gambling and the law: October 2008 Archives

#2008-1 Copyright 2008, all rights reserved worldwide.  Gambling and the Law® is a registered trademark of Professor I Nelson Rose, www.GamblingAndTheLaw.com

Gambling and the Law®:

A Modest Proposal

            Is poker a game of skill?

            In states without licensed cardrooms, the answer will almost always determine whether it is legal to operate the game as a business.  In about half the states, it would also determine whether merely playing in a commercial game is a crime.

            States do have the right to put restrictions on games of skill played for money.  They may even be able to outlaw them completely, although there is case law holding that governments cannot discriminate by picking on only certain skill games.

            But all states outlaw unauthorized gambling, defined as games with three elements:

1) A prize of value;

2) Consideration, meaning it costs something to play; and

3) An outcome determined predominantly by chance, not skill.

            There are cases being fought in the U.S. and Europe on whether poker has the third element.

            Courts and commentators have looked at the issue from many angles.  I like to think that we can put all games on a spectrum, from pure chance, like roulette, to pure skill -- chess. 

            But even roulette can involve some skill:  knowing what bets not to make.  Wizardofodds.com mentions one bet available at a tribal casino where the house advantage is 23.55%!  And Russell T. Barnhart wrote an entire book in 1992 called "Beating the Wheel," discussing biased wheels and clocking.

            I think that any factor beyond the players' control, such as having the flu, should count as "chance."  But even if these should be counted as part of the players' "skill," there is still the coin flip to determine who gets white and the right to move first.

            I am involved as a consultant and expert witness in some of the court cases being fought over proving poker, especially tournaments, is predominantly skill.  So, I have to make it clear that the modest proposal I am presenting in this column is not necessarily the actual law of any state or nation.

            In 1870, Mark Twain wrote a column entitled "Science vs. Luck."  It concerned a fictional Kentucky case involving whether the card game "seven up" or "old sledge" fell under the prohibition on "games of chance."  According to my copy of "The American Hoyle; or Gentleman's Hand-Book of Game," published in 1885, the game was also known as "all-fours."  It was similar to the modern game of hearts, with players getting points for most tricks, and for taking the highest, lowest and Jack of trumps.

            Like our modern cases, the courtroom battle came down to a battle of experts.  The prosecutors called in deacons and other clergymen, all testifying that old sledge was a game of chance.

            Mark Twain doesn't go into detail on the experts the defendants called.  But we know, today, they would be mathematicians, professional players and people like me, who can testify about the law and history of the game.

            With experts on both sides, the judge "said there was no way of coming to a determination..."  The defense attorney suggested a solution:  "Impanel a jury of six of each, Luck versus Science.  Give them candles and a couple of decks of cards.  Send them into the jury-room and just abide by the result."

            After playing all night, with some clergymen coming out to borrow more money, the jury reached their unanimous verdict:  "old sledge" was a game of skill.

            I propose the poker world do the same.  Bring out of their forced retirements Sen. Bill Frist and Rep. Jim Leach, the architects of the UIGEA.  They can be joined by the other leading "anti's" in Congress:  Sen. Jon Kyl and Rep. Frank Wolf.  Throw in the leading religious opponents, Rev. Tom Grey and Dr. James Dobson, and you have half the jury.  We can give each of them a sheet with the rankings of the hands.

            The big question:  Which six players should represent the poker world?

                                                                          END

© Copyright 2008.  Professor I Nelson Rose is recognized as one of the world's leading experts on gambling law.  His latest books, Internet Gaming Law and Gaming Law: Cases and Materials, are available through his website, www.GamblingAndTheLaw.com.

#07-21 Copyright © 2008, all rights reserved worldwide.  Gambling and the Law® is a registered trademark of Professor I Nelson Rose, www.GamblingAndTheLaw.com

Gambling and the Law®:

Compacts, Elections and Bureaucrats - Oh My!

            On February 5, 2008, Californians voted on whether four tribes could triple the number of slot machines in their casinos, from 8,000 to 25,000.

            The tribes won.  If they hadn't, there would have been years of ugly lawsuits.

            Opponents, primarily unions and competing tribal casinos and racetracks, believe the legal mess was created by underhanded attempts to guarantee that these four tribes would get their slots, even if the voters disapproved. 

