10 Del. Admin. Code § 203-3.0

Current through Reigster Vol. 28, No. 6, December 1, 2024

Section 203-3.0 - Licensing of Agents; Business Plans

3.1 Any applicant required by Delaware law to obtain a video lottery agent license shall apply to the agency on forms specified by the Director from time to time. All persons who directly or indirectly are beneficial owners or legal owners of over 10% in the applicant or in any person that will act as the agent must submit the information listed in this Section 3.0 and meet the qualifications set forth in subsection 3.8. Application forms shall require the applicant to provide the following, without limitation:

3.1.1 The applicant's legal name, form of entity (e.g., general or limited partnership, corporation), the names, addresses, federal employer identification or social security or individual taxpayer identification numbers (if applicable) and dates of birth (if applicable) for each of its directors, officers, partners, owners, key employees, table game employees and video lottery operations employees.

3.1.2 A description of the applicant's organizational structure.

3.1.3 With respect to any persons named in subsection 3.1.1 that are not individuals, the names, addresses, social security or individual taxpayer identification or federal employer identification numbers, and birth dates of all individuals who are directors, officers, owners, partners, trustees, members, LLC managers, key employees, or gaming employees of any such persons.

3.1.4 The percentages of shares of stock, membership shares, or other forms of ownership, if any, held by each person named in subsections 3.1.1 or 3.1.3 above. The Director may, at his or her discretion, cause periodic reexamination of the percentage of ownership shares held by persons subject to such disclosures under these regulations.

3.1.5 The names of all persons principally involved in the original creation of the applicant's company, trust, or other type of business entity or association.

3.1.6 The names, if any, and addresses, social security or individual taxpayer identification numbers, and dates of birth of any person who is or was a director, officer, owner, partner, key employee, or gaming employee of the applicant who has been charged with or convicted of a felony, a crime involving gambling, or a crime of moral turpitude.

3.1.7 Certified copies of the applicant's charter, articles or certificate of incorporation, certificate of formation, certificate of statutory (or business) trust, certificate of limited partnership, statement of partnership, and any other documents which constitute or explain the legal organization of the applicant plus a certificate of good standing that has been issued by the Secretary of State for the state in which the applicant was created and that is dated within 30 days of the date of the licensing application.

3.1.8 The name, address, social security or federal employer identification or individual taxpayer identification number and date of birth or date of creation of the record owner of the premises upon which the applicant's business operations are located or the property upon which the premises are located or, if the applicant is not the sole owner of the premises or property, the information required by subsection 3.1.1 above with respect to all persons having an ownership interest in the premises or property and copies of all agreements pursuant to which the applicant occupies the premises or property, as well as copies of all documents relating to the premises or property including, without limitation, all mortgages, deeds of trust, bonds, debentures, pledges of corporate stock and voting trust agreements, but excluding easements; utility agreements; subdivision and plot plans; and, for the period prior to three years before the filing of the application, deeds in the chain of title and satisfied mortgages.

3.1.9 The information required by subsection 3.1.1 above as to any operator of any business conducted by the applicant and any other contractor (which is not a publicly traded entity) utilized by such applicant which has received compensation from such applicant in excess of $400,000 in any of the three (3) preceding fiscal years, together with a copy of all agreements between the applicant and such operator or contractor and a statement of all compensation paid to such operator or contractor during said three-year period.

3.1.10 Copies of the applicant's audited financial statements for the preceding three (3) fiscal years and a copy of internally prepared financial statements for the current fiscal year as of the close of the most recent fiscal quarter.

3.1.11 Copies of the applicant's State and Federal income tax returns for a period of three (3) fiscal or calendar years, as applicable.

3.1.12 Copies of the declaration pages of all insurance policies insuring the applicant or the premises upon which the applicant operates its gaming operations.

3.1.13 The information required by subsection 3.1.1 above as to the ten (10) largest unsecured creditors to which the applicant owes more than $25,000 for a period in excess of sixty (60) days and which are not publicly traded business entities, accounting firms or legal firms of the applicant.

3.1.14 Disclosure of all gaming or gambling licenses or permits in any other jurisdiction regardless of whether they are expired, pending, active, denied, suspended, or revoked for the applicant and any other persons identified in subsections 3.1.1 or 3.1.3.

3.1.15 Any other information as the Director may require to determine the competence, honesty and integrity of the applicant as required by Title 29 of the Delaware Code, Ch. 48, subch. I.

