May 28, 2010

Recapping Oral Arguments In
Rousso v. State of Washington

Thursday morning, the Washington supreme court heard oral arguments in Rousso v. State of Washington, the legal challenge to Washington's ban on online gambling.  Interestingly, the man who brought the challenge, Lee Rousso, argued the appeal on his own behalf (he is also a Washington attorney).  Also, Rousso chose to split his argument time (each side gets 30 minutes total) with an attorney for the Poker Players Alliance (PPA), which had filed an amicus curiae brief. You can watch the entire argument, which clocks in at just over an hour:

Full length video of oral argument.

Below the jump I will discuss the arguments raised by the attorneys, the court's questions to the attorneys, and what I think it all means for the case's likely outcome. There will be several snippets of the argument embedded in the post below the jump, which I think were key moments in the argument. Be warned that the embedded videos seem to load slowly, apparently due to technical limitations at (Washington's state public TV network). You will need to give the videos a few minutes to load, and may need to refresh the page to get particular videos to reload.

Now that you've joined me for the full-length discussion, let's talk law. Neither side raised any significant new arguments not previously raised in the briefs they submitted to the court.  Overall, I thought Rousso presented a solid argument focusing primarily on the concept of protectionism—specifically, that the online gambling ban favored in-state brick-and-mortar casinos and card rooms over out-of-state or international internet gambling sites.  The difficult questions for Rousso focused on the idea of regulation if the state online gambling ban were struck down.  The court expressed concerns about who—if anyone—would regulate internet gambling.  In a key exchange with Chief Justice Barbara Madsen, Rousso makes the point that internet poker rooms are in fact already regulated, simply by foreign governments.  With a nice rhetorical flourish (the good kind that drives a point home to an audience), Rousso declared:

It's not the Wild, Wild West out there with respect to internet poker.

Rousso discusses the state's need to regulate
online gambling with the Chief Justice.

Following up on this point, Justice Richard Sanders seemed worried that Washington would be unable to protect its legitimate regulatory interests by merely trusting that internet gambling sites might or might not be subject to some variable degree of oversight in a foreign country.  However, the justice did indirectly express some skepticism about the state's claimed need to ban online gambling, phrasing the state's claim as a "prohibition of internet gambling for the benefit of all these people in this court room, whether they know it or not."  In any event, I thought Rousso's response to this concern was rhetorically brilliant.  First, he acknowledged the need for regulation of online gambling, essentially granting the state its premise that the public needs some degree of protection in the realm of internet gambling.  But Rousso then pivoted and suggested that such regulation of an interstate and international commercial enterprise is best left to Congress.  Here is the key part of Rousso's exchange with the court:
The issues you raise are legitimate ones. People have concerns about the integrity of internet poker. The people in the internet poker community have a strong interest in the integrity. But I think if ... we're dealing with corporations that are domiciled overseas, it's the job of Congress [to regulate online gambling].

Rousso throws Congress under the online gambling bus.

To my ear, this argument seems fairly straightforward and compelling.  If the court is worried that online gambling will be unregulated if they strike down Washington's statute, they can be assured that most online gambling at this point does have some degree of regulation, and if that regulation is insufficient, then Congress can step in and impose national regulatory standards.  I think this argument will be aided by an amicus curiae brief filed by four poker players (whose connection to the PPA is unknown to me) which detailed the online poker regulatory schemes of several foreign countries, as well as proposed regulations pending in Congress.  Frankly, I wish Rousso's briefs to the court would have focused more on this "Washington needs to step aside and let Congress regulate online poker" meme, as it feels (to me at least) more compelling than Rousso's dominant argument in his briefs that the Washington legislature was acting to unfairly protect brick-and-mortar card rooms from online competition.

Following Rousso's argument was Thomas Goldstein, an attorney from the well-respected national Akin Gump law firm, arguing for the PPA.  Goldstein was easily the attorney best-versed in the nuances of Dormant Commerce Clause analysis, and was also the attorney with the smoothest presentation style.  Nonetheless, I felt his performance ultimately was the weakest of the three attorneys, doing little to build on the solid foundation laid by Rousso, while in places actually undermining Rousso's argument.

