MINEOLA, N.Y., Aug. 2 /PRNewswire-FirstCall/ -- Kenilworth Systems Corporation ('Kenilworth') (OTC Pink Sheets: KENS) released today an Opinion rendered on August 11, 2005 by the International Law Firm Greenberg Traurig to Kenilworth to express their opinion on the Legal Issues Relating to Roulabette(TM).
On July 12, 2006 Kenilworth announced that it has been granted a ten (10) year contract to broadcast live, in-progress casino table games from Filipino casinos by the Philippines Amusement and Gaming Corporation (PAGCOR).
August 11, 2005
VIA: E-MAIL
AND VIA FEDEX
Kenilworth Systems Corporation
185 Willis Avenue
Mineola, New York 11501
Attn: Herbert Lindo, President
Re: Legal Issues Relating to Roulabette(TM)
Dear Sir:
We are writing in response to your request for an opinion as to the legal issues relating to the implementation of the Roulabette(TM) concept of Kenilworth Systems Corporation ('KSC').
Roulabette(TM) is a method and system for placing wagers on live, in-progress casino table games such as roulette, baccarat and dice from locations remote from the actual casino tables at which the games are taking place. The system begins at the casino, where television cameras in strategic locations above the casino table games follow the games being played at the casino tables, and microphones pick up the sounds of the table play. The game play is transmitted via digital satellite and cable transmissions to subscribers who are able to wager by using set top boxes which receive the broadcast of the game and record wagers and results.
LEGAL ANALYSIS
In making use of this opinion, Kenilworth Systems Corporation ('KSC') should be aware that this is a very complex area of law, involving U.S. federal gambling statutes, the gambling statutes of the fifty states and the District of Columbia, and the gambling statutes of all the countries of the world where you might want to operate a Roulabette(TM) casino or offer Roulabette(TM) wagering. The gambling laws of these jurisdictions vary widely, ranging from the absolute prohibition of Utah, to the street-side betting shops of England, to the wide-open casinos of Las Vegas . Further confusing matters is the fact that there is very little statutory law specifically addressing remote gambling, and the few statutes which do exist relate to Internet gambling, which is not the same as Roulabette(TM). So, for the most part, we will be interpreting the provisions of gambling statutes which were enacted before the digital technology of today existed, and did not contemplate the possibility of playing casino games from remote locations. Similarly, the case law relative to remote gambling is also very sparse and, once again, concerns Internet gambling, which is different from Roulabette(TM). Finally, there are the interpretations of the law relating to remote gambling which have been publicly pronounced by the U.S. Department of Justice ('DOJ'), which in our opinion are clearly erroneous. Consequently, although the opinions expressed below are our best assessment of the situation after years of research and active involvement in numerous cases, they are to a great extent projections of what we believe the courts would hold if the issues were ever adjudicated. They are not shared by the DOJ, they do not take into account laws which may be enacted in the future as the countries of the world continue to address the issues of remote gambling, and in time they may prove to be incorrect in one respect or another.
In the United States , the prohibition and/or regulation of gambling is a matter of state law. Some states, such as Nevada, permit a wide range of gambling activities throughout the state. Other states, such as Mississippi and New Jersey, permit a wide range of gambling activities, but only at certain geographic locations, such as riverboats and Atlantic City casinos. Finally, other states, in fact most states, permit only very limited gambling activities, such as thoroughbred racing, jai alai, bingo, etc. Superimposed on this tangle of state laws and regulations are the federal statutes, which are designed to assist the states in combating illegal gambling operations which cross state and national borders. So, basically, the U.S. legal regime applicable to gambling is two-tiered. The individual states determine the forms of gambling which are legal and illegal, and to what extent they are banned or regulated, and the federal government assists the states in dealing with illegal gambling activities which cross state or national borders.
Given the fact that Roulabette(TM) would be most successful if distributed on a national or international level, the federal issues must be addressed first to determine whether it is legally feasible to distribute the product across state and national borders. If there is no federal prohibition, casino locations must be selected and the state and local laws of the jurisdiction where the casino is located must be analyzed to determine if it is legal and feasible to broadcast from the chosen locations. In view of the fact that casinos can be chosen from anywhere in the world, there is little doubt that locations can be identified from which to originate the broadcasts. It is only a matter of identifying the best casino or casinos from a legal and business perspective. Finally, several U.S. and foreign courts have concluded that remote gambling takes place both where the server is located (or in this case, the casino), and where the player is located. So, once one or more casinos are identified, another analysis will be necessary to determine the markets where it would be legal to offer the games being played. It is not a question of whether there are legal markets for one or more games, but a matter of the number of markets available and the types of games which can be offered in each market.
