April 14, 2016, Introduced by Senators KOWALL, HERTEL, WARREN, JOHNSON and KNOLLENBERG and referred to the Committee on Regulatory Reform.
A bill to create the lawful Internet gaming act; to require
the licensing and certification of persons to engage in Internet
gaming; to create the division of Internet gaming; to provide for
the powers and duties of the division of Internet gaming and other
state governmental officers and entities; to impose fees; to impose
a tax on the conduct of Internet gaming; to create the Internet
gaming fund; to prohibit certain acts in relation to applications
for licenses and certification and in relation to Internet gaming
and to prescribe penalties for those violations; to require the
promulgation of rules; and to provide remedies.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the
"lawful Internet gaming act".
Sec. 2. (1) The legislature finds that the Internet has become
an integral part of everyday life for a significant number of
residents of this state, not only in regard to their professional
lives, but also in regard to personal business and communication.
Internet wagering on games of chance and games of skill is a core
form of entertainment for millions of individuals worldwide. In
multiple jurisdictions across the world, Internet gaming is legal,
regulated, and taxed, generating billions of dollars in revenue for
governments.
(2) In an opinion dated September 20, 2011, the United States
Department of Justice reversed its previous interpretation of 18
USC 1084, commonly referred to as the federal wire act, allowing
states, subject to certain restrictions, to legalize and regulate
Internet gaming and capture the revenue for the benefit of state
governments.
(3) In order to protect residents of this state who wager on
games of chance and skill through the Internet and to capture
revenues and create jobs generated from Internet gaming, it is in
the best interest of this state and its citizens to regulate this
activity by authorizing and establishing a secure, responsible,
fair, and legal system of Internet gaming that complies with the
United States Department of Justice's September 2011 opinion
concerning 18 USC 1084.
(4) The legislature additionally finds that this act is
consistent and complies with the unlawful Internet gambling
enforcement act of 2006, 31 USC 5361 to 5367, and specifically
authorizes use of the Internet to place, receive, or otherwise
knowingly transmit a bet or wager if that use complies with this
act and rules promulgated under this act.
Sec. 3. As used in this act:
(a) "Authorized participant" means an individual who has a
valid Internet wagering account with an Internet gaming licensee
and is at least 21 years of age.
(b) "Board" means the Michigan gaming control board created
under section 4 of the Michigan gaming control and revenue act,
1996 IL 1, MCL 432.204.
(c) "Division" means the division of Internet gaming
established under section 5.
(d) "Fund" means the Internet gaming fund created under
section 13.
(e) "Gross gaming revenue" means the total of all money
actually received by an Internet gaming licensee from Internet
gaming operations, less only the total of all money paid out as
winnings to patrons. As used in this subdivision:
(i) "Prizes" includes both cash and noncash prizes. The value
of noncash prizes is the actual cost of the prize if the prize is
purchased from an unrelated party or, if purchased from a related
party, the amount the prize would have cost if purchased from an
unrelated party.
(ii) "Winnings" includes all of the following:
(A) The total amount players receive as prizes during the
accounting period.
(B) Stakes returned to players.
(C) Other amounts credited to players' accounts, including the
cash value of loyalty points and similar incentives granted to
patrons.
(f) "Institutional investor" means that term as defined in
section 2 of the Michigan gaming control and revenue act, 1996 IL
1, MCL 432.202.
(g) "Internet" means the international computer network of
interoperable packet-switched data networks, inclusive of such
additional technological platforms as mobile, satellite, and other
electronic distribution channels approved by the division.
(h) "Internet game" means a game of skill or chance that is
offered by an Internet gaming licensee, as authorized by the
division. Internet game includes gaming tournaments conducted via
the Internet in which players compete against one another in 1 or
more of the games authorized by the division or in approved
variations or composites as authorized by the division.
(i) "Internet gaming licensee" means a person that is issued
an Internet gaming license from the division to conduct Internet
wagering.
(j) "Internet gaming platform" means an interactive set of
related data networks used to provide Internet wagering to
authorized participants.
(k) "Internet gaming vendor" means a person that is certified
by the division to provide or offer to provide goods, software, or
services to an Internet gaming licensee, including goods, software,
or services related to or supporting the acceptance, testing,
auditing, management, operation, support, administration, or
control of Internet wagering, Internet games, Internet wagering
accounts, or Internet gaming platforms.
