Taking Wagers on Sports Betting & Online Gambling

– Joe Rosenbaum

The Professional and Amateur Sports Protection Act of 1992 prohibits most states from authorizing sports betting (the law grandfathered a few states, such as Nevada) and New Jersey has been fighting to convince the Federal government to allow the State to legalize and license sports betting.  The latest attempt to circumvent the Act was the repeal of New Jersey’s own sports betting prohibitions at racetracks and casinos.  That effort was derailed by a series of court decisions, culminating in a 9-3 en banc decision of the Third Circuit Court of Appeals, which then led to the State of New Jersey petitioning the Supreme Court of the United States.

Last month, the Supreme Court refused to deny New Jersey’s challenge to the Federal ban (see, Christopher J. Christie, Governor of New Jersey, et al, Petitioners v. National Collegiate Athletic Association, et al; and New Jersey Thoroughbred Horsemen’s Association, Inc., Petitioner v. National Collegiate Athletic Association, et al) and left the door open to grant certiorari in the case if the Office of the Solicitor General (which is part of the U.S. Department of Justice) argues the case raises serious issues and questions of Federal law. They could, if they so choose, seek to revisit the long-standing position of the DOJ holding sports betting illegal.  To some extent, with the new administration of President Trump in place, many see this as an opportunity to do just that, since many of you may remember that as owner of casinos in Atlantic City, New Jersey, then businessman Donald Trump was a proponent of the legalization of sports betting.

Clearly, as States look to generate other sources of tax revenue, many view this as an opportunity to increase revenues and regulate an activity that has long been associated with organized crime. Indeed, the American Gaming Association estimated well over $4 billion in bets were placed on the Super Bowl last Sunday, virtually all of it, illegally. President Trump has consistently said he is in favor of eliminating or reducing legislation and regulation that restricts what States may or may not do and that encumber businesses needlessly beyond necessary Federal oversight. This may well fit right into that category, although there have been no comments as yet from the Administration.

Former Alabama Senator Jeff Sessions, just confirmed last night as Attorney General of the United States, has voiced opposition to any expansion of online gambling in the past, although when questioned during Senate hearings, did indicate he was willing to take another look at how and to what extent online gaming is being enforced by the Federal government.  There is also the possibility that in deciding to allow sports betting and an expansion of online gaming generally, the Federal government may choose to adopt some form of federally regulated or licensed betting and gambling scheme. While the path ahead is far from certain and opposition remains, some things do seem clear: attitudes are changing, the present administration is not averse to controversial new ideas, is favorably disposed to the elimination of any unnecessary Federal regulation that stands in the way of creating jobs and stimulating the economy and, notably, is likely to welcome finding an opportunity to enable States to find ways to increase tax revenue – and taxing so-called ‘sin’ industries may not be such an objectionable idea.

Stay tuned and, of course, if you have any questions, want further information or need help, don’t hesitate to contact me, Joe Rosenbaum, or any of the attorneys you regularly work with at Rimon.

FCC Drops ‘App’ Plan to Open Set-Top Boxes

–  Joe Rosenbaum

The Federal Communications Commission (FCC), under its new Chairman Ajit Pai, removed from its list of items for consideration, a proposal originally put forth by prior Chairman Tom Wheeler that would have allowed consumers to access pay-TV content on third-party devices.  Previous Chairman Wheeler’s original proposal took an “apps” based approach, but also included a licensing scheme that would require implementation of a standardized license for placing apps on such platforms or devices.

Critics, however, noted this particular proposal would actually have the opposite effect and more restrictively limit the choices available to consumers.  The original proposal also put the FCC in the position of acting as supervisory authority in order to ensure, in each case, that such a license wouldn’t harm competition.  Critics immediately raised concerns over the need for such intrusion by the FCC at all (some raised questions regarding the authority of the FCC to require or supervise such a licensing scheme), with many preferring to simply get rid of restrictions and limitations on access devices altogether.