            I believe the problems were the result of federal and state bureaucrats following what they thought was the letter of the law, without using common sense.

            This particular fight started a couple of years ago, when Gov. Schwarzenegger signed compacts giving these tribes more slots in exchange for the state receiving up to 25% of the net gaming revenue.  The compacts had to be approved by the State Legislature. The Senate approved immediately.  But opponents stalled the approvals in the Assembly, until the tribes agreed to a few additional terms in side agreements.  This creates the first legal question: are side agreements between the state and tribes enforceable, when they are not part of the compact?

            The opponents did not give up.  They launched referenda campaigns and got enough signatures to have the compacts on the February 5^th ballot.

            But, meanwhile, Gov. Schwarzenegger, with approvals in hand from the State Legislature, signed the compacts and gave them to state Secretary of State Debra Bowen to forward to the federal Department of the Interior.  This she did, because she read state law as requiring her to do so.

            This would have created the second set of lawsuits.  California law does require her to forward approved compacts.  But were the compacts approved?  Technically, the State Legislature's approval has to be in the form of a statute.  Statutes normally don't take effect until January 1^st of the following year.  So, maybe Bowen sent the compacts too soon.

            Plus, under California law, normal statutes do not take effect at all, once they have been challenged by a referendum.

            The Secretary of Interior is not supposed to rubber-stamp tribal-state compacts.  Rather, the Indian Gaming Regulatory Act requires that he review them to see that they meet all legal requirements.  But, government bureaucrats being bureaucrats, his office apparently misplaced the compacts.

            No big deal ... except the Act also says that the compacts are "deemed approved" if the Secretary fails to take any action on them for 45 days.

            These compacts were big news.  Anyone in the Dept. of Interior with common sense would have treated them with special care.  The Dept. has apparently never before misplaced a compact.

In any case, the Secretary should have returned them to California, or at least asked questions whether the approvals by the State Legislature were still valid.

            Even after screwing up for 45 days, the Secretary should have done something, such as ask for guidance from the courts.  Instead, he announced that the compacts had been deemed approved, because he couldn't find the paperwork.

            In the uproar that followed, someone noted that federal law requires more than an announcement by the Secretary.  To be official, the Secretary's approval must be published in the Federal Register.

            So, all the Secretary had to do was not publish his approval until after the February election.

            On December 19^th, this Bush appointee published his approval in the Federal Register.

            When asked why he did such a bonehead thing, his reply was pure bureaucratese: once deemed approved, the law required him to publish the approval.

            So, a bureaucrat in California sent compacts to Washington, that she should have held.  Then the bureaucrats in Washington lost the compacts for a few months.  Then, instead of asking for copies, they said that since the compacts had not been rejected, since they had been misplaced, they were deemed approved.  Finally, instead of holding off a couple of months until the voters of California decided the issue, the federal bureaucrats published the compacts, making them official.

            Imagine the mess if the voters had rejected these compacts after they had already been approved.  The only winners would have been the lawyers.

                                                                          END

© Copyright 2008.  Professor I Nelson Rose is recognized as one of the world's leading experts on gambling law.  His latest books, Internet Gaming Law and Gaming Law: Cases and Materials, are available through his website, www.GamblingAndTheLaw.com.

Gambling and the Law®:

Prosecutors Claim Internet Gaming Ads Violate Local Laws

            Here's a quote that should scare anyone involved with any form of legal gaming.

            The federal Department of Justice ("DOJ") got Google, Microsoft and Yahoo to agree to pay $31.5 million in fines to settle claims that they had promoted illegal gambling by running ads on the Internet.  The DOJ announced that the fines were "for corporate conduct the government found in violation of the Federal Wire Wager Act, federal wagering excise tax laws, and various states' statutes and municipal laws prohibiting gambling."

            The DOJ has been waging a war of intimidation against Internet gambling for almost 10 years.  It has been effective, although slightly deceptive.

            For example, the DOJ warned that "gambling on the Internet" was illegal -  although there are, in fact, no federal laws against merely making bets.

            It declared that it can extradite, or even kidnap, British subjects who violate American laws - although the U.S. is not going to invade England to grab a bookie.

