Shifting Opinions: United States v. DiCristina

Fine lines persist between skill games and gambling crimes

by , Sep 18, 2012 | 1:50 pm

I intended to blog about the DiCristina decision since it was released on August 21st, but I haven’t made the time until now. With the usual great commentary about the case coming from all over the gaming spectrum, many of the more interesting points about the facts of the case itself and about what it means for poker have already been made. This post is really intended to be something of a summary of the commentary and reactions to date. If nothing else, hopefully Pokerati can act as a repository of documents and reflections on the case.

The Decision
Let’s start with the facts and the decision itself, a copy of which is here (all 120 pages of it). This summer, a jury convicted Lawrence DiCristina of operating (and of conspiracy to operate) an illegal gambling business contrary to the federal Illegal Gambling Business Act (IGBA). Those were the only federal charges against him. Mr. DiCristina ran a two-table, twice-weekly poker club in the back room of a Staten Island warehouse. The house at this business charged a 5 percent rake; the dealers were paid 25 percent of the rake collected. The defendant brought a motion for acquittal, arguing that the operation of the poker games didn’t violate the IGBA. The US District Judge in the case, Jack Weinstein, wrote his memorandum, order, and judgment in response to this motion. After an extensive discussion of the statute and its relationship to poker, Judge Weinstein vacated Mr. DiCristina’s conviction and dismissed the indictment.


Some of the (virtual) ink that’s been spilled on this case is worth mentioning even at this early stage in the post. Nelson Rose wrote an interesting column on DiCristina last week (“Court Rules Poker Is Game of Skill, But …”) in which he recounts the mechanics of this “weird jury trial,” followed by the judge throwing out the charges as a matter of law. Aside: If you’re not on Nelson’s free e-mail distribution list, you should sign up. Send him an email at rose<-at->sprintmail.com.

The IGBA makes it a federal offence to conduct, manage, finance, supervise, direct, or own all or part of an illegal gambling business. What’s an illegal gambling business? It’s a business that is, generally, in violation of state law; that involves five or more persons who conduct, finance, manage, supervise, direct, or own all or part of the business; and, that has been or remains in “substantially continuous operation” for more than thirty days or has a gross revenue of $2,000 in any one day. According to the government, these three conditions were all that were required to make out the IGBA violation. In other words, so long as the business was of a certain threshold size or duration and there was an underlying breach of state law on gambling, the prosecutors thought they had made out their entire case. (In fact, Judge Weinstein commented in the decision that the overwhelming majority of previous IGBA cases simply took for granted that the government need only prove that the business involved state law-defined gambling. See Judge Lewis Kaplan’s memorandum opinion, referenced below, for an example of this approach.)

However, Judge Weinstein held that an additional gambling definition in the statute must be met. This definition is in 18 U.S.C. § 1955(b)(2) and reads as follows: “Gambling includes but is not limited to pool-selling, bookmaking, maintaining slot machines, roulette wheels or dice tables, and conducting lotteries, policy, bolita or numbers games, or selling chances therein.” So, to obtain an IGBA conviction, there must be a state law violation and the impugned activity must be “gambling” within the meaning of this separate federal definition.

The DiCristina court noted that the definition of gambling in the IGBA is inclusive. Gambling doesn’t “mean” only the nine enumerated activities associated with running a gambling business; it includes but isn’t limited to them. (Nelson makes this point, as well, and rightly posits it as a possible ground of appeal for the government.) But nor is poker expressly mentioned in this inclusive list. According to Judge Weinstein, if Congress intended to include every criminal offence as defined by state law – without a separate federal definition – it could have done that (§ 1955(b)(2) would have read very differently from how it reads now were that the case). Clearly Congress did not do this.

The essential question at the heart of the judgment is whether poker is “gambling” within the meaning of this federal definition. Having reviewed the applicable precedents and the common law and dictionary definitions of “gambling,” the DiCristina court held that gambling in the IGBA means an activity where chance predominates.

This conclusion, and the evidence buttressing it, is one of the juiciest parts of the judgment for poker players and scholars. Judge Weinstein has crafted an opinion that gives a comprehensive overview of expert witness testimony, studies, experiments, and judicial considerations about chance versus skill in poker. As I wrote elsewhere talking about DiCristina, a more cogent judicial statement about why poker is predominantly a game of skill will be hard to find. I won’t get into the details of the skill findings here as I think others have done it more justice. (Curious readers should read the decision itself, @Grange95 on the need for an asterisk when referencing this case, and Jennifer Ouellette of Scientific American (check out her personal website here) on what mathematicians have to say about it.) At the end of the day, Judge Weinstein held that poker is a game in which skill – not chance – predominantes. Accordingly, poker is not within IGBA. Therefore, Mr. DiCristina was not guilty of conducting an illegal gambling business under federal law.

