BUSINESS

Are we leaving gaming’s future to chance?

TAGs: Guest Contributor, Martin Owens, United States

This is a guest contribution by Martin Owens. If you would like to submit a contribution please contact Bill Beatty for submission details. Thank you.

In one sense it’s inevitable that gaming and gambling law should lag behind the technology. After all, there were no laws or regulations for automobile traffic until the automobile came along. But in the United States especially, gambling law has been allowed to stay fixed in the past. Faced with the accelerating changes of the digital age- social media, virtual goods, new formats and platforms-American gambling law threatens to become not merely outdated, but irrelevant and even un-Constitutional.

Comparing the Elements

Of the three elements that go to make up gambling- consideration, prize, and chance, chance is by far the most controversial. Merely labeling a given activity a “game of chance” is to condemn it altogether under the laws of many US states, and cast suspicion on its legitimacy in most of the rest. Yet chance is the most nebulous and least clearly defined of all these legal elements.

Are We Leaving Gaming's Future To Chance?The definition of “Consideration”, by comparison, has evolved considerably in American gambling law. While a minority of states retain the general-issue contract law definition: “any right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other”1 ,a majority of states and the Federal government have come to take the view that for there to be consideration for gambling, the player must pay money to participate. Beginning with the Yellow Stone lottery case of 1890,2 the concept evolved through The Bank Night Cases of the 1930s, culminating in the US Supreme Court decision in Federal Communications Commission v American Broadcasting Company. 3 Today, the dominant view is that the element of consideration does not exist, for a gambling transaction, unless participants are required to give money in order to participate.4 

The element of prize, likewise, began with a broad, general definition: “Anything offered as a reward of contest”. 5 As far as gambling law, however, this has since been brought around to a commonsense definition: essentially, anything of general value. In the mid-20th century, the legal definition was expanded in many states to cover a new wrinkle in gambling. Certain amusement machines would award replays as prizes, and those replays could be exchanged, sub rosa, for cash or merchandise.6 But since legal and licensed gaming is available in almost every state,  bettors today need no legal subterfuge is in order to play. Consequently, this particular racket is essentially extinct in the USA.

Today the majority of US jurisdictions treat games that offer true prizes of value (cash, merchandise, or services, or points redeemable for same) differently from games which merely award nontransferable points and replays. The first group is held to contain the element of prize, the second generally is not. A further refinement differentiates, in practice, between games which award only merchandise and those that have cash prizes. Merchandise rewards do not attract very much attention from law enforcement, even when the merchandise might be valuable (vacation trips, etc.) Cash prizes, however, tend to remain on the official radar.7

The legal definition of chance, however, has not evolved. In fact, it is defined and described in vague, conclusory, and even contradictory terms, varying state-to-state to boot. Alabama, for instance, defines a “game of chance” as “Any contest, game, gaming scheme or gaming device in which the outcome depends in a material degree upon an element of chance”. 8 Just what constitutes “material degree” or how that conclusion is to be arrived at, is, naturally, not specified. Tennessee’s statute is so rigid as to be almost self-contradictory: gambling is “ risking anything of value for a profit whose return is to any degree contingent on chance.”9 Of course the element of chance, in some degree, affects everything human beings do, so once again the degree of dependency which would trigger this law is simply unknown. Texas law talks of bets, and defines them as “Agreement[s] to win or lose something of value solely or partially by chance.”10 How partially is once again not stated.

And it matters that these specifics are not mentioned or defined, because deliberate vagueness violates the guarantee of clarity provided by the Fifth Amendment to the U.S. Constitution. Simply put, if the authorities wish to forbid a given act or activity, the thou- shalt-not must be stated in terms which enable an ordinary reasonable person to understand what must not be done. In addition, as applicable, when, where, how and with whom it must not be done, must also be specified. Everyone must have a fair and open chance to avoid offense.11 As Justice Butler put it long ago: “no one may be required at peril of life, liberty, or property to speculate as to the meaning of penal statutes.”12 Except deliberately vague terminology in many US state gambling laws does just that.

