DiCristina—Midnight Strikes for Poker's Cinderella Case

Last week, the Second Circuit Court of Appeals issued its much-anticipated appeal decision in United States v. DiCristina. Although sharply disappointing to poker players, the Second Circuit's reversal of Judge Weinstein's pro-poker decision was predictable and straightforward. Excellent coverage and analysis of the appeal decision can be found at these poker media sites:

• "The Judges' Game" at Hard-Boiled Poker, by Short-Stacked Shamus.
• "Court Reverses DiCristina Decision, But Skill Issue Remains Unresolved" at Online Poker Report, by Chris Grove.
• "THE FIGHT: DiCristina, California and Reid Spell a Bad Week for Poker", at Bluff Magazine, by Dave Behr.
• "Online Poker May Be Considered Illegal Gambling Whether Based On Skill Or Not", at Forbes.com, by Darren Heitner.
• "U.S. Court of Appeals Reverses Weinstein Decision in DiCristina Case", at Diamond Flush Poker, by Diamond Flush.

The above sources provide a thorough discussion of the appeal decision. For what it's worth, and in the interest of closing the circle on my prior analysis of the DiCristina district court decision and appeal, here are my thoughts on the Second Circuit's decision.


A.  State law defines gambling for IGBA violations.

The essence of the Second Circuit's ruling is that state law defines "illegal gambling" for purposes of establishing a violation of the federal Illegal Gambling Business Act (IGBA). The crux of DiCristina's argument was that the IGBA had an independent definition of gambling (based on a "predominate factor" analysis), and thus not all gambling illegal under state law was illegal gambling under the IGBA. This was an essential premise for Judge Weinstein's analysis of the "game of skill" argument because everyone involved in the case—DiCristina, the U.S. attorneys, Judge Weinstein, and the Second Circuit—agreed that poker is illegal gambling under New York state law. Thus, for the court to even reach the "game of skill" argument, the court first had to find that the IGBA's definition of "illegal gambling" was both different from and narrower than the definition used in New York state law. In other words, Di Cristina could only win if it were possible for certain kinds of gambling, including poker, to be illegal under state law but outside the scope of the IGBA.

In a relatively brief and workmanlike analysis, the Second Circuit concluded that the plain language of the IGBA did not support DiCristina's argument. The court determined that the IGBA has only three elements:  a) a gambling business operating in violation of state law; b) five or more people involved in the business; and c) substantially continuous operation for more than 30 days or gross receipt in excess of $2,000 in any single day. There was no dispute DiCristina's poker operation violated the latter two points. Further, as noted above, DiCristina had also conceded poker was illegal under New York law, a concession both Judge Weinstein and the Second Circuit noted was well-established by New York state appellate case law.

The Second Circuit found that DiCristina and Judge Weinstein erred in attempting to add a fourth element to the mix by requiring the predicate gambling act to also meet a specific definition found in the IGBA:

(2) “gambling” includes but is not limited to pool-selling, bookmaking, maintaining slot machines, roulette wheels or dice tables, and conducting lotteries, policy, bolita or numbers games, or selling chances therein.

The Second Circuit found that this subsection was not a definition of "gambling", but rather was merely an illustration of the types of gambling businesses covered by the IGBA. The court noted that this subsection (2), unlike subsections (1) and (3), did not use the phrase "'gambling means", even though an earlier draft of the statute considered but rejected by Congress used the word "means" in subsection (2). Also, the court observed that subsection (2) was not defining gambling but rather was focused on gambling businesses. Looking at subsection (2), it does not actually list illegal games, but rather lists types of activities—e.g., "bookmaking" or "conducting lotteries"—that profit from illegal gambling. Given the plain language of the statute, the court concluded that operating a poker room was clearly an illegal "gambling business" under New York state law and thus was illegal under the IGBA so long as the IGBA's size and scope requirements were met.

The Second Circuit also made a significant observation that undercut Judge Weinstein's finding of ambiguity in the IGBA definition of "gambling":

We note that the District Court’s analysis, which turned on the question of whether skill predominates in a particular game, would, as the District Court acknowledged, “require ‘an ad hoc analysis of how similar or dissimilar the game was to those listed in IGBA’s list of examples,’ creating an ‘extraordinarily complex and unpredictable approach to the statute.’”

In other words, the analytical approach advocated by DiCristina and adopted by Judge Weinstein—requiring an independent analysis of the predicate gambling offense under the IGBA—actually would inject a significant element of ambiguity into the IGBA. Relying on state law alone to define illegal gambling for purposes of the IGBA is less complicated and provides individuals with more clarity as to whether their business activities are covered by the statute. By finding that the IGBA had only three elements, and by rejecting Judge Weinstein's determination that "gambling" was an additional element to be analyzed under the IGBA, the Second Circuit found there was no ambiguity as to whether operating an illegal poker room was a violation of the IGBA.

Finally, the Second Circuit rejected DiCristina's argument that whether poker was "gambling" under the IGBA was an issue for the jury to decide. Generally speaking, issues of law are for the court to determine, while issues of fact are decided by the jury. DiCristina argued that whether poker is gambling under the IGBA was a mixed question of law and fact, and thus should have been submitted to the jury rather than decided by the court. The Second Circuit rejected this argument, finding that the issue of whether poker is gambling under the IGBA is a pure issue of statutory construction which would not vary based on the facts of a particular case. This argument was a long shot by DiCristina, but the court's conclusion is still important because in future cases defendants will not be able to request that the issue of whether poker is gambling be submitted to a jury (which would presumably be more sympathetic to the "game of skill" argument). Instead, whether poker is illegal gambling will continue to be determined by the courts, where poker players and the "game of skill" argument have not had the best track record.


B.  "Game of skill" analysis found to be irrelevant.

Poker players were ecstatic about Judge Weinstein's ruling which found poker to be a "game of skill". On appeal, however, because the Second Circuit determined that state law governs whether poker is illegal gambling, and because New York state courts have held that under state law operating a poker room is illegal, the Second Circuit noted that Judge Weinstein's lengthy "game of skill" analysis was utterly irrelevant to determining whether the IGBA had been violated. In fact, the Second Circuit engaged in no analysis of the "game of skill" argument at all, other than noting that the argument had been raised, and then brushing it off by finding the argument was "inapposite" in the context of the IGBA. So, the vast majority of Judge Weinstein's 120 page decision was simply ignored by the Second Circuit.


C.  The Second Circuit's ruling was not a surprise.

Back in June, several members of the poker media attended the DiCristina oral argument before the Second Circuit, as did representatives affiliated with the PPA (Online Poker Report and Diamond Flush Poker both posted excellent summaries of the argument). Post-argument comments ranged from upbeat to gushing. A consensus narrative emerged that the pro-poker attorney had scored a solid knockout against the bumbling Assistant United States Attorney. Yet, less than two months later, the Second Circuit awarded the United States a decisive win. So what happened?

First, in modern appellate litigation, the importance of oral argument is wildly overestimated by the press and the public. In fact, most appellate cases at both the state and federal levels are submitted solely on written briefs, without argument. Further, even in cases where argument is granted, oral argument is rarely determinative of the outcome of the case. At best, oral argument offers attorneys an opportunity to respond to judges' concerns about policy implications of various rulings. But in most cases, oral argument is simply garnish on the main arguments raised in the parties' briefs. [FN1].

In DiCristina, the Second Circuit issued its decision less than two months after oral argument. This suggests that the court was predisposed to rule against DiCristina based on the briefs, and nothing was said at oral argument that caused any of the judges to reconsider that predisposition. To observers, the attorney for DiCristina may have handled the panel's questions better, but the judges weren't grading on style, they were looking for any issues that they might have overlooked in the briefs. Oral argument satisfied the judges that they understood the issues raised in the briefs, and thus ratified their pre-argument inclination as to how the case should be decided.

Several factors made the United States' position a heavy favorite on appeal. First, as I noted previously, Judge Weinstein is a judge with a history of being reversed for going outside the judicial mainstream in some criminal law cases. In a legal Catch-22, DiCristina needed to draw a trial judge like Judge Weinstein who would be open to his novel "game of skill" argument. Yet having such a judge rule in his favor immediately raised red flags at the appellate level. The fact Judge Weinstein needed 120 pages for his analysis of a simple statutory construction issue likely only waved those red flags harder.

The Second Circuit clearly had trouble accepting Judge Weinstein's analysis. In order to reach the "game of skill" argument, Judge Weinstein had to find a way around a significant amount of contrary precedent. The Second Circuit was simply unwilling to make the same analytical leap. The Second Circuit noted that prior case law in the Second Circuit (United States v. Gotti) established that poker—albeit video poker—could be a predicate offense under New York law, and further established that IGBA violations were based on state gambling law without further independent analysis of whether a particular activity was "gambling" under the IGBA; the court noted that the Ninth Circuit also interpreted the IGBA in the same manner. The Second Circuit further noted that the Third Circuit had ruled in United States v. Atiyeh that an IGBA violation could occur even without participation in the gambling activity, so long as the defendant participated in the gambling business. Finally, the Second Circuit noted that numerous federal Circuit Courts of Appeal had affirmed IGBA convictions predicated on gambling activities which were not specifically identified in the IGBA, but were violations of state law, including poker, video poker, blackjack, gin rummy, and bingo.

The Second Circuit also cited to an interesting federal district court decision from Guam, United States v. Hsieh, decided just two months prior to oral argument in the DiCristina appeal. The judge in Hsieh specifically analyzed and rejected Judge Weinstein's analysis of the IGBA in denying a motion to dismiss an indictment for running a poker business in violation of the IGBA. Although the Second Circuit only cited Hsieh once as part of a string cite of cases, even a cursory reading of Hsieh reveals its analysis had a profound influence on the Second Circuit's DiCristina decision. In fact, the influence of Hsieh on the Second Circuit's DiCristina opinion is so pronounced that in a non-judicial context one could argue that the Second Circuit effectively plagiarized the Hsieh decision. In any event, Hsieh is an excellent example of mainstream judicial analysis of the IGBA which highlights how far out of the mainstream Judge Weinstein's decision rested, and how difficult a task DiCristina's attorneys faced in attempting to defend Judge Weinstein's ruling on appeal.

