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Poker and the Feds

Does running a poker room in New York violate the federal Illegal Gambling Business Act, 18 U.S.C. ยง1955?  Judge Jack Weinstein says no, in this opinion with an extensive analysis of the skill v. chance aspect of poker.  (Thanks to Orin Kerr for the link.)

The federal statute defines an "illegal gambling business" as "a gambling business which--(i) is a violation of the law of the State ... in which it is conducted" and other elements not disputed in this case.  New York, unlike some other states, does not define gambling based on whether skill or chance predominates.  It only requires that "the outcome depends in a material degree upon an element of chance, notwithstanding that skill of the contestants may also be a factor therein."  Poker (specifically Texas hold 'em) is clearly gambling under New York law.
Judge Weinstein goes on to find an implied federal element that "the business must operate a game that is predominately a game of chance," even though most cases are contrary and simply refer to state law.  I find these "predominantly" arguments problematic, because the answer depends on whether you focus on one hand, one session, or the long haul.  It is painfully apparent to every poker player who has suffered a "bad beat" (i.e., every poker player), that the outcome of one hand is indeed highly subject to chance.  In the long run, the probabilities even out.  The good players have net winnings.  The bad players have substantial losses.  The average (mean) player loses precisely his share of the house "rake."

As a matter of policy, many people will cheer the result.  From a federalism perspective, the federal government does not need to prosecute this case.  If a cardroom is a violation of New York law, let New York prosecute it.  From a libertarian perspective, government need not and ought not prohibit this activity at all.  As a matter of statutory interpretation, though, I think Judge Weinstein is wrong.  Poker is "gambling" as that term is commonly understood, and Congress intended to incorporate state law as to which forms would be legal.

The federalization of this crime back in 1970 was due to the connection of illegal gambling with organized crime.  State law enforcement was considered inadequate because the operators of illegal gambling pervasively bribed the local officials.  Today, there is so much legal gambling going on that bribery in the traditional sense is far less of a problem.  (Political spending by the operators of legal gambling is considered a serious problem by some, but that is a different problem not addressed by this law.)  The decline of the original reason for the law is an argument for Congress to repeal it, though, not a reason for a judge to construe it not to apply where it plainly does.  This decision is probably headed for reversal.

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