The Legality of Cash Skill Gaming
Mentions: Skill Gaming Sites , Legal Issues
Skill gaming, namely the staking of cash on a game of skill, is an issue of hot contention in state legislatures across the US. Following the passage of last Fall's Internet Gambling Prohibition Act of 2007, skill gaming was recognized to be exempt from federal prohibition. However, gambling is an issue that is regulated at a state level, so states too can outlaw skill gaming, as many have done. According to WorldWinner, the largest provider of skill gaming services, its services are, currently, illegal in fourteen states: Arkansas, Arizona, Connecticut, Delaware, Florida, Iowa, Illinois, Louisiana, Maryland, Montana, South Carolina, South Dakota, Tennessee and Vermont.
According to our research, WorldWinner (and many other skill gaming companies) take an extremely liberal view of state laws barring online gambling. If there is any ambiguity with respect to the legality of their services in any particular state, then they operate freely there. Two years ago, WorldWinner operated in 44 states; today, it operates in 36 states, reflecting the increasingly restrictive state, legal environment for skill gaming operators.
Under cover of anonymity, we received the following legal opinion, written this past February, from a start-up company seeking to enter the skill gaming space. This legal opinion was prepared by one of the biggest law firms in the world, which has one of the largest and most conservative legal practices.
"...An entity that has structured its website to be used as a platform for U.S.-based persons to place online monetary wagers against one another on player-to-player video games of skill, and that collects a fee in connection with each such wagering matchup facilitated through the website, has a substantial risk of being in violation of the Wire Act, 18 U.S.C. §1084, and other federal criminal laws triggered by a violation of the federal Wire Act, such as the Unlawful Internet Gambling Act of 2006. The Wire Act prohibits any person or entity engaged in the business of betting or wagering from knowingly transmitting wagers or information assisting in the placing of wagers in interstate or foreign commerce using a wire communication facility. In view of the U.S. Department of Justice’s interpretation of the Wire Act, an entity violates the Wire Act even though the wagers placed through its website are not placed on sporting events. See, e.g., Letter from David M. Nissman, US Attorney, DOJ, to Eileen R. Petersen, Chair, Virgin Islands Casino Control Commission (Jan. 2, 2004). Further, there is nothing to suggest that the entity is not violating the Wire Act simply because the wagers placed through its website are placed on games of skill rather than on games involving chance. To the contrary, at least one federal appellate court has indicated that the “wagers” contemplated by the Wire Act are not limited to wagers placed on games of chance. See United States v. Bergland, 318 F.2d 159 (7th Cir. 1963). If the entity is likely violating the Wire Act, it is also likely violating each of several other federal criminal laws the violation of which is contingent upon, among other things, a violation of the Wire Act or a violation of a state statute. These additional statutes include the Racketeering Influenced and Corrupt Organizations Act (“RICO”) and the Travel Act, and may also include the newly-enacted Unlawful Internet Gambling Enforcement Act of 2006...
All states, in one form or another, prohibit at least some gambling activities, although certain states appear to exempt skill game wagering from the prohibitions of the states' gambling-related laws. The exemption does not expressly legalize skill game wagering but limits the scope of a state’s gambling-related laws by excluding wagers on skill games...
Assuming that the wagering contemplated by the business plan does not violate the federal Wire Act, there are, at a minimum, twenty-eight states (and the District of Columbia) that present a moderate to high degree of risk that skill game wagering will violate the state’s gambling-related laws: Arizona, Arkansas, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Iowa, Louisiana, South Dakota, Alaska, Illinois, Michigan, Maryland, Mississippi, Montana, Nevada, New Jersey, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Washington, and Wyoming...
In the states that legalize certain gambling activities, such as state lotteries, horse race wagering and bricks and mortar casinos, players are typically subject to age limitations. The minimum age to participate in legal gambling varies depending upon the jurisdiction and type of gambling activity. See 10 P.S. §320(e) (For small games of chance operated by charities, "no person under 18 years of age" shall be permitted to play.); but see 4 Pa.C.S. §1207 (Each gaming entity must "prohibit persons under 21 years of age from operating or using slot machines."); Ariz. Rev. Stat. 13-3301 (No person under the age of 21 may participate in social gambling); La. Rev. Stat. §90.5 ("No person under the age of twenty-one shall enter, or be permitted to enter, the designated gaming area of a riverboat, the official gaming establishment, or the designated slot machine gaming area of a pari-mutuel wagering facility,"); Miss. Code §97-33-23 ("Any person of full age who shall bet any money … with a minor, knowing such minor to be under the age of twenty-one years, or allowing any such minor to bet at any game or games …shall be punished by imprisonment.")..."