Finally, both the facts of the case and the policy implications of Judge Weinstein's analysis likely heavily influenced the Second Circuit's ruling. At the end of the day, DiCristina was not some local businessman who had inadvertently run afoul of an obscure federal regulation in between attending Chamber of Commerce meetings and sponsoring high school athletic teams. DiCristina admitted he had run an illicit, unlicensed, untaxed poker room for a profit, complete with security cameras and guards, knowing it was illegal under state law—hardly the portrait of a sympathetic defendant, and certainly far removed from a simple home game (which the court specifically noted would not trigger the IGBA). Further, if the Second Circuit ruled in favor of DiCristina, the door would be opened to underground poker rooms across the country operating free from fear of prosecution under the IGBA, and with the potential additional evils of racketeering, corruption, and money laundering (remember, the IGBA was enacted in response to gambling run by organized crime groups). Although these considerations did not dictate the Second Circuit's analysis, judges are always sensitive to the potential impact of their rulings when considering novel legal arguments.

In the end, the Second Circuit's DiCristina decision followed the easiest analytical path. Asking the Second Circuit to follow Judge Weinstein's tortured analysis in finding a poker loophole in the IGBA was simply too ambitious a goal, too heavy a lift for poker advocates.


D.  DiCristina has no chance at prevailing on further appeal.

When a party is deeply dedicated to a case, it is common to hear them rehtorically claim they will "take it all the way to the Supreme Court!" if necessary to get justice. Many poker players have suggested DiCristina should appeal, and the PPA has declared itself ready to support DiCristina in a further appeal. The only problem? DiCristina is plum out of viable appellate options.

Technically, DiCristina has two avenues of further appeal available. The first is to file a petition for en banc review by the full panel of active judges sitting on the Second Circuit (roughly 13 judges total, depending on retirements, recusals, and other vacancies). The second is to file a petition for writ of certiorari with the U.S. Supreme Court. The critical and insurmountable obstacle facing DiCristina is that both of these appellate options are discretionary with the courts, not a matter of right.

Looking first at the U.S. Supreme Court, the Court 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. In this case, the Second Circuit ruling in DiCristina is consistent with the other Circuits in looking to state law to establish a predicate IGBA offense, and thus the Supreme Court would likely see no reason to step in to review the decision. Ironically, had the Second Circuit affirmed Judge Weinstein's decision, the resulting Circuit split would have made DiCristina a much more likely candidate for Supreme Court review. But as it stands, DiCristina will not be the case where the Supreme Court wrestles with the finer points of variance and expected value.

Turning back to en banc review by the full Second Circuit, DiCristina's chances are actually worse than with the Supreme Court. Again, en banc review is discretionary with the Second Circuit. By rule, en banc review is disfavored and limited to cases where a panel decision either addresses an issue of "exceptional importance" or which conflicts with prior decisions of the Circuit or the Supreme Court. Statistics kept by the federal courts demonstrate that en banc review is exceedingly rare (p. 4); from 2000 through 2010, the federal Circuit Courts decided over 325,000 appeals, and issued en banc decisions in only 667 (0.21%) of those cases. Over that same time period, the Second Circuit issued en banc decisions in only 8 out of 27,856 of its appeals (0.03%). The recent trend is even less favorable; in the twelve month period ending in September 2012, the Circuit Courts granted en banc review in only 59 of 35,095 appeals (0.17%). During that same period, the Second Circuit decided 3,448 appeals and never granted en banc review.

Stick a fork in DiCristina. This case is done.


E.  DiCristina has only symbolic value for poker legalization.

Many in the poker community, including the PPA, were quick to point out that, because the Second Circuit did not reach the "game of skill" argument, the portion of Judge Weinstein's ruling declaring poker to be a game of skill when analyzed under the "predominate factor" test for gambling remained good law that can be cited in future cases in support of a "game of skill" argument. In technical legal terms, the case could be cited to another court as having been "reversed on other grounds"; i.e., that the appellate court did not reverse the trial court's decision on the "game of skill" issue. [FN2].

The problem with grasping for this silver lining is that there are different weights given to "reversed on other grounds" citations. The stronger use of this type of citation is where the appellate court implicitly endorses a trial court decision on one issue, but reverses the trial court on another issue. For example, an appellate court might say something like, "Although we agree with the trial court's ruling on the admissibility of the expert testimony, we find that the trial court erred in the calculation of damages, and thus we must reverse and remand for a new trial as to damages only." In such a case, even if the appellate court confines its discussion to the damages issue, the appellate court has endorsed the trial court's evidentiary decision as being correct.

By contrast, a much weaker use of the "reversed on other grounds" citation occurs when, as in DiCristina, the appellate court is faced with several issues, but only analyzes one issue because it is dispositive of the case. The remaining issues are not analyzed by the appellate court, and there is no implication of endorsement of the trial court ruling as to those issues. In such a situation, any citation to the trial court decision is of limited value, carrying at best the same weight as any federal district court decision which has not been appealed, but with an asterisk because the cited decision was actually reversed on appeal.

It is hard to imagine a court case where Judge Weinstein's DiCristina decision will play a significant role in a "game of skill" challenge to any gambling law. Other anti-gambling federal laws such as UIGEA, RICO, and the Travel Act are like the IGBA in relying on a violation of state gambling law as an element of or predicate offense for a violation of federal law, rendering Judge Weinstein's ruling irrelevant. In many states, poker is explicitly defined as gambling by statute or regulation, or has been found to be gambling pursuant to case law, again rendering Judge Weinstein's ruling irrelevant. In those states where poker's status under state gambling laws has not yet been established, Judge Weinstein's DiCristina decision will be competing with a number of other recent state appellate court decisions which have considered and rejected the "game of skill" argument (all of which had technical evidence and expert testimony about the skill element of poker, and most of which involved the PPA as amicus curiae). [FN3]. Considering that gambling issues are generally a matter of state law, and given that state appellate court decisions are generally given more weight than federal district court decisions (particularly on issues of state law), state appellate courts confronted with pro-poker "game of skill" arguments in the future will likely give Judge Weinstein's DiCristina opinion little consideration. [FN4].

The legacy of Judge Weinstein's DiCristina decision will most likely be as the Baxter v. United States of the modern poker era. Baxter, decided in 1986, is another federal district court case which held that poker was a game of skill for purposes of federal law, albeit a federal tax statute. Within the poker community, Baxter has long been touted as a significant legal victory. The reality is that Baxter was actually an obscure decision of little or no consequence to the issue of poker's legal status. Like Baxter, Judge Weinstein's ruling in DiCristina is ultimately nothing more than a nice little vanity award, soothing the bruised egos of poker players who crave mainstream respect.

The course of the DiCristina litigation reminds me of the Cinderella fairy tale. Poker players feel like their game does not get the love, attention, and respect it deserves. Then, Judge Weinstein waved his magic wand and declared poker to be a game of skill. Suddenly, poker had attained its rightful place in the world. Happy days! But, the magic could only last so long. Cinderella's fun at the ball ended when the clock struck midnight, while the DiCristina poker celebration ended with the Second Circuit's decision.

The only problem with this analogy? There is no Prince Charming on the horizon looking to sweep poker players off to happily-ever-after.


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[FN1]  Appellate arguments are easily my favorite part of being a litigator. So it pains me to admit that in most cases my argument is unlikely to materially affect the outcome of the appeal. Still, that 15-20 minutes in front of a "hot bench" (a panel of appellate judges with numerous questions) is always a thrilling experience.

[FN2]. For those of you curious how this type of citation would look in a legal brief:

A federal court which analyzed extensive expert evidence about poker concluded that poker was a game of skill under a "predominate factor" test. United States v. DiCristina, 886 F. Supp. 2d 164 (E.D.N.Y. 2012), reversed on other grounds, --- F.3d ---, 2013 WL 3984970 (2d Cir. 2013).

Interestingly, there is also a legal citation form, "affirmed on other grounds", typically seen where a party may have two or more paths to victory on appeal, and the appellate court chooses a different analysis to reach the same conclusion as the trial court.

[FN3]. Recent state appellate court decisions which have rejected the "game of skill" argument for poker include:

• Joker Club, LLC v. Hardin (North Carolina Ct. App. 2007)
• Commonwealth of Pennsylvania v. Dent (Pennsylvania Super. Ct. 2010) (my discussion)
• Three Kings Holdings, L.L.C. v. Six (Kansas Ct. App. 2011) (the "Kandu case")
• Town of Mt. Pleasant v. Chimento (South Carolina Supreme Ct. 2012) (my discussion) (much like the Second Circuit's decision in DiCristina, the South Carolina Supreme Court found that the "game of skill" argument was irrelevant to determining whether poker was included in the state's anti-gambling statute).

Additionally, the PPA pressed a "game of skill" argument in Colorado. A district court ruled that poker was defined to be gambling under Colorado law and thus the "game of skill" argument was irrelevant. The Colorado supreme court declined to accept the PPA's appeal.

[FN4]. Whether the PPA should continue forward with its quixotic "legalization by litigation" strategy in light of the DiCristina appellate decision is a question for another post. However, my pre-DiCristina thoughts are HERE and HERE.

Managing Expectations for DiCristina

This week, the Second Circuit Court of Appeals heard oral arguments in the DiCristina poker case. The DOJ is challenging a federal district court decision which found that the Illegal Gambling Business Act (IGBA) did not apply to poker because poker is a game of skill and the IGBA only applies to games of chance. Poker media guru "Diamond Flush" posted an excellent summary of the arguments, which by all accounts went very well for the pro-poker side.

