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Poker and the Law: Is it a Game of Skill or Chance?

 

 

 

 

Poker and the Law: Is it a Game of Skill or Chance?

The parameters of legal poker playing  are still  unclear.  On November 2, 2005, Baltimore police  raided the Owl’s Nest, a private club, and charged 80 Texas Hold’Em players with illegal gambling and seized over $ 25,000 cash and over $ 16,000 cash and over $ 16,000 in poker chips.  It may have been the largest raid since prohibition era.  A Vice detective opined that the players, “could receive a year in jail or a $ 1,200 fine.”  Fortunately for the players the charges were dismissed because the police had used the wrong statute.”

     

In contrast, California allows local governments to regulate and tax its approximate 94 cards rooms.”  The games are essentially pari-mutuel events, unlike banked games.  Parts of the California regulatory process might seem to border on the absurd, e.g. poker operators may only take money out of a pot (“rake the pot”) three times.  A North Dakota bill would have amended the law so that “gambling does not include: (a) lawful contests of skill, including Internet live poker..”
      Presently, there are two major cases before the courts on whether poker is primarily a game of skill, and if so, is it prohibited by law.  One case is on appeal in North Carolina and the other is before an English court.  On November 15, 2004, the Joker Club, LLC, sought  a declaratory judgment  (4 CVS 6034) in a North Carolina Superior Court  on whether poker was a game of skill, which in the opinion of its attorneys would make it legal since North Carolina law only prohibits games of chance.vi  The Joker club had leased facilities for poker games, but claimed it could not open for business until received a favorable court ruling.”


      The defendant, James Hardin, then the county district attorney, responded to the inquiry by the attorney for the Joker Club by stating that poker “does not comply with North Carolina law”  and that even if it were a game of skill, “that’s [prohibited] gambling in North Carolina.” Hardin also stated that even poker games at a player’s home were “illegal technically speaking.” 
      If a complaint were filed with, say, the Durham Sheriff’s Department  and they went to a location and found folks playing cards for money, they would be subject to arrest under our law.  Now what’s the probability of that happening?”
      The Attorney Generals Office of North Carolina, representing Hardin, filed a motion to dismiss for failure to state a cause of action.  He also stated:
      We’re not talking about shuffleboard here, ..We’re not talking about archery.  Poker is simply not legal The turn of a card is what settles it all.  The best player in the world can get beat by an amateur.  Chance predominates.  Chance overwhelms skill…

The cards are dealt face down.  You can be as skilled as possible.  You can do all the statistical analyses.  But chance predominates when  you flip the card over.  It’s just that simple.  You can’t will the card to be an ace when it’s a deuce.”
      North Carolina law  concerning poker and skill was unclear.  N.C.G. Stat.§14-292 states: “any person or organization that operates any game of chance or any person who plays at or bets on any game of chance at which any money, property or other thing of value is bet, where the same be in stake or not, shall be guilty of a Class 2  misdemeanor.”  Case law had long required that a gambling violation required proof for a conviction that chance alone or that chance predominated over skill.  In State v. Eisen,”  the North Carolina  appellate court concluded that blackjack as a matter of law could not be considered a game where skill predominated over chance.  “Whether blackjack as described in the evidence was a game of chance or one of skill was a question for the jury to decide from the evidence..”  The court did opine that “the element of chance clearly dominates the element of skill.”  In Collins Music Co. 

v. North Carolina ABC Common the appellate court concluded that chance in video poker machines predominated over skill. In  dicta, the court stated “all of the skill elements associated with the ordinary game of draw poker are absent in the video version.  The game of draw poker, played against other individuals, permits a player to use psychology, bluffing and knowledge of the law of probabilities relative to the game of poker, to increase his potential win relative to the total number of games played.  Psychology and bluffing have no effect on the final outcome of play when playing electronic video poker.”  Thus, it was a reasonable possibility for the judge to conclude that poker was a game where skill predominated over chance.
      Yet there was an archaic 1848 Supreme Court of North Carolina case, State v. Gupton, which discussed “  idle and vicious practice of gaming” and the North Carolina statute that prohibited games of chance.  In interpreting what constituted a game of chance, the court concluded that chess, bowls, billiards, etc, were games of skill.  The court, however, opined that dice games and “the hand at cards [which] depends upon a dealing with the face down, exhibit the [two]  classes of games of chance.”

      At the hearing on May 23, 2005, the Joker club introduced testimony from various experts.  Ray Cooke, a 16-year professional poker player and author of books and articles on poker, responded to the following question as to what might happen if the lawyer and Cooke “played a single hand of poker.  Cooke said Powell [the lawyer ] had a chance of winning.  ‘How about if we play 1,000 hands?’  ‘You’re dead,’ Cooke said.”  The defendant utilized an employee of the Alcohol Law Enforcement  agency who testified he played poker for over 39 years.
      On July 1, 2005, the judge issued a seven-page order.  More than half of the findings of fact summarized the plaintiff’s expert witnesses’ testimony, especially that of Ray Cooke.  For example, the court cited Cooke’s testimony that

  • 7..when a player is successful in engaging his opponents in situations that are mathematically favorable he will create positive expectations for the long run and although he will not win every hand, he will win more chips over the course of time.
  • 8.. Mr. Cooke testified that he spent years developing control of his own mannerisms so as to not give away his hand or strategy and so he could give false reads to other players.
  • 9.. Mr. Cooke testified that in Poker a large percentage of the hands do not get to the showdown where the cards are compared.  Many of the hands are folded prior to the showing of the cards.”

