authority to exclude patrons from their establishments. For example, bingo licensees are required by law to prohibit minors from engaging in charitable bingo contests. The ability of a licensee to exclude other, non-minor patrons from an establishment is set forth in the rules and regulations prescribed by the local Alabama jurisdiction for the subject county.

With respect to charitable bingo contests, record-keeping requirements vary by local Alabama jurisdiction, but most counties require bingo licensees to maintain certain records for at least three years from the date on which the last bingo game is conducted. These records include an itemised list of the gross receipts for each session and an itemised list of all expenses, other than prizes paid during a bingo session, including the name of each person to whom any expenses are paid and a receipt for all expenses.

With respect to pari-mutuel wagering on horse and dog races, any record-keeping requirements that exist are promulgated separately by each local racing commission.

Most local jurisdictions require charitable bingo licensees to file the records discussed above in 5.1 Record Keeping Requirements with the local sheriff. Generally, the records for a calendar year must be filed on or before 15 April of the following year.

With respect to pari-mutuel wagering on horse and dog races, licensees are required to submit periodic reports to the appropriate local racing commission, as required by such commission, including, for example, reports respecting the amounts applied by licensees to provide purse money, and financial reports for such periods as the commission may require.

Most local jurisdictions in which charitable bingo is permitted have enacted laws and regulations governing the management of charitable bingo contests; such laws and regulations vary by jurisdiction.

With respect to pari-mutuel wagering on horse and dog races, local racing commissions retain the authority to promulgate rules and regulations, and to identify internal controls and procedures with which licensees must comply.

With respect to charitable bingo contests, the local jurisdictions in which bingo is authorised generally delegate enforcement authority to the local sheriff, who is generally required to regulate the holding, operation or conduct of bingo, including the method of play and selection of winners, and the type of equipment to be used.

With respect to pari-mutuel wagering on horse and dog races, local racing commissions are required to review each licensee’s performance and compliance with applicable laws and regulations, on an annual basis.

With respect to charitable bingo contests, the local jurisdictions in which bingo is authorised retain the authority to criminally sanction and impose fines on licensees who violate applicable laws.

With respect to pari-mutuel wagering on horse and dog races, local racing commissions have the authority to suspend or revoke a licence or fine a licensee up to USD5,000 if said licensee is not in compliance with the rules and regulations prescribed by that commission.

Pari-mutuel facilities are required to pay state wagering fees, commission wagering fees and racetrack admission fees. The state wagering fee for horse races is 1% of the horse racing handle, paid monthly to the Alabama Department of Revenue. The commission wagering fee is 2% of the horse racing handle to the extent the handle does not exceed USD150 million, and 4% for amounts over USD150 million for the calendar year. For dog racing, the greyhound wagering fee during the first ten years of operation is 2% of the greyhound racing handle for the first USD150 million, and 4% for amounts over USD150 million per calendar year. After ten years, the greyhound wagering fee changes to 2% of the greyhound racing handle for the first USD150 million, 6% for amounts between USD150 million and USD300 million, and 4% for the portion that exceeds USD300 million per calendar year. The racetrack admission fee is USD0.25 per person paying for admission to any daily performance.

There are no taxes on charitable bingo operations, as these operations are restricted to charitable entities.

Terminal/machine-based gaming is not permitted in Alabama.

Terminal/machine-based gaming is not permitted in Alabama.

There are no restrictions on licensees and employees in regards to participation in political activities or political contributions.

Several bills have been introduced during the current legislative session that seek to amend Alabama’s constitutional prohibition on lotteries. These bills seek to establish an Alabama Lottery to fund scholarships and to create an Alabama Lottery Corporation to implement and regulate such a lottery.

These bills appear to be dead for the current legislative session; and, if they are to be passed, will need to be introduced and passed in a special session.

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Law and Practice

Authors



Jones Walker LLP 's Gaming Practice offers full-spectrum legal, dispute resolution, government relations and legislative advocacy services to clients in every sector of the gaming industry. To help owners, operators, investors, lenders, tribes and charitable organisations minimise risks and maximise emerging opportunities, lawyers draw on our industry leadership, effective relationships with government regulators and tax authorities across the south-eastern United States, and the firm's roster of highly experienced corporate, regulatory, finance and trial attorneys. The team provides value-added solutions to almost every business and legal challenge, from licensing and financing to compliance and litigation.

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