THE SENATE

S.B. NO.

755

TWENTY-SIXTH LEGISLATURE, 2011

S.D. 2

STATE OF HAWAII

H.D. 1

 

 

 

 

 

A BILL FOR AN ACT

 

 

relating to economic development.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 


PART I

SECTION 1. The legislature finds that tourism is still the number one industry in Hawaii because no other industry can readily match its capacity to generate continuing revenue.  But Hawaii's struggle in recent years to remain competitive with other "sun and sand" resort destinations has challenged the legislature to look beyond traditional means to attract mainland and global visitors. The State must also raise its profile through earned media marketing with events that will not only help draw more visitors to Hawaii but also provide free exposure for Hawaii to overseas markets.  With recession lingering in the global economy and recent unrest in the Middle East, air travel costs remain volatile and continue to trend upward. In addition, the recent earthquake and tsunami in Japan may result in the loss of approximately twenty per cent of the visitor market. Accordingly, the State must find new ways to attract visitors from the mainland United States and other parts of Asia.

The legislature also finds that one way to attract visitors is to host peer-to-peer poker tournaments or championship series in Hawaii. Experience in other markets demonstrates that many poker tournaments and championship series fill hotel rooms for the duration of the tournaments, which run for several weeks at a time, with participants, their families, and supporters, as well as poker aficionados. Furthermore, these events are televised nationally and internationally to large audiences and include scenic shots and other coverage of local attractions. This coverage provides free advertising and exposes these areas to a worldwide audience. Organizers of these peer-to-peer poker tournaments and championship series are eager to hold such events in Hawaii. Like traditional poker events in Las Vegas and other places, these games are played between human players without a house running the game. However, these games are not allowed under current Hawaii law because they are classified as games of chance, rather than games of skill, and are held in venues that are open to the public.

The purpose of this part is to authorize peer-to-peer games of skill and thereby to bolster the State's economy.

SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"CHAPTER A

PEER-TO-PEER ENTERTAINMENT

A-1 Limited peer-to-peer entertainment authorized. Peer-to-peer entertainment and a system of wagering incorporated therein, as defined in this chapter, are authorized only to the extent that peer-to-peer entertainment and wagering is conducted in accordance with this chapter.

A-2 Definitions. As used in this chapter, unless the context clearly requires otherwise:

"Chairperson" means the member of the Hawaii peer-to-peer entertainment commission selected by the other members of the Hawaii peer-to-peer entertainment commission.

"Commission" means the Hawaii peer-to-peer entertainment commission.

"Contest of skill" has the same meaning as defined in section 712-1220.

"Department" means the department of business, economic development, and tourism.

"Executive director" means the executive director of the commission.

"Peer-to-peer entertainment" means the games of poker known as "Texas Hold 'em" and "Omaha" and other contests of skill authorized by the commission and conducted in a manner by which:

(1) Each player receives the player's personal winnings from the game;

(2) No other person or entity derives any proceeds based on the outcome of the game; and

(3) Play by computer, computer software, or other inanimate device, directly or indirectly, is prohibited.

A-3 Hawaii peer-to-peer entertainment commission. (a) There is established the Hawaii peer-to-peer entertainment commission, which shall be a body corporate and a public instrumentality of the State for the purpose of implementing this chapter. The commission shall be placed within the department of business, economic development, and tourism for administrative purposes. The commission shall consist of seven members to be appointed by the governor with the advice and consent of the senate under section 26-34. Of the seven members, two shall be appointed from a list of nominees submitted by the president of the senate and two shall be appointed from a list of nominees submitted by the speaker of the house of representatives. All appointments to the commission shall be made within sixty days of the effective date of this Act.

(b) No person shall be appointed as a member of the commission or continue to be a member of the commission if the person:

(1) Is an elected state official;

(2) Is licensed by the commission pursuant to chapter B, or is an official of, has a financial interest in, or has a financial relationship with, any peer-to-peer entertainment operation subject to the jurisdiction of this commission pursuant to this chapter;

(3) Is related to any person within the second degree of consanguinity or affinity who is licensed by the commission pursuant to chapter B; or

(4) Has been under indictment, convicted, pled guilty or nolo contendere, or forfeited bail for a felony or a misdemeanor involving gambling or fraud under the laws of this State, any other state, or the United States within the ten years prior to appointment or a local ordinance in a state involving gambling or fraud that substantially corresponds to a misdemeanor in that state within the ten years prior to appointment.

(c) The term of office of a commission member shall be five years. Vacancies in the commission shall be filled for the unexpired term in like manner as the original appointments.

(d) The president of the senate or the speaker of the house of representatives may request that the governor remove or suspend a member of the commission who is nominated by the president of the senate or the speaker of the house of representatives. Upon receipt of a request from the president of the senate or the speaker of the house of representatives, and after due notice and public hearing, the governor may remove or suspend for cause any member of the commission.

(e) Members of the commission shall:

(1) Be a resident of the State;

(2) Serve part-time;

(3) Be paid compensation of $        for each day in the performance of official duties; and

(4) Be reimbursed for expenses, including travel expenses, incurred in the performance of official duties.

