RWB-33-07-00005-RP Internet and Telephone Account Wagering on Horseracing

2/13/08 N.Y. St. Reg. RWB-33-07-00005-RP

NEW YORK STATE REGISTER

VOLUME XXX, ISSUE 7

February 13, 2008

RULE MAKING ACTIVITIES

RACING AND WAGERING BOARD

REVISED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. RWB-33-07-00005-RP

Internet and Telephone Account Wagering on Horseracing

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following revised rule:

Revised action:

Addition of Part 5300 to Title 9 NYCRR.

Statutory authority:

Racing, Pari-Mutuel Wagering and Breeding Law, sections 101, 222, 301, 401, 518, 520, 1002 and 1012

Subject:

Internet and telephone account wagering on horseracing.

Purpose:

To ensure the integrity of pari-mutuel wagering by adopting licensing and regulatory standards for internet and telephone account wagering. This rule would establish reporting, recordkeeping, operational and application requirements for race track operators and off-track betting corporations within New York State that offer internet and telephone account wagering.

Substance of revised rule:

5300.1 Definitions and general provisions.

Contains definitions of various words and terms, when used in this chapter including: Account, Account holder, Account wager, Account wagering, Account wagering center, Account activity, Authorized pari-mutuel wagering entity, Board, Internet, Official, Stored value instrument, Totalisator system, and Wagering device.

5300.2 Account wagering, general.

Allows authorized pari-mutuel wagering entities (hereinafter “entity”) to offer account wagering with prior board approval, restricting accounts to wagering purposes only; and determines which entities account wagers are deemed to be on track wagers and which are to be deemed off- track.

5300.3 Approval of account wagering. Provides that entities authorized to conduct account wagering shall have a Board approved written plan of operation, including at least a proposed system of accepting wagers, internal controls, system security details, account wagering rules, and an independent recording for each transaction.

5300.4 Establishment of an account.

(a) Sets forth minimum criteria for establishment of accounts, allowable purposes, information to be provided, who may open an account, standards for verification of identity, notification standards, information allowed to be collected.

(b) Bearer accounts. Provides standards for the use of bearer accounts evidenced by a card with a PIN number for customers without collecting identity information. 5300.5 Official address. Provides that the entity may use the address listed on the account wagering application for listed purposes, until the entity is informed by the account holder of a change in address.

5300.6 Changes to account information.

Requires the entity to provide a method for the account-wagering holder to make official changes to his/her account information.

5300.7 Right to refuse an account.

Provides for refusal of account based on business judgment, and for mandatory exclusion of certain persons.

5300.8 Segregation of funds.

Requires the entity to deposit account holder's money within 72 hours of receipt in a segregated account.

5300.9 Conduct of wagering.

Provides rules for acceptance of wagers from established account holders via the telephone, internet, or other means subject to an approved plan of operation.

5300.10 Record of wager; pari-mutuel tickets.

This section deems all wagers placed through the account wagering system pari-mutuel tickets subject to all rules and laws governing pari-mutuel tickets.

5300.11 Withdrawals and other debits to accounts.

Sets forth standards for withdrawals from accounts, including identity, means, record keeping and time requirements; authorizes electric fund transfers.

5300.12 Credits to accounts.

States requirements for making and crediting deposits and winning payoffs, effect of IRS requirements, and other credits.

5300.13 Account statements.

Sets requirements for frequency, means of delivery and content of account statements.

5300.14 Recordkeeping.

Sets forth recordkeeping requirements for entities, including details and time required to be kept, and how account liabilities are to be recorded on books and records.

5300.15 Confidentiality of accounts.

Requirement for keeping accounts confidential, states exceptions.

5300.16 Closing of accounts.

Sets requirements for closing of accounts at request of account holders.

5300.17 Dormant accounts.

States rule for distribution of dormant accounts.

5300.18 Surcharge.

States rule for suspension of surcharge on accounts.

5300.19 Vouchers.

Defines vouchers and states these are not accounts or account wagers.

