This is part 4 of my series on where we stand now in the post-April 15 world. You can find parts 1, 2, and 3 here:

Part 1
Part 2
Part 3

Every time we discuss poker legislation on this board, someone comes in and says "why are we even talking about this? Online poker is legal isn't it? Why can't we just take them to court and win?"

Now, in part 1, I addressed why the poker sites, which were the logical candidates to bring court challenges, didn't do it. But any poker player would have standing to challenge a law that potentially interferes with his or her play as well. So why not just go to court and beat the Department of Justice and get back to the pre-April 15 status quo?

Well, the answer involves a combination of a few different things. And understanding this is key to why we do, in the end, need a poker bill. We may be able to obtain favorable results on some issues we care about if we litigate, but litigation is unlikely to restore the status quo ante.

To understand the problems and possibilities of litigation, we have to go back to a point I made in part 1. Our legal system is a "common law" legal system which we inherited from the British. What this means is that rather than having detailed statutory codes governing all aspects of our behavior (this is called "civil law", descends from the Romans, and is used in most European countries such as Spain and France), we allow somewhat more ambiguous, open-ended laws which are then interpreted by our courts, with the court interpretations becoming a part of our law going forward.

You may have seen Skallagrim and me get into a heated discussion in another thread recently about the meaning of New York's gaming law. That is what this is about. New York's gaming law is vague on the issue of what the relationship between "skill" and "chance" is that would make a game illegal. It could be given many different interpretations. There is a court case from a New York court that has adopted an interpretation of the law that is unfavorable to poker players.

We can assume for sake of argument that Skalla's criticisms of that case are well-founded; the thing that nonlawyers may not understand about it is the role that published cases have in our legal system. In other words, when another case is brought under New York's gaming law, a civil law jurisdiction would just go back and look at the statute again and interpret it anew. But in a common law system like ours, the prior case becomes a precedent which other courts are required to consider when determining how to interpret the statute.

There are two types of precedents-- controlling precedents and persuasive precedents. A controlling precedent is a case that was decided by a court which hears appeals (directly or indirectly) from the court that we are currently before, and which does not have materially different facts, meaning facts that are not only different but which would justify a different result. For instance, the Flood v. Kuhn case is a US Supreme Court case that holds that baseball is exempt from federal antitrust laws. The US Supreme Court hears appeals, directly or indirectly, from any court in the US on issues of federal law. The result is that if any US attorney's office or any private citizen brings a federal antitrust action against Major League Baseball, the court that hears that case will be REQUIRED to follow Flood v. Kuhn.

A persuasive precedent is any precedent that isn't controlling. Courts are not required to follow persuasive precedents; however, they are, as the name implies, seen as persuasive. Essentially, when there's a case out there that goes against the argument that you want to make, you need to show the court why it shouldn't follow it-- either because the facts are different, or the reasoning is shoddy. Most of the time, but not all of the time, persuasive precedents are followed as well. But the difference between persuasive precedents and controlling precedents is that when you bring an action that is inconsistent with a controlling precedent, your case will be quickly thrown out of court. When you bring an action that is contrary to a persuasive precedent, you will be given an opportunity to show the court why the precedent should not be followed.

What does this have to do with poker litigation? Well, simply put, as I said in part 1, absent a controlling precedent, the Department of Justice is not legally required to accept the arguments of poker players, even if those arguments are the best interpretation of the law. So long as their arguments are not frivolous (i.e., completely devoid of legal merit), they will get a hearing, and indeed for many reasons, good (the Department of Justice usually hires very smart and honest lawyers whose interpretations are entitled to some respect) and bad (many judges are selected from the pool of DOJ prosecutors and have a pro-prosecution bias), DOJ arguments are going to tend to receive some deference from the courts.

The second thing you need to understand about poker litigation is that even if we are right and the government is wrong, we need to prevail on several different arguments to ensure the continued legality of online poker. We have to not only defeat the application of the Wire Act, but also other federal laws like the UIGEA, plus (as we have seen), potentially, money laundering, bank fraud, and other illegal gambling laws. Plus we have to defeat the application of state laws as well.