In a sense, DiCristina raises more questions than it answers – certainly more questions than I have answers to now or that I can address in one even lengthy post. Some of the more compelling and important issues to come up are how state gambling laws interact with federal laws, the prospects for an appeal of Judge Weinstein’s decision, and what DiCristina might mean for the Black Friday defendants and in a larger sense.

State Law Pre-Eminence
One of the interesting parts of Judge Weinstein’s decision is the interplay between federal and state law. Again, the ruling made clear that a New York state law gambling violation is a necessary but not sufficient condition for an IGBA conviction. In fact, the prosecutors – and many judges in earlier cases, when they addressed the issue at all – had assumed that a predicate state law violation and showing the minimum size or duration of the business was all that was needed. If there is an appeal in DiCristina (and more on the possibility of an appeal, below), the appellate court(s) may decide that the definition in § 1955(b)(2) is much more inclusive than Judge Weinstein believed, and that poker is gambling under the IGBA. Reasonable people may differ on that issue. What there will be no argument about is that a violation of New York state law is essential to sustain a conviction. State law here remains the lynchpin of most federal gaming charges. Nelson, quoted in a San Francisco Chronicle piece on DiCristina, rightly emphasized that gambling in the US is almost invariably a state issue.

Judge Weinstein also makes the critical point that Mr. DiCristina’s “operations were necessarily and properly found by the jury to violate New York state gambling laws.” Accordingly, he could have been prosecuted by the local district attorney’s office under New York law. This interpretation of the IGBA would do nothing to impede such a prosecution.

In a good discussion on the International Masters of Gaming Law LinkedIn discussion group, Martin Owens made what I think is a great point: that the true impact of the DiCristina decision may not even be in legal terms, but in its effect on the development of Internet gaming policy at the state level. As he notes, the main drivers of online gaming policy right now seem to be state-level legislators, and DiCristina could serve as a kind-of catalyst for pushing more state-level i-gaming initiatives. In that respect, according to Martin, DiCristina could be “the pebble that starts a landslide.”

What Happens to Mr. DiCristina?
A critical issue is whether this judgment will survive appeal, if it’s appealed. As of September 11th, the Public Affairs Officer for the EDNY US Attorney’s Office said that the decision is still under review and that no further comment was available. Nelson makes the point that, as of now, DiCristina is only binding in Judge Weinstein’s court, and indicates several grounds of appeal. @Grange95 expects an appeal and suggests that an appellate court could easily reverse, but adds that the decision has a puncher’s chance of being upheld.

I don’t have anything new to add on this point. One of the things DiCristina has going for it is that it’s a methodical and comprehensive decision, which may help it survive an appeal. Whether it survives or not, (and as @Grange95 also noted), parts of the decision could still be convincing and persuasive for other federal courts looking at poker issues, even if not binding on them.

DiCristina’s Legacy
This is the cocktail party game of the moment, or it would be if the party were stocked with poker law nerds: How significant is this decision, and what will its legacy be? There’s been a lot of inexact language used about this, and I’m definitely as guilty as anyone else in trying to pigeonhole the meaning associated with DiCristina.

As noted, Martin made the point about the effect being primarily on policy development and perhaps not as much on impacting existing law. Nelson calls the decision “significant,” undercutting “the most important remaining federal statute [the IGBA] that could be applied to  Internet poker, now that the Department of Justice has limited the (1961) Wire Act to sports betting.” @Grange95 calls it a win for poker players, but not a game-changer.

I had earlier questioned the “significance” of the win. No state law is changed by DiCristina. (As @Grange95 aptly put it, “if poker was illegal gambling in your state prior to the decision, it is still illegal today.”) Other federal laws are also unaffected; the definition of “gambling” considered by Judge Weinstein is unique to the IGBA. Travel Act violations as they relate to gaming don’t necessarily require an independent federal gambling offence, but only a business enterprise involving gambling in violation of state or another federal law (not both). Nor will the DiCristina analysis affect the Unlawful Internet Gambling Enforcement Act. (Ian Imrich has great points to make about both the Travel Act and the UIGEA in the IMGL thread. They’re well worth reading.) The court clearly limited its holding to the IGBA and I think left the door open (in obiter) to other federal statutes being used to attack gaming activity involving poker.

