August 06, 2015

Will the Supreme Court Finally Play a Hand of Poker?

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

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

I.  Cabazon and the IGRA

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

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

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

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

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

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

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

In analyzing the issue, the Seventh Circuit first looked at the definition of Class II gaming in IGRA:
(A) The term “class II gaming” means—
(ii) card games that—
(I) are explicitly authorized by the laws of the State, or
(II) are not explicitly prohibited by the laws of the State and are played at any location in the State,

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

25 U.S.C. § 2703(7)(A)(ii)
The interesting thing about Wisconsin is that poker is not only banned by the state's broad gambling statute, it is also banned by the state constitution. In fact, the Wisconsin state constitution specifically authorizes a lottery, bingo, and parimutuel on-track betting, but explicitly prohibits casino gaming and identifies numerous prohibited games—including poker—by name (see Wisconsin State Const. Art. IV, § 24(6)(c)). Pretty compelling case that Wisconsin does not authorize and in fact explicitly prohibits poker, right? Not so fast, said the Seventh Circuit.

The court noted that the "Indian law canons"—rules for interpreting statutes touching on Indian sovereignty—require that any statutory ambiguities be resolved in favor of the Nation, and that the IGRA be interpreted broadly as protecting the Nation's sovereignty unless Congress had clearly limited that sovereignty. Consequently, the court determined it was compelled to read the definition of Class II gaming in IGRA § 2703 in conjunction with the regulatory provisions of IGRA § 2710 which provides:
(1) An Indian tribe may engage in, or license and regulate, class II gaming on Indian lands within such tribe's jurisdiction, if--
(A) such Indian gaming is located within a State that permits such gaming for any purpose by any person, organization or entity (and such gaming is not otherwise specifically prohibited on Indian lands by Federal law) ....

25 U.S.C. § 2710(b)(1)(A)
Well, again, if Wisconsin's constitution and statutes ban poker, the state can hardly be "permitting" poker to be played, right? The court, however, felt the issue was not so clear cut. Instead, the court felt compelled to apply the Cabazon regulatory/prohibitory analysis to Wisconsin's ban on poker, even though the IGRA was enacted after Cabazon was decided. In the court's view, Congress wrote the IGRA with Cabazon in mind, and did nothing to reject Cabazon's regulatory/prohibitory approach. In fact, the court noted that some legislative history suggested Congress intended for the Cabazon analysis to be used in implementing the IGRA.

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

The court also questioned the state's contention that it had fully banned poker. The court noted that, if the state truly had a ban on poker, then a mere municipal referendum could not override the constitution to permit poker on tribal lands. The fact that the state had negotiated with other tribes to permit poker on their tribal lands further undermined the state's position that poker was prohibited as a matter of public policy. Finally, the court noted that in 1999, the state had decriminalized video poker machines in taverns. The state essentially made possession of five or fewer video poker machines subject only to a civil penalty of $500 per machine, and further provided that possession of video poker machines could not be used as a basis for revocation of a liquor license. As the court reasoned:  "Wisconsin cannot have it both ways. The state must entirely prohibit poker within its borders if it wants to prevent the Nation or any other Indian tribe from offering poker on the tribe's sovereign lands." Thus, the court ultimately concluded:
"[T]he states lack statutory authority to deny an Indian tribe the ability to offer gaming that is roughly equivalent to what the state allows for its residents. A state must criminalize a gambling activity in order to prohibit the tribe from engaging in it. Wisconsin does not criminalize nonbanked poker; it decriminalized that type of gaming in 1999. IGRA thus does not permit it to interfere with Class II poker on tribal land. This means that the Ho-Chunk Nation has the right to continue to offer nonbanked poker at its Madison facility."
The Seventh Circuit's conclusion that Wisconsin's explicit constitutional and statutory ban on poker is less than a prohibition of poker might be viewed by non-lawyers as something of a head-scratcher. But in the realm of statutory interpretation, words and phrases often take on odd meanings and peculiar usages. Still, the court's reasoning is questionable in places; we will look at some criticisms of the decision in Section IV.