5300.20 Reports to board.

Sets forth time and content requirements for reports on handle, number of accounts or other reports.

5300.21 Yearly audit.

Contains minimum frequency requirements for audits.

5300.22 Disputes/complaints.

Sets forth requirements for handling customer disputes including documentation and audit requirements.

5300.23 Cooperation with officials.

Sets forth requirement for entity to cooperate with Board officials upon request.

Revised rule compared with proposed rule:

Substantial revisions were made in sections 5300.1(b), (e), (m), 5300.4(a)(2), (5), (b)(1)(i), (ii), (5)(iv), 5300.7(b), 5300.8, 5300.9(c)(2), 5300.11(a), (b), 5300.12(c), 5300.13(a) and 5300.19(c).

Text of revised proposed rule and any required statements and analyses may be obtained from:

Gail Pronti, Secretary to the Board, Racing and Wagering Board, One Broadway Center, Suite 600, Schenectady, NY 12305-2553, [phone], e-mail: [e-mail]

Data, views or arguments may be submitted to:

Same as above.

Public comment will be received until:

30 days after publication of this notice.

Regulatory Impact Statement, Regulatory Flexibility Analysis, Rural Area Flexibility Analysis and Job Impact Statement

While the revisions made to the original proposed rulemaking are substantive for the purposes of Executive Order 20 review by the Governor's Office of Regulatory Reform and publication as a Revised Rulemaking in the State Register, these revisions will have not require a revised Regulatory Impact Statement nor will the have an impact upon jobs, small business, local government, or state agencies as described in the original Notice of Proposed Rulemaking published on August 15, 2007 (ID No. RWB-33-07-00005-P). The revisions contained in this Revised Rulemaking are consistent with the provisions of the original Proposed Rulemaking. In fact, some of the revisions which were requested by the pari-mutuel wagering entities will relieve them of certain paperwork requirements (such as repealing the requirement that a written record of wagering activity be prepared and allow for electronic records, and repealing the requirement that written monthly statements be sent to the account holders and merely requiring that the statements be available to account holders) and allow pari-mutuel entities more flexibility in making fund transfers (previous language limited fund transfers to electronic transfers).

This proposal does not require a Regulatory Flexibility Statement, Rural Area Flexibility Statement or Job Impact Statement as the amendment addresses the limited issue of operational and administrative aspects of Internet and telephone account wagering. This rule would affect race track operators and off-track betting corporations throughout New York State, all of who currently offer telephone account wagering. This rule is consistent with current practices employed by such entities, as well as certain disclosure and operational plan requirements of the Racing and Wagering Board. This rule is intended to modify the Board's rules to properly regulate the expansion of pari-mutuel wagering into the realm of the Internet and telephone wagering as authorized by the Legislature in 2006. It does not limit job opportunities. In fact, the increased revenue from pari-mutuel wagering over the Internet may help preserve and expand economic opportunities in the New York State horse racing industry by capturing revenue that is wagered over the Internet on horseracing in other states and countries. Establishing Internet and telephone account wagering standards does not impact upon a small business pursuant to such definition in the State Administrative Procedure Act § 102(8) because race track operators and off-track betting corporations are not small businesses. Nor does this rule affect employment. The proposal will not impose an adverse economic impact on reporting, recordkeeping or other compliance requirements on small businesses in rural or urban areas nor on employment opportunities. The rule does not impose any significant technological changes on the industry because the race track operators and off-track betting corporations are able to use the current telephone account wagering and Internet server technology that they currently possess.

Assessment of Public Comment

The Board received public comments from six regulated entities. The Board reviewed all of the comments and adopted some of the current revisions based upon the comments received. In cases where issues of rule interpretation were raised, the Board reviewed the comments and if ambiguous or vague language was apparent, the language was revised and clarified. The Board opted not to adopt rule changes that were unique to a specific track or pari-mutuel wagering entity, and has decided that such specifics can be addressed in a Plan of Operation (as required by the rule) so long as the plan of operation is consistent with the overall direction and principals of the revised rulemaking. While the public comments sought clarification or revisions of some of the limited provisions rule, none of the public comments objected to the comprehensive framework of the rulemaking. Generally, there were recurring concerns regarding the use of electronic signatures and verification (particularly in the application and withdrawal processes), cancellation of wagers by account holders, and allowing bearer accounts to be used in multiple locations.

