Gaming Alert – Eastern District of New York Rules Poker Is Not Gambling Under IGBA

by Cadwalader, Wickersham & Taft LLP
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In a decision that could have a significant impact on distressed gaming companies, Judge Jack B. Weinstein of the U.S. District Court for the Eastern District of New York ruled on Tuesday that poker does not constitute gambling under the Illegal Gambling Business Act (“IGBA”), a federal statute that makes the operation of any “illegal gambling business” a criminal offense. See U.S. v. Dicristina, No. 1:11-cr-00414-JBW (E.D.N.Y. Aug 21, 2012). While poker operations remain illegal under the laws of the vast majority of U.S. states, including New York, the decision may lend support to the argument that online poker operations should be considered outside the scope of certain other federal laws regulating online gaming.

Background

Defendant Lawrence Dicristina was charged in December 2011 with operating an illegal gambling business in violation of the IGBA. His business consisted of two poker tables in the back room of a bicycle warehouse, where poker games were held twice a week. Dicristina collected a five-percent “rake” of the amount bet by his customers on each hand, and employed several dealers and waitresses. Following a jury trial, Dicristina was found guilty on all three counts in his indictment, and immediately renewed a motion for a judgment of acquittal.

In his motion for a judgment of acquittal, Dicristina argued that poker was not “gambling” under the IGBA, which defines “gambling” as “includ[ing] but . . . not limited to pool-selling, bookmaking, maintaining slot machines, roulette wheels or dice tables, and conducting lotteries, policy, bolita or numbers games, or selling chances therein.” Id. at 101 (citing 18 U.S.C. § 1955(b)(2)). Specifically, Dicristina argued that gambling under the IGBA was limited to those games explicitly listed in § 1955(b)(2) or substantially similar to such games, and attempted to differentiate poker as “a game of skill rather than chance and thus outside the purview of the statute.” Id. at 9. The government countered primarily by arguing that any form of gambling illegal under state law could be prosecuted under the IGBA.

Decision

After a lengthy discussion of state and federal gambling laws, and a summary of scientific studies conducted on the relative degree of skill and chance inherent to poker, Judge Weinstein concluded that the poker is not gambling under the IGBA. Judge Weinstein’s conclusion was premised on his finding that because neither the text of the IGBA nor its legislative history clearly indicated that Congress intended for the IGBA to cover poker, the “rule of lenity” required the court to resolve the statute’s ambiguity in favor of the defendant. Specifically, Judge Weinstein held that in order to constitute an illegal gambling business under the IGBA, a business must either operate one of the nine types of games specifically listed in § 1955(b)(2) or “a game that is predominately a game of chance.” In finding that poker was predominately a game of skill, Judge Weinstein relied heavily on “persuasive evidence” presented by Dicristina’s expert witness proving that “(1) [P]oker involves a large number of complex decisions, which allow players of varying skill to differentiate themselves . . . ; (2) many people play poker for a living and consistently win money over time . . .; (3) players who obtain superior results with other starting hands tend to obtain superior results with any given hand, indicating that the players’ abilities, not the cards, are responsible for the results . . . ; (4) the published studies are all consistent with [these] conclusions.” Id. at 114.

Impact on Online Poker

Judge Weinstein acknowledged at the end of his decision that “the conclusion that poker is predominately a game of skill does not undermine the holding that poker is gambling as defined by New York law” and noted that Dicristina could have been prosecuted in state court. Despite the fact that poker remains illegal under the laws of most U.S.states, this decision may lend support to the argument that poker should be considered outside the scope of other federal laws regulating online gaming.

For example, the Unlawful Internet Gambling Enforcement Act of 2006 (“UIGEA”) prohibits any person engaged in the business of “betting or wagering” from processing financial transactions related to “unlawful Internet gambling.” The UIGEA defines “unlawful Internet gambling” as “a bet or wager by any means which involves the use, at least in part, of the Internet where such bet or wager is unlawful under any applicable Federal or State law in the State or Tribal lands in which the bet or wager is initiated, received, or otherwise made.” 31 U.S.C. § 5632 (emphasis added). The term “bet or wager” is further defined as “the staking or risking by any person of something of value upon the outcome of a contest of others, a sporting event, or a game subject to chance. . .” Id (emphasis added).

While the Dicristina decision is only one federal court’s interpretation of different provisions of a different federal statute, it may be cited in support of the argument that poker is “not a game subject to chance” and therefore does not involve bets and wagers made in connection with unlawful gambling activities prohibited by the UIGEA. Accordingly, distressed gaming companies should continue to monitor both any appeal filed in the Dicristina case and any other attempt to extend Judge Weinstein’s conclusions to the relationship between online poker under other federal statutes.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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