(l) "Internet wagering" means the acceptance of a wager by an
Internet gaming licensee from an individual who is either
physically present in this state when placing the wager or
otherwise permitted to place the wager by law. For purposes of this
subdivision, the intermediate routing of electronic data in
connection with Internet wagering, including across state lines,
does not determine the location or locations in which the wager is
initiated, received, or otherwise made.
(m) "Internet wagering account" means an electronic ledger in
which all of the following types of transactions relative to the
Internet gaming platform are recorded:
(i) Deposits.
(ii) Withdrawals.
(iii) Amounts wagered.
(iv) Amounts paid on winning wagers.
(v) Service or other transaction-related charges authorized by
the patron, if any.
(vi) Adjustments to the account.
(vii) Any other information required by the division.
(n) "Person" means an individual, partnership, corporation,
association, or other legal entity.
Sec. 4. (1) Internet wagering is authorized to the extent that
it is carried out in accordance with this act.
(2) A wager under this act initiated by an individual in this
state and received in a casino in this state, whether a casino in a
city and operated under the Michigan gaming control and revenue
act, 1996 IL 1, MCL 432.201 to 432.226, or a casino operated by an
Indian tribe, is considered to be gambling or gaming in the casino.
Sec. 5. (1) The division of Internet gaming is established in
the board. The division has the powers and duties specified in this
act and all other powers necessary and proper to enable it to fully
and effectively execute this act to administer, regulate, and
enforce the system of Internet gaming established by this act.
(2) The division has jurisdiction over every person involved
in Internet gaming operations.
(3) The division may enter into agreements with other gaming
entities, including foreign entities, to facilitate, administer,
and regulate multijurisdiction Internet gaming to the extent
consistent with state and federal laws and the laws of any foreign
jurisdiction. For this purpose, the division may enter into
multijurisdictional agreements with other states and foreign
jurisdictions.
(4) The division shall not authorize, administer, or otherwise
maintain a system for offering wagering on any amateur or
professional sporting event or contest, unless doing so is
consistent with state and federal laws.
(5) Notwithstanding anything else in this act, a wager may be
accepted from an individual who is not physically present in this
state if the division determines that the wager is not inconsistent
with federal law or the law of the jurisdiction, including any
foreign nation, in which the individual is located or that the
wagering is conducted under a multijurisdictional agreement to
which this state is a party that is not inconsistent with federal
law.
Sec. 6. (1) The division may issue an Internet gaming license
to a person that applies for the license if the division determines
that the applicant is eligible for an Internet gaming license under
this act and the rules promulgated under this act.
(2) An Internet gaming license issued under this act is valid
for 5 years after the date of issuance and is renewable after that
5-year period for additional 5-year periods, if the division
determines that the licensee continues to meet all the requirements
of this act and the rules promulgated under this act.
(3) An assignment or transfer of an interest in an Internet
gaming license, or a greater than 10% interest, whether direct or
indirect, in an Internet gaming licensee, is subject to written
approval by the division. An approved transferee is subject to a
$100,000.00 nonrefundable application fee.
(4) The division shall only issue an Internet gaming license
to a person that is 1 of the following:
(a) A casino licensee under the Michigan gaming control and
revenue act, 1996 IL 1, MCL 432.201 to 432.226.
(b) A federally recognized Michigan Indian tribe that operates
a gaming facility under a facility license issued in accordance
with a tribal gaming ordinance approved by the chair of the
National Indian Gaming Commission. The division shall not issue an
Internet gaming license under this subdivision unless the Indian
tribe, in connection with its application to conduct gaming under
this act, waives its sovereign immunity with respect to conducting
gaming under this act and paying fees and taxes imposed under this
act.
(5) The division shall not issue an Internet gaming license if
the issuance would allow more than 8 Internet gaming licensees to
conduct Internet gaming under this act.
(6) A qualified applicant may apply to the division for an
Internet gaming license to offer wagering on Internet games as
provided in this act. The application must be made on forms
provided by the division and contain the information required by
the division, including, but not limited to, detailed information
regarding the ownership and management of the applicant, detailed
personal information regarding the applicant, financial information
regarding the applicant, and the gaming history and experience of
the applicant in the United States and other jurisdictions.
(7) An application under this section must be accompanied by a
nonrefundable application fee of $100,000.00.
