#102 © Copyright 2004, all rights reserved worldwide. Gambling and the Law® is a registered trademark of Professor I Nelson Rose, Whittier Law School, Costa Mesa, CA

The future of the gaming industry in New York state depends upon the competence, or more accurately the incompetence, of lawyers.

It is common for major questions involving the legalization of gambling to depend upon fine distinctions of law. Whether a state legislature has the power to authorize a state lottery to have gaming devices may be decided by the skill of the lawyers who draft the bill. They may succeed if the new law is seen as legalizing permitted Video Lottery Terminals (“VLTs”), but fail if the machines are described as forbidden slot machines.

What is unusual about the legal battle in New York is that the outcome depends not upon the competence of the lawyers who drafted the laws or compacts, nor upon the skill of the trial lawyers fighting to preserve racinos and tribal casinos. They have all done terrific jobs of legalizing gaming machines that are clearly prohibited by the State Constitution.

No, whether New York racetracks and Indian casinos will continue to have VLTs and slot machines depends upon the competence of lawyers who represent parties (the “anti’s”) who are opposed to all forms of gambling.

So far, they have done a terrible job.

Their latest failing can be found in a careful reading of the recent opinion written by Justice Thomas Mercure of the State Supreme Court’s Appellate Division in the case of Dalton v. Pataki.

Most of the media’s attention has been focused on the holding that the revenue raised by VLTs at race tracks cannot go to help the tracks’ breeding funds and purses. This has had an immediate impact on plans to open more racinos. No one is going to put up hundreds of millions of dollars if there is no way they can constitutionally make a profit.

But of far greater importance are the rulings that VLTs are permitted lotteries, and that tribes can operate Class III casinos.

The incorrect decision that the VLTs authorized by the State Legislature do not violate the detailed and specific language of the New York Constitution appears to be only partly the fault of the justices deciding this case.

When voters approved amending the Constitution in 1966 to authorize a State Lottery, they were thinking of paper tickets, not VLTs. Here is the actual language of the Constitution:

“except as hereinafter provided, no lottery or the sale of lottery tickets, pool-selling, bookmaking, or any other kind of gambling, except lotteries operated by the state and the sale of lottery tickets in connection therewith… and except pari-mutuel betting on horse races… shall hereafter be authorized or allowed within this state.”

The New York Constitution prohibits all gambling. It then makes exceptions, such as lotteries with tickets.

The state argued that “lottery” includes all games with consideration, chance and prize. The Court understood that this would legalize every form of gambling. So, it decided that lotteries were different, not only because they required tickets, but also because they required “multiple participation.”

Here, the lawyers for the “anti’s” missed an opportunity to educate the judges. One of the two games VLTs will offer is Keno. Keno does not require a ticket.

It also is a banking game, which never requires multiple participation.

These VLTs will also offer video versions of instant lottery tickets. The justices decided that a video screen is a ticket, basically because the legislature said so.

The State Constitution has another exception to the otherwise complete ban on gambling: it allows charities to run bingo and carnival wheels and other “games of chance,” broadly defined as:

“games in which prizes are awarded on the basis of a winning number or numbers, color or colors, or symbol or symbols determined by chance from among those previously selected or played, whether determined as the result of the spinning of a wheel, a drawing or otherwise by chance.”

The Court said Keno falls under this definition. That is true. But it has nothing to do with lotteries.

The “games of chance” law would clearly allow games like Roulette. What it does not permit are slot machines. And this is where the lawyers for the anti’s made their biggest mistake.

The Court was also asked to rule on whether the state permitted Class III games, so that tribes had to be given compacts. The federal Indian Gaming Regulatory Act (“IGRA”) requires a state to negotiate compacts with its tribes for Class III games permitted by state law.

Justice Mercure does make an unimportant, but revealing mistake at this point. He declares stud poker to be a Class III game. Since all poker games are Class II, his statement shows that he either does not completely understand IGRA, or does not gamble himself, or both. It is the obligation of the lawyers to educate their judges, which the anti’s did not do in this case.

More importantly, the anti’s’ lawyers asked the Court to decide the wrong question.

They tried to knock out every compact on the ground New York does not permit Class III gaming. Even a quick reading of the Constitution would show the state permits a State Lottery, parimutuel betting, and games like Roulette. So, of course, Justice Mercure ruled that, yes, the state allows Class III gaming.

What he was not asked to decide is whether the state permits slot machines.

Hidden in a footnote is an indication that the anti’s would not have won their war against all Class III gaming, but they would have won the major battle, eliminating slot machines, if they had only asked:

“Because plaintiffs do not challenge the constitutionality of any of the specific games contemplated by the Seneca Nation compact and none of the parties provides any analysis of how each game is played in their briefs before us, we do not address whether any particular game listed, as opposed to class III gaming in general, is a “game of chance” within the meaning of N.Y. Constitution.”

The problem for the anti’s is they don’t know anything about gaming law or gambling.

If they ever learn, racinos and tribal casinos in New York will be in big trouble.

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Professor I Nelson Rose is recognized as one of the world’s leading authorities on gambling law. His website is www.GamblingAndTheLaw.com