#159 © Copyright 2003, all rights reserved worldwide Gambling and the Law® is a registered trademark of Professor I Nelson Rose, Whittier Law School, Costa Mesa, CA

The biggest event in the world of Internet poker took place not online, but in a casino in downtown Las Vegas.

As most poker players already know, on May 23, 2003, Chris Moneymaker won the World Series of Poker, and its $2.5 million top prize, at Binion’s Horseshoe Hotel & Casino. You could not write a script like this. Well, you could, but no one would believe it.

Start with the winner’s name. It really is Chris Moneymaker. To get the money to travel from his home in Tennessee, he sold a 20% stake to his father for $2,000. But in the movies heroes need not just a loving dad, but also a buddy. Let’s see… Moneymaker… I know, have him sell a second 20% share to his friend, named… David Gamble.

So Moneymaker senior and Mr. Gamble get $500,000 each. That leaves $1.5 million for Chris. Sounds good. But now let’s make this totally fantastic.

It costs $10,000 to enter the WSOP. Some players pay cash. But let’s have Chris put up only $40 and win his entry fee through satellite tournaments.

The final kicker is Chris never before played in a live poker tournament, where you can see the other players’ faces. Chris, like dozens of others at the WSOP, won his entry fee through poker games played entirely online.

This naturally raises the question of whether Chris was breaking the law. I get more email asking me whether it is legal to bet online than on any other subject.

The answer is, it depends.

It depends mostly on where you live. It depends also on how the game is being run. And, in the real world, it depends on whether anyone is going to do anything about it.

Federal law is clear. The federal government’s interest in gambling is pretty much limited to organized crime. Federal statutes are written with phrases like, “Whoever being engaged in the business of betting or wagering… “or “Whoever conducts, finances, manages, supervises, directs, or owns all or part of an illegal gambling business… ”

A regular player cannot get into trouble with the federal government even if the gambling operation is blatantly illegal, unless he does something to help the business. Prosecutors have charged players with being part of the gambling business when they helped operators collect debts from other players. But the very few times the federal Department of Justice has gone after regular players, judges have thrown the cases out.

What about state laws? Here the question is more difficult, because many states long ago passed anti-gambling laws, which are still on the books. There was a time when state governments wanted to protect not only the health, safety and welfare of their citizens, but their souls as well.

All states make it a crime to conduct some forms of unauthorized gambling. But about half the states also make it a crime to make a bet under some circumstances, even though nobody is ever charged any more.

There are obvious exceptions to the anti-gambling laws. It would not make sense for a state to run a State Lottery and make it a misdemeanor to buy a ticket.

Many states also make excepts for social gambling. For example, the Oregon Legislature passed a statute expressly exempting players in social games, like poker, from the prohibition on gambling, as long as the players do not help set up the game and the only money they make is from winning. But a player at a commercial poker website is not so clearly protected.

The only way to know for sure is to check the laws of your state. I do not know of any state which has passed a law stating that players can play poker online. The best you can hope to find is that the state simply has never made this form of gambling illegal.

California, for example, makes it a crime to play 11 named games, including “21,” and any “banking or percentage game.” (Calif. Penal Code §330). In the rest of the world, a “percentage game” means the house participates and has a percentage advantage. Due to bad case law, in California the term means a game, including a poker game, where the operator takes a percentage of the amounts bet or won, even even if the operator does not play a hand. So, participating in a poker game where the house rakes the pot is a crime in California. The situation gets even more complicated, because the California Legislature, by statute, allows licensed card clubs to take up to three levels from a pot, four if the house takes nothing if the pot is too small. (Calif. Penal Code §337j). For example, an operator can take nothing for a pot less than $10, $1 from a pot with more than $10 and less than $20, $2 from a pot between $20 and $30, and $3 from a pot over $30. This is defined as not being a percentage game.

The California Penal Code also makes it a misdemeanor to make sports bets. (Calif. Penal Code §337a). But other wagers are not forbidden. It is not a crime to buy a lottery ticket, even in an illegal numbers game.

So, at least in California, it seems it is not a crime to play poker online for money, if the game is not a percentage game.

This does not mean it is necessarily legal to run such a game and take bets from California. Penal Code section 337j states that it is illegal “To deal, operate, carry on, conduct, maintain, or expose for play in this state any controlled game,” which specifically includes poker.

Of course, this opens the question of whether an Internet operator is dealing a game in California if the operator and maybe other players are no in that state. But that is a topic for another column.

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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