Results tagged “gambling and the law” from Center for Gaming Research

What Asia can Learn from Las Vegas, and Vice Versa

            Macau has been called the Las Vegas of Asia.  Since the casino industry in this Special Administrative Region of China has already passed Nevada's famous Strip in gaming revenue, win per table and handle per machine, perhaps it is Las Vegas that should be dubbed the Macau of the United States.

            I have an unique perspective on this development.  Like many others, I often act as a consultant and expert witness for governments and industry, in North America and Asia.  But I also have taught Gaming Law at the University of Nevada-Reno, in China, Spain, France and Slovenia, and every June at the University of Macau.

            So what lessons can the casino capitols of the world learn from each other?  Here are a few:

1)        Gambling has to be strictly regulated to keep it honest and prevent scandals. 

2)        Casino regulation requires knowing who the real owners are and the background of everyone involved in the casino's operation.

3)        Casino regulation also requires keeping track of every dollar, or pataca, that goes in or comes out.

4)        And watch the hands that handle the money - that means the dealers and up, more than the players.

            All these points relate to why we regulate legal gambling at all.  Wouldn't it be easier to just sell the licenses to the highest bidders and then bow out?  Most governments don't do that, in part because they want to make even more money, by selling licenses and then getting a large share of the gaming revenues through taxes.  This means that governments have a direct stake in casinos' profits and are hurt if insiders skim off the top before the profits can be taxed.  It also means...

5)        Governments always get greedy and raise taxes if you're successful.

            But governments also have a duty to protect patrons.  A license is seen as a promise by the government to everyone who enters a casino that they will get an honest game.  One problem when organized crime (in the U.S., they call themselves "O.C.") runs casinos is they have no qualms about rigging games to increase their take.  This even happens with dis-organized crime: dealers who steal by slipping chips to a confederate will cheat other players, so their tables won't have suspiciously low holds.

            The decision whether to have casinos is a state, not a federal, issue.  But infiltration by O.C. can attract unwanted attention from higher governments.  In the 1950s, U.S. Senator Estes Kefaufver held the first televised hearings, which linked Nevada casinos with O.C.  The state feared the federal government would step in and kill the industry, so it created the first true regulatory system.

6)        Legalization opens the door to an unrelenting push for more gambling: more casinos; additional games, loosening of restrictions on hours, stakes and credit.

7)        Regulators start out tough, but can become overly friendly to operators.

8)        Over time, almost every decision regulators make is favorable, or at least neutral, to operators. 

            Casino executives often think regulators are against them, since they may turn down nine out of ten requests.  But they do grant that tenth request.  And since players aren't organized, regulators' decisions almost never favor patrons.

9)        The first casinos have fantastic returns on investment, due to pent up demand.

10)      This leads inevitably to an over-supply and bankruptcies, if there is no limit to the number of licenses.

11)      The situation is made worse, because it is impossible to control neighboring jurisdictions.  Monopolies are extremely profitable.  That's why they won't let you have one.

            Iowa legalized low-limit riverboat casinos with the idea of being the only "Las Vegas" between Nevada and New Jersey, living primarily off the Chicago market.  It would have worked, if only Illinois would have cooperated and had not authorized high-limit casinos.  Iowa had to raise its limits, although some of the boats did sail south.

12)      Legalization gives legislators and regulators the chance to be social engineers.  Cruising was designed to protect gamblers from themselves.  No one thought what it meant to lock a compulsive gambler in a casino for four hours.

13)      Experiments sometimes work, and sometimes fail.

14)      Conventional wisdom should be followed, and ignored.

            The Atlantis went bust in Atlantic, in part for having a three-story casino with large windows.  On the other hand, before the Sands opened in Macau, "everyone" said Chinese gamblers hate slot machines.  And "everyone" said the Mirage would never work, because casinos in Las Vegas had to have doors opening on the sidewalk.   

            As the G2E's, especially the G2E Asia, have shown, slot machines do not always have to be video screens with three symbols down and five across.

15)      Be prepared for inevitable problems: Slot machines malfunctioning, players claiming they have won when they have not, minors trying to sneak in, disruptive drunks.