PokerNews published highlights of a discussion with PPA litigation director Patrick "Skallagrim" Fleming, which is well worth a read. Unfortunately, PokerNews dropped the ball on a couple of major legal issues:

A Circuit Court ruling that IGBA doesn't include poker would be a big victory for the legality of poker. As it's already been determined that The Wire Act doesn't apply to poker, the IGBA is the last federal law the DOJ interprets as making poker illegal and was at the center of the Black Friday indictments. Other charges of money laundering and violating the Unlawful Internet Gambling Enforcement Act were dependent on operating a poker business being unlawful under the IGBA.

....

The case is sort of a freeroll for poker. If the DOJ wins, it will be able to continue interpreting the IGBA to include poker as it has been. If DiCristina wins, the DOJ won't have any legal standing against poker on a federal level. There also seems to be very little chance that the court would overrule Judge Weinstein's finding that poker is a game of skill since it doesn't affect the appeal.

There are two significant errors here, which are somewhat interrelated. First, the money laundering and UIGEA charges in the Black Friday indictments were not solely predicated on the IGBA violation. Instead, the indictments were based on violations of both federal law and New York state gambling laws. Certainly having the IGBA found inapplicable to online poker would undermine the Black Friday charges, but a pro-poker decision in DiCristina would not negate the UIGEA and money laundering charges.

Second, and more significantly, it is simply untrue that "the IGBA is the last federal law the DOJ interprets as making poker illegal" and that a victory in DiCristina means "the DOJ won't have any legal standing against poker on a federal level." Of course, the UIGEA still prevents the transmission of money to fund online poker sites operating in violation of state law, and most states have laws which classify poker as gambling for purposes of gaming regulations. More to the point, however, is that the Travel Act—a breathtakingly broad statute targeted at criminal enterprises—very much remains in play. As I wrote when analyzing the federal district court ruling in DiCistina:

The [DiCristina] decision only interpreted the IGBA. There are other federal statutes that could still be used by federal prosecutors against businesses offering poker, most notably the Travel Act. Unlike the IGBA which contained its own definition of "gambling", the Travel Act simply relies on a violation of a state gambling law to establish the predicate offense. Also, note that the Travel Act prohibits use of "the mail or any facility in interstate commerce" to "distribute the proceeds of any unlawful activity" or "otherwise promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on, of any unlawful activity". This arguably could mean that merely mailing checks, promotional materials, or awards to players could be a violation of the Travel Act. So far federal prosecutors have not used the Travel Act in any poker-related prosecutions (at least not to my knowledge), but that might change if they lose the IGBA as a tool because of this decision.

My words turned out to be prophetic (though my prophesy wasn't any more challenging than predicting that LeBron James would win multiple NBA titles). A mere three weeks after the district court decision in DiCristina was issued, the DOJ amended their Black Friday civil forfeiture complaint against PokerStars, Full Tilt Poker, Ultimate Bet, and various business entities and individuals associated with those sites to include a Travel Act violation as a basis for forfeiture of poker-related assets. So, although it's unclear where PokerNews was getting its legal information on this point, PokerNews' coverage was unquestionably inaccurate on a significant legal point.

Now, why does it matter if PokerNews got this legal point wrong? The biggest issue is that this kind of misinformation feeds into the poker community's collective misunderstanding of applicable law and raises unrealistic expectations, in particular an impression that a favorable appellate ruling will clear the way for legalized online poker on a national basis. If the Second Circuit affirms the district court's decision—and I certainly hope that it does so—the effect on online poker will almost certainly be rather modest. As I wrote in my previous analysis of the DiCristina district court decision:

Even if the [DiCristina] decision is affirmed on appeal, its impact on the poker legalization fight is likely to be minimal. In many states, whether poker is a game of skill is utterly irrelevant as poker is explicitly regulated as gambling. In other states where poker's status is not defined by statute, courts have already ruled that poker is gambling, and those courts are unlikely to reverse course after having decided the issue. The decision probably has little application to other federal gambling statutes because the decision is based on the IGBA's particular definition of "gambling". ... Most likely, the decision will ultimately have only symbolic value.

Now, I don't want to leave the impression that DiCristina is not important; it is unquestionably a significant case. In fact, if the Second Circuit affirms the district court's ruling, then the DiCristina case will have significance both in removing poker from the ambit of another federal statute, and in being the first appellate court decision finding poker to be a game of skill. Nonetheless, at the end of the day, even a win in DiCristina will have little discernible impact on the effort to legalize poker. [FN1]. That's a fight that will need to be waged on a state-by-state basis, at least for the time being.

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[FN1]  As I previously discussed, one potential major winner from a DiCristina win in the appellate court is PokerStars:

Because the decision is from a different court, it does not change the pending DOJ Back Friday criminal or civil forfeiture cases other than to make it marginally easier for the remaining defendants to leverage a better plea bargain or settlement because the DOJ's IGBA and associated money laundering charges are now in a somewhat weaker position. The Black Friday cases are ultimately more about the banking and financial shenanigans of those involved than the underlying poker businesses themselves. But the decision certainly strengthens the argument to be made by PokerStars to state gaming regulators that merely running an online poker business did not violate federal law. Even if the decision is reversed on appeal, PokerStars could still argue that if a respected federal judge thought that poker was not regulated by the IGBA, then they certainly had a good faith belief they were not violating the IGBA. Of course, there would still be the matter of PokerStars allegedly violating state gambling laws, the UIGEA, federal money laundering laws, and federal banking laws. But if the applicability of the IGBA and the Wire Act can now be called into question, it becomes easier to raise doubts about some of the other laws in the mix.

Unfortunately, appellate courts rarely move quickly. A decision will likely take three to six months to be issued. If so, then PokerStars will be denied an opportunity to rely on a potentially favorable appellate court decision as New Jersey considers PokerStars' application for a gaming license.

Same Song, Different Verse:Poker Players Lose Again (South Carolina Edition)

"Insanity: Doing the same thing over and over again and expecting different results."

~Albert Einstein

This morning, the South Carolina Supreme Court finally issued its long-awaited decision in Town of Mount Pleasant v. Chimento, the legal challenge to the application of the state's anti-gambling statute to poker games hosted in a private residence. Considering the case was argued more than two years ago, I think it's now safe to conclude that the reason for the lengthy delay between the argument and the ultimate release of the opinion was that the judges simply could find little common ground on which to agree. The court issued a fractured decision, with two of the court's five judges joining in a plurality opinion delivering the court's judgment, two judges joining in a dissenting opinion, and one judge concurring in the plurality's judgment while agreeing largely with the dissent's reasoning. Despite the fractured decision, the ultimate result was much the same as in other state court challenges to state gambling laws—the Chimento court held that poker was illegal gambling under state law, at least when played for money in a private home whose owner took a small rake or fee for hosting the game.

I.  The Three Opinions

A.  Case Background:  I previously summarized in detail the factual background of the case as well as the primary arguments raised by the parties. I will presume you are familiar with my prior summary as you read the remainder of this post. However, I will summarize the relevant facts again here to help frame the court's decision:

• The game was held in a private residence.
• The game was regular and recurring, typically being held once or twice each week.
• The game was open to new participants known to the game organizer or brought to the game by established players.
• Participants—including new players—could learn about the game via an online social network.
• The game involved very low stakes Texas hold 'em cash game play—blinds of 25¢ / 50¢, with a maximum buy-in of $20.
• The game organizer (who also resided in the house with his girlfriend) took a small rake from each pot, ostensibly to cover food and beverage expenses. The game organizer testified that the maximum rake was 50¢ per pot, while a state investigator testified the maximum rake was $2 per pot (which seems unlikely given the stakes).

B.  Issues:  The illegal gambling charges against the defendants were based on a two-century old statutory ban on gambling (the full text of the statute is set out in my prior summary of the arguments). The court's analysis came down to two particular phrases in that statute (emphasis added):

If any person shall play at any tavern, inn, store for the retailing of spirituous liquors or in any house used as a place of gaming, barn, kitchen, stable or other outhouse, street, highway, open wood, race field or open place at (a) any game with cards or dice, ...

Essentially, the defendants argued that: a) poker was a game of skill and the statute implied only that card games of chance were illegal gambling; b) a private residence could not be a "house used as a place of gaming" where the only game being played was poker; and, c) the phrase "house used as a place of gaming" in the statute was unconstitutionally vague because an ordinary citizen would not appreciate that the statute might be interpreted to apply to a private home poker game.

The state argued that: a) the statute barred gambling on all card games regardless of whether they were games of skill or chance; b) a private residence could be a "house used as a place of gaming" if the owner or host took a fee or rake; and c) the phrase "house used as a place of gaming" in the statute could be understood by an ordinary citizen to apply to a poker game such as the one attended by the defendants, and thus the statute was not unconstitutionally vague.

The court was ultimately confronted with two issues. First, is playing poker in a private residence illegal gambling under South Carolina law? Second, if playing poker in a private residence is illegal gambling under the statute, is the anti-gambling statute unconstitutionally vague because it fails to clearly define "house used as a place of gaming"? If the defendants won on either issue, they could not be convicted of a gambling offense.

C. Plurality Opinion:  At the outset, it should be noted this is the rare appellate decision (at least for a state court) which does not have a true majority opinion—a decision in which a majority of the justices agree both as to the judgment (the result) and the opinion (the legal reasoning used to reach the result). Occasionally, as here, a majority of the judges can agree on the ultimate judgment—reversal of the lower court and a reinstatement of the guilty verdicts—but do not agree on how the law supports that result. Such opinions are binding on the parties, but generally are not given as great of weight when cited by other courts. In this case, the plurality opinion by Justice Pleicones (joined by Justice Beatty) leads off the official decision because it is the opinion with the most support by the justices in the majority as to the judgment. As will be seen later, Chief Justice Toal concurred in the judgment (agreed the guilty verdicts should be reinstated), but actually disagreed with both the plurality and the dissent on different aspects of the constitutional questions presented.