But this is all really just a matter of degree. Is DiCristina “significant” and “important?” Is it a “win” for poker players? How far-reaching are its consequences? It’s too soon to answer some of these, and the effects could be felt in ways that we haven’t fully considered. It’s an important decision on a number of levels, but no-one should lose sight of the fact that there are still a great many state and federal tools that can be used by prosecutors to attack the operation and promotion of land-based and Internet poker games. If DiCristina stands, perhaps one of those tools may be gone. Just one. And if the decision is a step on the path to legalization efforts in the US, it’s a small step. Maybe a necessary one, but a small one.

Meet the Defendants Next Door
One of the most interesting things about DiCristina is how it immediately prompted questions and commentary about what it would mean for defendants in another couple of related cases taking place in the immediately adjacent federal district: the criminal indictments and civil complaint involving the Black Friday defendants in the Southern District of New York. Observers didn’t have to wait long to find out the US Attorney’s position. The prosecutors’ actions since DiCristina indicate that DiCristina is not a game-changer, or at least that the government doesn’t see it as one.

On August 28, counsel for Howard Lederer sent a letter to Judge Leonard Sand in the Southern District, asking for a status conference so that the parties could discuss – and the court consider – “how best to manage this litigation in light of DiCristina.” Counsel asserted that “[t]he core of the government’s allegations in this case is that on-line real money poker violates IGBA.” If Judge Sand agreed with the result in DiCristina, “then much of the govenrment’s case here, and many of the seizures which have already been authorized, will no longer have a legal basis.” (See Ian’s original posting of the Lederer letter’s text here.)

The US Attorney’s office was not slow to respond with its own letter, dated August 29. In that correspondence, the US Attorney made three short, but key, points. First, DiCristina is not binding on the proceedings in the SDNY (see Nelson’s comment on this) and that, in any event, Judge Weinstein’s decision conflicts with Judge Kaplan’s earlier memorandum opinion on the motion by John Campos and Chad Elie to dismiss the indictment as against them. Judge Kaplan did not consider the separate federal definition of “gambling” that Judge Weinstein hangs his hat on in DiCristina. For Judge Kaplan, “[t]he focus of IGBA is upon the conduct of gambling businesses in the United States in violation of the laws of the states and political subdivisions in which they are conducted.” In the SDNY court’s reasons, poker was clearly gambling (see page 7).

Second, the government “disagrees with many of the conclusions reached in the DiCristina Order,” and a status conference is the wrong forum to address those disagreements. The prosecutors asserted that the proper method for addressing any disagreements about DiCristina was to wait for the government’s (then coming) second amended complaint and to duke it out on any motions to dismiss there.

Third, there is the second amended complaint itself, which has now been filed. In the August 29 letter, the government noted “that the DiCristina Order deals almost exclusively with the application of IGBA to specific types of poker games. It does not address the other statutory claims that have been, or will be, alleged by the Government in this action that do not involve IGBA. (The Government notes that it intends to include additional statutory grounds for forfeiture and other relief in the second amended complaint.) In other words, even if this Court were to find the DiCristina Order persuasive, which we do not think it should, it would not impact many of the claims asserted in this action.” [Emphasis added.]

There were other non-IGBA claims asserted (e.g., money laundering) in the earlier versions of the complaint (including, for example, the first amended complaint), and there were non-IGBA claims to come in the second amended complaint (e.g., the Travel Act).

So the government’s essential point here is that, even if DiCristina is adopted wholesale by the SDNY court, only one comparatively small part of the civil case is gone. There are plenty of other ways of attacking these defendants and other unlicensed, bricks and mortar poker rooms and US-facing i-poker enterprises.

Conclusions
Where does all of this leave us? Unfortunately, it’s difficult to say. As noted, DiCristina doesn’t change the status of poker under any state law, and it isn’t binding authority throughout the federal courts, or even in the Second Circuit. It is a robust analysis of the IGBA and other applicable federal legislation and may be convincing authority on a number of points (notably the role of skill in poker). It may be a spur to further legislative efforts on Internet poker; in fact, in the fullness of time, it’s possible that that may be its most enduring legacy. But for now, it won’t change that much, certainly not in the zealousness with which federal prosecutors in certain districts are pursuing Internet gaming, including online poker. The US Attorney in the SDNY has already and clearly indicated that he has many other tools at his disposal when it comes to pursuing unlicensed interstate and foreign operations.


  • David

    Hey man keep up the good work. I’m enjoying the blog!

    David @Transformpoker