(f) Officers of the commission, including the chairperson, shall be selected by the members. The commission, subject to chapter 92, shall hold at least one meeting in each quarter of the State's fiscal year. Special meetings may be called by the chairperson or any four members upon seventy-two hours written notice to each member. Four members shall constitute a quorum, and a majority vote of the members present shall be required for any final determination by the commission. The commission shall keep a complete and accurate record of all its meetings.

(g) Before assuming the duties of office, each member of the commission shall take an oath that the member shall faithfully execute the duties of office according to the laws of the State and shall file and maintain with the director a bond in the sum of $25,000 with good and sufficient sureties. The cost of any bond for any member of the commission under this section shall be considered a part of the necessary expenses of the commission.

(h) The commission shall appoint a person to serve as the executive director of the commission and who shall be subject to the commission's supervision. The executive director shall:

(1) Hold office at the will of the commission;

(2) Be exempt from chapters 76 and 89;

(3) Devote full time to the duties of the office;

(4) Not hold any other office or employment;

(5) Perform any and all duties that the commission assigns;

(6) Receive an annual salary at an amount set by the commission and be reimbursed for expenses actually and necessarily incurred in the performance of the executive director's duties.

(i) Except as otherwise provided by law, the executive director may:

(1) Hire assistants, other officers, and employees, who shall be exempt from chapters 76 and 89 and who shall serve at the will of the executive director; and

(2) Appoint committees and consultants necessary for the efficient regulation of peer-to-peer entertainment events; provided that no person shall be hired or appointed under this subsection who:

(A) Is an elected state official;

(B) Is licensed by the commission pursuant to chapter B or is an official of, has a financial interest in, or has a financial relationship with, any peer-to-peer entertainment operation subject to the jurisdiction of this commission pursuant to this chapter;

(C) Is related to any person within the second degree of consanguinity or affinity who is licensed by the commission pursuant to chapter B; or

(D) Has been under indictment, convicted, pled guilty or nolo contendere, or forfeited bail for a felony or misdemeanor concerning gambling or fraud under the laws of this State, any other state, or the United States within the last ten years, or a local ordinance in any state involving gambling or fraud that substantially corresponds to a misdemeanor in that state within the ten years prior to employment.

(j) The salaries of employees hired pursuant to subsection (i) shall be set by the executive director.

(k) The commission shall adopt rules in accordance with chapter 91 establishing a code of ethics for its employees that includes restrictions on which employees are prohibited from participating in or wagering on any peer-to-peer entertainment operation subject to the jurisdiction of the commission. The code of ethics shall be separate from and in addition to any standards of conduct set forth pursuant to chapter 84.

(l) No person shall be employed by the commission if:

(1) During the three years immediately preceding appointment or employment, the person held any direct or indirect interest in, or was employed by:

(A) A licensee under chapter B or a gaming licensee in another jurisdiction; or

(B) A potential licensee who had an application for a license to operate an internet peer-to-peer entertainment operation pursuant to chapter B pending before the commission or for a gaming license in any other jurisdiction;

except that the person seeking employment may be employed by the commission if the person's interest in any operator of peer-to-peer entertainment events or licensee under chapter B would not, in the opinion of the commission, interfere with the objective discharge of the person's employment obligations. A person shall not be employed by the commission if the person's interest in the licensee constitutes a controlling interest in that licensee; or

(2) The person or the person's spouse, parent, child, child's spouse, or sibling, is a member of the commission, or a director of, or a person financially interested in, any person licensed pursuant to chapter B, or any person who has an application for a license pursuant to chapter B pending before the commission.

(m) Each member of the commission, the executive director, and each key employee, as determined by the commission, shall file with the governor a financial disclosure statement:

(1) Listing all assets, liabilities, and property and business interests of the member, executive director, key employee, and any of their spouses; and

(2) Affirming that the member, executive director, and key employee are in compliance with this chapter.

The financial disclosure statement shall be made under oath and filed at the time of employment and annually thereafter.

(n) Each employee of the commission, except the executive director or a key employee, shall file with the commission at the time of employment a financial disclosure statement listing all assets, liabilities, property and business interests, and sources of income of the employee and the employee's spouse.

(o) A member of the commission, executive director, or key employee shall not hold direct or indirect interest in, be employed by, or enter into a contract for service with, any applicant or person approved by the commission pursuant to operate a peer-to-peer entertainment event pursuant to this chapter or with any applicant or person licensed by the commission pursuant to chapter B for a period of five years after the date of termination of the person's membership on or employment with the commission.

(p) An employee of the commission shall not acquire any direct or indirect interest in, be employed by, or enter into a contract for services with any applicant or person approved by the commission pursuant to operate a peer-to-peer entertainment event pursuant to this chapter or with any chapter B applicant or person licensed by the commission pursuant to chapter B for a period of three years after the date of termination of the person's employment with the commission.

(q) A commission member or a person employed by the commission shall not represent a person or party other than the State before or against the commission for a period of three years after the date of termination of the member's term of office or the employee's period of employment with the commission.