While the FCC has removed the proposal from its list of items being considered for a vote, it remains on the Commission’s circulation list. Thus, the FCC’s action removes the proposal from immediate consideration, but doesn’t close the file officially – something over which industry groups remain concerned.   Their concerns continue to relate to the uncertainty of having a proposal still open for consideration, which, if resurrected, could pose problems for many in the industry, including distributors and content creators whose existing contracts might be in violation of such a new FCC requirement or policy.  Stay tuned.

California Employment Agreements – Choice of Law? Venue: Think Again!

by Thomas M. White

California’s Labor Code was amended effective January 1, 2017, to require that employment disputes regarding California resident employees be subject to the substantive law of California and that the arbitration or litigation of such matters be held in California.  These requirements will have a significant effect on how out-of-state employers negotiate and draft employment, separation and confidentiality agreements. Moreover, some of the statutory language is subject to interpretation and may result in violations of law by unsuspecting employers.

By way of background, in drafting employment agreements, employers typically identify one state whose substantive laws apply and require all disputes be litigated or arbitrated in a venue where the business operations are centered.  First, employers with employees spread across several states want the certainty and uniformity in their business arrangements. Second, the substantive law of a particular state may be more amenable to employer concerns. Third, employers may wish to inhibit litigation or arbitration by requiring employees to travel to another state to assert or defend contractual rights. These factors, already under assault in California, are expressly given no weight in the new statute.

The new statute, effective January 1, 2017, with respect to employees who primarily reside and work in California, will apply to all new employment agreements and also covers agreements that are extended or modified after that date.  Under the new law, injunctive relief is available and reasonable attorneys’ fees may be awarded.  However, the new law does not apply to contracts where the employee was represented by an attorney during the negotiation of the agreement.

Several of the above statutory features require additional consideration:

  • On its face, the new law does not apply to independent contractors. However, if such a contractor were to be deemed an ‘employee’ in the context of disputes involving other matters (e.g., tax, employee benefits, etc.), they may well also be held covered under the new law as well;
  • The law does not specify what is meant by an employee that lives and performs services “primarily” within California. You might want to keep records of employees in case a dispute arises. The answer may well mean the difference between the application of this new law and not;
  • It is not clear whether a contract is “extended” or “modified” if there is an automatic rollover or extension provision? What if there is a finite term and then the contract continues month to month, subject to termination at-will? Is that an ‘extension’ for purposes of the new statute?  Similarly, if the employee is entitled to a set of fringe benefits available to similarly situated employees and a new benefit is added January 1st –  is that a “modification”?

Although there is an exception for agreements negotiated by counsel, most employees don’t typically have the funds necessary to engage counsel. Consider this: it may be worthwhile for an employer to reimburse an employee for attorney’s fees in certain situations where the benefit of employment limitations outweighs the additional cost. Note, where this exception is intended to be relied upon, it is wise for the agreement to specify it has been negotiated by counsel, including the name of the attorney and the firm. Given the many choice of law considerations that arise in litigation, it should not be assumed non-California choice of law and venue provisions will be upheld simply because the employee retained counsel during negotiations.

What should you do now?  Any business that has current employment agreements with employees (and independent contractors) living and working in California, should carefully review those agreements in light of the need to comply with the new law. Where concerns may arise – in the language or the interpretation, counsel should be engaged to assure that relevant consideration is given to applicable factors.

For more information, contact Thomas M. White, a Partner specializing in the full scope of human resources management and employment law, including employee benefits, executive compensation and healthcare.  Of course, you can always contact me, Joe Rosenbaum, the Editor, or the attorney you normally work with at Rimon.

The Paradox of Illumination

I first heard about the paradox of illumination from Lee Loevinger, an extraordinary gentleman I was privileged to know professionally.  Lee was a multi-faceted, multi-talented, thought-provoking lawyer whose sage advice and stimulating ideas continue to resonate with those honored to have known him, and everyone else wise enough to read his work and the words he left behind.