Goldstein stumbled right out of the gate, by suggesting that the PPA's argument was "more modest" and less "robust" than the argument made by Rousso.  Where Rousso had argued a facial challenge to the internet gambling statute, arguing that the state had no right to regulate online gambling at all, the PPA's position was an as applied challenge, contending that the state could prohibit internet gambling if it could prove that it could not effectively regulate online gambling:
When Washington makes the decision to legalize, for example, regulated poker, it has to either prove that it can't regulate it over the internet, or it has to regulate it over the internet.  That is the discrimination.
Now, this is actually a fine Dormant Commerce Clause argument, but Goldstein, representing an amicus curiae, has no standing to advocate positions not raised by the parties themselves (this rule prevents special interest groups from looking for controversial appeals and then hijacking them for their own purposes under the guise of serving as a "friend of the court").  Two of the justices jumped on Goldstein almost immediately about this issue, and he correctly retreated, casting his comments as simply augmenting the argument made by Rousso.  However, in several spots, Goldstein indirectly returned to the idea of an "as applied" challenge by suggesting that the court needed to remand the case to the trial court for an actual trial or hearing on whether Washington could effectively regulate internet gambling.  The state's attorney, Jerry Ackerman, would note in his argument that neither party has ever contended that such a trial is necessary, which was a subtle jab at Goldstein's overreaching argument.

As his argument developed, Goldstein continued to hamstring Rousso, by declaring that the PPA's position is that Washington state has the power to regulate online gambling sites, even those based overseas.  In contrast to Rousso's position that internet gambling sites may be regulated in the United States only by Congress or not at all, the PPA contended that Washington could require out-of-state or overseas internet gambling sites to be licensed and regulated by the state.  Although this is probably an easier argument for the court to accept, it has a big hitch—if the court strikes down the internet gambling ban, there are no regulations in currently in place applicable to online gambling.  The result of such a decision might conceivably be the return of a "Wild Wild West" scenario, which the court will be reluctant to create.

Turning back to the Dormant Commerce Clause argument, Goldstein's main point was that, where the state has authorized one form of gambling in a brick-and-mortar context, then the state can't discriminate by banning exact same game being offered on the internet.   However, the chief justice specifically noted that Goldstein's argument implied that games beyond poker might be legalized in the online context under Goldstein's reasoning, and Goldstein confirmed that any game authorized by the state—for example, blackjack—would have to be authorized online.  As I noted in my prior analysis of the case, this implication that striking down the online gambling ban will have results far beyond poker and potentially legalize online versions of any casino game permitted by the state is a big hurdle for the court to jump.  Goldstein's use of blackjack as an example seems to be a misstep; he would have been much better off limiting his argument to poker.

Goldstein did finish on a strong note, however, by correctly pointing out that this case carries implications beyond the context of online gambling:
This case is about internet commerce, not about gaming.  The rule you articulate here will apply to everything the State wants to permit to happen inside its stores inside the State of Washington and forbid on the internet.  And that's a tremendously consequential point beyond the four corners of poker.
The court seemed to pick up on this point, and posed several tough questions to the state's attorney, Jerry Ackerman, during the early part of his argument.  Altogether, despite a rough start and a few missteps, the last part of Goldstein's argument really did seem to score some points with the court:
Goldstein discussing the big picture implications
of internet regulation with the court.

Because his argument time was undivided, Jerry Ackerman had a lot more time to make points with the court during his argument on behalf of the state.  In the case heard by the Washington supreme court immediately prior to the Rousso argument, Ackerman had given a masterful, polished, and persuasive argument that an online sports betting site was engaged in illegal bookmaking, even when the site gave bettors an option to "welch" on their bets against other players.  By contrast, Ackerman seemed less in command during the Rousso argument, though that is likely a function of receiving significantly more difficult questions from the bench.

Ackerman started his argument by pointing out that poker is gambling under Washington law.  He cited to a statute that indicates that any game where chance is a material element is gambling, even if the skill of the player can affect the outcome.  This explains why the PPA's patented "poker is a game of skill" argument was not advanced, at least not directly (though Rousso and the PPA made allusions to the point in their briefs and arguments).

