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April 14, 2009

Your Albany Top Ten List

By Bennett Liebman

Many entertainment, arts, and sports law practitioners in New York look at Albany as some sort of foreign land. It’s almost like the old Saul Steinberg New Yorker “View of the World” cover. This time, instead of looking west, we look north with entertainment and arts civilization ending at the Bronx –Westchester border. There might be dots in the picture for outposts like Woodstock, Saratoga Springs, or Caramoor, but basically any locale north of New York City would be deemed a cultural wasteland. How can a town with arcane ways and less than 100,000 people determine the entertainment and arts policies governing the nation’s – if not the world’s - entertainment and arts hub? It’s like Sparta exercising artistic dominion over Athens, or if the Philistines had defeated the Israelites.

One of the major legislative issues has already been resolved. That is the sales tax on admissions issue. Governor Paterson in his budget had initially proposed to extend the sales tax to various amusement charges. He anticipated that this action, when fully implemented, would have increased state revenues by $70 million. The budget plan extended the State’s 4% sales tax and any applicable local sales tax to admission charges. Thus, per the State Budget division, there would have been a sales tax imposed “for admission to horse racing tracks, boxing and wrestling events, live dramatic and musical arts performances, circuses, motion picture theaters (whether or not to see a movie), and places where patrons will participate in a sport such as a swimming, bowling, tennis, etc.”

The provision was adamantly opposed by Broadway theaters, ski resorts, and bowling alleys. The New York Times even wrote an editorial against its application to Broadway stating “An entertainment tax should certainly stay in that mix, especially when it comes to thriving businesses like movies, sports events, concerts and dog shows. When it comes to Broadway, only a smaller levy makes sense -- and even that should be short term.” The Governor withdrew this proposal and a host of so-called “nuisance” taxes on March 11 and replaced them in his budget with federal stimulus funds.

Without trying to decipher Albany’s ways, this is an attempt to develop a top ten list of the initiatives in Albany that are likely in 2009 to affect the arts, entertainment, and sports fields. It’s where the netherworld meets the entertainment world.

10. Mixed Martial Arts Legalization – This recession seems to be the most likely time for an attempt to legalize mixed martial arts competition. It may be the fastest growing sport in the nation, and its proponents are likely to claim that he sports’ legalization will have a significant positive economic effect on New York.

9. Video Lottery Terminals at Racetracks – Video lottery terminals are instant lottery tickets that are dispensed in a manner that makes them indistinguishable from slot machines. They are now at all the State’s harness racing tracks. Negotiations with an ostensible winning bidder to bring VLT’s to Aqueduct Racetrack in Queens failed this month. Current state law prevents VLT’s from being used at Belmont Park on the Nassau-Queens border. Will VLT’s be expanded to include Belmont, which could bring in hundreds of millions of dollars to the State? Will the negotiations over Aqueduct be resolved? Will efforts be made to expand the definition of a lottery to include electronic table games and/or traditional slot machines? What composer Frank Loesser in Guys and Dolls might have called the “oldest established permanent floating gambling debate” will certainly continue in Albany.

8. Baseball and Brodsky- Powerful and outspoken Assemblyman Richard Brodsky of Westchester County has been engaged in a running war with New York Yankee president Randy Levine over the financing of Yankee Stadium. Brodsky has challenged the financing as corporate welfare for the richest team in baseball. He has called on the IRS to review the stadium deals of both the Yankees and Mets. The Yankees through Levine have accused Brodsky of political grandstanding. The issue becomes what the end game for each of the participants is and what impact there will be on the sports teams and the taxpayers of New York.

7. Stimulus money – It may not be a legislative issue, but a major issue facing the entertainment industries will be whether they can access federal stimulus moneys. For example, will there be federal stimulus money available to help construct Bruce Ratner’s Atlantic Yards project which is supposed to house the stadium for the relocated New Jersey Nets? Will there be stimulus funds for Broadway theaters or for arts projects?

6. The OTB’s – With the horse racing industry seeming to crater in New York State and in the nation, what will become of the six regional OTB’s in New York State. The commercial racetracks all have video lottery terminals. The New York Racing Association has considerable State support and is on the verge of having VLT’s. But the OTB’s – which are six separate public benefit corporations – have little backup. There is a State task force that is supposed to report on the overall issue, but issues of privatization, consolidation, and shared services have proven difficult in the past to deal with.

5. Ticket Resales – Major issues have sprung up nationwide over the resale practices of companies offering concert tickets. There have been incidents in the United States and Canada where concert ticket go up for sale at Ticketmaster, are quickly sold out, and then reappear at high prices on Tickets.now, a reseller of tickets owned by Ticketmaster. This has become an issue that attorney generals and legislators are likely to review. If there are going to be probes of resalers, it is also likely that these investigations will look at fees and service charges of the ticketing companies. The proposed merger between Ticketmaster and Live Nation is also likely to be subject to legislative criticism.

4. Museum Art Sales – With endowments shrinking due to the massive losses of the stock market, some museums have resorted to selling portions of their collections to pay their operating costs. This is a practice that has been frowned on by much of the museum world, which does not believe that works of art should be used to monetize museum collections.
To accomplish this goal, the omnipresent Assemblyman Brodsky has introduced A. 6959 which would create rules for deaccessioning items in a museum's collection and which would regulate the use of funds received from deaccessioned items. Museums would be required to adopt a binding collection management policy and a mission statement. Items can only be deaccessioned if certain criteria have been met, and “any museum disposing of an item must make a good faith effort to sell or transfer such item to another museum in New York state.” Proceeds derived from the deaccessioning items from a museum’s collection may not be used for normal operating expenses. It remains to be seen if this legislation will be regarded as overly burdensome by much of the museum community and encounter significant resistance.


3. Broadway Generally – With a slew of 13 play closings on Broadway in January and a depressed market in general, the Broadway theaters are looking to Albany for some measure of relief. In the best of all possible worlds, they would like to see some Broadway theater credit much in the same manner as the film production credit. Budgeteers in Albany might tend to view the Broadway stage as a captive industry. Unlike the film industry, it cannot pick up and move to a different state or province. Thus, they may be unlikely to find money for Broadway when Albany is already under fiscal stress. Will there be other measures such as Assemblyman Brodsky’s bill A. 5062 which would authorize the State Power Authority to provide electricity to Broadway and off-Broadway theaters, or will Broadway be fortunate to thank its lucky stars that the sales tax on admissions was not extended to Broadway shows?

2. The Film Credit – In last year’s budget, Governor Paterson and the legislature passed a film production credit which granted film and TV companies get a 30% tax break on production costs for shows shot in New York. This credit has proven so popular that its funds have been depleted, and there may not be enough money in the upcoming budget to continue to supply the credit. Governor Paterson in his budget did not propose to increase funding for the credit. Because of the uncertainty over whether the credit will continue, at least one television show, Fringe, has announced it will leave New York for Vancouver, and others are considering leaving as well. Both the studios and the labor unions have lined up in support of full funding for the credit and making the credit permanent. The AFL- CIO is in support of this tax break stating, "As the legislature debates the 2009 budget, it is imperative to give this program certainty for thousands of workers. ... We are losing jobs right now. Good-paying union jobs with benefits are leaving New York.”

This is a big ticket lobbying number. In 2009, Steiner Studios in Brooklyn reported over $125,000 in lobbying expenses on this issue last year. The Motion Picture Association of America, which was involved in other issues as well, reported over $235,000 in lobbying expenses in New York in 2008. Again, this is an issue where we may see some resolution when the State budget is passed. If the budget does not address this issue, it is likely to be around throughout the session.

1. The Dead Celebrities Bill- This is the issue which flared up at the conclusion of the 2008 legislative session involving the privacy and publicity rights of the estates of deceased celebrities. A huge publicity effort was mounted in Albany last June to obtain legislation similar to California’s Dead Celebrities Bill which was passed in 2007.Much of the lobbying effort was fueled by the estate of Marilyn Monroe. The Monroe estate (Marilyn Monroe LLC) reported $120,000 in lobbying expenses last year to pass this legislation. Numerous other groups were concerned about this issue as well including the Association of the Bar, the Broadcasters Association, the Broadway League, McGraw-Hill, the Motion Picture Association, the Screen Actors Guild, and the Cable TV Association. Another huge fight seems a sure thing in 2009. It is Albany’s answer to the Battle of the Network Stars, and it’s a sure thing that this battle of the dead celebrity stars will be more entertaining than most of the films and television shows that the dead celebrities starred in.

Bennett Liebman is the Executive Director of the Government Law Center of Albany Law School. He also serves on the board of directors of the New York Racing Association.

June 26, 2009

Libel Tourism Legislation

By Bennett Liebman

For large parts of the 20th century, the New York State legislature set the agenda for legislation that would be subsequently passed in other statehouses. It is regrettably no longer the case today, as the New York State legislature is more often noted for its alleged incapacity and dysfunction rather than for its transformative qualities.

Yet, the 2008 legislation that New York State passed on "libel tourism" may end up being a national model. Other states are following the New York example, and the United States Congress may also end up following the New York State model on libel tourism.

www.nysba.org/AM/TemplateRedirect.cfm?Template=/CM/ContentDisplay.cfm&ContentID=28529">More ... (PDF)

December 8, 2009

21st Century Dreidel

By Bennett Liebman

The gambling game of dreidel has become synonymous with the Jewish festival of Hanukah. A dreidel is a four-sided square top, which has four Hebrew letters on each side. The letters are Nun, Gimmel, Hay and Shin, which stand for the Hebrew phrase "nes gadol hayah sham", a great miracle happened there, which in turn symbolizes the marvel that the oil at the initial Hanukah celebration burned for eight nights and days.

The game operates much as a prehistoric dice game. It is played typically for a penny, but also for candy, matchsticks or other tokens. All the players ante up to begin the game. Each spin of the dreidel has four equally likely outcomes. The chances that a Nun, Gimmel, Hay and Shin are all one of four. The players take turns spinning the dreidel. If the letter Nun (N) comes up, there's no payoff, and play passes to the next player. If Gimmel (G) comes up, the player collects the entire pot, and everyone contributes a penny to form a new pot. If Hay (H) comes up, the player collects half the pot. If Shin (S) comes up, the player adds a penny to the pot. After each spin, the dreidel is passed to the next player. The whole pot needs to be replenished only after a Gimmel is spun. The game continues until one player owns the entire pot or until some agreed upon stopping point.(1)

This game has been played for centuries, and the fact is that while small children, or individuals who have consumed an excessive amount of schnapps, might enjoy it, the game is at best slow and tedious. It is hardly the crack cocaine of gambling. It is far closer to the Sominex of gambling. Also at least according to one mathematical study it is an unfair game. The first player who spins the dreidel has a better chance of winning than the second player, and on and on.(2)

The thought here is that the game of dreidel needs to be retooled for the 21st century. It need not be your zayde’s game of dreidel. The payoffs need to be increased. The pace of the game needs to be sped up, and there ought to be a way to involve all the players while one player is spinning the dreidel.