(r) A business entity in which a former commission member or employee or agent has an interest, or any partner, officer, or employee of the business entity, shall not make any appearance or representation before the commission that is prohibited to that former member, employee, or agent. As used in this subsection, "business entity" means a corporation, limited liability company, partnership, limited liability partnership association, trust, or other form of legal entity.

A-4 Staff. (a) The executive director shall keep records of all proceedings of the commission and shall preserve all records, books, documents, and other papers belonging to the commission or entrusted to its care relating to peer-to-peer entertainment.

(b) In addition to persons hired under section A-3(i) the commission may employ any personnel that may be necessary to carry out its duties related to a peer-to-peer entertainment operation.

A-5 Powers of the commission. The commission shall have all powers necessary to fully and effectively supervise all peer-to-peer entertainment events pursuant to this chapter, including the power to:

(1) Determine what contests of skill may be conducted as peer-to-peer entertainment;

(2) Authorize operation of large scale, peer-to-peer entertainment events at commercial venues, issue permits, and establish and collect fees for these permits;

(3) Provide for the collection of all fees imposed and to collect, receive, expend, and account for all revenues derived from the operation of peer-to-peer entertainment events;

(4) Investigate alleged violations and take appropriate disciplinary action against operators of peer-to-peer entertainment events for violations of this chapter or rules adopted by the commission, or institute appropriate legal action for enforcement, or both;

(5) Administer, regulate, and enforce the provisions of this chapter relating to peer-to-peer entertainment events. The commission's jurisdiction shall extend to every person, association, corporation, partnership, trust, and any other entity with a financial interest in or holding a permit to operate a peer-to-peer entertainment event, or otherwise subject to the requirements of this chapter;

(6) Enter at any time without a warrant and without notice the premises, offices, facility, or other places of business of an operator of peer-to-peer entertainment events authorized by this chapter where evidence of the compliance or noncompliance with this chapter or rules is likely to be found. Entry is authorized to:

(A) Inspect and examine all premises wherein peer-to-peer entertainment events are being conducted, or where any records of those activities are prepared;

(B) Inspect, examine, audit, impound, seize, or assume physical control of, or summarily remove from the premises all books, ledgers, documents, writings, photocopies of correspondence records, videotapes, including electronically stored records, money receptacles, other containers and their contents, equipment in which the records are stored, or other peer-to-peer entertainment related equipment and supplies on or around the premises, including counting rooms;

(C) Inspect the person and inspect, examine, and seize personal effects present in a business operating peer-to-peer entertainment events pursuant to this chapter; and

(D) Investigate and deter alleged violations of this chapter or rules;

(7) Be present, through its inspectors and agents, any time peer-to-peer entertainment events are conducted in any venue for the purpose of certifying compliance with this chapter and applicable rules, receiving complaints from the public, and conducting other investigations into the conduct of peer-to-peer entertainment events as from time to time the commission may deem necessary and proper;

(8) Conduct hearings, issue subpoenas for the attendance of witnesses and subpoenas duces tecum for the production of books, records, and other pertinent documents, and to administer oaths and affirmations to the witnesses, when, in the judgment of the commission, it is necessary to administer or enforce this chapter. The executive director or the executive director's designee is also authorized to issue subpoenas and to administer oaths and affirmations to witnesses;

(9) Eject or exclude, or authorize the ejection or exclusion of, any person from facilities in which peer-to-peer entertainment events are being conducted pursuant to this chapter if the person is in violation of this chapter or the person's conduct or reputation is such that the person's presence within a facility, in the opinion of the commission, may call into question the honesty and integrity of the peer-to-peer entertainment event or interfere with the orderly conduct thereof or any other action that, in the opinion of the commission, is a detriment or impediment to the peer-to-peer entertainment event; provided that the propriety of that ejection or exclusion shall be subject to subsequent hearing by the commission;

(10) Permit peer-to-peer entertainment events authorized pursuant to this chapter to use a wagering system whereby wagerers' money may be converted to tokens, electronic cards, or chips;

(11) Impose and collect fines of up to $50,000 against individuals and up to $100,000 for each violation of this chapter, any rules adopted by the commission, or for any other action that, in the commission's discretion, is a detriment or impediment to peer-to-peer entertainment events; and

(12) Delegate the execution of any of its powers for the purpose of administering and enforcing this chapter.

A-6 Member, employee, or agent of commission; conduct generally. (a) By January 31 of each year, each member of the commission shall prepare and file with the commission, a disclosure form in which the member shall:

(1) Affirm that the member or the member's spouse, parent, child, or child's spouse is not a member of the board of directors of, financially interested in, or employed by an operator of peer-to-peer entertainment events or a licensee, or applicant for a license, pursuant to chapter B;

(2) Affirm that the member continues to meet all other criteria for commission membership under this chapter or the rules adopted by the commission;

(3) Disclose any legal or beneficial interest in any real property that is or may be directly or indirectly involved with peer-to-peer entertainment events authorized by this chapter or peer-to-peer internet entertainment authorized by chapter B; and

(4) Disclose any other information that may be required to ensure that the integrity of the commission and its work is maintained.

