OLR Bill Analysis

SB 1090

AN ACT CONCERNING GAMING.

SUMMARY:

This bill authorizes off-reservation casino gaming at up to three unspecified locations in Connecticut, subject to regulation by the Department of Consumer Protection (DCP), which regulates all gambling in the state, except gambling at the state's two casinos. Under the federal Indian Gaming Regulatory Act (IGRA), the Mashantucket Pequots and Mohegans currently operate the Foxwoods and Mohegan Sun casinos, respectively, on their reservations (see BACKGROUND).

The bill authorizes DCP to issue up to three licenses to the two tribes to jointly operate up to three off-reservation casinos, under a memorandum of understanding (MOU) executed between the attorney general and the tribes ( 2) (see BACKGROUND—Tribal-State Gaming Compacts).

The MOU must provide that the tribes, as a condition of licensure, will contribute annually a “specified” (1) amount of money to the Connecticut Council on Problem Gambling, (2) percentage of gross operating revenue to the host town, and (3) percentage of gross operating revenue to the state. Except for these provisions, the bill does not stipulate what the MOU must contain ( 3).

The location of any of the facilities is subject to approval by the legislative body of the host town, and only after the town holds a public hearing on the proposal ( 2).

The bill requires the casinos to indemnify and hold the state harmless against any actions, claims, or demands the state sustains or incurs as a consequence of issuing the casino licenses ( 2).

The bill subjects the licensee to many of the laws that apply to the off-track betting (OTB) licensee under existing law.

The bill requires DCP to adopt implementing regulations to (1) ensure proper, safe, and orderly conduct of casino gaming and (2) protect the public against fraud or overcharge. The regulations must address other issues, including security at the facilities, audits and record keeping, and licensing of personnel.

EFFECTIVE DATE: October 1, 2015

1 — DEFINITIONS

The bill defines “authorized games" as any game played with cards, dice, equipment or any mechanical, electromechanical or electronic device or machine for money, checks, credit or any representative of value, including blackjack, poker, dice, money-wheels, roulette, baccarat, chuck-a-luck, pan game, over and under, acey-deucy, beat the dealer, bouncing ball, slot machines, and such other games the DCP commissioner approves.

2 — LICENSING

People who Must be Licensed

Under the bill, any person or business organization doing any of the following at the casinos must be licensed by DCP as follows:

1. concessionaire—to operate a concession;

2. vendor—to provide facilities, components, goods, or services necessary to operate the casino; and

3. affiliate—to exercise control over a concessionaire or vendor licensee, other than a shareholder in a publicly traded company. The commissioner must issue affiliate licenses to qualified business organizations.

The following must be licensed as occupational licensees:

1. employees of a concessionaire, vendor, affiliate, or casino licensee;

2. officers, directors, partners, trustees, or owners of a business organization licensed above, whether located in-state or out of state; and

3. shareholders, key executives, agents, or other people connected with a concessionaire, vendor, affiliate, or casino licensee, who, in the commissioner's judgment, will exercise control in or over the licensee.

People seeking an occupational license must apply to the commissioner no later than 30 days after she asks them, in writing, to do so. She must complete her licensing investigation and inform the applicant of her decision within one year after she receives the application. If she determines good cause exists for extending an investigation, she must give the applicant a reasonable opportunity for a hearing, by a date she prescribes.

In determining whether to issue a license, the commissioner may require applicants to submit information on their financial standing and credit; moral character; criminal record, if any; previous employment; corporate, partnership, or association affiliations; ownership of personal assets; and other information she deems pertinent to licensing. She may reject a license application for good cause. The license is a revocable privilege and gives the licensee no vested rights.

Penalties for Noncompliant Licensees

The DCP commissioner, deputy commissioner, executive assistant, or any unit or assistant unit head authorized by her may suspend or revoke a license for good cause after a hearing held in accordance with the Uniform Administrative Procedure Act (UAPA).

