It doesn't take much daring to say that 60 Minutes messed up. The seminal investigative news program lost its teeth a long time ago. But still, it would have been interesting and educational if the program had treated the Tim Donaghy story as something more compelling than a banal morality tale about the depths of addiction. 60 Minutes had the first public interview of the disgraced former NBA referee. It consequently had the opportunity for the first serious examination of the scandal that exposed the hidden underside of professional sports leagues, namely that game officials are omnipresent third-players in the game contests and have a mind of their own.
The 60 Minutes interviewer pressed the point repeatedly that Donaghy was guilty of an act of moral turpitude, a description that Donaghy was very willing to concede. Indeed, the one small act of self-preservation on Donaghy's part, coming when he described his conduct as a "bad choice," drew the interviewer's pointed response that Donaghy's choice was more than bad. So let's try "horrible," Donaghy responded helpfully. The one substantive point Donaghy tried repeatedly to make was that the personal vendettas and whims of game referees go so far to determine game outcomes as to render Donaghy's picks correct about 75% of the time. Yet the interviewer's lame follow-up to this telling assertion was a question put to the FBI investigator, of all people, asking whether the NBA had a problem with biased referees. The agent's reluctant agreement was underscored by the interviewer, as if a key point had been conceded. But how would an FBI agent be in position to confirm or deny such a charge? Biased refereeing hardly rises to the level of a federal crime.
I would have preferred that the investigative report have been more thought-provoking. The story about a lone NBA ref who goes bad tells me nothing new, and indeed mimics the NBA's line. But what was the NBA's role in all this? There can be no question that refereeing a game has a strong subjective element, particularly when the game is NBA basketball, which strikes me as the most difficult sport to officiate at its highest level. So many big men collide in such a small space, rendering the constant charge/blocking call all but impossible to make with any practical consistency. Referee calls will be inevitably variable, regardless of whether the referees are motivated by a pursuit of objectivity or base revenge.
Subjectivity in refereeing will always be with us. The question is what to do about it. The NBA did exactly the wrong thing. It made a policy to keep the referee assignments a secret until game time. The NBA did so in order to keep its referees away from the corrupting influence of gamblers, who had they been aware of which referees were assigned to a particular game would have had an opportunity to fix the game. Yet instead of protecting its referees, what the league's policy did was to make it possible for a referee to be corrupted. By keeping referee assignments secret, the league created inside information. Donaghy and the gamblers he tipped used this inside information to gain a betting advantage. In a point overlooked by the interviewer, Donaghy drew this analogy to inside information explicitly.
Had the league routinely released referee game assignments well in advance of the contest, gamblers would have helped the league keep the game clean. Sports bettors leave no stone unturned in seeking even minute competitive advantages. A referee's biases and proclivities (regardless of whether their cause is malign or benign) would likely be detectable in historical game data; certainly sports gamblers would do their best to discover any foul-calling tendencies both for totals bets but also to see if a referee's calls might tend to favor a particular team. How hard could it have been to discover biases? Donaghy was able to pick 75% of the games based on little more than offhand, anecdotal knowledge.
Had the NBA released its referee assignments, it would have negated their importance. Bettors and touts would have competed to use this new information, and in short order the tendencies and biases of individual referees would have been reflected in the point spreads on side bets or in the over/under on the totals bets. I made this point repeatedly on my other blog (The Sports Law Professor) as the Donaghy scandal was unfolding. Interestingly, in its response to the Donaghy episode, the NBA decided to announce referee assignments well in advance of games.
60 Minutes should have investigated why the NBA unnecessarily created inside information, information moreover that was valuable to gamblers and no one else. Why did the NBA make this mistake? As importantly, why do pro sports leagues continue to keep secrets? The NFL won't even release the rules of its game. Major League Baseball keeps secret the formula it uses to rate free agent players; its umpire ratings are guarded like the colonel's chicken recipe. The NBA does not have an NFL-like requirement for teams to disclose injury information. What is going on here? These are games we're talking about. If the NBA had never kept its silly secret, Tim Donaghy would have had no inside information on which to base his bets.
Sunday, December 6, 2009
Wednesday, September 2, 2009
Final Word On Delaware Lottery Decision
By the title of this entry I don't mean my final word. I'm referring to the very recent decision of the U.S. Court of Appeals for the Third Circuit, which decision most likely comprises the final word of the federal judiciary on Delaware's planned sports lottery. Here's the link to the court's opinion.
I've complained previously about the unnecessary haste with which this court decided to resolve this important legal issue. If this decision stands, as most likely it will, then it represents the permanent resolution of Delaware's status under the federal PASPA statute. It's an important issue, one of salience to Delaware's ability to take advantage of its unique status under federal law. That Delaware's federal exemption from PASPA should have been conclusively resolved, and resolved in a way apparently contrary to the spirit of the law and to Delaware's expressed sovereign interest in raising state revenue, is problematic. That this resolution was done in the hasty manner normally reserved for cases involving the potential loss of constitutional rights (abortion, free speeech) is even more troubling. No threat to life or liberty necessitated this action.
