Will the Supreme Court Finally Play a Hand of Poker?

For more than a decade, many online poker advocates have chased a quixotic dream of having poker declared legal in various states or even throughout the United States by judicial fiat. The ultimate dream was a favorable ruling from the Supreme Court of the United States (SCOTUS) which would sweep away legal prohibitions against poker. Yet the path to SCOTUS has proved tough to navigate for poker advocates. Prior to Black Friday, the Poker Players Alliance (PPA) brought an ill-considered court challenge to Washington state's ban on online gambling (the Rousso case), a challenge swiftly and predictably rejected by the Washington supreme court. Despite asserting a federal constitutional argument for the legalization of poker, the PPA chose not to pursue an appeal to SCOTUS, recognizing—belatedly—the futility of their case. More recently, poker advocates' hopes were dashed when SCOTUS rejected an appeal of the Second Circuit's DiCristina decision which held the federal Illegal Gambling Business Act applied to poker.

Poker may soon get its day in court, and in front of SCOTUS, to boot. Two recent decisions by the Seventh and Ninth Circuit Courts of Appeal have created a scenario where SCOTUS could reasonably feel compelled to confront the legality of poker head on. There is one catch, however. The cases do not involve online poker or even poker in general. Rather, the issue raised in these cases is whether states which prohibit poker must nonetheless permit poker at Indian tribal casinos within their borders.


I.  Cabazon and the IGRA

The law governing the regulation of Indian gaming ranges from complex (being charitable) to messy (being blunt). This complexity arises from the concept of sovereignty, by which Indian tribes retain significant control and authority to govern their people and lands. Indian tribal sovereignty, generally speaking, is co-equal to the sovereignty of the states, and can only be limited by Congress. So, a state cannot enforce its laws on tribal lands without an explicit grant of authority from Congress to do so.

Tribal sovereignty became a key issue in the realm of gaming in 1987, when SCOTUS decided California v. Cabazon Band of Mission Indians. In Cabazon, the Court was confronted with the issue of whether California could enforce its state gaming laws to prohibit bingo and poker games conducted in casinos and card rooms on tribal lands. The Court held that, because California permitted a lottery, parimutuel horse betting, and poker rooms, the state's gaming laws were regulatory (civil) rather than prohibitory (criminal) in nature. Thus, there was no basis for California to intrude on tribal sovereignty and enforce its gaming regulations on tribal lands.

In response to Cabazon, Congress promptly passed the Indian Gaming Regulatory Act (IGRA). Pursuant to IGRA, gaming is divided into three classifications. Class I gaming is limited to certain ceremonial games with modest prizes; Indian tribes retain full authority to regulate such games. Class II gaming includes bingo and pull-tabs, and also includes non-banked card games which are authorized by the state where the tribal lands are located. Indian tribes retain authority to regulate Class II gaming, subject to oversight by the National Indian Gaming Commission (NIGC). Class III gaming includes all other forms of gaming, including all slot machines and house-banked table games associated with traditional casino gaming. Class III gaming can only be conducted on tribal lands pursuant to a compact between the tribe and the state.

Under the IGRA scheme, poker is an obvious fit for Class II gaming in states which authorize poker to be played in card rooms or casinos. In those states, tribes may offer poker at tribal card rooms and casinos within the same general limits on hour of operations and wagering (e.g., limits on bet or pot sizes) as imposed by the state for non-tribal poker rooms. In states which do not authorize poker, however, poker is considered Class III gaming, and tribes wishing to offer poker must do so, if at all, pursuant to a compact with the state.

As it turns out, drawing the line between regulating poker as Class II or Class III gaming is more difficult in practice than the IGRA contemplated. In keeping with American tradition, the issue has found its way to court.


II.  The Seventh Circuit—Wisconsin v. Ho-Chunk Nation (April 29, 2015)

Wisconsin has compacts with several Indian tribes, permitting them to offer Class III gaming so long as gaming is approved by referendum in the county where the tribe intends to offer gaming. Dane County (Madison) voters rejected a referendum on Class III gaming in 2004. The Ho-Chunk Nation subsequently began offering electronic poker (traditional poker played in-person at electronic tables without a live dealer or physical chips) at its Madison casino, asserting poker was a Class II game. Wisconsin sued in federal court, requesting an injunction prohibiting poker at the casino, asserting it was a Class III game. The district court agreed with the State, and the Nation appealed.

In analyzing the issue, the Seventh Circuit first looked at the definition of Class II gaming in IGRA:

(A) The term “class II gaming” means—
....
(ii) card games that—
(I) are explicitly authorized by the laws of the State, or
(II) are not explicitly prohibited by the laws of the State and are played at any location in the State,

but only if such card games are played in conformity with those laws and regulations (if any) of the State regarding hours or periods of operation of such card games or limitations on wagers or pot sizes in such card games.

25 U.S.C. § 2703(7)(A)(ii)

The interesting thing about Wisconsin is that poker is not only banned by the state's broad gambling statute, it is also banned by the state constitution. In fact, the Wisconsin state constitution specifically authorizes a lottery, bingo, and parimutuel on-track betting, but explicitly prohibits casino gaming and identifies numerous prohibited games—including poker—by name (see Wisconsin State Const. Art. IV, § 24(6)(c)). Pretty compelling case that Wisconsin does not authorize and in fact explicitly prohibits poker, right? Not so fast, said the Seventh Circuit.

The court noted that the "Indian law canons"—rules for interpreting statutes touching on Indian sovereignty—require that any statutory ambiguities be resolved in favor of the Nation, and that the IGRA be interpreted broadly as protecting the Nation's sovereignty unless Congress had clearly limited that sovereignty. Consequently, the court determined it was compelled to read the definition of Class II gaming in IGRA § 2703 in conjunction with the regulatory provisions of IGRA § 2710 which provides:

(1) An Indian tribe may engage in, or license and regulate, class II gaming on Indian lands within such tribe's jurisdiction, if--
(A) such Indian gaming is located within a State that permits such gaming for any purpose by any person, organization or entity (and such gaming is not otherwise specifically prohibited on Indian lands by Federal law) ....

25 U.S.C. § 2710(b)(1)(A)

Well, again, if Wisconsin's constitution and statutes ban poker, the state can hardly be "permitting" poker to be played, right? The court, however, felt the issue was not so clear cut. Instead, the court felt compelled to apply the Cabazon regulatory/prohibitory analysis to Wisconsin's ban on poker, even though the IGRA was enacted after Cabazon was decided. In the court's view, Congress wrote the IGRA with Cabazon in mind, and did nothing to reject Cabazon's regulatory/prohibitory approach. In fact, the court noted that some legislative history suggested Congress intended for the Cabazon analysis to be used in implementing the IGRA.