            It told Nevada regulators that regulations for online casinos would result in arrests - although it knew courts had ruled that the Wire Act applies only to race and sports bets.

            Now the DOJ has subtly, but greatly, expanded the war.  It has openly declared that it has the right to file criminal charges against anyone who violates any state or municipal law against gambling.

            Of course, every state, city and county has laws against gambling.  Nevada, for example, actively prosecutes illegal bookies and anyone else who operates commercial gambling without the necessary licenses.

            And every state and municipality has laws against advertising illegal gambling, and often, even legal gambling.

            A Georgia law, for example, reads:

"A person who knowingly prints, publishes, or advertises any lottery or other scheme for commercial gambling or who knowingly prints or publishes any lottery ticket, policy ticket, or other similar device designed to serve as evidence of participation in a lottery commits the offense of advertising commercial gambling."

Under this law, everyone who advertises a licensed casino, cardclub or out-of-state lottery in Georgia is committing "a misdemeanor of a high and aggravated nature."  There is no express exemption for Internet ads.  An Atlantic City casino that allows residents of Georgia to register online might be violating this statute.

            The immediate reaction has to be, "What about the First Amendment?"  The constitutional protections around free speech are greatly weakened when it comes to advertising, especially the advertising of gambling.  In what is known as the commercial speech cases, courts have ruled that governments sometimes can prohibit these ads.

            In a case that it later criticized, but did not expressly overrule, the High Court ruled that Puerto Rico could prohibit casino advertising to its residents.

            The Supreme Court also declared that it was constitutional for Congress to limit television and radio state lottery commercial broadcasts to states with state lotteries.  That is still the law today: A Las Vegas T.V. station might lose its license if it airs an ad for the California State Lottery.

            In the Greater New Orleans Broadcasting case, the Court ruled that it did indeed violate the First Amendment for Congress to prohibit a Louisiana-licensed casino from advertising on Louisiana T.V. and radio stations.  The main problem was that the prohibition was irrational, since identical, but tribally-owned, casinos could broadcast their commercials.

            The case also involved Mississippi casinos, so it seems clear that the federal ban on T.V. and radio ads for licensed casinos was invalid, but only in states with casinos.  Ironically, it was the DOJ that expanded the decision, by announcing that it would no longer go after any casino broadcaster under federal law, even in states without licensed casinos.

            But the DOJ, and, of course, the states, never said they would not enforce their own state prohibitions on gambling ads.  And the Supreme Court has never said those state statutes are unconstitutional.

            The good news is that there is so much legal gambling in the country now, that it would be difficult for a state, or the DOJ, to defend a state law that prohibits the advertising of legal gaming from another state.  And the Internet, like television and radio waves, cannot be kept out.  Utah may not like it, and it might even have violated Utah state laws if the T.V. or radio tower had been within that state, but commercials for Nevada casinos are received in the beehive state.

            As a nice twist, one of the lawyers for the American Gaming Association in the Greater New Orleans Broadcasting, arguing for the right of casinos to advertise, was my former classmate, John Roberts, now Chief Justice of the United States.

            Although advertising has some protections, free speech does not apply to the actual act of gambling.  Anyone who takes a bet online might be violating some state or local law.  And the DOJ has now declared that it will use those laws to go after anyone who advertises those websites.

            The operators who would appear to be most at risk are not all overseas.  The DOJ believes interstate wagers on horseraces are illegal, despite the Interstate Horseracing Act and the express authorization of more than 20 states.

            It is possible that DOJ is once again merely beating its chest, and not intending to go after any more online advertisers.  And it's not even clear if local laws do apply to the Internet.

            Still, if I were in charge of a licensed casino, I would have my lawyers look again at my web advertising, with an eye on avoiding "various states' statutes and municipal laws prohibiting gambling."

END

#140 © Copyright 2008, all rights reserved worldwide.  Gambling and the Law® is a registered trademark of Professor I Nelson Rose, www.GamblingAndTheLaw.com.  Professor I Nelson Rose is recognized as one of the world's leading experts on gambling law.  His latest books, Internet Gaming Law and Gaming Law: Cases and Materials, are available through his website,  www.GamblingAndTheLaw.com.