I hate poker analogies when it comes to poker litigation (they are so overused), but I would compare this to getting pocket aces ten times in a row in hold 'em. Every single time, we will be a huge favorite. But the chances of our aces at SOME point getting cracked increases the more times we are dealt them. Even if we assume all our legal arguments are sound, all it takes is one judge or court panel at one point not buying an argument we make and we can lose big time, and the chances of that increases the more arguments from the other side we have to defeat.

And, of course, that's assuming that all our arguments are sound. In fact, some are stronger than others. The argument that the Wire Act does not cover poker is an extremely strong argument. We have a case precedent on our side from a Circuit Court of Appeals (the second highest level court in the federal system), and the language seems to be best interpreted as applying to sports betting. (Even there, ever the cautious lawyer, I would not pretend that the DOJ didn't have some chance of winning a Wire Act argument. But nonetheless, we have a strong position there.)

Similarly, the argument that the UIGEA requires a state law predicate and thus doesn't prohibit financial transactions with poker sites in the many states where there is no prohibition on internet poker is a very strong argument, supported by the text of the statute.

But other arguments that people make are weaker. A case was litigated on the issue of the commerce clause prohibiting states from banning internet poker-- this resulted in an entirely predictable 7-0 ruling against us from the Washington Supreme Court.

Similarly, the "skills vs. chance" argument that is now playing out in the New York DOJ case and often turns up in many cases is, honestly, a toss-up. It's one of those things that depends entirely on how one characterizes poker (and thus will end up depending a lot on how a particular judge views the game). Obviously, skills and chance are both elements of the game. This isn't to say we shouldn't emphasize the role of skill in court cases and in any public forum we can. Rather, it just means that we should be realistic and understand that not every judge out there is going to agree with us that poker is fundamentally a game of skill.

So now we aren't talking about getting pocket aces ten times in a row. We are talking about getting a run of reasonably strong hands along with some speculative hands like suited connectors. We are still favored to win a lot of cases, but it's highly unlikely that we win every hand.

And that's why people have to be realistic about litigation. I would love it if Stars and Tilt executives came to the US, fought the DOJ charges, and won. It would be great for online poker. And I would also love it if a poker player brought a court claim and successfully litigated the legality of online poker under federal law.

But with the victories are likely to come defeats, and some of those defeats are going to hurt us. Thanks to that Rousso case, for instance, state legislators who oppose us are going to have a legal talking point about Washington's state law that they can use when proposing anti-poker legislation. And I actually have a fear in the back of my mind that the current DOJ action could result in a federal court ruling that internet poker is illegal in New York state, which would be a very bad thing indeed.

And lastly, successful litigation results (unless we were able to establish a constitutional right to play poker online, which is almost impossible under current law) can always be reversed by legislatures anyway. A ruling that the UIGEA didn't apply to internet poker could always be followed by an amendment tacked on to some unrelated bill and passed in the dead of night that provided that it does. Litigation results are rarely permanent when there is organized opposition.

We need to fight back against the DOJ and to litigate claims that appear to have a good chance of success. A good litigation strategy is part of the way forward. But we need to be realistic about the effectiveness of litigation. The only road to long-term legal security for internet poker is legislation, not litigation.

Thank you for taking the time to write this series!

Violation of my Life, Liberty and the pursuit of Happiness.

What laws protect me from a handful of men taking my freedoms away?

What laws stop a few men from effecting 308,000,000 people?

What are the penalties for taking the people's freedom, and in some cases, jobs?...How can it be judged the amount of suffering a few men have caused, and from that, how can you get the number of years they should sit in jail?

How can a crime have no victims? Then, what are we talking about? Gambling and drug use, the top questions on Obama's Facebook stunt. Which he ignores.

So in my mind this angle still comes down to not only what is most winnable but also what puts the most pressure on congress to legislate. Also, venue seems to be a major factor here. Picking where to initiate any action seems like a big decision to a pedestrian like me. And I would imagine the choice would be influenced by appeals prospects.

Also, cost of the whole process is a major factor. Allocating resources across activities is definitely a non trivial activity here.

lawdude, thanks for writing your ass off these last few days. Much appreciated.

In general, I agree with everything substantive you had to say, but I do want to take issue with one point you and I have disagreed on in the past. In a post as authoritative as yours will be seen to be, I did not want the characterization of DOJ lawyers as "smart and honest," to pass unchallenged.

The readers who have not practiced law will have no idea that the DOJ has a reputation of cutting ethical corners claiming they are not bound by the ethics rules in the states they practice in.