Justice James Johnson then began a series of questions directed at the Dormant Commerce Clause issue.  Justice Johnson seemed inclined to agree that the internet gambling ban discriminated against out-of-state online gambling companies, and wanted to explore the state's justification for an outright ban on internet gambling instead of a legalization and regulation approach.  Justice Johnson noted that brick-and-mortar gambling has become common in Washington (a sentiment later echoed by Justice Gerry Alexander), and inquired as to why the ubiquitous nature of casino-based gambling in the state didn't undermine the state's claim that prohibition of poker was needed to prevent a number of social problems.  After citing a number of studies related to the purported detrimental impact of online gambling, Ackerman used a question from Chief Justice Barbara Madsen to pivot and remind the court that the statute at issue bars all online gambling, not just poker, the implication being that overturning the statute would permit online gambling other than poker.  However, once he turned to a discussion of the "parade of horribles" that would result from permitting this expansive version of legalized online gambling, he couldn't resist a rhetorical flourish of his own:
Internet gambling is the crack cocaine of gambling, because it makes it so easy, so readily available, so easy to digest.
However, Justice Gerry Alexander broke in, and inquired whether the mere advance in technology was enough to distinguish online gambling from traditional gambling:
You say those things [about the perils of online gambling].  It's sort of a generational thing.  I mean, the same argument could be made about email—we shouldn't have email because it's so instant, we should go with U.S. mail, take our time, write letters. ... I think we've got to get modern here.
Ackerman's response was essentially that online gambling has been studied, and the problems associated with online gambling are different in degree and kind because of the peculiar nature of the availability and immediacy of the internet experience:
Ackerman discusses the perils of online gambling,
facing skeptical questions from the bench.

In response to questions from Justice James Johnson and Justice Richard Sanders about whether his position would permit discrimination in other lines of commerce such as barring internet shoe sales to protect in-state shoe shops, Ackerman took the opportunity to refer to a case, Brown & Williamson v. Pataki, in which the Second Circuit Court of Appeals (a federal court) upheld a New York statute which barred internet sales of cigarettes, even though cigarettes can be sold in in-state brick-and-mortar shops.  The importance of this case is that the court held that the method of delivery of the product meant that the two businesses were not "similarly situated", and thus the state could ban one method of sale without discriminating for purposes of the Dormant Commerce Clause analysis.  Thus, Ackerman contended that poker in a brick-and-mortar setting is not the same as poker on the internet because the method of delivery of the gambling product is fundamentally different.  Though he did not develop the point, the Brown & Williamson case also implies that courts will be more deferential to state legislatures when they regulate traditional vices.

Toward the end of Ackerman's argument, Chief Justice Barbara Madsen again asked if Rousso's "facial challenge" to the online gambling ban meant that the statute barred online gambling that was not legal even in the Washington brick-and-mortar casinos.  The import of this question is that overturning the statute on a facial challenge means that the statute cannot be applied at all to prohibit or regulate any form of online gambling; by contrast, a successful "as applied" challenge directed to internet poker would be limited to legalizing online poker, while leaving a ban on other forms of online gambling in effect.  Most of the Chief Justice's questions seemed to be in this same vein, expressing a hesitation to endorse a sweeping ruling invalidating a ban on all online gambling, particularly forms of gambling not legal in the state's brick-and-mortar casinos.

During the final series of questions in Ackerman's argument, Justice Debra Stephens (who was a particularly active participant in the prior argument) asked if the gambling context of the Rousso case had any impact on the proper Dormant Commerce Clause analysis.  Ackerman understood the concern suggested by the question—are regulations of vices reviewed under a more lenient standard than regulations of "ordinary" commerce?—and contended that online gambling is barred by federal law (citing 22+ prosecutions under the Wire Act) as well as by every state (probably true if one assumes gaming unregulated by a state is illegal, as no state has explicitly legalized online gambling).  Ackerman then argued that the Dormant Commerce Clause is not violated by laws barring universally illegal activities:
When you have no lawful commerce that can be burdened—think heroin trafficking—then the Dormant Commerce Clause has no application to what's taking place.