Once the court applied the Cabazon regulatory/prohibitory analysis, the jig was up. The court noted that Wisconsin had moved away from a complete prohibition on gambling in favor of a system where certain types of gambling—notably the lottery and parimutuel betting on horse and dog races—were permitted. Thus, the court determined that the state's endorsement of certain forms of gaming indicated a public policy which favored regulated gaming over a prohibition on gaming. As the court concluded, "Wisconsin has not been willing to sacrifice its lucrative lottery and to criminalize all gambling in order to obtain authority under Cabazon and § 2710(d)(1)(b) to prohibit gambling on Indian lands." Rather, "The establishment of a state lottery signals Wisconsin's broader public policy of tolerating gambling on Indian lands."

The court also questioned the state's contention that it had fully banned poker. The court noted that, if the state truly had a ban on poker, then a mere municipal referendum could not override the constitution to permit poker on tribal lands. The fact that the state had negotiated with other tribes to permit poker on their tribal lands further undermined the state's position that poker was prohibited as a matter of public policy. Finally, the court noted that in 1999, the state had decriminalized video poker machines in taverns. The state essentially made possession of five or fewer video poker machines subject only to a civil penalty of $500 per machine, and further provided that possession of video poker machines could not be used as a basis for revocation of a liquor license. As the court reasoned:  "Wisconsin cannot have it both ways. The state must entirely prohibit poker within its borders if it wants to prevent the Nation or any other Indian tribe from offering poker on the tribe's sovereign lands." Thus, the court ultimately concluded:

"[T]he states lack statutory authority to deny an Indian tribe the ability to offer gaming that is roughly equivalent to what the state allows for its residents. A state must criminalize a gambling activity in order to prohibit the tribe from engaging in it. Wisconsin does not criminalize nonbanked poker; it decriminalized that type of gaming in 1999. IGRA thus does not permit it to interfere with Class II poker on tribal land. This means that the Ho-Chunk Nation has the right to continue to offer nonbanked poker at its Madison facility."

The Seventh Circuit's conclusion that Wisconsin's explicit constitutional and statutory ban on poker is less than a prohibition of poker might be viewed by non-lawyers as something of a head-scratcher. But in the realm of statutory interpretation, words and phrases often take on odd meanings and peculiar usages. Still, the court's reasoning is questionable in places; we will look at some criticisms of the decision in Section IV.


III.  The Ninth Circuit—Idaho v. Coeur d'Alene Tribe (July 22, 2015)

Moving westward, a similar dispute arose between the state of Idaho and the Coeur d'Alene Tribe over whether poker was Class II or Class III gaming. Like Wisconsin, Idaho's constitution and gaming statutes specifically permit only charitable bingo and raffles, a state lottery, and parimutuel race betting (see Idaho State Const. Art. III, § 20). Also, several traditional casino games, including poker, are explicitly named as prohibited games in both the state constitution and its enabling statute:

GAMBLING DEFINED. "Gambling" means risking any money, credit, deposit or other thing of value for gain contingent in whole or in part upon lot, chance, the operation of a gambling device or the happening or outcome of an event, including a sporting event, the operation of casino gambling including, but not limited to, blackjack, craps, roulette, poker, bacarrat [baccarat] or keno, but does not include:

(1) Bona fide contests of skill, speed, strength or endurance in which awards are made only to entrants or the owners of entrants; ....

Idaho Code § 18-3801

In the early 1990s, the state and the Tribe litigated a disagreement as to whether the state's adoption of a lottery and parimutuel betting had opened the door for broad Class III gaming on tribal lands pursuant to their gaming compact. The Idaho federal district court determined that the state constitution authorized only charitable bingo and raffles, a state lottery, and parimutuel betting, and that the state's public policy clearly prohibited all other forms of gaming, including Class III gaming. Thus, the Tribe was barred from offering Class III gaming.

In 2014, the Tribe announced plans to offer live poker—specifically, Texas Hold 'Em tournaments—at a casino located on its tribal lands. The state promptly brought suit in federal court and obtained an injunction prohibiting the Tribe from offering poker. The Tribe appealed to the Ninth Circuit.

Now, although the Coeur d'Alene case centered on a state constitutional prohibition on poker as had the Ho-Chunk case, the Ninth Circuit's analysis took an entirely different path than that laid out by the Seventh Circuit. For example, while the Seventh Circuit focused on the history of the IGRA and relied on the Indian law canons to interpret the IGRA, the Ninth Circuit rejected use of the Indian law canons, finding that the critical analysis was interpretation of Idaho's constitution and gaming statute rather than the IGRA. In fact, IGRA § 2710, which was critical to the Seventh Circuit's analysis, is essentially ignored by the Ninth Circuit in its analysis. Similarly, the Seventh Circuit relied heavily on the Cabazon regulatory/prohibitory analytical framework, while the Ninth Circuit ignored Cabazon in its analysis.

Given the widely divergent analytical path it took, it is hardly a surprise the Ninth Circuit found itself reaching a conclusion diametrically opposed to that of the Seventh Circuit. The Tribe offered three main contentions for why poker was not illegal under Idaho law:

• Poker is a skill game, not gambling.  Yes, our old friend, the skill game argument, returns for an encore performance with predictable results. Here, the Tribe argued that the Idaho gambling statute contained a carveout for "bona fide contests of skill, speed, strength or endurance in which awards are made only to entrants or the owners of entrants". Because poker is a skill game (at least in the form of Texas Hold 'Em), the Tribe argued that it should fit into this exemption from the gaming statute. The court rejected this argument, noting that the statute specifically identifies poker as a prohibited form of "casino gambling", and thus, the more general "skill game" exemption could not plausibly be read to permit poker. Further, the court noted that interpreting the statute to permit poker would contravene the state constitutional ban on poker; courts will generally interpret a statute so as to prevent a constitutional conflict.
• Poker is permitted under a "promotional contests" exclusion to the state gaming statute.  Here, the Tribe tried to make use of case law which had held in other states that the authorization of "casino night" charitable events constituted authorization of gaming sufficient to permit tribes to offer Class II gaming. The court, however, noted that the Idaho statute prohibited promotional contests from giving any consideration for such events, which is inconsistent with the offering of real-money poker.
• The state does not evenly enforce its prohibition on poker.  This argument is essentially that because the state admitted it does not always enforce its ban on private poker games (i.e., the state does not prosecute all private poker games known to law enforcement), the state is de facto authorizing or permitting poker to be played within the state. The court rejected the argument, noting that to fit within the IRGA § 2703 definition of Class II gaming, the Tribe must show both that poker "[is] not explicitly prohibited by the laws of the State and [is] played at any location in the State." Although poker might be played within Idaho, it is explicitly prohibited by law, so the Tribe could not establish one of the required statutory elements. The court also found that use of prosecutorial discretion in some cases did not rise to the level of desuetude—the abandonment of a law to the point where it becomes unenforceable—particularly where the state had not disavowed the ban on poker and in fact prosecuted cases under the statute. [FN 1].