It might be best if the game of dreidel could be combined with the best elements of the gambling game of craps. Two dreidels would be utilized, and the game would be played against a bank – rather than against the other players. All players could bet on all spins of the dreidel, and there would be the opportunity to win (or lose) real money. In short, it might actually be an interesting game.

Many skeptics might claim that the game of craps has seen better days, and that it reached its peak during the era of Nathan Detroit and the Rat Pack. Even if that is an accurate assessment of the current state of craps, it is far better than the game of dreidel which probably peaked in popularity during the age of Maimonides.(3)

Here’s how the basics of the 21st century dreidel game might be played. I have little training in statistics so the odds calculations are rudimentary. As a casino game, 21st Century Dreidel could be designed to insure a house edge on all wagers, but the edge would not be the same for all wagers. It could also be played as a friendly game with almost no edge to the house. I have tried to use traditional craps terminology to describe possible wagers.(4)

Basic Play:

Pass Bet – (Even money) On the first spin or the “coming out” roll, the “pass” bettors win on any doubles. Any other result becomes the point. Let’s say the point is N-S. If the payer spins an N-S before spinning any double, the “pass” bettors win. If the player spins any double before spinning N-S, the “pass” bettors lose. This is truly an even money bet. If this was a casino which needed a small house edge, you might make the “pass” bettors lose on a double S on the first spin.

Don’t Pass Bet - (Even Money) This is the reverse of the pass bet. On the first spin, the “don’t pass” bettors lose on all doubles. Once the point is established, the “don’t pass” bettors win if a double comes up before the point is spun. The “don’t pass” bettors lose if the point is spun before a double. Again, this is a 50-50 bet. A casino might want to charge the “don’t pass” player double for a double S on the first spin.

Similarly “come” bets and “don’t come” bets (Even Money) would work in the same fashion as “pass” and “don’t pass” bets after the point has been established. Again the odds are exactly even money for these bets.

Single Spin Wagers

Any Double (3-1) The odds of spinning a double are 4 of 16. So in order to put the players at the same level as the bank, the payoff should be 3-1. At a casino, the payment to the winning bettor might be 2-1 or 5-2.

2 N’s, S’s, G’s H’s (15-1) The odds of spinning 2 N’s, or any specific double 1 of 16 or 15-1. Again, at a casino, it might be appropriate to maintain a house edge and pay winning bettors at odds of 14-1 or 13-1.

Any N, S, G, H (1.2-1) The odds of spinning at least one N or other specific letter is 7 of 16. This translates into real odds of 1.2-1. The appropriate odds level for a payout both in a casino and at a friendly game should probably be even money.

Any N, S,G, or H but no doubles. (1.67-1) The odds of spinning at least one N (but not 2 N’s) is 6 of 16 or 1.67-1. Again, a casino might only pay out at 3-2.

Point Established Bets – These are wagers that can be placed after the point has been established. It is traditional in craps that the “pass” and can take “pass” line the odds by placing additional wagers on their original bets after the point has been established. (The same is the case for “don’t pass” bettors who can lay the odds after the point has been established. These bets are set at the correct odds. Most casinos will allow the player to double or triple the size of his or her original bet. In 21st century dreidel, the additional “pass” bets would pay off at 2-1. The additional “don’t pass” bets would pay off at 1-2.

Opposite – (Even money) If the point is G-S, then an opposite bet would be that H-N would be spun before the G-S is spun. There are 2 in 16 chances that a G-S would be spun, and similarly 2 in 16 chances of an H-N. The odds are exactly even, and this would be appropriate in a friendly game, if not at a casino. This bet could be utilized whenever the point has been established.

There are clearly other wagers that might be considered in the 21st century game of dreidel. But the point is that 21st Century Dreidel (5) is not just your typical crappy game of dreidel. It combines the best of both craps and dreidel. It has the potential to get people over the age of 10 interested in playing dreidel. It offers plenty of action and the opportunity to win significant money. It could be a popular wager in the state of Israel which regularly ponders the legalization of casinos, (6) and it might prove to be a useful wager for charitable organizations conducting casino nights during the season of Hanukah. Maybe State constitutions, statutes, and rules can be changed to authorize the 21st century game of dreidel as a charitable game of chance. From there, it could be a staple at tribal casinos. Who knows what the limits will be for the 21st century game of dreidel? Maybe we’ll soon have to worry about dreidel specialists shaving dreidels as part of a scheme to produce a higher percentage of Gimmels.

1. For the rules of the game of dreidel, see http://www.mahalo.com/how-to-play-dreidel.

2. Feinerman, Robert. 1976. An ancient unfair game. American Mathematical Monthly 83(October):623-625.

3. The Jewish philosopher Moses Maimonides lived from 1135-1204.

4. A craps glossary can be found at: http://casinogambling.about.com/od/craps/a/crapsterms.htm and http://homepage.ntlworld.com/dice-play/CrapsGlossary.htm.

5. Other names for the game are possible. Maybe it should be called Crappy Dreidel, Dueling Dreidels, or maybe Dead Sea Stud Dreidel?

6. “BDI: 3 casinos will create 1,200 new jobs,” Globes [online] - Israel's Business Arena December 10, 2003. See also Freidberg and Thompson, “Politics of Casino Gambling: Israel and the Palestinian Authority -An Update,” Gaming Law Review, December 2003, 7(6): 421-426.

July 8, 2010

EASL Legislation in Albany

By Bennett Liebman

With the legislature leaving for the time-being this week, here’s where we are the major pieces of EASL legislation:

1. Dead Celebrities Rights Legislation – S. 6790 was not acted on by either house. No companion bill was even introduced in the Assembly

2. Resale of Tickets – S. 8340- A was passed by both houses. Since this legislation was a program bill of Governor Paterson’s, it is virtually certain to be signed by him. The bill permits the resale of tickets (what used to be known as scalping) until May 15, 2011.

3. The film credit legislation, which was part of the overall revenue bill in the Budget ( A. 9710-D, S. 6610-C), passed only the Assembly. The full revenue package is supposed to be the subject of future negotiation between the Governor and the two houses of the legislature. Again, there is no disagreement among any of the participants in the budget negotiations about the size of the film credit, which is supposed to be $420 million per year for the next five years.

July 13, 2010

Reselling Tickets in New York: 2010

By Bennett Liebman

The ticket reselling saga in New York State reached a measure of temporary closure two weeks ago with the signing by Governor Paterson on July 2, 2010 of legislation (Ch. 151, Laws of 2010; Glenn Bain and Kenneth Lovett, " Gov Paterson Kos Bruce Springsteen's and Other Rocker's Bid to Make Tickets Paperless," New York Daily News, July 3, 2010) which largely reinstated the provisions authorizing the free market in the reselling of tickets. This capped a month and a half period where the laws authorizing the free market in ticket reselling lapsed, triggering the reinstitution of New York State's traditional strict limits on the scalping of tickets.

From 1922 -2007, New York State had a rigorous law limiting the price for which tickets for entertainment events could be resold. (Michael H. Samuels, "New York's Ticket Resale Law Leaves Industry in Limbo," Long Island Business, May 28, 2010. Arts and Cultural Affairs Law, §, 25.30 .1.(c)) There was limited and inconsistent enforcement, and with the advent of the Internet, these strict anti-scalping laws had become antiquated. The anti-scalping law was replaced in 2007 by legislation which established a free market for the resale of tickets coupled with a system under which ticket brokers were regulated by the New York State Department of State. (See. Ch. 61, Laws of 2007 and Ch. 374, Laws of 2007)

The 2007 legislation was set to expire in 2009, and was renewed by the legislature in 2009 until May 15, 2010. (Ch. 68, Laws of 2009) The 2009 renewal renewed the free market in included a requirement that the Secretary of State report on the overall effectiveness of the 2007 deregulation scheme. The Secretary of State reported that the legislation should be renewed. In reviewing the issue of paperless ticketing, she also found that paperless ticketing "arguably cuts down on ticket speculation insofar as the actual purchaser has to be present in order to gain access to the concert venue." (Samuels, note 2 supra)

Nonetheless, the 2010 renewal was hardly easy. The 2010 battle largely involved the issue of the use of paperless tickets. Paperless tickets are tickets issues for an event without any paper whatsoever. They are not e-tickets which can be printed out at home; they are closer to what would be considered electronic personal seat reservations. (Paul Fahri, 'Paperless Ticketing' Aims to Thwart Scalping at Concerts, Sports Events," Washington Post, July 5, 2010) The buyer uses a credit card to purchase the ticket. "The buyer must then go to the venue with the same credit card and a photo ID to gain admittance. A swipe of the credit card at the gate produces a slip confirming the location of the reserved seat." (Id)

This was largely a battle between the primary ticket sellers (Think Live Nation/Ticketmaster which overwhelmingly dominates this market) joined by venue operators and certain artists against the larger ticket resellers (Think StubHub and Razorgator). Over the past few years, a number of artists such as Miley Cyrus and Bruce Springsteen have insisted on a paperless system under which the artist's fans would have direct access to the primary tickets since the paperless system would largely prevent purchasers from selling their tickets on sites such as StubHub. This arguably means "that tickets end up in the hands of fans, not speculators, ... and at the prices established by the performer." (http://www.ticketnews.com/view/TopPrimarySellers) The proponents of the paperless system also believe that it thwarts counterfeiting and the problem of lost tickets. (Id) They suggest that there is no reason to regulate paperless tickets while the technology is evolving and where technology may resolve these issues.

