Second Circuit Clarifies That Elements Of 'Skill' Do Not Exempt Gaming From The Reach Of IGBA (18 U.S.C. § 1955)

A debate has been ongoing in law enforcement and gaming circles over whether operators of online poker sites could be prosecuted for illegal gambling under federal law. Poker, so the argument has gone, is a game of "skill" and not a game of "chance" and, therefore, does not constitute "gambling" of the type that federal anti-gambling laws were intended to reach. Last year, a federal court in New York ruled that poker was a "game of skill" and, therefore, did not constitute "gambling" under the Illegal Gambling Business Act, 18 U.S.C. § 1955 ("IGBA"). United States v. DiCristina, 886 F.Supp.2d 164 (E.D.N.Y. 2012),. That ruling, which was cheered loudly by poker proponents, as well as by fantasy sports operators who highlight fantasy gaming's "skill" component, has now been completely rejected on appeal by the Second Circuit U.S. Court of Appeals. (No. 12-3720, Second Circuit, August 6, 2013).

At issue in the case was whether IGBA reached the operation of businesses that offered poker play to patrons in return for a fee. The defendant in the case, Lawrence DiCristina, was charged (along with a co-defendant) with operating a poker club in the back room of a warehouse in Staten Island, New York. DiCristina, his co-defendant, and a group of others hosted poker tables in the warehouse at which dealers collected a 5% "rake" from each pot for the house, from which was used to pay expenses (including costs of the dealers) and profits to DiCristina and the others. At trial, DiCristina argued that poker is not house-banked (i.e. the house did not compete against customers for the pot) and the outcome of each poker hand was not predominated by chance and, thus, that poker was not "gambling" for purposes of IGBA. The District Court accepted this argument, noting that, while IGBA did not contain explicit criteria for defining what was or was not "gambling" under the statute, the list of examples given within the statute all involved games of chance and, thus, it was reasonable to conclude that "chance" was a necessary element for a game to be considered "gambling" under IGBA. 886 F.Supp.2d at 234.

On appeal, the Second Circuit rejected this argument in its entirety, noting that under the IGBA definition gambling "includes but is not limited to..." the list of enumerated examples in the statute. (Slip op. at pp.11-13). Thus, the Appeals Court held, "gambling" under IGBA could include any activity defined as prohibited gambling under the laws of the...