Home » 2007 Issues » May 09, 2007 » RWB-19-07-00003-E Internet and Telephone Account Wagering on Horseracing
RWB-19-07-00003-E Internet and Telephone Account Wagering on Horseracing
5/9/07 N.Y. St. Reg. RWB-19-07-00003-E
NEW YORK STATE REGISTER
VOLUME XXIX, ISSUE 19
May 09, 2007
RULE MAKING ACTIVITIES
RACING AND WAGERING BOARD
EMERGENCY RULE MAKING
I.D No. RWB-19-07-00003-E
Filing No. 426
Filing Date. Apr. 23, 2007
Effective Date. Apr. 23, 2007
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, Par-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 go 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 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 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 corporation within New York State that offer internet and telephone account wagering.
Text of emergency rule:
Subchapter C titled “Internet and Telephone Account Wagering” is added to Subtitle T of Title 9 NYCRR.
Part 5300 is added to new Subchapter C to read as follows:
5300.1 Definitions and general provisions.
The following words and terms, when used in this sub-chapter, shall have the following meanings, unless the context clearly indicates otherwise:
(a) Account shall mean a formal record of all transactions (debits, wagers, deposits, withdrawals and credits) initiated by an account holder in a wagering account with an authorized pari-mutuel wagering entity.
(b) Account holder shall mean a person authorized by an authorized pari-mutuel wagering entity to place wagers via account wagering.
(c) Account wager shall mean a wager placed by means of account wagering. An account wager may be made by the account holder in person, via telephonic device or by the internet or by communication through other electronic means.
(d) Account wagering shall mean pari-mutuel wagering in which an individual deposits money in an account with an authorized pari-mutuel wagering entity to be used for pari-mutuel wagering authorized by law to be conducted by the authorized pari-mutuel wagering entity.
(e) Account wagering center shall mean the facility or facilities which have the capability of accepting telephonic wagers utilizing wired or wireless communications devices, including but not limited to wireline telephones, wireless telephones, and the internet, to transmit the placement of wagers on races and special events.
(f) Account activity shall mean any deposit, withdrawal, wager or other transaction made by the account holder.
(g) Authorized pari-mutuel wagering entity shall mean a corporation or association that is duly licensed by the board or holds a franchise to conduct pari-mutuel wagering and simulcasting activity.
(h) Board shall mean The New York State Racing and Wagering Board.
(i) Internet shall mean a computer network consisting of a worldwide network of computer networks that use the TCP/IP network protocols to facilitate data transmission and exchange.
(j) Official shall mean a representative(s) of the board.
(k) Racing law means title 47A of the consolidated laws of the State of New York, the New York State Racing, Pari-Mutuel Wagering and Breeding Law.
(l) Regional off-track-betting corporation shall mean a corporation created pursuant to Section 502 or Section 603 of the New York State Racing, Pari-Mutuel Wagering and Breeding Law.
(m) Report shall mean a summary of wagering activity or other written record prepared pursuant to this sub-chapter.
(n) Stored value instrument shall mean Funds or monetary value represented in digital electronics format (whether or not specially encrypted) and stored or capable of storage on electronic media in such a way as to be retrievable and transferable electronically.
(o) Totalisator system shall mean a computer system that registers and computes the wagering and payoffs in pari-mutuel wagering.
(p) Wagering device shall mean a device enabling the placing of wagers.
5300.2 Account wagering, general.
An authorized pari-mutuel wagering entity may offer a system of account wagering whereby wagers and withdrawals are debited and winning payoffs and deposits are credited to an account held by an authorized pari-mutuel wagering entity on behalf of an account holder provided:
(1) Prior board approval is granted for the account wagering system.
(2) Accounts are restricted for wagering purposes only.
(3) Account wagers are deemed to be on-track wagers for those wagering entities licensed or franchised pursuant to Articles II, III or IV and Section 1007 of the Racing, Pari-Mutuel Wagering and Breeding Law, and are deemed to be simulcast wagers for those entities licensed pursuant to Sections 1008 or 1009 of the Racing, Pari-Mutuel Wagering and Breeding Law.
5300.3 Approval of account wagering.
Authorized pari-mutuel wagering entities are authorized to conduct account wagering pursuant to the written plan of operation approved by the Board. The plan of operation shall include, at a minimum;
(1) Systems of processing wagers.
(2) Internal controls for account wagering.
(3) System security which shall include but not be limited to the use of access encryption and firewalls.
(4) Account wagering rules.
(5) Provide for a recording for each transaction on a system separate from the totalisator system.
5300.4 Establishment of an account.
(a) Accounts shall be used for wagering purposes only. Authorized pari-mutuel wagering entities may establish/open accounts for individuals provided the following minimum requirements are met:
(1) An account holder shall be a natural person (18) eighteen years of age or older.
(2) Accounts may be opened in-person with cash or check, or by mail with check.
(3) Account holders shall provide their age, address, mailing address (if different), phone, social security number and date of birth.
(4) Application shall be signed attesting to its accuracy.