16)      And for potential scandals that are not your fault: Patrons leaving children in cars, reporters catching politicians making enormous bets.

17)      And for the law changing: Smoking bans, government requiring more reporting of cash transactions.

            All this leads to the most important rule:

18)      Understand and accept that casinos are not like other businesses.  They are not adult Disneylands®.

            Amusement parks do not have to worry about restrictions on their rights to advertise, whether their contracts are enforceable, and how to collect debts from patrons.  They aren't normally faced by opposition from churches, or accused of ruining families.  No one suggests outlawing all bars because of drunk drivers.

            Hire the most experienced personnel you can find, from anywhere in the world.  Security and day-to-day operations are most important in the short run.  But you also need to retain the best outside experts in fields like marketing and law, or you won't have any long run.

                                                                          END

#145 © Copyright 2009.  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.

Not Your Grandmother's Bingo

            One of the biggest fights in the often strange world of legal gaming is -- What is bingo?

            This has been fought in courts for more than a decade.  One case almost made it to the U.S. Supreme Court.  But then-Chief Justice Rehnquist refused to hear the appeal, because he did not want to become the butt of jokes on late-night talk shows.

            But bingo is no laughing matter.  At least as many people play bingo as play poker.  And bingo halls make money.  Leading industry analyst Eugene Martin Christiansen estimates the nation's commercial, charity and tribal bingo games have gross revenues of more than $3.5 billion a year.

            Nobody has much trouble, any more, with paper bingo played with ink daubers or paper pull-tabs sold by hand.  These are clearly Class II games under the Indian Gaming Regulatory Act.

            Tribes can set up Class II games without having to ask permission from the state in which the bingo hall is located.  Class III gaming requires a formal tribal-state compact.

            The problem is electronics.  With computers and video screens, bingo can be played on a gaming device that is as easy to play as a slot machine, and as much fun.

            For the past five years, National Indian Gaming Commission Chairman Phil Hogen has been trying to get a bright line drawn in the law between what is a Class II bingo or pull-tab device and what is a Class II lottery or slot machine.  His efforts have not been greeted warmly by tribes, manufacturers or players.

            According to Indian Country Today, at a Senate Committee on Indian Affairs hearing on April 17, 2008, Hogen responded to a question, "Senator, I'm going home sometime soon.  I'm going back to the Black Hills.  When you hear that 'hurrah' out in Indian country, you'll know that happened.  But the thing is, I gotta get this done . . . so that the industry, the manufacturers, the tribes, the states can know what's going on."

            Why the deadline for bingo regulations should be tied to Hogen's retirement date is not clear.

            But, more importantly, who exactly does not know "what's going on"?

            The current regulations and court decisions are not difficult to understand.  I have worked with bingo played both on and off Indian land, and no one seems terribly confused.  Manufacturers and operators of linked bingo devices and paper pull-tab dispensing machines with video screens understand when I suggest modifications to keep their games within the law.  I have given a number of Legal Opinions to tribes and tribal suppliers that a gaming device is Class II and not Class III, and to commercial and charity bingo operators that a gaming device is bingo and not a slot machine. 

            While everyone inside bingo is in favor of the current situation, state governments, the federal Department of Justice and direct competitors, including casinos, want the law not clarified, but changed.  I recently filed an amicus brief with the Alabama Supreme Court, because the Governor thinks all bingo should be played with paper cards and ink daubers.

            Their problem is that the law of bingo today has more to do with how the game was played in the 1980s than the 1930s (when, by the way, they did not use ink daubers).

            For hundreds of years, bingo and its predecessors, lotto and tombola, were played with hard paper cards and markers.  When bingo was brought over to the U.S. in the 1920s and Americanized -- changed from a three by nine card into the familiar five by five -- players often covered their numbers with beans.  In fact, entrepreneur Edwin Lowe, who is credited with inventing the modern version, called his game "Beano," which is still the accepted name in Massachusetts.  An apocryphal story says the name was changed when an overeager winner tried to call out, "Beano!" and blurted out, "Bingo!"

