Delaware Online Gaming Supplier Regulatory Overview

In November 2013, the State of Delaware began operating online casino-style wagering through its racetrack casinos. Unlike other states that have authorized or are exploring limited online wagering activities for solely poker or other games, Delaware has authorized a full range of casino games to be made available through Internet portals located on the state’s racetrack websites. Online gaming activities are regulated by the Delaware State Lottery Office (“Lottery”) pursuant to state lottery laws, specifically 29 Del.C. §4826, and the Lottery’s Internet Lottery Rules and Regulations (“Rules”).

While the Lottery establishes and monitors the systems that allow for Internet gambling, each website is operated by a racetrack casino located in the state. Online gambling is only available for those individuals who are over the age of 21 and are present within the state at the time the wagering activity occurs.

The Rules contain provisions for licensing and approval of suppliers working with the Lottery to provide online gaming. Suppliers are divided into two classifications under the Rules: technology providers, which supply goods or services related to the wagering activity or financial accounts, and service providers, which provide ancillary services in the amount of $100,000 or more in any 12-month period. Below is a brief analysis of the licensing requirements for each of these types of suppliers, along with a description of other pertinent provisions of the Rules governing supplier activity for online gaming in Delaware.

In May 2013, the Lottery selected Scientific Games Corporation, 888 Holdings, Inc., and Williams Interactive, LLC to jointly provide the initial technology services for online gaming activity.

Technology Providers

In establishing the online gaming system in Delaware, the Lottery contracts with technology providers that must be licensed as such by the Lottery.¹ The Rules define technology providers as “providers of Internet lottery systems that consist of the hardware, software, and expertise to operate a gaming platform providing an integrated suite of modules including player account management, network management, multi-level tracking and reporting, and integration with multiple game content vendors.”²

More specifically, technology providers are those that provide the hardware, software, or operational services required to operate the Internet lottery gaming platform, provide game content using one or more connection from an external gaming platform, and/or provide goods or services that directly contribute to the outcome of an Internet lottery game.³

As noted above, technology providers contract directly with the Lottery to help establish the online gaming system for use by licensed operators. As such, those individuals and entities interested in being considered as a technology provider must participate in the state’s standard procurement procedures in addition to the gaming licensing process.⁴

Duration

There is no specific term for a technology provider license issued by the Lottery. However, the Lottery may require those licensed as a technology provider to submit annual updates regarding changes to any of the information submitted during the initial licensing investigations.
⁵

Fees

The fee for an initial technology provider license and any required renewals is $4,000. In addition, as a condition to receive the license, the applicant must post a bond in an amount to be established by the Lottery.⁶

Approval Process – Required Conditions

In order to complete the technology provider license application, an applicant must agree to and adhere to the following conditions:

1. If required by law, the applicant must hold a license to conduct business in Delaware;
2. Applicants must agree to modify any technology to fit Lottery standards, if necessary;
3. Applicants must promptly report any violations of the Rules;
4. Applicants must attend all trade shows required by the Director of the Lottery;
5. All technology must be operated in a manner consistent with the public interest;
6. Applicants must hold harmless the Lottery and the State of Delaware;
7. The applicant’s premises must be open for inspection to Lottery agents and personnel;
8. The applicant must maintain all required operations records; and
9. All products offered must be authorized by the Lottery.⁷

Applicants must also submit to the general procurement requirements for contracting with a state agency in Delaware.

Reciprocity

It should be noted that those entities or individuals that currently hold a gaming vendor license under the Delaware Video Lottery and Table Games regulations are not required to obtain a separate technology provider license.⁸

strong>Service Providers

Those entities and individuals that are classified as a service provider must also obtain a license from the Lottery prior to the provision of any goods or services in connection with online gaming operations in the state. Service providers are those that “provide ancillary services to support the operation of the Internet lottery system [that do] not contribute to the outcome of Internet lottery games” over a certain threshold.⁹ The transaction thresholds that require licensure as a service provider are the provision of goods or services equal to or greater than $100,000 within any 12-month period to a single technology provider or equal or greater than $150,000 in a 12-month period to two or more technology providers.¹⁰

Duration

A service provider license is valid for a period of five years, coinciding with the terms of technology provider licenses issued by the Lottery.¹¹

Fee

There is an initial application and renewal fee in the amount of $2,000 for each service provider applicant. In addition, the applicant is responsible for any costs associated with the investigation of the applicant.¹² Prior to issuance, a service provider must post a bond in an amount established by the Lottery.¹³

Approval Process – Required Conditions

In order to complete the service provider application process, the applicant must agree to the following conditions:

1. The applicant will cover all investigative costs;
2. If required, the applicant is licensed to conduct business in Delaware;
3. The applicant may only provide services authorized by the Lottery;
4. The applicant must hold harmless the state and the Lottery, as well as agree to abide by the Rules and all applicable laws.
5. The applicant will provide all information for the applicant and its key persons;
6. The applicant will disclose relevant investigations of the applicant or any of its key persons;
7. The applicant will disclose the identifying information of its key persons;
8. The applicant will disclose the names of those employees that will be working with the technology provider; and
9. The applicant will provide a copy of its contract proposal regarding online gaming services to be offered in Delaware.¹⁴

