A Look Inside the New Jersey DGE – Kahnawake Online Gambling Treaty

The recent agreement over the availability in the US and New Jersey of various “grey market” online gambling sites between New Jersey’s Division of Gaming Enforcement [DGE] and the tribal-based Kahnawake Gaming Commission [KGC], which operates out of Canada, might turn out to be a very big deal.

Then again, and perhaps more likely, it might turn out to be nothing at all.  Such is the nature of the regulation of online-gambling sites in the Garden State and elsewhere, though the recent DGE-KGC deal is a very curious circumstance.  Why so curious?  Because it involves the DGE trying to dictate to a third party, outside the US, how it can regulate services offered to the rest of the US, and not just in New Jersey.

Let’s get to the nitty-gritty. A couple of days back, the New Jersey Division of Gaming Enforcement and the Kahnawake Gaming Commission jointly –but quite separately — announced a deal in which KGC-regulated sites will not be allowed to offer their services to customers not only in New Jersey, but to any customers in any US state whatsoever.

The Kahnawake Gaming Commission, it so happens, oversees dozens, if not hundreds of such sites — it’s pretty much the staple of Kahnawake-based and -regulated offerings.  And to elaborate on that “-based” stuff, there are a couple of sibling operations to the KGC’s regulatory duties.  Those sister operations have nothing to do with regulatory oversight, but instead offer physical connectivity, notably Mohawk Internet Technologies and Continent 8, LLC.

Continent 8, along with the KGC, gets a specific mention in a recent statement offered by the DOJ about this strange new regulatory agreement.  There’s a lot of ground to cover, but let’s start there.

Courtesy of the DGE, this bold proclamation:

The New Jersey Division of Gaming Enforcement Announces Agreement with Kahnawake Gaming Commission to Combat Unlicensed Internet Gaming Sites

Atlantic City — The New Jersey Division of Gaming Enforcement (DGE) today announced that it has reached a series of agreements related to its licensee, Continent 8, LLC, that will prevent illegal Internet gaming websites from accepting bets from residents of the United States and New Jersey through a data center located on the Mohawk Territory of
Kahnawake, Canada.

When DGE became aware that Continent 8, LLC, may have provided services to certain illegal Internet gaming websites through that data center, it took prompt action. After extensive discussions with the Mohawk Council of Kahnawake and the Kahnawake Gaming Commission (KGC) involving unique jurisdictional issues, the Division was able to ensure that any such websites originating from Kahnawake will no longer be available to United States residents in jurisdictions where these companies are not authorized to operate, after September 30, 2016.

As a result, sites such as Bovada, a leading provider of illegal online sports wagering and other online gaming content, will no longer be operating out of the data center located in Kahnawake. Also after that date, the KGC will take regulatory action against any of its applicants or licensees found to be accepting such wagers.

DGE Director David Rebuck stated: “The Division is pleased to have the KGC’s assistance as a fellow regulator and looks forward to working together in the future. We were able to reach a series of agreements that are amenable to all of the parties involved and satisfy the Division’s regulatory concerns. The Division appreciates the KGC’s commitment and looks forward to its continued cooperation in the fight against unlicensed Internet gaming traffic. This agreement is an important step in ensuring the integrity of Internet gaming operations in New Jersey and helps ensure that online gaming patrons can play on fair, regulated sites.”

Continent 8, LLC is a Kahnawake-affiliated server center based in New Jersey.  It was established in 2014 as the Kahnawakes eyed the nascent New Jersey online-gaming market, and is duly licensed as a third-party service provider by the DGE.  And that’s where the conflict arises, the fact that the Kahnawakes own and operate Continent 8 in New Jersey while also operating the KGC regualtory regime, which has offered a rubber stamp of approval to all those gray-market sites serving US customers.  Though, notably, not customers in New Jersey; most sites offering gray-market services elsewhere in the US stopped allowing New Jersey residents to play back in 2011 and 2012, when the “official” New Jersey sites came online.

Also keep track of that line in the above DGE statement about “sites such as Bovada… will no longer be operating out of the data center in Kahnawake.”  Bovada is owned by Morris Mohawk Gaming Group, and MMGG’s head, Alwyn Morris, is, ermmm, Kahnawake, being a former member of the Mohawk tribal nation’s Council of Chiefs.

Bodog sold its US-facing business to MMGG a few years back, and that portion of the Bodog operation was then renamed Bovada.  (Whether or not the original Bodog and its ownership group, led by Calvin Ayre, receive any sort of in-perpetuity revenue share from the MMGG-owned Bovada operation is not publicly known. There could even be an ownership clawback arrangement, hidden somewhere deep in the paperwork.)

Yet there’s a kicker: Bovada (formerly Bodog), stopped serving New Jersey players long before the Kahnawakes opened the Continent 8 server operation in New Jersey in 2014.  So why is Bovada even mentioned in the New Jersey DGE announcement?