There are four federal statutes which are most applicable to remote gambling.(1) They are:
-- The Wire Act, which prohibits the use of interstate or foreign
communications facilities to transmit wagering information on sporting
events or contests;(2)
-- The Illegal Gambling Businesses statute, which prohibits the operation
of a gambling business in violation of the laws of the state where it
is conducted;(3)
-- The Travel Act, which prohibits the use of interstate or foreign travel
and the use of the mail or any facility in interstate or foreign
commerce (such as the Internet or digital satellite services) to
facilitate illegal activities, including illegal gambling;(4) and
-- The Interstate Transportation of Wagering Paraphernalia statute, which
prohibits transporting gambling-related items in interstate or foreign
commerce.(5)
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(1) There are also additional statutes, such as conspiracy (18 U.S.C.
section 371), money laundering (18 U.S.C. section 1956 and
racketeering (18 U.S.C. section 1962) statutes which could apply if
the gambling statutes are violated.
(2) 18 U.S.C. section 1084.
(3) 18 U.S.C. section 1955.
(4) 18 U.S.C. section 1952.
(5) 18 U.S.C. section 1953.
1. The Wire Act
This statute prohibits gambling businesses from using interstate or international telephone facilities to transmit gambling-related information, and states:
Whoever being engaged in the business of betting or wagering knowingly
uses a wired communication facility for the transmission in interstate or
foreign commerce of bets or wagers or information assisting in the placing
of bets or wagers on any sporting event or contest, or for the
transmission of a wire communication which entitles the recipient to
receive money or credit as a result of bets or wagers, or for information
assisting in the placing of bets or wagers, shall be fined under this
title or imprisoned not more than two years, or both.(6)
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(6) 18 U.S.C. section 1084(a).
The Wire Act has been a formidable tool for the DOJ in the prosecution of operators of Internet gaming sites. The DOJ merely has to establish that a bet was transmitted or received over the Internet and it can obtain a conviction, without ever having to address such issues as the actual location of the betting (i.e., where the bettor is or where the bookmaker is), or the fact that the operator was licensed by a sovereign nation to provide gambling services over the Internet.
In the Spring of 1998, when the United States
The Internet is not an electronic sanctuary for illegal betting. If a
state outlaws soliciting or accepting bets, you can't evade those
requirements by going online. It's a federal crime to use the Internet to
conduct betting operations. And to Internet betting operators everywhere
we have a simple message; you can't hide online and you can't hide off-
shore.
This assertion appears to be correct. 'Wire communication facility' is broadly defined as an instrumentality or service 'used or useful in the transmission of writings, signs, pictures and sounds of all kinds by aid of wire, cable or other like connection.'(7) The courts have ruled that even with satellite transmissions, there is still a wire connecting the gamblers computer to the Internet.(8) So, even though Roulabette(TM) utilizes satellite transmissions, it is likely that there will be a wire of some sort used for the transmission somewhere along the line, most likely at the casino or at the player's TV and set-top box. However, regardless of whether a wire was used in the transmissions, the Wire Act still would not apply for two reasons.
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(7) 18 U.S.C. section 1081.
(8) World Interactive Gaming, 1999 WL 591995, 6-8 (N.Y. S.Ct.) ('Like a
prohibited telephone call from a gambling facility, the Internet is
accessed by using a telephone wire'); United States v. Cohen, 260
F.3rd 68 (2nd Cir. 2001).
First, although the DOJ takes the position that the Wire Act applies to all Internet gambling, sports and non-sports alike, the courts have held otherwise. The DOJ reasons that the word 'sports' in the phrase 'sports events or contests' modifies only the word 'events' thereby leading to a reading that the statute covers betting on sports events and betting on [other] contests. However, the courts and virtually all legal scholars and attorneys experienced in the field are of the opinion that it only applies to sports betting.
The Supreme Court has established the rules of statutory construction, and if the statutory language is clear and unambiguous, then you look no further and follow the language of the statute. The Wire Act makes it a crime to send or receive wagers on sporting events and contests. Sporting events and contests are football, baseball, basketball, hockey, golf, tennis prize fighting or whatever, but not poker, bingo and similar games. Although a card game or a poker tournament, may be a contest, is not as sporting contest.
