Myths about UIGEA from "semi-pro"

[Billman]

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Up to this point, DoJ actions have had nothing -- I repeat, nothing -- to do with the UIGEA. The investigation into Neteller for example began in July, three months before the UIGEA was passed. They're prosecuting people under old statutes. It's a two-front war that we've been fighting.

I happen to think the DoJ actions are the far more serious concern. e.g., if the UIGEA had passed, but the DoJ never lifted a finger, then I think we'd better off than if the UIGEA hadn't passed, but DoJ attempted to enforce existing statutes vigorously. Now we have both, of course, which isn't good.

I'm not trying to rip on you -- I agree with 90% of what you wrote in your blog. But you're flat wrong on this issue.

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Well I can't be flat wrong because I agree with you and then that would mean that you're calling yourself wrong which, and if you've seen enough bad sci-fi movies you know this is true, that'll create disturbances in the time-space continuum that will suck this entire thread into a black hole.

Yes, the Neteller arrests were part of an investigation that pre-dates the UIGEA. However the memo that the NACHA sent to members specifically referenced the UIGEA. The DOJ is using the UIGEA as an easy tool to accomplish things it might have been much more difficult previously. Everything that happened in Jan was a carefully orchestrated attack on the entire industry. They picked wire act violations to do this they used the UIGEA to do that and the net effect was a pretty serious blow to online gaming.

Besides, the real point of that myth was that we have 270 days before the UIGEA becomes law. That was never the case and recent events show that banks and ACH networks can act voluntarily to implement portions of the UIGEA without waiting for the regs to be published.

[Nate tha\\\' Great]

[ QUOTE ]
[ QUOTE ]

Up to this point, DoJ actions have had nothing -- I repeat, nothing -- to do with the UIGEA. The investigation into Neteller for example began in July, three months before the UIGEA was passed. They're prosecuting people under old statutes. It's a two-front war that we've been fighting.

I happen to think the DoJ actions are the far more serious concern. e.g., if the UIGEA had passed, but the DoJ never lifted a finger, then I think we'd better off than if the UIGEA hadn't passed, but DoJ attempted to enforce existing statutes vigorously. Now we have both, of course, which isn't good.

I'm not trying to rip on you -- I agree with 90% of what you wrote in your blog. But you're flat wrong on this issue.

[/ QUOTE ]


Well I can't be flat wrong because I agree with you and then that would mean that you're calling yourself wrong which, and if you've seen enough bad sci-fi movies you know this is true, that'll create disturbances in the time-space continuum that will suck this entire thread into a black hole.

Yes, the Neteller arrests were part of an investigation that pre-dates the UIGEA. However the memo that the NACHA sent to members specifically referenced the UIGEA. The DOJ is using the UIGEA as an easy tool to accomplish things it might have been much more difficult previously. Everything that happened in Jan was a carefully orchestrated attack on the entire industry. They picked wire act violations to do this they used the UIGEA to do that and the net effect was a pretty serious blow to online gaming.

Besides, the real point of that myth was that we have 270 days before the UIGEA becomes law. That was never the case and recent events show that banks and ACH networks can act voluntarily to implement portions of the UIGEA without waiting for the regs to be published.

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I can certainly agree that the fallout from the Neteller incident has been worse in light of the UIGEA. I don't think that the UIGEA has yet been a motivating factor behind DoJ's actions per se, though I've argued many times that the DoJ is a hell of a lot smarter than people are giving it credit for.

I also do not think that there is anything particularly magical about the 270-day threshold. Rather, I think we'll see a series of shocks, some small and some large, which make online gambling progressively more costly to the consumer in terms of the risk associated with having money in an offshore, gambling-dedicated account (essentially the risk of not being able to "get the money out", either at all or without significant hassle) and will trigger a parallel decline in game quality. I think these shocks will tend to occur faster than the industry can rebuild itself, and at some point, perhaps soon, they may begin to overwhelm the profit potential of the poker games. It's something that everyone needs to keep an eye out for, monitoring the situation on a weekly if not daily basis.