This is important to the poker cases. A lot of people look at these indictments and say, "how can the DOJ claim in good faith that poker is covered by existing statutes when it fairly plainly is not?" The answer, in fact, is that it is simply wrong to assume that the DOJ is acting "in good faith." The most recent example of this is the fact that Preet Bharara so egregiously misled people with his press release on the seizures that it amounted to a lie.

I would like to add that the Rousso case did not settle the Dormant Commerce Clause issue regarding the right of states to ban or regulate online poker. It has no precedence in a federal court.

Also, if you read Skallagrim's past explanation of the Rousso ruling, you will find that this court ignored and failed to apply standards, set forth by SCOTUS, to test its state law prohibiting online poker under this doctrine. IMO, a federal court will apply such standards. This application may require taking of evidence and fact finding which never happened in the Rousso case. This lack of evidence and factual record is why the case was not appealed to the SCOTUS. IMO, we have a good chance of prevailing on this doctrine which would invalidate most or all state laws that purport to govern online poker. Federal courts usually take an expansive view of federal power and a narrow view of state rights. State courts often do the opposite.

Really, the legality of online poker depends on the application of the dormant commerce clause doctrine to it. The Interstate Unlawful Gambling Business Act depends on violation of a state law. The only strictly federal law on gambling, the Wire Act, has already been interpreted by the Fifth Circuit Court of Appeals to cover only sports betting. Yes, another federal court in another circuit might differ, but most legal scholars agree with this view. So if UIGEA likely covers online poker, then online poker likely has to violate some valid state law.

The bank fraud charges in Friday's cases are a separate matter. I just hope that one of the defendants in these cases fights, none may for various reasons.

Also, I'm not sure that any online poker player has standing to file litigation. If any of them did, then the PPA could. Skall has indicated that more harm than disruption to their ability to play online poker is necessary for individuals to have such standing and confer in on the PPA. I would think that if FTP fails to pay any US players, then the standing problem is solved, but in the meantime, this is an open issue too.

I do agree with Lawdude that regulation and licensing legislation is our best solution and avenue to playing online, real money poker. But IMO, a ruling by a federal court judge that online poker sites do not violate any valid federal or state law would stop the DOJ's current campaign against online poker. I don't think that we need such ruling by SCOTUS if the DOJ loses such a case at the Court of Appeals level or even District Court with no appeal.

I apologize if I missed this somewhere else, but I haven't seen anyone mention the MN situation. Our state made an attempt to block us from internet poker that got completely shredded. Can this give us any hope?

mpeth:

If you look at the context of what I said, I was discussing the perception that DOJ lawyers are smart and honest among judges as a reason why DOJ interpretations of the law receive some deference. This is a reality we have to deal with.

That said, you should understand that many, many lawyers have great respect for federal prosecutors. There are definitely some bad apples and some crusaders, but in general terms, US attorney's offices are filled with some of the best and the brightest in our profession. Certainly many defense lawyers are A LOT more concerned with issues like honesty, suppression of evidence, improper tactics, grandstanding, and playing to the public and to get reelected when dealing with various state and local prosecutor's offices.

And you should further understand that it is actually crucial that the DOJ have the same right that everyone else does to bring cases to court and establish the bounds of the law where they have a colorable basis for their arguments. The reality is that one of the things they are doing here is actually exactly what we wanted them to do-- i.e., bring a court case where we can litigate the real meaning of the UIGEA and other federal gaming laws. Citizens can seek declaratory judgments and sue for damages; the DOJ brings an indictment and puts its legal theories before a court where they can be accepted or rejected.

Fundamentally, the DOJ is wrong here because their interpretation of the UIGEA and federal gaming law is incorrect. But they aren't wrong because they brought a case-- if they think this is what the law means, it's a lot more honorable to bring a case than to just put the squeeze on payment processors like they had been doing in the past while avoiding bringing the matter to court directly.

This is actually quite false.

What is TRUE is that a federal court is not required to follow Rousso. It is only persuasive authority. But if you brought a dormant commerce clause claim in federal court and there was an oral argument on the 12(b)(6) motion, one of the first questions the judge will ask you is "why shouldn't I follow Rousso?". Federal courts follow persuasive authorities issued by state courts all the time. They are precedents and will be considered by any court hearing an issue.