In short, this legal opinion suggests that skill gaming may in fact be illegal in far more states than WorldWinner, MoneyGaming, and similar companies, currently choose to admit. Moreover, we would caution our readers to expect that many skill gaming companies, at least the more legitimate ones, will pull back from more US states. GameAccount, a site that offers many of the same games as WorldWinner, has already vacated the US market entirely, given the "ambiguity" of the legal environment for its services. Play65 now only accepts users from 28 states.
We will keep you apprised of further developments in this space.
Live life well,
Ronin
According to our research, WorldWinner (and many other skill gaming companies) take an extremely liberal view of state laws barring online gambling. If there is any ambiguity with respect to the legality of their services in any particular state, then they operate freely there. Two years ago, WorldWinner operated in 44 states; today, it operates in 36 states, reflecting the increasingly restrictive state, legal environment for skill gaming operators.
Under cover of anonymity, we received the following legal opinion, written this past February, from a start-up company seeking to enter the skill gaming space. This legal opinion was prepared by one of the biggest law firms in the world, which has one of the largest and most conservative legal practices.
"...An entity that has structured its website to be used as a platform for U.S.-based persons to place online monetary wagers against one another on player-to-player video games of skill, and that collects a fee in connection with each such wagering matchup facilitated through the website, has a substantial risk of being in violation of the Wire Act, 18 U.S.C. §1084, and other federal criminal laws triggered by a violation of the federal Wire Act, such as the Unlawful Internet Gambling Act of 2006. The Wire Act prohibits any person or entity engaged in the business of betting or wagering from knowingly transmitting wagers or information assisting in the placing of wagers in interstate or foreign commerce using a wire communication facility. In view of the U.S. Department of Justice’s interpretation of the Wire Act, an entity violates the Wire Act even though the wagers placed through its website are not placed on sporting events. See, e.g., Letter from David M. Nissman, US Attorney, DOJ, to Eileen R. Petersen, Chair, Virgin Islands Casino Control Commission (Jan. 2, 2004). Further, there is nothing to suggest that the entity is not violating the Wire Act simply because the wagers placed through its website are placed on games of skill rather than on games involving chance. To the contrary, at least one federal appellate court has indicated that the “wagers” contemplated by the Wire Act are not limited to wagers placed on games of chance. See United States v. Bergland, 318 F.2d 159 (7th Cir. 1963). If the entity is likely violating the Wire Act, it is also likely violating each of several other federal criminal laws the violation of which is contingent upon, among other things, a violation of the Wire Act or a violation of a state statute. These additional statutes include the Racketeering Influenced and Corrupt Organizations Act (“RICO”) and the Travel Act, and may also include the newly-enacted Unlawful Internet Gambling Enforcement Act of 2006...
All states, in one form or another, prohibit at least some gambling activities, although certain states appear to exempt skill game wagering from the prohibitions of the states' gambling-related laws. The exemption does not expressly legalize skill game wagering but limits the scope of a state’s gambling-related laws by excluding wagers on skill games...
Assuming that the wagering contemplated by the business plan does not violate the federal Wire Act, there are, at a minimum, twenty-eight states (and the District of Columbia) that present a moderate to high degree of risk that skill game wagering will violate the state’s gambling-related laws: Arizona, Arkansas, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Iowa, Louisiana, South Dakota, Alaska, Illinois, Michigan, Maryland, Mississippi, Montana, Nevada, New Jersey, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Washington, and Wyoming...
In the states that legalize certain gambling activities, such as state lotteries, horse race wagering and bricks and mortar casinos, players are typically subject to age limitations. The minimum age to participate in legal gambling varies depending upon the jurisdiction and type of gambling activity. See 10 P.S. §320(e) (For small games of chance operated by charities, "no person under 18 years of age" shall be permitted to play.); but see 4 Pa.C.S. §1207 (Each gaming entity must "prohibit persons under 21 years of age from operating or using slot machines."); Ariz. Rev. Stat. 13-3301 (No person under the age of 21 may participate in social gambling); La. Rev. Stat. §90.5 ("No person under the age of twenty-one shall enter, or be permitted to enter, the designated gaming area of a riverboat, the official gaming establishment, or the designated slot machine gaming area of a pari-mutuel wagering facility,"); Miss. Code §97-33-23 ("Any person of full age who shall bet any money … with a minor, knowing such minor to be under the age of twenty-one years, or allowing any such minor to bet at any game or games …shall be punished by imprisonment.")..."
In short, this legal opinion suggests that skill gaming may in fact be illegal in far more states than WorldWinner, MoneyGaming, and similar companies, currently choose to admit. Moreover, we would caution our readers to expect that many skill gaming companies, at least the more legitimate ones, will pull back from more US states. GameAccount, a site that offers many of the same games as WorldWinner, has already vacated the US market entirely, given the "ambiguity" of the legal environment for its services. Play65 now only accepts users from 28 states.
We will keep you apprised of further developments in this space.
Live life well,
Ronin
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