Update: Eastern District of New York Judge Finds Poker to be Game of Skill Not Chance Under Illegal Gambling Business Act

Sep 04, 2012   

On August 21, 2012, Judge Jack Weinstein of the United States District Court for the Eastern District of New York dismissed the indictment against Lawrence Dicristina under 18 U.S.C. § 1955, the Illegal Gambling Business Act (“IGBA”) for Mr. Dicristina’s operation of a poker room. Judge Weinstein found that poker does not fall under the definition of gambling, as that term is defined under IGBA because poker is a game of skill as opposed to chance. In so holding, the Court’s opinion may mark a sea change in the ability of federal prosecutors to prosecute online pay-for-play poker operators and the payment processors who transmit funds between those sites and their customers. A copy of the Court’s opinion can be read here. 

As we have previously reported here, here and here, ongoing federal prosecutions have targeted internet pay-for-play poker operators and their payment processors for violations of federal law under IGBA, the Unlawful Internet Gambling Enforcement Act of 2006 “UIGEA” 31 U.S.C. §§ 5361-5366 and various other violations of federal law including wire fraud and money laundering. Under IGBA, it is a felony for anyone to conduct, finance, manage, supervise, direct, or own a gambling business which is prohibited by the State in which the business is operating. IGBA defines “gambling” as: “includ[ing] but is 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.”

The heart of Dicristina’s argument turned on the basic premise that merely because something is defined as “gambling” at the state level does not automatically make it “gambling” for purposes of federal prosecution under IGBA. In his Motion to Dismiss, Dicristina argued that IGBA was not designed to regulated poker because: 1) a business must involve games sufficiently similar to the games enumerated in the federal definition in order to be prosecuted as a “gambling business” under the IGBA; and 2) a game run by a “gambling business” must be both: a) house-banked, and b) predominated by chance. In its opposition, the Government argued that the statute’s plain language does not restrict what kinds of games constitute gambling under IGBA. The Government further argued that when the statute’s broad language is read in the context of its purposes of bolstering state efforts at reducing organized criminal gambling activity, any gambling activity that is illegal under state law should be considered gambling under IGBA.

In its decision, the Court noted that, based on the text and legislative history of IGBA, both Dicristina’s argument, that “gambling” under IGBA is restricted to those games predominated by chance, and that of the government’s, that “gambling” under IGBA is co-extensive with how gambling is defined in the state in which the business operates, were plausible. Therefore, the Court found that the rule of lenity placed the burden on the government to prove that its position was the correct interpretation of IGBA. As explained by the United States Supreme Court in United States v. Santos, when interpreting ambiguous criminal statutes, “[t]he rule of lenity requires ambiguous criminal laws to be interpreted in favor of the defendants subjected to them. This venerable rule not only vindicates the fundamental principle that no citizen should be held accountable for a violation of a statute whose commands are uncertain, or subjected to punishment that is not clearly prescribed. It also places the weight of inertia upon the party that can best induce Congress to speak more clearly and keeps courts from making criminal law in Congress’s stead.”

In evaluating skill versus chance, the Court stated that “chance (as compared to skill) has traditionally been thought to be a defining element of gambling and is included in dictionary, common law, and other federal statutory definitions of it.” The Court found that the fundamental question in determining whether poker was a game of chance or skill “is not whether some chance or skill is involved in poker, but what element predominates.” (emphasis in original). In finding that skill, not chance, predominates poker, the Court noted that poker involved more than the luck of the draw. Instead “expert poker players draw on an array of talents, including facility with numbers, knowledge of human psychology, and powers of observation and deception.” Thus, the Court found that the Government failed to show that it is more likely than not that chance predominates over skill in poker and therefore poker is not considered “gambling” under IGBA.

While this decision may have removed an arrow from the quiver of federal prosecutors in their efforts to prohibit pay-for-play poker, the Court expressly noted that prosecution at the federal level for organized criminal poker operations could still be prosecuted under other federal statutes, such as RICO, and states were free to prohibit poker site operations within their own jurisdictions.

Fuerst Ittleman will continue to monitor these developments. If you have questions pertaining to IGBA, UIGEA, the BSA, anti-money laundering compliance, and how to ensure that your business maintains regulatory compliance at both the state and federal levels, or for information about Fuerst Ittleman’s experience litigating white collar criminal cases, please contact us at contact@fidjlaw.com.