The difficulty is what happens when the purchaser wants to give a gift of the paperless tickets to his or her friends or relatives. Also, what happens to the would be attendees if the person who purchased the tickets fails to make it to the event? Do the parents of the children who want to attend the Miley Cyrus concert have to actually show up at the venue site to swipe their credit card? Perhaps more significantly, the battle is one between the primary ticket sellers and the secondary ticket sellers. Under a paperless system, the ticket buyer would need to go through the primary ticket seller or its agent to transfer a ticket. The secondary ticket vendors see paperless tickets as "a way for Ticketmaster and other companies to control, and potentially eliminate, that secondary market."(Ben Sisario, "Scalping 2.0: Naming the Ticket's Master," New York Times, June 6, 2010)

On the political side, the fight was largely fought between Governor Paterson (with the State Assembly as an ally) against State Senator Craig Johnson. Governor Paterson supported a requirement that purchasers have a right to a paper ticket (Governor Paterson issued a statement to the press saying, "Specifically, the bill would make it illegal for venues and ticketing companies to prohibit ticket holders from transferring tickets on their own. In many cases, these entities require that ticket holders charge minimum prices and pay substantial service charges just to get rid of tickets that they can no longer use. This important consumer protection will ensure that consumers can give tickets as gifts, and transfer or sell tickets that they cannot use to other people without having to go through the entity from which they originally purchased the tickets. May 18 Statement from Governor David A. Paterson, http://www.state.ny.us/governor/press/051810_StatmntGovDavidAPaterson.html), while Senator Johnson wanted no restrictions on paperless ticketing. The Assembly initially passed the Governor's program bill (Assembly Bill No. 11108) which required "require that consumers be provided with the option of a transferable ticket at the time of first public sale." (New York State Assembly Memorandum in Support of Legislation, Assembly Bill No. 11108) The Senate, however, only passed legislation extending the existing legislation one month until June 15, 2010. (Senate Bill No. 7835)

With the impasse between the Senate and the Assembly, the free market in ticket resales came to an end on May 15, 2010, and the old anti-scalping laws went back into force. (Kenneth Lovett, "Gov Reenacts Tough Ticket Scalping Law," New York Daily News, May 21, 2010)

Meanwhile, the war of words between Senator Johnson and the Governor became more heated. Senator Johnson at a public hearing on June 2 stated, "For reasons I have yet to get a satisfactory answer on, Governor Paterson has chosen to ignore his own secretary of state, and a pre-existing agreement that let her report govern any extension of the secondary ticket market, and insist that the paperless system be altered in any final legislation."(Ryan Hogan, "New York Lawmakers Still Debating Paperless Ticketing Legislation," http://www.authoritytickets.com/?p=214. The video of the hearing held by the Senate Committee on Investigations and Government Operations can be seen at http://www.nysenate.gov/event/2010/jun/02/paperless-ticket-transferability) Senator Johnson cited a New York Daily News editorial which stated, "From start to finish, this is craziness. Paterson and the Legislature should simply reauthorize the law as it existed and let arenas expand into paperless ticketing without government interference. Albany should butt out of private business until a problem arises, if one ever does."("Ticket Blitzed," New York Daily News, May 24, 2010)

Nonetheless, with considerable confusion occurring due to the reversion to the pre-2007 anti-scalping provisions, Senator Johnson eventually largely acceded to the demands of the Governor Paterson on paperless tickets. The Governor resubmitted a program bill (Senate Bill No. 8340-A, same as Assembly Bill No. 11536-A) ,and it was passed at the conclusion of the legislative session in 2010. It was quickly signed into legislation by Governor Paterson. (Ch. 151, Laws of 2010, signed on July 2, 2010)

The basic provision on paperless tickets in the enacted bill requires that an operator of a place of entertainment may not "employ a paperless ticketing system unless the consumer is given an option to purchase paperless tickets that the consumer can transfer at any price, and at any time, and without additional fees, independent of the operator or operator's agent.

Notwithstanding the foregoing, an operator or operator's agent may employ a paperless ticketing system that does not allow for independent transferability of paperless tickets only if the consumer is offered an option at the time of initial sale to purchase the same tickets in some other form that is transferrable independent of the operator or operator's agent including, but not limited to, paper tickets or e-tickets." (Id., §8; Arts and Cultural Affairs Law, § 25.30 .1.(c)) Thus, consumers are entitled to the option to purchase a transferrable ticket at the time of the first purchase.

The language of the enacted bill seems somewhat less restrictive of the right of the operator of a place to entertainment or restrict resale of promotional tickets. In the first Governor's program bill, the only tickets that could not be resold were promotional tickets for people with disabilities.(See Assembly Bill No. 11108 note 13 supra ) In the enacted bill, the operator may restrict the" resale of tickets to a far larger community. Resales can be restricted "that are offered as part of a targeted promotion, at a discounted price, or for free, to specific membership in, a specific community or group, including, but not limited to, persons with disabilities, students, religious or civic organizations, or persons demonstrating economic hardship." (Arts and Cultural Affairs Law, §25.30.2)

Other provisions of Ch. 151 were far less controversial. Automated ticket purchasing software to purchase tickets was made illegal by the legislation. (Arts and Cultural Affairs Law, §25.24) The free market in resale of tickets is extended until May 15, 2011. (Ch 151, Laws of 2010, §5) Certain penalties for violating the ticket reselling provisions of the law are increased(Id., §9, Arts and Cultural Affairs Law, §25.35.7), and service charges in association with tickets sold shall be reasonable. (Id. §7, Arts and Cultural Affairs Law, §25.29.1) Additionally, "operators and their agents would be prohibited from charging differing face value prices on any given ticket based on its form or transferability" (New York State Senate Introducer's Memorandum in Support for S. 8340 -A. Arts and Cultural Affairs Law, §, 25.30 .1.(c)), and obstructed view seats must be disclosed." (Ch. 151, Laws of 2010 §8, Arts and Cultural Affairs Law §25.30.4)

Finally, the legislation would provide for a new reporting requirement for ticket brokers. (Id. §6, Arts and Cultural Affairs Law §25.25.2) This "would enable the State to better determine the impact of the resale marketplace on consumers, as well as to study the purchasing trends of consumers." (Introducer's memorandum, note 28 supra )

In the absence of a crystal ball that can accurately foresee developments in ticket technology, it remains to be seen what happens next. Will certain performers not hold concerts in New York due to the limits imposed on paperless tickets? Will the law de facto stop paperless tickets in New York, or will primary ticket vendors be able to figure out a way to work within the law to establish a system under which the overwhelming majority of customers will opt for paperless tickets? Will other states follow New York State's lead on paperless tickets? Will technology provide a solution for the easy transferability of paperless tickets? Will anyone venture to explore the tax consequences occasioned by the resale of tickets for the all the parties involved in a transaction? In short, can we expect a similar battle to reoccur in the legislature in May of 2011? We are likely to need to log in next year to find out what will happen.

September 1, 2010

New York's Film Tax Credit in the 2010 Legislature

By Bennett Liebman

In the course of final passage of the State budget, the State legislature, followed by gubernatorial approval, passed a significant extension and expansion of New York's existing film tax credit. The 30% film production tax credit was extended for five additional years, and it was funded at the rate of $420 million per year for this five year period.(1)

Additionally, the legislature added a standalone credit for productions that do their post production in New York State. Eligible productions that complete 75 percent of their post production in New York can now apply for a 10% credit for the post production work done in NY.(2)

The legislation allocates additional $420 million in each of 2010, 2011, 2012, 2013, and 2014 and defines this as an "additional pool" for those years. Previously, the legislature had allocated $85 million in 2010, $90 million in 2011 and 2012, and $110 million in 2013 for the film credit.(3) In 2009, the legislature allocated an additional $350 million for the film credit for that year (4) on top of $75 million that had been previously allocated.(5)

New York State is among numerous states that have provided tax incentives to the film and TV industries. According to the nonpartisan Tax Foundation, 44 states plus the District of Columbia and Puerto Rico offered significant movie production incentives in 2009, up from five states in 2002.(6) 28 of these states offered tax credits. In the Unites States, the film tax credit concept started in Louisiana which in 1992 passed legislation for tax credits for investment losses for films which contained substantial Louisiana content.(7) The initial Louisiana experiment did not spur much added economic activity. Minnesota similarly enacted a film credit in 1997, (8) but by 2002, there were only four states in the nation that had film incentives. New Mexico (9) and Louisiana,(10) however, changed the entire ballgame in 2002 by expanding the monetary value of the film tax credits significantly. The 2002 Louisiana legislation included "a series of incentives designed to revitalize the state's movie business, which had declined in part because of a nationwide migration to Canada, where producers enjoy generous incentives and a favorable currency exchange rate."(11)

New York State has one of the larger film production industries in the United States. "Sources generally conclude that the states of California, New York, and New Mexico receive the most economic impact (in that order.)"(12) The Motion Picture Association in 2006 estimated a $1.5 billion economic effect for the film industry in New York.(13) The New York Governor's Office for Motion Picture and Television Development states that in 2009 the film production credit led to $1.88 billion in direct production spending.(14)

New York started its film production credit in 2004 with the aggregate amount of annual tax credits capped at $25 million (15) It was expanded in 2006 to increase the cap to $60 million.(16) It was further expanded in 2008 and 2009 to increase the cap, and with the 2010 legislation, it has reached its highest levels of State support.

The New York 30% credit applies only to below the line film expenses. According to the Governor's Office for Motion Picture and Television Development, below the line film expenses "mean hard costs of production including the salaries of crew and extras as well as equipment and facility rental, lab costs, construction materials, props, wardrobe, locations, editing and catering, etc. Typically, BTL represents 65 percent of the average budget."(17) Thus, the 30% credit would typically provide a benefit that approximates "18 percent of a project's total budget."(18)

Besides the additional $2.1 billion in funding, the 2010 legislation placed some qualifications on claiming the credit. The legislation specifies a time frame which will determine the tax year for which the credit can be claimed. It requires that at least 10% of the principal shooting days be spent at a qualified New York film production facility. This 10% requirement is waived for "qualified independent film production companies" which are smaller entities defined as entities "principally engaged in the production of a qualified film with a maximum budget of fifteen million dollars, and (ii) controls the qualified film during production, and (iii) either is not a publicly traded entity, or no more than five percent of the beneficial ownership of which is owned, directly or indirectly, by a publicly traded entity".(19)

The legislation requires that the completed DVD release of the production either contain an end credit acknowledging New York State support of the production or contain a New York promotional video approved by the governor's office of motion picture and television development. The production must also "certify that it will purchase taxable tangible property and services, defined as qualified production costs" only from companies registered to collect sales tax in New York.(20)

Postproduction costs of a qualified production will only be eligible for the general film credit where "the post production costs paid or incurred that is attributable to the use of tangible property or the performance of services in New York in the production of such qualified film equals or exceeds seventy-five percent of the total post production costs spent within and without New York in the production of such qualified film."(21)

The 2010 legislation also provided a separate credit that would cover 10% of work at a post production facility. This would cover works not eligible for the general 30% film production tax credit. It would cover works only where the costs at the New York post production facility met or exceeded "seventy-five percent of the total post production costs paid or incurred in the post production of the qualified film at any post production facility."(22)

$7 million is allocated annually for the post production tax credit. A separate chapter amendment makes clear that this $7 million allotment is part of and not in addition to the overall $420 million annual allocation.(23) The chapter amendment provides "that the post production tax credit will be allocated $7 million annually from the $420 million pool of available tax credits. Unallocated post-production tax credits may be made available for the Empire film production credit upon the exhaustion of the aggregate amount of film credits."(24)

In an especially tight budget year, there was significant legislative support for the film credit in New York. Governor Paterson's initial budget proposed the $2.1 billion in additional funds for the credit, and the only action taken by the legislature to in any way alter this funding was to use $35 million of the $2.1 billion allocation to establish the post production credit.