If there is some doubt as to the meaning of the statute, the courts turn to case law and the legislative intent of Congress. There have been cases addressing the question of whether the Wire Act applies to non-sports gambling and the case law is consistent -- it does not. The most recent case dealing with the issue was In re: MasterCard International, a civil RICO case, which hinged on the applicability of the Wire Act to non-sports Internet gambling.(9) In deciding the issue, the court stated that the wording of the Act, the case law and the legislative intent all lead to the conclusion that the Wire Act only covers sports gambling. The case was upheld on appeal by the Fifth Circuit Court of Appeals, which stated: 'we agree with the district court's statutory interpretation, its reading of the relevant case law, its summary of the relevant legislative history, and its conclusion.'(10)
It should be noted that although the DOJ loudly proclaims that the Wire Act applies to all Internet gambling, it is apparently concerned that its interpretation may be wrong, and has never attempted to use the statute against non-sports gambling business in the ten years that Internet gaming has existed. In our opinion, the Wire Act does not cover non-sports gambling, such as Roulabette(TM) -- that is the law, as enacted by Congress and interpreted by the courts, the desires and opinion of the DOJ notwithstanding.
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(9) 2001 WL 197834 (E.D.LA.).
(10) In Re: MasterCard Int'l., 313 F.3d 257, 262 5th Cir. 2002).
Second, there is an exemption to the Act, which provides that it is not illegal to transmit 'information assisting in the placing of bets or wagers on a sporting event or contest from a place where such betting is legal to another place where such betting is legal.'(11) The Roulabette(TM) broadcast would constitute 'information assisting in the placing of bets or wagers' within the meaning of the statute, and it would be broadcast from a casino in a jurisdiction where such gaming activity is legal to a jurisdiction where the actual wagering activities would take place and where such wagering would be legal. Consequently, even if one accepts, or accedes to, the expansive view of the U.S. Department of Justice, with which most people do not agree, that the Wire Act is not limited to sports betting but extends to other forms of wagering activities, Roulabette(TM) would be exempted from the statute.
2. The Illegal Gambling Businesses Statute(12)
This statute prohibits persons from operating an illegal gambling business, and states:
(a) Whoever conducts, finances, manages, supervises, directs, or owns all
or part of an illegal gambling business shall be fined under this
title or imprisoned not more than five years or both.
(b) As used in this section -- 'illegal gambling business' means a
gambling business which (i) is a violation of the law of a State or
political subdivision in which it is conducted; (ii) involves five or
more persons who conduct, finance, manage, supervise, direct, or own
all or part of such business; and (iii) has been or remains in
substantially continuous operation for a period in excess of thirty
days or has a gross revenue of $2,000 in any single day.(13)
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(11) 18 U.S.C. section 1084(b); United States v. Ross; Martin v. United
States, 389 F.2d 895, 898 (5th Cir. 1968); See also e.g. United
States v. Miller, 22 F.3d 1075 (11th Cir. 1994) (affirming conviction
under Section 1084 'for aiding and abetting the telephonic
transmission of wagering information between Georgia and Nevada');
United States v. Scavo, 593 F.2d 837 (8th Cir. 1978) (affirming
conviction of defendant who when living in Nevada provided gambling
point spread information to a Minnesota bookmaking business); United
States v. Cohen, 260 F.3rd 68 (2nd Cir. 2001) (cert. denied, 2002).
(12) This statue is also knows s the Organized Crime Control Act or OCCA,
because it was included as part of that omnibus crime bill.
(13) 18 U.S.C. section 1955.
The statute applies to all forms of gambling, sports and non-sports alike, and makes it a federal offense to conduct, finance, manage, supervise, direct or own all or part of an 'illegal gambling business.' An illegal gambling business is defined as a gambling business, which 'is a violation of the law of a State or political subdivision in which it is conducted.' The application of this statute to Roulabette(TM) is obvious, because it applies to sports and non-sports gambling alike, and Roulabette(TM) would be operated, managed, financed or owned by at least five people. Despite the language appearing to limit the statute to persons who conduct, finance, manage, etc., numerous cases have recognized that the statute proscribes any degree of participation in an illegal gambling business except participation as a bettor.(14) As one court recently put it, 'conducts extends to those on lower echelons, but with a function at their level necessary to the illegal gambling operation.'(15)
However, unlike the Wire Act, under this statute, the location of the actual activity is of critical significance, because it must be a violation of the law of the state or political subdivision in which it is conducted. This should not be an issue for Roulabette(TM), because it intends to broadcast from a casino in a jurisdiction where it would be legal. If it was not legal under the laws of the jurisdiction where the casino is located, and the casino is in the United States , then there would be a violation not only of state law, but of this federal statute as well.
