The New York State Legislature, as part of its annual revenue bill, has authorized mobile sports wagering in New York, and the Governor is expected to sign that bill momentarily. Through this landmark legislation, New Yorkers will soon be able to wager on sporting events online, just like millions of Americans who live in other states.
Although New York has long delayed legalizing various forms of sports wagering due to provisions of its State Constitution, the new mobile sports wagering law should pass constitutional muster. As Gibson Dunn attorneys argued in a New York Law Journal article last year,[1] the Legislature has the authority to authorize mobile sports betting, consistent with the State Constitution, so long as the servers that effectively place the bets are physically housed “at” the casinos duly authorized under the State Constitution. Through the new sports wagering law, the Legislature adopted Gibson Dunn’s constitutional interpretation: The new law “deem[s]” “[a]ll mobile sports wagering initiated in this state” as “tak[ing] place at the licensed gaming facility where the server . . . is located.”[2]
I. New York’s Online Sports Wagering Law Adopts Gibson Dunn’s Constitutional Interpretations and Will Likely Survive Constitutional Challenge
In 2013, New York State voters approved a constitutional amendment to allow the Legislature to authorize “casino gambling” “at” up to seven casinos in the State.[3] Prior to this constitutional amendment, legal gambling in New York was limited to state-run lotteries and betting on horse races, as well as gambling allowed on Native American tribal lands under federal law. The same constitutional amendment also conferred on the Legislature broad authority to regulate wagering in the State.
Pursuant to this constitutional authority, in 2019, the Legislature legalized “sports wagering” in New York State.[4] The law then enacted provided that sports wagers may only be accepted “from persons physically present” “in a sports wagering lounge located at a casino.”[5] In effect, the law prohibited online sports betting, since sports betters would only be permitted to make bets in person at an authorized casino.
But as Gibson Dunn attorneys argued in a 2020 New York Law Journal op-ed,[6] the Legislature had the authority to go further under the 2013 constitutional amendment. As our attorneys explained, the Legislature could enact legislation legalizing online sports wagering for two reasons. First, sports betting fits within the Constitution’s language empowering the legislature to legalize “casino gambling.” Specifically, when the constitutional amendment was passed and adopted, “casino gambling” would have been understood to include sports betting. Second, online sports wagering can be conducted “at” an authorized casino. As our attorneys explained, a wager is nothing more than a contract, and under well-established New York law, a contract is made where the contractual offer is accepted. When a mobile sports bettor in Manhattan, for instance, asks to place a wager by entering her bet into an app or website, that request constitutes a contractual offer. So long as the acceptance of the Manhattanite’s bet and ultimate placement of the wager occurs at a server located at a duly authorized casino, online sports betting can be deemed to have occurred “at” a casino.
New York’s new online sports wagering law adopts Gibson Dunn’s constitutional reasoning. The Legislature amended the 2019 law to state that “all sports wagers through electronic communication . . . are considered placed or otherwise made when and where received by the mobile sports wagering licensee on such mobile sports wagering licensee’s server . . . at a licensed gaming facility, regardless of the authorized sports bettor’s physical location within the state at the time the sports wager is placed.”[7] The hypothetical sports bet requested by an app user in Manhattan, for example, therefore is deemed to occur “at” the casino that ultimately accepts and places the bet. Additionally, the new law is based on a legislative declaration that “a sports wager that is made through virtual or electronic means from a location within New York state and is transmitted to and accepted by electronic equipment located at a licensed gaming facility . . . is a sports wager made at such licensed gaming facility.”[8] Under well-established New York law, this legislative finding of fact will be considered presumptively valid, making it more likely that the law will survive a constitutional challenge.[9]
With our attorneys’ reasoning codified into law, New Yorkers across the State will be able to access online sports wagering websites and apps, and the State will begin to reap the economic benefits (including tax revenue) of these lucrative transactions.
