Delaware Gaming Supplier Regulatory Overview

Delaware currently has three commercial casinos that offer video lottery terminals and traditional table games. These locations are regulated by the Delaware State Lottery (“Lottery”), which also reviews and approves licensing requests for companies that provide goods or services to gaming facilities. This analysis will provide an overview of the licensing and registration requirements necessary for individuals and entities to provide goods or services to video lottery locations in the state.

Delaware became the first state after the Supreme Court overturned the Professional and Amateur Sports Protection Act (PASPA), which prohibited full-scale sports betting, to begin offering sports wagering in July 2018.¹ Delaware offers full-scale sports wagering in a variety of sports, including football, basketball, baseball, hockey, soccer, boxing/MMA, and auto racing/golf.²

Additionally, football parlay wagering is offered for both college and professional games at authorized Delaware sports lottery retailers.³

Gaming Vendor – Service Company License

All entities or individuals seeking to provide goods or services to a gaming facility in the state must be licensed by the Lottery. Although the Lottery defines those providing goods or services to gaming facilities as “gaming vendors,” the license provided is a “service company license.”⁴ Each service company is to be licensed in accordance with the standards of a key employee.⁵ Banks, licensed lending institutions, and insurance providers are exempt from licensing.⁶ In addition, an institutional investor that owns less than 15 percent of the applicant and certifies that it holds the ownership interest for investment purposes only may petition for exemption from licensing.⁷

The Lottery defines a “gaming vendor” as “any vendor offering goods or services relating to the manufacture, operation, maintenance, security, distribution, service or repair of video lottery machines, sports lottery machines or table game equipment; any vendor offering goods or services to a video lottery agent on a regular and continuing basis; or any person providing gaming excursion services to a video lottery agent.” ⁸

The licensure procedure includes satisfying security, fitness, and background standards as necessary to ensure competence, honesty, and integrity.⁹

“Gaming Equipment” is defined as “any mechanical, electrical or electronic contrivance or machine or equipment used in connection with gaming.”¹⁰ Furthermore, the definition explicitly includes roulette wheels and balls, big six wheels, cards, dice, chips, plaques, card shoes, drop boxes, pai gow tiles and shakers, table game layouts, and other traditional casino gaming hardware.

Duration

Gaming vendor licenses are awarded for an initial term of two years, with a renewal term of three years.¹¹

Fees

There is a $4,000 licensing fee associated with all gaming vendor licenses and renewals.¹² In addition, the applicant must reimburse the Lottery for any out-of-pocket expenses incurred during the licensing process.¹³

Application

Interested parties must complete the applicable forms to apply for a service company license. In order to complete the forms, the following information is needed:
1. Demonstration of the applicant’s fitness and the background of its qualifiers;
2. Identification of all customers who have purchased gaming equipment within the last three years;
3. Financial statements, tax returns, insurance policies, and lists of creditors;
4. List of all persons with whom the applicant has a communications protocol agreement;
5. Disclosure of whether the applicant, or any of its qualifiers, has been the subject of an investigation in another jurisdiction, including the nature and outcome;
6. Demonstration of the applicant’s security and financial control over service technicians;
7. Disclosure of the applicant’s legal name, form, or entity, including the names, addresses, and federal identification of its qualifiers;
8. Disclosure of the names and addresses of individuals who have been authorized by the applicant to engage in dealings with the Lottery in order to represent the interests of the applicant;
9. Description of its engineering and software development resources, technical support capabilities, and ability to manufacture and deliver the machines.¹⁴

In addition, the following documents must be included with the application materials:

1. Financial statements from the past five years, tax returns, insurance policies, and lists of creditors;¹⁵
2. Copy of contract proposal with gaming facility.¹⁶

The Division of Gaming Enforcement of the Delaware Department of Safety and Homeland Security conducts background checks and investigations on all applicants.¹⁷ The applicant bears the cost of the investigation.¹⁸ A service company license is considered to be a revocable privilege conditioned upon the “proper and continued qualification” of the licensee.¹⁹

