Online Gambling: A Lost Cause? (5 of 8)

Gambling is a term used broadly across many different activities. It may include slot machines, table games, etc. A point of contention with the war on gambling the Department of Justice(DoJ) launched is whether poker is considered gambling or a game of skill. Although the Unlawful Internet Gambling Enforcement Act (UIGEA)[1]makes internet gambling illegal, there are many expressed exceptions to what is considered gambling or what bet/wager includes[2]. Under the definition it excludes fantasy sports[3]. The UIGEA makes it illegal for someone to accept bets or wagers in “unlawful internet gambling.” Looking at the term “bet or wager”, as codified by the statute[4], there is also requirement of the element of chance for it to be an illegal bet or wager.

A huge point of contention is whether poker is a game of chance or skill. Obviously, poker players consider it a game of skill, which would not make it illegal under the UIGEA. In 1986, a U.S. District Court dealt with issues related to poker and how it should be classified[5]. Baxter v. United States dealt with a federal tax provision and whether gambling earnings is earned income or unearned income. The individual in this case was a poker player who had played since he was 14 years old[6]. The judge who heard the Baxter case said “”I find the government’s argument to be ludicrous. I just wish you had some money and could sit down with Mr. Baxter and play some poker.”[7] To Baxter the difference was over $100k in taxes. Today’s implication of gambling earnings being considered earned income versus unearned would suggest it is derived using some sort of skill. In reaching it’s conclusion the court reasoned “The money[used in poker], once bet, would have produced no income without the application of Baxter’s skills. As discussed previously, it was Baxter’s extraordinary poker skills which generated his substantial gaming income, not the intrinsic value of the money he bet.”[8] Although Baxter was able to persuade the court his gambling winnings were a result of his skill, there hasn’t been a clear ruling on current gambling statutes to make this point definitive. Proponents of online poker advocate Baxter makes poker a game of skill, therefore not falling under the control of the UIGEA.

At the state level, Pennsylvania has faced the issue of whether poker should be considered a game of skill or luck. In 2010 the Superior Court of Pennsylvania was faced with the same issue poker players face today with the UIGEA. If it were considered a game of skill it would not be illegal, but if it were a game of chance it would fall into the codified definition of illegal gambling. In Commonwealth v. Dent (2010)[9], two defendants faced twenty counts of unlawful gambling after an undercover officer had played poker hosted by the defendants. Under Pennsylvania law three requisite elements to the crime were consideration, chance, and reward. Consideration and reward were not argued but chance was the pivotal point similar to the UIGEA.  Ultimately, the court held poker IS gambling because it is predominantly a game of chance and this was not expressly authorized under Pennsylvania law[10]. In reaching it’s decision the court said

“During oral argument, counsel for plaintiff analogized poker to golf, arguing that while a weekend golfer might, by luck, beat a professional golfer such as Tiger Woods on one hole, over the span of 18 holes, Woods’ superior skill would prevail. The same would be true for a poker game, plaintiff contended, making poker, like golf, a game of skill. This analogy, while creative, is false. In golf, as in bowling or billiards, the players are presented with an equal challenge, with each determining his fortune by his own skill. Although chance inevitably intervenes, it is not inherent in the game and does not overcome skill, and the player maintains the opportunity to defeat chance with superior skill. Whereas in poker, a skilled player may give himself a statistical advantage but is always subject to defeat at the turn of a card, an instrumentality beyond his control. We think that is a critical difference.”[11]

Considering federal and state history on the issue of gambling being skill or luck, we now visit the crack down of online poker by the United States. In 2009, the DoJ ordered four banks to freeze over 34 million dollars in payments owed to about 27,000 poker players[12]. In the first amended complaint by the U.S. against Pokerstars, Full Tilt, and others, the DoJ has charged a myriad of defendants under the UIGEA[13]. This has completely changed the face of online poker and severely limited access by former poker players. There has been a lot of negotiation outside of court and agreements to pay large amounts of money by these companies. It would be interesting for this case to make it up the appellate avenue to determine once and for all whether poker should be considered a game of skill or chance.

Considering Baxter and Dent, which approach is more persuasive? Should online poker be illegal? Is the legislative finding stating “internet gambling is a growing cause of debt collection problems for insured depository institutions and the consumer credit industry” a persuasive argument for outlawing gambling online considering someone can simply drive to a casino?

 


[1] 31 U.S.C. 5363

[2] 31 U.S.C. 5362

[3] Id., at (1)(E)(ix)

[4] Id., at (1)(A)

[5] Baxter v. United States, 633 F. Supp. 912 (D. Nev. 1986)

[6] Id., at 913

[8] Baxter, at 919

[9] Com. v. Dent, 992 A.2d 190 (Pa. Super. Ct. 2010) appeal denied, 296 MAL 2010, 2011 WL 1022803 (Pa. Mar. 23, 2011) and appeal denied, 297 MAL 2010, 2011 WL 1023264 (Pa. Mar. 23, 2011)

[10] Id., at 196.

[11] Id.

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~ by davidghassan on November 22, 2011.

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