There was little substantive discussion given to curtailing or suspending the film credit. There were few questions raised about the overall merit of the program. While the Governor's Office for Motion Picture and Television Development maintains that the funding is necessary to make New York competitive with states such as Connecticut Michigan and Massachusetts that have more generous film credits, (25) some studies have questioned the overall value of the film credit.

The Tax Foundation has stated, "While broad-based tax competition often benefits consumers and spurs economic growth and development, industry-specific tax competition transfers wealth from the many to the few. Movie production incentives are costly and fail to live up to their promises."(26)

"A 2005 study from the Louisiana Legislative Fiscal Office found that the state could expect to recoup 16 percent to 18 percent of the tax revenue it spends on the film incentive program. This means Louisiana--often held up as the standard-bearer for successful film incentive programs--loses about 83 cents for every dollar it spends on movie production incentives."(27) A Pennsylvania legislative study found some limited justification for its film credit. The report stated, "While there is a net fiscal loss when comparing the net present cost of the Film Tax Credit program ($58.2 million) to the taxes generated by productions directly receiving tax credits ($17.9 million), there is a net fiscal gain to the Commonwealth of $4.5 million when considering all of the revenues generated by the entire industry. While some of this activity would occur without the benefit of the FTC, a significant proportion of this activity would be at risk without such a tax credit program."(28)

This year, Iowa, Kansas, and New Jersey terminated or temporarily suspended their film tax credit program, the first states in the nation to do so.(29) The Iowa suspension was largely due to corruption found in the film office,(30) and the New Jersey suspension, which was based on budgetary concerns, has been harshly criticized by officials in Bergen County which has often been the site of Law& Order SVU episodes.(31)

Nonetheless, a serious review of the New York film credit will not likely occur in 2010.

1Ch. 57, Part Q, L. 2010.
2Id. See Tax Law §§31, 210.41,and 606.(qq).
3 Ch. 57, L. 2008.
4 Ch. 57, L. 2009.
5See note 3 supra.
6 Tax Foundation, "Study: Film Tax Credits, Production Incentives Fail to Spur Economic Growth," January 14, 2010, http://taxfoundation.org/research/show/25707.html.
7 Louisiana Act 894 (H.B. 252) (1992).
8 Tax Foundation, "Movie Production Incentives: Blockbuster Support for Lackluster Policy," January 2010; The Hollywood Reporter ,June 25, 1997.
9 2002 N.M. ALS 36.
10 2002 La. ACT 6.
112002 La. ACT 6; La. R.S. 47:6007; Stewart Yerton, "Counting on Film Credits," New Orleans Times Picayune, May 11, 2003.
12 Michal H. Salima, "State Film Tax Incentives and the Related Potpourri of Federal Income Tax and Tax Accounting Considerations," 62 The Tax Lawyer 1085 Summer, 2009.
13Motion Picture Association of America, "The Economic Impact of the Motion Picture and Television Production Industry in the United States," 13-14 (2006), http://www.mpaa.org/press_releases/mpa%20us%20economic%20impact%20report_final.pdf.
14 Report on the Empire State Film Production Tax Credit, August 2010, http://www.tax.state.ny.us/pdf/stats/policy_special/film_production_credit/report_on_the_empire_state_film_production_credit_august_2010.pdf .
15Ch. 60, L. 2004.
16Ch. 62, L. 2006.
17 See note 14 supra at p. 24.
18 Id. Besides the state film tax credit, new York City provides a 5% credit applied to the applicant's New York City tax liability. See Tax Law, §1201-a.(b).
19 Tax Law, §24.(b)(7).
20Tax Law §24.(a)(4).
21 Tax Law §24.(b)(1).
22 Tax Law §31.
23 Ch. 312, L. 2010.
24 New York State Assembly Memorandum in Support of Legislation, A. 11678.
25 See note 14 supra at 24.
26See note 8 at 16. See also Mark Sanchez, "Tax Foundation Report Hits Film Incentives by States," West Michigan Business Review, January 14, 2010 http://www.mlive.com/business/west-michigan/index.ssf/2010/01/tax_foundation_report_hits_fil.html.
27Tax Foundation Commentary, "Michigan Should Stop Red-Carpet Tax Treatment of Film Industry," May 4, 2010 http://www.taxfoundation.org/research/show/26275.html.
28 Pennsylvania's Film Production Tax Credit and Industry Analysis, Legislative Budget and Finance Committee May 2009, Pg. 5 http://lbfc.legis.state.pa.us/reports/2009/35.PDF.
29 Tax Foundation, "A Review of 2010's Changes in State Tax Policy, "August 23, 2010. http://www.taxfoundation.org/research/show/26645.html.
30Associated Press, "Iowa AG Files Charges over Film Tax Credits," February 8, 2010 http://wcco.com/local/film.tax.credits.2.1480422.html. Corruption issues have also arisen in Louisiana. See "Film Tax-Credit Scam That Ensnared Dozens With Ties To New Orleans Saints Leads to Guilty Plea," New Orleans Times Picayune, May 13, 2010, http://www.nola.com/crime/index.ssf/2010/05/film_tax-credit_scam_that_ensn.html; "Editorial: Lights, Camera, Corruption," New Orleans Times Picayune, August 20, 2007, http://www.nola.com/news/t-p/editorials/index.ssf?/base/news-4/1187589162244190.xml&coll=1.
31"Freeholders Call for Restoration of Tax Credit for NJ Filmmakers," South Bergenite, August 26, 2010, http://www.northjersey.com/arts_entertainment/101535368_Locals_could_lose_big_on_area_filming_loss.html; "Law & Order: SVU Moves Production," Philadelphia Business Journal, July 30, 2010, HTTP://WWW.BIZJOURNALS.COM/PHILADELPHIA/BLOGS/STIMULUS_TRACKER/2010/07/LAW_ORDER_SVU_MOVES_PRODUCTION.HTML.


January 7, 2011

Spider-Man Can't Turn Off the Critics

By Bennett Liebman

On December 28, 2010, New York Post reporter Michael Riedel (Riedel had previously been very critical of the production of the musical. See "And Spider-Man's Latest Troubles Are ..." New York Magazine, December 29, 21010 http://nymag.com/daily/entertainment/2010/12/and_spider-Tman_latest_troubles.html; Michael Riedel, "Bono, You too Should Care," New York Post, December 24, 2010) was denied his seat for the preview to the Broadway musical "Spider-Man: Turn off the Dark."

As described by Riedel:
As I was making my way down the aisle, a security guard approached and said, "Sir, may I see your ticket?"
I was wary, but showed it to him anyway.
"You can't sit here, sir," he said.
Suspecting that I was about to be thrown out of the theater on my ear (can't imagine why!), I stood my ground. "That seat is empty, and it's mine," I said as I scrambled over several sets of knees.
A few minutes later, the guard returned, this time with a house manager.
"I'm going to have to move you, sir," the manager said.
When I asked why, he said -- and I quote -- "For safety issues."
It really doesn't get any better than this, I thought. I didn't budge. The house manager reiterated: "I have another seat for you, sir, but I must move you for safety reasons." (Italics mine.)
I took out my notebook, identified myself as a reporter and asked why my seat in row D -- D for death, I guess -- wasn't safe. The color drained from the manager's face and, after conferring with the security guard, he said: "Sir, this seat has been sold twice. I have another seat for you, and I will give you a full refund."
Things were getting fishier by the minute, but I wasn't going to move.
"Sir, we cannot start the show until you move," the manager said. "If you do not, I will have to call the police..."
As the manager escorted me to the balcony, I said, "Look, are you banishing me to the balcony because I'm Michael Riedel of the New York Post?"
"I did not know who you were, sir, until you told me," he said.
My ego deflated, I plopped down into my new seat -- a lousy one, up in the rafters, against the wall. I fired a few more questions at the manager, but he bolted. I don't know if he was telling the truth about the seat being sold twice -- the view from my new seat was so bad, I couldn't see my old seat or half of the flying stunts.
But apparently D116, my original seat, was the only "dangerous" one since nobody else in the aisle was given the heave-ho.
I have yet to get to the bottom of this mystery. The press agent for "Spider-Man" says the producers weren't aware of it, though when they heard about it, they laughed.
I couldn't find the house manager after the show. And I'm still waiting for my promised refund. (Michael Riedel, "'Spidey' Stole My Seat!" New York Post, December 29, 2010. See http://www.nypost.com/p/entertainment/theater/spidey_stole_my_seat_Qm9hCJM2Hqh4I8Mr6ojsHP).

The short question is can they do that? Can Mr. Riedel be excluded from Spider-man?

The short answer is that if Mr. Riedel has a ticket, they can't exclude him due to a state statute passed in 1941. That statute basically reversed - for the Broadway stage - a longstanding precedent established by the New York State Court of Appeals. In that 1916 decision, dealing with a fact pattern similar to that of the Riedel case, the Court of Appeals upheld the right of a theater owner to exclude a newspaper critic from its theater. ( Woollcott v. Shubert, 217 N.Y. 212 (1916).). Michael Riedel can probably thank the Shubert Brothers for their persistence in trying to block criticism of their shows. They largely made this an issue that warranted legislative attention.

Alexander Woollcott and the Shuberts

In the 1916 case, the theater owners were the Shubert Brothers, and the critic was Alexander Woollcott, at the time the theater critic for The New York Times. (Woollcott eventually became a famous media personality, and his personality was parodied in the play "The Man Who Came to Dinner" written by George S. Kaufman and Moss Hart in 1939.). On March 17, 1915, the Shuberts opened the show, "Taking Chances." Woollcott's review, which did not have a byline, appeared on March 18. He found that the play was "not vastly amusing." ("Lou-Tellegen in a German Farce," New York Times, March 18, 1915.). He added, "Not much energy and ingenuity was left for the reconstruction of a good play. It must be said that the resulting product is quite absurd and little more than that." (Id.). Based on this review, the Shuberts determined to ban Woollcott from attendance at Shubert theaters.

