September 03, 2010

Washington Supreme Court Torpedoes Betcha.com in Online Gaming Appeal—
Bad Omen for Rousso Poker Appeal?

Yesterday, the Washington state supreme court handed down its ruling in the Betcha.com appeal.  The unanimous decision held that the Betcha.com business model—in which the site provides a place for individuals to propose and accept wagers on sports, entertainment, or other current events—in fact violated Washington's prohibition against bookmaking, and consequently also violated related statutes barring transmission of gambling information and the maintenance of gambling records.  Betcha.com sought to avoid the state's broad ban on "professional gambling" by a gimmick—site users had no obligation to pay losing wagers, and could "welch" on bets (though doing so incurred an eBay-like negative rating).  In fact, Betcha.com founder Nick Jenkins described his site as an "eBay for gamblers".

Since I began following the Rousso online poker appeal which is also being considered by the Washington supreme court, I have subscribed to the court's news service to keep track of decisions as they are entered.  An interesting observation is that the Washington supreme court regularly hands down splintered opinions, with dissents and (to a lesser degree) concurrences being quite common.  (Dissents disagree with the majority's reasoning and the result of the case, while a concurrence agrees with the result of the majority opinion, but disagrees with the analytical approach of the majority opinion, or wants to indicate a limited endorsement of the majority's decision.)  The fact that the Betcha.com decision was unanimous is a strong indication of the court's rejection of Betcha.com's reading of the law.

Digging into the decision, the court sidesteps the issue of whether Betcha.com's "welching" gimmick was enough to remove the site's method of wagering from the statutory definition of "gambling", instead finding that Betcha.com was engaged in "bookmaking", which was sufficient to make Betcha.com's business model illegal "professional gambling".  Although the parties (and the public) often expect courts to resolve every issue raised on an appeal, it is routine for courts to write decisions based on the narrowest possible grounds.  So, even though the court did not decide whether a "welching" option would remove a wager from the statutory gambling prohibition, nothing in the court's decision endorses such an interpretation.

Turning to the bookmaking analysis, the court correctly notes that their analysis is driven by interpretation of the relevant statute (RCW 9.46.0213):
“Bookmaking,” as used in this chapter, means accepting bets, upon the outcome of future contingent events, as a business or in which the bettor is charged a fee or “vigorish” for the opportunity to place a bet.

The court's analysis seems rather straightforward:

Accepting a bet may involve taking a position on wagers placed by bettors, but it may also simply include charging users a fee to bet with each other. Although Betcha did not take a position on the bets listed on its web site, it did charge its users a fee for the opportunity to place bets with others.  Betcha's entire business model was based on charging fees from those wishing to bet on its web site. Users meeting specific criteria were allowed to send bets to Betcha, which would post them on its web site for a fee.  Betcha charged fees "for the opportunity to place a bet."  It was unambiguously engaged in "bookmaking" as that term is defined under the gambling act.

Now Betcha.com's argument was based on a different, and rather tortured interpretation of the same bookmaking statute.  Jenkins has posted a rather lengthy critique of the court's decision on his personal blog*, and I'll let you wade through his argument, which has a whiff of the old Clintonian, "Depends what the meaning of 'is' is."  But after considering Jenkins' argument, ask yourself whether the bookmaking statute is really at all unclear.  The way I read the statute is (my edits in red):

“Bookmaking,” as used in this chapter, means accepting bets, upon the outcome of future contingent events: a) as a business, or b) in which the bettor is charged a fee or “vigorish” for the opportunity to place a bet.

To be even more clear, we can get rid of the self-referential clause to see the heart of the definition (my changes again in red):

“Bookmaking” ... means accepting bets, upon the outcome of future contingent events: a) as a business, or b) in which the bettor is charged a fee or “vigorish” for the opportunity to place a bet.

So, to be engaged in "bookmaking" one must first accept bets.  Next, those bets must be based on "the outcome of future contingent events".  So, a bet on the outome of tomorrow's game between the Nebraska Huskers and the Western Kentucky Wildcats would qualify, while a bet with a friend as to who is correct about the Huskers' bowl game record the past decade would not qualify.