3.2 The application, as well as other documents submitted to the agency by or on behalf of the applicant for purposes of determining the qualifications of the applicant or agent, shall be sworn to or affirmed before a notary public. If any form or document is signed by an attorney for the applicant, the signature shall certify that the attorney has read the forms or documents and that, to the best of his or her knowledge, information and belief, based on diligent inquiry, the contents of the form or documents so supplied are true.

3.3 Upon request of the agency, the applicant shall supplement the information provided in the application form as deemed necessary by the agency. The applicant shall furnish all information, including financial data and documents, certifications, consents, waivers, individual history forms, tax returns, cancelled checks or other materials required or requested by the agency for purposes of determining the qualifications of the applicant or agent.

3.4 To the extent, if any, that the information supplied in the application or otherwise supplied by the applicant or on the applicant's behalf, becomes inaccurate or incomplete, the applicant shall so notify the agency in writing as soon as it is aware that the information is inaccurate or incomplete, and shall at that time supply the information necessary to correct the inaccuracy or incompleteness of the information.

3.5 The applicant shall cooperate fully with the agency and the Division of Gaming Enforcement (DGE) with respect to its background investigation of the applicant. Among other things, the applicant, upon request, shall make available any and all of its books or records for inspection by the agency or the DGE.

3.6 The applicant shall submit with the application a proposed business plan for the conduct of table games and/or video lottery operations. Such plan shall be submitted in conformity with a separate form specified and supplied by the agency. The plan shall include, without limitation, the following items: a floor plan of the area to be used for table games or video lottery operations; an advertising/marketing plan; the proposed placement of table games and video lottery machines on the premises; the kind, type and number of table games and video lottery machines proposed, provided, however, that the name of the manufacturer(s) of such machines shall not be included; money control procedures; a security plan; a staffing plan for table games and video lottery operations; accounting and tax compliance procedures; and the method to be utilized for prize payments. The plan shall provide the details of any progressive jackpot games and shall provide for an escrow account or escrow accounts to be established and maintained in accordance with instructions provided by the agency for the purpose of holding in reserve large or progressive prizes yet to be won by players. The plan shall propose the use of video lottery machines such that a reasonable number of competitor manufacturers would be able to supply such machines. The specification of the kind, type and number of the video lottery machines in the business plans shall make clear whether or not the devices are video versus spinning reel; coin-in/coin-out versus coin-in/credit-out, etc. The plan shall also propose the generic games to be played on the devices (e.g., video poker, keno, bingo, blackjack, line-up games). The plan shall provide for payment for payout from video lottery machines such that the payouts shall not be less than 87 percent on an annual average basis, and shall otherwise comport with the requirements contained at 29 Del.C. § 4805(a)(15).

3.6.1 The business plan shall also include a description of its initial system of internal procedures and administrative and accounting controls for gaming operations accompanied by a certification by its chief financial officer or equivalent that the submitted procedures provide adequate and effective controls, establish a consistent overall system of internal procedures and administrative and accounting controls, and conform to generally accepted accounting principles, except an additional standard may be required by the Director for gross revenue tax purposes.

3.6.2 Each initial internal control submission shall contain a narrative description of the internal control system to be utilized by the casino and address all areas of the MICS as required by the Director, including but not limited to those set forth in regulations 1.2.1 through 1.2.12 herein.

3.7 As soon as the agency receives the application, it shall forward the application to the DGE. As soon as practicable, DGE shall undertake and complete the background investigation of the applicant, its officers, directors, partners, owners, key employees, and gaming employees and report its findings to the agency.

3.8 The Director shall weigh the following factors in his or her evaluation of the application:

3.8.1 Whether the applicant holds at least one of the following: either a horse racing meet license pursuant to Title 3 or Title 28 of the Delaware Code or a harness racing meet license pursuant to Title 3 of the Delaware Code.

3.8.2 The criminal background, if any, of the applicant, or any of its officers, directors, partners, owners, key employees, and gaming employees. No license shall be issued to any applicant if any of the persons identified in this subsection have been convicted, within ten (10) years prior to the filing of the application, of any felony, a crime of moral turpitude or a crime involving gambling.

3.8.3 The extent to which, if any, the applicant would be subject to the control or influence of its activities by any person having a financial interest pertaining to the applicant, including a mortgage or other lien against property of the applicant or, who in the opinion of the agency, might otherwise influence its activities. In such case the Director shall consider the character, honesty and integrity of whomever has the ability to control or influence the activities of the applicant.

