Because oral arguments were held over eight months ago, I have been tracking the appellate decisions which are released on the South Carolina judicial website in anticipation of the Chimento decision. Although the supreme court has yet to release its opinion in Chimento, the South Carolina court of appeals recently issued a decision in South Carolina Law Enforcement Division v. 1-Speedmaster SN 00218, a gambling case that could be a sign of trouble for poker advocates.
In Speedmaster, the court of appeals was confronted with the question of whether an electronic gaming device violated the state's video gaming statutes. The magistrate (trial) court had held a hearing during which a Speedmaster technician had both testified and demonstrated that a skilled player could beat the machine and win every time. Based on this record, the court of appeals ultimately concluded that the Speedmaster game was not a game of chance, and there was no evidence that players wagered on the outcome of the game. Thus, the Speedmaster game was not an illegal gaming device.
Although this decision might superficially seem beneficial to the "poker is a game of skill" advocates in Chimento, the bulk of the Speedmaster court's analysis of the "skill vs. chance" argument—if adopted by the Chimento court—is strongly anti-poker. The Speedmaster court noted that the South Carolina supreme court has not yet adopted either the "dominant factor" test or the British common law "pure chance" test for determining whether a game qualifies as "gambling" under criminal law. [FN1]. The court defined the two competing tests:
The dominant factor test provides when "the dominant factor in a participant's success or failure in a particular scheme is beyond his control, the scheme is a lottery, even though the participant exercises some degree of skill or judgment." [cite]. "If a participant's skill does not govern the result of the game, the scheme contains the requisite chance necessary to constitute a lottery." [cite].
In contrast, under the "pure chance doctrine," founded in British law, "any skill, however minimal, is sufficient to remove a scheme from the definition of lottery. [cite]."
Note that the court's formulation of the dominant factor test does not require any weighing of the relative effect of skill and chance on the outcome of the game as is usually presumed by litigants advocating the "poker as game of skill" argument. Instead, so long as chance is an intrinsic or inherent element in determining the outcome of the game, it constitutes gambling. Under this interpretation of the dominant factor test, it is difficult to see poker being found to be anything other than gambling. However, the Speedmaster court declined to adopt either test, noting that under either test, the Speedmaster machine at issue was unquestionably a game of skill because a player demonstrably could win every time he played. [FN2].
The Speedmaster court then turned to the question of whether the Speedmaster machine was an illegal "gambling device". The court first referred to South Carolina common law (which is consistent with most states’ common law) and found that the elements of gambling are “consideration, chance, and reward”, with a particular analytical emphasis on the element of “chance”:
"As legal terms, 'gaming' and 'gambling' are the same and involve either fraud, or cheating or chance applied in a situation of agreement between two or more persons in which, in accordance with certain rules, the parties play a game or contest, or await the outcome of some event that will determine one or more winners or losers."
The court also looked to a state statute regulating gambling on certain gambling cruises:
"'Gambling' or gambling device' means any game of chance and includes, but is not limited to, slot machines, punchboards, video poker or blackjack machines, keno, roulette, craps, or any other gaming table type gambling or poker, blackjack, or any other card gambling game."
The Speedmaster court’s reliance on the gambling cruise statute is important, because it emphasizes a point I have previously discussed: Where poker is legalized and regulated under some conditions (e.g., in a casino, on gambling cruises, or in a “charity” setting), courts will be reluctant to interpret a general gambling prohibition as permitting legalized poker outside the regulated settings permitted by state law. [FN3]. Here, the South Carolina legislature has enacted a recent statute declaring poker to be “gambling” subject to state regulation. The South Carolina supreme court in Chimento will likely rely on that statute in two ways. First, the gambling cruise statute expresses a public policy decision by the legislature that poker is included in the games to be regulated as gambling within the state. Second, the South Carolina supreme court will likely be reluctant to interpret the general anti-gambling statute at issue in Chimento as permitting poker to be played legally anywhere without regulation while poker on gambling cruises is subject to regulation.
Finally, the Speedmaster court noted in passing that even a skill game such as the Speedmaster machine could still involve gambling:
When parties wager on a game of skill, the element of chance is injected back into the game. For example, if Player A bets Player B $10 he can get a higher score in pinball, Player A has left to chance how Player B will perform. Even though Player A controls his own score, he does not control Player B's performance, and therefore, Player A does not control the outcome of the wager.
This view of the interplay between skill and gambling is also troubling for poker advocates. South Carolina’s general anti-gambling statute at issue in Chimento includes an exempt list of games of skill—billiards, bowls, backgammon, chess, draughts, and whist—which are not gambling so long as no money is wagered on the outcome of the game. The problem for poker, of course, is that no matter how much skill dominates the game, money being wagered on the outcome is an inherent part of the game. Under the Speedmaster court’s analysis that wagering on a skill game causes “the element of chance to be injected back into the game”, poker played for monetary stakes is gambling regardless of whether a rake or fee is taken by the house.