            In the 1980s, hard paper cards and loose markers gave way to preprinted sheets of paper, "flimsies," and large ink daubers.  Players could daub quickly, without having to worry about knocking beans all over the table.  The game got faster and faster, leading to "speed" or "quicky" bingo, in which the caller calls the numbers as fast as he can.  Other fast games included "instant bingo," in its many variations, and U-Pick 'Em, where players could choose their own numbers on three by three bingo cards.

            Every bingo card on flimsies had a serial number.  Simple computers allowed operators to know instantly if a claimed "Bingo!" was a winner.

            Those same computers allowed players to play the game directly on a video screen or hand-held device.

            At the time IGRA was being considered by Congress and signed into law in 1987 and 1988, bingo was being played on competing electronic devices.  These included the Bingo-Master, ElectroBingo, Easy Bingo/Bingo Brain, Cadillac Bingo, Diamond Bingo, Starship Bingo, and Bingo Card Minder, which played simultaneously dozens of bingo cards held in the machines' memory; MegaBingo, a large-prize bingo game played in multiple locations through the use of computers, satellites and telephone lines; automated paper pull-tab dispensing machines; and Lightning Bingo, which was a bingo game played on linked electronic devices.

            It was the intent of Congress to keep these games legal.  I know, because I drafted language that was incorporated into the legislative history of IGRA.  This was for clients who wanted to make sure they could stay in business.

            Hogen's proposed regulations would change the law.  Here are some examples:

$          Bingo cards would have to be displayed.  Bingo cardminders never displayed all of the cards being played.

$          Bingo could only be played with exactly 75 numbers.  Bingo is sometimes played with 90 number and with patterns such "jail bars" where only the Bs, Ns and Os are used.

$          Variants of bingo cannot have pre-covered numbers.  No Free Space?

$          Players have to wait at least two seconds for the game to begin, unless there are six players entered.  Games and devices were invented in the 1980s to speed up the play of the game, not slow it down.

            And my favorite:  If all the players leave before the game is over, the game is declared void and wagers are returned to the players.  How exactly is the operator supposed to return wagers to players who have left the game?

On June 5, 2008, Hogen and the NIGC gave up the fight, at least temporarily, to impose these new regs on tribes and manufacturers.  The federal regulators were hurt by their own estimates, that tribes would lose thousands of jobs and up to $2.8 billion a year in revenue, and by reports by me and other gaming experts on what constitutes the game of bingo.

            But, in a sign that bad ideas never die, Hogen sent a letter to a tribe in Alaska telling them that they could not install 30 proposed bingo machines.  Considering there are currently 50,924 Class II machines out there, Hogen will be writing a lot of letters before his term expires.

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

            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, makes it a crime to "knowingly print, publish, or advertise any lottery or other scheme for commercial gambling."  An Atlantic City casino that allows residents of Georgia to register online for a poker tournament might be violating this statute.

            In a case that it later criticized, but did not expressly overrule, the U.S. Supreme 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.

            However, 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.

            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.

            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 never said it would not enforce 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 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.

            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

#08-19 © Copyright 2009.  Professor I. Nelson Rose is recognized as one of the world's leading experts on gambling law.  His latest books, Internet Gaming Law (2^nd edition just published), Gaming Law: Cases and Materials, and Blackjack and the Law are available through his website, www.GamblingAndTheLaw.com.

Gambling and the Law®:

Can Everyone Win In Florida?

            Sometimes the most important part of a legal document are the words that are not there.

            Gov. Charlie Crist, for example, just signed a new compact with the Seminole Tribe.  It expressly allows the Tribe to have slot machines and banking card games, like blackjack.    

            What the compact doesn't mention is limits.  So, the Tribe is free to decide not only its stakes and hours of operations, but how many slot machines and table games it wants, in all seven of its casinos.

            It also means the compact violates federal and state law and is invalid - unless the Florida State Legislature decides to ratify it anyway.

            Crist signed a similar tribal-state compact in 2007.  But he was sued by the Florida House of Representatives.

            The case wasn't even close.

