By Wendeen H. Eolis
Since the United States Department of Justice’s (DOJ), announcement revising its position on the 1961 Wire Act, by exempting online poker from federal prosecution thereunder, the gaming industry nationwide has begun to see online poker and other online casino games as the coming of a new cash cow in America.
But, maybe not soon enough, argue some Wall Street analysts that have recently reviewed the financial outlook for Caesars Entertainment Corporation, owner of the fabled World Series of Poker.
Across the country, casino operators, state politicians seeking a remedy to address financial crises within their state budgets, as well as sympathizers to civil libertarian poker players are adding up the potential dollars to be found through licensed and regulated intrastate online poker--frustrated by the delays in reaching the finish line.
Political campaign planks, competing federal and state interests, and variable positions from state to state and within some states are doing as much to bog down progress in legalizing online poker in America as the revised interpretation of the Wire Act seems to do for promoting it.
Additionally, tribal nations regulated under the Indian Gaming Act and local politics across the country contribute to the complexities of legalizing online poker seamlessly throughout the United States.
The political scene in Washington is in enough disarray to seriously imperil current efforts to pass federal legislation favorable to poker. A federal legislative bill to license, regulate and tax online poker seems to be languishing in the joined hip pockets of Senator Harry Reid (D-Nevada) and John Kyl (R-AZ), while US Rep. Joe Barton’s pro-poker bill is thus far eluding full scale support of its own.
So, it is no wonder that a few individual states are raising the stakes in a bid to outplay Congress and recalcitrant bureaucrats elsewhere and pick up massive tax dollars with intrastate online betting legislation.
Moving legislation to legitimatize gambling anywhere in the United States has never been a walk in the park. But the process of doing so at the federal level since the Unlawful Internet Gambling Enforcement Act of 2006 has been impossible to date.
Even the states that have their ducks in a row to push forward online gaming legislation, are facing tedious and thorny issues created by competing interests, economic differences, and variable political agendas within their states.
Suffice to say, during the past several years, the poker world has been reminded repeatedly of novelist Jean-Baptiste Alfonse Karr’s famously translated words, “The more things change, the more they remain the same”—despite yearly reprises of legislative efforts and court cases pleading to treat poker as a game of skill, and therefore exempt from statutes that prosecute illegal gambling--until a recent ruling in the Eastern District Court of New York.
This past August, Federal Judge Jack Weinstein ruled in favor of a Staten Island, New York poker game runner, declaring poker as a game of skill, and therefore not gambling under a federal statute known as the Illegal Gambling Business Act—which was the basis of prosecution.
The judge ruled that poker is a game predominated by skill over chance. His reasoning resonated with every professional poker player worth his salt, as well as poker-related businesses across the country, not to mention the defendant in the criminal case US v DiCristina. Lawrence DiCristina’s New York City-based poker game led to the federal charges alleging violation of the Illegal Gambling Business Act.
The DiCristina case, heard by Judge Weinstein, yielded a decision that not only exonerated him, but may also raise the stakes on future prosecutions of poker as a conventional gambling game. How much so, is a matter of increasing debate, especially in the State of New York.
To reach his decision, Weinstein relied significantly upon the research and pre-trial testimony provided by the defendant’s expert witness, Randall D. Heeb, an economist, statistician, and competitive poker player. Ultimately, Weinstein was persuaded that skill distinguishes the boys from the men (and the girls from the women) in this complicated game of people that is played with cards, math, and judgment calls.
Backed by his extensive research, Mr. Heeb asserts that net winners comprise only 10 to 20 percent of the no limit poker-playing population, noting that this conclusion can be definitively established over just a few sessions. Lesser skilled players lose!
In Weinstein’s one hundred twenty page opinion giving the heave-ho to the prosecutors of the DiCristina case, he referenced the significance of Heeb‘s research, which stemmed from the review of more than 415 million hands of poker played at the online poker site, PokerStars. The Court concluded Heeb’s research was reliable, and also noted Heeb’s acknowledgement of several other research studies as compatible with his independent position. (See my PPN article “Who says poker is a Game of Skill?” Feb 28, 2012 for a listing of other significant research that reached the same conclusion as Heeb's most thorough examination).