The Ninth Circuit also considered and rejected two procedural arguments raised by the Tribe. First, the court found that the dispute over poker could be resolved in court without being submitted to arbitration. Second, the court found that the State-Tribe compact encompassed all Class III gaming, rather than a limited subset of games, such that poker was a game properly covered by the compact and the court had jurisdiction over the current dispute.

Based on its analysis of Idaho's prohibition of poker, the Ninth Circuit ultimately concluded that poker was Class III gaming under Idaho law and the IGRA, and thus the Tribe had no right to offer poker at its casino.


IV.  Wisconsin's Petition for Writ of Certiorari (July 28, 2015)

Wisconsin has filed a petition for writ of certiorari, asking SCOTUS to review the case. Appeals to SCOTUS are discretionary, so the state must persuade the Court to accept the case ("grant cert" in legal lingo). The state has identified three main arguments for the Court to review.

For its first assigned error, the state asserts the Seventh Circuit erred in applying the Cabazon regulatory/prohibitory test in analyzing the IGRA's definitions of Class II and Class III gaming. As the state points out, Cabazon interpreted an older federal Indian regulatory law (Public Law 280) which is not at issue in the current litigation. In fact, Cabazon predated the IGRA (and the IGRA was a Congressional response to Cabazon). So, the proper focus for interpreting the IGRA is the language of the IGRA itself, and Cabazon has no role to play in that analysis.

The state then criticizes the Seventh Circuit's analysis of the IGRA. The state notes that IGRA § 2703 defines Class II gaming as gaming which is either expressly authorized by the state, or not explicitly prohibited. Because poker is explictly prohibited by the state constitution and gaming statute, the state contends the IGRA analysis should end at that point with poker not qualifying as Class II gaming. In the state's view, the language of the IGRA is clear and resolves the issue in its favor.

The state also took issue with other parts of the Seventh Circuit's analysis of the IGRA. The state notes that whether the state permitted poker via tribal gaming compacts was irrelevant. The IGRA only looks to whether poker is authorized by state law, and a gaming compact is a contract, not a state law. Similarly, the state's limited decriminalization of video poker machines was irrelevant to the IGRA analysis because video poker is house-banked and thus is substantially different than regular poker, which remains illegal under Wisconsin law. Finally, the state asserts the Seventh Circuit's analysis was faulty because the court relied on IGRA § 2710(b)(1)(A) in defining poker as Class II gaming. In the state's view, Class II gaming is defined by IGRA § 2703, while IGRA § 2710 imposes an additional condition on tribes seeking to offer Class II gaming. As the state puts it, by looking to IGRA § 2710 to define Class II gaming, "the Seventh Circuit's analysis placed the cart before the horse."

For its second assigned error, the state takes issue with the Seventh Circuit's use of the "Indian law canons" in interpreting the IGRA. Recall that the Indian law canons require a court to interpret ambiguous statutes in the light most favorable to preserving Indian tribal sovereignty. The state asserts that use of the canons was improper where the text of the IGRA is unambiguous. Instead, the proper analysis is to give full effect to the terms of the statute, which, as previously discussed, means that poker in Wisconsin does not fit within the definition of Class II gaming because the state prohibits poker entirely.

For its third assigned error, the state notes that the Seventh Circuit's decision conflicts with the Ninth Circuit's decision in Coeur d'Alene. Now the Seventh Circuit has no obligation to follow a Ninth Circuit decision. And, obviously, the Coeur d'Alene decision was entered three months after the Ho-Chunk decision, so the Seventh Circuit had no opportunity to review and analyze the Ninth Circuit's decision. In fact, one could argue that the Ninth Circuit should have considered and explicitly applied or distinguished the Seventh Circuit's Ho-Chunk analysis. In any event, Wisconsin argues that the Ninth Circuit got it right in Coeur d'Alene by analyzing the IGRA so that the definition of Class II gaming is limited to the express terms of § 2703, without reference to § 2710, and without use of the Indian law canons or application of the Cabazon regulatory/prohibitory test.


V.  Will SCOTUS Intervene?

As noted earlier, SCOTUS has complete discretion whether to accept cases on appeal. When it comes to granting cert, SCOTUS is the ultimate nit, the cranky old guy who sits at the poker table all day to rack up hours for a comped buffet and a shot at the bad beat jackpot. But when it comes to actually playing poker, he just folds everything except Aces and Kings. As I pointed out in the context of the DiCristina petition for cert:

[SCOTUS] receives in excess of 7,000 petitions for writs of certiorari every year, yet takes fewer than 100 cases. Even after adjusting for the in forma pauperis petitions filed by indigent criminal defendants and prisoners which are much less likely to be granted cert, the Supreme Court still grants cert in less than 4% of cases. The Supreme Court is not interested in merely correcting legal errors—that is the role of the Circuit Courts of Appeal and state appellate courts. Instead, the Supreme Court's task is to select cases which either pose important questions of federal law or which resolve significant conflicts between lower appellate courts.

As I correctly predicted, SCOTUS did not find DiCristina worthy of cert, most likely because there was no split among the Circuits as to the proper interpretation of the Illegal Gambling Business Act and because determining whether poker was covered by the IGBA did not present an important question of federal law.

The state of Wisconsin, however, has a much better shot of getting SCOTUS to grant cert in Ho-Chunk. First, SCOTUS has historically considered Indian tribal sovereignty issues to be important questions of federal law, and Indian law issues regularly appear on the SCOTUS docket. In fact, in the Court's most recent Term, the Court issued an important tribal sovereign immunity decision arising out of the IGRA, holding that the federal courts had no jurisdiction over tribal gaming conducted off of tribal lands. Considering how central the Class II / Class III gaming issue is to the operation of the IGRA, SCOTUS might well grant cert in Ho-Chunk solely to resolve yet another significant sovereignty issue created by the IGRA.