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(14) Sanabria v. United States, 437 U.S. 54, 70-1 n.26 (1978).
(15) United States v. O'Brien, 131 F.3d 1428 (10th Cir. 1997).
The statute could also apply if the player is located in a state where the gambling would be in violation of state law. I think there is little question that offering services to players in a particular state would constitute doing business in that state. So, it will be essential that the service not be offered to players located in states where such gambling would be illegal. Otherwise there would be a violation of this federal statute, as well as the laws of the player's state.
3. The Travel Act
This statute prohibits the use of interstate or foreign travel, and the use of the mail or any facility in interstate or foreign commerce, to distribute the proceeds of illegal gambling, or otherwise promote, manage or facilitate any illegal activity, including gambling, in violation of federal or state law.(16)
Once again, the statute will not present a problem so long as Roulabette(TM) is legal in the state where the casino is located and the states where any U.S. players are located.
4. The Transportation of Wagering Paraphernalia Statute.
This statute prohibits persons from carrying or sending gambling paraphernalia in interstate or foreign commerce, and states:
Whoever ... knowingly carries or sends in interstate or foreign
commerce any record, paraphernalia, ticket, certificate, bills, slip,
token, paper, writing, or other device used, or to be used, or adapted,
devised, or designed for use in (a) bookmaking; or (b) wagering pools with
respect to a sporting event; or (c) in a numbers, policy, bolita, or
similar game shall be fined under this title or imprisoned for not more
than 5 years or both.(17)
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(16) 18 U.S.C. section 1952.
(17) 18 U.S.C. section 1953
A New York state court declared that an Internet gambling web site located in Antigua violated the law by sending records of gambling activity into the State of New York.(18) Moreover, the court also held that the defendant Internet gambling operator further violated the statute by sending computers to Antigua , which computers would ultimately be used for conducting gambling business between the United States and Antigua .(19) More on point, a California court has held that a computer disk containing a program for recording and analyzing bets on sporting events is gambling paraphernalia.(20) So, it is quite possible that the Roulabette(TM) data could be deemed to be paraphernalia. However, this statute should not apply because the data is not 'used, or to be used, or adapted, devised, or designed for use in (a) bookmaking; or (b) wagering pools with respect to a sporting event; or (c) in a numbers, policy, bolita, or similar game.' It is to be used in casino games, which are not covered by the statute.
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(18) People v. World Gaming, 714 N.Y.S.2d 844, 852 (N.Y.S.C. 1999).
(19) Id. at 853.
(20) United States v. Mendelsohn, 896 F.2d 1183 (9th Cir. 1990).
OPINION AND SUMMARY
Based on the analysis above, in our opinion Roulabette(TM) would be entirely legal under U.S. federal law, so long as: (1) it is legal under the laws of the state where the casino is located if the casino is in fact located in the United States , and (2) the service is not offered to any player in the United States in violation of the laws of the state where the player is located.
If KSC will select one or more casinos from which it intends to broadcast the games, we will research the jurisdiction where each such casino is located to determine if there are any legal impediments to Roulabette(TM). I would suggest selecting a Native American casino operated by a tribe which is receptive to the Roulabette(TM) concept, and located in a state which would be amenable to amending its compact with the tribe if research indicates that an amendment is necessary. I would also suggest selecting a casino in a foreign jurisdiction, which might be receptive to the Roulabette(TM) concept. A casino in a smaller country, perhaps in the Caribbean would probably be a good selection.
I hope this analysis is useful to KSC. If you have any questions or wish to discuss the issues further, please do not hesitate to contact me on my direct line at (954)768-8221.
Sincerely yours,
Greenberg Traurig, LLP
By: Patrick T. O'Brien
FORWARD LOOKING STATEMENT
This release contains 'forward-looking statements' within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E the Securities Exchange Act of 1934, as amended and such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 'Forward-looking statements' describe future expectations, plans, results, or strategies and are generally preceded by words such as 'may,' 'future,' 'plan' or 'planned,' 'will' or 'should,' 'expected,' 'anticipates,' 'draft,' 'eventually' or 'projected.' You are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements, including the risks that actual results may differ materially from those projected in the forward-looking statements as a result of various factors, and other risks identified in a company's annual report on Form 10-K or 10-Q and other filings made by such company with the Securities and Exchange Commission. You should consider these factors in evaluating the forward- looking statements included herein, and not place undue reliance on such statements. The forward-looking statements in this release are made as of the date hereof and Kenilworth undertakes no obligation to update such statements.
SOURCE Kenilworth Systems Corporation
