Opinion ID: 739314
Heading Depth: 3
Heading Rank: 3

Heading: The Regulatory Interest/Property Interest Distinction

Text: 36 We are equally unimpressed with the argument that Louisiana has only a regulatory interest, and not a property interest, in the video poker licenses. Those courts articulating this distinction usually focus on the fact that the issuance of a license is nothing more than a physical manifestation of the government's intent to regulate. See Schwartz, 924 F.2d at 417 (arms export license); Toulabi, 875 F.2d at 125 (taxicab driver license). In Schwartz, for example, the defendants were convicted of wire fraud for fraudulently obtaining arms export licenses allowing them to sell certain munitions to foreign purchasers. See Schwartz, 924 F.2d at 416. In holding that such licenses do not constitute money or property under the mail fraud statute, the Second Circuit focused on the fact that it was merely fortuitous that the government chose to regulate arms sales by means of a license as opposed to a less formal symbol of government regulation. See id. at 417. That court stated: 37 [T]he government's power to regulate does not a fortiori endow it with a property interest in the license; that is, the mere issuance of a document designed to formalize the government's regulation does not thereby create a property interest for the government. 38 Id. 39 The Second Circuit's logic, however, is not instructive in the instant case because of the difference between video poker licenses and arms export licenses. Unlike the arms export license analyzed in Schwartz, a video poker license does not merely signify government approval of an individual's right to take part in a particular regulated industry; it also evinces the State's intent to participate in that industry. 40 We agree, as an initial matter, that the right to regulate a particular industry does not a fortiori give the regulator a property interest in licenses signifying the government's regulation. Rather, a state's property interest in its licenses derives at least in part from the character of the licenses themselves. The issuance of the video poker licenses signifies not only that the licensee is eligible to participate in Louisiana's regulated video poker industry, but also defines the licensee's legitimate participation in an enterprise from which Louisiana derives significant revenues. One of the main reasons for the recent legalization of video poker was that it was considered an ongoing source of revenue for the State. Cleveland, 951 F.Supp. at 1262. As such, the Video Poker Act requires the licensees to pay a significant, up-front fee for their licenses and also to deposit 22.5% of their net revenues into the state treasury as a franchise fee. La. R.S. 33:4862.11 (recodified at La. R.S. 27:311). Simply put, Louisiana has much more than a regulatory interest in the video poker licenses; it has a direct and significant financial stake in its role as issuer of the licenses. 2