#153 © Copyright 2009, all rights reserved worldwide. Gambling and the Law® is a registered trademark of Professor I Nelson Rose, www.GamblingAndTheLaw.com

Where you find the laws most numerous, there you will find also the greatest injustice.

Arcesilaus

The new year has started with dramatic and sometimes unexpected changes in the law.

Of course there was that small matter of a new Congress and President.

But the first few weeks of 2009 have shown how important the American court system remains in preventing injustice. For some poker operators and all Internet gaming sites, this has meant courts bringing 19th century state anti-gambling laws into line with 21st century thinking.

Changes in the law trail changes in society. The law is normally reactive, not proactive: Legislators don’t normally sit around debating solutions to problems that have not yet happened. All federal and many state courts are not even allowed to make advisory opinions. If there is not a real “case or controversy” between parties that have actual interests at stake, the court is required to dismiss the lawsuit.

The laws surrounding gambling are especially slow to change. When Victorian morality swept the country more than a century ago, states put prohibitions on gambling into both statutes and constitutions, and constitutions are designed to be difficult to change. The prohibitions were broad enough that prosecutors usually could find some criminal statute to use to go after an illegal gaming operation.

But society’s views of gaming have changed. In 1961, when the federal Wire Act was passed, the only state with casinos was Nevada, and the only state with a state lottery was… well, there weren’t any.

And then there is technology. The Wire Act was designed to cut “the wire,” that is, the telegraph wire that illegal bookmakers used to get horse racing results before their patrons.

Modern federal prosecutors have to be forgiven for being so grouchy. Imagine trying to close down Internet poker rooms, and finding your major weapon is a statute a half-century old. designed to go after telegraphs.

State officials usually have the same problem — no modern statute that clearly reaches the Internet — along with the additional difficulty that state laws normally do not reach beyond their borders.

Which is why the governor of Kentucky decided to use a law designed to destroy illegal gaming devices when he asked a court to seize 141 gaming web site names. The Kentucky Legislature has not enacted any specific statutes aimed at online gaming. So, Gov. Steve Beshear (D) had few legal weapons at his disposal.

The weakness of the case can be seen from the refusal of the state Attorney General to prosecute the suit. Gov. Beshear had to hire a private law firm, on a contingency fee basis, to go after the foreign Internet gaming operators.

In September 2008, Gov. Beshear succeeded in convincing Judge Thomas Wingate that the domain names were “gambling devices.” The case drew international attention when this Franklin County Circuit Court decided that it had the power to reach into countries on the other side of the globe, because the web name was “property” that somehow could be found in Kentucky.

I predicted that the trial court would be reversed, in part because this was such a dangerous precedent. If a county judge here could seize foreign domain names, what would prevent an Islamic court in Iran from deciding that every American website was immoral and therefore illegal? But I felt the Kentucky courts of appeal would avoid the difficult issues involving the Internet and take the easy way out: a web name is simply not a slot machine.

On January 22, 2009, the Kentucky Court of Appeals agreed with me, in a 2-1 decision:

“It stretches credulity to conclude that a series of numbers, or Internet address, can be said to constitute a ‘machine or any mechanical or other device . . . designed and manufactured primarily for use in connection with gambling,'” Judge Michelle Keller wrote in the majority opinion.

The case is not yet over. Gov. Beshear appears ready to take an appeal to the Kentucky Supreme Court. But I think the Commonwealth’s highest court is not going to allow a statute clearly designed for physical items like slot machines to be stretched to cover intangible concepts like Internet addresses.

Two other cases were decided in January which also can be seen as preventing state governments from overreaching. In both, criminal prosecutions for running poker games were defeated — by defendants who showed that poker is a game of skill and therefore not gambling.

The cleaner case, in terms of legal precedent, is the written decision issued January 14 by Pennsylvania’s Columbia County Judge Thomas A. James, Jr. He dismissed 20 counts of violating Pennsylvania’s anti-gambling statutes that had been filed against Walter “Buzz” Watkins and Diane A. Dent. Watkins had rented a garage and had Dent deal Texas Hold ’em, without a rake or drop, just tips expected for the dealer.

Watkin’s attorneys filed a writ of habeas corpus, which, in this criminal case, was treated the same as a motion for summary judgment would be in a civil case. Judge James let both sides present all their evidence and arguments. Significantly, he let Watkins introduce books, articles and studies on the skill elements involved with poker. These included articles from the Gaming Law Review and Economics, for which I am co-editor-in-chief, as well as a statistical study of online poker published by academics in Sweden. He concluded, along with every other authority who has studied poker, “in the long run, good players will win money and bad players will lose money.”

This case also is not over. In fact, because it was only an unpublished opinion from a state trial court, it cannot be cited as formal precedent. But it still is a breakthrough: A judge looked at scientific studies and modern thinking and concluded that Texas Hold ’em is predominantly a game of skill.

Before the end of the month a third court issued a similar ruling in Colorado. The decision is even weaker as a precedent, because there was no written opinion. Rather, a jury simply found the organizers and dealers of a poker tournament in a bar not guilty of the crime of professional gambling. But the case was fought solely on the ground that poker was a game of skill, and, again, evidence was introduced by experts, including testimony from Robert Hannum, Professor of Statistics at the University of Denver.

As this is being written, other cases are getting ready for trial. The most important will probably be the case arising from a raid on a private home in South Carolina nearly three years ago. The poker players were charged under an anti-gambling law dating from 1802, long before poker was even invented.

As with the other cases, the defendants are organized and are getting professional help with the legal and gaming issues. If done right, they will win. And South Carolina will soon be the fourth state in only a few weeks to recognize that ancient anti-gambling laws do not really work today.

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© Copyright 2009. Professor I Nelson Rose is recognized as one of the world’s leading authorities on gambling law and is a consultant and expert witness for governments and industry. His latest books, Internet Gaming Law and Gaming Law: Cases and Materials, are available through his website, www.GamblingAndTheLaw.com.