After discussing the legislative history of the two-century old anti-gambling statute, the plurality first concluded that a private residence could constitute a "house used as a place of gaming", but noted that such a definition excluded "casual games" (emphasis added):

By altering the prohibition on playing prohibited games from “public house” to “house used as a place of gaming,” the legislature effectively adopted the view of Justice Brevard in his Brice dissent. What was originally a ban on merely playing these games “in a public house” became a ban on playing of these games in a residence or mansion house only when that house was “used as a place of gaming.” Thus, individuals gambling on a casual game in a person's home were no longer subject to prosecution under this statute.

If, however, a dwelling house is being used “as a place of gaming,” then all those playing the game, whether or not they are betting on it, and those present and betting, even if not playing, are guilty of violating § 16-19-40. To the extent that respondents argue that a residence or dwelling cannot be a house within the meaning of this statute, their contention is refuted by Faulkener, supra, and the plain language of the statute.

To determine whether the residence was being "used as a place of gaming", the plurality next looked at whether poker is illegal gambling under South Carolina law. This is the central issue in the case, and the place where the PPA's standard "poker is a game of skill" argument was brought to bear. The plurality sidestepped the entire skill/chance analysis, however, by finding that the skill/chance analysis applies only to "lotteries" while "gambling" involves betting on games, and thus any analysis of whether skill or chance predominates with respect to the underlying game is irrelevant (emphasis added):

Under the plain language of § 16-19-40, gambling on a game of skill is a violation if that gambling is being done in a prohibited location. The statute specifically lists several games that are exempt from the absolute ban on playing games in prohibited locations: billiards, bowls, backgammon, chess, draughts, and whist. These games all involve skill, yet betting on these games is a crime under the statute. [citations]. A violation of the gaming prohibition of § 16-19-40 does not depend on whether the particular game involves more skill than chance.

The plurality further held that, under South Carolina law, the key defining component of gambling is whether money is wagered, noting that money can be wagered on games of skill as readily as games of chance (emphasis added):

[G]ambling/gaming depends not on the skill/chance ratio, but on the wager.

We hold that one "games" within the meaning of § 16-19-40 when money is wagered on Texas Hold’em, even though it is a game in which skill predominates.

Thus, the plurality held that poker is "gambling" under South Carolina law because it involves betting on a game of cards; whether poker is a game of skill or chance is ultimately beside the point.

The plurality then moved on to the constitutional claim. The plurality first noted that merely because a phrase is undefined in a statute is insufficient to render a statute void for vagueness. The plurality cited to a 1909 decision for the proposition that "the evidence of keeping a gaming house is determined by the facts and circumstances" of each case. In this particular case, the plurality noted that the evidence supported a finding that the residence in question in fact was used as a house of gaming:

[T]he evidence showed that Stallings’s house was used regularly twice a week for poker games at which there was gambling, and that the games were advertised to interested persons on the website, and open to those individuals and their friends.

Further, the plurality contended that, although the statute might arguably be vague as to some persons involved in different types of games, the statute was not vague with respect to the poker game in question (emphasis added):

One whose conduct clearly falls within the statutory proscription does not have standing to raise a void-for-vagueness challenge. [citation]. We find respondents lack standing to challenge § 16-19-40,7 but also note that a person of reasonable intelligence would understand the statute to prohibit gambling on a card game at a house where players were invited on a regular basis to engage in this activity, especially where, while not a profit-making commercial activity, the players were required to contribute money to cover the host’s expenses.

Thus, the plurality held that because these particular defendants clearly should have known that this type of poker game was illegal under the statute, they did not have a viable constitutional complaint about how the statute was worded or applied.

D.  Dissenting Opinion:  Jumping ahead to the dissenting opinion, Justice Hearn (joined by Justice Kittredge) focused on the constitutional void-for-vagueness argument. In fact, the dissent expressly disavowed any comment on the statutory construction issues that formed the bulk of the plurality opinion, finding that it was not necessary to wrestle with whether poker was illegal gambling under the statute when the statute was, in the dissent's view, unconstitutionally vague.

Interestingly, the dissent did not directly disagree with the plurality's reasoning on the vagueness issue. In fact, the dissent specifically agreed that the defendants should have been aware that the poker game was illegal gambling:

As reasonable, intelligent people, Respondents should have understood the statute prohibited their conduct. It banned playing cards, with betting involved, in a house used as a place of gaming; Respondents participated in bi-weekly, organized poker games at someone's home with strangers that responded to advertisements on the internet, with a buy-in and the house taking a rake. While I question whether other individuals under different circumstances would have sufficient notice of whether their conduct is proscribed, such as four individuals who play a penny-ante poker or bridge game once per month, it is clear that Respondents were on notice their gambling fell within the ambit of the statute.

However, the dissent noted that there are two ways a statute can be unconstitutionally void: a) where the statute fails to give a person notice that their conduct is illegal, or b) where the statute fails to provide sufficient standards for law enforcement to objectively determine whether particular conduct is illegal. Although the two tests are intertwined to a degree, they are distinct.

The dissent then argued that the South Carolina anti-gambling statute failed to provide sufficient objective standards to guide law enforcement. The dissent noted that the phrase "house used as a place of gaming" was undefined and has no common understanding in the community. Thus,

Because the statute itself provides no guidance, it was up to police and local governments to determine just where this line is drawn. To that end, Officer Hembree believed that the frequency of the games, the number of players involved, and whether the game was run for a profit all factored into whether individuals were playing in a "house used as a place of gaming." However, none of these criteria appears in the statute, and Officer Hembree's decision to issue Respondents a citation was based on these additional elements imposed simply to ferret out conduct he truly believed violated the statute. Officer Hembree therefore had to take it upon himself to make a policy decision based on his own personal opinions as to what should be covered by the statute. It is also clear from Officer Hembree's testimony that had another officer entered Stallings' home, the officer could have come to a different conclusion.

In the dissent's view, the statute as written improperly permitted—even required—law enforcement officers to engraft their own criteria onto the statutory definition of "house used as a place of gaming", which necessarily would lead to different interpretations of the statute by different officers, and thus different treatment of poker players based solely on the policy of law enforcement where they lived:

Accordingly, when a statute such as section 16-19-40 or the one at issue in Morales grants officers too much discretion, the decision to target a certain individual is based upon the officer's own understanding of what the statute proscribes and not solely upon the language of the statute itself. Therefore, every arrest or citation is the result of the officer's personal exercise of discretion; the individuals he lets be are only granted that relief because he has decided their conduct does not fall within the proscription as he understands it. I agree with Justice Breyer that the inescapable conclusion accordingly is that the statute's application is invalid in every case, rendering it facially unconstitutional. A criminal statute is the place for setting forth with precision what conduct constitutes a crime, and our law does not sanction the idea that police and the prosecution can subjectively vary from the statutory elements and impose their separate criteria. If part of a statute permits such variance, as the one before us today does, that language is unconstitutionally vague.

E.  Concurring Opinion:  The court's decision ultimately came down to Chief Justice Toal. Her concurring opinion is quite interesting; in fact, it is rather unlike any other concurring opinion I can think of off the top of my head. The Chief Justice begins by stating, "I agree wholeheartedly with the constitutional analysis contained in the excellently researched and beautifully written dissenting opinion ...". Usually, one would expect the dissent to prevail after hearing how their argument is correct. However, the Chief Justice then goes on to proclaim that "because of the unique circumstances of this case, ... I concur in the result reached by the majority that these defendants' convictions must stand". Well, that's certainly an interesting case of judicial whiplash.

The Chief Justice begins her analysis in a rather straightforward manner, agreeing with the plurality that, even if the statute is vague, the defendants' conduct in this case was so clearly illegal that they had no legal basis ("standing") to complain about that vagueness:

I agree with the majority that these Appellants are foreclosed from challenging the constitutionality of this section because they were engaged in conduct that fell so clearly within the statutory proscription. This was not your penny ante game of poker organized in someone's home, but a regular card game hosted in Stallings's home after advertisements were posted on the Internet to recruit players who paid to participate. Thus, they do not have standing to challenge the statute as vague.

Thus far, the Chief Justice's analysis is pretty standard stuff. But then her opinion takes a twist, declaring that she finds the statute to be unconstitutionally void for vagueness, but is unwilling to strike down the statute because to do so would potentially render all gambling in private homes legal, opening the proverbial floodgates of criminal activity, causing great harm to the state (emphasis added):

In my opinion, striking this language would also open the door wide to all heretofore illegal gaming practices in this state, including video poker. See S.C. Code Ann. § 16-19-40(g) (proscribing the playing of "any machine or device . . . used for gambling purposes"). Because of this very real consequence, I am concerned that striking this critical language from the statute would beget, as elucidated by the General Assembly in 1816 when amending section 16-191-40, the "impoverishment of many people, corruption of the morals and manners of youth, . . . the tendency which is vice, misery and crime, as examples in this state have abundantly proven." These dire concerns resonate as much today as they did nearly 200 years ago. I do not need to remind any person of the havoc wreaked upon this State as a result of the "pernicious" practice of video poker. Although there are other sound provisions outlawing video poker, see S.C. Code Ann. §§ 1221-2710, 2712 (2000), I am loathe to strike the critical language from the general ban on gaming in the event that it guts these provisions, and consequently, South Carolina's longstanding prohibition against gambling.

In lieu of invalidating the statute as vague, the Chief Justice instead tossed the problems with the anti-gambling statute back to the legislature to fix:

Section 16-19-40 is hopelessly outdated, as it applies to any gaming activity (including all card games) played in a residential home whether wagering occurs or not. This section expired in usefulness long ago and should not form the basis of a modern anti-gambling statute. Thus, I now charge the legislature to modernize section 16-19-40, as I am inclined to agree with the dissent that this provision is constitutionally infirm. However, for the aforementioned reasons, I join the majority in result only, and would reverse the circuit court under these circumstances.

