Opinion ID: 2001496
Heading Depth: 1
Heading Rank: 6

Heading: Mega Millions

Text: Finally, plaintiffs challenge the constitutionality of part D of chapter 383 of the Laws of 2001. Pursuant to this legislation, authorizing the Division of the Lottery to enter into an agreement with a government-authorized group of one or more other jurisdictions providing for the operation and administration of a joint, multi-jurisdiction, and out-of-state lottery (L 2001, ch 383, part D, § 3, codified at Tax Law § 1617). New York entered into an agreement with nine other states to participate in Mega Millions. [16] As noted above, the State Constitution prohibits lotteries in general, but makes an exception for lotteries operated by the state (NY Const, art I, § 9 [1]). The Mega Millions agreement specifically provides that the revenue generated by the lottery within each state remains in that state for distribution according to that jurisdiction's relevant requirements. The states agreed to operate the lottery jointlyincluding sharing start-up costs and operating expenses. As for the responsibility of paying out prize money, each state is liable for a percentage of its sales proportionate to the total amount of sales. The agreement further provides that the laws of the state will control in the event of any conflict between state law and the Mega Millions agreement. Any claims or litigation involving tickets sold in New York must be determined under New York law. No state will be held accountable for the negligent actions or omissions of the agents or employees of another state lottery. Each state is also permitted to withdraw from the Mega Millions agreement either upon six months' notice or immediately if the withdrawal is by operation of law. Plaintiffs make two arguments in support of their position. First, they argue that the multistate lottery is not operated by the state as required by the Constitution (NY Const, art I, § 9 [1]). Next, they assert that the net proceeds are not applied exclusively to or in aid or support of education in this state (NY Const, art I, § 9 [1]). We address these arguments in turn. Although several jurisdictions are involved, New York retains sufficient control over the sale of Mega Millions tickets so that it operates the lottery within the state. According to both the terms of the Mega Millions agreement and the Tax Law, New York retains the authority to specify where and in what manner the lottery tickets may be sold ( see Tax Law § 1604 [a] [6], [7]). The Division of the Lottery also has the power to license ticket agents and determine the manner and amount of compensation due to such agents ( see Tax Law § 1604 [a] [9]; [b]). The Mega Millions procedures comply with New York law and, if at any time they no longer comply, the State is free to withdraw from the agreement. That other states share in certain administrative costs and functions does not change our conclusion. The Division of the Lottery regularly contracts with outside vendors and other entities for various equipment and services to assist in the operation of the state lottery. Although different states operate different aspects of the multistate lottery, [17] that does not change New York's operation of Mega Millions within the state. While the State may not have exclusive control over every aspect of the Mega Millions lottery, it operates the multistate lottery within New York as required by the Constitution ( see art I, § 9 [1]). [18] Next, we address whether the net proceeds from Mega Millions are applied exclusively to or in aid or support of education in this state (NY Const, art I, § 9 [1]). Net proceeds are reasonably understood as the amount of revenue remaining after the distribution of prize money and necessary administrative expenses ( see Tax Law § 1619 [j] [2]). The Mega Millions agreement specifies that the states will share equally in any joint start-up and operating costs. As the Appellate Division determined, the expenses paid by New York are used to satisfy the actual administrative costs of operating the multistate lottery. There is no indication that the funds are used to advance the governmental purposes of other states ( see Dalton, 11 AD3d at 106). Thus, the necessary net proceeds, less the required administrative expenses, remain in New York and are appropriately dedicated to education within the state. Thus, we reject plaintiffs arguments that part D is unconstitutional. Plaintiffs' final argument that the Governor's message of necessity was unconstitutional under New York Constitution, article III, § 14 is without merit ( see Maybee v State of New York, 4 NY3d 415 [2005]). In conclusion, we hold parts B, C and D of chapter 383 of the Laws of 2001 to be constitutional. Plaintiffs have failed to meet their burden of proving beyond a reasonable doubt the invalidity of the legislation. As to Indian gaming compacts, since as a matter of criminal law and public policy class III gaming activity is not prohibited in New York, and although heavily regulated, it is permitted for charitable and other purposes, IGRA's mandate allows the State to play an important and essential role in regulating gambling on Indian lands. Allowing video lottery terminals and participation in Mega Millions further promotes the State's public policy to increase funding for education via state-sponsored lotteries. We find no constitutional infirmity in the legislation. Although some may argue the wisdom of the policy choice, the Legislature has made a valid legislative judgment. Accordingly, the order of the Appellate Division should be modified, with costs to defendants, by declaring part C of chapter 383 of the Laws of 2001 constitutional and, as so modified, affirmed. G.B. SMITH, J. (dissenting in part). Article I, § 9 of the New York State Constitution prohibits the Legislature from enacting legislation authorizing commercialized gambling and directs the Legislature to pass laws preventing such gambling. In light of article I, § 9, the main issue in this case is whether the Indian Gaming Regulatory Act (IGRA) (Pub L 100-497, codified at 25 USC §§ 2701-2721 and 18 USC §§ 1166-1168) authorizes the Legislature to enact legislation, e.g., part B of chapter 383 of the Laws of 2001, empowering the Governor to negotiate and enter into compacts with Indian tribes for the establishment and operation of commercialized gambling casinos in New York State where such casinos would ordinarily be impermissible. Based on a review of the relevant law, IGRA does not authorize the New York State Legislature to enact such legislation. Accordingly, the Legislature had absolutely no authority to enact part B of chapter 383 of the Laws of 2001. Because the Legislature does not have the authority to enact such legislation, that purported legislation has no effect. From this it follows that the Governor, who pursuant to Saratoga County Chamber of Commerce v Pataki (100 NY2d 801 [2003], cert denied 540 US 1017 [2003]) must have valid legislative approval in order to bind New York State to a tribal-state gaming compact, does not have the power to even enter into compact negotiations with Indian tribes for the establishment of for-profit casino gaming in New York State. Moreover, IGRA does not and cannot require or authorize the Governor to enter into such negotiations. The majority's conclusion, that part B is constitutional, fails to adequately consider the plain language of article I, § 9, New York's statutory scheme (e.g., the General Municipal Law and Penal Law) which prohibits commercialized gambling, and New York's strong, long-standing public policy against such gambling as reflected in making article I, § 9 a part of the Bill of Rights of the New York State Constitution. Most importantly, the majority's conclusion bypasses the citizens of New York State who have expressed their opposition to commercial gambling and who have not had their say, one way or the other, via the amendment process, as to whether the Legislature should be given the authority to enact legislation allowing for the type of commercialized, casino gambling contemplated under part B. I, therefore, dissent and would hold that: (1) part B of chapter 383 is unconstitutional; (2) any compact(s), entered into pursuant to part B of chapter 383, are void and unenforceable; (3) casinos opened and now operating pursuant to such a compact should be declared illegal; [1] and (4) the Governor and other New York State officials should be declared unauthorized to enter into activities in furtherance of part B of chapter 383 (e.g., any compact negotiations should cease immediately) unless and until the New York State Constitution is amended.