Now, once a qualifying bet has been made, a person has engaged in bookmaking if one took the bet either "as a business" or if one "charged a fee or 'vigorish' for the opportunity to place the bet" (the use of the disjunctive "or" by the legislature is generally interpreted by the courts to imply that there are two alternatives, either one of which is sufficient for a violation of the statute).  I'm quite puzzled by Betcha.com's argument that bookmaking requires the bookmaker to take a position on the wager since that requirement does not appear in the second alternative listed by the statute.  For example, a group of friends puts together a college football pool, where they make bets against each other on various games.  Wins and losses are tracked on a computer spreadsheet by one member, but no player takes a fee.  This is not bookmaking, since it is neither being operated as a business, nor is a fee being charged.  But, if one of the friends holds the money for the wagers, and takes a fee (perhaps a percentage of the wager, or a flat fee per wager or for the entire season) for his record-keeping and wager payment efforts, then that friend is "bookmaking" even if he isn't doing so as a business, and even if he is not a party to some or even most of the wagers.

It is certainly a time-honored criminal defense tactic to find a loophole in a criminal statute:

By far the most exciting part of a defense lawyer’s practice is parsing the words of a criminal statute to uncover its latent ambiguity.  Nothing, not an impassioned plea for the life of the accused, not a cross-examination that reduces the government’s lead witness to tears, comes close to the excitement that comes from demonstrating the lawfulness of a defendant’s conduct from the placement of an adverb in a sentence.  Few realize the spark that inspired many of the giants of our profession occurred during those sessions at the black board (def. antecedent of white boards involving the use of chalk against a slate surface) in elementary school where sentences were de-constructed under the admiring gaze of our classmates.  Little did we know that our facility with parallel and vertical lines identifying the subject from the predicate and showing which clauses modified which phrases would become so valuable later in our professional lives.

Amazingly, there are still lawyers practicing who fail appreciate the beauty of the poorly drafted statute; who eschew examination of the crime charged, failing to appreciate the obfuscation that led their client astray. ...

—Jon May, "Statutory Construction:  Not For The Timid", Champion Magazine (Jan./Feb. 2006).

However, as a practical matter, courts will adopt the clearest and most straightforward reading of a statute whenever possible, and will usually interpret a statute consistently with the general understanding of the statute's ultimate objective.  Here, if Betcha.com's interpretation were adopted, then ordinary bookmakers could avoid criminal liability under the statute simply by not taking a position on any bet, but rather merely accepting bets they could match against another bettor taking the opposite side, even if the bookmaker were charging a "vigorish" for his services (which might well include rather aggressive collection practices).  But, the legislature clearly intended ordinary bookmakers to be included in this statutory prohibition, and drafted the statute broadly to prevent bookmakers from engaging in such attempts to sidestep the statutory prohibition.

Jenkins also complains that the court ignored the question of whether the bets involved had to themselves be "illegal gambling" as a predicate for a bookmaking offense.  In other words, if the bookmaker were taking legal wagers, could he nonetheless be engaged in illegal bookmaking?  The court determined the legality of the underlying wager was irrelevant to the question of whether bookmaking occurred.  This makes sense in light of the statutory language (the bookmaking statute requires only a bet, not an illegal bet), and in terms of practical application.  The bookmaking statute isn't directed at the wagering activity itself, rather its purpose is to punish those who seek to profit on wagers made by other people.  The legislature could have reasoned that preventing illegal gambling would be easier if there were specific prohibitions against bookmakers, regardless of whether they were profiting on legal or illegal wagers.  The purpose, then, of the bookmaking prohibition is to prevent the professionalization of gambling.  Adopting Betcha.com's interpretation of the statute would permit unregulated individuals and businesses to run gambling operations for profit, without any regard for state regulations to ensure fairness and prohibit the influence of criminal elements.  With that practical implication running headlong into the traditional understanding of bookmaking, is there any wonder the court found Betcha.com to be in violation of the law?