As for JP's other points:

1. The Rousso case was 7-0. There was no dissent. The Washington Supreme Court has a reasonably good reputation. The decision cites numerous US Supreme Court precedents and applies them to poker. We know that some people don't like the decision, but we also know that no petition for US Supreme Court review was brought and no federal lawsuit was filed. I suspect that nobody in the poker community is anxious to relitigate this matter and likely lose again on a bigger stage.

2. Poker players definitely have standing to sue over government actions that prevent them from playing or interfere with their cashouts or deposits. Litigation is costly and uncertain, but there's not really a standing problem here with at least with respect to most of the court challenges that I have seen proposed. Organizations like the PPA would have to meet more stringent standing requirements.

Lawdude, I agree with you on this subject. But why do I feel that without the bank fraud charges against most of the defendants (I think that the Cereus defendants were not charged with bank fraud), the SDNY office would not have filed the criminal or civil cases against the defendants connected with the online poker sites?

Lawdude, we'll have to agree to disagree on these subjects. The answer to 1. is because the Washington Supreme Court did not follow SCOTUS precedent in applying the DCC doctrine to its law prohibiting online poker.

Also, I don't know for sure, but Skall has indicated in the past that your point 2. is not correct and players will have to lose money due to DOJ's interference to have standing. Same for the PPA.

JP:

All you need for standing in federal court under Allen v. Wright is a personal injury, causation, and redressibility. That's it.

A poker player who can't play due to DOJ enforcement actions has suffered an injury. A poker player who can't deposit or can't withdraw has also suffered one. Causation and redressibility are pretty easy to prove.

This is the part that bothers me the most in the whole thing. Poker is profitable because most people don't understand it. While a lot of the people on this forum "get it," there are just so many people that will never understand exactly how skill determines outcomes for winners. In fact, I'm sure that very few judges anywhere understand the fundamentals that well at all, let alone the intricacies of the game. Statistical evidence for skill may be shown in court, and some judges may even be persuaded that poker is a game of skill (some have been). However, their understanding of why and how skill prevails is missing, because such knowledge would almost require regular winning play at the game. All the while, it is extremely clear to us how skill, chance, expectation, variance, game theory, range reading, etc. affect game outcomes.

What happens in cases where arguments are based on highly abstract reasoning, perhaps based on high level math or physics? It seems that if an argument cannot be reduced to terms that laypeople understand, then the legal outcomes will be largely due to misinterpretation or misunderstanding.

Thanks for writing this Lawdude. These turns of events causing me to consider becoming a lawyer! Keep up the good work!

As a general matter, you get battles of experts. If the judge understands what the experts are telling him or her and has an excellent BS detector, these types of cases can come out right. If the judge gets hoodwinked by some "expert" with a smile and shoeshine, sometimes they don't.

Pretty much all card games have skill involved in them. Any card game in which you make decisions is a skill game(war for instance is not). A game where your decisions can determine your results is not gambling. If your decisions can have influence over the outcome, then by that logic at the very least the game has elements of skill to it.

Following this logic the uncertain outcome has become "less uncertain" given that the player has some control over the outcome based on his skill(bluffing etc). "Less uncertain" in not "uncertain" and so poker is not gambling because the outcome is something that differs from "uncertain".

Gambling should be defined as games you are destined to lose in, and have no possibility of beating your competition over the long run. Then it is gambling is no longer a game of skill. If you dont agree with that, then basically insurance company's should be considered gambling as well, since they take something of value, and pay it out based on an uncertain outcome!

Or, you put in the hard work to make sure your evidence is readily understandable and your experts speak in clear fashion and you as the lawyer are capable of explaining that evidence in a fashion even someone who has never player poker before can grasp and understand.

And you do this despite the folks who tell you it will never work and that you are just wasting your time and that they already know you will fail because others have failed before you.

And you do this despite the cost and despite the nay-sayers because you know you are right and someday the truth will prevail.

But even then, just like in poker, the outcome of any one effort is still not guaranteed.

And so you have to fight on.

Most of you think that the Berlin Wall, for example, came down all in one dramatic action on one dramatic day. It may have looked that way, but anyone really familiar with the situation knows better. The Berlin Wall fell because everyday for each of its 30+ years someone was beating on it. Some beat it often, some beat it and walked away, some beat it and got shot for their troubles. Only a few who beat on it lived to see it fall. But it never would have fallen without the effort all those people put in for all those years.