Let’s move over to the corresponding KGC announcement about the DGE-KGC deal, which says some of the same things but has an altogether different feel:

For immediate release

(Mohawk Territory of Kahnawake – 26, Seskehkó:wa/September 2016)

Since 1999, when it became one of the first jurisdictions in the world to license and regulate online gaming, Kahnawà:ke has recognized the necessity of continually evolving its regulatory environment to keep pace with this dynamic industry while ensuring Kahnawà:ke’s jurisdictional reputation and integrity are maintained at the highest levels.

After careful consideration, the Kahnawà:ke Gaming Commission (the “Commission”) has directed that an applicant or existing licensee that accepts players from a US State without being authorized by the US State to do so, is engaged in an activity that adversely affects Kahnawà:ke’s jurisdictional integrity or reputation (the “regulatory directive”). An application from an operator that engages in this activity will be denied. Existing licensees have been advised that, not later than September 30, 2016, they must modify their operations to conform to the Commission’s regulatory directive or their licenses will be terminated.

Kahnawà:ke’s elected governing body, the Mohawk Council of Kahnawà:ke (the “Council”), is fully aware of and supports the Commission’s authority, as empowered through Kahnawà:ke’s law, to issue the regulatory directive. Over the past several months, the Commission has established a strong regulatory collaboration with the New Jersey Department of Gaming Enforcement (“DGE”). Building on a foundation of mutual respect and cooperation that was first established in 2014, the Commission values the excellent working relationship it has fostered with the DGE.

“The Council and the Commission have had a direct and productive dialogue with DGE over the past several months,” said Commission Chairman Mark Jocks. “We understand the DGE’s concerns about online gaming sites operating in New Jersey and elsewhere in the US without being properly authorized by a regulatory body in those jurisdictions.”

“The DGE understands and respects Kahnawà:ke’s significant accomplishments in the online gaming industry over the past 17 years—grounded on the exercise of Mohawk jurisdiction,” added Grand Chief Joseph Tokwiro Norton. “We consider the strengthening of our working relationship with the DGE to be a positive development for our respective jurisdictions,
and for the online gaming industry.”

The key, key takeaway from this one is in that second paragraph about careful consideration,” in which the KGC notes: “Existing licensees have been advised that, not later than September 30, 2016,” that the KGC will no longer regulate them.

And as for Bovada, which is owned by a prominent citizen?  Well, it’s clear that the behind-the-scenes wrangling between the KGC and the DGE has been going on for some time, likely several months.  In a very quiet announcement, made several weeks back and buried on the KGC’s site, is the announcement that several sites affiliated in one way or another with the Bodog/Bovada operations — which maybe separately owned but still use the same software and affiliate structure, among other things — had already “voluntarily” surrendered their regulatory stamp of approval from the KGC.  Among those sites is the brand new Ignition Casino, which started up in September and as of the first of October, has become the new home for Bovada Poker.

The KGC announcement about that:


(MOHAWK TERRITORY OF KAHNAWAKE – September 2, 2016) Salmon River Technologies Limited (www.bovada.lv) and Lynton Limited (www.cafecasino.lv, www.slots.lv and www.ignitioncasino.eu) have both voluntarily terminated their Client Provider Authorizations pursuant to sections 190 to 193 of the Regulations concerning Interactive Gaming. The voluntary terminations were effective at 12:00 (noon) EST on September 1, 2016 (the “effective date”).

As of the effective date, the Commission no longer licenses or regulates Salmon River Technologies Limited, Lynton Limited or any gaming site operated by either entity. The Commission is not responsible for complaints received after the effective date concerning these entities or the gaming sites they operate.

We’re getting deeper in this particular rabbit hole.  If there’s anything truly, truly buried in all of this, it’s the true ownership of Ignition Casino, the new home of Bovada Poker.  And though it can’t be stated with 100% certainty, it appears that Ignition is owned by the Kahnawakes themselves, using a variant of an address that belongs to the tribal nation’s other server operation, Mohawk Internet Technology.

Note also that there may be a difference between “ownership” and “server connectivity”.  It is entirely possible, based on the specific letter of the language in the two press statements offered, that some US-facing “gray market” sites may still be Kahnawake-owned, but not housed at the Continent 8 or MIT server farms.  And as for the KGC not regulating such sites (even if there might be a hidden ownership interest in there somewhere), that boils down to a big “So what?”  The so-called seal of approval has nothing to do with a site’s actual operational performance anyway.

It’s possible to dig deeper, like peeling the layers of an onion, but the DGE-KGC deal appears to be a lot of smoke and precious little fire.  Most of the sites referenced by the DGE haven’t been available to New Jerseyites for several yeas anyway.  Instead, it appears that the DGE just wanted to make a little noise, while trying to keep the Kahnawakes’ NJ-based operation, Continent 8, on the straight and narrow.

Call it  shot over the bow, but all that Bovada business is a misdirection.  With Bovada Poker now moved go the new IgnitionCasino.eu domain, it’s business as usual for those grey-market sites… outside of New Jersey.  Where they were anyway.