II. Analysis

A.  Casual, Social, Low-Stakes Home Games Are Likely Legal (For Now):  Although the court never explicitly ruled on the issue, a common thread in each opinion was that the game at issue was illegal because the game was more than a mere low-stakes, casual home game. The opinions went out of their way to emphasize that the game in this case was more than penny-ante ($20 buy-in; whoa, call in Ivey and Galfond!), was regular, invited players via social media, and paid a rake to the host. The opinions also expressed unease with applying the "house used as a place of  gaming" designation for casual, social, low-stakes games. Given how the court's opinions were written, as well as the state's admission in oral argument that the statute did not apply to social poker games held in private homes, South Carolina poker players probably have some breathing space for hosting low-stakes, rake-free, private games and tournaments. But that doesn't mean some law enforcement officer won't decide to bust even those poker games, so proceed at your own risk.

B.  "Poker As a Game of Skill" Argument Takes a Back Seat:  After all of the time spent in testimony at trial and pages devoted in appellate briefs to the skill/chance argument, the court collectively shrugged and avoided any analysis of the issue. The entire argument was essentially ignored, except for the plurality opinion stating in passing, "We hold that one 'games' within the meaning of § 16-19-40 when money is wagered on Texas Hold’em, even though it is a game in which skill predominates." (emphasis added). Poker players will almost certainly latch on to this one statement and declare that the court held that poker is a game of skill. But in fact, the court actually held it didn't matter whether poker was a game of skill, so the court simply passed on deciding the issue altogether. This distinction is important, because other courts wrestling with the skill/chance issue will give little credence to what is essentially a throwaway, conclusory sentence which had no bearing on the court's analysis of the controlling issues (what lawyers refer to as "dicta").

C.  Opinion Shopping:  This decision is rather strangely written. As noted earlier, this decision featured fractured opinions and a lengthy delay (over two years) from argument to decision. Also, both the plurality opinion and the dissenting opinion contain full-fledged procedural and factual histories, which is uncommon unless the dissent wants to highlight certain facts; here, the plurality and dissent mirror each other. My read of the situation is that Chief Justice Toal waffled in her vote, and the two opposing sides wrote multiple drafts of opinions hoping to get her to sign on to their side of the decision. Based on the Chief Justice's ultimate concurring opinion, it was a close call, but her concerns about the possible negative effects of striking down the statute entirely eventually won the day for the plurality; the Chief Justice stared into the legalized, unregulated gambling abyss and flinched. As I discussed previously, given the Chief Justice's vocal concerns about the evils of gambling in a prior case involving video poker (referenced in her concurring decision in this case), nobody should be all that shocked that she finally sided with the anti-poker argument.

D.  "Void for Vagueness" Is a Tough Argument to Win, Particularly for the Guilty:  As a general rule, constitutional challenges are rarely successful, and the "void for vagueness" sub-genre is notoriously among the least likely to prevail; courts go out of their way to find statutes constitutional against vagueness challenges. In this case, the defendants also argued that the statutory proscription against any card game was vague and overbroad. As I noted in my prior analysis of the appelllate briefs:

[T]he defense argument on this point is a bit awkward, essentially stating, "You can't convict us for gambling when we were playing cards for money, because the statute might arguably apply to the kids next door playing Old Maid." Let's just say that the kids playing Old Maid, if they were ever arrested for gambling, would have a much stronger argument on this point than the poker players in this case.

Similarly, when you make a void for vagueness challenge, you want to be in the "gray area" of the law (preferably the light gray area) to demonstrate how extreme and unfair the prosecution is. Here, by contrast, the defendants were well into the dark gray area at best, involved in a poker game one step removed from an actual underground poker room, à-la Rounders. The defendants would likely have won their appeal if their game had been a truly casual, friendly, no-rake affair.

E.  Judicial Hand-Wringing:  Chief Justice Toal's concurring opinion bothers me a bit as an attorney. She could easily have said something to the effect, "Although I share the dissent's concerns as to whether the statute might be void for vagueness in some contexts, I agree that these defendants clearly crossed the line into illegal behavior." Instead, the Chief Justice went out of her way to express in great detail how much she agreed with the dissent about how poorly the statute was written (and how archaic the statute was). But instead of voting to strike down the law and forcing the legislature to enact a "modern" gambling law, the Chief Justice flinched at the idea of implicitly legalizing gambling by fiat, and instead resorted to the classic judicial dodge: "I really hate this statute, but my hands are tied. It is up to the legislature to fix this statute, not me." Now, such a hands off jurisprudence might be appropriate in many situations. Maybe it was even appropriate here. But it feels awkward to have a judge wax poetic about how a statute is flawed, only to punt at the last second to the legislature, leaving the actual parties in the lurch (and with a criminal record).

F.  Things Could Get Worse for Poker Players:  Given that the court essentially threw down the gauntlet challenging the legislature to fix the anti-gambling statute before the court is forced to invalidate it, I would expect the South Carolina legislature to enact a "modern" anti-gambling statute in its next session. Considering how socially conservative South Carolina is compared to the rest of the nation, don't be surprised to see a sleek new highly restrictive anti-gambling law rolling off the legislative assembly line in the next year. None of the justices gave any indication they would find a general ban on poker to be legally problematic, and in fact the court endorsed the idea that skill games can be the predicate for illegal gambling. Poker players may well end up in a worse legal position under any new law than they are under the archaic current law.

G.  The PPA Is Still Inept:  This case was a perfect storm of good factors for the PPA's legalization-by-litigation strategy. The statute was, by the court's own admission, poorly drafted. The trial court found that poker was a game of skill. Yet the South Carolina Supreme Court all but ignored the arguments made by the PPA in its amicus brief, and ultimately ruled against poker players in general and the poker player defendants specifically. Although this topic deserves its own lengthy post (in the works!), this case serves to underscore the ineptitude of the PPA on the litigation front. Frankly, it probably serves to demonstrate the futility of pursuing further poker legalization litigation.

As many of my readers are aware, I've long argued that the poker legalization-by-litigation strategy is flawed and ultimately doomed to failure, primarily because of the inherent difficulty in convincing an appellate court to flout historical and social understandings of poker as a form of gambling. My readers may recall I accurately predicted the failure of the PPA's Commerce Clause challenge to the Washington state ban on internet gambling. Similarly, I predicted the failure of the Chimento appeal, as reflected below:

Given the text of the statute and the related case law, I think the South Carolina supreme court will most likely find that poker is prohibited by the anti-gambling statute, regardless of whether it is predominately a game of skill or a game of chance. To hold otherwise would overturn decades of social agreement that poker is gambling, with the effect of essentially legalizing unregulated, for-profit poker rooms and poker tournaments statewide. As I've discussed previously, asking courts to rule that poker is not gambling is really no better than tilting at windmills.

[T]his is precisely the ruling I expect the court to reach—poker is gambling, and is legal if done as a private, no-rake game, but becomes illegal when played in a public place and/or for a rake or fee. Such a ruling would preserve the traditional notion of poker as gambling, prohibit poker in public or for-profit setting contexts, but allow casual home poker games to be played legally. Such a ruling is actually the result most poker players should want.

Of course, my prediction of the outcome is not the result most poker players think they want. But those players are short-sighted. Yes, the statute is rather poorly written, though that is mostly an artifact of its age. Yes, the statute could use clarity. Yes, it would be really nice if a court would recognize poker is a game of skill, and exempt it from an anti-gambling statute. But such a ruling would essentially legalize unregulated, for-profit poker rooms and poker tournaments throughout the state. The legislature would almost certainly react swiftly and negatively to such a ruling, and likely enact draconian restrictions against playing poker, including perhaps an explicit ban on online poker. Don't forget, this is South Carolina, where conservative "family values" politics still hold sway. Frankly, a fully pro-poker court ruling might be the worst result for poker players, a Pyrrhic victory leading to explicit and more onerous anti-poker laws.

Poker is illegal gambling under South Carolina law, regardless of skill element? Check. Casual home poker games are not illegal? Check. Charging a rake is a major factor in making home poker games illegal? Check. Judicial concerns about striking down the anti-gambling statute and legalizing unregulated, for-profit poker rooms preventing a pro-poker decision? Five star check. Legislature weighing in with broad new anti-poker restrictions in response to the appellate decision? Pending.

Look, I'm no legal Nostradamus. But I am an attorney with over 17 years of trial and appellate experience. The PPA's "poker as a game of skill" argument looks great on paper. But in the real world, it's not even worth using as toilet paper.

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ADDENDUM:

Poker Grump has posted his thoughts about the decision, many of which dovetail with mine.

PokerFuse put out a nice news article about the decision which is worthy of reading.

United States v. DiCristina—A Win for Poker Players (with an Asterisk)

"Well, let's not start sucking each other's dicks quite yet."

~ The Wolf (Harvey Keitel), in Pulp Fiction (1994)

As most poker players are aware, earlier this week a federal district court judge entered a ruling in United States v. DiCristina finding that poker is a "game of skill" and therefore is not "gambling" for purposes of the federal Illegal Gambling Business Act (IGBA). The lengthy decision by Senior Judge Weinstein is as thorough a discussion of the statistical evidence of the effect of skill in poker as one will likely ever see in a judicial decision. The opinion also contains an exhaustive review of practically every conceivable state or federal statute or appellate decision that addresses the regulation of poker in the context of gambling laws. Every poker player should read the decision to better understand the nature of the legal issues certain to arise as online poker continues down the path to inevitable legalization and regulation in some form.