(b) By January 31 of each year, each employee of the commission shall prepare and file with the commission a disclosure form in which the employee shall:

(1) Affirm the absence of financial interests prohibited by this chapter;

(2) Disclose any legal or beneficial interests in any real property that is or that may be directly or indirectly involved with an operator of peer-to-peer entertainment events authorized by this chapter or peer-to-peer internet entertainment authorized by chapter B;

(3) Disclose whether the employee or the employee's spouse, parent, child, or child's spouse is financially interested in or employed by an operator peer-to-peer entertainment events authorized by this chapter or peer-to-peer internet entertainment authorized by chapter B; and

(4) Disclose any other information that may be required to ensure that the integrity of the commission and its work is maintained.

(c) A member, employee, or agent of the commission who becomes aware that the member, employee, or agent of the commission or their spouse, parent, or child is a member of the board of directors of, financially interested in, or employed by an operator of peer-to-peer entertainment events authorized by this chapter or by a licensee, or an applicant for a license, pursuant to chapter B shall immediately provide detailed written notice to the chairperson.

(d) A member, employee, or agent of the commission who has been indicted, charged with, convicted of, pled guilty or nolo contendere to, or forfeited bail for:

(1) A misdemeanor involving gambling, dishonesty, theft, or fraud;

(2) A local ordinance in any state involving gambling, dishonesty, theft, or fraud that substantially corresponds to a misdemeanor in that state; or

(3) A felony under Hawaii law, the laws of any other state, or the laws of the United States, or any other jurisdiction;

shall immediately provide detailed written notice of the conviction or charge to the chairperson.

(e) A member, employee, or agent of the commission, or former member, employee, or agent of the commission, shall not disseminate or otherwise disclose any material or information in the possession of the commission that the commission considers confidential, unless specifically authorized to do so by the chairperson or the commission.

(f) A member, employee, or agent of the commission shall not engage in any conduct that constitutes a conflict of interest and shall immediately advise the chairperson, in writing, of the details of any incident or circumstances that would present the existence of a conflict of interest with respect to the performance of commission-related work or duty of the member, employee, or agent of the commission.

(g) A member, employee, or agent of the commission who is approached and offered a bribe in violation of this chapter shall immediately provide a written account of the details of the incident to the chairperson and to a law enforcement officer of a law enforcement agency having jurisdiction.

(h) A member, employee, or agent of the commission shall not engage in political activity or politically-related activity during the duration of the person's appointment or employment.

(i) A former member, employee, or agent of the commission may appear before the commission as a witness testifying as to factual matters or actions handled by the member, employee, or agent during the person's tenure as a member, employee, or agent of the commission. The member, employee, or agent of the commission shall not receive compensation for such an appearance other than a standard witness fee and reimbursement for travel expenses as established by statute or court rule.

(j) No member, employee, or agent of the commission may participate in or wager on any peer-to-peer entertainment event authorized by this chapter or conducted by any licensee, applicant for a license, or any affiliate of a licensee or an applicant for a license under chapter B, except that the member, employee, or agent of the commission may participate in and wager on a peer-to-peer entertainment event conducted by a licensee under this chapter, to the extent authorized by the chairperson or commission as part of the person's surveillance, security, or other official duties for the commission.

(k) Violation of this section by a member of the commission may result in disqualification or constitute cause for removal or other disciplinary action as determined by the commission.

(l) A violation of this section by an employee or agent of the commission shall not result in termination of employment or require other disciplinary action if the commission determines that the conduct involved does not violate the purpose of this chapter.

(m) Violation of this section shall not create a civil cause of action.

(n) As used in this section, "political activity" or "politically related activity" includes any of the following:

(1) Using the person's official authority or influence for the purpose of interfering with or affecting the result of an election;

(2) Knowingly soliciting, accepting, or receiving political contributions from any person;

(3) Running for nomination or as a candidate for election to a partisan political office; or

(4) Knowingly soliciting or discouraging the participation in any political activity of any person who is:

(A) Applying for any compensation, grant, contract, ruling, license, permit, or certificate pending before the commission; or

(B) The subject of or a participant in an ongoing audit, investigation, or enforcement action being carried out by the commission.

A-7 Rules. The commission shall adopt rules pursuant to chapter 91 necessary to govern, restrict, approve, or regulate the peer-to-peer entertainment events authorized by this chapter, including but not limited to those that:

(1) Establish a permit fee for each peer-to-peer entertainment event not to exceed $          ;

(2) Require applicants for a permit to operate a peer-to-peer entertainment event to possess current federal and state tax clearances;

(3) Address the requirements for a peer-to-peer entertainment events venue, including that it is open to the public, is capable of accommodating a specified minimum number of persons, and meets all applicable state and county code requirements;

(4) Specify a minimum number of participants in a peer-to-peer entertainment event and a maximum limit on the duration of the event;

(5) Establish minimum levels of insurance to be obtained by applicants for a permit to operate a peer-to-peer entertainment event; and

(6) Promote the safety, security, and integrity of the peer-to-peer entertainment events authorized in this chapter;

provided that nothing in this chapter or the rules shall be construed to permit the establishment of a casino, card room, or similar operation on either an occasional or ongoing basis."