(5) The name of each new account holder will be confirmed in accordance with the Federal Government's standards for evaluating and confirming government issued identification and credentials (U.S. Department of Justice Employment Verification Form I9, which can be obtained online at http://www.usdoj.gov/usao/nh/pdfreleases/Forms/i9.pdf.) A copy of each properly validated credential will be maintained with the appropriate account application.
(6) Account is non-transferable.
(7) The authorized pari-mutuel wagering entity shall issue a card or other document representative of the account.
(8) The authorized pari-mutuel wagering entity shall provide to the account holder rules governing the conduct of account wagering.
(9) The authorized pari-mutuel wagering entity shall notify the account holder whenever rules have changed and provide a copy of such changes.
(10) The authorized pari-mutuel wagering entity may require a minimum balance consistent with their internal controls.
(11) Bank account number and other necessary information if the account holder desires to make electronic fund transfers.
(b) Bearer Accounts
(1) Notwithstanding the provisions of part (a) of this section, an authorized pari-mutuel wagering entity may establish an account for a customer without collecting the information found in part (a)(1) – (5) of this section provided that:
(a) The account can only be used in person through a teller or self service machine and,
(b) The account is only used in the location or branch at which it was opened.
(2) The authorized pari-mutuel entity shall issue a card or other document representative of such account.
(3) The authorized pari-mutuel entity may establish guidelines for the expiration of such accounts consistent with its approved plan of operation.
(4) A wager placed through a bearer account cannot be cancelled once the account holder has accepted it and it has been processed by the authorized pari-mutuel wagering entity.
(5) all other provisions of this sub-chapter apply except:
(a) Withdrawals shall be made in person and may be paid in cash to the person bearing the card or other document issued in (2) and after verification of the PIN.
(b) Account Statements pursuant to section 5300.13 are not required to be mailed but must be made available to the person possessing the card issued in (2).
(c) the provisions of 5300.5 and 5300.6 do not apply.
(d) accounts shall only be closed in person for the person bearing the card issued in (b) and after verification of the PIN or pursuant to other applicable provisions of the law.
5300.5 Official address.
The address listed on the account wagering application is deemed the account holder's official address for purposes of this section. The authorized pari-mutuel wagering entity shall use the official address for all mailings, including notices, checks, withdrawal slips, account statements and other correspondence.
5300.6 Changes to account information.
The authorized pari-mutuel wagering entity shall provide a method for the account wagering holder to make official changes to his/her account information. The method shall include the name, date, address, and social security number, account wagering identification number, PIN and signature.
5300.7 Right to refuse an account.
(a) The authorized pari-mutuel wagering entity may exclude anyone from opening an account based on business judgment.
(b) The authorized pari-mutuel wagering entity shall refuse an account to known bookmakers, touts, minors and persons on the entity's self-exclusion list.
5300.8 Segregation of funds.
The authorized pari-mutuel wagering entity shall, upon receipt of money from account holders and related winning wagers, deposit such money within 72 hours in a segregated account, kept and maintained by the authorized pari-mutuel wagering entity until appropriately distributed.
5300.9 Conduct of wagering.
(a) Account wagers shall only be transacted through an account wagering center.
(b) The authorized pari-mutuel wagering entity may accept account wagers via any wired or wireless communications device, including but not limited to wireline telephones, wireless telephones, and the internet subject to applicable laws, rules and the approved plan of operation.
(c) The authorized pari-mutuel wagering entity shall:
(1) require the account holder to provide the account wagering identification number and PIN before an account wager is accepted.
(2) verify all account wagering transactions before acceptance of an account wager.
(3) verify that the account has sufficient funds to pay for the wager. No wager or portion of wager shall be accepted if the account fails to have sufficient funds to cover the wager.
(4) debit the total amount of the wager from the account immediately after verifying wager.
(5) not accept any account wager if the recording devices are inoperable.
5300.10 Record of wager; pari-mutuel tickets.
For purposes of this section, all wagers placed through the account wagering system are deemed pari-mutuel tickets and are subject to all rules and laws governing pari-mutuel tickets.
5300.11 Withdrawals and other debits to accounts.
(a) Excepting bearer accounts, withdrawals may be made in person or by mail by completing a request for withdrawal. The request for withdrawal shall include, at a minimum;
(1) the account holder's name,
(2) account identification number,
(3) account holders signature, (except for electronic fund transfers) and
(4) date the request for withdrawal was made.
(b) Fund transfers may be made via electronic means pursuant to an approved plan of operation.
(c) Withdrawals can be for all or any portion of the account holder's balance.
(d) The authorized pari-mutuel wagering entity shall process all requests for withdrawals made via mail within five business days of receiving the request. All other requests for withdrawals shall be processed immediately. If the request is incomplete or required information is missing, the authorized pari-mutuel wagering entity must notify the account holder of the required information as soon as possible.
(e) If the account does not contain sufficient funds to cover the requested withdrawal, the authorized pari-mutuel wagering entity shall release the remaining funds and notify the account holder.