            The Florida Supreme Court ruled that Crist and the Seminoles could agree to slot machines, because the State Constitution permits slots in parimutuel outlets in two counties.  But the Governor simply could not enter into a compact for a prohibited game, like blackjack.  The Court held the compact invalid, because only the State Legislature can decide what forms of gaming are legal in the state.

            In light of threats, of questionable legality, by the federal Secretary of Interior to impose rules for slot machines without the state's input or revenue sharing, the State Legislature authorized Crist to enter into a new compact.  He had until 11:59 pm on August 31, 2009.  He made it, with only a few hours to spare.

            But the State Legislature had authorized the Governor to enter into a compact which allowed banking card games only at the tribe's four casinos in Broward and Hillsborough counties.  The Seminoles' lawyer, Barry Richard, the lead litigator for George W. Bush in the 2000 Florida voting fiasco, was widely quoted as saying,

            "The tribe has substantial arguments that they would be able to have blackjack, whether or not they have a compact.  I can't guarantee they're going to get it, but [the possibility] is a very strong incentive for the Legislature to work something out.  If they don't, the state is going to get no money."

Of course, blackjack is only available through a valid compact.

            The compact contains a few other strange departures from what the Legislature required.  Where the Legislature required that injured patrons could receive up to $1 million, the Governor and tribe agreed to a cap of only $100,000 on patron tort claims; hardly sufficient in a wrongful death case. 

            The revenue sharing is also different, but still a minimum of 12%, reaching up to 25% of gaming win over $2.25 billion in Broward County.  The state will eventually get billions, but the tribe will stop paying if state or privately-owned casino-style gambling expands.

            Crist did give one bone to competitors:  Cardrooms would be able to spread no-limit poker games.

            The State Legislature now has only an up or down vote on the proposed compact.  The lawmakers will have to decide if they can live with this, or hope for another, better deal, while the state's budget deficit continues to grow.

            My guess is the Legislators will throw in some additional side requirements, like decent insurance protection for patrons and some tax breaks for competitors, and sign off on the deal.  For it is politics, not law, that will determine who wins in Florida.  As the man who brought us George W. Bush - even though Al Gore got more votes - put it, "If they don't, the state is going to get no money."

                                                                          END

#2009-13 © Copyright 2009.  Professor I Nelson Rose is recognized as one of the world's leading authorities on gambling law and is a consultant and expert witness for players, governments and industry.  His latest books, Internet Gaming Law (2nd edition just published), Blackjack and the Law and Gaming Law: Cases and Materials, are available through his website, www.GamblingAndTheLaw.com.

Almost the Law

            Law school classes are conducted using the case method.  Students are given published court opinions and then questioned on what they deduce the law is.  This produces lawyers with the mistaken belief that the first place to look when conducting legal research is reported cases.

            It is dangerous to forget that the final say on the law still usually means a bill that has been approved by a legislature and signed by the executive.

            With a few important exceptions - Indian gaming, interstate horseracing and Internet gaming - it is state legislatures, not the federal government, who determine the most important issues involving legal gambling. 

            So, what are the big issues facing lawmakers?  Looking at the bills that were introduced in state legislatures over the years shows us not only what is being proposed, but what actually becomes law.

            Almost every state is looking at expanding legal gaming.  The Hawaii Legislature had so many proposals to legalize gambling that it passed a Resolution, now gone, declaring no new gaming proposals. 

            Yet in every state, almost all expansion bills still can't get out of committee. 

            But one occasionally does pass and is signed into law.  These inevitably lead to more proposals for expansion, never reduction.

            States start with legalizing charity bingo and licensing horseracing.  There still are a few that don't have state lotteries.  But the current trend is proposals for racinos.  This year, they were approved for Ohio.  And once slot machines or video lottery terminals are introduced, there are always campaigns to expand with table games, as recently happened in West Virginia and Delaware.

            Delaware has the additional advantage of being one of the few states grandfathered-in under the federal Professional and Amateur Protection Act, with the right to take sports bets through its state lottery.  I was hired by the Delaware State Lottery to recommend what the tax rate on the new sports books should be. 