SECTION 3. Section 712-1220, Hawaii Revised Statutes, is amended to read as follows:

"712-1220 Definitions of terms in this part. In this part, unless a different meaning plainly is required, the following definitions apply.

[(1)] "Advance gambling activity"[. A person "advances gambling activity" if he engages] means to engage in conduct that materially aids any form of gambling activity. Conduct of this nature includes but is not limited to conduct directed toward [the]:

(1) The creation or establishment of the particular game, contest, scheme, device, or activity involved[, toward the];

(2) The acquisition or maintenance of premises, paraphernalia, equipment, or apparatus therefor[, toward the];

(3) The solicitation or inducement of persons to participate therein[, toward the];

(4) The actual conduct of the playing phases thereof[, toward the];

(5) The arrangement of any of its financial or recording phases[, or toward any]; or

(6) Any other phase of its operation. A person advances gambling activity if, having substantial proprietary control or other authoritative control over premises being used with [his] the person's knowledge for purposes of gambling activity, [he] the person permits that activity to occur or continue or makes no effort to prevent its occurrence or continuation. A person advances gambling activity if [he] the person plays or participates in any form of gambling activity.

[(2)] "Bookmaking" means advancing gambling activity by accepting bets from members of the public upon the outcomes of future contingent events[.]; provided that accepting wagers placed during the course of peer-to-peer entertainment does not constitute bookmaking.

[(3)] "Contest of chance" means any contest, game, gaming scheme, or gaming device in which the outcome depends [in a material degree] predominantly upon an element of chance, notwithstanding that skill of the contestants may also be a factor therein.

"Contest of skill" means any contest, game, gaming scheme, or gaming device in which the outcome depends predominantly upon the skill of the contestants, notwithstanding that an element of chance may also be a factor therein; provided that no contest, game, gaming scheme, or gaming device shall be deemed a "contest of skill" unless approved as such by the peer-to-peer entertainment commission pursuant to chapters A and 91.

[(4)] "Gambling"[. A person engages in gambling if he] means conduct by which a person stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under [his] the person's control or influence, upon an agreement or understanding that [he] the person or someone else will receive something of value in the event of a certain outcome. Gambling does not include peer-to-peer entertainment, bona fide business transactions valid under the law of contracts, including but not limited to contracts for the purchase or sale at a future date of securities or commodities, and agreements to compensate for loss caused by the happening of chance, including but not limited to contracts of indemnity or guaranty and life, health, or accident insurance.

[(5)] "Gambling device" means any device, machine, paraphernalia, or equipment that is used or usable in the playing phases of any gambling activity, whether that activity consists of gambling between persons or gambling by a person involving the playing of a machine. However, devices, machines, paraphernalia, or equipment used in peer-to-peer entertainment conducted pursuant to chapters A and B; lottery tickets; and other items used in the playing phases of lottery schemes are not gambling devices within this definition.

[(6)] "Lottery" means a gambling scheme in which:

[(a)] (1) The players pay or agree to pay something of value for chances, represented and differentiated by numbers or by combinations of numbers or by some other medium, one or more of which chances are to be designated the winning ones; [and]

[(b)] (2) The winning chances are to be determined by a drawing or by some other method based on an element of chance; and

[(c)] (3) The holders of the winning chances are to receive something of value.

[(7)] "Mutuel" means a form of lottery in which the winning chances or plays are not determined upon the basis of a drawing or other act on the part of persons conducting or connected with the scheme, but upon the basis of the outcome or outcomes of a future contingent event or events otherwise unrelated to the particular scheme.

"Peer-to-peer entertainment" means the contests of skill authorized by the peer-to-peer entertainment commission pursuant to this chapter and that are conducted in a manner by which:

(1) Each player receives the player's personal winnings from the game;

(2) No other person or entity derives any proceeds based on the outcome of the game; and

(3) Play by computer, computer software, or inanimate device, directly or indirectly, is prohibited.

[(8)] "Player" means a person who engages in gambling or peer-to-peer entertainment solely as a contestant or bettor.

[(9)] "Profit from gambling activity"[. A person "profits from gambling activity" if he accepts or receives] means to accept or receive money or other property pursuant to an agreement or understanding with any person whereby [he] the person participates or is to participate in the proceeds of gambling activity.

[(10)] "Social gambling" [is] means the same as defined in section 712-1231.

[(11)] "Something of value" means any money or property, any token, object, or article exchangeable for money or property, or any form of credit or promise directly or indirectly contemplating transfer of money or property or of any interest therein, or involving extension of a service or entertainment."

PART II

SECTION 4. The legislature has received a mandate from the State's voters to address the massive shortfall of revenue that threatens to stagnate the economic growth necessary to maintain much needed social programs, guarantee quality education, and fund essential county and state programs. To meet these challenges, while avoiding over-burdensome taxation regimes and further draconian cuts, the State needs to look at new and emerging economic alternatives that permit Hawaii to use its competitive advantage over other locales without exposing the population to the potential negative side effects that might attend these alternatives.