3.8.4 The degree to which the applicant has demonstrated its ability to finance the proposed table games and video lottery operations, as well as the source of such financing.

3.8.5 The degree to which the applicant has supplied accurate and complete information pursuant to the requirements of these regulations.

3.8.6 Whether the applicant holds a license as a service company. An agent license shall not be granted to an applicant who is an owner of a service company.

3.8.7 Whether the applicant has demonstrated the business ability and experience necessary to satisfactorily conduct the table games and/or video lottery operations.

3.8.8 The extent to which the applicant has cooperated with the agency and the DGE in connection with the background investigation.

3.8.9 Whether the person, or any of its officers, directors, partners, owners, key employees, or gaming employees are known to associate with persons of nefarious backgrounds or disreputable character such that the association could adversely affect the general credibility, security, integrity, honesty, fairness or reputation of the lottery.

3.8.10 With respect to any past conduct which may adversely reflect upon the applicant, the nature of the conduct, the time that has passed since the conduct, the frequency of the conduct and any extenuating circumstances that affect or reduce the impact of the conduct or otherwise reflect upon the applicant's fitness for the license.

3.8.11 The extent, if any, to which the applicant has failed to comply with any applicable tax laws of the federal, state or local governments.

3.8.12 The adequacy of the applicant's business plan, as it reflects on the applicant's competency or capability to conduct table games or video lottery operations in conformance with the requirements of these regulations.

3.8.13 Any other information before the Director, including substantially similar background investigations performed by other agencies or jurisdictions, which relates to the applicant's competency, financial capability, honesty, integrity, reputation, habits, or associations.

3.9 A license shall be issued to the applicant if the Director is satisfied, upon consideration of the factors specified in subsection 3.8, that the applicant would be a fit agent and not pose a threat to the public interest, the reputation of the lottery, or the effective control of the lottery.

3.10 The approval of any license or the renewal of a license to an agent is subject to the following conditions:

3.10.1 Operation pursuant to a license issued under these regulations shall signify agreement by the agent to abide by all provisions of the regulations, including those contained in this section.

3.10.2 The agent shall at all times make its premises available for inspection by authorized representatives of the agency or the DGE personnel, on a 24-hour unannounced basis. The Lottery and the DGE shall be authorized entry to the premises and access to any table game or video lottery machines or records of the agent without acquiring a warrant.

3.10.3 The agent and any entity owned by the agent in which the agent has a controlling ownership interest shall consent in writing to the examination of all accounts, bank accounts, and records under the control of the agent or the owned entity; and, upon request of the agency, shall authorize all third parties in possession or control of the said documents to allow the agency to examine such documents.

3.10.4 To the extent permitted by law, an agent accepts all risks of adverse public notice, embarrassment, criticism, damages, or financial loss which may result from any disclosure or publication of material or information supplied to the agency in connection with the application for the agent's operations.

3.10.5 An agent shall immediately notify the agency of any proposed or effective change regarding the makeup of the owners, directors, officers, partners, or key employees of the agent.

3.10.6 The agent shall certify by a sworn notarized statement that it has not entered and does not intend to enter into any joint venture, partnership or teaming agreement in order to fulfill its obligations in connection with the table games or video lottery operations; that it is not acting as a distributor of products manufactured by another entity; and that it has not entered and does not intend to enter into any agreement whereunder the proceeds generated by any agreement between the agent and the agency would be shared with one or more other persons. Provided, however, that an agent may enter into a management agreement with a third-party, who is not licensed under these regulations as a {technology provider} service company, for the operation of the lottery on the agent's premises provided that:

(1) the proposed management agreement is provided to and approved by the agency, and

(2) the third-party complies with all these regulations which apply to agents, including without limitation the licensure requirements.

3.10.7 An agent has a continuing duty to maintain suitability for licensure. A license does not create a property right, but is a revocable privilege contingent upon continuing suitability for licensure.

3.11 Any license granted may not be transferred, assigned or pledged as collateral. A change of ownership which occurs after the Director has issued a license shall automatically terminate the license ninety (90) days thereafter. Provided, however, that the Director may issue a license to the new owner if satisfied, after the submission of an application that the new owner has met the requirements contained in 29 Del.C. § 4806(a)(1-4), as well as the fitness and background standards contained in such law and these regulations. In the case of a death of an owner, the estate of such owner shall be deemed to have met the requirements of §4806(a)(1-4) for a period of one year following such death without the need for submitting an application, and, thereafter, need only supply such additional information as the Director may request. In the case of a shift in equity positions of owners, or a transfer among owners, notice shall be given the Director, but the license shall not terminate so long as no new owner is created or results. An agent may also seek approval of a proposed change in ownership prior to the actual change.

