In a decision that may help guide marketers conducting skill-based promotions, a federal judge in New York recently decided that Texas Hold ''Em poker is a game of skill and therefore not gambling under federal law. The landmark 120 page decision, issued by Judge Jack Weinstein in the U.S. District Court for the Eastern District of New York, is the first time a federal court has determined that poker is not gambling under the Illegal Gambling Business Act (the "IGBA"), the federal law that criminalizes illegal gambling. According to a notice filed with the court on September 14, the government intends to appeal the decision.
Whether poker is a game of chance or a game of skill has been subject to years of judicial and public debate with significant variance in the treatment of the game under state gambling laws. Most state courts find that an "activity is...illegal gambling if a person risks something of value on an activity predominately determined by chance for the opportunity to win something of greater value than he or she risked" (See page 62 of the decision). Federal prosecution under the IGBA requires both a violation of the applicable state law and proof of the operation of an "illegal gambling business," involving five or more employees and operating for at least thirty days or earning $2,000 or more in any given day. In the past, many federal courts have considered poker to be a game of chance and therefore characterized it as gambling.
The decision focused on extensive research by an expert witness-a statistician and competitive poker player- who proffered studies of online poker games to prove that despite luck determining what cards players receive, skill is the predominant factor in players'' success. The studies suggested that a player''s skills or abilities "permit the best poker players to prevail over the less-skilled players over a series of hands."
In his decision, Judge Weinstein compared sports betting to poker, stating: "In poker, by contrast, increased proficiency boosts a player''s chance of winning...[e]xpert poker players draw on an array of talents, including facility with numbers, knowledge of human psychology, and powers of observation and deception. Players can use these skills to win even if chance has not dealt them the better hand" (See page 111 of the decision).
Judge Weinstein added that the defendant could have been prosecuted in state court under New York state law. While the ruling does not overturn state illegal gambling laws-some of which expressly or implicitly include poker in their statutes or define it as a game of chance (including, for example, Connecticut, Wisconsin, Arkansas and Florida) - it may have a significant impact on the treatment of poker under US law. The decision may also provide helpful guidance for promotions lawyers analyzing their clients'' games and contests under state lottery laws to ensure that they are truly skill-based.
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