Let us take by comparison, the offense of driving drunk. As with gambling, this is also largely reviled as an offense based in a moral failing, and its enforcement is held out as a matter of public safety. But at least there are independent, objective, and measurable criteria involved. In the United States, a blood alcohol level of .08% means you’re driving under the influence, and thereby subject to be run in on a DUI charge. Short of that and you ain’t. To be sure, the authorities reserve the right to react to exigent circumstances (e.g., there are some folks who are clearly hammered on a beer and a half), But the standard is there. And the accused has the right to plead in his own defense that he did not exceed these posted limits, based on objective measurement.

For gambling, however there is no legally usable means of measuring chance. Which means there is no objective method of determining whether or not a given activity is a “game of chance” or not. To be sure, the probability of a given event, such as rolling boxcars at dice or being dealt cards that add up to 21 at blackjack, can be measured, but this is of little use in a law enforcement context. Because, contrary to what many gamblers assume, probability is not cumulative. That is to say, previous results do not eliminate future possibilities. Just because the odds of rolling two dice, for instance, and coming up with a two (“snake eyes”) are approximately 33%, does not mean that the roller must get “snake eyes” on every third throw. Probability resets for every roll of the dice- or turn of the cards, or pull of the handle. Each and every one is a separate event; moreover, the probabilities are calculated in different ways for different types of games. The odds of rolling boxcars at dice are not governed by the same probability frame as coming up with blackjack on the next turn of the cards, and neither set of probabilities is useful in betting on professional sports such as football or basketball.13

There is, in short, no quick, reliable statutory yardstick that can be applied here. Let us return to our comparison, the subject of drunk driving. The accused can have his breath or blood analyzed (in fact he cannot refuse, given probable cause and a reasonable,  reasonably administered test)14,  and if it is found to be above a certain level (the current rule of thumb seems to be about .08%) then he is deemed guilty. The event in question, whether the accused was driving with a forbidden level of booze in his system, on this one particular occasion, is considered separately and by itself.

Are We Leaving Gaming's Future To Chance?But there is no such distinction as regards gambling. The probability of winning or losing in, for instance, a poker tournament, cannot be judged in that way, by a single sample, but rather how probability behaves over a series of such events. But even if that behavior were to be so considered, there simply are no standards for a court to use in doing it. There is no system for measuring the cumulative effect of chance, as with the tournament, or chance across the board, as in a number of different games. And nowhere is there any sort of neutral statutory guideline as to what concentration is legally hazardous.

And no objective analysis is possible under a so-called standard which talks about “dominant” or “substantial” influence of chance, particularly since there is no legally usable and objective means of measuring chance. There is no such thing as a chance-o-meter, no generally recognized standard unit of measurement, no generally recognized limits or threshold. Is 2 to 1 odds, as with dice,  “substantial”, whereas 37 to 1, as with an American roulette wheel, “dominant”?

These terms do not yield clear guidance because, quite bluntly, they were never meant to. What we’re seeing here is an application of the old lawyer’s trick of disguising a conclusion as an element of analysis, the better to steer the judgment beforehand and reason backwards to a pre-desired result. It is in the statutes of the state of Arkansas that we find the most forthright and uncompromising statement of this hang-‘em-high philosophy:

“(a) In their construction of the statutes prohibiting gaming, the judges of the several courts in this state shall construe the statutes liberally, with a view of preventing persons from evading the penalty of the law by changing of the name or the invention of new names or devices that now are, or may hereafter be, brought into practice, in any and in all kinds of gaming, and all general terms of descriptions shall be so construed as to have effect, and include all such games and devices as are not specially named.

(b) In all cases in which construction is necessary, the construction shall be in favor of the prohibition and against the offender.”15

Some states take a variation on the Tennessee approach, and pronounce any admixture of chance to be sufficient grounds to identify the proceedings in question as gambling.16 Others, like Arizona, cover all bases and pronounce betting on  games of chance or of skill to be equally taboo.17 Most state courts, however, when confronted with the question of how much chance and how much skill are involved, especially in games like poker, simply fall back on the old shibboleth of ” a material degree” 18, or the unsupported assertion that chance is “dominant”.19   The essential question- how much is too much?-remains unaddressed.

