DOJ Response to Black Friday Response: LOL

Alleges PokerStars mafia connek; declares sports betting a game of skill, too

by , Nov 10, 2011 | 10:27 pm

The DOJ has laid out more of its case against Isai Scheinberg, Ray Bitar, et al — in a 58-page response to the response from two Black Friday indictees, payment processor Chad Elie and the Utah banker John Campos.



The People vs. Online Poker



Among other denials, Campos and Elie sought to get much of the case thrown out on the grounds that the UIGEA is a bad law and/or poker isn’t gambling. With the action back on the DOJ, Preet Bharara assistant Arlo Devlin Brown delivers some rather compelling legal composition (the best writing is in the footnotes, imho) that reads like a big STFU from SDNY … with a message of hey, better watch it or we could indict the whole damn poker industry!

I’m paraphrasing, obv … but here’s the full Government’s Response to Defendants’ Pre-Trial Motions. They purport to have a mountain of evidence ready for trial … and show a century’s worth of precedent to snuff out any hopes that poker people could actually win this case.

With the standard disclaimer of “I’m not a lawyer but …” some fascinating elements include:

  • Tactics allegedly used by Stars and Tilt to keep money flowing when the payment squeeze tightened, including going to mafia associates.
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  • Game of skill argument ain’t gonna hold water, they say, because UIGEA weakness or not … online poker sites serving American players are still “illegal gambling businesses”.
  • Federal courts have repeatedly and consistently upheld the application of the IGBA to poker. For example, at least three Circuits have specifically affirmed a defendant’s IGBA conviction where the sole gambling business at issue was the operation of a poker room. See United States v. Rieger, 942 F.2d 230 (3d Cir. 1991) (upholding IGBA conviction based solely on operation of a poker room); United States v. Zannino, 895 F.2d 1 (1st Cir. 1991) (same); United States v. Tarter, 522 F.2d 520 (6th Cir. 1975) (same); cf. United States v. Trupiano, 11 F.3d 769, 774-74 (8th Cir. 1993) (upholding IGBA conviction based on weekly card games hosted at individual’s home). Multiple Courts of Appeals – including the Second Circuit – have similarly upheld the application of the IGBA to gambling businesses offering video poker. See, e.g., United States v. Gotti, 459 F.3d 296, 342 (2d Cir. 2006) (affirming IGBA conviction for operating video poker machines, and specifically rejecting argument that IGBA and referenced New York gambling law did not apply to games that involved an element of skill); United States v. Lanzotti, 205 F.3d 951 (7th Cir. 2000) (affirming video poker conviction under IGBA); United States v. Hill, 167 F.3d 1055, 1064 (6th Cir. 1999) (same); United States v. Grey, 56 F.3d 1219 (10th Cir. 1995) (same). Additionally, multiple Courts of Appeals, again including in the Second Circuit, have applied IGBA to gambling operations that offered poker alongside other traditional casino games such as craps or blackjack, without the slightest suggestion that the IGBA’s definition of gambling excluded poker. See, e.g., United States v. Cook, 922 F.2d 1026 (2d Cir. 1991); United States v. Giovanetti, 919 F.2d 1223, 1225 (7th Cir. 1990).

  • They look at historical precedent on poker as gambling going all the way back to 1888!
  • 4 E.g., Utsler v. Territory, 10 Okla 463 (1900) (“The witness Fisher also testified that he saw gambling carried on in the room with cards, being known as ‘stud poker,’ and he also testified that liquor was sold in the same room.”); In re Selling’s Estate, 17 N.Y. St. Rep. 833 (1888) (“The proof submitted by the petitioner also shows the respondent Joseph Selling to be a man of utterly worthless and irresponsible character; that he is a professional gambler, know[n] as ‘Poker Joe….’”).

  • They even cite a song by Kenny Rogers, albeit misattributed:
  • For example, Willie Nelson’s classic poker song, about knowing when to “hold ‘em” and when to “fold ‘em” is called – based on the movie by the same name — “The Gambler.”

    [Aha, your honor, with this sort of investigatory flaw, I move for dismissal, and instant restoration of Full Tilt poker funds and PokerStars points!]

  • Perhaps most shocking is the DOJ identifying sports betting as a bona fide game of skill!
  • First, defendants claim that in each of the listed games, the bettor has “no role in, or control over, the outcome” and that the game is instead subject only to chance. That is not true with respect to bookmaking, at the very least. Betting on the outcome of sporting events involves “substantial (not ‘slight’) skill,” including “the exercise of [a] bettor’s judgment in trying to . . . figure [out] the point spreads.” Office of the Attorney General of the State of New York, Formal Opinion No. 84-F1, N.Y. Op. Atty. Gen 11 (1984). Sports bettors have every opportunity to employ superior knowledge of the games, teams and the players involved in order to exploit odds that do not reflect the true likelihoods of the possible outcomes. Indeed, academics who have argued that poker should not be treated as a form of illegal gambling on the grounds that it is a “game of skill” make the same argument with respect to sports betting.11 Ultimately, the outcome of the bets that poker players make on the cards, just like the outcome of the bets on sporting events.

  • I think there could be a “holy shit” for a lot of poker industry folks in this … if not a full on FML for being part of the conspiracy:
  • In making this argument, the defendants conflate two distinct concepts under IGBA – what it means to be “conducting” a gambling business in a certain place and whether certain employees can be construed as being involved in “conduct[ing]” the business. Becker addresses only the latter issue and holds, consistent with legislative history, that “Congress’ intent was to include all those who participate in the operation of a gambling business, regardless of how minor their roles and whether or not they be labeled agents, runners, independent contractors or the like, and to exclude only customers of the business.” 461 F.2d at 232. The footnote in Sanabria says the same thing. 437 U.S. at 70-71 n.26. The cited cases do not address (much less limit) what it means for a gambling business to be “conducted” in a state, and the logic of the argument that defendant’s advance is absurd: a New Yorker who buys a hot dog from a street vendor is not of course “conducting” that hot dog business, but it would be incorrect to claim that this means the business is not being conducted at all, by anyone.

  • DOJ scoffs at insinuations that poker isn’t gambling, particularly in New York:
  • Elie alone also contends that IGBA is unconstitutionally vague as applied here because it is charged with reference to New York law and because “reasonable minds can differ” as to “whether poker constitutes gambling” under the provisions of the New York Penal Law referred to in each of the IGBA counts charged in the Indictment. Elie IGBA Brf. at 27-30. Reasonable minds cannot.

    [OK, OK, so they're taking this kinda seriously. Strong means weak, maybe?]

  • With American-serving online poker sites constituting illegal businesses, they seem almost to be indicting the entire industry, particularly rev-share affiliates for participating in the rake:
  • 30 18 U.S.C. § 2 provides that “[w]hoever commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal.” 18 U.S.C. § 2(a).

  • They have a whole section that could be titled, “2+2 is wrong”:
  • C. The UIGEA, As Applied to Online Poker, Is Not Void For Vagueness

    In the end, it could come down to a matter of who’s gonna sing, or who’s already sung. Meanwhile, The Gambler does make a great metaphor for how Full Tilt (and PokerStars?) may or may not have misplayed their hand:


    • http://www.adrtimes.com/ Online Dispute Resolution

      Very clear and
      well-written guide. Much appreciated.