RWB-33-07-00005-E Internet and Telephone Account Wagering on Horseracing
3/26/08 N.Y. St. Reg. RWB-33-07-00005-E
NEW YORK STATE REGISTER
VOLUME XXX, ISSUE 13
March 26, 2008
RULE MAKING ACTIVITIES
RACING AND WAGERING BOARD
EMERGENCY RULE MAKING
I.D No. RWB-33-07-00005-E
Filing No. 230
Filing Date. Mar. 07, 2008
Effective Date. Mar. 07, 2008
Internet and Telephone Account Wagering on Horseracing
PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following action:
Action taken:
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
Finding of necessity for emergency rule:
Preservation of general welfare.
Specific reasons underlying the finding of necessity:
These amendments are necessary to detect and deter unlawful financial activity in off-track betting over the internet and telephone. These amendments give regulatory force and effect to the statutory amendments that permit the use of the Internet in account wagering which went into effect on January 22, 2007, and are contained in Chapter 314 of the Laws of 2006 as codified in Section 1012 of the RPWBL. Specifically, the amendments are necessary to provide guidelines and safeguards that allow for the use of state-of-the-art communication equipment in account wagering while preserving the integrity of pari-mutuel wagering in New York State, thereby ensuring substantial revenue for state and local governments and strengthening and furthering the racing, breeding and pari-mutuel wagering industry in New York State. The 2002 Breeders' Cup Ultra Pick 6 scandal, which involved the use of telephone account wagering in the fraudulent placing of bets and threatened to undermine public confidence in off-track betting, demonstrated the need for heightened scrutiny of account wagering. These rules are designed to detect and deter such unlawful activity which potentially threatens government revenue derived from off-track betting.
Subject:
Internet and telephone account wagering on horseracing.
Purpose:
To ensure the integrity of parimutuel 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 emergency 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 Record keeping.
Sets forth record keeping 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.
This notice is intended
to serve only as a notice of emergency adoption. This agency intends to adopt the provisions of this emergency rule as a permanent rule, having previously published a notice of proposed rule making, I.D. No. RWB-33-07-00005-P, Issue of August 15, 2007. The emergency rule will expire May 5, 2008.
Revised rule making(s) were previously published in the State Register on
February 13, 2008.
Text of emergency 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, (518) 395-5400, e-mail: info@racing.state.ny.us
Regulatory Impact Statement
(a) Statutory Authority: Racing, Pari-Mutuel Wagering and Breeding Law, sections 101, 104, 222, 301, 401, 518, 520, 1002 and 1012. Subdivision 1 of section 101 of the Racing, Pari-Mutuel Wagering and Breeding Law (RPWBL) vests the Racing and Wagering Board (the Board) with general jurisdiction over all horse racing and all pari-mutuel wagering activities in New York State. Section 222 authorizes the conduct of pari-mutuel betting on horse races for the purpose of deriving a reasonable revenue for the support of government and to promote agriculture and breeding of horses in New York State. Subdivision 1 of section 301 grants the Board the authority to supervise generally all harness race meetings in New York State at which pari-mutuel betting is conducted and the authority to adopt rules accordingly. Subdivision 1 of section 401 grants the Board the power to supervise generally all quarterhorse race meetings in the state at which pari-mutuel betting is conducted. Section 518 authorizes off-track pari-mutuel betting so long as it is conducted under the administration of the Board. Subdivision 1 of section 520 grants general jurisdiction to the Board over the operation of all off-track pari-mutuel betting facilities within the state, and directs the Board to issue rules and regulations regarding off-track pari-mutuel betting activity. Subdivision 1 of section 1002 grants the Board general jurisdiction and rulemaking power over the simulcasting of horse races within the state. Subdivision 4 of section 1012 requires that the maintenance and operation of telephone accounts for wagers placed on licensed pari-mutuel racing shall be subject to rules and regulations of the New York State Racing and Wagering Board. Subdivision 4-a of section 1012 was added by Chapter 314 of the Laws of 2006 to expand authorized telephone account wagering to include wired or wireless communications, including the internet.
(b) Legislative Objectives: These amendments give regulatory force and effect to the statutory amendments contained in Chapter 314 of the Laws of 2006 as codified in Section 1012 of the RPWBL. Specifically, the amendments provide the necessary definitions, guidelines and safeguards that allow for the use of state-of-the-art communication equipment in account wagering while preserving the integrity of pari-mutuel wagering in New York State, thereby ensuring substantial revenue for state and local governments and strengthening and furthering the racing, breeding and pari-mutuel wagering industry in New York State.
(c) Needs and Benefits: The New York State and the Racing and Wagering Board needs to ensure that the hundreds of millions of dollars that may potentially be wagered by telephone and the Internet in any given year can be accounted for using uniform and reliable methods. These regulatory amendments are necessary to implement the statutory provisions of Chapter 314 of the Laws of 2006, which became effective January 22, 2007 and amended Section 1012 of the Racing, Pari-Mutuel Wagering and Breeding Law (RPWBL) by expanding the authorized method of placing account wagers to include “all those wagers which utilize any wired or wireless communication device, including but not limited to wireline telephones, wireless telephones, wireless telephones, and the internet.” This rule is necessary to ensure the integrity of Internet and telephone account wagering in New York State. While Chapter 314 authorized in general terms the use of certain electronic devices in pari-mutuel wagering activities, this rule establishes the specific guidelines necessary for practical implementation of the statutory amendments. Telephone account wagering has been available in New York State for approximately 30 years, but there have been no comprehensive Board rules for account wagering. This will establish such rules. The New York State Legislature has recognized the potential of Internet account wagering in bolstering New York horse racing, and these rules will ensure that the use of the Internet in pari-mutuel wagering will be conducted in an open and honest manner.