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

Moving westward, a similar dispute arose between the state of Idaho and the Coeur d'Alene Tribe over whether poker was Class II or Class III gaming. Like Wisconsin, Idaho's constitution and gaming statutes specifically permit only charitable bingo and raffles, a state lottery, and parimutuel race betting (see Idaho State Const. Art. III, § 20). Also, several traditional casino games, including poker, are explicitly named as prohibited games in both the state constitution and its enabling statute:
GAMBLING DEFINED. "Gambling" means risking any money, credit, deposit or other thing of value for gain contingent in whole or in part upon lot, chance, the operation of a gambling device or the happening or outcome of an event, including a sporting event, the operation of casino gambling including, but not limited to, blackjack, craps, roulette, poker, bacarrat [baccarat] or keno, but does not include:

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

Idaho Code § 18-3801
In the early 1990s, the state and the Tribe litigated a disagreement as to whether the state's adoption of a lottery and parimutuel betting had opened the door for broad Class III gaming on tribal lands pursuant to their gaming compact. The Idaho federal district court determined that the state constitution authorized only charitable bingo and raffles, a state lottery, and parimutuel betting, and that the state's public policy clearly prohibited all other forms of gaming, including Class III gaming. Thus, the Tribe was barred from offering Class III gaming.

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

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

Given the widely divergent analytical path it took, it is hardly a surprise the Ninth Circuit found itself reaching a conclusion diametrically opposed to that of the Seventh Circuit. The Tribe offered three main contentions for why poker was not illegal under Idaho law:
  • Poker is a skill game, not gambling.  Yes, our old friend, the skill game argument, returns for an encore performance with predictable results. Here, the Tribe argued that the Idaho gambling statute contained a carveout for "bona fide contests of skill, speed, strength or endurance in which awards are made only to entrants or the owners of entrants". Because poker is a skill game (at least in the form of Texas Hold 'Em), the Tribe argued that it should fit into this exemption from the gaming statute. The court rejected this argument, noting that the statute specifically identifies poker as a prohibited form of "casino gambling", and thus, the more general "skill game" exemption could not plausibly be read to permit poker. Further, the court noted that interpreting the statute to permit poker would contravene the state constitutional ban on poker; courts will generally interpret a statute so as to prevent a constitutional conflict.
  • Poker is permitted under a "promotional contests" exclusion to the state gaming statute.  Here, the Tribe tried to make use of case law which had held in other states that the authorization of "casino night" charitable events constituted authorization of gaming sufficient to permit tribes to offer Class II gaming. The court, however, noted that the Idaho statute prohibited promotional contests from giving any consideration for such events, which is inconsistent with the offering of real-money poker.
  • The state does not evenly enforce its prohibition on poker.  This argument is essentially that because the state admitted it does not always enforce its ban on private poker games (i.e., the state does not prosecute all private poker games known to law enforcement), the state is de facto authorizing or permitting poker to be played within the state. The court rejected the argument, noting that to fit within the IRGA § 2703 definition of Class II gaming, the Tribe must show both that poker "[is] not explicitly prohibited by the laws of the State and [is] played at any location in the State." Although poker might be played within Idaho, it is explicitly prohibited by law, so the Tribe could not establish one of the required statutory elements. The court also found that use of prosecutorial discretion in some cases did not rise to the level of desuetude—the abandonment of a law to the point where it becomes unenforceable—particularly where the state had not disavowed the ban on poker and in fact prosecuted cases under the statute. [FN 1].
The Ninth Circuit also considered and rejected two procedural arguments raised by the Tribe. First, the court found that the dispute over poker could be resolved in court without being submitted to arbitration. Second, the court found that the State-Tribe compact encompassed all Class III gaming, rather than a limited subset of games, such that poker was a game properly covered by the compact and the court had jurisdiction over the current dispute.

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

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

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

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

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

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

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

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

V.  Will SCOTUS Intervene?

As noted earlier, SCOTUS has complete discretion whether to accept cases on appeal. When it comes to granting cert, SCOTUS is the ultimate nit, the cranky old guy who sits at the poker table all day to rack up hours for a comped buffet and a shot at the bad beat jackpot. But when it comes to actually playing poker, he just folds everything except Aces and Kings. As I pointed out in the context of the DiCristina petition for cert:
[SCOTUS] receives in excess of 7,000 petitions for writs of certiorari every year, yet takes fewer than 100 cases. Even after adjusting for the in forma pauperis petitions filed by indigent criminal defendants and prisoners which are much less likely to be granted cert, the Supreme Court still grants cert in less than 4% of cases. The Supreme Court is not interested in merely correcting legal errors—that is the role of the Circuit Courts of Appeal and state appellate courts. Instead, the Supreme Court's task is to select cases which either pose important questions of federal law or which resolve significant conflicts between lower appellate courts.
As I correctly predicted, SCOTUS did not find DiCristina worthy of cert, most likely because there was no split among the Circuits as to the proper interpretation of the Illegal Gambling Business Act and because determining whether poker was covered by the IGBA did not present an important question of federal law.

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

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

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

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

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

* * * * *

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

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