Is Poker a Federal Crime? The Second Circuit Will Decide

Updates

By David J. Apfel

A three-judge panel for the U.S. Court of Appeals for the Second Circuit in New York City recently heard arguments in the most important case affecting the future of poker in the United States.

The case is United States v. DiCristina, a federal prosecution in Brooklyn, New York, which was tried before Judge Jack Weinstein and a jury in 2012. The jury convicted DiCristina of running an illegal poker business in violation of 18 U.S.C. § 1955, the Illegal Gambling Business Act (“IGBA”).

But Judge Weinstein vacated the jury’s verdict and dismissed the indictment, holding in a 120-page opinion that poker is predominately a game of skill and, therefore, “not gambling as defined by the IGBA.”  DiCristina, 886 F. Supp. 2d 164, 234 (E.D.N.Y. 2012). The government appealed Judge Weinstein’s decision, and it is that appeal that the Second Circuit heard last month.

The appeal turns on the definition of “gambling” under IGBA, which is not only the statute under which DiCristina was prosecuted, but also the principal statute under which the “Black Friday” online poker defendants were charged. Following the Department of Justice’s September 11, 2011 opinion limiting the applicability of the federal Wire Act, 18 U.S.C. § 1084, to sports betting, IGBA has become the primary federal statute used to criminally prosecute those engaged in the poker business, online or otherwise.

But if Judge Weinstein is affirmed, IGBA will no longer be available to prosecute poker businesses, at least not in the states covered by the Second Circuit.

IGBA explicitly defines an “illegal gambling business” as a “gambling business” which:

  • is a violation of the law of a State or political subdivision in which it is conducted
  • involves five or more persons who conduct, finance, manage, supervise, direct, or own all or part of such business
  • and has been or remains in substantially continuous operation for a period in excess of thirty days or has gross revenue of $2,000 in any single day. 18 U.S.C. § 1955(b)(1).

The question in DiCristina, whether or not poker constitutes “gambling” under IGBA, is not easy to answer, largely because while the statue defines a “gambling business,” it does not clearly or explicitly define “gambling.”  Instead, it puts the word “gambling” in quotation marks and notes that it “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.”  See 18 U.S.C. § 1955(b)(2).

In vacating DiCristina’s conviction, Judge Weinstein noted that chance is the common denominator among all nine activities listed in IGBA as representative of “gambling,” and that since poker is not predominantly a game of chance, a poker business is not a “gambling” business under IGBA, and therefore cannot be criminalized under the statute. Judge Weinstein recognized that poker is illegal under the law of New York State, home of DiCristina’s poker business, but said that under IGBA more is required — poker must be a game predominated by chance, which he found it is not.

On appeal, the government has taken the position that IGBA does not define “gambling,” and that the word as used in the statute must be given its common everyday meaning of “wagering.”  The government’s position is that any activity that involves wagering and otherwise meets the three statutory defined elements of a “gambling business,” may be prosecuted under IGBA, regardless of whether skill or chance is involved. Because poker involves “wagering” and is also covered by the three statutory elements, the government argues, it simply doesn’t matter whether it is a game of skill or chance.

We attended the oral argument in DiCristina on June 19, 2013. The panel of three judges – Straub, Hall, and Chin — was “hot,” particularly Judges Chin and Straub, who peppered both sides with questions. Judge Chin appeared to be tougher on the prosecution, while Judge Straub was tougher on the defense. Both sides received hard, or at least challenging, questions.