I skimmed the decision when it was issued and Tweeted some initial thoughts (one of the advantages of being a lawyer is learning how to find the legally significant spots in a 120-page decision) (for the record, those Tweets are here, here, here, here, and here). After a more leisurely perusal of the decision, my initial thoughts remain valid, but I did pick up a few additional points of interest. Now many poker players probably just care about the bottom line—a win is a win, right? In law, however, how one wins is often more important than the case specific outcome. [FN1]

So, in no particular order, here are what I found to be the key points and interesting nuggets from the opinion:

Big win for poker players and the PPA:  There is no question that this decision was a win for poker players. Having a federal judge give careful consideration to the "poker is a skill game" argument and then endorse it in a thoughtful opinion is a win, regardless of the ultimate outcome on any appeal, and regardless of whether the decision is adopted by other courts or remains a one-off outlier. The Poker Players Alliance (PPA) also deserves kudos for not merely rehashing its prior arguments, but for finding an expert economist and statistician, Dr. Randal Heeb, who provided critical analysis and testimony that formed the underpinning of the decision (more on Dr. Heeb later). This decision would not have been possible without the solid work of the PPA's attorneys, and the PPA rightfully should be proud of the decision. [FN2].

First meaningful win for poker: This decision is also important because it is the first court of consequence to issue a ruling that will have any precedential effect. To date, the handful of court "wins" for poker have all been issued by state district courts whose decisions have no binding or persuasive effect on other courts. Every appellate court to date has ruled against the "poker is a skill game" argument. But federal district courts occupy a unique spot in the legal authority realm. Federal district court decisions of consequence are "reported" (officially published) and can be cited as authority in other cases just like appellate court decisions. These district court decisions are not binding on other courts as an appellate decision would be, but they are often looked to as persuasive authority by appellate courts confronted with developing areas of the law. Having a thorough, well-crafted judicial opinion on the merits of the "poker is a skill game" argument on the books, so to speak, lends a certain gravitas to the argument which can bolster that argument if and when it is considered by other courts.

The decision has a shot at being affirmed on appeal:  The obvious question on most poker players' minds is whether the decision can survive if the government appeals. An appeal is not guaranteed, but given that the decision breaks new ground and cuts against precedents from other federal courts, and considering that the government invested a lot of resources fighting this issue rather than plea bargaining what otherwise looks to be a trivially routine gambling case, I would expect there to be an appeal. Now Judge Weinstein is known for a liberal slant, and has written groundbreaking criminal decisions that were later reversed on appeal. But the Second Circuit is less conservative than most federal courts of appeal, and Judge Weinstein is well-respected as a smart judge (and former law professor at Columbia). Also, the case involves a bread-and-butter interpretation of a federal statute rather than a hot button Constitutional issue, so ideological differences among the appellate judges will have very little impact on the outcome of any appeal.

The decision is going to generate a lot of attention among the appellate court judges for several reasons. First, the sheer length of the decision will signal that something significant is occurring. The reason for the length of the decision is that Judge Weinstein spends a great deal of time going over legislative history as well as an exhaustive analysis of poker-related statutes and decisions from around the country. That kind of effort simply is not put into a routine decision, and the appellate judges will certainly note that Judge Weinstein is setting up his argument for a novel interpretation of the IGBA. The weakest part of the decision is that it conflicts with: a) prior federal court decisions related to the IGBA in which state gambling law served as the sole determining factor as to whether a predicate offense had occurred, b) prior federal court decisions in which poker was the predicate gambling activity for an IGBA offense, and c) numerous state appellate decisions and several federal court decisions that have determined poker is "gambling", including some which have considered and rejected the "skill game" argument.

To be blunt, established case law weighs heavily against Judge Weinstein's decision, and it would be fairly easy for the appellate court to reverse the decision. But, many of the prior IGBA cases can be distinguished because they assumed that poker was within the scope of the IGBA rather than analyzing the issue. Also, this case has the best, most detailed factual record as to the "skill game" issue of any court challenge to date. In this regard, Judge Weinstein was a fortunate draw for poker players, as his decision does an excellent job of pointing out the flaws inherent in the legal and factual assumptions underlying the prior adverse decisions. Judge Weinstein has marked a clear legal analysis path for the appellate court, if it chooses to follow his lead.

Nonetheless, I think the deck remains stacked against poker players if there is an appeal. Despite Judge Weinstein's adept "skill game" analysis, poker is still regarded as gambling both under New York law and in the public eye. Poker's reputation in front of the appellate court will certainly not be enhanced by the highly publicized Black Friday prosecutions (and the DOJ's "Ponzi scheme" commentary), particularly given the context of the IGBA's anti-organized crime history and purpose. As I have discussed previously, poker's reputation is a tough hurdle to overcome. Poker's considerable historical and cultural baggage might well overwhelm Judge Weinstein's legal analysis. And if the Second Circuit decides it doesn't want to endorse legalized poker, existing precedents will make it easy for the appellate court to reverse the decision. The easiest and most likely analysis to be used by the appellate court to reverse the decision is to follow those federal courts which defer to state law to define "gambling", and to find that New York state law governs the issue of whether poker is "gambling".

Interestingly, if the decision is reversed on appeal, the portion of the decision analyzing the "skill game" argument would potentially still have precedential value. If the Second Circuit decides that state law controls the "illegal gambling" question and that no further analysis is required under the IGBA, then the Second Circuit would never reach the "skill game" analysis. In that situation, although the case would have been reversed, Judge Weinstein's analysis of the "skill game" argument would remain fair game for citation to other courts (lawyers refer to this by the phrase "reversed on other grounds").

If I were a betting man, I would wager that the decision is ultimately reversed on appeal. But the odds against poker players are not nearly as long as they have been in past cases, and with a favorable panel of judges the decision has at least a puncher's chance of surviving on appeal. [FN3]

The decision is limited in scope:  The decision only addresses the narrow question of whether poker is "gambling" for purposes of the federal Illegal Gambling Business Act (IGBA). As I have discussed in prior posts, when it comes to statutes, definitions are critical. "Gambling" for purposes of one statute may not be "gambling" for purposes of another statute. So the mere fact that poker is regulated as gambling under New York law (or another federal or state statute) is not necessarily dispositive of whether poker was gambling for purposes of the IGBA. Likewise, merely because the court ultimately found that poker was not gambling for purposes of the IGBA does not mean that poker is no longer illegal gambling under most state laws and possibly other federal laws. Still, if the decision holds up, it would remove one weapon from federal prosecutor's anti-poker arsenal.

Poker is illegal under New York state law:  Although the defense team abandoned its argument that poker is not gambling under New York state law, the court nonetheless found that the argument had no merit. The decision explicitly noted that, "New York courts have long considered that poker contains a sufficient element of chance to constitute gambling under that state's laws." Another defendant could always raise a challenge to New York's state law on poker, but it seems doubtful that such a challenge would be successful.

Poker is still illegal under most states' laws: The decision contains an exhaustive listing of state laws and appellate decisions which consider poker to be gambling subject to ban or regulation (see Section II(5), pp. 47-51). The list is pretty bleak from a pro-poker perspective. Most states either explicitly define poker as gambling, or have found poker to be within the definition of gambling, regardless of the amount of skill involved. Again, poker players must keep in mind that, even if skill predominates chance in poker, states can still define "gambling" in such a manner as to encompass poker. The decision doesn't change how any state gambling laws view poker. So if poker was illegal gambling in your state prior to the decision, it is still illegal today.

Poker may still be illegal under federal law:  The decision only interpreted the IGBA. There are other federal statutes that could still be used by federal prosecutors against businesses offering poker, most notably the Travel Act. Unlike the IGBA which contained its own definition of "gambling", the Travel Act simply relies on a violation of a state gambling law to establish the predicate offense. Also, note that the Travel Act prohibits use of "the mail or any facility in interstate commerce" to "distribute the proceeds of any unlawful activity" or "otherwise promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on, of any unlawful activity". This arguably could mean that merely mailing checks, promotional materials, or awards to players could be a violation of the Travel Act. So far federal prosecutors have not used the Travel Act in any poker-related prosecutions (at least not to my knowledge), but that might change if they lose the IGBA as a tool because of this decision.

House-banked game defense was rejected:  The PPA and many poker players have argued that the fact that poker is not a house-banked game (like blackjack, or three-card poker) is a significant distinction in determining whether poker should be considered "gambling". Even Judge Weinstein rejected that argument, rather summarily (p. 109). This argument is one of those situations where an important factual distinction winds up having no legal significance. So legally, if money gets wagered, it's probably gambling, regardless of how the house makes it profitable.

Revenge of the nerds:  As noted earlier, it is obvious that Judge Weinstein was impressed by Dr. Heeb's statistical and economic research. Although there have been a number of studies that purported to prove that poker was a "skill game", those studies merely demonstrated that skill had an effect on the game, and none of those studies really reached any meaningful conclusions as to the relative effects of skill and luck on the outcome of the game. Dr. Heeb did some really interesting and persuasive analysis directed to that specific issue. One analysis showed that the "long term" required to allow skill to overcome chance is not nearly as long as might be imagined, perhaps as low as 1,000-3,000 hands (rates that can be seen over the course of a long, deep-stacked tournament or a relatively short period of cash game sessions). Another analysis attempted to isolate the skill element of poker by cleverly demonstrating how winning and losing players showed significantly different win rates even when playing the same hand (the examples Dr. Heeb used were K9o and QJs). Any fan of Freakonomics-style analysis would enjoy the court's discussion of Dr. Heeb's testimony. I don't think it is an overstatement to conclude that Judge Weinstein's decision likely would have turned out differently without Dr. Heeb's analysis.

The court's discussion also noted that most online players in the large dataset used by Dr. Heeb were losing players, with 90-95% of players showing net -EV. This statistic was somewhat higher than I would have expected. This statistic could also be used on appeal to argue that, since most players are expected to lose, poker is no different than house-banked games. Judge Weinstein dismissed this argument as irrelevant to the issue of whether poker is a "skill game", and I agree that it is not relevant. But that fact still is one that might be of interest to an appellate court.