In the next installment, we will discuss possible methods for quantifying and measuring chance in gaming, and how they can be legally applied.

1  See, e.g., Opinion of the Atty. Gen. of New York regarding the “Good As Gold” real estate sales incentive Opn  No.96-F1 (January 29, 1996). Available at https://casetext.com/case/opn-no-96-f1 (December 26, 2017) (cited in Rose and Owens, INTERNET GAMING LAW, 2nd ed.Mary Ann Liebert Publishers, New Rochelle, New York, 2009 pp 4-11)

2   Yellow-Stone Kit v. State, 88 Ala196, 7 So.338 (1890).

3  347 US 284,74 S. Ct. 593, 98 L.Ed. 699 (1954).This and the Yellow-Stone case, supra, cited in Rose and Owens, INTERNET GAMING LAW, 2nd ed.Mary Ann Liebert Publishers, New Rochelle, New York, 2009 pp 4-11) GAMING LAW, 2nd ed.Mary Ann Liebert Publishers, New Rochelle, New York, 2009 pp 4-9)

4  Ibid

5   Black’s Law Dictionary, sixth edition

6   See, e.g. United States v Sixteen Electronic Gambling Machines, 603 F. Supp.32 (1984).

7  Rose and Owens, supra, at 25.

8  Alabama Code Section 13A-12-20

9  Tennessee Code Section 39- 17- 501 (1)

10  Texas Penal Code § 47.01(1)

11   “That the terms of a penal statute creating a new offense must be sufficiently explicit to inform those who are subject to it what conduct on their part will render them liable to its penalties is a well-recognized requirement, consonant alike with ordinary notions of fair play and the settled rules of law; and a statute which either forbids or requires the doing of an act in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application violates the first essential of due process of law.”  Connally v. General Constr. Co., 269 U.S. 385, 391 (1926.) Cited in Martin D. Owens  Jr., “Environmental Change under a Thinning Vice Cap: How I-Gaming May Wedge Due Process into U.S. Gambling Law, Gambling Law Review and Economics, Volume 13, Number 3, 2009.

12  Lanzetta v. New Jersey, 306 U.S. 451, 453 (1939) cited as per FN11, supra.

13 For a slightly more in-depth discussion of this abstruse and complicated subject,, see, e.g. Randy Ray, “16 Gaming Probability Examples”, December 9, 2016 at  https://www.gamblingsites.com/blog/14-gambling-probability-examples-14437/

(January 8, 2018)

14  See, e.g., Schmerber v. California, 384 U.S. 757, 767, 86 S.Ct. 1826, 1833, 16 L.Ed.2d 908 (1966).

15  Arkansas Code § 5-6-101.  Note the designation of the defending party not even as “the accused” but as “the offender”-  the accusation alone, apparently, suppling sufficient proof of the commission of the offense, and the responsibility therefor.

16  See, e.g., Charnes v Central City , 773 P.2d 546,547(Colo. 1989)

17  Ariz. Rev. Stat.§ 13-3301(4). There is, however, a skill exception for “amusement gambling” (A.R.S. §13-3301(1)(iv)).

18 See, e.g. United States v. Dicristina, 886 F.Supp.2d 164, 169 (E.D.N.Y. 2012)

19  See, e.g., Commonwealth v. Two Electronic Poker Game Machines, 502 Pa. 186, 465 A.2d 973, 977 (1983)

Mr. Owens is a California attorney specializing in the law of Internet and  interactive gaming  since 1998.  Co-author of INTERNET GAMING LAW with Professor Nelson Rose,( Mary Ann Liebert Publishers , 2nd ed 2009) ; Associate Editor , Gaming Law Review & Economics; Contributing Editor, TSN. Comments/inquiries welcome at  mowens@trade-attorney.com.

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