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Contracts and Poker: Government Regulation

by Scott J. Burnham |  Published: Dec 19, 2018

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A player claims that a casino took his tournament entry fee knowing that he was a compulsive gambler. Does the player have a claim against the casino?

Poker tournaments are generally conducted pursuant to rules such as those promulgated by the Tournament Directors Association or those applicable to particular tournaments, such as the World Series of Poker or the World Poker Tour. All of these rules, like the rules that govern other contracts, are ultimately subject to government regulation. Fortunately, these regulations rarely crop up in the context of a poker tournament, but they are always hovering in the background.

With some important exceptions, gambling is regulated by the states rather than by the federal government. The default rule is that gambling is illegal, so any form of gambling is permitted only when the government has affirmatively allowed it. That is why even your home game or your March Madness bracket is probably illegal. Gambling laws are rarely enforced, however, and when they are, the law usually punishes only the organizers of the endeavor who supposedly duped the others into participating. There are exceptions, such as the Washington state statute that makes it a felony to play online poker!

The main exception to state regulation is IGRA, the Indian Gaming Regulatory Act, which federally regulates gaming in Indian Country but which ultimately results in state regulation. It is sometimes said that IGRA legalized Indian gaming, but that is a misconception. The courts recognized that as sovereign entities, the tribes had a right to offer gambling. In response to that, Congress enacted IGRA to regulate Indian gaming, thus restricting the freedom given to the tribes by the courts.

The basic rule of IGRA is that, in addition to traditional Indian games, a tribe is authorized only to offer the gambling that is legal in the state in which it is located. Thus, Utah has Indian reservations but no Indian casinos because Utah does not allow any form of gambling. Idaho has Indian casinos, but no poker because poker is not legal in the state. In fact, the state recently cracked down on a poker game that the casino in Coeur d’Alene tried to offer.

Beyond that minimum, the state is supposed to negotiate in good faith with the tribe as to the gaming that will be allowed at an Indian casino. The resulting agreements are called “compacts” and you can find them all online at the Bureau of Indian Affairs Office of Indian Gaming. The compacts are particularly important in states such as Montana and California that have legalized poker but not table games or slot machines. In the compact, the tribe can negotiate to offer those additional forms of gambling.
States may regulate poker and poker tournaments, determining such things as whether the minimum age to play is 18 or 21. The Montana rules, for example, are very interesting and often bizarre. One regulation provides that “all poker tournaments shall comply with the most recent version of the Poker Tournament Directors Association Rules.” Nevertheless, the state regulations contain many rules, some of which contradict the TDA rules and thus preempt them. Perhaps the stupidest rule states that “Prizes may only be awarded at the conclusion of the tournament.” While that sounds innocuous, it is interpreted to mean that if a card room has weekend events on Friday, Saturday and Sunday, that counts as one tournament and the money is not paid out until after the Sunday tournament has concluded!

The WSOP famously had to put an end to its ladies-only tournament in deference to state anti-discrimination laws; it then found a workaround by giving ladies a discount, which is apparently not discriminatory. Go figure. An example of express deference to regulatory rules is found in WSOP Rule 120, which cites the Nevada statute on resolution of a dispute between a player and the casino. It may surprise players that when they have a claim against a casino they usually have to pursue the claim through the regulatory agency and not through the courts. The theory is that if a casino violated the gaming laws, that gives the regulatory agency a claim but does not necessarily give the player a private right of action against the casino.

Sometimes a player can bring a claim in court if the claim is not for violation of the gaming laws and the gaming laws do not preempt the claim. The most frequent of these common law claims are that the casino allowed the person to play in spite of having a gambling disorder or having too much to drink. These claims don’t come up too often with poker players, for if you are determined to lose your money, there are quicker ways than poker, and most players value sobriety in order to better follow what is happening at the table. Furthermore, in poker, the casino is not the primary beneficiary of the player’s incapacity.

In any event, these claims are usually unsuccessful. In fact, Nevada prohibits compulsive gambling as a defense to payment of a marker. While drunkenness is a defense to a contract, it has rarely been a successful claim against a casino.

Gambling addiction and alcohol abuse are problems that should not be minimized, but the burden of doing something about it is generally on the player rather than on the casino. Those who recognize they need help know where to find it. Many casinos offer to put patrons on an exclusion list. If you put yourself on the list and the casino doesn’t exclude you, however, you are generally the one who is penalized and not the casino. ♠

Scott J. Burnham is professor emeritus at Gonzaga Law School in Spokane, Washington. He can be contacted at profburnham@yahoo.com. This column is adapted from his article, A Transactional Lawyer Looks at the Rules of Tournament Poker, which was published in Gaming Law Review and Economics.