Non-Gaming Vendor – Vendor Registration

A non-gaming vendor that provides business in excess of $10,000.00 per year must complete a vendor registration form (VRF).²⁰ Non-gaming vendors must also obtain a license if the non-gaming vendor provides goods or services in excess of $400,000 per year to any single facility, or in excess of $750,000 per year to multiple facilities.²¹ Non-gaming vendors are defined as “any vendor offering goods or services other than gaming equipment.”²²

Duration

A non-gaming vendor license is valid for a period of three years, with renewal terms of four years.²³

Fees

There is a $2,000 fee associated with each license and renewal.²⁴

Application

The VRF will include information and documents that provide the following information:
1. Nature of the business;
2. The date of the formal offer and acceptance of the agreement to conduct business;
3. Names of subsidiaries;
4. Names and percentage ownership of each entity owning more than 10 percent of the non-gaming vendor;
5. Names of any individual who entered into the agreement with or will deal directly with the agent;
6. Names of any qualifier who will be significantly involved in the conduct of the non-gaming vendor’s business;
7. Name of the sole proprietor, if applicable;
8. Identification of each beneficial owner of more than 5 percent in the applicant;
9. Name and title of the individual who completed the vendor registration form.²⁵

In addition to the VRF, a non-gaming vendor must submit a license application if it meets either the $400,000.00 or $750,000.00 transaction thresholds.²⁶ The license application will include the following:
1. Demonstration of the applicant’s fitness and the background of its qualifiers;
2. Disclosure of whether the applicant, or any of its qualifiers, has been the subject of an investigation in another jurisdiction, including the nature and outcome;
3. Disclosure of the applicant’s legal name, form, or entity, including the names, addresses, and federal identification of its qualifiers;
4. Disclosure of the names and addresses of individuals who have been authorized by the applicant to engage in dealings with the Lottery in order to represent the interests of the applicant;
5. Copy of contract proposal with gaming facility.²⁷

In addition, applicants must also include with the application materials a copy of the proposed contract with the gaming facility.²⁸

Contract Requirements

In addition to the licensing and registration requirements listed above, the Lottery requires that service company contracts contain certain provisions.²⁹ These include language that requires service companies to provide technical support upon request, to submit items for testing, to certify all required parts software, as well as reporting requirements and other related provisions.
³⁰

Technical Requirements

The Lottery requires that all video lottery equipment be tested and certified prior to being placed on the gaming floor.³¹ The Lottery may require that a licensed company submit two prototype machines for testing and may further require a brief testing period prior to issuing a final approval of the game or device.³² The Lottery also requires that each licensed provider of gaming equipment conform to certain reporting requirements related to the continued operation of the licensee’s games or devices.³³

Exemptions

Banks and other lending institutions are exempt from the licensing and registration processes required of gaming and non-gaming vendors.³⁴

Online Gambling

On June 28, 2012, Gov. Jack Markell signed into law the Delaware Gaming Competitiveness Act, a law that will allow online gaming in the state. The law allows players who are physically located in the state, verified through computer software, to wager on a variety of casino-style gambling games over the internet. Delaware became the first state to launch full-scale online gaming in November 2013.³⁵ Delaware Park, Dover Downs, and Harrington Raceway introduced virtual real-money games including poker, blackjack, roulette, and slots.³⁶

Both technology providers and service providers involved in goods and services of online gaming are required to be licensed by the Lottery.

Online Gambling — Technology Providers

A technology provider is defined as a person or entity who provides the hardware, software, or operational services required to operate the gaming platform; who provides the game content to the gaming platform using at least one connection from an external gaming platform; or whose products or services contribute directly to the outcome of internet lottery games.³⁷

Duration

The Division of Gaming Enforcement may require an annual update of information to be submitted.³⁸ Contact the Delaware Lottery for current terms of licenses.