If an affiliate licensee fails to comply with the bill, the commissioner may (1) revoke or suspend the concessionaire or vendor license, fine any one or more of the licensees up to $2,500, or both and (2) revoke or suspend the casino gaming license, fine the licensee up to $75,000, or both.

The commissioner must state the reasons for license suspensions or revocations and record the reasons in DCP records.

The above penalties apply under existing law to licensees.

Appeals

A licensee whose license is suspended or revoked, or an applicant aggrieved by the commissioner's action on a license application, may appeal in accordance with the UAPA.

2 — DCP REGULATIONS

The bill requires DCP to adopt regulations to (1) ensure that casino gaming is conducted in a proper, safe, and orderly manner and (2) protect the public against fraud and overcharge. The regulations must cover:

1. requirements for a system of internal procedures and administrative and accounting controls;

2. security requirements, which must include videotaped monitoring of the casino facility and other areas in which cash is handled;

3. operating hours;

4. procedures governing the manufacture, sale, and distribution of gaming devices and equipment;

5. procedures to recover winning bets;

6. computing and reporting of gross operating revenue;

7. requirements for financial audits;

8. requirements for periodic financial reports consistent with standards and intervals prescribed by DCP;

9. procedures to be followed for cash transactions;

10. the filing of agreements and descriptions of agreements regarding any business or person doing business with, or on the premises of, a casino gaming facility; and

11. provisions for imposing fines and suspending licenses for violations.

Records and Bookkeeping

The commissioner may require that licensees, other than occupational licensees, (1) maintain their books and records as she deems best and (2) prepare related financial or other statements in accordance with generally accepted accounting principles in a form she prescribes. She or her designee must be authorized to visit, investigate, and place expert accountants and others she deems necessary at the casino or other of the licensee's business places to ensure that licensees strictly comply with DCP's regulations.

Commissioner's Authority to Remove Licensees' Employees

The commissioner may, for good cause, require the removal of any employee or official employed by a licensee.

License Exemptions

As under existing law for licensees, the commissioner may, on her own motion or upon an application, exempt a person or business organization from licensing or some or all of the disclosure requirements. She may limit or condition the terms of the exemptions; her determination is final. She may not exempt anyone who exercises control in or over an integral part of any authorized activity. The burden of proving that an exemption should be granted rests solely with the applicant.

License Duration

All the licenses are valid for one year, except the casino license. The bill does not say for how long the casino license is valid or stipulate its terms.

The commissioner's regulations must prescribe the form and manner of the applications and renewals.

3 — STATE-TRIBAL MOU

Current state law requires both houses of the legislature to approve tribal-state compacts (CGS 3-6c).

The bill authorizes the attorney general, on the state's behalf and notwithstanding current law, to execute an MOU with the Mohegans and Mashantucket Pequots to possibly establish and operate “a casino gaming facility” in the state. (Section 3 of the bill authorizes up to three licenses and up to three gaming facilities.) If the tribes receive a casino gaming license, the MOU must require them to contribute a “specified” (1) amount of money to the Connecticut Council on Problem Gambling, (2) percentage of gross operating revenue to the host town, and (3) percentage of gross operating revenue to the state.

4 — INTERNAL PROCEDURES

Each casino licensee must submit to DCP a narrative and diagrammatic description of its system of internal procedures and administrative and accounting controls at least 90 days before gaming begins. These must contain (1) accounting controls, including the standardization of forms and definition of terms to be used in the gaming operations and (2) job descriptions and the system of personnel and supervisors. They must also include procedures for:

1. receiving, storing, and disposing of chips, cash, and other cash equivalents used in games; cashing checks; redeeming chips and other cash equivalents used for gaming; and recording gaming transactions;

2. collecting and securing money at gaming tables;

3. transferring money from gaming tables to the counting process;

4. securing, counting, and recording revenue;

5. securing, storing, and recording chips and other cash equivalents used in the gaming operation;

6. transferring money or chips from and to slot machines;

7. paying and recording slot machine jackpots;

8. procedures for cashing and recording checks;

9. securing, handling, and storing gaming apparatus, including cards, dice, machines, wheels, and all other gaming equipment; and

10. the conduct of authorized games and the responsibility of employees with respect to such games.