 

Presently, there are two major cases before the courts on whether poker is primarily a game of skill,

The order summarized the single defense expert testimony almost derisively.  He said that he enjoys poker and agreed that there was skill involved in poker, but he believes that luck prevails every time.  He testified that he had seen a television poker tournament in which there was a hand that had a 91 percent chance to win and yet it lost to a hand with only a 9 percent chance to win.  He opined that this was absolute proof that, in poker, luck predominates over skill.  The defendant offered no other witnesses.The court opined that it:

  • 21 ..could not determine the meaning of the term “predominates” and therefore the court cannot apply the proper standard to determine whether poker is predominately a game of skill or predominately a game of chance.
  • 22.. That this court is not the proper forum in which this issue should be decided.

The court concluded that the matter should be resolved by the legislature and that “the court is satisfied after reviewing North Carolina case law, that card games similar to poker where hands are dealt face down and the participants cannot control which cards they receive are games of chance.  This Court therefore determines that under North Carolina law poker is a game of chance.
      A newspaper reporter quoted the court in stating orally that the “statute dated from the 19th century and might be antiquated.  The culture is different now.  Society is different.  The law is ambiguous in a number of different ways.”  The judge also stated that it is unclear as to the skill / chance determination.”  How do you measure that?”  the judge asked.  “If the legislature told us what they had in mind.  I’d understand .  but they didn’t tell us what it means.”  The judge, however, concluded that  “he was bound to follow the law as it was written.”  The matter is now being appealed.

      Within the United States, case law is unclear as to whether skill in poker predominates over chance.  Many, if not most, cases discussed whether poker should be distinguished from a lottery.  The Supreme court of Rhode Island,” opined  that proposed casino gambling would violate the Rhode Island constitutional prohibition of lotteries.  The court did admit that poker, which would be operated at a casino, like blackjack, had some degree of skill, but since chance was “the predominate factor,” it was a form of lottery and therefore prohibited.  Other courts have concluded that poker is not a prohibited lottery because of the skill involved.  Several state statutes have included poker as a game of chance, e.g. Maine, New Mexico, and Ohio.

     

In London, there are various poker clubs which presently have an unclear legal status.  The relevant statute.  The Gaming Act of 1968, has been interpreted not to prohibit games of skill such as chess or bridge.  If poker is determined to be a game of chance such as roulette and blackjack, it may be played legally only in Great Britain’s approximately 137 casinos.  “According to the English Rule, any amount of skill in determining the outcome of a game removes that game from the status of gambling.”  However, in practice, English law often leaves the issue of chance to a jury.
      In early 2004, Derek Kelly set up two legal entities in London in order to comply with the law concerning poker.  Gutshot Limited owns a bar, restaurant, Internet café, and an online card room.  Gutshot Private Members Club, a nonprofit organization consisting of about 12,000 members, pays rent to Gutshot Limited for use of its premises for poker tournaments.  All monies from profits/ service charges would eventual be returned to its 12,000 members.  Thus, Gutshot has asserted it makes no profit from gambling.


      Its owner, Derek Kelly, has claimed: “Poker is a game dominated by skill…Provided you are more able, untimely you will be the winner.  Like any game or sport, there are elements of luck.  However, the more skillful player will win out in the end.” Gulshot has been hosting poker tournaments since early 2004.
      The metropolitan Police Club and Vice Unit, after a year-long  investigation, has filed charges in September 2005 against Derek Kelly for breaches of the Gaming Act of 1968.  Its spokesman stated: “There seems to be a prima facia case of breaches of the Gaming Act is a book as wide as Wales but there are a couple of specific offences.  It’s a very unusual police case in that the defendants and the police are saying exactly the same thing is happening.  We’re saying ‘You did this,’ and they’re saying ‘Yes we did.  But we don’t think we’re doing anything wrong.”
      The specific statutes are Section 3(1), 4 and 8(1) of the Gaming Act of 1968.  The charges were brought against Derek Kelly, and it is understood that different charges will be filed before a scheduled hearing in January 2006.

      Canada has eliminated the skil l/ chance determination.  In Ross v. The Queen, the Supreme Court of Canada had to determine whether a bridge club violated the law for charging a fee for playing bridge.  The court stressed that Canada had had not adopted the predominate factor test as to whether skill predominated over chance.  “It seems clear that the Parliament of Canada sought to avoid the uncertainties involved in trying to ascertain the predominate factor in mixed games by enacting that they would be treated in the same way as games of pure chance.”  Most commentators have suggested that unlicensed poker games might be in violation of some part of the Canadian Criminal Code.

 

 

 
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