Online Poker Update

In my column about last week's onlike poker indictment, I noted that the underlying New York state offense cited by U.S. Attorney Preet Bharara involves "a contest of chance," a label that arguably does not apply to poker. A Las Vegas gaming attorney who blogs as CKBWoP explains that New York defines "a contest of chance" as "any contest, game, gaming scheme or gaming device in which the outcome depends in a material degree upon an element of chance, notwithstanding that skill of the contestants may also be a factor therein." CKBWoP adds that a 1995 decision by the Criminal Court of New York identified poker as "a contest of chance":

Games of chance range from those that require no skill, such as a lottery, to those such as poker or blackjack which require considerable skill in calculating the probability of drawing particular cards. Nonetheless, the latter are as much games of chance as the former, since the outcome depends to a material degree upon the random distribution of cards. The skill of the player may increase the odds in the player's favor, but cannot determine the outcome regardless of the degree of skill employed. 

What about backgammon, where the outcome depends to a material degree on random rolls of the dice? Or Scrabble, where the outcome depends to a material degree on random draws of tiles? Or, for that matter, bridge, where…well, I don't know much about bridge, but I gather that it involves dealing cards out of a deck, so surely chance plays an important role in the outcome. It's hard to see why these are not considered games of chance but poker is.

I also mentioned in my column that the bank fraud charges against PokerStars, Full Tilt Poker, and Absolute Poker seemed dubious since these companies did not trick anyone out of their money. Instead they are accused of disguising their transactions so as not to alarm banks worried about potential liability under the Unlawful Internet Gambling Enforcement Act. Far from suffering any losses as a result of this alleged deception, the banks made millions of dollars in transaction fees. But that may not matter, argues an Iowa attorney who blogs as Grange95. He cites a 1994 case in which the U.S. Court of Appeals for the 7th Circuit held that telemarketers who camouflaged their transactions could be guilty of bank fraud even if the only thing of value they obtained was payment processing services at the usual rates. He says the parallels to the online poker case are "striking," although he also notes that the law may be read differently in the 2nd Circuit (which includes New York).

Meanwhile, gambling law expert I. Nelson Rose reports that "players in countries like England, where [online poker] is indisputably legal…found themselves unable to access their favorite sites" after the Justice Department seized the .com domain names associated with PokerStars et al. The government also "effectively froze the money deposited by hundreds of thousands of American players, who had done nothing wrong" since "there is no federal law against merely playing poker." New York's law likewise focuses on gambling promoters rather than players. On Wednesday, responding to dismay among American poker players anxious about their money, Bharara's office said (PDF) it had reached agreements that "allow for PokerStars and Full Tilt Poker to use the pokerstars.com and fulltiltpoker.com domain names to facilitate the withdrawal of U.S. players' funds held in account with the companies." PokerStars has more information here. The agreements with the U.S. Attorney's Office also "do not prohibit, and, in fact, expressly allow for, PokerStars and Full Tilt Poker to provide for, and facilitate, players outside of the United States to engage in playing online poker for real money."

Rose says "traffic on the seized sites seems to be down, but not precipitously." He speculates that "Americans must have quickly discovered that they can sign up to the same operators through .eu and .uk sites." Joseph Kelly, co-editor of Gaming Law Review and Economics, warns that "the long-range impact of this action may be to drive reputable poker operators out of the U.S. market."

[Thanks to Matt and Bob for the links.]