            But expansion is still the exception, not the rule.  The gaming industry has gained great political power in many states, but card clubs and casinos still lose most of their battles.  This is particularly true when they want restrictions relaxed, such as being able to operate longer hours or higher stake games.  And forget about getting tax rates reduced, unless there have been a few high-publicity bankruptcies.  The failure of almost every bill having anything directly to do with gaming and money, except raising taxes, shows how important it is to make sure everything is done right when legal gambling is first introduced into a state.

            Legal gaming is especially politically weak when confronted with widespread social movements.  Having legislators mandate such things as smoke-free rooms can hurt business when there are direct competitors, such as tribal casinos, that don't have the same restrictions.  The casinos in Black Hawk, Cripple Creek and Central City did not celebrate when Colorado repealed their exemption from the "Colorado Clean Indoor Air Act."

            Every proposal to bring in legal gaming now includes provisions to help problem gamblers, such as proposal in California to keep ATMs off the gaming floor.

            Casinos are still viewed as slightly immoral deep pockets.  So, bills to exempt businesses from burdensome taxes, in states like Colorado, Indiana, Kansas and Nebraska, or to preserve historic buildings in Montana, expressly exclude casinos from the benefits of the new laws.

            One Connecticut representative introduced a bill that could create a national nightmare for casinos and players:  to tax out-of-state visitors on all they have won at casinos in the state.

            States are ramping up their competition for the gaming dollar.  The Louisiana Legislature created a committee to study "the effects of Mississippi's decision to land-base its casinos."  We know what the recommendations will be:  "a study is necessary for the state to determine whether a move to limited inland gaming would also lead to increased economic development in this state..."

            But Tom Burch, a Kentucky Representative, had the ultimate solution for competition.  He introduced a resolution that Kentucky send a submarine to sink any Indiana riverboat casino that strayed onto its side of the Ohio River.

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Gambling and the Law®:

Proving Poker is a Game of Skill

            How can we make poker legal?

            The cleanest way is to get a statute passed through the state legislature.

            In my book, Gambling And The Law, I show how California became the draw poker capital of the world because the state enacted laws in the 19th century that outlawed specific games, like 21 and faro, but left draw poker off the list.

            Of course, there still can be problems.  When Florida lawmakers authorized commercial cardrooms, they initially put a ridiculous limit of $10 on the size of pots.  And questions arose over what games qualify.  I testified as an expert witness that one innovation, essentially a game where players get two cards and try to get closer to 21 without going over, was not poker.

            Politically it has proven nearly impossible to get a poker bill through both houses of a state legislature and be signed by the governor.  At the very least, the pro-poker faction would have to spend enormous amounts of time and money lobbying local lawmakers.

            An easier route is litigation.  If the highest court of a state declares that playing poker for money is legal, then it is.  Even the U.S. Supreme Court can't overrule that decision, although the state legislature could put on restrictions.

            There are presently a couple of cases working their way through court systems in the United States, and a few more than that in Europe.  These aren't necessarily the perfect test cases, because lawyers often have to take the case their client has, rather than the one they would wish for.

            But the stakes are so great that somebody is going to put together the right case.  Here's what they should do:

1)        Put together a team of lawyers and experts in advance, so that a test case will have the right combination of laws and facts.

2)        Choose a state with the right laws.  The goal is to have a trial showing that poker is a game of skill and therefore legal.  The statute should clearly state that gambling is limited to games that are predominantly chance.  And there should be prior published case decisions that can be used.  The California Supreme Court, for example, declared that the card game of bridge is predominantly skill.  So it would only be necessary to prove that poker has as much skill as bridge.

3)        Use poker tournaments as the test case.  Courts that have ruled that  poker is predominantly chance have focused on the possibility that an amateur could be dealt a hand better than a professional.  So eliminate the possibility of winning on a single hand.

4)        File an action for a declaratory judgment - do not get arrested.  The best you can get once a case is in criminal court is a "not guilty."

5)        Get expert poker players to testify that most hands are not called, to show that it is not just who is dealt the best hand.