Saratoga Harness suggested that the rules should allow customers to sign up for accounts online upon satisfactory identification and verification, and that the calendar year requirement of Rule 5300.13(a) should be removed, and that the rules should be amended to allow account holders to redeem vouchers through their accounts rather than limiting the accounts to cash and winning tickets.

Vernon Downs submitted comments regarding the restricted use of a Fast Bet Card for wagering at a racetrack, and questioned whether the rule could be interpreted to read that wagers placed through a bearer account may not be cancelled. Vernon Downs asked that the rule allow for cancellations for on-site bettors using bearer accounts. Vernon Downs also had a question regarding the requirement that account wagering funds be deposited into a segregated account within 72 hours. Vernon Downs was concerned that this is problematic given holiday weekends, and recommended the language be changed to “three business days.” Vernon Downs also suggested an amendment to allow vouchers to be redeemed through wagering accounts in addition to winning tickets and cash.

Yonkers Raceway submitted comments requesting three amendments to the proposed rulemaking. Yonkers requested that the rules permit an account to be opened by mail, telephone or by electronic means, and not be limited to just in-person applications; that the rule requiring an actual signature on an application be revised to allow for electronic signatures; and the rules be expanded to permit electronic verification with respect to each account holder's name, principal residence address, date of birth and social security number.

The Board received comments from another pari-mutuel wagering entity which submitted a letter requesting reconsideration of numerous provisions. The comments requested a provision for online applications for account wagering; funding of accounts via wire transfer, debit cards, credits cards and automated clearing house transactions; permit accounts to opened pending the deposit of funds at a later date wherein no wagering will occur until a deposit is made; the use of electronic signatures or personal identification numbers for account wagering applicants; authentication of an applicant's identity by the use a social security card and a copy of a driver's license; permit bettors the ability to use their account from one race meet to another; permit bearer account holders to cancel bets in a manner similar to the way non-bearer account bettors cancel their bets; remove the requirement for issuance of written statements to bearer account holders because unscrupulous account holders could use the statement improperly, such as misreporting gambling losses to the IRS); permit withdrawals from accounts using personal identification numbers; and permit the use of vouchers to fund and make withdrawals from wagering accounts.

New York City Off-Track Betting Corporation submitted comments that suggested various revisions to the proposed rulemaking. While there were requests for clarification of certain technical aspects of the rule, there were several requests for substantive revisions. Changes were requested: to the definitions, to allow the opening of an account by e-mail or fax and the use of signature by fax or scanned signature, to allow withdrawals and debits to other accounts via e-mail and fax under proper signature, to allow flexibility in where a bearer's account card can be used in multiple locations similar to how paper vouchers are now used, to allow the cancellation of wagers placed through a bearer account, clarification of the rule regarding the closure of a bearer account, the inclusion of “interactive television” as a means of wagering, the withholding of funds until an account holder provides necessary tax information, and other revisions regarding confidentiality of accounts, closing of accounts and vouchers.

Nassau Downs Off-Track Betting Corporation submitted comments requesting various revisions to the rules that allow for opening new accounts online, the use of digital signatures for verifying a new application, the use of Personal Identification numbers for withdrawals, the use of Nassau Downs' existing Knowledge Based Authentication system for identifying account holders and verifying their signatures, allowing for online notification of rule changes rather than requiring that a copy of the new rules be mailed via postal service to the account holders, to allow wagers that are placed through bearer accounts to be cancelled in a manner similar to existing methods, to clarify the requirement that pari-mutuel entities shall maintain a segregated account from account holders, and to allow bearer account holders to wager at locations other than just the one where they opened their account.