DCP must review and approve the information, and licensees may not begin gaming operations, or alter their system of internal procedure, until after DCP approves.

5 — CASINO GAMBLING INVOLVEMENT BY DCP PERSONNEL PROHIBITED

As is currently the case for other authorized gambling, such as the state lottery and OTB, the bill prohibits the commissioner and DCP unit heads and employees, directly or indirectly, individually or as members of a partnership or shareholders of a corporation, from having any interest in (1) dealing in the casino or (2) owning or leasing any property or premises used by or for the casino. It also prohibits the commissioner or unit heads from directly or indirectly betting at the casino. And it allows the commissioner to adopt regulations prohibiting DCP employees from engaging, directly or indirectly, in any casino gambling activity in which such employees are involved because of their employment.

A “unit head” is any managerial employee with direct oversight of a legalized gambling activity.

6 — DISPLAY OF COMPULSIVE GAMBLING MATERIAL

By law, the DCP commissioner must prepare and distribute informational material designed to inform the public of compulsive gambling prevention, treatment, and rehabilitation programs.

Under the bill, the commissioner must require the casino licensee to display the information at the casino, just as other licensees must do under existing law.

7 — MINORS PROHIBITED AT CASINOS

Under the bill, it is a class A misdemeanor, punishable by imprisonment for up to one year, or fine of up to $2,000, or both, for minors to bet at the casinos or for anyone to knowingly permit them to do so.

The bill imposes a fine of up to $25 on anyone who knowingly permits a minor in the casinos. These same penalties apply under existing law in regard to the OTB licensee.

It imposes a $100 fine on the casino licensee if any minor is found at the casino, including the parking areas, in violation of the bill.

The commissioner must not pay any claims for or on behalf minors who bet in violation of the bill.

8 — CASINO AUDITS

The bill requires the commissioner to annually require a DCP audit of the casino licensees. She may, from time to time, cause an audit of other licensees. Licensees must permit access to their books and records for the audits. They must produce, at the commissioner's request, any documents and information required for such audits. The commissioner must keep the audit records on file at DCP. These same requirements apply under existing law to the OTB licensee.

LICENSE FEES

The bill imposes license fees as follows:

1. concessionaire, for each concession, $250;

2. concessionaire affiliate, for each concession of the concessionaire, $250;

3. concession employees, $20;

4. vendor, for each contract, $250;

5. vendor affiliate, for each vendor contract, $250; and

6. casino gaming employees, $40.

These same fees apply under existing law to the OTB system. The bill does not contain a fee for the casino license.

A “concessionaire affiliate” is a business organization, other than a shareholder in a publicly traded corporation, that exercises control in or over a concessionaire. A “concessionaire” is any individual or business organization granted the right to operate an activity at a casino to make a profit that receives or, in the exercise of reasonable business judgment, can be expected to receive more that $25,000 or 15% of its gross annual receipts from such activity.

The commissioner must require license applicants to submit to state and national criminal history record checks, which must be conducted in accordance with the law governing criminal history record checks mandated by state law.

10 — CASINO GAMBLING EXEMPT FROM GAMBLING BAN

By law, it is illegal to gamble in Connecticut unless the gambling (1) is specifically authorized by state law or other legally binding state agreements (charitable gaming and Indian casino gaming) or (2) fits an exemption in the criminal laws (e.g., state lottery and OTB). It is also illegal to solicit or induce others to gamble, or be present when others are gambling. A violation of the gambling laws is a class B misdemeanor, punishable by imprisonment of up to six months, a fine of up to $1,000, or both (CGS 53-278b).

