Red's Deal

Is Internet Poker Legal in the US? (Part 1 of 2)

Seems like a simple question, sure, but it's remarkably difficult to answer. I'll give you some background today and the thrilling conclusion tomorrow.

Let me start by saying I am not an attorney and this should not be considered legal advice. If you want a definitive answer to the question, your best bet is to seek a gaming lawyer. When you do, be sure to bring a big check book, a fluffy pillow and your favorite (legally prescribed) mood calmer with you because what you'll ultimately get is an expensive, long and frustrating response.

For all of you cheapies with YouTube attention spans, the short answer is this:

If you live in the states of IL, IN, LA, MT, NV, OR, SD, WA or WI, the answer is absolutely "yes," Internet poker is illegal. You have a law in your state that definitively prohibits Internet poker. If you play online in those states, you are a criminal. If you live in any other state, the answer is "maybe yes, maybe no" (probably better here is to think in terms of Magic 8-ball, where the answer would be "REPLY HAZY - TRY AGAIN" -- without the ability to re-shake the 8-ball).

I find the longer answer really interesting because it's chock-full of things that you actually never learned in civics class in school. It also gives you a peek deep under the hood of the American political roadster, including a look at the power plant that is in need of a serious tune-up.

When I co-founded Team Nuts (the company that ultimately took controlling interest of CyberArts Licensing), the first thing we did was hire a knot of lawyers to make sure we wouldn't end up in the slammer. (1) To be clear, I'm such a legal line walker that I don't even get parking tickets, so for damn sure I wasn't going to go to the Big House for writing software. (And I'm guessing that any conversation in the yard answering the question: "What're you in for?" with "Poker coding," wouldn't have a good ending. Although I probably would get a few new friends that way.)

To let you know precisely how convoluted this can get, in the early days of our company there was a point where we had twice as many lawyers working for us as we did programmers (ten and five to be exact). We spent several thousand dollars and came up with very few definitive answers to what seemed to be an easy question(the essence of a corporate lawyer is to say "no" to whatever you've asked as they drop the bill on you). We also learned some remarkably surprising things.

But before we get to the good part, we have to turn the clock back a bit...

Contrary to what you were probably taught in school, the United States of America isn't a true pure democracy, but rather a federated republic. The federal government was originally intended to be primarily responsible for the protection of the country's boundaries, international trade and to a lesser extent, interstate commerce and communication.

In the early days of America the rights of states were a big deal, mostly because the founders didn't want to see the US become another Britain/monarchy/generally awful place that overtaxes tea and dresses its military in a lot of red. The over-riding thought of the day was that by ensuring the states have a certain level of sovereignty and decision making, the national collective could be more powerful: local laws, customs and attitudes of the states could be protected by the broader oversight of a Federal government. For the time this was a novel, radical and extremely good concept -- a logical and yet super-daring step forward from the Magna Carta in England. In brief, states are responsible for the moral fiber and well-being of their citizens. (2)

We see the knock-on effects of this even today. The difference in jurisdiction between the state and the federal government is the underlying reason that you can place a roulette bet legally in Atlantic City, NJ, but not in Ewa Beach, HI; it's also why you risk getting busted for going to a prostitute in Eek, AK, but not for getting your rocks off in a legally authorized facility in Pahrump, NV.

In the strictest sense of the word, the federal government would be overstepping their authority and bounds if they said "Internet poker is illegal." That's a concept that in the absolute purest American Constitutional sense should be strictly left to the jurisdiction of the state.

However, the federal government does look at interstate commerce. So if someone set up a poker site in Wyoming and someone else played on that site from Illinois, the fact that you were breaking a state law through interstate commerce could be enforced by the Federal government. Putting it another way, Wyoming state police can't easily go after you in Illinois, but the Federal Bureau of Investigation (FBI) can. (This, by the way, is precisely why all online gambling operations are set-up offshore.)

As you would guess, the situation has become more complicated since the founding of the United States. Populations have swelled. Several states have been added to the Union. Organized crime has gained power and threat. Take these reasons, put them in a blender, add a general push by the Federal government to dissolve the power of the states (both directly and indirectly using such levers as Federal matching funds), press start and you'll get a frothy shake of the current political environment.

A great example of this in action is to look at the Interstate Wire Act (often called the "Federal Wire Act") of 1961.

In an effort to stop organized sports betting operations on the east coast of the US, the federal government passed a law making it illegal to place a bet "over the wire." What it meant was you couldn't place a sports bet over a telephone line without federal ramifications. The law was possible because it concerned interstate commerce (and certainly none of the states would argue against it). The law was necessary because it drew a very distinct and exact demarcation saying "if you cross this line, you're in trouble and this is what will happen." (3)

It worked like a charm. Sports books were brought quickly (and in some cases brutally) to their knees.

When the Internet sprang up, the FBI was quick to say that if you were betting online -- even if you were placing that bet outside the country -- you were in violation of the Wire Fraud Act.

Now it's important to remember a few things here.

One is the FBI is in the enforcement branch of the Federal system. They are not the people who pass laws (that would be the congress), nor are they the people who decide if you have broken a law (that would be the judicial system). Having said that, it *is *important to remember that they are the people who will leap through a window and put a gun in your face if they think you've broken a law. Which automatically means it's important to give them their space.

Another thing to keep track of is that it's unclear if the Internet is "over the wire" (again, the FBI are not the people who determine if that's true -- that would be the courts).

And still another is the Wire Act only mentions sports betting by name, *not *poker. (Always remember: laws have exact words for a reason.)

In the late 90's, the FBI sent out a cease-and-desist letter to most (if not all) of the major online sports books saying they were in violation of the Wire Fraud Act, stating if they were taking bets from Americans, they were breaking the law.

It's very interesting to note that the initial focus was exclusively on sports books also using toll-free phone numbers. My guess (although no one in the government has ever said this, so it's pure opinion) is they chose those sites specifically so they could always use the Wire Fraud Act as a back-up in trial if push came to shove.

The notice brought about a mixed response. If the people were running the sites were "foreigners" they tended to either laugh (and make a note never to vacation in the US again), or grumble and make modifications to their software to no longer accept US bids.

If Americans were running the sites they pretty much either sold their interests or decided to leave the States for keeps. No one that I know of opted for the modification angle (probably because they either thought it was too hard or too risky).

There was somebody who stepped forward, though. I'll tell you all about him, as well as bundling everything else up in a box, tomorrow.

(1) - I'm using "knot" as the collective noun for a group of lawyers, although I'm not sure what the proper term actually is. It's what you call a group of toads, so I'm assuming it's close enough. And you better believe for the amount of money we paid them, I can absolutely call them whatever I want.

(2) - "moral fiber and well-being" isn't a legal phrase, but was uttered in passing by the best gaming attorney I ever met. It describes very accurately the absolute core of both the feeling and intent of the founders of the US legal system (think: "those guys with wigs that are on US currency").

(3) - A huge difference between the US and Britain is that in America laws are passed to well-define what is and is not legal -- in Britain, new possible offenses are looked at in relation to past precedent.