The odds of SCOTUS granting cert in Ho-Chunk are augmented by what is at least arguably a Circuit split on the proper method for analyzing whether a game explicitly barred by a state constitution and statute is Class II or Class III gaming. Certainly the Seventh and Ninth Circuits took widely divergent analytical paths to reach opposite conclusions. But, those differences are due in large part to how the cases were briefed and argued. In Coeur d'Alene, the Tribe did not argue that the Cabazon regulatory/prohibitory test should be applied. In fact, the Tribe only referenced Cabazon briefly, and then only with respect to the issue of interpreting the scope of the underlying State-Tribe gaming compact. Also, although the Tribe in Coeur d'Alene did argue in passing that the Indian law canons and IGRA § 2710 supported its position, the centerpiece of its argument was the "skill game" exemption in the Idaho gaming statute, an argument missing from the Ho-Chunk decision. Frankly, in terms of arguments and analysis, the Ho-Chunk and Coeur d'Alene decisions are the proverbial ships passing in the night. Still, given the factual similarities in the cases, SCOTUS may view the divergent results as a sufficient sign of a Circuit split in analyzing the Class II / Class III gaming question to merit granting cert to provide uniform resolution of that issue.

An additional factor that might weigh in favor of SCOTUS granting cert in Ho-Chunk is if a petition for cert is also filed in Coeur d'Alene. Multiple petitions for cert on the same issue out of different Circuits would highlight for the Court the importance of the issue raised, and would demonstrate the frequency at which the issue is confronted by the lower courts. A petition for cert in Coeur d'Alene would improve the chances of SCOTUS granting cert in both cases (in such situations, the Court could either consolidate the cases for joint consideration, or could stay one case pending its decision in the other case).

Should SCOTUS grant cert in Ho-Chunk, its ultimate decision on the merits will likely not have a significant impact on the poker industry as a whole. At most, the decision would potentially permit poker to be offered by tribal casinos and card rooms in those relatively few states which currently prohibit poker. The language of any such decision might also shed indirect light on the issue of whether tribes can offer online poker hosted on tribal lands but involving players outside tribal lands, an issue where the Class II / Class III gaming analysis and tribal sovereignty are in full play. The tribal-based online poker issue, however, will almost certainly be the subject of its own round of intense litigation, should a state and tribe come into conflict on that issue (e.g., the recent and ongoing dispute between California and the Santa Ysabel tribe).

In any event, the smart money, as always, is on SCOTUS denying cert. Yet, the odds of SCOTUS granting cert in Ho-Chunk are not nearly as long as for most cases. Ho-Chunk is a potentially attractive case for SCOTUS to take up, and it will certainly be given serious consideration by the Court. Don't be surprised if Justice Scalia gets all "jiggery pokery" with the IGRA in the Court's upcoming Term.

* * * * *

[FN 1]  The Tribe's prosecutorial discretion argument was founded primarily on a pair of related misdemeanor cases pending since 2013 in Ada County, Idaho (State v. Michael Kasper & Jared Levsinger, Case Nos. CR-MD-2013-0009859, CR-MD-2013-0009864) (See Ninth Circuit Brief of State of Idaho, pp. 35-36). The PPA supported the defendants by trotting out their usual "skill game" dog and pony show, complete with expert witnesses. During arguments on the defendants' motion to dismiss, the deputy city attorney serving as prosecutor suggested that poker games between "friends and family" would not be prosecuted. The magistrate found this degree of prosecutorial discretion was in violation of Idaho's constitutional and statutory gaming policy provisions and made the statute void for vagueness as applied to the defendants. This analytical approach is consistent with current American law, where the theory of desuetude has been abandoned by nearly every state (the notable exception being West Virginia), but where excessive prosecutorial discretion can be a factor in finding a statute void for vagueness when applied in specific situations.

According to the Idaho state court online docket, the Kasper-Levsinger cases are still open, with a hearing having been held on July 21, 2015. The cases are mildly interesting, though of little practical impact beyond the disposition of those individual charges. Still, they will be the subject of a separate blog post in the near future.

PokerStars Sells Out Its Washington Players

The poker world is abuzz with news of PokerStars abrupt decision yesterday to block residents of Washington state from playing for "real money" in PokerStars tournaments and cash games (hat tip to the first source to reach me with the news via Twitter, the esteemed folks at Pokerati.com).  The ban includes players with a Washington address on record regardless of where they are playing, as well as players physically present in Washington state regardless of state of residence.  The ban also prevents those same players from participating in any play money activity with PokerStars if any cash prize is awarded for such play.  According to a PokerStars FAQ page, FPPs, tournament tickets/dollars, and similar earned bonuses will be converted to cash equivalents, and players will be able to withdraw or transfer money in their accounts.

In its official statement, PokerStars pinned the blame for its decision squarely on last week's Rousso decision by the Washington supreme court which rejected a constitutional commerce clause challenge to the validity of the 2006 statutory ban on all online gambling in the state:

PokerStars today announced that it would cease providing real-money poker to residents of Washington State.  To date, PokerStars has operated in Washington on the basis of legal opinions where the central advice was that the state could not constitutionally regulate Internet poker, or at least could not discriminate in favor of local cardrooms and against online sites.  Last week, however, the Washington Supreme Court for the first time rejected that position and upheld the state’s Internet gaming prohibition.

In light of this decision, following extensive consultation with our legal advisors, we believe that the right course of action is to now block real money play by Washington residents on the PokerStars.com site.  This policy will remain in effect until the law changes or subsequent legal challenges succeed. ...

The timing of the PokerStars pullout from the Washington online poker market is rather curious.  Although PokerStars wants to claim that their decision to block Washington residents was required by the recent Washington supreme court decision, the actual timeline of events shows that dog won't hunt:

• Online poker in Washington was likely illegal prior to the legislature passing the explicit online gambling ban.
• Online poker in Washington was unquestionably illegal after the legislature passed the explicit online gambling ban which became effective in June 2006.
• Online poker in Washington remained illegal after the Washington district court upheld the statutory online gambling ban.
• Online poker in Washington remained illegal after the Washington court of appeals upheld the statutory online gambling ban.
• Online poker in Washington remains illegal today because of the Washington supreme court ruling upholding the statutory online gambling ban.
• Online poker in Washington will remain illegal even if appealed to the U.S. Supreme Court, unless and until the U.S. Supreme Court grants certiorari and reverses the Washington supreme court decision (two highly improbable events).