Following the Weinstein decision, lawyers for Howard Lederer, a former director of Full Tilt Poker, raised with the Court the impact of the Weinstein decision on Lederer’s ongoing Black Friday-based civil forfeiture case which is pending before another Federal District Court Judge--Leonard B. Sand.
No sooner than the matter was brought to the attention of Judge Sand, the DOJ responded to the Court by rejecting the Lederer request for a status conference on his case, insisting that Judge Sand is not bound by the Weinstein ruling on the Illegal Gambling Business Act. Lederer’s fellow directors, as of April 15th, followed Lederer's lead with the same request.
More ominous than the Government’s rejection of Lederer’s position was the immediate warning issued by US Attorney for the Southern District of New York, Preet Bharara, that the Government intended to file a second amended complaint by Sept 10 to include additional statutory grounds for forfeiture and other relief. The US Attorney made good on his word with a second amended complaint Monday, that revealed more about Lederer's alleged use of misguided funds to underwrite his taste for cars and other luxuries.
Nowhere in the United States are the complexities of gambling more visible than in the great Empire State of New York. The Department of Justice found its way into New York to prosecute online poker in America because New York was and is a uniquely hospitable state to make the challenge, according to gaming lawyers across the board.
The promotion of gambling is prohibited under N.Y. Penal Law Section 225.00, as noted in the Weinstein decision. As further discussed in the decision, poker is classified as gambling as a matter of law in New York State, without regard to whether or not it is a game predominated by skill. The litmus test in this state that defines poker as gambling is based upon its classification as a game in which chance is a material element according to several gaming lawyers who note that this factor was not raised in the DiCristina case.
Following the Weinstein decision, celebrations were the order of the day across the country and perhaps most hopefully among poker game runners and aspiring poker club operators especially in New York.
But, Bill Gantz, a senior partner in the gaming space at the national law firm of SNR Denton, has put a pin in the swelling balloon of enthusiasm. A strong proponent of legalized gaming, and a supporter of the legal position that poker is a game of skill, Gantz nevertheless makes clear that, in his opinion, the Weinstein decision “is not a game changer” at this time, with respect to government’s enforcement activities.
“Underground poker venues in New York remain in great peril of prosecution, no matter how low key,” says another defense lawyer who has handled sports betting and poker gambling cases for decades around the city. He predicts that a new proliferation of poker clubs in New York City would result in a backlash; another spate of poker raids in New York, like those in 2000, and again a few short years later by the same City law enforcement agencies that have previously prosecuted underground poker clubs. By 2006, after the passage of UIGEA, New York poker aficionados, for the most part, resigned themselves to a two hour drive up or down the coast to licensed casinos for their poker fix.
Since the 70’s New York State has flirted seriously with efforts to legalize gambling by state legislation that would allow for licensed, taxed, and regulated casinos—at least in economically depressed areas of the state. New York City real estate and hotel interests have generally opposed such proposals, and once outside of New York City, the state has traditionally distinguished itself as one of the most parochial states in the country with regard to its citizens’ views on gambling.
In recent months, New York Governor Andrew Cuomo has sent multiple signals pressing for renewed consideration citing the prospect of substantial job opportunities as well as tax revenues among the economic benefits. Legislation to allow regulated gambling and that would include modernizing the notion of poker as a game of skill appears to be on the horizon here, say my legislator friends and government officials in Albany—only off the record.
Hold the champagne for now!
Author’s note: Gaming lawyers from seven AmLAw 200 firms, as well as two recognized individual practitioners in the gaming space contributed significant time to discuss the matters in this article.
Editor’s Note: Wendeen H. Eolis is CEO of the legal consultancy, Eolis International Group. She formerly served as a senior advisor to Mayor Giuliani; then to NY Gov. Pataki; her portfolio has included gaming legislative efforts, internationally and commercial and tribal gaming issues for the executive chamber in New York. She was the first woman to cash in the main event of the WSOP (1986) and has six more WSOP cashes. This article, and related research is property of the author, and may be used in her other writings. She can be reached at email@example.com and at the website www.eolis.com you can also find her on Facebook, Twitter and LinkedIn.