Woollcott's review was hardly the only negative review of "Taking Chances." The play drew six mixed reviews and eight pans. Its only positive review was from the Shubert controlled New York Review. (Foster Hirsch, The Boys from Syracuse, First Cooper Square Press (1998 ) Pg. 107. See also "Reviewing a Play Under Injunction," New York Times, April 4, 1915.).

On April 1, 1915, Woollcott presented orchestra tickets to see a Shubert play but was denied admission. Woollcott and the Times sued under the State's Civil Right Act and soon received an injunction enabling Mr. Woollcott to admission at the Shubert theaters. (Id., "Reviewing a Play Under Injunction."). The exclusion of Woollcott soon became a major national issue, with much of the press lined up against the Shuberts. (The Boys from Syracuse, supra note 7 at Pg. 108.).

The focus of the litigation was New York State's Civil Right Act. (Civil Rights Law § 40.). This law had been passed in 1895 and was one of a number of state laws that had been passed in reaction to the Supreme Court decision in the Civil Rights Cases. (109 US 3 (1883).). The Supreme Court had restricted the federal Civil Rights Act of 1875 from applying to private actors. The New York law - then popularly known as the Malby Law after its sponsor Assemblyman and Former Assembly Speaker George Malby of St Lawrence County - had been largely designed to provide civil rights to blacks. (Ch. 1042, L. 1895.). It provided for civil recoveries in the event that to "all citizens of every race, creed or color" (Id. §2.) who were not provided full and equal accommodations at certain establishments including inns, restaurants, hotels, music halls and theaters. (Id. §1.). The legislation had been decried by The New York Times as a bill that "should have been entitled 'an act to enable negroes to blackmail the keepers of restaurants and hotels.'" (Editorial, New York Times, June 19, 1895. For another New York Times article in opposition to the Malby Law see "Equality By Legislation, New York Times, June 30, 1895.).

In 1913, the Civil Rights Law was expanded to include hotels "for the accommodation of those seeking health education or rest." (Ch. 285, L. 1913.). Additionally, the law prevented places of public accommodation from publishing or printing advertisements or communications that they intended to discriminate in violation of the Civil Rights Law. This law - the Levy-Wagner Law - was largely designed to prevent discrimination against Jews at resort hotels. (See Jeffrey Gurock, "The 1913 New York State Civil Rights Act, "1 Association for Jewish Studies Review, 93 (1976).).

In amending the Civil Rights Act of 1895, the 1913 legislation changed the beginning lines of the statute to read, "All persons within the jurisdiction of this state shall be entitled to the full and equal accommodations, advantages and privileges of any place of public accommodation, resort or amusement, subject only to the conditions and limitations established by law and applicable alike to all persons. No person, being the owner, lessee, proprietor, manager, superintendent, agent or employee of any such place, shall directly or indirectly refuse, withhold from or deny to any person any of the accommodations, advantages or privileges thereof..."

That overall language change was the basis of the Times/Woollcott argument that the public enjoyed an overall right to enter places of public accommodations specified in the Civil Rights Law. (The Court of Appeals had ruled in Grannan v. Westchester Racing Association, 153 N. Y. 449 (1897) after the initial passage of the Malby Law that there was no general right of individuals to enter a place of public accommodation. The plaintiffs needed to find that the statute had been amended so that Grannan would no longer apply.).

At the trial level, the judge ruled for Woollcott and the Times. The judge found that New York Civil Rights act provided the plaintiff with a broad right of general access to the places, such as theaters that were specifically enumerated in the statute. (Woolcott [sic]v. Shubert, 90 Misc. 474 (Sup. Ct., N.Y. County 1915).).

On appeal, however, the courts ruled for the Shuberts. The appellate division (Woollcott v. Shubert, 171 A.D. 901, (1st Dep't 1915).), followed by the unanimous Court of Appeals ( See note 3 supra. Voting for the Shuberts in the case was Judge Cardozo, who had previously served as an attorney for the Shuberts. Andrew L. Kaufman, Cardozo, Harvard University Press, 1998, Pg. 101.), found that the Civil Rights Law did not provide for general public access to places of public accommodation. Instead, it only banned discrimination "expressly qualified by the subsequent words 'on account of race, creed or color.'" (Id. at 220.). Thus, only if Woollcott had been denied admission based on his race, creed, or color would the Civil Rights Law apply.

The plaintiffs further argued that the legislative debates involving the 1913 law established the intent to abrogate the common law. The Court of Appeals, however, found, "It is established law, however, that the statements and opinions of legislators uttered in the debates are not competent aids to the court in ascertaining the meaning of statutes." (Id. at 221.). Since Woollcott had not been discriminated against based on his race, creed, or color, the theater owner retained its common law right to exclude him at will.

The 1941 Statute

The Woollcott decision remained in place until 1941when the legislature enacted a new addition to the Civil Rights Law. (Ch. 893, L. 1941.) That bill added a new section to the Civil Rights Law (Civil Rights Law §40-b.) which was designed to repeal the Woollcott decision. The provision, which has remained unchanged since its enactment reads:

"No person, agency, bureau, corporation or association, being the owner, lessee, proprietor, manager, superintendent, agent or employee of any place of public entertainment and amusement as hereinafter defined shall refuse to admit to any public performance held at such place any person over the age of twenty-one years who presents a ticket of admission to the performance a reasonable time before the commencement thereof, or shall eject or demand the departure of any such person from such place during the course of the performance, whether or not accompanied by an offer to refund the purchase price or value of the ticket of admission presented by such person; but nothing in this section contained shall be construed to prevent the refusal of admission to or the ejection of any person whose conduct or speech thereat or therein is abusive or offensive or of any person engaged in any activity which may tend to a breach of the peace.

The places of public entertainment and amusement within the meaning of this section shall be legitimate theatres, burlesque theatres, music halls, opera houses, concert halls and circuses." [Emphasis added].

Thus, if a critic, or any other person, holds a ticket to a show, he or she cannot be ejected or excluded from the performance. That holds true even if the potential attendee receives a refund of the purchase price of the ticket. Only if the attendee is abusive, offensive or engaged in any activity which may breach the peace can the attendee be excluded or ejected.

The law does not apply to all conceivable places of public entertainment. Movie theaters are not covered. (Impastato v. Hellman Enters., 147 A.D.2d 788, 790 (3d Dep't 1989).). Sporting events are not covered, (Mandel v. Brooklyn Nat'l League Baseball Club, 179 Misc. 27 (Sup. Ct., Bronx Co., 1942).), but it certainly applies to Broadway theaters, and to Spider-man.

The constitutionality of the law was quickly tested after its enactment in 1941, and again it involved the Shuberts. The Shuberts in Manhattan denied admission to a patron named Robert Christie from Schenectady County who held a ticket for the Broadway show "Panama Hattie." Christie sued the Shuberts for $500 under the amendment to civil rights law. (Associated Press, "Laws Protecting Critics of Plays Argued in Court, "New York Times, September 21, 1941.). Longtime Shubert lawyer William Klein, as part of this test case, argued that it was important for theater owners to be able to exclude critics because "95 percent of readers of critical reviews are influenced by criticisms." (Id., Klein's long-time association with the Shuberts is highlighted in The Boys from Syracuse, supra note 7 at Pg. 125.). The Shuberts argued that the classification of the law, by excluding motion picture theaters, was a violation of the Equal Protection Clause.

The trial court disagreed with the Shuberts. It found that the statute was a valid exercise of the police power and that it was not possible to find that the exclusion of the motion picture theaters made the statute "arbitrary, capricious, or unreasonable." (Associated Press, "Rules for Theatre 'Safe for Critics,'" New York Times, December 13, 1941.).

On appeal, the Appellate Division affirmed the trial court's decision. It stated, "The New York statute is constitutional and sustains plaintiff's right to recover unless the exclusion of motion picture theatres makes it discriminatory." (Christie v. 46th St. Theatre Corp., 265 A.D. 255, 258 (3rd Dept., 1942); "Law Compelling Theatres to Admit Any One With Ticket Upheld by Court," New York Times, December 30, 1942.). It too was unable to find an equal protection violation because classifications are legislative matters. The fact that there are thousands of movie theaters while less than 50 Broadway theaters provided a reasonable justification for the enactment. (Id.)

The Court of Appeals affirmed the decision without an opinion (Christie v. 46th St. Theatre Corp., 292 N.Y. 520 (1944).), and the Supreme Court did not grant certiorari. (323 U.S. 210 (1944). See also "Theatre Ticket Law Is Up to High Court with New York Seeking Its Affirmation," New York Times, October 9, 1944.).

Accordingly, New York has a statute which "codifies the right of reasonable access for only the small group of patrons who attend places of 'public entertainment and amusement.'" (Steven Sutherland, "Patron's Right of Access to Premises Generally Open to the Public," 1983 U. Ill. L. Rev. 533, 544 (1983).). In response to the Shuberts' desire over the years to exclude critics, the New York State legislature has had in place, for nearly 70 years, a law that would protect Michael Riedel from being ejected from Spider-man. The producers of the show cannot reject Mr. Riedel's ticket or turn off Mr. Riedel's light.

April 26, 2011

Was He Really a Duke?

By Bennett Liebman

Dodger Hall of Famer Duke Snider died two months ago on February 27. To many baby boomers, especially those of us who grew up in and around Brooklyn, he will always be our idol. To those of us who saw him in his prime, he could do little wrong. He hit home runs - more than anybody in the 1950's. He had a special distinctive grace, and he was clutch. With the aging and fading in talent of Jackie Robinson and Pee Wee Reese, and to a certain extent Roy Campanella, Duke personified the Dodgers in their last five years in Brooklyn.

When he returned to New York to play for the Mets in 1963, I spent months cajoling my mother to drive around Rockville Center on Long Island to scope out his apartment so that we could meet the Duke. (Nobody called it stalking in those days.) Even one of the world's most indulgent mothers would not put up with this 13 year old's demands.

Yet, the Duke had a more fragile relationship with the bulk of Brooklyn fans than his other teammates. He was the youngest of the regulars who dominated the Dodger lineup from 1947-1957. He was also the least media savvy of the Boys of Summer. Every once in a while, he would complain about Brooklyn and its fans. He always seemed to need to be schooled by Pee Wee Reese. The kids who followed the Dodgers loved Duke far more than their parents.