Fees

There is a $4,000.00 fee associated with each license and renewal. A second license is not required for an applicant who is already licensed as a gaming vendor.³⁹

Application

Interested parties must submit an application including:
1. Demonstration of the applicant’s fitness and the background of its qualifiers;
2. Identification of all customers to whom it has furnished internet lottery systems within the last three years;
3. Disclosure of whether the applicant, or any of its qualifiers, has been the subject of an investigation in another jurisdiction, including the nature and outcome;
4. Demonstration of the applicant’s security and financial control over service technicians;
5. Disclosure of the applicant’s legal name, form, or entity, including the names, addresses, and federal identification of its qualifiers;
6. Disclosure of the names and addresses of individuals who have been authorized by the applicant to engage in dealings with the Lottery in order to represent the interests of the applicant;
7. Financial statements from the past five years;
8. Description of the applicant’s risk management capabilities, engineering and software development resources, technical and maintenance support capabilities, and ability to develop and deliver the Internet lottery system;
9. Copy of contract proposal with gaming facility.⁴⁰

An applicant will be issued a license if the Director is satisfied that the applicant would be a “fit technology provider and not pose a threat to the public interest, the reputation of the lottery or to the effective control of the lottery.”⁴¹

Online Gambling – Service Providers

Service providers provide ancillary services to the support of the internet lottery system.⁴² A service provider is considered to be conducting regular and continuing business if it provides more than $100,000.00 in transactions per year to any single gaming facility or technology provider, or more than $150,000.00 in transactions per year to multiple facilities or providers.⁴³

Duration

Service provider licenses are valid for five years and should be renewed at least 60 days before expiration.⁴⁴

Fees

The fee for a service provider license and renewal is $2,000.⁴⁵

Application

A service provider deemed to conduct regular and continuing business must submit an application including:
1. Demonstration of the applicant’s fitness and the background of its qualifiers;
2. Disclosure of whether the applicant, or any of its qualifiers, has been the subject of an investigation in another jurisdiction, including the nature and outcome;
3. Disclosure of the applicant’s legal name, form, or entity, including the names, addresses, and federal identification of its qualifiers;
4. Disclosure of the names and addresses of individuals who have been authorized by the applicant to engage in dealings with the Lottery in order to represent the interests of the applicant;
5. Copy of contract proposal with gaming facility.⁴⁶

The Director will evaluate whether the applicant has “demonstrated an ability to interface its technical capabilities with the selected gaming platform and that it has the resources, experience and ability necessary to provide the services” contracted with the Lottery.⁴⁷

Sports Wagering – Technology Providers

On May 14, 2018, the Supreme Court overturned PASPA, which prohibited full-scale sports betting, when it ruled in favor of New Jersey in Murphy v. NCAA.⁴⁸ Delaware’s racinos – Delaware Park, Dover Downs, and Harrington Raceway – opened sports betting to the public on June 5, 2018.⁴⁹

A technology provider contracts with the Lottery “for the provision of goods or services related to a sports lottery.”⁵⁰ The Director gives public notice of the Lottery’s “intent to select technology providers of sports lottery systems that consist of sports wagering products, risk management (bookmaking), operations and support services” through a request for proposal in a Delaware newspaper and trade publication.⁵¹ Any party interested in a license must submit a contract proposal and an application to the Lottery.⁵²

The Director enters into contracts with licensed technology providers as he determines to be appropriate.⁵³

Duration
Sports wagering technology provider licenses have an initial term of two years and a renewal term of three years.⁵⁴

Fees

Contact the Delaware Lottery for current fees.

Application

Interested parties must submit an application including the following:
1. Demonstration of the applicant’s fitness and the background of its qualifiers;
2. Identification of all customers to whom it has furnished sports lottery systems within the last three years;
3. Disclosure of whether the applicant, or any of its qualifiers, has been the subject of an investigation in another jurisdiction, including the nature and outcome;
4. Demonstration of the applicant’s security and financial control over service technicians;
5. Disclosure of the applicant’s legal name, form, or entity, including the names, addresses, and federal identification of its qualifiers;
6. Disclosure of the names and addresses of individuals who have been authorized by the applicant to engage in dealings with the Lottery in order to represent the interests of the applicant;
7. Financial statements from the past three years;
8. Description of the applicant’s risk management capabilities, engineering and software development resources, technical and maintenance support capabilities, and ability to develop and deliver the sports lottery machines;
9. Copy of contract proposal with gaming facility.⁵⁵