II. New York’s Detailed Regulatory Scheme for Mobile Sports Wagering
The new law includes a number of provisions regulating mobile sports wagering. It clarifies that online sports betting is legal as long as the bettor is “physically present” in New York at the time of the transaction.[10] By requiring the casino, bettor, and servers all to be located in New York, the law limits mobile sports wagering to intrastate transactions. This allows the mobile sports betting industry to avoid problems that may arise from conducting interstate transactions, which are subject to federal regulations, including the federal Wire Act’s prohibition on using wires to transmit “bets or wagers on any sporting event or contest” if the state where the bet initiates has banned sports betting.[11]
The law‘s regulatory framework centers on the “platform providers” that will offer online sports betting services. The law authorizes the State Gaming Commission to select two platform providers to become mobile sports wagering operators based on a competitive bidding process.[12] The Commission may permit more than two mobile sports wagering operators if the Commission determines that doing so is “in the best interests of the state” and if the additional operators pay the same tax rate as the initial two licensees.[13] Applicants must provide a range of information about their operations and predicted earnings.[14] Additionally, all licensees must pay a one-time $25 million fee to the State, and the operator’s license will need to be renewed after ten years.[15]
One primary factor in assessing licensing applications will likely be the amount of tax on revenues that mobile sports wagering operators are willing to pay. The law sets the minimum revenue tax on mobile sports wagering operators at 12%—with casinos to pay a 10% revenue tax only on in-person sports wagering.[16] But the bidding process appears designed to reach a higher rate of taxation, explicitly stating that the ultimate tax percentage platform providers will pay “shall be determined pursuant to a competitive bidding process.”[17] This revenue tax will be paid at least “monthly.”[18]
The new law requires any casino that offers mobile sports wagering, and each mobile sports wagering platform provider, to submit a detailed annual report to the Commission. The report must include, among other information, the total amount of wagers placed and prizes awarded and the number of accounts established by sports bettors.[19] New York law will also now empower the Commission to conduct financial audits of casinos and mobile sports wagering licensees and mandate that the Commission publish an annual report sharing the aggregate information that the Commission receives across all sports betting entities.[20]
Mobile sports wagering operators must satisfy a number of compliance requirements as “condition[s] of licensure.”[21] For instance, they must limit sports bettors to a single account, take steps to ensure “to a reasonable degree of certainty” that individuals are only placing bets from within New York State, prevent minors from participating in any sports wagering, and avoid running advertisements that mislead players about the odds of winning on a bet.[22]
Conclusion
New York’s mobile sports wagering law stands on solid constitutional ground. By deeming online bets to take place at the location of the servers housed on casinos’ premises, the new law follows the proposal made by Gibson Dunn attorneys last year and is consistent with the New York State Constitution.
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[1] Mylan Denerstein, Akiva Shapiro & Lee R. Crain, The Constitutionality of Mobile Sports Betting in New York State, N.Y. L.J. (Jan. 31, 2020), https://www.law.com/newyorklawjournal/2020/01/31/
the-constitutionality-of-mobile-sports-wagering-in-new-york-state/.
[2] N.Y. Rac. Pari-Mut. Wag. & Breed. Law (PML) § 1367–a(4)(i) (post-2021 amend.).
[3] N.Y. Const. art. I, § 9. These casinos authorized by the State Constitution do not include those that Native American tribes may operate pursuant to the Indian Gaming Regulatory Act, 18 U.S.C. §§ 1166–1168 and 25 U.S.C. §§ 2701 et seq.
[4] See PML § 1367 (pre-2021 amend.).
[6] Denerstein, Shapiro & Crain, supra note 1.
[7] PML § 1367–a(2)(d) (post-2021 amend.) (emphasis added).
[8] S.B. S2509, 2021 Leg., 2021–2022 Sess., Part Y, § 2 (N.Y. 2021) (emphasis added).
[9] See, e.g., All Am. Crane Serv. Inc. v. Omran, 58 A.D.3d 467, 467 (1st Dep’t 2009) (noting that laws are “presumed to be supported by facts known to the legislative body”).
[10] PML § 1367(1)(b) (post-2021 amend.).
[11] 18 U.S.C. § 1084(a)–(b); cf. Murphy v. Nat’l Collegiate Athletic Ass’n, 138 S. Ct. 1461, 1483 (2018) (emphasizing that “federal policy” is to “respect the policy choices of the people of each State on the controversial issue of gambling”).
[12] PML § 1367–a(7) (post-2021 amend.).
The following Gibson Dunn lawyers prepared this client alert: Mylan Denerstein, Akiva Shapiro, Lee Crain, Michael Klurfeld, Grace Assaye* and Lavi Ben Dor*.
Gibson, Dunn & Crutcher’s lawyers are available to assist with any questions you may have regarding these issues. Please feel free to contact the Gibson Dunn lawyer with whom you usually work, or the following authors in New York:
Mylan L. Denerstein – Co-Chair, Public Policy Practice (+1 212-351-3850, mdenerstein@gibsondunn.com)
Akiva Shapiro (+1 212-351-3830, ashapiro@gibsondunn.com)
Lee R. Crain (+1 212-351-2454, lcrain@gibsondunn.com)
Michael Klurfeld (+1 212-351-6370, mklurfeld@gibsondunn.com)
*Ms. Assaye and Mr. Ben Dor are not yet admitted to practice law in New York and currently are practicing under the supervision of members of the New York Bar.
© 2021 Gibson, Dunn & Crutcher LLP
Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
On March 31st, 2021, New York became the 16th state to legalize marijuana for recreational use with the enactment of Senate Bill S854A. Under the new law, it is legal for individuals 21 and older to possess and purchase up to three ounces of marijuana. At their place of residence, individuals are also permitted to possess up to five pounds of the drug. While the law takes effect immediately, it is expected to take the state as long as two years to fully implement it, including setting up a system to license marijuana retailers. The law also modifies the state’s existing medical marijuana program, in place since 2014, by expanding the types of medical conditions for which marijuana can be prescribed.