The most challenging questions the panel posed to the prosecution included:

  • how the statutory purpose of IGBA—fighting organized crime—would be enhanced by reinstating DiCristina’s conviction, since there was no evidence that DiCristina was involved in organized crime. The government’s answer was that the statute is not limited to the prosecution of organized crime, and DiCristina’s poker business was the type of business that could attract organized crime, with DiCristina and the game’s participants being potential victims.
  • concerns that the government’s position that the statute does not define “gambling” rendered the statute’s subsection on “gambling” – subsection (b)(2) – into unnecessary surplusage. The government’s response was that even though the “gambling” subsection is not definitional, it is not surplus. Rather, the government views the statute’s list of nine “gambling” activities as simply a non-exhaustive list of activities that typically involve “wagering,” and which Congress happened to be most focused on when it wrote IGBA.
  • concerns that criminalizing poker under the statute, especially given the government’s definition of “gambling” as anything involving “wagering,” would criminalize social games of poker, including any games played by the panel’s poker-loving brethren on the Supreme Court. The government had a ready answer: Wagering in and of itself does not violate the statute because the three other statutory elements must also be present. Only those involved in an “illegal gambling business,” with the emphasis on business, can be prosecuted under IGBA. Social games of poker, including any in which Supreme Court justices may participate, do not involve armed guards or the exchange of tens of thousands of dollars, both of which were present at DiCristina’s games.
  • whether the government appeared to have abandoned its earlier position that poker was not a game of skill. The panel questioned if this change of position suggested a lack of clarity in the statute. The government responded that it had not conceded that poker is a game of skill, but rather it had deemphasized its view because the statute applies equally to games of skill and chance, provided wagering and the three statutory elements of an “illegal gambling business” are present.

The most challenging set of questions posed to the defense concerned the Second Circuit’s 2006 decision in United States v. Peter Gotti, 459 F.3d 296 (2d Cir. 2006), and whether that precedent runs counter to DiCristina’s position and Judge Weinstein’s decision.

The defense endeavored to distinguish Gotti, stating that the Gotti court used New York’s, and not IGBA’s, definition of “gambling,” and arguing that in Gotti the issue of skill versus chance had not been decided. Judge Straub was clearly not persuaded. In his view, Judge Weinstein’s opinion ignored controlling precedent, and he observed that the panel would have to overrule Gotti in order to sustain Judge Weinstein’s opinion.

A review of the Gotti decision makes clear that the issue of whether poker is a game of skill rather than a contest of chance was explicitly raised. See Gotti, 459 F.3d at 342. To the extent the defense suggested otherwise, it was wrong. But the defense was right in its contention that the issue of whether skill plays a predominant role in poker was not decided by the Gotti court.

The defense was also right in its contention that the Gotti court looked to New York state’s definition of “gambling” in determining that poker was illegal under IGBA. Insofar as Judge Straub seemed to suggest that Judge Weinstein had effectively thumbed his nose at controlling precedent, he was wrong. The Gotti court did not address the argument now being made, namely whether IGBA includes its own definition of gambling that limits gambling to games predominated by chance.

Still, it would be surprising if the court were to affirm Judge Weinstein. Not only was it clear at the argument that Judge Straub was not inclined in that direction, but it would simply be easier for the court to fall back on the language in IGBA that defines an “illegal gambling business” as one that violates the law of the state in which the business is run.  The court might also look to Gotti, which found — at least in New York —that games like poker depend to a material degree on chance and violate IGBA despite the skill involved. Gotti, 459 F.3d at 342.

The Gotti precedent and Judge Straub’s observations lead us to think that the Second Circuit will not reach the issue of whether IGBA has its own separate definition of gambling requiring a predominant element of chance.

We may well be wrong, but if we had to bet we would say that DiCristina is in trouble, as are others involved in poker businesses in states where gambling on games with a material element of chance is illegal. One way or another, we’ll find out either late this summer or in the fall when the Second Circuit renders its decision. And, then, almost undoubtedly, whoever loses will seek review by the Supreme Court.

Regardless of the Second Circuit’s decision – and barring passage in Congress of the Internet Poker Freedom Act of 2013, H.R. 2666, 113th Cong. (2013), which is at best a very long shot – it seems clear that the question of whether or not poker is a federal crime is not going to be decided anytime soon.

Goodwin summer associates Alexander J. Callen and Caitlin Proper attended oral argument in the Second Circuit and contributed to this blog post.

 

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