The legislature finds that one alternative that will permit the State to address its needs is to adopt a licensing regime for peer-to-peer internet entertainment. Unlike traditional internet gaming in which players play against a computerized house similar to video poker machines in destinations like Las Vegas, peer-to-peer internet entertainment involves human players competing against other players from around the world in a virtual venue that is hosted by the licensed site. Because of Hawaii's time zone position relative to those in Asia and the western hemisphere, peer-to-peer entertainment sites situated in Hawaii would permit same day processing of financial transactions arising from game play.

The legislature also finds that the State could realize substantial revenue through a robust licensing fee and wager service hosting fees. Because these internet competitions are conducted primarily with players from Asia, the mainland United States, and other parts of the world outside Hawaii, the social ills associated with gambling would not be visited upon Hawaii residents. Therefore, it would not be necessary for the State to expend scarce resources to combat these social ills.

The legislature further finds that while there are no cases on point, legal opinions have reasoned that, because these sites consist of competition in games of skill between human players and not in games of chance that are now prohibited under Hawaii's anti-gambling statutes, this type of entertainment would not violate the federal Unlawful Internet Gaming Enforcement Act, 31 U.S.C. 5361-5367. Additionally, the legislature finds that federal cases do not interpret the federal Wire Act, 18 U.S.C. 1084, to prohibit the transfer of funds that one may have earned through these human-to-human competitions from the licensed host to the players' bank account.

The purpose of this Act is to authorize internet based peer-to-peer contests of skill to be hosted in Hawaii and thereby to bolster the State's economy.

SECTION 5. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"CHAPTER B

PEER-TO-PEER INTERNET ENTERTAINMENT

B-1 Definitions. As used in this chapter, unless the context clearly requires otherwise:

"Chairperson" has the same meaning as defined in section A‑2.

"Commission" has the same meaning as defined in section A‑2.

"Executive director" has the same meaning as defined in section A-2.

"Peer-to-peer entertainment" has the same meaning as defined in section A-2.

"Peer-to-peer internet entertainment" means peer-to-peer entertainment conducted via the Internet by a host whose facilities and principal place of business are in the State.

B-2 Authorization for limited peer-to-peer internet entertainment. (a) Peer-to-peer internet entertainment shall be authorized by the commission pursuant to this chapter only as follows:

(1) Not more than two licenses shall be issued to operators of the infrastructure necessary to host peer-to-peer internet entertainment pursuant to chapter 103D, Hawaii Revised Statutes;

(2) Procedures shall be established to ensure that play is conducted only between live participants and not by computers, computer software, inanimate devices, or by agents of the licensee;

(3) Chapter A and the rules adopted thereunder shall apply to peer-to-peer internet entertainment authorized under this chapter; and

(4) Advertising on the peer-to-peer internet entertainment websites shall be provided free of charge to the State for tourism promotion and for licensing by the State of any other advertising.

(b) The Hawaii peer-to-peer entertainment commission shall adopt rules necessary and make applications available for a licensee to begin peer-to-peer internet entertainment operations within one hundred twenty days of its appointment. Applications for a peer-to-peer internet entertainment license shall be submitted to the commission no later than sixty days after the date applications are made available and shall include a development plan for the facility and its operations. The commission shall select applicants no later than ninety days after the final date applications must be submitted to the commission. If a selected applicant meets all the requirements of this part, the commission shall issue a license to the applicant within one hundred and twenty days after the date the applicant is selected.

B-3 Powers of the commission. In addition to the powers conferred pursuant to chapter A, the commission shall have all powers necessary to regulate peer-to-peer internet entertainment operations under this chapter, including the power to:

(1) Require that records, including financial or other statements, of any licensee under this chapter be kept in the manner prescribed by the commission and that any licensee involved in the ownership or management of peer-to-peer internet entertainment operations submit to the commission an annual balance sheet and profit and loss statement, a list of the stockholders or other persons having a five per cent or greater beneficial interest in the peer-to-peer internet entertainment activities of each licensee, and any other information the commission deems necessary to effectively administer this chapter;

(2) Prescribe any employment application form to be used by any licensee involved in the ownership or management of peer-to-peer internet entertainment operations for hiring purposes; and

(3) Suspend, revoke, or restrict licenses or require the removal of a licensee or an employee of a licensee for a violation of this chapter or a commission rule or for engaging in a fraudulent practice.

B-4 Member, employee, or agent of commission; conduct generally. (a) Every member, employee, or agent of the commission shall adhere to the standards of conduct set forth in chapter A with regard to peer-to-peer entertainment, generally, and to the standards set forth in this section with regard to peer-to-peer internet entertainment, in particular.

(b) Any member, employee, or agent of the commission who is negotiating for, or acquires by any means, any interest in any person who is a licensee or an applicant for a license, or is affiliated with such a person, shall immediately provide written notice of the details of the interest to the chairperson. The member, employee, or agent of the commission shall not act on behalf of the commission with respect to that person.