(8) The division shall keep all information, records,
interviews, reports, statements, memoranda, or other data supplied
to or used by the division in the course of its review or
investigation of an application for an Internet gaming license or a
renewal of an Internet gaming license strictly confidential and
shall use that material only to evaluate an applicant for a license
or renewal. The materials described in this subsection are exempt
from disclosure under section 13 of the freedom of information act,
1976 PA 442, MCL 15.243.
(9) A person that does any of the following is guilty of a
misdemeanor punishable by imprisonment for up to 93 days or a fine
of up to $500.00, or both:
(a) Knowingly makes materially false statements to obtain an
Internet gaming license.
(b) Knowingly advertises in this state any game, product, or
feature that is not authorized by the person's license.
(c) Violates any other provision of this act or of a rule
promulgated under this act.
(10) A person that commits a second or subsequent violation
under subsection (9) is guilty of a misdemeanor punishable by
imprisonment for up to 1 year or a fine of up to $1,000.00, or
both.
(11) If a person that is not an individual commits a violation
under subsection (9) or (10), imprisonment may be imposed on the
partners, officers, or members who knowingly participated in the
violation.
(12) An application under this section must be filed and
considered in accordance with the rules promulgated under this act.
The division shall promulgate rules to effectuate this section
within 60 days after the effective date of this act.
(13) An institutional investor that holds less than 30% of the
equity of an applicant under this section is exempt from the
consideration process under subsection (12).
(14) An Internet gaming licensee shall pay a license fee of
$5,000,000.00 to the division at the time the license is issued.
The division shall deposit all application and license fees paid
under this act into the fund. A license fee imposed by this section
is an advance payment of Internet wagering taxes owed by the
Internet gaming licensee under section 12.
Sec. 7. (1) The division may certify Internet gaming vendors
to provide goods, software, or services to Internet gaming
licensees.
(2) The division shall certify an Internet gaming vendor for 5
years. A certification under this section is renewable after the
initial 5-year period for an additional 5 years if the division
determines that the Internet gaming vendor continues to meet all
the requirements of this act and rules promulgated under this act.
(3) A person may apply to the division to become an Internet
gaming vendor as provided in this act and the rules promulgated
under this act.
(4) An application under this section must be made on forms
provided by the division and contain any information required by
the division, including, but not limited to, detailed information
regarding the ownership and management of the applicant, detailed
personal information regarding the applicant, financial information
regarding the applicant, and the gaming history and experience of
the applicant in the United States and other jurisdictions.
(5) An application under this section must be accompanied by a
nonrefundable application fee in an amount to be determined by the
division, not to exceed $100,000.00.
(6) The division shall keep all information, records,
interviews, reports, statements, memoranda, or other data supplied
to or used by the division in the course of its review or
investigation of an application for certification as an Internet
gaming vendor strictly confidential and use the materials only to
evaluate an applicant for a certification. The materials described
in this subsection are exempt from disclosure under section 13 of
the freedom of information act, 1976 PA 442, MCL 15.243.
(7) A person that does any of the following is guilty of a
misdemeanor punishable by imprisonment for up to 93 days or a fine
of up to $500.00, or both:
(a) Knowingly makes materially false statements to obtain
certification as an Internet gaming vendor.
(b) Violates any other provision of this act or of a rule
promulgated under this act.
(8) A person that commits a second or subsequent violation
under subsection (7) is guilty of a misdemeanor punishable by
imprisonment for up to 1 year or a fine of up to $1,000.00, or
both.
(9) If a person that is not an individual commits a violation
under subsection (7) or (8), imprisonment may be imposed on the
partners, officers, or members who knowingly participated in the
violation.
Sec. 8. The division may do anything necessary or desirable to
effectuate this act, including, but not limited to, all of the
following:
(a) Develop qualifications, standards, and procedures for
approval and licensure of Internet gaming licensees and
certification of Internet gaming vendors.
(b) Decide promptly and in reasonable order all license
applications and approve, deny, suspend, revoke, restrict, or
refuse to renew Internet gaming licenses and Internet gaming vendor
certifications. A party aggrieved by an action of the division
denying, suspending, revoking, restricting, or refusing to renew a
license or certification may request a hearing before the division.