In a nutshell, the paradox of illumination is extraordinarily complex, but simple to describe.  Much like Albert Einstein who, when asked about his theory of relativity and the notion that time is not constant, described it in personal terms: if a man is at dinner for 10 minutes with a beautiful woman, it seems like a fleeting instant; but sit on a burning hot stove for 10 minutes and it seems like an eternity :).

The paradox of illumination can similarly be described on a personal level.  Sit in completely dark room.  Really.  Completely dark.  What can you see?  Nothing.  You know little about your surroundings and can only sense your own body – in fact, you don’t even know how far your surroundings extend beyond your immediate sensations.

Now light a match.  The circle of illumination allows you to see a little of what is around you – but the perimeter and beyond are still dark.  Now light a candle.  The circle of what you can see illuminated by the light is larger than before, but the size of the perimeter beyond which you cannot see is also a lot larger than before.  The larger the light, the larger the area of illumination, but larger by far is the perimeter beyond which we know nothing.

The more we can see and the more we know and understand about the world around us, the larger the amount becomes that we don’t know.  In other words, as the circle of our knowledge grows, so does the amount of knowledge we cannot see and don’t know.  The paradox of illumination is the paradox of knowledge.  Perhaps that is why Michelangelo, when he was more than 87 years old, still said, “Ancora Imparo” (I am still learning).

FTC Finally Defines ‘Unfair’

According to the FTC: “The basic consumer protection statute enforced by the Commission is Section 5(a) of the FTC Act, which provides that “unfair or deceptive acts or practices in or affecting commerce … are … declared unlawful.” (15 U.S.C. Sec. 45(a)(1)). Safe Web amended Sec. 5(a) “unfair or deceptive acts or practices” to include such acts or practices involving foreign commerce that cause or are likely to cause reasonably foreseeable injury within the United States or involve material conduct occurring within the United States.”

Given that view and the FTC’s traditionally robust enforcement activities in areas of false, deceptive or misleading advertising, it is not surprising that most advertising, marketing and promotional professionals are familiar with section 5.

However, of lesser fame are pronouncements by the FTC in what is “unfair” competition – another segment of the authority vested in the Federal Trade Commission by section 5 of the FTC Act. This is the lesser-known part of section 5 that gives the FTC the authority to take action when it determines that “unfair methods of competition in or affecting commerce” may be deemed illegal – essentially an antitrust concept.

For the first time, the FTC, this past Thursday (August 13, 2015) released a single page “Statement of Enforcement Principles Regarding ‘Unfair Methods of Competition’ Under Section 5 of the FTC Act“. Perhaps indicative of the challenges and internal discussions among the regulators themselves, the principles are short and, to many, appear to be a re-statement of what has already been the enforcement practices of the FTC in recent years concerning this provision of the Act.

The Commission announced it will follow three basic principles. In short, enforcement will be considered: (1) Using the same underlying principles that guide antitrust law – protection of consumer welfare; (2) if the practice causes, or is likely to cause, harm to competition or the competitive process, without any counter-balancing justification; and (3) if enforcement under the Sherman or Clayton Act is insufficient and independent action is considered necessary.

If you want to know more or have questions, please contact me or any Rimon attorney with whom you work.

FTC Updates Its FAQs for Endorsement Guides

The Federal Trade Commission has just updated its version of Frequently Asked Questions, or FAQs, that relate to the “Guides Concerning the Use of Endorsements and Testimonials in Advertising” that went into effect December 1, 2009. You can find the updated FTC website page right here “What People Are Asking.”

If you are a loyal Legal Bytes’ reader, you know we have been following this since as early as November 2008, when we posted Endorsements & Testimonials – FTC Broom Proposes Some Sweeping Changes, and numerous updates and informational pieces have graced these pages since then (now when we say “pages,” we mean web pages). You can refer back to any or all of them, or you can check out any you may have missed right here: FTC Testimonial and Endorsement Guides Stimulate Industry Comment (March 2009); a presentation given at the University of Limerick on the subject entitled “Trust Me, I’m a Satisfied Customer: Testimonials & Endorsements in the United States,” which you can download; Ghostwriters: Medical Research or Paid Endorsers (and are they mutually exclusive?) and Rights of Publicity – Wake Up and Smell the Coffee! (both in August 2009); and FTC Releases Updated Endorsement & Testimonial Guidelines and Rimon Analysis of the New FTC Endorsement and Testimonial Guidelines (both in October 2009).