(c) A member, employee, or agent of the commission shall not enter into any negotiations for employment with any person or affiliate of any person who is a licensee or an affiliate and shall immediately provide written notice of the details of any such negotiations or discussions to the chairperson. The member, employee, or agent of the commission shall not take any action on behalf of the commission with respect to that person.

(d) Any member, employee, or agent of the commission who receives an invitation, written or oral, to initiate a discussion concerning employment or the possibility of employment with a person, or affiliate of a person, who is a licensee or an applicant shall immediately report the invitation to the chairperson. The member, employee, or agent of the commission shall not take action on behalf of the commission with respect to that person.

(e) A member, employee, or agent of the commission or a parent, spouse, sibling, or child of a member, employee, or agent of the commission shall not accept any gift, gratuity, compensation, travel, lodging, or anything of value, directly or indirectly from any licensee, applicant, or any affiliate or representative of an applicant or licensee, unless the acceptance conforms to a written policy or directive issued by the chairperson or the commission. Any member, employee, or agent of the commission who is offered or receives any gift, gratuity, compensation, travel, lodging, or anything of value, directly or indirectly, from any licensee or any applicant or affiliate or representative of an applicant or licensee shall immediately provide written notification of the details to the chairperson.

(f) Any commission member, licensee, or applicant or affiliate or representative of a commission member, licensee, or applicant who receives any ex parte communication in violation of section B-7(c), or who is aware of an attempted communication in violation of section B-7(c), shall immediately report details of the communication or attempted communication in writing to the chairperson.

(g) Any member of the commission who receives an ex parte communication that attempts to influence that member's official action shall disclose the source and content of the communication to the chairperson. The chairperson may investigate or initiate an investigation of the matter with the assistance of the attorney general and law enforcement to determine if the communication violates subsection (f), section B-7(c), or other state law. The disclosure under this section and the investigation shall remain confidential. Following an investigation, the chairperson shall advise the governor or the commission, or both, of the results of the investigation and may recommend action, as the chairperson considers appropriate.

(h) A new or current employee or agent of the commission shall obtain written permission from the executive director before continuing outside employment held at the time the employee begins to work for the commission. Permission shall be denied, or permission previously granted shall be revoked, if the nature of the work is considered to or does create a possible conflict of interest or otherwise interferes with the duties of the employee or agent for the commission.

(i) An employee or agent of the commission granted permission for outside employment shall not conduct any business or perform any activities, including solicitation, related to outside employment on premises used by the commission or during the employee's working hours for the commission.

(j) The chairperson shall report any action the chairperson has taken or contemplates taking under this section, with respect to an employee or agent or former employee or former agent, to the commission at the next meeting of the commission. The commission may direct the executive director to take additional or different action.

(k) If a financial interest in a licensee or an applicant, or affiliate or representative of a licensee or applicant, is acquired by:

(1) An employee or agent that has been offered employment with the commission;

(2) An employee of the commission; or

(3) The employee's or agent's spouse, parent, or child;

through no intentional action of the employee or agent, the employee or agent shall have up to thirty days to divest or terminate the financial interest. Employment may be terminated if the interest has not been divested after thirty days.

(l) As used in this section:

"Outside employment" includes the following:

(1) Operation of a proprietorship;

(2) Participation in a partnership or group business enterprise; or

(3) Performance as a director or corporate officer of any for-profit corporation or banking or credit institution.

B-5 Application for a peer-to-peer internet entertainment license. (a) Applications to the commission for a license to conduct peer-to-peer internet entertainment shall be made under oath on forms provided by the commission and shall contain information as prescribed by the commission, including all of the following:

(1) The name, business address, telephone number, social security number and, where applicable, the federal tax identification number of the applicant;

(2) An identification of any business, including, if applicable, the state of incorporation or registration, in which the applicant or qualifier has an equity interest of more than five per cent. If the applicant is a corporation, partnership or other business entity, the applicant or qualifier shall identify any other corporation, partnership, or other business entity in which it has an equity interest of more than five per cent, including, if applicable, the state of incorporation or registration. The applicant may comply with this paragraph by filing a copy of the applicant's registration with the Securities Exchange Commission if the registration contains the information required by this paragraph;

(3) Whether the applicant has been indicted, convicted, pled guilty or nolo contendere, or forfeited bail for a felony within the last ten years or for a misdemeanor involving gambling, theft, or fraud within the last ten years and including the date, the name and location of the court, arresting agency, prosecuting agency, the case caption, the docket number, the offense, the disposition, and the location and length of incarceration;

(4) Whether the applicant has ever been granted any license or certificate issued by a licensing authority in the State, or any other jurisdiction, that has been restricted, suspended, revoked, or not renewed and a statement describing the facts and circumstances concerning the application, denial, restriction, suspension, revocation, or nonrenewal, including the licensing or codifying authority, the date each action was taken, and the reason for each action;

(5) Whether the applicant, within the last ten years, has filed or had filed against it a civil or administrative action or proceeding in bankruptcy or, within the last ten years, has been involved in any formal process to adjust, defer, suspend, or otherwise address the payment of any debt, including the date of filing, the name and location of the court, the case caption, the docket number, and the disposition;