Perhaps that was what was most striking about all the encomiums to Duke Snider in the media when he passed away. All of the Duke's perceived petulance had disappeared. What remained was a man who behaved as gracefully in person as he had patrolled center field in Ebbets Field. Everybody had an enjoyable encounter with Duke Snider.

His Hall of Fame induction speech included no mention of his playing abilities but included his gratitude for his teammates, family, and fans. He found the time to talk with everyone. Dodgers historian Mark Langill said, "Hanging around him, he always was the nicest, most unassuming of stars...He was always truly just happy to be a Dodger."

We read of him returning to his former home in Bay Ridge in Brooklyn just to talk to the people who now lived in his home. Former colleagues during his time as a broadcaster for the Montreal Expos talk about his stopping on every visit to New York City to meet with a longtime fan who had become homeless. His visits to New York also included trips to old friends who owned a restaurant where the Duke would play bocce. At Vero Beach, he would get up early to help fantasy campers with their swings. He wrote encouraging letters to the kids who played baseball at his local high school in Falbrook, California. Even at his death, his family directed donations to the Fallbrook Union High School Baseball Program.

As Richard Griffin in the Toronto Star wrote, "There are other celebrities like Duke Snider who was comfortable with his status in life as a sports hero and didn't try to hide it. He tried to share it. For the short time they are together, athletes like Duke elevate their new friend du jour to their own level and make them feel for a shining moment that they also are very special, more important than when they entered the room. Duke never apologized for celebrity and was always willing to share it generously."

I was able to encounter Duke Snider once during spring training in Palm Beach Florida in 1980, where the Atlanta Braves and the Montreal Expos shared a training camp. I was walking up the ramp to the mezzanine while the Duke was walking down. There was almost nobody else in the ballpark. We talked for ten minutes. He told me how he hit knuckle ball pitchers. I told him about seeing his 300th and his 400th home run. He couldn't have been more gracious. I didn't have the heart to tell my mother that it would have been worth it to stalk his apartment in Rockville Center.

While Mickey Mantle remained a kid (maybe not the "last boy" of Jane Leavy's book, but a boy nonetheless) throughout his life, alternating between debauchery, drunkenness, humor, and confessionals, and Willie Mays, for all his greatness, withdrew from his public almost to a level approaching Greta Garboism, Duke Snider grew up. He wasn't just a Duke. He became the Mensch of Flatbush.

September 30, 2015

Entertainment Arts and Sports: One Man Connects Them All



By Bennet Liebman

There may be maybe some cynical individuals who consider the fields of entertainment, arts and sports law to be separate areas of legal practice. These individuals might similarly consider the Entertainment Arts and Sports Law (EASL) Section of the New York State Bar Association to be a catchall designation intended to bring a variety of disciplines together with one designation.

These cynics did not know Joseph Oller. Nobody signifies the connection of these practice areas better than he. Oller was not a lawyer; he was basically a 19th century businessman. He was not an American, and lived almost all of his life in France. He died in 1922, well before anyone would have envisioned the possibility of the existence of an EASL Section. Yet, Joseph Oller personified EASL.

Oller, who was born in 1839 in Spain, started off as a businessman in the sports field. He ran a business in Paris in the early 1860's selling tickets on horse races. It started off as a pool/sweepstakes business, wherein a customer bought a ticket on a race - without any selection of a particular horse or horses - and won a prize based on the outcome of the race. It was a game of pure chance, much like a raffle. The amount paid to the winning bettor(s) was based on the number of persons with winning tickets. Under these conditions, the proprietor of the pool deducted a certain share of the total wagers (generally 10%) for his or her own purposes, and the rest was paid out to the winning bettors in proportion to their shares of the net pool. Under this system, the bettors were wagering against themselves, and the pool proprietor kept a share of the total amount wagered.

The pool system was profitable, but it raised legal pitfalls. France had a law banning lotteries. It was likely that this pool system based entirely on chance would be considered a lottery. Accordingly, in 1868, Oller developed a system which added a skill element to the horse racing game. Under Oller's new pari-mutuel system, a number would be assigned to each horse in the race. "People are at liberty to stake upon the horse which most takes their fancy until a given time of the day." ("The 'Paris-Mutuels,'" Daily News of London, July 30, 1872). Oller would then take 10% out of the full pool for himself and paid the remaining net pool back proportionately to the people who had bet on the winning horse.

Oller's pari-mutuel system was a winner both in business and in the court of law. While the authorities prosecuted Oller and others for running a lottery, the pari-mutuel business survived the legal challenge. While the sweepstakes business was an illegal lottery, the pari-mutuel system was not. In the pari-mutuel context, the skill used by a bettor in using his or her own discretion in placing a wager on a particular horse sufficiently limited the extent of chance involved in the game, and placed it outside the realm of a lottery. The public took to the pari-mutuel system quickly, and Oller's business boomed. Oller even developed machines to help him calculate the pool payouts.

Oller's business was interrupted for a short time by the Franco-Prussian War of 1871. He returned after the war, and again his business prospered. In fact his pari-mutuels - occasionally called the Paris mutuels - may have become too successful. Numerous imitators (especially many from Great Britain) followed Oller's example and started a slew of pari-mutuel businesses in Paris. (Oller appeared to run the largest of these businesses.) In August of 1874, the authorities raided and indicted all pari-mutuel operators.

This time, the basis of the suit was that the pari-mutuel operators had defrauded the bettors in connection with the operations of the wagering. All 24 defendants were convicted. Oller was fined $4,000 francs and spent 16 days in jail. His days of operating a pari-mutuel business were ended.

Eventually, however, Oller's system triumphed both in France and the rest of the world. In 1891, France outlawed bookmaking and made Oller's pari-mutuel system the only legitimate way of wagering on horse races. Pari-mutuel wagering spread to the United States, and now outside of Nevada, federal law makes pari-mutuel wagering the only legal method for betting on horse racing, dog racing or jai alai. According to the Encyclopaedia Britannica, Oller's pari-mutuel system "has spread to every country in the world and forms the rational basis for running nearly all modern lotteries as well as most organized betting on horse racing, association football (soccer) and other professional sports." Oller's 1868 system is a dominant factor in the world of sports.

After his ventures into the gambling world concluded, Oller became involved in the entertainment business. In 1889, he owned and opened the Moulin Rouge, the nightclub cabaret. Not only did the Moulin Rouge quickly become famous for its entertainment, it was soon known worldwide for popularizing the Can-Can dance. The dancers who performed the Can-Can became celebrities. The entertainment and the atmosphere at the Moulin Rouge made it a recognizable and notorious symbol of pre-World War I Paris.

The entertainment aspect of the Moulin Rouge continues to this day. There have been numerous books, movies and a musical about it; including John Huston's 1952 "Moulin Rouge", the 2001 Baz Luhrman musical similarly entitled "Moulin Rouge!", and Cole Porter's Broadway 1953 musical (later a 1960 movie) "Can-Can". Charles Aznavour's musical "Latrec," which ran in London in 2000, similarly focused on the Moulin Rouge. With a revised book, and newly entitled as "My Paris," the Aznavour musical ran this summer at the Goodspeed Theatre in Connecticut.

Similarly, the art aspect of Joseph Oller's Moulin Rouge remains with us. The paintings and posters of Toulouse Lautrec are an integral part of the Bell Époque art movement. Other artists similarly have painted scenes from the Moulin Rouge. A number of composers, including Franz Lehar and Jacques Offenbach, have written music for the Can-Can. There is even "Moulin Rouge - The Ballet", which has been a major hit for the Royal Winnipeg Ballet over the last decade. Finally, the Moulin Rouge has always played an outsized role in the fashion world. Even the 2001 Baz Luhrmann film inspired a fashion trend, as Moulin Rouge boutiques opened in the United States, and "numerous designers from Los Angeles watched the film and then created their own version of the `Moulin Rouge' look with petticoats, dresses, crystal chokers, tiaras, gloves, hats, tap pants, bustiers and stockings." (See Barbara De Witt, "Fashion Designers Go Ga-Ga Over Can-Can," Long Beach Press-Telegram, May 21, 2001.)

Jospeh Oller achieved the hat trick of the EASL Section. He was a most prominent figure in entertainment, arts and sports. He demonstrated that the three areas were not merely compatible, but that they could be part of one achievable and realistic alliance. In the 19th century, Joseph Oller embodied the work of the EASL section.

December 19, 2016

He Wanted to Be a Producer

By, Bennett Liebman
Government Lawyer in Residence, Albany Law School

President-elect Donald Trump on November 19th tweeted a series of complaints about how the cast of the hit musical "Hamilton" had treated Vice President-elect Mike Pence. This was hardly the President-elect's first foray onto the Great White Way. In fact, he has been involved with Broadway for over 45 years, including a brief but unsuccessful stint as an investor and associate producer in 1970.

Soon after graduating from college, the 23-year-old Trump invested in the Broadway show "Paris is Out", which opened on Broadway in the winter of 1970. "Paris Is Out" was a comedy about an elderly Jewish couple who was planning a long-anticipated trip to Europe, while simultaneously dealing with problems about their children. It starred the venerable actors Molly Picon and Sam Levene. Trump, with a $70,000 investment, financed half the production cost. The Playbill program for the show lists David Black as the producer "in association with Donald J. Trump." Trump's bio in Playbill read, "Donald J. Trump who joins Mr. Black in this production as Associate Producer is making his theatrical debut. He is in the investment and real estate business, and will be associated with Mr. Black in his new musical, W.C." ("W.C." was never made.)

While Trump allegedly was not involved in the day-to-day production of the show, the production team was extraordinarily enterprising in its approach to the show. "Paris Is Out" was not a good show. It was unlikely to be a critical success. It was likely, however, given its stars and subject matter, to appeal to a distinct crowd of Jewish senior citizens who frequented the theater. The first innovation of the production team was to reduce the role of the critics by not officially opening the show. The show went into previews on January 19, 1970, and there was not to be any opening night. Instead, the critics were invited to attend the show several weeks after it started. At that point, critics would be welcome, and tickets would be made available to them. Management would not be soliciting any reviews. The producers ran ads from alleged theatergoers, and even from critic Rex Reed, in support of their non-opening night policy.

The policy was modified after critics threatened to review the play after its first preview. The critics were urged to come to the show but only after the show had been frozen. After the Associated Press and the Newark News had reviewed the play during its first week in previews, the policy was further changed to invite the critics to attend the show from January 28th to January 31st, with reviews embargoed for publication until February 3rd. Even then, the Daily News refused to review the show.