Restrictions on Employers’ Hiring and Disciplinary Policies
Of particular importance to employers, the law creates new restrictions on an employer’s ability to discipline or terminate employees for using marijuana, as well as limits on employers’ ability to refuse to hire a prospective employee for consuming the drug. Specifically, it is now unlawful for employers to refuse to hire, employ or license, or to discharge from employment or otherwise discriminate against an individual in compensation, promotion, or terms, conditions or privileges of employment because that individual uses cannabis as permitted under state law. N.Y. Lab. Law § 201-d(2). However, the law allows employers to take action based on an employee’s or a prospective employee’s use of marijuana where required by federal or state law, or when an employee is impaired while on the job. N.Y. Lab. Law § 201-d(4-a).
These restrictions build on existing provisions of New York’s medical marijuana law, which treats a person’s status as a certified user of medical marijuana as a disability that employers must accommodate where reasonably possible. See N.Y. Pub. Health Law § 3369. They also come on the heels of a law that took effect in New York City in May 2020, prohibiting employers from testing job applicants for marijuana usage. See N.Y.C. Admin. Code § 8-107(31)(a). New York City’s law exempts employers in certain cases, such as where the applicant is being considered for a safety-sensitive position. N.Y.C. Admin. Code § 8-107(31)(b).
Trend in State and Local Laws
With the enactment of S854A, New York becomes the third state in 2021 to liberalize its laws governing marijuana use. In February 2021, New Jersey also legalized recreational marijuana, and starting in July 2021 residents of South Dakota will be permitted to use marijuana for certain medical reasons. Both New Jersey’s and South Dakota’s laws also place restrictions on when employers can take action based on an employee’s or job applicant’s marijuana use. See N.J. Stat. § 24:6I-52(a); S.D. Codified Laws § 34-20G-22.
In total, 19 states and the District of Columbia now have laws restricting employers’ ability to take marijuana usage into account when making employment decisions. These laws vary widely both in how extensively they limit employers’ actions, as well as in the number and types of exceptions they allow, creating a patchwork of different legal obligations across the country that employers must navigate. New York’s new restrictions are among the most extensive in the nation, and will require many employers to make significant changes to longstanding drug testing and employment policies.
Takeaways for Employers
- Employers in New York State should review their policies governing drug use among employees and job applicants to ensure they are in compliance with the new restrictions on basing employment decisions on a person’s consumption of marijuana.
- Employers with operations in multiple states should closely examine applicable state and local laws to ensure they are in compliance with the unique limitations on how marijuana use is treated in the workplace in different jurisdictions. A uniform, one-size-fits-all policy on drug use is, in many cases, no longer feasible for employers with nationwide operations.
- Employers should closely monitor developments in this area as states and cities adopt new laws. The rules governing how marijuana use is treated when making employment decisions are changing rapidly across the country, and employers may find that longstanding employment practices need to be adjusted as this trend continues.
Gibson Dunn lawyers are available to assist in addressing any questions you may have about these developments. Please contact the Gibson Dunn lawyer with whom you usually work in the firm’s Labor and Employment practice group, or the following:
Gabrielle Levin – New York (+1 212-351-3901, glevin@gibsondunn.com)
Blake Lanning* – Washington, D.C. (+1 202-887-3794, blanning@gibsondunn.com)
Please also feel free to contact any of the following practice leaders:
Labor and Employment Group:
Catherine A. Conway – Los Angeles (+1 213-229-7822, cconway@gibsondunn.com)
Jason C. Schwartz – Washington, D.C. (+1 202-955-8242, jschwartz@gibsondunn.com)
*Mr. Lanning is admitted only in Indiana, and is currently practicing under the supervision of members of the District of Columbia Bar.
© 2021 Gibson, Dunn & Crutcher LLP
Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
There were more initial public offerings (“IPOs”) of special purpose acquisition companies (“SPACs”) in 2020 alone than in the entire period from 2009 until 2019 combined, and in the first three months of 2021, there have been more SPAC IPOs than there were in all of 2020. All of these newly public SPACs are looking for business combinations and many private companies are or will be considering a combination with a SPAC as a way to go public.
After an IPO, a SPAC has a limited amount of time to acquire a target company. Many of these business combinations move quickly and a private company becomes a public reporting company in a relatively short period of time. It is important for sponsors, target companies and investors to be aware of some of the special attributes of SPACs and the post-business combination public company.
On March 31, 2021, the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “SEC”) issued a statement addressing certain accounting, financial reporting and governance issues related to SPACs and the combined company following a SPAC business combination.
The following Gibson Dunn attorneys assisted in preparing this update: Hillary Holmes, Peter Wardle, Gerald Spedale and Rodrigo Surcan.