For PokerStars to tie its decision to pull out of the Washington state online poker market to the Washington supreme court's Rousso decision is beyond disingenuous.  PokerStars has been violating Washington state gaming laws since at least the enactment of the online gambling ban, and most likely as long as it has been in business.  Notice that PokerStars itself never bothered to directly challenge the Washington online gambling ban.  Instead, PokerStars was aware of the enactment of a statutory online gambling ban, and a series of court decisions affirming the validity of the statute, yet continued to blatantly operate its business in violation of that statute.  There was nothing magical about the Washington supreme court ruling that suddenly made online poker illegal in the state.  The PokerStars withdrawal is all about creating the appearance of caring about state gaming laws, while generating a smokescreen to hide its past blatant disregard for those laws.

So, why would PokerStars choose to ban Washington residents now, rather than four years ago?  The smart money is on HR2267, the federal online gambling bill which only passed out of committee in the House of Representatives in late July.**  HR2267 includes a so-called "bad actors" provision which would preclude from any federal online gambling licensing any current site that has operated in violation of state or federal laws.  Now, I happen to think that current online poker sites are in fact violating gambling laws beyond Washington's statewide ban, but that's a discussion for an upcoming post.*  In any event, four years ago, the status quo of no federal regulation coupled with benign neglect by state governments enabled online poker sites to continue operations with little risk of criminal liability.  In fact, over that timeframe, PokerStars and Full Tilt have transformed themselves from marginal bit players into the two largest players in the U.S. market.  So, it was clearly in PokerStars' business interests to pretend they were in full compliance with state and federal gaming laws, including Washington's outright ban on online gambling. 

Times change, however, and federal licensing is now moving closer to reality.  Yet federal licensing seems likely to occur only with the support of current brick and mortar gaming giants (Harrah's, MGM, and various tribal casino interests) who will demand a "bad actors" prohibition.  So, PokerStars' current business interests require it to pay more than lip service to the legality of its operations.  Thus, purely as a business decision, PokerStars can withdraw now from the Washington market using the Rousso decision as cover for its change in policy, at the relatively minor cost of sacrificing a small number of players and associated revenues, in exchange for the appearance of complying with state gambling laws and a better shot at avoiding a "bad actors" designation if federal licensing ever becomes a reality.  Missing out on Washington state revenues for a few months or years is a small price to pay for a better shot at a lucrative federal license down the road, which may be the only way for PokerStars to maintain its dominant position in the lucrative U.S. market.

As always in poker, it's all about the money.

----------------------------------------------
*  I have a couple of posts coming over the weekend related to two issues:  a) Was the PPA stupid to bring the Rousso case?, and b) Does the Rousso decision really change anything in terms of whether online poker is legal?  In the meantime, there is some interesting reading in the 2+2 forums on the PokerStars withdrawal from the Washington market, HERE, HERE, and HERE.  It's interesting to note how many Washington poker players apparently had no clue about the statutory ban, the Rousso case, or the Washington supreme court decision.

**  EDIT (1 Oct. 2010):  The original text stated HR2267 passed the House, instead of merely the House Financial Services Committee.  As reader Local Rock pointed out in the comments (and as I noted in an earlier post about the bill), there is a significant difference between passing out of committee and passing the entire House.

Justice Sanders, In the Conservatory, With a Con Law Hornbook

Between football games this past weekend, I was mulling over the recent Washington supreme court decision in Rousso, which rejected the PPA's attack on Washington's total ban on internet gambling.  Reading the forums over at 2+2, the general consensus seemed to be that the decision was wrong, and the justices were either stupid or had ignored the law for political reasons.  This reaction was remarkably similar to the collective 2+2 response to the recent Pennsylvania appellate court decision in the Dent appeal, where the court rejected the PPA's patented "poker is a game of skil and is not gambling" argument (note: the Pennsylvania supreme court has not yet determined if they will review the decision).  Here is a sampling of comments from those two discussion threads:

So tilting that morons have the authority to make these decisions in are country.  A game that has skill, but predominantly chance.  Pff gtfo [link]

You can lead a horse's ass to knowledge but you can't make it listen.  [link]

It's so ironic, much like an experienced player who knows he holds the edge, but fears and treads carefully to the amateur's unpredictability (stupidity?), we fear the stupidity (unpredictability?) of ignorant judges and juries. [link]

It seems the majority in this case cherry picked decisions that supported what they wanted to decide.  [link]

As you know, I agree about the problem of judges ignoring fact and law when making decisions.  ... This is what happens when judges and politicians ignore the US Constitution for a long time.  The system of laws established by the founding fathers is replaced by an unpredictable system of politics.  [link]

I can't believe judges can't discern that poker is a game of skill.  It's just baffling and makes me wonder if it's more political.  [link]

Sorry to disagree but I've lived here for most of my life and the state and local governments in PA are as corrupt as they come.  Organized crime is very real and has a much bigger influence than you can probably imagine here. ...

Of course I can't prove anything but you shouldn't just dismiss the recent decision to allow table games in regards to this reversal.  If someone showed me undeniable evidence that "the fix was in" I would not be surprised in the slightest bit and as you can tell by the tone of my message, I would be more surprised to learn that there wasn't some sort of "favors" or "influence" used to get a couple of judges to play ball.

I could also be wrong and the judges have no sense of logic or reasoning at all and are influenced by their churches etc.. but PA is so damn crooked.  [link]

Basically I don't think it would matter how logical the argument was/is if you have judges that owe some 'favors'.  [link]

They reach different conclusions because the state court justices are ruling what they want the law to be; not what it is as decided by SCOTUS.  Too many judges rule like arbitrators; what they want to rule rather than what the law should require. [link]

I didn't bother to read the opinion.  Once I read that the Court decided that B&M gambling did not compete with online gambling or visa versa, then I knew it was a strictly, and typical, political decision. [link]

The ruling by the Supreme Court of Washington is irrational at best and ludicrous at worse. These kind of political decisions (evading all past legal precedent by irrational and ridiculous factual findings) are killing the US economy, its society and the American Dream.  [link]

The problem is that this totally bogus, political decision will haunt the whole online poker industry for another 1-2 years until SCOTUS reverses it. Also, it just makes the whole US legal system more of a lottery than a judicial system.  [link]

Now, as a lawyer, I think it is more than fair for people to critique judicial decisions, and even disagree with them strongly on their merits.  I can think of a half dozen cases off the top of my head where I briefed an appellate case, and felt the court reached the wrong decision (or in one case, correctly ruled for my client, but for the wrong reason).  But claiming that a court ruled against your position because the judges were stupid, ignorant, incompetent, "political", and/or corrupt is simply sour grapes whining which does nothing to advance the cause of poker legalization.  It's kind of like a sports team blaming a referee for a bad loss while ignoring the players' lack of talent and sloppy execution, and the coach's bad game plan and poor in-game decisions.