Of course, the South Carolina supreme court is not obliged to follow or even take note of the Speedmaster decision, as court of appeals decisions are not binding on the supreme court. However, the Speedmaster decision is interesting and important because it reveals the general manner in which appellate judges in the state are likely to think about gambling statutes. [FN4]. Moreover, the Speedmaster decision is likely to at least be read by the supreme court justices given that the decision references a prior South Carolina supreme court decision, State v. Johnson, which found video poker games were not “lotteries” (leading to their immediate regulation by the legislature). Johnson is important to Chimento because the current supreme court Chief Justice Toal concurred in one dissenting opinion and wrote her own dissenting opinion in that case. In her own dissent, Chief Justice Toal asserted that video poker machines could not pass even a pure chance analysis. In the dissent by another justice supported by Chief Justice Toal, she agreed with the position that the court should apply a dominant factor analysis, and then conclude that video poker was a game of chance:
I would hold, where the dominant factor in a participant's success or failure in a particular scheme is beyond his control, the scheme is a lottery, even though the participant exercises some degree of skill or judgment. If a participant's skill does not govern the result of the game, the scheme contains the requisite chance necessary to constitute a lottery.
The third category of games ("Type III") includes games such as poker and black jack as well as one variety of keno. In these games, the player makes a variety of decisions at one or more points during play of the game. The decisions the player makes may affect the continued play and the ultimate results of the game in a variety of ways.
First, the player may make decisions as to how to continue to play. For instance, in a poker game the player will decide which cards to keep and which to discard. While this decision could be based on sheer caprice, it would normally be based on the player's view of the probability of receiving certain replacement cards that would constitute a winning hand. This decision may also be influenced by the player's analysis of the relative value of the given hands that could be received. In other words, a player faced with two or more possible "good" options may be willing to try for the less likely hand if the payout is high enough to justify the increased risk...
In short, the Type III games are the most complex and diverse .... Still, some features are common to all machines .... In particular, each game begins with the random selection of cards, numbers, or other icons. The player sees these and is given an opportunity to make one or more decisions. A second random selection is then made by the machine. The ultimate outcome is, therefore, influenced by, but is not entirely determined by the player's decisions. However. regardless of skill, knowledge, or experience, a player cannot alter the probabilities inherent in the play of any Type I, Type II, or Type III video machine games. Neither can the player modify the function of the random number generator, or the random delivery of cards, numbers, or icons.
Whether chance predominates over skill is not easily answered with regard to the Type III games because the parties define "skill" differently. The plaintiffs maintain since play is completed by a random act outside the control of a player or by a player's decision to stand on the result of a prior random act, and the odds are stacked against a player, chance predominates. In effect, the plaintiffs define "skill" as the ability to affect the odds of obtaining a given card and, ultimately, the outcome of the game.
On the other hand, the defendants define "skill" as a player's ability to maximize the numbers of credits or dollars won through knowledge of probabilities and consideration of the potential payoff. One of the defendants' experts presented a mathematical model which compared the results of a player using optimum game strategy with a player acting entirely randomly. Since the most skilled player would win back 96.5% of his credits and the most unskilled player would win back 31% of his credits, the expert concluded skill predominated over chance.
As noted in the defendants' expert's mathematical model, the probability of obtaining a particular hand does not increase, regardless of a player's level of skill. Although a skilled player (unlike an unskilled player) can improve his chances of winning and maximize those winnings, his ability to affect the outcome of a game, i.e., actually obtain the winning card, is determined by the random number generator. Similarly, if two players both exercise optimal strategy, chance would determine which player, if either, would obtain a given card. A player's skill, no matter how good or poor, does not control the random "deal" of the cards.
In my opinion, skill should be defined in terms of the ability to obtain the desired outcome - a certain card - rather than the ability of one player to play more judiciously than another. As noted by the certification order, a video poker player is unable to control the random selection of cards, in spite of his skill, knowledge, or experience. Since the player cannot improve the likelihood he will obtain a certain card, I conclude chance dominates over skill in the operation of the Type III video game machines.
This analytical approach to the skill vs. chance argument bodes poorly for poker legalization advocates in Chimento if the court chooses to follow the lead of the Johnson dissenters. Further, Chief Justice Toal is the only current member of the South Carolina supreme court who considered the Johnson decision. Consequently, it might be presumed she will be familiar with the skill vs. luck arguments, and may have more influence on the outcome of the Chimento case than usual. Of course, poker has some fundamental differences from video poker, and there is good evidence in the record for the court to consider regarding the relative role of skill in poker. Nonetheless, I think it’s safe to assume Chief Justice Toal is a likely vote against poker legalization.
[FN1] U.S. courts looking to British common law is not unusual, particularly in eastern states where the original Colonies established their legal systems by importing British common law. Common law in later states tends to diverge somewhat from the original British common law, most notably in western states where the common law reflects more of a frontier, libertarian flavor.
[FN2]. The Speedmaster court did note that the South Carolina supreme court would be confronting the issue of the proper test for determining whether a game is skillful or gambling in the Chimento case.
[FN3]. See my discussions of the Dent decision in Pennsylvania (poker is regulated in casinos), the Wong case from Ohio rejecting a claim for reimbursement of player funds, attempts to legalize intra-state poker in Iowa (poker is regulated in casinos), and the "Pokerhaus" lawsuit in Illinois (poker is regulated as charitable gambling).
[FN4]. Similarly, the Washington supreme court's anti-poker decision in Rousso was foreshadowed by that court's anti-online gambling decision a few weeks earlier in the Betcha.com case.