In December 2009, Legal Bytes posted another thoughtful and practical analysis FTC (Revised) Endorsement Guides Go Into Effect, written by John P. Feldman, so you know Rimon is following and keeping up with developments as they occur.

So, if you want to know more or have questions, please do not hesitate to contact me, or any Rimon attorney with whom you regularly work.

Mobile Money, Mobile Risk – The Future of ePayment Systems

Earlier this week, the editorial staff of the UK-based publication e-Finance & Payments Law & Policy, interviewed Joseph I. Rosenbaum, New York-based partner and Chair of Rimon’s global Advertising Technology & Media law practice, in connection with its cover story for the January 2013 issue. The stimulus for the initial story was the release late last year of a report by the U.S. Federal Deposit Insurance Company (FDIC) regarding the risks attendant to the growth and evolution of the mobile payment industry, and the use of mobile contactless payment technology by consumers and merchants in routine purchase transactions (e.g., NFC, Bluetooth, RFID, SMS, Wi-Fi, and WAP enabled devices generally.)

While the cover story is still in the process of being edited for publication, the editorial staff felt that publishing the full interview separately was itself newsworthy. So follow this link and you can read the full text of the e-Finance & Payments Law & Policy interview with Joseph I. Rosenbaum, partner at Rimon LLP.

You can also read the FDIC report, issued in its Supervisory Insights – Winter 2012 release, right here: Mobile Payments: An Evolving Landscape.

Of course, if you need help or more information, contact Joseph I. Rosenbaum (joseph.rosenbaum@rimonlaw.com), who also leads the ATM Mobile Marketing initiative, or feel free to call upon any of the Rimon lawyers with whom you regularly work. We are happy to help.

New Jersey Casinos Permitted to Offer Mobile Gambling on Premises

In a press release dated October 9, 2012, the New Jersey Office of the Attorney General, Division of Gaming Enforcement, unveiled new temporary regulations applicable to mobile gaming in Atlantic City casinos. Procedurally, these regulations will remain in effect as of October 8 for 270 days, while the Division of Gaming Enforcement hopes to publish final regulations within 60 days.

With a focus on preventing underage gambling and protecting the security of mobile gaming, these new regulations will permit established and licensed casinos to enable mobile gambling on their property – ostensibly in every “recreational” area, but not in parking lots and garages. The regulations require providers of software and other technical means to exploit mobile gambling, to also obtain licenses as gaming-related service providers.

If you want to review the press release and materials, you can go to the New Jersey Office of the Attorney General website, or you can download and read a copy of the new temporary regulations right here N.J.A.C. 13:69O [PDF].

Of course, if you need help or more information, contact me, Joseph I. Rosenbaum (joseph.rosenbaum@rimonlaw.com), or any of the Rimon lawyers with whom you regularly work.

CFPB Proposes Nonbank Risk Supervision

This post was written by Robert M. Jaworski and Joseph I. Rosenbaum.

The Dodd-Frank Act granted to the newly created Consumer Financial Protection Bureau (“CFPB”) supervisory authority over a wide array of financial entities, including large depository institutions and their affiliates, as well as various nonbank “covered persons,” such as residential mortgage originators and servicers, private education lenders, payday lenders, and “larger participants” in other markets and their respective service providers. To prevent “bad actors” from escaping through cracks in the CFPB’s supervisory reach, Dodd-Frank gave the CFPB broad authority to supervise other nonbank covered persons if CFPB has “reasonable cause to determine, by order … and after a reasonable opportunity to respond” that such nonbank covered person “… is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services” (“Additional Authority”). The CFPB has now taken its first step toward fleshing out this Additional Authority and providing a framework for this type of supervisory authority.

