A Look at the Kahnawake Gaming Commission 15 Years Later
By: Hartley Henderson - Exclusive to OSGA.comPublished: Dec 16, 2014
Heads turned at one of the early GIGSE conferences when a group from the Native Reserve of Kahnawake (just outside of Montreal) announced they were going to start accepting applications for Internet gamblinglicenses to run on their servers. At that time most offshore gambling was hosted in Antigua or Costa Rica where the reliability of server connection was somewhat unstable so the opportunity to be hosted on North American soil where the connections were far more stable was welcome. Moreover, the fee for a Kahnawake Gaming Commission (KGC) offshore gambling license was a fraction of other jurisdictions. The question many had at the time was whether what the Kahnawake Mohawks were doing was legal and more importantly whether they would cooperate with U.S. or Canadian authorities if the legality of their operations was ever challenged. Nevertheless the appeal was far too great to ignore and many companies including Intertops,Bodog and Sports Interaction took the gamble and purchased a Kahnawake license.
Things went quite smoothly and the concern over the legality of the operations was allayed when a Liberal MP who spoke at the conference a couple of years later called Mohawk Internet Technologies (MIT) a success story. As well the Quebec police did enter the reserve at times but they were clearly there just to observe and there was never an indication they were going to challenge the Mohawks in court. Of course the Oka Crisis of 1990 (a land dispute between a group of Mohawk people and the town of Oka, Quebec) was still fresh in the minds of police and the media. In the summer of 1990 Quebec police and the Royal Canadian Mounted Police were lambasted for ceding to the Oka mayor's demands and taking the side of a golf course developer who wanted to build the course on Mohawk burial grounds. The standoff led to the death of a Quebec police officer and an over-reaction by the police force that still remains a black mark on Canadian police to this day. So a confrontation over gambling rights was clearly the last thing the Federal or Provincial government wanted at that time (or even today).
The KGC experienced their first rea
l crisis in 2007 when it was revealed that 2 sites being hosted on MIT servers were cheating players in high stakes poker tournaments. Absolute Poker and Ultimate Bet had a flaw in their programs which allowed former software developers and managers of those sites to use super user accounts to cheat in tournaments. The cheating was clearly illustrated from posts at the 2 plus 2 gambling servers. The KGC conducted an 18 month investigation spearhead by former New Jersey regulator, Frank Catania, which among other thing directed Ultimate Bet to repay players over $23 million in funds lost in the tournaments. An Ontario court ruled that the faulty software existed when the companies were licensed in other jurisdictions, prior to the sale of the companies to former Chief Joseph Norton and ordered the 2 companies which sold the faulty software to repay Ultimate Bet over $16 million. Nevertheless the cheating was a black eye to the KGC. Yet licensees did not pull out and Absolute Poker and Ultimate Bet (which combined to become the Cereus Network) were forced to close after Black Friday when the 2 URLs were seized by the FBI. And despite the Cereus Network issues almost all other licensees have kept their sites operating.With that in mind I decided to interview Dean Montour, Chairman of the KGC and Murray Marshall, the KGC's General Counsel to find out about how the KGC is doing today, what the plans are for the future and what has been learned from the incidents of the past.
Q: How many companies are currently licensed by the KGC and what are their offerings by percentage (sports, casino, poker, bingo)?
A: The KGC has issued twenty-nine (29) Client Provider Authorizations ("CPAs"). Of these twenty-nine (29) licensees, five (5) are not yet live or presently operational. Of the remaining twenty-five (25) CPA's, their respective game offerings are broken down as follows:
- Sportsbook : 8/25 (or 32%)
- Casino : 21/25 (or 84%)
- Poker : 10/25 (or 40%)
- Bingo : 2/25 (or 8%)
Q: There seems to be some confusion over whether the owner of a site operating in Kahnawake has to be Mohawk owned. Can you elaborate?
A: The KGC has never had a requirement making it mandatory that the holders of CPAs (operator permits) be Mohawk owned and operated. However, in accordance with the requirements of the Kahnawake Gaming Law, the holder of an Interactive Gaming License ("IGL") must be Mohawk. Only one IGL has been issued, and it was issued to Mohawk Internet Technologies, which is 100% Mohawk owned and operated.
Q: So is it similar to the arrangement in New Jersey whereby any company can own an online gambling website but they have to be partnered with a company with a physical site in Atlantic City which maintains the license – eg. Betfair owned the Betfairpoker website but Trump was the partner and kept the license?
A: Yes, it is similar in a sense that all CPA's must be appended to the IGL to be valid. However, unlike the commercial arrangement between Betfair and Trump in New Jersey, the purpose for having this arrangement is strictly to ensure that all CPA's are hosted at Mohawk Internet Technologies, which further ensures that the KGC has regulatory leverage. In other words, the KGC can effectively direct the IGL to disconnect or "unplug" hosting services for any non-compliant licensee.
Q: Can someone who works at one of the websites (say Bovada) live on the Kahnawake Reserve if they are not Mohawk?
A: No. In accordance with the Kahnawake Membership Law, anyone eligible to reside in Kahnawake must be on the Kahnawake Membership Registry. However, there are many Mohawks and non-Mohawks who work in Kahnawake at the many businesses established in the Community (Bodog included).