In any event, one or two judges might get an issue "wrong", but the recent poker legalization fight hasn't been argued in front of a couple of maverick or senile judges.  In Dent, two of three judges ruled against the "poker as a game of skill" argument (the third would have reversed for lack of evidence and not reached the merits of whether poker is gambling under Pennsylvania law), while in Rousso, a unanimous nine-justice court ruled that Washington could ban online gambling without violating the Constitution's Commerce Clause.  For that matter, we can throw in another panel of three appellate judges from North Carolina who unanimously ruled against the "poker as a game of skill" argument back in 2006 in the Joker Club case.  Do poker legalization advocates truly believe that 14 out of 15 appellate judges are collectively too stupid, ignorant, corrupt, or political to rule in favor of poker if the pro-poker side had the better of the legal arguments?

Let's focus for a moment on the Rousso decision.  When I watched the oral arguments, I felt that at least three of the justices—Justices James Johnson, Richard Sanders, and Gerry Alexander—were open to Rousso's constitutional arguments, and were skeptical of the state's justifications for treating internet gambling differently than brick and mortar gambling.  Yet all three of these justices signed onto the majority opinion, without a dissent or even a concurrence among them, despite the fact that Washington's Supreme Court has a high rate of dissenting and concurring opinions filed for a state appellate court (for the year October 2000-October 2001, 38% of decisions had a dissent, while the nine decisions entered during the past two weeks—the period including Rousso—had four dissents and two concurrences).  Even more significant is that Justice Sanders wrote the opinion for the court! 

What's so noteworthy about Justice Sanders?  Well, Justice Sanders considers himself a libertarian who has a personal responsibility to defend the rights of the individual against the oppression of big government.  Perusing some of Justice Sanders' speeches and writings since becoming a judge paints a picture of a judge who is skeptical of state claims of expansive government powers, sees the role of the judiciary as curbing state actions taken without constitutional authority, and feels he has a duty as a judge to dissent and speak his mind rather than sign on to a flawed opinion for the mere sake of judicial collegiality.   Not surprisingly, many of Justice Sanders' speeches have been to libertarian and conservative organizations such as the Cato Institute, the Federalist Society, the Goldwater Institute, and the Washington State Libertarian Convention. 

A review of the opinions, concurrences, and dissents authored by Justice Sanders demonstrates he is unafraid to advocate ruling against the state or to find constitutional violations by the state on a wide range of issues, including property takings, criminal forfeitures, civil commitment proceedings, free speech rights, and criminal due process rights.  Of some interest to today's younger internet poker players, Justice Sanders wrote a dissent in a medical marijuana legalization case (Seeley v. State), asserting a state constitutional right for use of marijuana on personal liberty grounds.  Of more immediate interest to the Rousso decision, Justice Sanders wrote a dissent in a Dormant Commerce Clause case (Franks & Son v. State) in which he stated that a road use flat-fee tax for trucks was unconstitutional as it placed a disparate economic burden on out-of-state truckers.  It is indisputable that Justice Sanders not only feels he has a duty to dissent when he doesn't agree with the court's majority opinion, but he relishes the opportunity to dissent, and issues dissents freely and often.

Turning back to the Rousso decision, poker advocates should take seriously the fact that the court was not only unanimous, but the decision was written by Justice Sanders.  Yes, the great libertarian champion who fearlessly defends the little guy against an overzealous state government, that's the guy who wrote these passages [.pdf]:

The State wields police power to protect its citizens' health, welfare, safety, and morals. On account of ties to organized crime, money laundering, gambling addiction, underage gambling, and other societal ills, "[t]he regulation of gambling enterprises lies at the heart of the state's police power." [cites].

Internet gambling introduces new ways to exacerbate these same threats to health, welfare, safety, and morals. Gambling addicts and underage gamblers have greater accessibility to on-line gambling -- able to gamble from their homes immediately and on demand, at any time, on any day, unhindered by in-person regulatory measures. Concerns over ties to organized crime and money laundering are exacerbated where on-line gambling operations are not physically present in-state to be inspected for regulatory compliance. Washington has a legitimate and substantial state interest in addressing the effects of Internet gambling.  [pp. 12-13].

This is not to imply the dormant commerce clause can be satisfied any time the State invokes the magic words: "public policy determination." But here there is a legitimate public interest. The ban on Internet gambling is a public policy balance that effectively promotes that interest. A reasonable person may argue the legislature can balance concerns for personal freedom and choice, state finance, and the protection of Washington citizens in a "better" way -- but he or she must do so to the legislature. [p. 21]

Justice Sanders is obviously a smart man who understands the issues in this case.  He favors a libertarian, individual rights, limited government jurisprudence.  He is also unafraid to publicly take unpopular positions, ruffle some feathers, and slap down the state government, whether in majority opinions, dissents, or speeches.  If ever a judge existed who would willingly champion the poker legalization cause, even if only in a blistering dissenting opinion, Justice Sanders is that judge.  Yet Justice Sanders not only didn't vote in favor of the poker legalization position, he actually wrote the opinion rejecting the pro-poker position!  If Justice Sanders isn't buying what the Poker Players Alliance (PPA) is selling, I doubt there's much of a market for their argument among most mainstream appellate judges.

Sometimes in law, you just have to recognize when you have a dog of a case.  The PPA's poker legalization lawsuits seem to have fleas.

