US Igaming Update: Two Noteworthy Developments Federal Regulatory Scheme to Was Found Guilty on All Three Progress Towards the Regulation of Regulate Online Poker
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US US iGaming update: two noteworthy developments federal regulatory scheme to was found guilty on all three Progress towards the regulation of regulate online poker. Nevertheless, counts in his indictment, and online gaming in the US may be many large gaming companies are immediately sought to overturn slow, but two developments - the not waiting for the federal the verdict. opinion of the Office of Legal government to act and have begun In his motion for a judgment of Counsel on the scope of the Wire seeking state licences to offer acquittal, Dicristina argued that online poker within such states. poker was not 'gambling' under Act and a ruling in a New York the IGBA, which defines 'gambling' District Court on the status of poker The OLC opinion as 'includ[ing] but . not limited as a game of skill - have caught the Prior to September 2011, the to pool-selling, bookmaking, attention of those hoping for a Criminal Division of the US maintaining slot machines, roulette Department of Justice had wheels or dice tables, and change in the regulatory landscape. historically taken the position that conducting lotteries, policy, bolita Scott Greenberg and Michael J. the Wire Act 3 is not limited to or numbers games, or selling Cohen of Cadwalader, Wickersham sports-related wagering and can be chances therein.' 4 Dicristina argued & Taft LLP, discuss the applied to other forms of gambling that gambling under the IGBA was developments. involving interstate information or limited to the games explicitly funds transfer in order to regulate listed in the statute or substantially While investors, operators and online gambling. In September similar games, and attempted to technology providers eagerly await 2011, the OLC issued an opinion differentiate poker as 'a game of opportunities that are beginning to concluding that 'interstate skill rather than chance and thus appear on an intrastate basis in transmissions of wire outside the purview of the statute.' jurisdictions such as Nevada, a communications that do not relate The US government argued in holistic interstate legal solution for to a sporting event or contest' fall response that any form of internet poker has yet to emerge outside the reach of the Wire Act. gambling illegal under state law Stateside, though two Addressing proposals by the New could be prosecuted under the developments have sparked York and Illinois state lottery IGBA. interest: the memorandum opinion systems that would allow the in- Judge Weinstein agreed with issued by the US Department of state purchase of lottery tickets Dicristina and held that poker did Justice Office of Legal Counsel online, the OLC concluded that the not fall within the IGBA's (OLC) in 2011 1 and a judicial inclusion of the term 'any sporting definition of gambling. Judge opinion in US v. Dicristina 2 by event or contest' in the Wire Act Weinstein's conclusion was Judge Jack B. Weinstein of the US modified all of the Wire Act's premised on his finding that District Court for the Eastern prohibitions on bets and wagers. neither the text of the IGBA nor its District of New York. Because the states' proposals were legislative history clearly indicated Both opinions are rooted in unrelated to sporting events or that Congress intended for the principles of statutory contests, the OLC determined that IGBA to cover poker. Because the interpretation and construction states could permit such lottery court found that both Dicristina's and address specific federal purchases without violating the and the government's statutes. Nevertheless, the opinions Wire Act. interpretations were plausible, it reveal a willingness to depart from invoked the 'rule of lenity' to conventional wisdom surrounding US v. Dicristina resolve the statute's ambiguity in the legality of online gaming in the In December 2011 federal favour of the defendant. US and give hope to those waiting prosecutors in New York charged Judge Weinstein held that to to seize this business opportunity. Lawrence Dicristina with operating constitute an illegal gambling Given the uncertainty regarding an illegal gambling business in business under the IGBA, a federal regulation of online violation of the IGBA. His business business must either operate one of gaming, it is unsurprising that the consisted of two poker tables in a the nine types of games specifically President of the American Gaming warehouse, where poker games listed in the statute or 'a game that Association stated that ‘it's no were held twice a week. Dicristina is predominately a game of longer a matter of if online collected a five-percent 'rake' of the chance.' In finding that poker was gambling will be legalised in the amount bet on each hand, and predominately a game of skill, US, but when, where and how’ and employed dealers and waitresses. Judge Weinstein relied heavily on has called for the