On May 20, 2012, the CFPB suggested rule was published in the Federal Register, proposing to establish procedures by which it will supervise any nonbank covered person that is not already subject to CFPB supervision. The most significant of these procedures would:

  • Require the CFPB to provide such unsupervised person with a Notice of Reasonable Cause, informing them that the CFPB believes it has a reasonable basis upon which to assert supervisory authority and providing facts that support that belief
  • Give the unsupervised person an opportunity to respond to the Notice, in writing within 20 days, either contesting the assertions or voluntarily consenting to supervision
  • Allow an unsupervised person to contest the assertion of such supervisory authority, in writing, but also through informal arguments in a supplemental oral response (typically by telephone), which would not constitute a hearing on the record, and neither discovery nor testimony of witnesses would be permitted. Following any contest and submissions, the Assistant Director for Nonbank Supervision would be required to make a recommendation, with the Director authorized to issue the final decision and Order as to whether or not the unsupervised person shall be subject to CFPB supervision.
  • Allow the unsupervised person, once becoming subject to CFPB supervision, to petition the Director after two years (and no more than annually thereafter) for termination of the Order. FYI, an unsupervised person that voluntarily consents to CFPB supervision would not have a right to file such a petition.

Issuance of a Notice does not mean charges have been filed against the unsupervised person, it simply triggers the procedures outlined in the CFPB rules. However, if the CFPB issues a notice of charges, it can choose, in its sole discretion, to utilize more formal adjudicatory procedures (including some variations) that are described in 12 C.F.R. 1081.200. Comments on the proposed rules are due by July 24, 2012, and you can read the entire proposed CFPB rule directly at Procedural Rules To Establish Supervisory Authority Over Certain Nonbank Covered Persons Based on Risk Determination.

If you need more information about these proposed rules, or want help determining if you should submit comments and the best way to approach the substance and form of those comments, please contact Robert M. Jaworski (rjaworski@rimonlaw.com). Of course, you can always find out more or get the assistance you need by contacting me, Joe Rosenbaum, or the Rimon attorney with whom you regularly work.

IAPP Privacy Presentation – Is the Wizard of Oz Still Behind the Curtain?

On May 10, 2012, I had the privilege of making a presentation at the IAPP Canada Privacy Symposium 2012. The title of my presentation was "Social and Mobile and Clouds, Oh My!" and it addressed some of the emerging issues in privacy, data protection and surveillance that arise as a result of globalizing technology and the convergence of social media, mobile marketing and cloud computing.

As part of that presentation (and as I have started to do for some time now in other presentations), I raised the issue of how lawyers, the law, legislators and regulators often use words to describe activities – words rooted in tradition or precedent – that are no longer applicable to the activity in today’s world. "Privacy" is such a word, although "not applicable" perhaps is too harsh. Obviously the word has significant applicability in a wide variety of situations. But "invasion of privacy" has become a knee-jerk reaction to virtually every information-gathering activity, even information readily and publicly available and, in some cases, posted, disclosed or distributed by the very individual whose privacy is alleged to have been "invaded."

Please feel free to download a PDF of my presentation, "Social and Mobile and Clouds, Oh My!" [PDF] (Note: Embedded video file sizes are too large to include), and let’s start a conversation about how we use words and how they wind up in laws and regulations. Lawyers work with words. Use them artfully and they provide powerful structures within which society, commerce and all forms of human endeavor function. Use them improperly and they cause confusion, uncertainty, inconsistency and inherently inequitable outcomes.

Seems like I am not the only one to point this out. Take a look at the insightful comments by John Montgomery, COO of GroupM Interaction, North America, as reported in a MediaPost RAW posting on Social Media entitled: If Marketing Terms Could Kill.

Kudos John. I’m with you. Let’s get it right.

FYI, Rimon has teams of lawyers who have experience and follow developments in privacy and data protection, information security and identity theft. If you want to know more, if you need counsel or need help navigating, or if you require legal representation in this or any other area, feel free to call me, Joseph I. ("Joe") Rosenbaum, or any of the Rimon lawyers with whom you regularly work.