And so you fight on.

Skallagrim

Actually, the problem is that doesn't solve the conundrum either. Many blackjack games are beatable with card counting. Does that make them not gambling? It's probably even theoretically possible to rig a slot machine. It's definitely possible to rig a roulette wheel. There are at least theorists who say that how you throw the dice can affect the odds in craps.

The "skills vs. chance" test may be like what Winston Churchill said about democracy-- it's the worst test available, except for all the others.

One aspect of this is that the long, hard slog that you posit is also likely to result in legislation anyway.

Gay rights advocates, for instance, challenged "don't ask don't tell" for years. Public opinion eventually changed. Judges became more receptive to their arguments. But the same process that made judges more receptive also made a political reversal possible.

If judges come to understand better why online poker should be permissible, it's certainly going to come within the context of political victories for poker players.

That doesn't make litigation useless or mean that we shouldn't pursue it, but it does mean, again, that our expectations need to be modest.

So you finally understand what I said all those months ago about litigation and legislation working together. Good.

Skalllagrim

I never denied they could-- I just think you sometimes assume that your arguments on various matters face a lot better odds in court than they actually do.

Actually, you did deny it. But more importantly your thinking was wrong then and maybe still is. You confused my willingness to litigate with predicting that litigation must or should win. With the understanding you displayed above, can you now see that there is value to pursuing litigation independent of the specific odds you will win the litigation?

The political points you gain and the awareness you increase can be just, and sometimes more, important than actually winning the specific case.

Skallagrim

Skalla, I don't want to rehash ancient history, but you often post arguments that are contestable and claim that they are "clear", or claim that adverse court decisions are the result of "political" judges, or dismiss authorities contrary to your position with broad statements that they are poorly reasoned or that you can "disprove" the reasoning in them with "better evidence".

The reality is that litigation is a tough, rocky road, and it has clear downsides as well as upsides. It is sometimes necessary, but it is an ancillary to the main project which is to obtain a legal, regulatory solution to the issue of online poker. You sometimes portray it as something where we just go to court, whip out our arguments and win, and if we don't it's because the judges are corrupt idiots, and that's wrong.

I think Black Jack is still gambling for a number of reasons including that its not a competition like poker is, and also, when compared to poker, its outcomes in fact are much more uncertain when looking at the arguments I presented for poker specifically.

As I see it......

Poker
I can be relatively certain of the outcome on the river(at the very least). I know about how often my opponent will fold, or call my bet or bluff me etc. I have control over outcomes in relating to My opponent folding, and the size of the pot if he doesnt, or my folding. There are many situations like this where the outcome is very apparent to me, and would not then be uncertain.

Black Jack
I bet, not knowing what cards, Ill be dealt.
I might be counting and know I have an edge, but I really don't have any control over whether I win the hand or not.

If you have control over how often you win, it is not longer gambling, it has become skill.

Old:

That doesn't work either, because there are variants of poker where you have much less control over the outcome of particular hands. For instance, I am primarily a limit hold 'em player, and you have very little fold equity on the river much of the time. It's basically a matter of deciding whether a bet is going to go in on the river or not and whether you are ahead or behind the opponent's range.

The better arguments on skill vs. chance are the types of arguments that Skalla often makes-- i.e., that even though there is a chance element to any individual hand, if you play enough hands skill always wins out and chance becomes a minor factor. This is true in basically any poker variant. These arguments work especially well with online poker, where a typical player probably plays far more hands than are played live and thus skill predominates.

The problem is in the end this is just an argument, and the skill/chance dichotomy allows judges a lot of leeway to insert whatever their personal feelings are about poker into the determination. A judge who views poker players as a bunch of degenerate gamblers will easily find persuasive an argument that chance predominates; a judge who views the best of us as skilled mathematicians and psychologists will be persuaded by arguments that skill in the end determines who wins and who loses.

The best approaches to gaming regulation that I have seen actually identify games by name and say "legal" or "illegal". There are still disputes about games not on the list, but then we don't have to evaluate the issue based on such a fuzzy framework. But if the legislator / regulators won't do that, "skill" versus "chance" doesn't do any worse a job of capturing the distinctions than any other test.