Not unexpectedly, the reviews were dismal. George Oppenheimer in Newsday found it "embarrassingly bad" and suggested that "Paris Is Out" "is the sort of play whose situations and dialogue you whistle as you enter the theater." Clive Barnes in the New York Times found the show "pitiable" with the writing "deplorable." Walter Kerr for the New York Times added, "I simply sat there and looked at it." He found the production "professional while the play is not."

Martin Gottfried for Women's Wear Daily was probably the most venomous. He wrote, "Frankly, it is terrible - gross, thick-witted, senseless, humorless, narrow-minded, hypocritical, boring, archaic, exclusively commercial, embarrassing, short-sighted, long-winded, uneducated, uninformed, uninteresting and unsuited for anyone un-Jewish and under age 50."

In fairness, most every reviewer mentioned that the audience seemed to love the show. There were also a minimal number of critics that liked it. The Wall Street Journal found it "warmly entertaining." Undoubtedly the most favorable review appeared in the horse racing daily, The Morning Telegraph. Its reviewer Leo Mishkin found the play to be "rich and delicious and as filling as a large helping of apple strudel." A play was surely in trouble when this was its main booster.

Faced with these harsh reviews, but with a receptive audience, the production team remained steadfastly creative. In an era when almost all shows held only two matiness (Wednesday and Saturday), "Paris Is Out" became the first show to move to four matiness. It had afternoon performances on Wednesday, Thursday, Saturday and Sunday. Business appeared to pick up for a time, but sank in April of 1970. The final performance of the show was April 19, 1970. Variety claimed that it ran 96 performances with 16 previews.

The show had a brief afterlife when the actor Pat O'Brien and his wife Eloise converted the show from a Jewish family comedy into an Irish family. They toured with the show across the country on the straw hat circuit and dinner theater circuits for half a decade. However, the play has hardly been seen in the past 35 years.

March 13, 2018

Constructing a Sports Gambling System for New York

By Bennett Liebman
Government Lawyer in Residence
Government Law Center, Albany Law School
Edited by Elissa D. Hecker

It is now conventional wisdom that the U.S. Supreme Court will soon find the 1992 Professional and Amateur Sports Protection Act ("PASPA") unconstitutional. PASPA is the federal law that requires states (except for those that had sports gambling before 1992) to make sports gambling illegal. If PASPA is unconstitutional, then the individual states would be free to determine whether to legalize sports gambling.

However, it's not that easy in New York State. Key and complex decisions need to be made by the legislature and the electorate before New York can establish a comprehensive system to legalize sports gambling.

The initial hurdle is New York State's constitution, which bans all of forms of gambling with certain specified exceptions. In terms of sports, the key exceptions are pari-mutuel horse racing and casino gambling. Since casino gambling can be viewed in the U.S. to encompass sports gambling, in 2013, as a part of the casino authorization legislation, New York State authorized the four upstate casinos to have sports gambling if PASPA were to be amended or found unconstitutional. Thus, if the Supreme Court finds PASPA unconstitutional, once the Gaming Commission establishes regulations, the four upstate casinos could begin sports gambling. For all the other entities in the state, sports gambling would need a constitutional change. If both the Senate and Assembly pass a sports gambling authorization in 2018, a newly elected legislature could then pass a second authorization in 2019. The amendment would then be submitted to the electorate in November of 2019. Full sports gambling could conceivably begin in 2020.

What, then, would occur? Who will be able to offer sports gambling, besides the casinos? Could the racinos, combined tracks and casinos, the individual racing associations, Off Track Betting ("OTB"), the state lottery, or the fantasy sports groups? The OTBs have been requesting sports gambling for over 40 years, and the fantasy sports companies would be harmed significantly from direct competition from sports gambling. Using the lottery system would bring a virtual army of retailers to sell sports gambling products. Perhaps individual bars, taverns, and even airport terminal managers would want to be part of any sports gambling network.

How would the federal and state governments tax revenue resulting from sports gambling? The federal government already taxes it. Some of the sports leagues are suggesting that they receive funds to preserve the integrity of their sports. What would the state tax rate be? Would state tax revenue, like the lottery, be funneled to education? If the state's tax is too high, would this open the way for tribal sports gambling to offer better odds and services to bettors?

How would revenues to OTBs make their way to local governments? Further, how would revenues from Video Lottery Terminals operated by racetracks be distributed to horsemen and to the state's horse breeders?

Would there only be in-person betting from individual tellers, or could there be slot-like machines that offer sports bets? Would telephone wagers and computerized bets be authorized, and would exchange wagering, where individual bettors offer their own lines to other bettors, be allowed? The state could authorize only one technology operator, or it could license several technology companies to oversee sports gambling.

What sports would be authorized as wagering products? Will games played by in-state colleges be the subject of bets? How about betting on minor league professional sports or on non-U.S. sports leagues? Will there be in-game wagering? Must one bet on individual games, or could one bet on the potential Super Bowl or World Series champion?

There is also the issue of proposition wagering, which involves betting on events not directly connected with the outcome of the event. Who wins the coin toss? How many completions will Tom Brady have? What's the over and under for the length of the national anthem? A decision will be needed regarding what proposition bets will be allowed.

On its face, sports gambling looks like the easiest game to operate. It should be a mortal lock for any operator to make money. However, legalizing sports gambling is actually a labyrinth. Given its past performances, it is even money that the state government will get tangled up in this maze. Mistakes in the maze have consequences. It can be a cruel game, with winners and losers. Authorizing sports betting is far closer to Jumanji than to Candyland.


June 5, 2018

What Is the Status of New York Sports Gambling?

By Bennett Liebman
Edited by Elissa D. Hecker

I. Current New York State Constitutional Provisions involving Sports Gambling

In a Constitutional provision that dates from 1894, the New York State Constitution (the Constitution) specifically makes gambling illegal. No form of gambling "shall hereafter be authorized or allowed within this state." (New York State Constitution, Article 1, §9.1. Very few states have specific provisions in their constitutions that make all gambling illegal, except for certain exceptions. These states would include Delaware, (Del. Const. art II, § 17) Idaho, (Idaho Const. Art. III, § 20) New Jersey (N.J. Const., Art. IV, Sec. VII, Para. 2), and Wisconsin (Wis. Const. Art. IV, § 24.))

In the years since 1894, the Constitution has permitted certain exceptions to the general prohibition on gambling. These include pari-mutuel betting on horse racing, bingo, a state-operated lottery and games of chance. The exceptions for bingo and games of chance are only for the benefit of certain "bona fide religious, charitable or non-profit organizations", and the exception is intended to "prevent commercialized gambling," (New York State Constitution, Article 1, §9.2.)

Over the years, efforts in New York have been made to authorize sports gambling; basically, the use of parlay cards. In 1984, after Governor Mario Cuomo advocated for the lottery's use of parlay cards in the state budget, Attorney General Robert Abrams issued an advisory opinion finding that sports parlay card betting was not authorized as a lottery. (1984 N.Y. Op. Att'y Gen. 1.) The Attorney General stated: "We find that the Constitution, both through its specific bans on bookmaking and pool-selling and through its general ban on all forms of gambling not expressly authorized, forbids the kind of gambling involved in the proposed sports betting game."

In 1991, a proposed sports lottery came very close to being passed by the state legislature. The plan was thwarted when Senator Majority leader Ralph Marino, who had earlier agreed to the sports lottery, withdrew his support.

In 2013, the Constitution was amended to include an exception for "casino gambling at no more than seven facilities as authorized and prescribed by the legislature." The question has become whether casino gambling is sufficiently broad to encompass sports gambling. Certainly, in the state of Nevada, casino gambling facilities have long been able to offer sports wagering. The New York State legislature in the 2013 legislation, designed to implement the casino gambling amendment, contained a provision specifically providing an opportunity for the casinos to have sports wagering. (Chs. 174 and 175, L. 2013.)

II. Current New York Statutory Provision on Sports Gambling

Outside of Nevada and the grandfathering of limited sports wagering in several other states, 1992's Professional and Amateur Sports Protection Act (PASPA) banned sports gambling throughout the U.S. When the Supreme Court on May 14th decided in Murphy v. National Collegiate Athletic Association ruled that PASPA was unconstitutional (Murphy v. National Collegiate Athletic Association 138 S.Ct. 146 (2018).), §1367 of the Racing, Pari-Mutuel Wagering and Breeding Law (Racing Law) went into effect.

Section 1367 was the provision in the Upstate New York Gaming Economic Development Act of 2013 (UNYGEDA) that dealt specifically with the issue of sports gambling in New York State. The UNYGEDA was designed to be the implementing statute that would provide the regulatory framework for New York's constitutional approval of casino gambling.

Section 1367 was based on New Jersey's law signed by Governor Chris Christie in January of 2012 that authorized sports wagering in that state. (N.J.P.L.2011, c.231.) Unlike New Jersey, which directly legalized sports gambling and challenged PASPA, New York's law was only intended to provide an indirect challenge to PASPA. The New York law was designed to go into effect only at "such time as there has been a change in federal law authorizing such or upon a ruling of a court of competent jurisdiction that such activity is lawful." The sports gambling provision was basically an attempt to prevent New Jersey from establishing a monopoly on Mideast sports gambling. If PASPA were ever found unconstitutional or amended, New York, as well as New Jersey, would have legalized sports gambling.

Section 1367 allows sports gambling only in person at the state's four private upstate casinos. Bettors need to be age 21 or older. Betting is not allowed on collegiate sports played in New York State, and similarly not ever permitted on games - regardless of the location - in which New York colleges are playing.

The State Gaming Commission is given significant power not only to license sports wagering operators, but also to establish the rules under which sports wagering is to be operated. According to recent newspaper accounts, the State Gaming Commission is currently in the process of drafting these regulations. Ron Ochrym, its interim director, has stated that draft rules will be available for "review in the near term." (Jon Campbell. "Rules Being Crafted for Sports Betting in New York," Westchester Journal News, May 22, 2018.)

III. Legislative Developments after Murphy

The existing New York sports wagering provision in §1367 is obviously not beneficial to much of the gambling industry in New York State. It only benefits the current four private upstate casinos, which are located in Monticello, Schenectady, Tioga and Waterloo. None of these locations are particularly close to metropolitan New York. Thus, the in-person sports wagering business at these locations does not figure to be overwhelming.

As only these four casinos can offer sports gambling, the other parts of the gambling industry in New York are shut out; including the nine video lottery (VLT) facilities, the state's horse racing industry, including the racetracks, horsemen and breeders, the off-track betting (OTB) corporations, and the fantasy sports corporations. While not technically excluded, the major corporations outside New York that offer sports gambling in Nevada and in Europe obviously do not see a huge market for in-person wagering at four upstate casinos.