The decision is probably not a game-changer:  Even if the decision is affirmed on appeal, its impact on the poker legalization fight is likely to be minimal. In many states, whether poker is a game of skill is utterly irrelevant as poker is explicitly regulated as gambling. In other states where poker's status is not defined by statute, courts have already ruled that poker is gambling, and those courts are unlikely to reverse course after having decided the issue. The decision probably has little application to other federal gambling statutes because the decision is based on the IGBA's particular definition of "gambling". The decision is unlikely to affect federal or state poker legislation efforts as legislation is mostly a political issue which will not be swayed by one court's technical legal analysis of one federal law; poker simply isn't the kind of hot button legal-political issue like abortion or health care where a court ruling matters to legislators. It is possible that anti-gambling groups will use the decision to press for an explicit ban of online poker, but nothing I've read suggests that anti-gambling groups would have any better success passing a poker ban than pro-poker groups have had in passing poker legalization; those issues appear to be in stalemate at least through the upcoming elections. Most likely, the decision will ultimately have only symbolic value.

PokerStars may be the hidden winner:  Because the decision is from a different court, it does not change the pending DOJ Back Friday criminal or civil forfeiture cases other than to make it marginally easier for the remaining defendants to leverage a better plea bargain or settlement because the DOJ's IGBA and associated money laundering charges are now in a somewhat weaker position. The Black Friday cases are ultimately more about the banking and financial shenanigans of those involved than the underlying poker businesses themselves. But the decision certainly strengthens the argument to be made by PokerStars to state gaming regulators that merely running an online poker business did not violate federal law. Even if the decision is reversed on appeal, PokerStars could still argue that if a respected federal judge thought that poker was not regulated by the IGBA, then they certainly had a good faith belief they were not violating the IGBA. Of course, there would still be the matter of PokerStars allegedly violating state gambling laws, the UIGEA, federal money laundering laws, and federal banking laws. But if the applicability of the IGBA and the Wire Act can now be called into question, it becomes easier to raise doubts about some of the other laws in the mix.

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[FN1]  Think of the recent U.S. Supreme Court kerfuffle over the Affordable Care Act; although the Act was upheld, the legal reasoning in the decision placing limits on Congress' Commerce Clause authority may ultimately prove critical in decisions far removed in time and subject matter from the health care debate.

[FN2]  The PPA's success in this case, however, does not change my prior critiques of the PPA's "legalization by litigation" strategy. The discussion of whether the damage done by the PPA's earlier legal blundering is redeemed by this decision is better reserved for a separate post.

[FN3]  Thinking way down the road, if the Second Circuit affirms Judge Weinstein's decision, it could potentially set up a U.S. Supreme Court appeal to resolve a conflict among the various circuit courts of appeal as to how the IGBA is interpreted. This would be most likely if the Second Circuit finds that state law does not control the determination of what constitutes "illegal gambling". A lot of stars would need to align for poker to have a day in that Court, but these are the types of issues that are SCOTUS' bread-and-butter cases (i.e., interpretation of a federal statute, and resolving conflicts among the circuits).

Palmetto State Poker Litigation Tour

Earlier this week, the South Carolina supreme court heard oral arguments in Chimento v. Town of Mount Pleasant, a case that challenges whether home poker games are banned by the state's anti-gambling statute.  Although I have been unable to find any video or audio coverage of the argument online (which is typical for many state appellate courts), I was able to procure copies of the parties' appeal briefs* thanks to the Carolina-insider connections of the inestimable Otis, without question the best blogger in all the Carolinas, and likely throughout the erstwhile Confederacy.  So, let's take a tour of the legal arguments the court will consider.

Now appeals deal with legal issues, but they are driven by the underlying facts; lawyers often say, "Bad facts make bad law."  In Chimento, the court is considering whether poker players who participated in a home poker game violated the state's anti-gambling statute.  The relevant facts can be distilled as follows:

• The game was held in a private residence.
• The game was regular and recurring, typically being held once or twice each week.
• There is some dispute about whether strangers could play in the game.  At a minimum, the game was open to new participants known to the game organizer or brought to the game by established players.
• Participants—including new players—could learn about the game via an online social network, meetup.com.
• The game involved very low stakes Texas hold 'em cash game play—blinds of 25¢ / 50¢, with a maximum buy-in of $20.
• The game organizer (who also resided in the house with his girlfriend) took a small rake from each pot, ostensibly to cover food and beverage expenses.  Although the state's undercover investigator who infiltrated the game testified that the rake was $2 per pot, this was disputed, and appears to have been the maximum rake taken ($2 per pot flat rake is simply infeasible in such a small stakes game).  Testimony from the game organizer stated that the maximum rake was 50¢ per pot.
• The game organizer pled guilty to "operating a house of gaming" as part of the same police investigation.

Although the Poker Players Alliance (PPA) has framed its press releases about the case in terms of their now-standard "skill vs. luck" argument, the case actually presents a Gordian knot of legal issues which the court will need to untangle in order to determine whether home poker games are legal in South Carolina.  The legal analysis, however, must begin with the language of the applicable anti-gaming statute:

If any person shall play at any tavern, inn, store for the retailing of spirituous liquors or in any house used as a place of gaming, barn, kitchen, stable or other outhouse, street, highway, open wood, race field or open place at (a) any game with cards or dice, (b) any gaming table, commonly called A, B, C, or E, O, or any gaming table known or distinguished by any other letters or by any figures, (c) any roley-poley table, (d) rouge et noir, (e) any faro bank (f) any other table or bank of the same or the like kind under any denomination whatsoever or (g) any machine or device licensed pursuant to Section 12-21-2720 and used for gambling purposes, except the games of billiards, bowls, backgammon, chess, draughts, or whist when there is no betting on any such game of billiards, bowls, backgammon, chess, draughts, or whist or shall bet on the sides or hands of such as do game, upon being convicted thereof, before any magistrate, shall be imprisoned for a period of not over thirty days or fined not over one hundred dollars, and every person so keeping such tavern, inn, retail store, public place, or house used as a place for gaming or such other house shall, upon being convicted thereof, upon indictment, be imprisoned for a period not exceeding twelve months and forfeit a sum not exceeding two thousand dollars, for each and every offense.

—S.C. Code Ann. § 16-19-40

Now there's a lot going on in this statute.  First, note that the statute distinguishes between gambling and "keeping a place of gaming".  Both activities are prohibited, but under different circumstances, with stiffer penalties for those keeping places of gaming.  Turning to just the ban on gambling, the ban is not complete, but only bans gambling that meets two requirements:  a) particular games, which are b) played in certain places.  For purposes of the Chimento appeal, both prongs of this test are in play.

Looking first at the type of game, the statute explicitly bans "any game with cards or dice".  On its face, then, the statute covers poker, which is unquestionably a game played with cards.  The defendants and the PPA, however, make two arguments:  1) the statute is vague and overbroad to the point it could arguably cover any game played with cards or dice, including family or childrens' games (e.g., Uno or Yahtzee); and 2) poker is a game of skill, not a game of chance, and thus should not be considered subject to an anti-gambling statute.

Looking at the first argument, the state counters that the statute implies a requirement that betting or wagering be a element of the game.  The defendants and the PPA respond that the courts should not read into the statute a requirement not explicitly identified by the legislature.  The problem with the defense position is twofold:  a) the statute itself does mention betting or wagering, and b) the statute has a long history of being interpreted to require an element of betting or wagering.  Looking at the statute, certain games are explicitly exempted from prosecution:

... except the games of billiards, bowls, backgammon, chess, draughts, or whist when there is no betting on any such game of billiards, bowls, backgammon, chess, draughts, or whist or shall bet on the sides or hands of such as do game ...

We'll return to this list of exempt games in a moment when considering the "game of skill" argument.  For now, the point to take away from the exempt games list is that the games are exempt only so long as there is no betting or wagering either by the players or by anyone not involved in the game.  Now it's true that there is no similar distinction made for the games banned as "games of cards or dice", but the historical context of the statute must be kept in mind.  The anti-gambling statute is more than two centuries old, and was enacted at a time when almost all games of dice and cards were played for money.  The legislature's purpose in addressing the ills of gambling can certainly be discerned from the text of the statute, and the South Carolina courts have long interpreted the anti-gambling statute to require betting or wagering, as in this appeal decision arising from jury instructions in a prosecution for running an illegal dice game:

The acts of our general assembly on this subject, now incorporated in the General Statutes of this state as sections 1715, 1716, do certainly denounce betting on the throwing of dice as an offense.  In general terms, the circuit judge was here seeking to enable the jury to see what was and what was not gambling.  He was seeking, in other words, to impress upon their minds that the mere handling and throwing dice, where money was not bet, was not an offense under our laws.

State v. Robinson, 40 S.C. 553, 18 S.E. 891, 892 (1894) (emphasis added).

Finally, the defense argument on this point is a bit awkward, essentially stating, "You can't convict us for gambling when we were playing cards for money, because the statute might arguably apply to the kids next door playing Old Maid."  Let's just say that the kids playing Old Maid, if they were ever arrested for gambling, would have a much stronger argument on this point than the poker players in this case.

Turning to the poker as a game of skill argument, the defense and PPA make the same familiar arguments, and even had testimony from Mike Sexton and Robert Hannum, PhD to buttress their claim that Texas Hold 'Em is a game of skill.  This evidence is really uncontroverted, and the facts are of less importance than the legal significance of those facts when the law is applied to the facts.  In other words, even though we may all be able to agree that skill plays a significant—even "predominate"—role in poker, that fact may have differing significance once the courts are asked to interpret and apply a state's anti-gambling statute.  To put it another way, the same game—Texas Hold 'Em—might be legal in one state under one definition of or test for "gambling", while being illegal in another state utilizing a different definition or test.