(6) Whether the applicant, within the last five tax years, has failed to pay any final amount of tax due and payable under federal, state, or local law, after exhaustion of all inter-agency appeals processes, including the amount, type of tax, the taxing, and time periods involved;

(7) A statement listing the names and titles of all public officials or officers of any unit of state government or county government in the jurisdiction in which the peer-to-peer internet entertainment facility is to be located, and the spouses, parents, and children of those public officials or officers who, directly or indirectly, own any financial interest in, have any beneficial interest in, are the creditors of or hold any debt instrument issued by, or hold or have an interest in any contractual or service relationship with, the applicant or a qualifier. As used in this paragraph, "public official" or "officer" does not include a person who would be listed solely because of the person's state or federal military service; and

(8) The name and business telephone number of any attorney, counsel, or any other person representing an applicant in matters before the commission.

(b) Information provided on the application shall be used as the basis for a thorough background investigation that the commission shall conduct with respect to each applicant. An incomplete application shall be cause for denial of a license by the commission.

(c) Each applicant shall disclose the identity of every person, association, trust, or corporation having a greater than five per cent direct or indirect financial interest in the peer-to-peer internet entertainment operation for which the license is sought. If the disclosed entity is a trust, the application shall disclose the names and addresses of the beneficiaries; if a corporation, the names and addresses of all stockholders and directors; if a partnership, the names and addresses of all partners, both general and limited.

(d) An application fee of $5,000 shall be paid to the commission by an applicant at the time of filing to defray the costs associated with an applicant and qualifier's background investigation conducted by the commission. All information, records, interviews, reports, statements, memoranda, or other data supplied to or used by the commission in the course of its review or investigation of an application for a license shall be confidential, used only for the purpose of evaluating an applicant, and exempt from public disclosure required by chapter 92F, and shall not be admissible as evidence, nor discoverable in any action of any kind in any court or before any tribunal, commission, agency, or person, except for any action deemed necessary by the commission.

(e) An applicant shall be ineligible to receive a peer-to-peer internet entertainment license if:

(1) The applicant has been convicted of a felony under the laws of this State, any other state, or the United States;

(2) The person has been convicted of any violation under part III, chapter 712, or substantially similar laws of another jurisdiction;

(3) The person has knowingly submitted an application for a license under this chapter that contains false information;

(4) The person is a member of the commission;

(5) The firm or corporation applying for a license employs a person described in paragraph (1), (2), (3), or (4) who participates in the management or operation of entertainment operations authorized under this chapter; or

(6) A license of the applicant issued under this chapter, or a license to own or operate gaming facilities in any other jurisdiction, has been revoked.

B-6 License fee; disposition. The commission shall award a license to operate a peer-to-peer internet entertainment operation pursuant to chapter 103D to the two highest qualified bidders; provided that the minimum bid for each license shall be $100,000,000 and that each licensee shall thereafter pay an annual fee of twenty percent of all wagers placed. All fees collected pursuant to this section shall be deposited into the general fund.

B-7 Licensee or applicant; conduct generally. (a) A licensee or applicant shall not knowingly initiate a negotiation for, or discussion of, employment with a member, employee, or agent of the commission. A licensee or applicant who initiates a negotiation or discussion about employment shall immediately provide written notice of the details of the negotiation or discussion to the chairperson as soon as that person becomes aware that the negotiation or discussion has been initiated with a member, employee, or agent of the commission.

(b) A licensee or applicant, or affiliate or representative of an applicant or licensee, shall not, directly or indirectly, knowingly give or offer to give any gift, gratuity, compensation, travel, lodging, or anything of value to any member, employee, or agent of the commission that the member, employee, or agent of the commission is prohibited from accepting under section B-4(e).

(c) A licensee or applicant or any affiliate or representative of an applicant or licensee shall not engage in ex parte communications concerning a pending application, license, or enforcement action with members of the commission. A member of the commission shall not engage in any ex parte communications with a licensee or an applicant, or with any affiliate or representative of an applicant or licensee, concerning a pending application, license, or enforcement action.

(d) Violation of this chapter by a licensee, applicant, or affiliate or representative of a licensee or applicant may result in denial of the application of licensure or revocation or suspension of license or other disciplinary action by the commission.

B-8 Rules. The commission shall adopt rules pursuant to chapter 91 necessary for the purpose of this chapter."

PART III

SECTION 6. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 7. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 9. This Act shall take effect on July 1, 2112.



 

Report Title:

Gambling; Peer-to-Peer Entertainment

 

Description:

Authorizes events featuring peer-to-peer entertainment, including poker, in which each player receives the player's personal winnings but in which no other person or entity derives any proceeds based on the outcome. Authorizes issuance of not more than two licenses to operate infrastructure for online peer-to-peer entertainment for a minimum fee of $100,000,000 per year, 20% of total wagers, and free advertising for State. Prohibits operator of events or licensee from participating, directly or indirectly, in peer-to-peer entertainment and prohibits participation by computer. Establishes peer-to-peer entertainment commission. Effective 7/1/2112. (HD1)

 

 

 

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