passage of a new Following a jury trial, Dicristina 'persuasive evidence' presented by World Online Gambling Law Report - October 2012 05 US Dicristina's expert witness, Recent interpreting the IGBA would states have begun considering including the following speculation render poker outside of UIGEA's legislation to legalise various forms considerations: (1) [P]oker has focused definition of 'bet' or 'wager.' of internet gambling, and Nevada involves a large number of on potential Although the OLC opinion and has already enacted legislation legislation complex decisions, which allow that would Dicristina reached their governing internet poker, granting players of varying skill to reverse the conclusions by interpreting specific its first online gaming operator differentiate themselves; (2) Many impact of the federal statutes, taken together the license in August. Additionally, people play poker for a living and OLC opinion results appear to form a trend that over 30 industry participants have consistently win money over time; and amend is slowly eroding the once powerful applied to the Nevada Gaming the Wire Act (3) Players who obtain superior to prohibit all tools used by federal regulators and Control Board to obtain the results with other starting hands forms of prosecutors to regulate and prevent necessary online gaming licences. tend to obtain superior results with internet internet gaming. Faced with this any given hand, indicating that the gambling uncertain landscape, industry Conclusion with a carve- players' abilities, not the cards, are out for horse participants appear to be divided While the OLC opinion and responsible for the results; and (4) racing, poker over the future of internet gaming Dicristina are focused on specific The published studies are all and state regulation. In recent reports, the federal anti-gaming statutes, their consistent with [these] lotteries. CEO of a gaming technology effects are already being felt. conclusions. provider stated that the economics Market participants and observers On 15 September 2012, the of state-by-state regulation may be agree that a new regulatory scheme government appealed Judge challenging, while the CEO of a for online poker is inevitable, but it Weinstein's decision to the US casino operator indicated that is still unclear whether the new Court of Appeals for the Second future regulations should be left to scheme will be primarily a creature Circuit. The government's brief is the states. The American Gaming of federal or state regulation or a due on 20 December and it is Association has stated that it combination of both. In the expected the court will set oral supports the rights of states to interim, many states appear to be argument in the first quarter of license and regulate online poker, extending their embrace of land- 2013. but believes the US government based gaming to the online area, should provide minimum offering licensing opportunities to Impact on online poker standards for consumer protection, technology providers and gaming The direct impact of Dicristina preventing underage gambling and companies, which are ready to appears to be somewhat limited. As promoting responsible gambling. launch poker sites. We are on the Judge Weinstein noted in the Recent speculation has focused precipice of change in the online opinion, his analysis did not affect on potential legislation that would gaming space here in the US, but whether poker constitutes reverse the impact of the OLC without clear and consistent gambling under New York state opinion and amend the Wire Act regulatory and legislative guidance, law, which separately regulates to prohibit all forms of internet most investors, operators, and gaming activities. Additionally, the gambling with a carve-out for technology providers will take a federal Unlawful Internet horse racing, poker and state slow and cautious approach. Gambling Enforcement Act of lotteries. The poker carve-out 2006 (UIGEA), which has a scope would allow states to voluntarily Scott Greenberg Attorney Michael J. Cohen Associate distinct from IGBA and currently opt into the new regulatory regime, Cadwalader, Wickersham & Taft LLP prohibits online interstate and would establish the regulatory [email protected] gambling in the US, defines 'bet' or framework and fee structure for [email protected] 'wager' as 'the staking or risking by obtaining online poker licences. 1. Whether proposals by Illinois and New York any person of something of value Additionally, credit card providers to use the internet and out-of-State upon the outcome of a contest of would only be allowed to process Transaction Processors to sell lottery tickets to others, a sporting event, or a game payments from licensed entities. in-State adults violate the Wire Act (Sept. 20, subject to chance.' 5 Additionally, However, the majority of analysts 2011), http://www.justice.gov/olc/2011/state- lotteries-opinion.pdf. UIGEA does not include the list of do not anticipate passage of federal 2. No. 11-cr-414 (JBW), slip op. (Aug. 21, nine games included in IGBA.