6)        Have experts run tests that have worked in other cases.  For example, games of skill always have a learning curve, and professionals beat amateurs in the long run.

7)        Be creative and prepared.  Courts have looked at how many books have been written on bridge (concluding it's a game of skill), and others have emphasized that the general public thinks lotteries are predominantly chance.  So lists should be made showing there are now more books for poker players than for bridge players.  And public opinion polls should be taken that prove the general public feels poker is a game of skill.

                                                                          END

#08-6  © Copyright 2009.  Professor I Nelson Rose is recognized as one of the world's leading experts on gambling law.  Gambling and the Law® is a registered trademark of Professor I Nelson Rose.  His latest books, Internet Gaming Law (1^st & 2^nd editions) and Gaming Law: Cases and Materials, are available through his website,  www.GamblingAndTheLaw.com.

#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.

Gambling and the Law®:

No Withholding Taxes on Poker Tourneys

            The IRS has decided that every poker operator in the United States will have to report anyone who wins more than $5,000 in a poker tournament. 

            To get around the fact that Congress never authorized this, IRS is pretending to require that 25% or more of these winners' prizes have to be withheld by the poker operators and forwarded to the IRS.

            That is only partially true.

            Buried in the IRS's published statement changing the tax treatment of poker tournaments is the following sentence: 

"The IRS will not assert any liability for additional tax or additions to tax for violations of any withholding obligation with respect to amounts paid to winners of poker tournaments... provided that the poker tournament sponsor meets all of the requirements for information reporting" under the tax code and regulations.

            What this means is the IRS has declared that poker tournament operators are absolutely required to withhold at least 25%, but that the IRS won't add any tax penalties or fines to operators who voluntarily turn in their big tourney winners.

            I hate laws like this.

            What apparently happened was that when word got out that the IRS was going to devastate poker tournaments, land-based casinos lobbied for a compromise.  This is exactly what lobbyists are supposed to do, assuming they cannot get the regulator to completely drop the idea.

            The result is better for players.  As one example:  If withholding were required, anyone who won a $10,000 buy-in to the WSOP would actually collect only $7,500.  Now, the player wins the seat, but is reported on a Form W-2G to the IRS.

            Of course, this is still bad news for winners.  A W-2G is practically an invitation to be audited.

            The compromise has created other problems.  Some land-based card clubs and casinos are withholding while others are not.  This is not just because this "waiver of liability," as the IRS calls it, is hard to find and decode.  Conservative lawyers and accountants might still advise their clients to send a chunk of big winners' prizes to the IRS.

            The problem is that the IRS says it is interpreting the Internal Revenue Code, which contains criminal penalties for non-compliance.  Notice that the IRS only promised not to impose "additional tax or additions to tax."

            Plus, the actions of the IRS are highly questionable.

            When people think of laws, they naturally think of statutes passed by legislatures, like Congress.  Every adult knows there is another set of laws that is at least as important in their everyday life: regulations from government agencies, like the IRS.  Both statutes and regulations require public input. 

            We know what happens when the public is not allowed its say.  You end up with statutes like the Unlawful Internet Gambling Enforcement Act, or this new rule on poker tournaments from the IRS.

            For the IRS did not propose a regulation.  Nothing was published.  There was no opportunity for card rooms, let alone players, to object.

            The IRS simply declared that it was reinterpreting a law passed by Congress in 1976, containing a term,  "wagering pool," which dates back to the 1950s.  Nobody, before now, thought "wagering pool" included poker or other games.  In fact, everyone knew it didn't, because it is exclusively lumped in with lotteries and bookmaking.

            The IRS has now declared that when Congress required withholding of  "wagering pools," it meant to include poker tournaments.  But, the IRS is giving a free pass to every card room and casino which openly violate a law passed by Congress, so long as they voluntarily turn in their big winners.

                                                                           END

#2007-18 © 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 authorities on gambling law, and is a consultant and expert witness for governments and industry.  His latest books, Gaming Law: Cases and Materials and Internet Gaming Law, are available through his website, www.GamblingAndTheLaw.com.