A request for hearing under this subdivision must be made to the
division in writing within 5 days after service of notice of the
action by the division. The division shall serve notice of action
under this subdivision either by personal delivery or certified
mail, postage prepaid, to the aggrieved party. Notice served by
certified mail is considered complete on the business day following
the date of mailing. The division shall conduct a hearing requested
under this subdivision in reasonable order.
(c) Conduct all hearings pertaining to civil violations of
this act or rules promulgated under this act. The division shall
promulgate rules that contain procedures for conducting hearings
under this subdivision. In a hearing under this subdivision or in a
court action, a reproduced copy of a record of the division
relating to an Internet gaming licensee or Internet gaming vendor,
including, but not limited to, a notice prepared in the ordinary
course of business of the division or a book, record, or other
document offered in the name of the division under certificate of
the executive director of the board or of any officer or employee
of the division designated in writing by the executive director
must be admitted into evidence and is prima facie proof of the
information contained in the record. The attorney general shall
prosecute a violation of this act or a rule promulgated under this
act.
(d) Provide for the establishment and collection of all
license and certification fees and taxes imposed by this act and
the rules promulgated under this act and the deposit of the fees
and taxes into the fund.
(e) Develop and enforce testing, audit, and certification
requirements and schedules for Internet gaming platforms, Internet
wagering, and Internet wagering accounts, including, but not
limited to, age and identification verification software,
geolocation software, Internet games, and gaming hub software.
(f) Develop and enforce requirements for responsible gaming
and player protection, including privacy and confidentiality
standards and duties.
(g) Develop and enforce requirements for accepting Internet
wagers, Internet wagering accounts, and authorized participants and
minimum insurance requirements.
(h) Develop and promote standards governing contracts between
Internet gaming licensees and the payments industry.
(i) Develop and enforce standards and requirements regarding
antifraud, anti-money-laundering, and anticollusion methods.
(j) Develop protocols related to the security of and disputes
arising over Internet wagers and Internet wagering accounts.
(k) Adopt by rule a code of conduct governing division
employees that ensures, to the maximum extent possible, that
persons subject to this act avoid situations, relationships, or
associations that may represent or lead to an actual or perceived
conflict of interest.
(l) Develop and administer civil penalties for Internet gaming
licensees and Internet gaming vendors that violate this act or the
rules promulgated under this act.
(m) Audit and inspect, on reasonable notice, books and records
relevant to Internet gaming operations, Internet wagers, Internet
wagering accounts, Internet games, or Internet gaming platforms,
including, but not limited to, the books and records regarding
financing or accounting, marketing or operational materials, or any
other similar materials held by or in the custody of an Internet
gaming licensee or Internet gaming vendor. The division may assert
its authority under this subdivision by an administrative subpoena,
which may also contain a request for relevant documents or
interrogatories, and which is enforceable in the circuit court.
(n) Acquire or lease real property and make improvements to
the property and acquire by lease or by purchase personal property,
including, but not limited to, any of the following:
(i) Computer hardware.
(ii) Mechanical, electronic, and online equipment and
terminals.
(iii) Intangible property, including, but not limited to,
computer programs, software, and systems.
Sec. 9. The division shall promulgate and enforce rules
governing the administration and conduct of Internet gaming as it
considers necessary to carry out this act. The division shall
promulgate the rules pursuant to the administrative procedures act
of 1969, 1969 PA 306, MCL 24.201 to 24.328. The rules may include
all of the following:
(a) The types of Internet games to be offered, including
poker.
(b) Forms of payment accepted for Internet games.
(c) Responsible gaming.
(d) Technical and financial standards for Internet wagering,
Internet wagering accounts, and Internet gaming platforms, systems,
and software or other electronic components for Internet gaming.
(e) Anything else necessary or desirable for the efficient and
economical operation and administration of Internet gaming and for
the convenience of authorized participants, Internet gaming
licensees, and Internet gaming vendors.
Sec. 10. (1) An Internet gaming licensee's Internet gaming
platform must provide 1 or more mechanisms to reasonably verify
that an authorized participant is 21 years of age or older and that
Internet wagering is limited to transactions that are initiated and
received or otherwise made exclusively within this state.
(2) An individual who wishes to place a wager over the
Internet under this act must satisfy the verification requirements
under subsection (1) before he or she may establish an Internet
gaming account or wager on an Internet game offered by an Internet
gaming licensee.