Q: The Absolute Poker/Ultimate scandal was a black eye to the KGC but you seemed to come out of it ok. What would you attribute to the fact that most companies continued to renew their licenses in spite of the scandal and what would you say the KGC learned most by what transpired with those sites?
A: As you are aware, Kahnawake was one of the first jurisdictions in the world to license, regulate and host online gaming sites. The KGC has a regulatory model that has been honed over the past 15+ years and that is constantly evolving to balance the imperative to protect players with the needs of the industry. Mohawk Internet Technologies is still the premier hosting facility for the online gaming industry in North America.
The KGC's investigation into the AP/UB cheating scandals resulted in significant sanctions against these companies but, more importantly, resulted in more than US$23,000,000.00 being repaid to affected players – a reimbursement that was (and is) unprecedented in the gaming industry.
In 2008, as a result of the AP/UB cheating scandals, the KGC undertook an extensive audit of its operations and made numerous enhancements to its administration, Regulations and regulatory functions.
Included in this overhaul and improvement of its operations:
- Design and implementation of an enhanced Continuous Compliance Program
- Development of a new "Certificate of Good Standing" (linked to the new KGC Logo)
- Increase in staff for regulatory oversight and administration purposes
- Enhanced player protection measures (Comprehensive Self Exclusion Program)
- Overhaul of Complaint and Dispute Resolution Services
Q: There are conflicting reports about whether Joseph Norton ever got money back from Excapsa and whether you were able to ever press charges against Russ Hamilton and Scott Tom. Can you comment about what exactly was done to try and get retribution from the 2 scam artists or where it currently sits?
A: It is our understanding that Excapsa paid a significant sum to the corporate owner of UB.com as part of a settlement agreement that was reached between the parties. However, the KGC was not involved in that transaction and has no further details.
During the course of its investigations into the AP and UB cheating scandals, the KGC became aware of information indicating that in addition to breaches of the KGC's Regulations, the actions taken by certain individuals may have been criminal in nature. Accordingly, the KGC contacted law enforcement authorities and provided its full cooperation to them. The KGC was not a party to any subsequent investigations initiated by law enforcement authorities and has no further information in this regard.
Q: What has the Canadian and/or the American governments said to you personally about the KGC? Are you concerned at all by recent announcements by the governments of Ontario and Quebec that they are going to crack down on unlicensed sites in an effort to help build their own provincial online gambling? If not, why not? If so what are you planning to do about it?
A: The KGC is not involved in any discussions with Canadian or American governments about jurisdictional issues as they are not the KGC's mandate. The KGC has an excellent working relationship with regulatory agencies in the US at both the State and the Tribal levels.
The KGC is aware of the efforts that Ontario, Quebec and other provinces have made to bring their gaming products online. We are unaware of any provincial efforts to "crack down on unlicensed sites" but would support such an effort as the KGC's operators are, in fact, licensed and offer their services within a highly regulated environment.
Q: Is the KGC doing anything with their sites to abide by the new rules by the UK Gambling Commission? In better words are you asking sites to separate wagers from UK customers vs. the rest of the world so that the UK can get their 15% of gross profits or are you asking sites not to accept UK customers. I'm assuming the UK customer base isn't very high anyways.
A: The KGC has a good working relationship with the UK Gambling Commission concerning gaming regulatory matters. However, with regard to taxation, Kahnawake has no tax treaty with the UK. Accordingly, the KGC has no mandate to assist in the enforcement of the UK's taxation laws nor has it been requested to do so.
Q: Has the KGC talked with any of the other Mohawk groups in the U.S. or Canada about coming aboard and setting up satellite offices? I know Akwasasne and the one in Calgary (forget the name) seemed interested in setting up their own servers.
A: The KGC has had numerous discussions with various Tribes in the US and First Nations in Canada – both Mohawk and other Nations. The KGC has issued an Inter-Jurisdictional Authorization to the Santa Ysabel Tribe in California for its poker site, which is not yet accepting real money bets.
Q: What do you see in the near and distant future for the KGC and do you have a goal for the number of licensed sites you would like to see by 2020?
A: Over the past 12 months, the KGC has seen resurgence in the number of inquiries and applications for licensure it has received. This may be attributed to operators' dissatisfaction with other jurisdictions where they experience: higher licensing/hosting costs; gaming revenue taxes; onerous bureaucratic requirements and unreliable connectivity. The renewal of interest in locating (or re-locating) in Kahnawake is also a result of the KGC's new licensing category – Inter-Jurisdictional Authorizations – which offer an operator unprecedented access to Kahnawake's hosting services without incurring significant costs or delay.
Q: Is there anything you would like to say to any companies that are considering offering online gambling and are looking for a place to host their site or to any online companies that are unhappy with the service in their current location?
A: There are many reasons for an online gaming operator to consider re-locating to Kahnawake. For over 15 years, Kahnawake has been the market leader in licensing and hosting online gaming operators. Kahnawake's hosting facility – Mohawk Internet Technologies – offers state-of-the-art services in a secure environment. The KGC has a progressive regulatory regime that balances the need for player protection with the realities of the industry. The cost of operating in Kahnawake – for both licensing and hosting – is competitive with other jurisdictions. Kahnawake imposes no taxes on operators. For more information about becoming licensed by the KGC, visit our website: www.gamingcommission.ca
Read insights from Hartley Henderson every week here at OSGA and check out Hartley's RUMOR MILL!
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