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| Montana Administrative Register Notice 23-16-244 | No. 1 01/06/2017 | |
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BEFORE THE DEPARTMENT OF JUSTICE OF THE STATE OF MONTANA
TO: All Concerned Persons
1. On October 28, 2016, the Department of Justice published MAR Notice No. 23-16-244 pertaining to the public hearing on the proposed adoption and amendment of the above-stated rules starting at page 1914 of the 2016 Montana Administrative Register, Issue Number 20.
2. The department has adopted and amended the following rules as proposed: New Rule II (23.16.510), ARM 23.16.101, 23.16.116, 23.16.502, 23.16.508, 23.16.1101, and 23.16.1102.
3. The department has adopted and amended the following rules as proposed, but with the following changes from the original proposal, new matter underlined, deleted matter interlined:
NEW RULE I (23.16.1203) SOCIAL CARD GAMES PLAYED SOLELY FOR PRIZES OF MINIMAL VALUE (1) remains the same. (2) For purposes of this rule, prizes of minimal value means: (a) an award to an individual card game winner of cash and/or merchandise which does not exceed (b) an award to the winner or winners of a social card game tournament in cash and/or merchandise (3) For purposes of this rule, a tournament means a prize structure which is determined by the play of more than a single game.
23.16.117 TRANSFER OF INTEREST TO NEW OWNER (1) through (7)(a) remain the same. (b) transfer that results in less than 5% ownership interest in a publicly traded corporation. Transfers that result in an ownership interest of 5% or greater in a publicly traded corporation are subject to the provisions in (10) (8) through (10)(a) remain the same. (b) Whenever a change in ownership results in an ownership interest by an active investor that is 5% or greater, but less than 10%, the licensee shall, within (c) Whenever a change in ownership results in
23.16.1903 VIDEO GAMBLING MACHINE TICKET VOUCHERS – EXPIRATION DATE – PAYMENT IN FULL UPON DEMAND – EXCEPTIONS (1) through (4)(a) remain the same. (b) If the department determines that a machine malfunction occurred, the ticket voucher is invalid, and the
4. The department has thoroughly considered the comments and testimony received. A summary of the comments received and the department's responses are as follows:
COMMENTS: Numerous people spoke, and one person wrote, in opposition to the prize value limitations proposed in New Rule I. Most stated that the limit should be higher to accommodate prizes suitable for larger social card game tournaments. Some suggested the minimal prize value be tied either to the number of games played in a tournament, or tied to the number of participants in a tournament. One person suggested there should be a definition of a tournament. Another commenter thought it was not the department's role to set a minimal prize value. The department received several written comments from attorney Michael Lawlor regarding the proposed requirement for licensees to submit a Form 30A for approval of location managers. Mr. Lawlor noted that some gambling businesses have written employment agreements with their location managers and, in those instances, submission of information on the form may require duplication of efforts. He suggested the department change the rule to allow a licensee to submit either a Form 30A, or a written employment agreement. Mr. Lawlor also offered comments regarding publicly traded corporations. First, he stated the rules should cover all publicly traded entities, not just corporations. He commented that publicly traded corporations do not always have sufficient prior control over ownership resulting from a merger or reorganization, and therefore those ownership changes should only be required to report changes within a certain period of time following the merger or reorganization. Mr. Lawlor suggested that a publicly traded entity may not have the ability to obtain the required information from a shareholder who has acquired an ownership interest, and therefore, the department should require only such basic ownership information as would appear on a stock ledger.
RESPONSE: The department appreciates the time and comments from all who expressed an interest in this rulemaking. Regarding social card games, the comments helped inform the department about the prize range historically seen in the play of the social card game of cribbage in the state, and the department believes the limits as adopted in this new rule will be sufficient to accommodate those social card games and social card game tournaments, particularly where the top 25% of tournament players are awarded a prize. The department believes a prize limitation which ties the maximum prize value to the number of participants in a social card game tournament is reasonable and a workable solution to the legislative directive in HB38 to define social card game prizes of minimal value. The department also agrees that a definition of a tournament would be helpful to avoid confusion for some players. The department notes further that when card games or card tournament prizes are proposed to exceed these limits, they can be permitted and operated pursuant to the card game tournament provisions in 23-5-317, MCA. The department appreciates Mr. Lawlor's comments regarding management agreements in lieu of a department form. However, the department believes the proposed change would mean an increased workload for department staff and delay in application approvals. Location managers are required to be identified on every application, and when a change in location managers is reported, a single form would streamline the reporting process. If the process allowed changes to be reported on either a form that has been narrowly tailored to request the necessary information, or on various employment agreements which likely contain superfluous information, then department staff would be required to sort through those submissions and attempt to weed out the pertinent information. The department chooses to avoid having to undertake those tasks, and does not see the reporting requirement as sufficiently burdensome to licensees to warrant adoption of his suggestion. With respect to Mr. Lawlor's comment regarding publicly traded entities generally, the department recognizes the existence of other publicly traded entities, but the controlling statute, 23-5-118(3), MCA, refers only to transfers of shares in publicly traded corporations. The department agrees with Mr. Lawlor's comment that mergers and reorganizations of publicly traded corporations should not be required to seek prior approval. Publicly traded companies are treated differently under the law because their ownership is traded on public exchanges where prior approval of ownership transfers cannot be obtained. Public companies can face a similar lack of control when undergoing a merger or reorganization, particularly with respect to timing of shareholder approvals. For this reason, the department believes the transfers of publicly traded shares resulting from corporate mergers or reorganizations can be treated in the same manner as other ownership transfers for publicly traded corporations. Consequently, the department omits the clauses relating to mergers and reorganizations of publicly traded corporations; the result will be that those ownership transfers will be treated the same as other ownership interest transfers in publicly traded corporations. Mr. Lawlor's comments raised the possibility that publicly traded corporations may not be able to obtain required shareholder information, particularly when those interests are small. The department does not perceive this concern as warranting an additional change to the proposed rules. Ownership interests of less than 5% of a publicly traded corporation do not require department approval, but that is the only distinction under law for gambling license applicants. Ownership interests of 5% or greater in those corporations are subject to the same rigors of licensure as any other applicant. The department is correcting two minor errors in the proposed amendments to ARM 23.16.117. The first is the notification period under ARM 23.16.117(10)(b); the department adopts a 60-day notification period from the date of transfer, which is consistent with the period of notification for other ownership transfers of interest in publicly traded corporations under this rule. The other minor edit is deletion of a typographical error in the proposed amendment to ARM 23.16.117(10)(c). Finally, the department amends ARM 23.16.1903 to remove the requirement for a machine owner to always remove a machine from play whenever the department determines a machine malfunction has occurred. In the event such determination is made, the department will provide direction to the machine owner regarding the required measures to resolve the malfunction, which may or may not include removing the machine from play.
/s/ Matthew T. Cochenour /s/ Timothy C. Fox Matthew T. Cochenour TIMOTHY C. FOX Rule Reviewer Attorney General Department of Justice
Certified to the Secretary of State December 27, 2016.
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