Each applicant must also submit any additional information or documentation requested by the Lottery during the course of its license investigation.¹⁵

Employee Licenses

Depending on the types of goods or services provided, certain employees within a licensed technology or service provider organization may be required by the Director of the Lottery to obtain an employee license. Employee licenses are issued in three classes depending on the job duties involved and include the following classes:

1. Key Employee – those employees “acting in a supervisory capacity or empowered to make discretionary decisions with respect to Internet lottery operations,” including the Chief Executive Officer, Chief Operating Officer, directors, and management employees.¹⁶
2. Gaming Employee – those employees with duties “involving the security, maintenance servicing, repair, or operation of Internet lottery equipment, or…[has] direct access to the internal workings of Internet lottery equipment.”¹⁷
3. Service Employee – those employees with duties “involving direct access to player and gaming information stored on Internet lottery equipment.”¹⁸

All classes are subject to the same general licensing requirements, such as providing copies of birth certificates and other identifying documents, with some additional information noted below required for the investigation of key employees associated with each applicant.

Duration

Each initial key employee license is valid for a period of two years, with renewal terms of three years.¹⁹

Each initial gaming employee license is valid for a period of three years, with renewal terms of four years.²⁰

Each initial service employee license is valid for a period of five years, with renewal terms of six years.²¹

Fees

Those applicants for a key employee license or renewal must submit a $500 application fee, as well as cover the cost of any “unusual or out of pocket expenses incurred” during the investigation.²²

Those applying for a gaming employee license or renewal must submit a $200 application fee.²³

Service employee applicants are not required to submit an application or renewal fee.²⁴

Application Elements

Each applicant for an employee license must submit the following documents and information in connection with a key employee, gaming employee, or service employee license application:

1. A passport, evidence of citizenship (Certificate of Naturalization, etc.), or a current photo ID card issued by a government agency containing specific identifying information;
2. Two of the following documents:
A. Birth certificate;
B. Driver’s license;
C. Military ID;
D. Student ID; or
E. Government-issued photo ID; and
3. A set of fingerprints.

In addition, each applicant must complete the proper application forms to be considered for an employee license. Key employee license applicants must complete the Multijurisdictional Personal History Disclosure Form and a Delaware Supplemental form.²⁵ Gaming employee license applicants must complete the Delaware Gaming Employee License application.²⁶ Service employee license applicants must complete the Delaware Service Employee application form.²⁷

Each of these application forms requires the disclosure of the following categories of information:

1. Basic identification information;
2. Employment history;
3. Licensing disciplinary action;
4. Criminal and civil action history;
5. Gaming regulatory history;
6. Personal financial information; and
7. Information pertaining to potential conflicts of interest (i.e., family relationships in the gaming industry, past employment in government positions).

Equipment Approvals

All equipment used to provide Internet lottery gaming services must be approved by the Director of the Lottery.²⁸ In order to receive such approval, applicants must provide an application for approval with the Lottery for any Internet lottery gaming systems in use per the requirements in the Rules.²⁹ These requirements include testing, various trial periods, certification that the games and systems meet the Lottery’s technical requirements, and that all servers are based in the United States.³⁰

Interactive Gaming – General Resources

As the interactive gaming market is still developing, another resource for suppliers of equipment related to interactive gaming, in addition to the state-specific information contained above, is the Gaming Standards Association (“GSA”). The GSA is an organization that is in the forefront of interactive gaming developments and assists in identifying unique issues for the industry and regulators alike related to new technology and operations practices.

Those interested in learning more about the GSA, including its model standards for gaming technology, should visit the association’s website.³¹

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¹Rules, Sec. 5.3.
²Rules, Sec. 5.1.
³Rules, Sec. 5.2.
⁴See Rules, Sec. 5.1.
⁵Rules, Sec. 5.14.
⁶Rules, Sec. 5.13, 5.12.
⁷Rules, Sec. 5.15.
⁸Rules, Sec. 5.13.
⁹Rules, Sec. 6.1.
¹⁰Rules, Sec. 6.3.
¹¹Rules, Sec. 6.17.
¹²Rules, Sec. 6.20.
¹³Rules, Sec. 6.16.
¹⁴Rules, Sec. 6.7, 6.21.
¹⁵Rules, Sec. 6.8.
¹⁶Rules, Sec. 2.0, 'key employee.'
¹⁷Id at 'gaming employee.'
¹⁸Id at 'service employee.'
¹⁹Rules, Sec. 7.15.
²⁰Rules, Sec. 7.19.
²¹Rules, Sec. 7.23.
²²Rules, Sec. 7.8.1.
²³Rules, Sec. 7.8.2.
²⁴Rules, Sec. 7.8.3.
²⁵Rules, Sec. 7.14.
²⁶Rules Sec. 7.18.
²⁷Rules, Sec. 7.22.
²⁸Rules, Sec. 8.1.
²⁹Rules, Sec. 8.2.
³⁰See Rules, Sec. 8.2, Sec. 8.4.
³¹See www.gamingstandards.com.