5300.12 Credits to accounts.
(a) Deposits to existing accounts may be made by an account holder in the form of cash, cash equivalent, check, or other method as specified in the plan of operation.
(b) Deposits shall be credited to the account promptly after receipt and verification of funds.
(c) Funds from winning wagers shall be credited to the account immediately after a race is declared official. However, funds from winning wagers subject to Internal Revenue Service reporting requirements shall be held and not available for use until such time the account holder has completed all necessary paperwork.
(d) Credits for other transactions are only permitted to the extent of the approved plan of operation.
5300.13 Account statements.
(a) The authorized pari-mutuel wagering entity shall no less than once per calendar month provide a statement to each account holder detailing the month's beginning and ending balances and each debit and credit by date.
(b) Upon written demand, the authorized pari-mutuel wagering entity shall make available to the account holder any monthly statement from the current or the previous calendar year.
(c) Upon written demand, the authorized pari-mutuel wagering entity shall make available to the account holder a statement beginning on the last day of the prior period through the date of written demand.
5300.14 Record keeping.
(a) The authorized pari-mutuel wagering entity shall maintain records of every deposit, withdrawal, wager, winning payoff and other credit and debits to an account for a period of three years.
(b) The authorized pari-mutuel wagering entity shall ensure that wagers are accepted only at designated telephone numbers and account wagering centers.
(c) The authorized pari-mutuel wagering entity shall record accou79nt wagering accounts as a separate liability on its books and records.
5300.15 Confidentiality of accounts.
The authorized pari-mutuel wagering entity, its employees and agents may not divulge any account information without the express written permission of the account holder, except to the board, by board order, or as may otherwise be prescribed by law.
5300.16 Closing of accounts.
Excepting bearer accounts, accounts may be closed at the request of an account holder made in-person or by mail or other method consistent with the plan of operation. For those requests made by mail, authorized pari-mutuel wagering entities shall mail to the account holder's official address or send via electronic funds transfer to the account specified in the account wagering application all funds within five business days of receiving such request. All other requests shall be processed immediately.
5300.17 Dormant accounts.
The authorized pari-mutuel wagering entity shall deactivate all accounts if there is no account wagering activity during a period of 36 consecutive months. All monies in such dormant accounts shall be distributed in accordance with Section 1012 of the racing law.
5300.18 Surcharge.
Any regional off-track-betting corporation may suspend surcharge of accounts pursuant to Section 1012 of the racing law and consistent with its plan of operation.
5300.19 Vouchers.
Vouchers are a document or card produced by a pari-mutuel system device, with a value printed on its face, that is recorded in and redeemed through the pari-mutuel system.
(a) Vouchers are not accounts or account wagers for purposes of this section.
(b) Vouchers may only be used to place wagers in-person and only pursuant to an approved plan of operation.
(c) Vouchers are not permissible in account wagering pursuant to this sub-chapter.
5300.20 Reports to board.
No later than March 15th, the authorized pari-mutuel wagering entity shall file with the Board a report detailing the following for the previous calendar year in which account wagering was offered:
(1) Total handle bet through the account wagering system;
(2) Total handle segregated by telephone, internet and other means;
(3) Total handle segregated by track;
(4) The beginning number of accounts, total accounts opened and closed and the ending number of accounts;
(5) Any other report as may be prescribed by the board.
5300.21 Yearly audit.
Authorized pari-mutuel wagering entities shall audit or caused to have audited the account wagering system data input and account updates not less than once during each calendar year. Such reports shall be provided to the board upon request.
5300.22 Disputes/complaints/adjustments.
(a) Subject to applicable laws, customer disputes concerning account transactions shall be addressed by the mutuel department supervisor, or such other pari-mutuel supervisor as may be designated by the authorized pari-mutuel wagering entity's management. Such designation must be in writing. The mutuel department supervisor or appropriate designee shall approve all final resolutions of account disputes. Documentation of all disputes and final resolutions shall be maintained by the authorized pari-mutuel wagering entity for a period of three (3) years from the end of the year the dispute was resolved.
(b) Disputed transactions that lead to an adjustment shall be audited by internal audit within 30 days of the adjustment.
5300.23 Cooperation with officials.
If the board determines that a certain computer printout, mutuel report, or other totalisator or mutuel record is needed to perform the official's regulatory duties, the official shall request the item from the mutuel manager or his designee and/or totalisator company representative. On receipt of a request under this section, the mutuel manager and/or totalisator company representative shall make the information available to the official no later than the deadline established by the official or provisions of this sub-chapter.
This notice is intended
to serve only as a notice of emergency adoption. This agency does not intend to adopt the provisions of this emergency rule as a permanent rule. The rule will expire July 21, 2007.
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, 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) Need 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 becomes effective January 22, 2007 and amends 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) Alternatives 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.
(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: These rules will become effective upon the date of publication in the State Registersubsequent to final adoption by the Board. It is anticipated that regulated entities can achieve compliance on the date of publication of this rule.
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 rack 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.