South Carolina has not yet explicitly adopted a legal test for whether a particular game is illegal gambling for purposes of the anti-gambling statute.  The state argues that poker falls within the "any game of cards or dice" prohibition, and thus no analysis of the relative role of skill or chance is necessary.  The defense counters that the court should apply the "dominant factor" test (sometimes also referred to as the "predominate factor" test) to discern whether a particular game—such as poker—is illegal gambling.  There is some suggestion from a dissenting opinion in a prior case that South Carolina might in fact adopt the dominant factor test. 

The problem with the defense argument is twofold.  First, as a matter of statutory construction, the legislature has identified a short list of what might be considered "games of skill" which are exempt from prosecution:  "billiards, bowls, backgammon, chess, draughts [checkers], or whist".  Whist is an old British trick-taking card game, which was frequently played for money—for example, Phileas Fogg, protagonist of Jules Verne's novel Around the World in Eighty Days, was depicted playing whist for money at his London gentlemen's club.  Modern derivatives of whist include popular trick-taking games like Hearts, Spades, Bridge, Euchre, and Pitch.  The interesting thing about Whist (and its modern derivatives) is that the game can be played simply for recreation by keeping score, or the game can be the basis for gambling, with monetary awards or penalties assigned for points scored, wins/losses, and sets (failed bids).  By contrast, games such as poker or blackjack are played only for money; money is how score is kept.  Further, a major principle of statutory interpretation is that items in a list exclude items not in the list, unless the list is merely illustrative.  In this case, the statute has carved out a very specific list of exempt games, each of which might be regarded as a "game of skill".  The failure of the legislature to designate poker as an exempt game of skill implies the legislature did not intend for poker to be exempt from the general prohibition against games of cards, even if poker is in fact a game of skill. 

However, even if the South Carolina supreme court analyzes poker under the dominant factor test, the court is unlikely to rule any differently on that issue than the many other state appellate courts which have found poker to be a game of chance.  South Carolina is a socially conservative state, certainly more conservative than states like Rhode Island, Pennsylvania**, Colorado, North Carolina, or New York which have all found poker to be a game of chance.  Further, the South Carolina supreme court has previously affirmed a conviction for maintaining a house of gaming in which poker was the game in question:

The appellants were indicted, as stated, for the crime of keeping a gaming house known as the Five O'clock Club. This night club was licensed in the name of and operated by the appellant, Douglas O'Neal, as owner. On the night of April 30, 1946, the witness, Bracey, who was visiting Columbia from his home in Virginia, went to the club about ten o'clock. The club was located on the second floor level of the building, and entrance to it was gained by a stairway on Main Street. The club comprised three rooms: One being used as a room for entertainment, where dancing was engaged in; another room or compartment was known as the ‘stag’ side, and contained two bars; and there was a third room, much smaller, in which there were two tables, which adjoined the stag room.

About two or three o'clock in the morning, after Bracey had indulged in several drinks of whiskey, a waitress, Aileen Thompson, who was employed and paid by the appellant, Douglas O'Neal, approached Bracey and asked him if he would like to play some poker.  After some short delay, Bracey entered the small room and found a poker game in progress, being participated in by four or five soldiers and the appellants, Walker and Harris, and another man named Whittle, described as the official ‘bouncer’ of the establishment.  The appellant, Harris, sold Bracey $10 worth of poker chips and he entered the game.  He proceeded to gamble until about twelve o'clock the following day.  As the game proceeded, the soldiers dropped out, and for the last eight or ten hours only Bracey, Whittle, and the two appellants, Walker and Harris, participated.  The stakes were increased in value from twenty-five cents a chip to $1, and when the game concluded Bracey, who was dazed from the effects of liquor, had lost in the neighborhood of $4,000.

During a great part of the time, appellant, Walker, who called himself the ‘house man,’ did most of the dealing.  At other times, the appellant, Harris, who acted as ‘banker’ of the game and who sold the chips and handled the cash, dealt the cards.  A short while, in which Bracey dealt, both Walker and Harris claimed the right to cut the deck before the cards were dealt.

There was testimony that Douglas O'Neal was manager of the club and Walker was manager of the gambling room, and that the latter paid Whittle from the cash box.  There was also evidence from which the conclusion could reasonably be drawn that a certain percentage of the amount staked on each game was deducted by Harris for the benefit of the ‘house.’  The evidence for the state also showed that sometime during the morning, before the game finally broke up, Douglas O'Neal approached the state's witness, Bracey, and asked him if he would like to have a cup of coffee.

Around midday two friends entered the club in search of Bracey, and realizing his condition went out and reported the situation to the city detectives.  They then returned to the club and took Bracey to his hotel.

It is the general rule that where the proprietor of a place not kept for the purpose of gaming, allows gaming to be carried on, in which he participates, or from which he in some way receives a benefit, he may be convicted as the keeper of a gaming place. [cites].

The rule is also well established that a person having general charge of a gaming place as an employee may be convicted of the offense of keeping a gaming house.  [cites]. The fact of agency need not be proved by direct evidence, but may rest in inference from facts and circumstances and the conduct of the parties.

State v. O'Neal, 210 S.C. 305, 313-15, 42 S.E.2d 523, 526-27 (1947) (citations omitted).

Given the text of the statute and the related case law, I think the South Carolina supreme court will most likely find that poker is prohibited by the anti-gambling statute, regardless of whether it is predominately a game of skill or a game of chance.  To hold otherwise would overturn decades of social agreement that poker is gambling, with the effect of essentially legalizing unregulated, for-profit poker rooms and poker tournaments statewide.  As I've discussed previously, asking courts to rule that poker is not gambling is really no better than tilting at windmills. 

However, the legal analysis does not end if the South Carolina supreme court should find that poker is a prohibited card game under the anti-gambling statutes.  As noted at the outset of our analysis, the statutory ban also requires that the prohibited card game be played in a prohibited place, specifically, "at any tavern, inn, store for the retailing of spirituous liquors or in any house used as a place of gaming, barn, kitchen, stable or other outhouse, street, highway, open wood, race field or open place".  The fight in the present case is whether a private residence can be considered a "house used as a place of gaming" (or "house of gaming" for short).  Although the defense advocates a fairly narrow interpretation of "house of gaming", let's look back at the prior South Carolina supreme court decsion in O'Neal, which affirmed a conviction for "keeping a place of gaming" after running a poker game at a night club:

It is the general rule that where the proprietor of a place not kept for the purpose of gaming, allows gaming to be carried on, in which he participates, or from which he in some way receives a benefit, he may be convicted as the keeper of a gaming place.

State v. O'Neal, 210 S.C. 305, 313-15, 42 S.E.2d 523, 526-27 (1947) (citations omitted).

Under this case law, a place (business or residence) which is normally used for proper purposes, may become a prohibited "gaming place" if the proprietor permits a prohibited game to be played and either:  a) plays in the game, or b) receives a benefit from allowing the game.  In the present case, it appears the game host not only organized the game, but also played in the game and took a rake.  Those facts might be sufficient to establish a private residence as a "house of gaming", thereby making the poker game at issue in this case a prohibited game.  Now, the court might find that playing in the game is not an appropriate factor to consider in the context of a private residence, rather than a tavern, club, or similar business.  Also, the de minimis nature of the rake—if one believes the host's testimony he rarely recovered more than his expenses—might be considered insufficient to qualify as receiving a "benefit" for running the game.  However, where does one draw the appropriate line?  Can a host be reimbursed for his time in organizing the private poker game?  How about for cards, chips, and other supplies?  Electricity and other utilities?

Interestingly, news reports indicated that the state conceded at oral argument that the anti-gambling statute does not apply to casual or recreational games.  It's not clear what is meant by "casual", though presumably it means low stakes games where no rake or fee is charged.  This concession is a smart legal strategy by the state, as it focuses the court's analysis on "professional" poker games, where the house is making money from hosting the games.  This argument also seems easier to defend as being more closely tied to the language of the statute, which suggests that private poker games (i.e., those not held in public places or in "houses of gaming") where the house does not take a rake or fee are not prohibited.  In fact, this is precisely the ruling I expect the court to reach—poker is gambling, and is legal if done as a private, no-rake game, but becomes illegal when played in a public place and/or for a rake or fee.  Such a ruling would preserve the traditional notion of poker as gambling, prohibit poker in public or for-profit setting contexts, but allow casual home poker games to be played legally.  Such a ruling is actually the result most poker players should want.

Of course, my prediction of the outcome is not the result most poker players think they want.  But those players are short-sighted.  Yes, the statute is rather poorly written, though that is mostly an artifact of its age.  Yes, the statute could use clarity.  Yes, it would be really nice if a court would recognize poker is a game of skill, and exempt it from an anti-gambling statute.  But such a ruling would essentially legalize unregulated, for-profit poker rooms and poker tournaments throughout the state.  The legislature would almost certainly react swiftly and negatively to such a ruling, and likely enact draconian restrictions against playing poker, including perhaps an explicit ban on online poker.  Don't forget, this is South Carolina, where conservative "family values" politics still hold sway.  Frankly, a fully pro-poker court ruling might be the worst result for poker players, a Pyrrhic victory leading to explicit and more onerous anti-poker laws.

It will be interesting to see how the court eventually rules in this appeal.  But, given the detailed evidentiary record developed in the trial court, the high quality legal work done by attorneys for the defendants and the PPA, and the admittedly poorly drafted statute at issue, if the "poker is a game of skill" argument fails here, it is difficult to imagine circumstances where the argument would ever prevail

In other words, Chimento looks like the last, best chance for the PPA to score a meaningful win in the poker legalization-by-litigation battle. 

Poker players shouldn't hold their collective breath.

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*  I have posted the following briefs on my Google Docs page:

State Final Brief
Respondents' (Defense) Final Brief
State Final Reply Brief
PPA Amicus Curiae Brief

The underlying district court decision was posted HERE by another person.

**  The Pennsylvania supreme court has yet to decide whether to grant further review in the Dent case, in which a Pennsylvania appellate court found poker to be a game of chance subject to the state's anti-gambling statute.