[Billman]

Nate,

Couldn't agree with you more. I just had a discussion the other day with somone regarding when we will likely see the *real* fallout from the Neteller and ACH freeze out. My hypothesis was that we're probably looking at 30 - 60 days before existing players burn through funds. Very few new accounts are being created due to the difficulties in funding accounts for complete newbies. So there's a fixed pool of funds in the hands of US players and sooner or later that pool is going to move from the 90% of players who lose money to the 10% who make money and then we're going to see some interesting reactions. Without a significant new payment method in the next 30 - 60 days, IMHO, we're going to see a waterfall like dropoff in players sometime after we've reached that liquidity tipping point.

Obviously some people are buying gift cards and there are non-US players out there but I don't think that's a significant enough factor to do anything other than extend that window by a couple of weeks.

I could be wrong and I'll label it as speculation but I think the reasoning is sound.

[Skallagrim]

Bill, thanks for returning to this discussion with facts and arguments rather than name calling.

The only issue I have with you is that you continue to repeat that MOST states decide against poker when confronted with the skill argument. I have previously listed the Courts that have ruled in favor of poker, I know only 1 that expressly ruled against. Also, you have to look closer at the Gutshot case in the UK, under UK law (as intereperted at the trial) if there was any chance in poker it had to be regulated. Of course there is some chance, in fact, the prosecutor in that case called experts who testified it was likely 70% skill and 30% chance. The prosecutor and Judge said the jury could accept those figures and still find against Gutshot. So they did. Whether the UK law should be intereperted that way is under appeal and I certainly dont know enough about UK law to guess the chance of that appeal's success - but the standard used in that case is NOT applicable to most US jurisdictions.

[Billman]

Don't speak too quickly. I could turn into a jerk at any moment :-)

As I've stated, I'm not a lawer. All I can do is do research and base my opinions from trusted professionals in the area. So far Chuck Humphries is one of the few attornies who specializes in this area that has written on the topic in a somewhat comprehensible way (sorry, but I. Nelson Rose is a bit of a rambler). Now I may misunderstand some of it and in presenting my analysis get into an area of dispute over specific terms used and such but there's no intent to deceive.

That being said, I'll take issue with what you've posted previously. You claimed that the Bicycle v. DOJ case found that poker was a game of skill. This is what Humphries says:

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In Bell Gardens Bicycle Club v. Dept. of Justice, 42 Cal.Rptr.2d 730 36 Cal.App.4th 717 (Court of Appeal, Second District, Division 7, California, July 11, 1995.Rehearing Denied Aug. 1, 1995. Review Denied Oct. 26, 1995) the issue was the legality of “jackpot” poker. In 1989 the California attorney general notified licensed cardrooms, which were offering jackpots, of his opinion that jackpot poker was unlawful because it violated California constitutional and Penal Code proscriptions against lotteries. Various state officials sued a number of the licensed cardrooms seeking to have the jackpot declared illegal.

In “jackpot” poker the “house” withholds money from pots in lawful poker games to fund the “jackpot,” which is won and then split among several players in a game when a specified rare hand is beaten by a better rare hand.[5]

The case finally reached the California Court of Appeals in 1995. The appellate court held that the jackpot feature is an illegal lottery under Penal Code section 319 given the predominance of the element of chance in winning a jackpot. The Court distinguished this from the legal game of poker under section 330. The analysis of skill versus chance in this case went to the question of whether the jackpot feature could avoid the status of being held to be a lottery, not to whether the game of poker itself is legal or illegal on the basis of skill predominating over chance.

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Now, I have niether the time nor the interest to hunt down every single one of the cases you cited but from the one above - and it is an often cited case by those claiming poker to be a game of skill - it does appear that these are not as black and white as your post suggested. I don't mean that to be short with you but I literally don't have the time . . . or desire to look at every single case and figure out what the court ruled on vs. what you said they ruled on. I gots me some more fun things to do :-)

[Skallagrim]

"The Court distinguished this from the legal game of poker under section 330. The analysis of skill versus chance in this case went to the question of whether the jackpot feature could avoid the status of being held to be a lottery, not to whether the game of poker itself is legal or illegal on the basis of skill predominating over chance."

The Court distinguished the jackpots from the legal game of poker...In other words, the direct issue of skill v chance re:Poker was not decided, BECAUSE IT HAD PEVIOUSLY BEEN DECIDED. It is the usual procatice among lawyers to refer to the latest case on a subject - this case re-affirmed the previously established point that in California, Poker is a game of skill - and further ruled that the jackpots in question were NOT the result of skill, hence illegal.

Humphrey is always a pessimist in this area, but even he does not state that POKER is FOR CERTAIN a game of chance under the predominance test.