(3) When a legally compliant mechanism is established to
permit wagering on Internet games by individuals physically located
outside of this state, the division may promulgate rules and adopt
procedures to allow and govern wagering by those individuals and
may enter into multijurisdictional agreements and related and
ancillary agreements to effectuate the wagering.
(4) An Internet gaming licensee's Internet gaming platform
must also provide mechanisms designed to detect and prevent the
unauthorized use of Internet wagering accounts and to detect and
prevent fraud, money laundering, and collusion.
(5) If a participant in Internet gaming violates this act or a
rule promulgated under this act, the participant's winnings are
forfeited. An Internet gaming licensee shall deposit forfeited
winnings into the fund.
(6) An Internet gaming licensee shall not authorize any of the
following individuals to establish an Internet gaming account or
allow them to wager on Internet games offered by the Internet
gaming licensee, except if required and authorized by the division
for testing purposes or to otherwise fulfill the purposes of this
act:
(a) An individual less than 21 years old.
(b) A partner, officer, or member or an individual employed by
an Internet gaming licensee or Internet gaming vendor.
(c) A spouse, civil union partner, child, brother, sister, or
parent residing as a member of the same household in the principal
place of abode of an individual described in subdivision (b).
(d) An individual whose name appears in the division's
responsible gaming database.
Sec. 11. (1) The division shall develop responsible gaming
measures, including a statewide responsible gaming database
identifying individuals who are prohibited from establishing an
Internet wagering account or participating in Internet gaming
offered by an Internet gaming licensee. The executive director of
the board may place an individual's name in the responsible gaming
database if any of the following apply:
(a) The individual has been convicted in any jurisdiction of a
felony, a crime of moral turpitude, or a crime involving gaming.
(b) The individual has violated this act or another gaming-
related act.
(c) The individual has performed an act or has a notorious or
unsavory reputation such that the individual's participation in
Internet gaming under this act would adversely affect public
confidence and trust in gaming.
(d) The individual's name is on a valid and current exclusion
list from another jurisdiction in the United States or a foreign
jurisdiction.
(2) The division shall promulgate rules for the establishment
and maintenance of the responsible gaming database.
(3) An Internet gaming licensee, in a format specified by the
division, shall provide the division with names of individuals to
be included in the responsible gaming database.
(4) The division may impose reasonable fees on persons
authorized to access and use the responsible gaming database.
(5) An Internet gaming licensee's Internet gaming platform
must offer in a clear, conspicuous, and accessible manner
responsible gambling services and technical controls to
participants, including both temporary and permanent self-exclusion
for all games offered; the ability for participants to establish
their own periodic deposit and wagering limits and maximum playing
times; referrals to crisis counseling and referral services for
individuals and families experiencing difficulty as a result of
problem or compulsive gambling; and other services as the division
reasonably determines are necessary or appropriate to reduce and
prevent problem gambling.
(6) Any authorized participant may voluntarily prohibit
himself or herself from establishing an Internet gaming account.
The division shall incorporate the voluntary self-exclusion list
into the responsible gaming database and maintain both the self-
exclusion list and the responsible gaming database in a
confidential manner.
(7) The self-exclusion list and responsible gaming database
established under this section are exempt from disclosure under
section 13 of the freedom of information act, 1976 PA 442, MCL
15.243.
Sec. 12. (1) A tax of 10% is imposed on the gross gaming
revenue received by an Internet gaming licensee from Internet games
authorized under this act.
(2) An Internet gaming licensee shall pay the tax imposed by
this section on a monthly basis. The payment for a month is due on
the tenth day of the following month.
Sec. 13. (1) The Internet gaming fund is created in the state
treasury.
(2) The state treasurer may receive money or other assets
required to be paid into the fund under this act or from any other
source for deposit into the fund. The state treasurer shall direct
the investment of the fund. The state treasurer shall credit to the
fund interest and earnings from fund investments.
(3) Money in the fund at the close of the fiscal year must
remain in the fund and not lapse to the general fund.
(4) The board is the administrator of the fund for auditing
purposes.
(5) The board shall expend money from the fund, on
appropriation, for the purposes specified by the legislature in the
appropriation.
Enacting section 1. This act takes effect 90 days after the
date it is enacted into law.
Enacting section 2. This act does not take effect unless
Senate Bill No. 890.
of the 98th Legislature is enacted into law.