Judge overturns jai alai rules amid gambling challenges

By DARA KAM
THE NEWS SERVICE OF FLORIDA

THE CAPITAL, TALLAHASSEE, December 18, 2015.......... Gambling regulators overstepped their authority with rules that would have placed additional requirements on jai alai operators, an administrative law judge ruled Thursday.

The decision by Judge Robert E. Meale siding with pari-mutuel facilities was part of a series of challenges to regulations issued by the state's Division of Pari-mutuel Wagering.

The challenges come after a years-long effort by regulators to create new rules --- many of them focused on controversial barrel racing --- for the pari-mutuel industry.

The Thursday decision invalidated proposed rules that would have required jai alai operators to have minimum rosters of at least eight players and mandatory rotational systems of playing in matches.

The division is "currently reviewing the opinion and exploring its options going forward," Department of Business and Professional Regulation spokeswoman Chelsea Eagle said in an email.

John Lockwood, an attorney representing Ocala-based Second Chance Jai Alai, argued that the new regulations would have a "dire impact" on the facility. Second Chance uses only two jai alai players to fulfill its performance requirements, which allows the pari-mutuel to run a more lucrative card room.

Thursday's decision also dealt with a complaint filed by Lockwood on behalf of West Flagler Associates, which owns the Magic City Casino in Miami and holds what is known as a summer jai alai permit but has not yet constructed a fronton. West Flagler also owns interests in two jai alai permits at Dania Jai Alai in Broward County.

West Flagler objected to proposed rules that would require frontons to be a certain size and be covered, if outdoors.

State agencies carry out statutes but are not allowed to "enlarge, modify or contravene" specific provisions of the laws.

Nothing in state law "even mentions jai alai courts or rosters," Meale wrote.

The invalidation of the jai alai rules came the same day a hearing was held in a challenge to horse-racing regulations. The challenge was filed by the North Florida Horsemen's Association, which represents about 200 owners, trainers and riders in the barrel-racing industry.

The horsemen are challenging several proposed rules, including a prohibition on obstacles on race courses, a requirement that jockeys wear white pants and "racing colors" and a requirement that jockeys wear protective garb, such as helmets and boots,

The association's lawyer, Donna Blanton, also questioned a proposed rule that would require all races to begin from a starting box or gate, which would put an end to "flag drop" races, previously approved by gambling regulators, at a Gadsden County pari-mutuel facility.

The latest version of the rules would bar barrel races and the "flag drops" and would impose a "significant adverse economic impact" on the riders, owners and breeders, Blanton wrote in a 44-page complaint.

The agency not only lacks the statutory authority to promulgate the rules but failed to provide a rationale for the prohibition, Blanton wrote. And banning obstacles conflicts with the department's previous authorization of other races like steeplechases, according to Blanton.

"It is illogical for the division to allow the use of obstacles in some horse races and prohibit them in others," she wrote.

Regulators in 2011 granted a pari-mutuel license to Gretna Racing for rodeo-style barrel racing, which, in turn, allowed the facility to open a card room. An appeals court later ruled that the state erred in granting the barrel-racing license --- the first of its kind in the nation. After the ruling, the state and Gretna Racing entered an agreement authorizing "flag drop" races in which two riders compete against each other but without any obstacles in the arena.

Gretna is also at the center of an appeal pending before the Florida Supreme Court about whether the Gadsden County track should be allowed to have slot machines without the express permission of the Legislature. The Supreme Court's ruling will likely affect gambling operations in Gadsden and at least five other counties --- Brevard, Hamilton, Lee, Palm Beach and Washington --- where voters have approved referendums authorizing slots at local pari-mutuels.

Another ongoing challenge to the Department of Business and Professional Regulation's rules focuses on lucrative types of poker that regulators decided are illegal after approving them for more than three years.

The case, a consolidation of challenges filed by numerous pari-mutuels that operate cardrooms, concerns what are known as "designated-player card games," which include a hybrid of three-card poker and resemble casino-style card games but are played among the gamblers instead of against the house, which pari-mutuel operators contend makes them legal. Pari-mutuels are barred by law from offering "banked" card games, including blackjack, in which players bet against the house instead of against each other.

Gambling regulators last month banned the games, reversing a rule issued last year that authorized them.

"In effect, through the proposed rules, the division is seeking to criminalize certain types of poker games only 16 months after adopting rules to facilitate their expansion," lawyer Michael J. Barry, representing greyhound tracks in St. Petersburg, Sarasota and Washington County, wrote in one of the many complaints.

Cardroom operators hired additional employees and made "significant capital contributions to expand their facilities to accommodate the increased demand for these games," Lockwood wrote on behalf of West Flagler.

At a hearing about the proposed rule change this month, Division of Pari-mutuel Wagering Director Jonathan Zachem said state law prohibits the designated-player games because they are not expressly authorized in laws governing card games.

"It's under prohibited activities. It has to be specifically authorized. I think this is a legislative question. Clearly, there's enough people in this room, power in this room, to go right down the street to the Legislature and present this issue, and specifically allow this. This is something you all can do," Zachem said to a meeting room packed with lobbyists and gambling operators on Dec. 2.