I still believe that all the recent research on Poker will make it quite easy, for those willing to finance the litigation, to proove the poker is predominantly decided by skill in those states where it matters. We shall see, because one thing I will predict is that some type of money transfer service will develop that will be just poker and just poker in states where this kind of argument can be made. That service will be in a very good place ot win in court.

[Billman]

No offense but certain types of card games where ruled legal in Ca. This case was a challenge to whether jackpot poker games were legal. Yes, you cited it as an example of cases where courts had ruled that poker was not a game of chance.

Again, not trying to be a jerk because I've enjoyed this exchange, but you can't sit there and pick apart everything I say down to which words I used and then waive away the fact that you offered up a counter-example that not only didn't support your claim but turns out to possibly give my argument credit.

The courts distinguished because there were already laws on the books which made certain forms of card games legal. Citing that case as an example of courts saying that poker is a skill game is not accurate.

I also think that you're carefully choosing your words to say one thing and to avoid being proven wrong. You say that Humphries never said that poker is for certain not legal but I can't see how you could come to another conclusion reading the following from him.

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Some commentators have argued that the operation of online poker Websites should be excluded from the reach of the new law because poker, being a skillful game, is not a game of chance. Under current state law that argument does not hold water. Most U.S. jurisdictions apply the Dominant Factor test to determine if a contest is a game of skill or a game of chance. That test looks to which elements predominate (51%) in determining outcome of the game. If the elements of chance predominate, then it is a game of chance, notwithstanding that skill elements are important, but not predominant. Furthermore, the outcome is to be determined by the considering the nature of the game and the abilities of the average player coming to the game. See: Is Poker a Game of Skill? Online poker operators should consider mathematical analysis of their vast data bases of poker results to support attempts to overturn the case law that views the "luck of the draw" aspect of poker as resulting in its being a game of chance.


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What he says is that the argument that poker is a game of skill doesn't hold water. The only thing he does offer that might support your view is that those who wish to challenge the law use vast data points to prove their point. My read is that he's saying that poker doesn't pass muster of the current standard so those who want to challenge the law need to do a better job at redefining what a skill game is.

And you call Humphries a pessimist but isn't that what people pay lawyers to be? I do. I want my lawyer to lay out the worse case scenario so I can make an educated decision. I mean who would you rather have working on your behalf, the guy who says "you want to name your company Google? Well there's a possible trademark issue involving a company named Gaggle. We should go ahead and clarify this before we invest too much money in a name that we might now be able to use." Or would you rather have an attorney who says "The chances of Gaggle suing you are pretty remote and if they do there's at least a 50% chance we can get this dismissed."? Personally I prefer the former. I can still disregard his advice but the later one is going to lead you into situations where your entire company could be at risk.

[Uglyowl]

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I know plenty of Republicans who are essentially Libertarians and I know plenty of Democrats who would love nothing more than to be able to regulate your entire existence.

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Libertarian Republicans were going the way of the do-do bird. The 2006 version of what is a Republican got very very ugly. Frist was an absolute disgrace, and this reaches father than poker. To allow this guy to be the head of your party in the Senate is scary.

Hopefully they will realize the error of their ways and move back towards a more Libertarian stance. Republicans ,IMO, let power get to their heads and needed a good lashing.

[JPFisher55]

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JP - I dont know of anything that stops a state from passing a law that says "its a crime to play poker on the internet." That is different from a law saying "if you play poker on the internet it must be at a site licensed by us or its illegal." If you have a theory about why they cant pass the first type of law LET ME KNOW! I respect your opinion.

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Skallagrim, I'm not an expert on this area of law. When I googled "dormant commerce clause" and looked up the cases, the authors of some articles about this legal doctrine stated that laws like the State of Washington law outlawing online gambling run afoul of the commerce clause. They cited sales tax cases and other cases dealing with laws in which states outlawed other types of interstate commerce which the federal courts struck down. Of course, the UIGEA may have provided federal sanction for these laws regarding some forms of online gambling. I think that this whole area of law is very muddled. And the WTO case further muddles the waters.

[permafrost]

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That was never the case and recent events show that banks and ACH networks can act voluntarily to implement portions of the UIGEA without waiting for the regs to be published.


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You think the banks and ACH networks acted "voluntarily"? I'm skeptical.