The Long Road to Regulated Online Poker in New York

The Long Road to Regulated Online Poker in New York

Seal of New YorkAlmost lost in all of the other stories last week was a small footnote involving online poker in New York State.

A few weeks ago, the New York Senate allocated funds that are expected to be derived from the legalization of online poker in a draft of the state budget. Although this particular budgetary allocation is not expected to be approved by the Assembly – and thus is not expected to make it into the final budget that will be signed by Gov. Andrew Cuomo – it was nonetheless hailed as an important first step towards regulated online poker in New York.

That whole truck needs to be backed up quite a bit.

The first step towards regulated online poker in New York is to carve poker out of the state’s definition of gambling. That definition, found in the New York Penal Code, is couched in terms of chance. Perhaps not surprisingly, online poker proponents argue that poker is a skill game, so New York’s prohibition on chance-based gambling shouldn’t apply. They point to U.S. v. DiCristina, a cased decided in Federal court in New York last August, to buttress their argument.

In Dicristina, the defendant was charged with violating the federal Illegal Gambling Business Act for running an underground poker game out of a warehouse on Staten Island. IGBA employs a chance-based definition of gambling. Federal judge Jack Weinstein, applying the Dominant Factor test, determined that poker is not gambling under IGBA because skill is the predominant factor in determining the outcome of a hand, notwithstanding that there is an element of chance involved.

However, Weinstein was explicit that “New York courts have long considered that poker contains a sufficient element of chance to constitute gambling under that state’s laws.” He cited several New York cases to support that statement. He also noted differences in the definitions of gambling under IGBA (which requires chance to be a preponderant influence on the outcome) and New York law, which only requires that chance influence the outcome to a material degree.

Relying exclusively on DiCristina isn’t going to get the poker industry what it wants in New York. Any regulatory effort in the Assembly and the Senate requires an explicit carve-out to New York Penal Law Section 225.00(2), the section that defines gambling.

That carve-out is especially important because gambling is currently prohibited by the New York state constitution. Although an amendment that removes this prohibition is making its way through the New York legislature, such an amendment (assuming it passes) has to be put to New York residents in a referendum in November. The likelihood of the amendment passing at referendum is not currently known.

All of that brings us back to the budget. Certainly, it’s helpful to the poker industry if New York legislators start thinking about online poker as a source of revenue for the state. That argument won’t hold much water with legislators that are considered with the proliferation of gambling as a general matter and with their perceptions of the particular dangers of internet poker.

In particular, the chair of the State Assembly Racing and Wager Committee, J. Gary Pretlow, who is the sponsor of the current constitutional amendment being considered, is uneasy about gambling on the internet – though the amendment would seem to allow such activity. It remains to be seen if Pretlow’s concerns cause the state to permit brick-and-mortar gambling but prohibit it on the internet.

However, with neighboring New Jersey already racing to set up its own licensing and regulatory scheme for online gaming, it may be a matter of “when”, not “if”, for New York. What’s certain is that the process won’t start with a budgetary allocation. It starts with an amendment that won’t be voted on until November – and it requires more legislative and then regulatory work after that.

If online poker is coming to New York State, it won’t get there before 2015 at the earliest.

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