3.12 If the Director proposes to deny a license application and the agency is subject to the requirements contained in subchapter IV of 29 Del.C. Ch. 101, the agency shall first give written notice to the applicant of the intended action, the reasons therefore, and the right to a hearing as provided for in 29 Del.C. Ch. 101.

3.13 At the time of issuance of the license or thereafter, in the Director's sole discretion, the Director may approve the proposed business plan of the applicant or the agent. If the Director determines that an amendment or amendments to the plan are necessary to increase revenue from the table games or video lottery, protect the public welfare or ensure the security of the table games or video lottery, he or she may amend the plan accordingly. An agent may request an amendment to an approved business plan, which proposed amendment shall be subject to the approval of the Director. The Director shall also review a submission made pursuant to subsection 3.6.1 to determine whether it conforms to the requirements of the Delaware Code, to the regulations and MICS, and provides adequate and effective controls for the operations of the particular agent submitting it. If the Director is satisfied that all requirements have been met, a written approval of the submission shall be granted. No changes to the approved system of internal control shall be implemented until it is submitted to and approved by the Director in writing.

3.14 To the extent provided by law, any non-publicly available information obtained pursuant to this Section 3 shall be held in confidence and not subject to the Delaware Freedom of Information Act, 29 Del.C. Ch. 100.

3.15 Any potential agent who is already licensed as a Delaware State Lottery Video Lottery Agent is not required to apply for a separate table game license. Any such agent must, however, file with the agency the names, addresses, employer identification or social security numbers (if applicable) and dates of birth (if applicable) of its directors, officers or partners, owners, key employees and gaming employees not already provided under the agent's video lottery license application. The agent must also submit an amendment to its video lottery business plan that shall include, without limitation, the items as described in section 3.6 of this regulation.

3.16 Unless exempted from the licensing requirements under subsection 3.1, the Director, in his sole discretion and upon receipt of a written application, may waive the licensing requirements for institutional investors that hold directly or indirectly up to 15% of the beneficial ownership or legal ownership in the applicant or in any person that will act as the agent. An applicant must submit to the Director any waiver applications at the same time that it submits its licensing application. If the Director grants or denies a person's waiver application, the Director must give the person a written notice of his decision within sixty (60) days of receiving the waiver application. Upon any denial of a waiver, the person must submit to all of the licensing requirements set forth in this Section 3.0. The Director's decision to deny any person a waiver of the licensing requirements is final and cannot be appealed. However, the Director upon good cause and with written notice may later revoke any grant of a waiver.

3.16.1 Any person that applies for a waiver under subsection 3.16 must affirm under oath that he purchased, received, or otherwise acquired beneficial ownership or legal ownership in the applicant or the agent for investment purposes only and that he does not have any intention of influencing or affecting the affairs or operations of the applicant or the agent.

3.16.2 All waivers must be notarized affidavits and must state the signatory acknowledges that the statements he makes on the waiver form are subject to penalties of perjury under Delaware law.

3.16.3 If a person that has applied for or been granted a waiver under subsection 3.16 subsequently decides to influence or affect the affairs or operations of the applicant or agent, it shall provide not less than thirty (30) days' notice of such decision to the lottery office. Such person shall then be required to file an application under Section 3.0 and be subject to the licensing requirements of these regulations before taking any action that may influence or affect the affairs of the applicant or the agent.

3.17 All applicants, licensees, registrants, or any other person who must be qualified pursuant to 29 Del.C. Ch. 48, subch. I shall have the continuing duty to provide any assistance or information required by the Director or the DGE, and to cooperate in any background check or investigation conducted by the DGE or in any hearing conducted by the Director. If an applicant, licensee, registrant or any other person who must be qualified refuses to provide information, evidence or testimony upon formal request by the Director or the DGE, the Director may deny or revoke the application, license, registration or qualification of such person as permitted by 29 Del.C. § 4830(a).

10 Del. Admin. Code § 203-3.0

22 DE Reg. 500 (12/1/2018)
27 DE Reg. 678 (3/1/2024) (Final)