Down Goes Rousso! Washington Supreme Court KOs Constitutional Challenge to Online Gambling Ban

The Washington supreme court today handed down its decision in the Rousso appeal, affirming the constitutionality of the state's outright ban of all internet gambling (.pdf version).  As my faithful crAAKKer readers will recall, this is the outcome I predicted earlier this year after watching oral arguments.  Although the court's ruling was not surprising to me, I was somewhat surprised both by the author of the opinion, and by the fact the opinion was unanimous.  While following the Rousso and Betcha.com gambling law appeals the past few months, I signed up for the court's online notifications for when new decisions are issued.  The Washington supreme court has a notably high rate of concurring and dissenting opinions for a state appellate court, indicating the justices are not shy about voicing their analytical disagreements.  The fact that the Rousso decision was unanimous indicates a strong rejection of Rousso's constitutional arguments.  The strength of the rejection is even more evident when one considers that the justice authoring the opinion, Justice Richard Sanders, was one of the three justices at oral argument who seemed most skeptical of the state's justifications for the gambling ban, and most open to Rousso's arguments in favor of striking down the ban.

Before digging into the court's decision, let's take a minute to consider the questions most on poker players' minds:  a) Can this decision be appealed? and b) What does the decision mean for online poker legalization efforts?  The first question is easy—because a federal constitutional issue is at issue, Rousso has the right to file a petition for writ of certiorari ("cert") to the United States Supreme Court.  The U.S. Supreme Court rarely grants cert in more than 1-2% of the cases where petitions are filed, so the odds are rather long against Rousso.  However, this case does present an interesting issue of Commerce Clause jurisprudence in the realm of online commerce, so the case might at least stand out and get a little closer review from the Court.  But even in the unlikely event cert is granted, I'm not certain the present court will be all that interested in striking down Washington's online gambling ban.  The Justices on the Court's conservative side tend to favor state control over "police power" regulations, and gambling regulation is a quintessential exercise of state police power.  Plus, gambling is not a particularly attractive or compelling economic activity, and once you throw in the money laundering and teen addict memes, it's tough to see the Court leaping at the chance to take the case.  Finally, with Congress at least making some attempt to impose a federal system for legalized gambling, the Court may decide it is simply premature to wade into a dispute that seems likely to end up being rendered moot by federal preemption, if not this year, then within the relatively near future.

Turning to the second question, the Rousso decision is, without question or qualification, "bad for poker".  Online gambling of any kind, including online poker, is now unambiguously and inarguably illegal within the State of Washington.  Period.  So, any online poker site which permits individuals located within the Washington state borders to play poker for money is violating Washington law.  Now, those poker sites might be difficult for Washington to prosecute because of jurisdictional issues, but there is no longer any gray area or wiggle room to assert that online poker is legal in Washington.  The Rousso ruling may be the biggest nail in the PokerStars and Full Tilt coffins if a federal online poker regulatory system is enacted which bans "bad actors" from federal licensing—under the language of the current version of HR2267, those sites no longer have any basis to claim they have not been violating Washington's gambling laws if they have taken any wagers from or paid winning wagers to any person located in Washington state since the ban was enacted. 

As far as online poker legalization efforts in general, the Rousso litigation attacked an outright state ban on internet gambling, and failed to have the statute stricken on constitutional grounds.  Similar attacks on less restrictive laws merely regulating online gambling in other states would seem equally immune to court challenge, and the Rousso decision would be available for other courts to cite.  Of course, other state or federal courts examining laws from other states might reach a different conclusion than the Washington supreme court, but the Rousso decision is fairly standard Commerce Clause analysis, so expecting a different result in another case requires quite the leap of faith.

Turning back to the Rousso decision, the court's analysis was actually rather succinct for a constitutional law decision, suggesting the court found the analysis rather straightforward.  The court began by determining whether Congress had explicitly granted states the right to regulate internet gambling.  Not surprisingly, the court determined that neither the Wire Act nor the UIGEA gave states such authority (pp. 4-6).

The court then turned to the Dormant Commerce Clause analysis, which examines first whether a state law discriminates in favor of in-state businesses to the detriment of out-of-state businesses, and then analyzes whether the law's effect on interstate commerce is justified in light of the state's police power interests.

Looking at the discrimination issue, the court easily concluded that the statute applied equally to in-state and out-of-state internet gambling sites, banning all such sites on the same terms (pp. 7-8).  However, Rousso had argued that the effect of the otherwise neutral statute was to favor in-state brick and mortar ("B&M") casinos at the expense of online gambling sites, most of which were based out-of-state.  The court rejected this contention, concluding that online and B&M gambling are different types of activities, and the online gambling ban would not necessarily directly lead to the effect of people gambling in Washington B&M casinos (pp. 8-11).  In other words, people in Washington who are unable to gamble online might well gamble in B&M casinos, but they might just as easily spend their online gambling dollars on any number of non-gambling activities.  Absent some direct economic link between the statute and in-state businesses (the B&M casinos), the online gambling ban was not a prohibited protectionistic statute, but instead was a neutral law with some potentially indirect, constitutionally permissible economic benefits for in-state B&M casinos.

Having found the statute was not unfairly discriminatory, the court next had to weigh the benefits of the online gambling ban against the degree to which the ban burdens interstate commerce.  Now these types of balancing tests are notoriously difficult to apply with any precision, which the Rousso court acknowledged in a footnote (pp. 13-14, n. 7).  Nonetheless, the court readily accepted the state's morality and welfare justifications for the statute (pp. 12-13):

The State wields police power to protect its citizens' health, welfare, safety, and morals.  On account of ties to organized crime, money laundering, gambling addiction, underage gambling, and other societal ills, "[t]he regulation of gambling enterprises lies at the heart of the state's police power." [cites].

Internet gambling introduces new ways to exacerbate these same threats to health, welfare, safety, and morals.  Gambling addicts and underage gamblers have greater accessibility to on-line gambling -- able to gamble from their homes immediately and on demand, at any time, on any day, unhindered by in-person regulatory measures.  Concerns over ties to organized crime and money laundering are exacerbated where on-line gambling operations are not physically present in-state to be inspected for regulatory compliance.  Washington has a legitimate and substantial state interest in addressing the effects of Internet gambling.

Rousso and the Poker Players Alliance (PPA) had argued that Washington could just as easily achieve its objective of protecting its citizens from this parade of gambling horribles by legalizing and regulating online poker, rather than banning it outright.  The court rejected this argument, concluding that online gambling regulation was not inherently superior to Washington's outright ban (p. 15):

Internet gambling has its own unique dangers and pitfalls.  A regulatory system to monitor and address concerns unique to Internet gambling would take significant time and resources to develop and maintain.  Even so, no regulatory system is perfect.  Some concerns will not be fully addressed, while loopholes may permit others to slip through the cracks.  The legislature decided to avoid the shortcomings and ongoing process of regulation by banning Internet gambling altogether.  The legislature could have decided to step out in the rain with an umbrella, but instead it decided to stay home, dry, and without the possibility that its umbrella would break a mile from home.  The judiciary has no authority to second-guess that decision, rebalancing public policy concerns to determine whether it would have arrived at a different result.  Under the dormant commerce clause, we observe only that it is not clear that regulation of Internet gambling could protect state interests as fully as, or at least in a comparable way to, a complete ban.