Ackerman completes the parade of horribles trifecta:
Online gambling corrupts kids like crack cocaine and heroin.
However, he missed the easy bonus points for invoking,
"The terrorists will win if this law is struck down." 

In his brief time for rebuttal, Rousso faced questions from the bench related to the state's claimed interests in preventing the evils associated with gambling.  Rousso started with a strong dissent from the state's assertion that a prohibition of online gambling was the only reasonable solution:
I think the position taken by the State is that this [online gambling] is a Leviathan that cannot be regulated.  And that will be the State's position until such time as it decides it wants to tax it.  And once it decides they can tax it, I assure you the State will decide immediately that it can, in fact, regulate this.

Rousso calls the state's bluff on the need for prohibition.

Justice James Johnson then turned the conversation to organized crime.  He questioned Rousso whether the state had any interest in preventing online gambling from being used by organized crime or terrorists to fund their operations.  Rousso again had a solid (if not entirely convincing) libertarian argument:
The way you eliminate crime from gambling is to make it legal.  And that's how you got rid of organized crime in Las Vegas—you made it legal.  If you want to get rid of crime in gambling, you make it legal, regulate it, tax it.  Crime goes away.

Rousso makes the Washington Supreme Court
an argument it can't refuse.

Note that a few seconds into his response, Rousso stated that the federal Wire Act was enacted to combat organized crime, and Justice Johnson interjected his agreement with that contention.  Overall, Justice Johnson seemed the most supportive of Rousso's position, although he may just have been playing devil's advocate to see how the attorneys would respond to questions probing the validity of the law.  More likely, Justice Johnson, along with Justices Sanders and Alexander, see some merit to Rousso's position.  Those three justices expressed some skepticism of the state's claim that it could not regulate and could only prohibit online gambling to accomplish its goals of protecting the state's citizens from the evils of gambling.  These justices also seemed troubled by the state's apparent hypocrisy given its close relationship with an extensive network of legal, regulated brick-and-mortar casinos, and seemed to view the internet as merely a more modern method of commerce, rather than a wholly new form of gambling.  However, just because a particular justice is sympathetic to a party's position doesn't mean that justice will ultimately vote in favor of that party on the merits.  It is not at all uncommon for a court to uphold a challenge to a law by essentially stating, "We disagree with the law, but it is the legislature's role to make policy decisions like this, and absent some compelling reason, we won't interfere with the legislature's decisions."

On the flip side, I think Chief Justice Madsen and Justice Stephens are unlikely to vote to overturn the online gambling ban.  Both of those justices seemed concerned that striking down the law would allow a wide array of online gambling (including gambling not authorized for Washington's brick-and-mortar casinos) to occur in an unregulated environment.  These justices seem more likely to endorse a middle way, such as the PPA's "as applied" challenge targeted only to striking down the law as applied to internet poker, not online gambling as a whole.  It's possible the court could rule that the statute is consitutional in general, but find that it may not be valid as applied to poker (or other games authorized by the state).  In that case, the court could either remand the case to the trial court for a hearing or trial on the state's need and ability to regulate or prohibit online poker, or it could simply decide the issue based on the record in front of it, despite the fact Rousso disavowed an "as applied" challenge.

Finally, the court may simply find the online gambling ban to be constitutional both facially and as applied to poker.  Although the justices may have some skepticism as to the state's claims regarding the reasons justifying an outright ban on online gambling, the court could decide that the state's claims are sufficient to meet a constitutional challenge, and let the legislature ultimately decide whether, when, and how to go about legalizing internet poker specifially, or online gambling in general.

I still think that Rousso's chances for success are a longshot, but I would say that oral argument certainly helped him frame the case in the most effective light for his position.  Despite Rousso's solid performance in court, ultimately this case requires the court to take a big step in striking down a law regulating gambling, an area where legislatures historically have enjoyed wide latitude and nearly unlimited discretion.  However, even if the court ultimately rejects his argument, Rousso certainly left the courtroom with the justices giving his argument serious consideration.  It will be interesting to see how the court rules.

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