In New York, there is also a long tradition of trying to craft gambling legislation that tries to benefit all participants in the gambling industry. Everyone gets a carrot in the omnibus goulash that constitutes the world of New York State gambling legislation.

In order to increase the betting market and to make the other elements of the New York gambling industry full participants in sports gambling, Senator John Bonacic, who chairs the Senate Racing, Gaming and Wagering Committee, introduced legislation to expand the existing scope of sports wagering. His initial bill (Senate Bill No. 7900) was introduced in March of 2018 before the decision in Murphy. Minor amendments were made to the bill after Murphy. (Senate Bill No.7900 A.) The purpose of the bill, per Senator Bonacic, is "to update the existing provisions of law which allow the four upstate casino gaming resorts to conduct sports betting in the event of a change in the federal law which currently prohibits it." (New York State Senate Introducer's Memorandum in Support S7900A.) This bill is an attempt to bring all players into the big tent of sports wagering.

IV. Questions on the Bonacic Bill

The best way to analyze the bill is to respond to certain questions on its effect.

A. With whom can a sports wager be placed?
The four casinos control this process. Individuals can wager at the casinos, through affiliates with whom they contract through self-service wagering kiosks. Affiliates are the VLT operators, OTB branch offices and the New York Racing Association. In addition, each casino can offer mobile sports wagering platforms through no more than three independent entities. Mobile sports wagering means that a bet can be placed through a computer or a similar device anywhere in New York State.

This is certain to raise significant constitutional questions. What is the purpose of having a limited number of casino facilities (a maximum of seven is authorized in the Constitution.) if people can bet away from the facilities of the casino? Do the mobile betting platforms make the constitutional facility limitation meaningless? Surely, the casinos can take a roulette bet or a baccarat wager from a mobile platform just as easily as they can take sports wagers. Would anyone think that a roulette wager placed via a phone in Suffolk County into Tioga Downs would constitute a wager lawfully placed at Tioga Downs? Simply trying to claim in legislation that the situs of a bet is considered to be placed at the casino misses the reality that the bet is actually being made away from the casino. Would any court agree to this fiction?

B. Where can one fund or establish an account?
One can fund or establish an account at the casinos, the offices of the affiliates and on the Internet through mobile sports wagering platforms.

C. On what can be bet?
Bets can be placed on almost every sporting event, except for high school events. Unlike current law, one can bet on New York college sports teams and college events played inside New York. Bets can include straight bets, propositions, over-under bets, parlays, exchange wagers and in-game wagers. Bets cannot include horse racing wagers, which are only authorized via traditional pari-mutuel wagering. (This might prove harmful in the long run to horse racing, since it prevents fixed odds wagering and exchange wagering. It would likely prevent most future books on major races, proposition wagers, and in-race wagers. It is short-sighted for a sport that has been suffering from a long slide in popularity to shut itself off from future types of wagers.)

D. Who can wager?
Bettors must be age 21 or older. They must be physically in New York. The proposal has an extremely detailed list of individuals who are barred from wagering. The list of banned individuals includes people with access to non-public confidential information and amateur athletes where the wager is based on an event overseen by that athlete's governing body. (That would mean that a collegiate water polo athlete could not wager on a collegiate lacrosse game since both sports are governed by the NCAA. Similarly, how during a collegiate sport's off-season would one make a determination that the potential bettor is still classified as an athlete? Can a college field hockey player, when school is out of session in the summer, place a bet on the Bowl Championship Series in football?) It may be that this is a subject handled far better by regulation than by legislation.

E. Who will regulate sports wagering?
Sports wagering will be regulated by the State Gaming Commission, but the Gaming Commission is to designate the State Police to have primary responsibility for conducting investigations into abnormal wagering activity and the possibility of corruption in the sport.

F. What role will the sports leagues have in sports wagering?
There is considerable involvement with the sports leagues. The sports governing body is to receive an integrity fee of "up to one-quarter of one percent of the amount wagered on sports events, however, in no case shall the integrity fee be greater than two percent of the casino's sports wagering gross revenue." The proposal defines a sports governing body to be "the organization that prescribes final rules and enforces codes of conduct with respect to a sporting event and participants therein." This is a potentially problematic definition. For Mixed Martial Arts fights in New York, who is the governing body: the promoter, or the State Athletic Commission that establishes the rules? The same holds true for boxing? Individual sports, such as tennis and golf, have major tournaments that are run by different organizations. The PGA Tour runs the PGA Championship, Augusta National runs the Masters, and the United State Golf Association runs the US Open. How is it determined what is the sports governing body when a casino takes a wager on individuals trying to win the grand slam in golf? What is the governing body in the Davis Cup? When there are European soccer matches between teams in the Premier League and the Bundesliga, what is the governing body? What is the sports governing body when a casino takes a parlay wager on two different sports?

In-play wagering is only permissible if the casinos operate and their agents use "official league data" and the league "possesses a feed of official league data." The leagues are supposed to provide the data at a commercially reasonable rate.

Sports governing bodies are able to petition the Gaming Commission to force the casinos to use official league data for "tier three wagers", which are neither in-play events nor wagers determined by the final score or outcome. A sports governing body may also apply to the Gaming Commission "to restrict, limit, or exclude wagering on its sporting events." No standards are set for how the Commission is to make this decision.

G. Where does the money go from sports gambling?
Typically, the Nevada gambling establishments have gross gaming revenues of between 4-5% of handle, which is the actual amount wagered. (In Nevada in 2017, this hold percentage was 5.11%.) From this amount, they pay a federal tax based on .25% of handle. Assuming a 5% gambling hold, this represents a tax of 5% on gambling revenue. The Bonacic bill adds an 8.5% State tax on this gambling revenue. On top of that, the casinos are to pay an integrity fee of a maximum of 2% of gaming revenue. Thus, assuming a 5% gambling hold rate, the casinos would be subject to an effective tax rate (including the integrity fee) of 15.5%. That does not include any amounts that the casinos would pay the sports leagues for "official league data." Assuredly, the casinos would also need to pay their affiliates and mobile agents for taking the wagers. At what point does the tax imposed on the casinos become too high?

The money from the taxes paid to the state is to be distributed as follows: 85% to the commercial gaming fund - much of which goes to education, 5% to problem gambling education and treatment, 5% to the Gaming Commission for its costs, and 5% to the racing industry. Given the estimates that Senator Bonacic has made for revenue from sports gambling - $10 million to $30 million, it is unlikely that a 5% allocation to all of the racing industry will provide much assistance. That would mean that a maximum amount of $1.5 million would be shared by all racetracks, their horsemen, and the OTB's.

V. Is There Sports Wagering Legislation in the Assembly?

Assemblyman Gary Pretlow, who chairs the Assembly Racing and Wagering Committee, had promised has own bill on sports wagering for several months. While no bill has yet been formally introduced yet, in the last week of May, Assemblyman Pretlow released a draft of his bill. It is a somewhat underwhelming copy of Senator Bonacic's amended bill with the nomenclature of the "integrity fee" changed to a "sports wagering royalty." (https://www.legalsportsreport.com/wp-content/uploads/2018/05/Pretlow-sports-betting-draft-1.pdf)

VI. The Effect on New York's Native American Tribes

New York has eight federally recognized tribes. Three of these, the Oneidas, Senecas, and St. Regis Mohawks, run gambling operations and have gambling compacts with the state. The Senecas appear to be monitoring the situation. There has been little word from the St. Regis Mohawks. The Oneida Nation has said that it will pursue sports wagering. The exact details of how this would occur are uncertain. Can the Oneida Nation's compact with the State be read to authorize sports gambling, or is there a need for a new compact? The Oneida Nation surely would not be bound by the state's requirement of any integrity fee payment.

Secondly, if mobile sports wagering is authorized throughout all locations within the state, will this break the exclusivity arrangements that New York State has with the three gambling tribes? Based on giving the tribes gambling exclusivity in the counties near their casinos, New York is paid exclusivity fees by the tribes. (New York and the Seneca Nation are currently in arbitration over the exclusivity payment, and the Nation has stopped making its payments.) For the 2017 fiscal year, the tribal exclusivity payments amounted to $206.8 million. That is far more revenue to New York than the $10 to $30 million that sports gaming could be expected to bring in. Can the state and the local governments that share in these payments risk losing them?

Finally, strong geo-fencing of the tribal reservations would be needed to make sure that bets on sports gambling were not accepted inside tribal reservation lands. Otherwise, New York State would likely be violating the terms authorizing class III gaming under the Indian Gaming Regulatory Act.

VII. What is the likelihood of passage?

There would appear to be an excellent chance that the sports wagering bill would pass the Senate. The Bonacic bill has generated little opposition thus far from inside the Senate. The unamended initial version was included and technically passed in the Senate as part of its one-house budget bill in March. There is an ongoing dispute in the Senate over which party controls the leadership of the chamber, but if this is resolved, the Bonacic bill is likely to pass.

The fate of sports gambling is uncertain in the Assembly, as Speaker Carl Heastie, who controls the Assembly, has expressed doubts and reservations over whether the bill's issues can be resolved. In his statements last week, the Speaker, however, indicated that he will let his colleagues decide the issue.

Governor Cuomo has also added that the issue is too complicated to decide in the current legislative term. Yet if the legislature passes a sports wagering bill, will the Governor veto a very popular bill in an election year?

VIII. Other Concerns

It has been surprising that nobody in the legislature has introduced a Constitutional amendment that would clearly authorize sports gambling. An amendment, if given first passage this year could be on the books by January 1, 2020. Passage of this amendment would give the legislature cover and assure that sports wagers placed by bettors outside the physical confines of the casinos could be considered valid sports wagering bets. Furthermore, if there is a constitutional challenge to expanded sports wagering, this amendment might be in place before the courts actually ruled on the legalities of sports wagering

There is only a limited leakage to other states if New York State fails to authorize further sports wagering. Federal law would prevent New Yorkers from betting electronically into other states. New Yorkers would need to physically cross the border and wager in a state like New Jersey. This places Tioga Downs owner Jeffrey Gural in an odd position. Gural is the owner of the Meadowlands in New Jersey, which would most likely be the spot where New Yorkers would place sports bets.

If sports wagers in New York can only be made within the confines of a casino, will this hasten the process to have casinos in downstate New York? Currently, casinos could not be operational downstate until 2023.


About Bennett Liebman

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