While still evaluating the possibility of imposing a regulatory scheme in lieu of an outright internet gambling ban, the court also found that any attempt by Washington to regulate foreign-based gambling sites might in itself impermissibly interfere with interstate commerce, as foreign commerce is generally subject to federal laws and treaties which would trump Washington state law (p. 17).  Also, attempts by Washington to regulate out-of-state gaming sites would effectively export Washington's regulatory standards and impose them on other states, which would likely be an impermissible burden on interstate commerce (p. 18).

Rousso also had argued that Washington could legalize online gambling with the regulation of online gambling sites handled by authorities in the licensing country.  The court rejected this suggestion, noting that the legislature could have determined that such foreign-based regulatory action would be insufficient to protect Washington residents from "social ills" such as "permitting its citizens to be exploited, scammed, or made unwilling participants of money laundering schemes" (p. 19).

The court also rejected the PPA's alternative argument that Washington in fact had the ability to regulate online poker, and in fact could effectively regulate online poker much as has been accomplished in other jurisdictions.  The court rejected the PPA's argument (pp. 19-20), reasoning:

Amicus Curiae The Poker Players Alliance champions the position that Washington can regulate Internet gambling itself, encouraging remand to the trial court for further proceedings to show that since other jurisdictions have had "success" with regulating Internet poker, Washington can too.  But what constitutes "success" is a fundamental public policy determination, reserved to the legislature.  Even if on remand Rousso were able to produce reports or studies stating some jurisdictions regulate Internet gambling in a manner that addresses gambling addiction, underage gambling, money laundering, and organized crime issues with success comparable to Washington brick and mortar regulation, the trial court would then need to determine (a) whether the findings from those reports and studies were reliable and outweighed contrary findings; (b) whether and to what extent such regulation could be budgeted for and implemented by Washington; and (c) whether gambling would increase due to the ready availability of gambling on a home computer, whether that increase would exacerbate current concerns -- e.g., causing individuals to go into debt, and increasing gambling addictions, underage gambling, and the prevalence of gambling in society, and whether such increases were "acceptable."  These purely public policy determinations demonstrate why the legislature, and not the judiciary, must make that call.

The court concluded its analysis by reemphasizing that, where there is a legitimate state purpose, it is for the legislature to weigh alternative policies and determine the best course of action:

This is not to imply the dormant commerce clause can be satisfied any time the State invokes the magic words: "public policy determination."  But here there is a legitimate public interest.  The ban on Internet gambling is a public policy balance that effectively promotes that interest.  A reasonable person may argue the legislature can balance concerns for personal freedom and choice, state finance, and the protection of Washington citizens in a "better" way -- but he or she must do so to the legislature. [p. 21]

... Rousso fails to show a ban on Internet gambling is useless to address legitimate state interests, including reducing underage gambling, compulsive gambling, and Washingtonians' unintentional support of organized crime and money-laundering operations.  [p.23]

Here, the legislature balanced public policy concerns and determined the interests of Washington are best served by banning Internet gambling.  The legislature chose the advantages and disadvantages of a ban over the advantages and disadvantages of regulation.  The evidence is not conclusive.  Many may disagree with the outcome.  But the court has no authority to replace the legislature's choice with its own.  Under the dormant commerce clause, the burden on interstate commerce is not "clearly excessive" in light of the state interests. RCW 9.46.240 does not violate the dormant commerce clause.  [p. 26].

Although I hate to say "I told you so" ... wait, who am I kidding?  Of course I love to be proven right!  In any event, the Rousso court's reasoning tracked closely with what I predicted in my initial analysis of the appeal:

• The court would show great deference to the legislature's policy decisions.
• The court would take into account the ongoing efforts to impose a federal regulatory scheme.
• The court would find online gambling to be different in kind from brick and mortar gambling, and thus would reject the idea that an online gambling ban was a protectionistic effort to benefit in-state brick and mortar casinos.
• The court would defer to the state's contention that online gambling would lead to a host of social ills, including underage gambling, pathological gambling, crooked games ("scamming" in the court's words), and organized crime and terrorism (money laundering).

Reading the court's decision, it seems the only issue I missed was the impact of federal legalization efforts, which were not cited in the court's decision.  Otherwise, though, the court's decision hit all the points I predicted months ago after merely reading the parties' appellate briefs.  Now, I have to admit that my prediction was really not all that impressive.  It's sort of like having the table rock check-raise all-in preflop; putting him on Aces or Kings is fairly easy.  But my point is that the court's decision should have been predictable for all the attorneys on the pro-poker side of the case.  What, then, was the point in pursuing this dog of a case, which resulted in a state supreme court going on record saying a state can not only regulate online poker, but ban it outright? 

Because of the PPA's hubris in pursuing this appeal, the Rousso decision will now be available to be cited and relied upon by other courts when they are confronted with the issue of state regulation of online gambling.  Much like the ill-conceived "poker is a game of skill and not gambling" line of litigation, the PPA has taken an area of law which was gray and ambiguous, and forced a state appellate court to clarify the law with a definitive decision adverse to the interests of online poker players.*  The PPA's attorneys are from a well-respected national law firm, and clearly are not idiots.  Absent any better explanation, the cynic in me wonders whether the PPA's litigation efforts are merely a stalking horse litigation strategy testing the legal waters for the PPA's puppetmasters at Full Tilt and PokerStars. 

In any event, with this latest appellate court defeat, it's high time for the PPA to throw in the towel on their failed poker "legalization by litigation" strategy, and refocus their resources on lobbying Congress and state legislatures for statutory changes.

-----------------------------------------------------------
* For the record, the PPA is "extremely disappointed" by the Rousso decision, and Rousso plans to appeal to the U.S. Supreme Court.  For my part, I'm extremely disappointed when my suited connectors fail to flop a straight flush, but I'm willing to lay odds that I will flop at least a dozen straight flushes before the PPA wins a pro-poker final decision from any appellate court.

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 tvw.org (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 Betcha.com 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 Betcha.com 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.