Is Online Poker Legal?

First let me qualify myself as an ordinary poker player. I am not an attorney, justice department official, nor a Supreme Court Justice. I am not giving legal advice nor will I draw any conclusions. What I have compiled is a collection of the best information I can find on the subject of “Is Online Poker legal?”.

Several recent events in congress has brought attention to the legal standing of online wagering in general. The first thing to understand is the skill game of poker is not the same as sports betting nor even "random chance" casino games like craps and roulette. It may be treated the same eventually, or it may not. Legal precedent for a lot of this simply does not exist. As of this article, no person has been charged, brought to trial, convicted, or sentenced for playing online poker. But this does not guarantee that if will not happen in the future.

In my research I found that Professor I. Nelson Rose, Professor of Law, Whittier Law School Costa Mesa, Ca, is one of the world’s leading authorities on gambling law. He states that "no United States federal statute or regulation explicitly prohibits Internet gambling, either domestically or abroad." Still, the US government has taken the position that certain things are illegal, and more importantly, certain things are worthy of prosecution. The Wire Act is the statute most often cited as making on-line gambling a federal offense. He notes that the operative subsection reads: "Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both."

Rose goes on to say: "The first element of the Wire Act, says that the statute applies only to an individual involved in the 'business of betting or wagering' (not to a common player)."

The question of whether Internet sportsbetting is covered by the Wire Act seems to have been answered by the US Supreme Court's refusal to review the conviction of Jay Cohen. Whether online casinos and online poker cardrooms are covered under the aimed-at-sportsbetting Wire Act is a different question. In February 2001, Judge Stanwood Duval of the US District Court in New Orleans ruled that it did not: "'in plain language' [the Wire Act] does not prohibit Internet gambling 'on a game of chance.'"

On November 21, 2002, the US Fifth Circuit Federal Appeals Court upheld Duval's ruling, stating: "The district court concluded that the Wire Act concerns gambling on sporting events or contests... We agree with the district court’s statutory interpretation, its reading of the relevant case law, its summary of the relevant legislative history, and its conclusion."

The Appeals Court further states: "Because we find neither the Wire Act nor the mail and wire fraud statutes may serve as predicates here, we need not consider the other federal statutes identified by the Plaintiffs... As the district court correctly explained, these sections may not serve as predicates here because the Defendants did not violate any applicable federal or state law."

The Appeals Court specifically cites Duval's statement: "[A] plain reading of the statutory language [of the Wire Act] clearly requires that the object of the gambling be a sporting event or contest." This is very explicit language. You would have to jump through a lot of mental hoops to consider the playing of online poker to be "a sporting event".

So, while the US Justice Department recently stated that the Wire Act covers casino games in addition to sports wagering, the Federal Appeals Court has directly ruled that that interpretation is not correct. This is not a small disagreement. It is a direct contradiction that could well spur the creation of new, 21st Century Federal legislation that actually deals with these issues. One bill introduced by James Leach of Iowa, aims to inhibit the ability of citizens to gamble online. It however does nothing to criminalize actual gambling online. But other bills may be introduced in the future with that goal.

Gambling regulation traditionally has been the responsibility of individual states. For instance, New York State Attorney General Eliot Spitzer reached a settlement with Citibank and PayPal regarding their involvement with online gaming. Some individual states have laws prohibiting any form of gambling online (or any gambling for that matter). That is a different issue from whether it is legal on a US Federal level.

A key distinction exists on a Federal level between bettors and those operators whose business is to benefit from the actual making of wagers: "engaged in the business of betting or wagering... which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers..." As long as players stay in the "players" category and not in the in-the-business-of-wagering owners/bookies/runners/agents categories, a significant difference in status exists.

There are many ways to read the Wire Act, but only under the broadest interpretation could playing online poker be deemed illegal in terms of the Wire Act. In my opinion (which isn't worth a hill of beans... only the US Supreme Court's view will matter unless new legislation passes) playing online poker is not illegal for US citizens, in regards to Federal Law -- unless it is a crime in an individual state, in which case the Federal Organized Crime Control Act of 1970 may apply. The Act makes it a federal crime for five or more persons to engage in a gambling business illegal under state law. Gambling online is definitely illegal in some states, but the Crime Control Act of 1970 does not apply to players. In addition, since the Crime Control Act does not refer to foreign commerce, it is hard to see how a case could be made that it applies to Internet gaming across multiple international borders.

Finally, in November 2004, the Caribbean island nation of Antigua and Barbuda won a World Trade Organization ruling that United States legislation criminalizing online betting violates global laws. In April 2005, the WTO Appellate Body affirmed the principal conclusions involved.

So, as long as online poker players do not participate in owning a share of the house rake; as long as players only wager against each other; as long as players participate in the skill game of poker and do not bet sports; as long as players obey state laws... draw your own conclusions.