The bill exempts gambling at the casinos from the state's general prohibition on unauthorized gambling ( 10).

BACKGROUND

Casino Gaming at the Foxwoods and Mohegan Sun Casinos

IGRA attempts to address the sovereign rights of tribes and states by creating a framework for resolving jurisdictional and legal issues surrounding gaming on Indian reservations (25 USC 2710 et seq.). Gambling at the Mohegan Sun Casino is conducted under a legally negotiated IGRA tribal-state compact. At the Foxwoods Casino, it is conducted under federal procedures, which are a legal substitute for an IGRA-negotiated compact. Both the compact and procedures are like federal regulations. As such, they supersede state law.

Tribal-State Gaming Compacts

Current state law requires both houses of the legislature to approve a tribal-state compact (CGS 3-6c).

By law, the governor must file a tribal-state compact or amendment with the Senate and House clerks within 10 days after it is executed. If filed during a regular session, the legislature has until its adjournment to approve or reject it. If not filed during a regular session, the legislature has until adjournment of (1) the next regular session or (2) a special session convened to take action on the measure. If the legislature does not act by adjournment, the compact or amendment is rejected and is not implemented.

If the governor files a compact or amendment within 30 days of the end of a regular session, the legislature can either (1) convene in a special session and vote within 30 days or (2) vote on it within the first 30 days of its next regular session. The legislature has until the end of either 30 day-period to vote before the measure is considered rejected.

Tribal-State Agreements (MOUs)

The Mashantucket Pequots and Mohegans have separate binding agreements (called MOUs) with the state that give the tribes the exclusive right to operate slot machines and other casino games in exchange for a monthly contribution of 25% of their gross slot machine revenue to the state.

Part of each agreement reads as follows:

The Tribe agrees that, so long as no change in state law is enacted to permit the operation of video facsimiles or other commercial casino games by any other person and no other person within the State lawfully operates video facsimiles or other commercial casino games, the Tribe will contribute to the state a sum (the “contribution”) equal to twenty-five percent (25%) of gross operating revenues of video facsimile games operated by the Tribe.

[If] any change in State law is enacted to permit the operation of video facsimiles or other commercial casino games by any other person or any other person within the State lawfully operates video facsimile games or other commercial casino games, the Tribe shall not be bound by the provisions of the Memorandum of Understanding so long as it does not claim any right to operate video facsimile games by virtue of this Memorandum of Understanding, but the Tribe may thereupon assert any rights which it may otherwise have under the Procedures; provided, however, that in such event neither party shall be bound by any of the provisions hereof nor shall either party be barred from taking any position inconsistent with the Memorandum of Understanding (p. 3).

COMMENT

Public Emolument

The bill could conceivably raise constitutional questions in that it appears to provide what may amount to an exclusive public emolument to the Mashantucket Pequots and the Mohegans. Article First, Section 1 of the Connecticut Constitution provides to operate off-reservation casinos in the state: “All men when they form a social compact, are equal in rights; and no man or set of men are entitled to exclusive public emoluments or privileges from the community.” The Connecticut Supreme Court has held that this constitutional provision invalidates state laws that grant emoluments or privileges to individuals unless there is a valid public purpose (Commission of Public Works v. City of Middletown, 53 Conn. App. 438, cert. denied 250 Conn. 923 (1999); Chotkowski v. State, 240 Conn. 246 (1997); City of Shelton v. Commissioner of Department of Environmental Protection, 193 Conn. 506 (1984)).

The Antitrust Act

The Connecticut Antitrust Act prohibits any contract or conspiracy to monopolize, or attempt to monopolize, a part of trade (CGS 35-27). The bill could conceivably be construed to have anticompetitive effects in violation of this law.

COMMITTEE ACTION

Public Safety and Security Committee

Joint Favorable

Yea

15

Nay

8

(03/19/2015)