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¹Delaware Sports Betting Information – Sportsbooks, Betting Sites, Sports Handle, https://sportshandle.com/delaware/ (last visited Jul. 23, 2019); Murphy v. National Collegiate Athletic Association, 138 S, Ct. 1461 (2018).
² Delaware Lottery Games, Sports Lottery, https://www.delottery.com/Sports-Lottery (last visited Aug. 1, 2019).
³Delaware Lottery Games, Sports Lottery, https://www.delottery.com/Sports-Lottery (last visited Aug. 1, 2019).
⁴29 Del. § 4829(a).
⁵29 Del. § 4829(c).
⁶10-203 Del. Admin. Code § 4.5.1.
⁷10-203 Del. Admin. Code §§ 3.16-3.16.1.
⁸29 Del. § 4829(a).
⁹29 Del. § 4829(b).
¹⁰10-203 Del. Admin. Code § 2.0.
¹¹29 Del. § 4829(h)(1).
¹²10-203 Del. Admin. Code § 4.22.
¹³10-203 Del. Admin. Code § 4.22.
¹⁴10-203 Del. Admin. Code § 4.2.
¹⁵10-203 Del. Admin. Code § 4.2.2.
¹⁶10-203 Del. Admin. Code § 4.2.11.
¹⁷Delaware Division of Gaming Enforcement, About the Division of Gaming Enforcement (DGE), https://dge.delaware.gov/contentFolder/index-in.shtml?dc=aboutagency (last visited Aug. 1, 2019).
¹⁸10-203 Del. Admin. Code § 4.2.1.
¹⁹29 Del. § 4830(a).
²⁰10-203 Del. Admin. Code § 4.3.
²¹10-203 Del. Admin. Code§ 4.6.
²²10-203 Del. Admin. Code § 2.0.
²³29 Del. § 4829(h)(2).
²⁴10-203 Del. Admin. Code § 4.23.
²⁵10-203 Del. Admin. Code § 4.4.
²⁶10-203 Del. Admin. Code § 4.6.
²⁷10-203 Del. Admin. Code § 4.8.
²⁸10-203 Del. Admin. Code § 4.8.6.
²⁹10-203 Del. Admin. Code § 5.0 et seq.
³⁰10-203 Del. Admin. Code § 5.2.1.
³¹10-203 Del. Admin. Code § 5.2.3.
³²10-203 Del. Admin. Code § 5.8.
³³10-203 Del. Admin. Code § 5.12 et seq.
³⁴10-203 Del. Admin. Code § 4.5.1.
³⁵Brett Collson, Delaware Becomes First State to Launch Full-Scale Real-Money Online Gambling, Poker News (Nov. 8, 2013), https://www.pokernews.com/news/2013/11/delaware-becomes-first-state-to-launch-full-scale-gambling-16741.htm.
³⁶Brett Collson, Delaware Becomes First State to Launch Full-Scale Real-Money Online Gambling, Poker News (Nov. 8, 2013), https://www.pokernews.com/news/2013/11/delaware-becomes-first-state-to-launch-full-scale-gambling-16741.htm.
³⁷10-206 Del. Admin. Code § 5.2.
³⁸10-206 Del. Admin. Code § 5.14.
³⁹10-206 Del. Admin. Code § 5.13.
⁴⁰10-206 Del. Admin. Code § 5.3.
⁴¹10-206 Del. Admin. Code § 5.11.
⁴²10-206 Del. Admin. Code § 6.1.
⁴³10-206 Del. Admin. Code § 6.3.
⁴⁴10-206 Del. Admin. Code §§ 6.17-18.
⁴⁵10-206 Del. Admin. Code § 6.20.
⁴⁶10-206 Del. Admin. Code § 6.7.
⁴⁷10-206 Del. Admin. Code § 6.14.1.
⁴⁸Delaware Sports Betting Information – Sportsbooks, Betting Sites, Sports Handle, https://sportshandle.com/delaware/ (last visited Jul. 23, 2019); Murphy v. National Collegiate Athletic Association, 138 S, Ct. 1461 (2018).
⁴⁹Delaware Sports Betting Information – Sportsbooks, Betting Sites, Sports Handle, https://sportshandle.com/delaware/ (last visited Jul. 23, 2019).
⁵⁰10-204 Del. Admin. Code § 2.0.
⁵¹10-204 Del. Admin. Code § 4.0.
⁵²10-204 Del. Admin. Code § 4.2.
⁵³10-204 Del. Admin. Code § 5.1.
⁵⁴29 Del. § 4829(h).
⁵⁵10-204 Del. Admin. Code § 4.2 et seq.