So, what, if anything, does the Betcha.com ruling mean for the Rousso online poker appeal which the Washington supreme court has yet to rule on?  First, the fact that the Rousso decision has not yet been issued might be related solely to the schedule of the judge writing the majority opinion; some judges write more quickly than others.  Or, the relative delay might indicate there are dissenting and/or concurring opinions being prepared; in those cases, the judges often review drafts of the other judges' opinions, and modify their opinion to address issues raised by the other judges.  As for the nature of the Rousso ruling, the Betcha.com decision really offers us little in terms of meaningful tea leaves to read.  The oral arguments on the two cases left me thinking that Betcha.com would be a resounding victory for the state, while the same assistant attorney general ran into greater resistance from the court during the Rousso argument; so the Betcha.com decision doesn't change my impression of the relative strengths of the cases. 

On the negative side, Betcha.com does reflect the court's willingness to read the gambling statute liberally as a prohibition on illegal gambling, as well as implying a degree of deference by the court to the legislature in the arena of gambling, which is not helpful to those challenging the statute.  But, perhaps the most significant implication of the Betcha.com ruling is that, although Betcha.com and Rousso deal with different sections of the illegal gambling statute, Betcha.com is the Washington supreme court's first application of a long-established gambling statute to a modern online gaming business.  The court's rejection of the Betcha.com online gambling business model is a rather ominous sign for those advocating that online poker sites—which obviously involve gambling—are immune from Washington's gaming laws.  In short, although Betcha.com shouldn't be read as a bellwether of doom for Rousso, it sure as heck isn't good news for online poker.

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* Jenkins' critique is more of a sour grapes diatribe about the perceived stupidity of the court for failing to rule in his favor, particularly since he (surprise!) found his position to be unquestionably correct.  Now, as an attorney, I can name a handful of cases I've handled where I still scratch my head over the court's ultimate ruling.  But I would never say that the court failed to take my argument seriously, that the judges failed to read my briefs, or that the judges were stupid for not agreeing with my brilliant argument.  The Washington supreme court has nine judges with pretty solid credentials, who are supported by a small army of law clerks and staff attorneys.  There is absolutely no way that the judges didn't fully comprehend Betcha.com's argument.  Sometimes, judges just aren't buying what we lawyers are selling.

ADDENDUM (6 September 2010):  Jenkins has now posted a "watered-down version" of his diatribe, though the original remains posted as well.  Perhaps the softer version is intended for republication elsewhere to a wider audience where it might garner attention from the Washington bar, who presumably aren't terribly excited about over the top criticism of judges by attorneys (Jenkins has a law degree, though it does not appear he is a practicing attorney).  In any event, the new version of Jenkins' post really breaks no new ground in terms of analysis or criticism.

2 comments:

  1. I've always felt that the online poker rooms did themselves a disservice by adding blackjack and other casino games to their repetoire because I felt it always weakened the poker as a skill rather than a game of chance argument. While it is true that poker is offered in B&M casinos and associated with gambling there it has already been legalized there under broader statute. Since online sites are technically still illegal their best chance seemed to be the skill vs chance argument. By adding standard casino games to their mix, and taking in to view the ruling on the non payoff factor, it looks like a jurist who might have been persuaded to accept the skill theory will now just figure, well, you are i9ncluding poker in and amongst all these other games of chance so how can you argue it isn't with a straight face. IOW, the law has basically viewed it as chance but there was a possibility that it could be convinced elsewise but the case has really been weakened IMHO.

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  2. @ Wolfshead: I agree with you completely. Also, in the Rousso appeal, the argument that Rousso makes is that the state cannot ban online poker since the state permits poker in brick & mortar establishments. But, this argument logically also means that Rousso is contending (by implication) that the state cannot ban online blackjack, roulette, slots, etc. if those games are permitted in B&M casinos. That's a really hard sale for a court to buy.

    For more about my take on Rousso:

    http://craakker.blogspot.com/2010/05/pokers-terrible-horrible-no-good-very_24.html

    http://craakker.blogspot.com/2010/05/recapping-oral-arguments-in-rousso-v.html

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