(d) Costs:
(i) The costs for the implementation of, and continuing compliance with, the rule to regulated persons will be negligible. Racetrack operators and off-track betting corporations already make telephone account wagering available and can comply with this rule by using existing accounting equipment and personnel. Such entities also have their own web sites and web server networks.
(ii) There would be no new costs for the implementation of, and continued administration of, the rule to the New York State Racing and Wagering Board, and the state and local governments. The Board and the Department of Taxation and Finance currently monitor telephone account wagering, and can continue to use current resources to administer this rule. The addition of internet wagering as a method of account wagering will not impose any new costs given the inherent accountability qualities of Internet servers and software systems. There would be no new costs to local governments because they do not regulate pari-mutuel wagering.
(iii) The information regarding costs was determined by Board staff. It made this determination based upon practical knowledge of the existing telephone account wagering systems, which it currently supervises pursuant to its general powers under the RPWBL.
(e) Paperwork: This rule does not impose any specific form requirement, but does include reporting requirements.
Authorized pari-mutuel wagering entities will be required to maintain for three years documentation of all persons excluded from opening an internet wagering account. Entities will also be required to maintain documentation of customer disputes and complaints for three years. All such documents must be made available to the Racing and Wagering Board upon request.
Authorized pari-mutuel wagering entities will be required to submit a written plan of operations for approval by the Racing and Wagering Board.
Authorized pari-mutuel wagering entities will be required to furnish monthly account statements to their customers.
Authorized pari-mutuel entities will be required submit annual reports detailing handle information and account activity from the previous calendar year. Entities will also be required to conduct annual audits of the account wagering system data input and account updates.
(f) Local Government Mandates: There are no local government mandates. Pari-mutuel wagering activities in New York State are exclusively regulated by the New York State Racing and Wagering Board.
(g) Duplication: Because the New York State Racing and Wagering Board has exclusive regulatory authority over pari-mutuel wagering activity, there are no other state or federal rules that duplicate, overlap or conflict with this rule. This rule is intended to give force and effect to Chapter 314 of the Laws of 2006. This rule is consistent with the provisions of the federal Unlawful Internet Gambling Enforcement Act of 2006, which amends Chapter 53 of Title 31, United States Code.
(h) Alternative Approaches: Several alternatives were considered. Board staff considered the Advance Deposit Wagering Rules of the Association of Racing Commissioners International and the telephone account wagering practices currently used in New York State. Board staff also reviewed and considered the account wagering rules of other jurisdictions, including Maryland, Louisiana, Massachusetts, Idaho, South Dakota, Washington, California and New Jersey. All of these similar rules and practices are relatively uniform.
In drafting this rule, the Board solicited and considered public comment from all entities engaged in pari-mutuel wagering in the State of New York, including thoroughbred and harness track operators, off-track betting corporations, and pari-mutuel wagering totalizator companies. There was general support for the Board's approach to accountability and reporting. The Board did revise certain aspects of the rule based upon public comments, but ultimately retained the overall regulatory approach as originally proposed.
Board staff considered the need for general age proof requirements in the rule and determined that none were necessary. Paragraph 1 of subdivision (a) of section 5300.4 requires that an account holder “shall be a natural person eighteen (18) years of age or older.” This requirement is consistent with section 104 of the Racing, Pari-Mutuel Wagering and Breeding Law, which states that “No association or corporation which is licensed or franchised by the board shall permit any person who is actually and apparently under eighteen years of age to bet on a horse race conducted by it nor shall such person be permitted to bet at an establishment of a regional corporation conducting off-track betting.” The association, corporation or off-track regional corporation is responsible for ensuring that no person — including persons who hold bearer accounts or wish to wager under a bearer account — is under the age of eighteen if they wish to place a bet. Section 5300(a)(1) simply reiterates the section 104 restriction so as to provide clear language and guidance to regulated parties. No additional rules were included in regard to general age proof requirements because Board staff has determined that Section 104 is self-executing and does not require additional rules in order to effectively enforce its provisions. The Board expects regulated entities to apply the same age proof requirements for section 5300.4(a)(1) as it does for section 104 of RPWBL.
(i) Federal Standards: There are no federal standards which specifically govern these pari-mutuel wagering activities. The Unlawful Internet Gambling Act of 2006 states that “unlawful Internet gambling” shall not include any activity that is allowed under the Interstate Horseracing Act of 1978 (15 U.S.C. 3001 et seq.).
(j) Compliance Schedule: This emergency rule is effective as of the date of submission to the Department of State (March 7, 2008.)
Regulatory Flexibility Analysis, Rural Area Flexibility Analysis and Job Impact Statement
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.