The court's opinion justified the rush to judgment as follows: "When a party seeks injunctive relief, the stakes are high, time is of the essence, and a straightforward legal question is properly presented to us, prudence dictates that we answer that question with dispatch." This statement may sound convincing, but it seriously misstates the law. It is simply not true that "when a party seeks injunctive relief" that that fact alone means the "stakes are high" and "time is of the essence." The plaintiff (here the professional sports leagues) has to prove that time is of the essence and quick judicial action is needed. The leagues tried to prove that the stakes were high and time was of the essence before the trial judge in this case, and failed to convince that judge to issue the injunction. No new proof of the need for haste was offered (or could be) to the appellate court; indeed, the appellate court specifically refused to address the issue of the potential of "irreparable harm" should the injunction stopping Delaware not be granted.
The fact of the matter was that there was no hurry. The NFL and the NCAA in particular, whose games are already subject to widespread and much-discussed betting action, would likely suffer no harm at all (never mind "irreparable" harm) should Delaware have been allowed to go forward with its lottery scheme. To imply that there would be harm and that Delaware's lottery plan required emergency judicial intervention seems doubtful, if not incorrect.
What we're left with is the claim that, because in the court's view no factual issues remained for resolution and because the legal issue was "straightforward," then the appellate court should proceed to conclusively resolve Delaware's statutory authority. This is not the law that the Supreme Court decision from which this authority is derived, the 1986 Thornburgh decision (about which I've written previously), expressly established. The Thornburgh decision did allow for final appellate resolution of a case on an emergency basis. But in a majority opinion (that collected only four votes) Thornburgh made clear that such an intervention "deviated from the stated norm" and that an appellate court should "ordinarily limit its review to abuse of discretion," and not to a resolution on the merits. The Supreme Court made plain that such intervention was justified in a "constitutional case" where "the unconstitutionality of the particular state action is clear." The Court also noted in Thornburgh that the appellate process in that particular case was benefitted by "an unusually complete factual and legal presentation from which to address the important constitutional issues at stake."
Obviously, no issue of constitutional rights, important or otherwise, was presented by Delaware's plan to expand its state lottery. No "unusually complete factual and legal presentation" was available, particularly considering that the entire case was litigated in a matter of weeks. Prudence did not "dictate" that the appellate court act with dispatch; it dictated the opposite. The claim that the stakes were high militated in favor of holding a trial on the merits, not rushing forward without one.
On the merits of the federal law, the appellate court limited Delaware to offering a lottery game "to the extent" it offered a game in 1976. Thus Delaware may offer parlay bets involving at least three games, and only on NFL games, because that is "the extent" to which Delaware offered bets in 1976. However, the court continued, Delaware's new game may differ from the 1976 game in "certain aspects," such as at what betting locations the game is offered. In short, the court held that Delaware may introduce changes to the game "as long as they do not effectuate a substantive change from the scheme that was conducted" in 1976.
This reasoning begs the question. The whole issue in the case was whether or not shifting from a three-game bet to a single game bet constitutes a "substantive change" from the 1976 game. For the court to tell Delaware that it may make non-substantive changes but not substantive changes tells Delaware nothing new. And when the appellate court holds, as a matter of law, that a change from a three-game bet to a single-game bet is a "substantive change," then the appellate court is resolving a factual issue, and is doing so without the benefit of a trial record.
Here's the factual issue: Is a three-game bet all that different (and different enough to be "substantive") from a single-game bet? The outcome of both bets involves a lot of luck; certainly the three-game bet involves more luck, but most sports gamblers would say that even winning a single-game bet against a point spread involves a lot of luck as well. Is the limited skill involved in a sports bet all that more prevalent in a single-game bet as opposed to a parlay? Is the greater degree of skill in a single-game bet enough of a difference to make the bet "substantively" different than that made in 1976? That's the issue the appeal presented. The issue presented cannot logically supply the rationale for the court's decision. Yet in the Third Circuit it did.
A trial on this point would have been very illuminating. Experts would have testified as to the mathematical differences between parlays and single-game bets; a trial judge would have marshaled and assessed the evidence in creating a record for appeal. Instead, the appellate court resolved the appeal on the merits because the court decided that there were no factual issues left in the case.
Assuming factual issues away doesn't make them go away, not really.
I've complained previously about the unnecessary haste with which this court decided to resolve this important legal issue. If this decision stands, as most likely it will, then it represents the permanent resolution of Delaware's status under the federal PASPA statute. It's an important issue, one of salience to Delaware's ability to take advantage of its unique status under federal law. That Delaware's federal exemption from PASPA should have been conclusively resolved, and resolved in a way apparently contrary to the spirit of the law and to Delaware's expressed sovereign interest in raising state revenue, is problematic. That this resolution was done in the hasty manner normally reserved for cases involving the potential loss of constitutional rights (abortion, free speeech) is even more troubling. No threat to life or liberty necessitated this action.
The court's opinion justified the rush to judgment as follows: "When a party seeks injunctive relief, the stakes are high, time is of the essence, and a straightforward legal question is properly presented to us, prudence dictates that we answer that question with dispatch." This statement may sound convincing, but it seriously misstates the law. It is simply not true that "when a party seeks injunctive relief" that that fact alone means the "stakes are high" and "time is of the essence." The plaintiff (here the professional sports leagues) has to prove that time is of the essence and quick judicial action is needed. The leagues tried to prove that the stakes were high and time was of the essence before the trial judge in this case, and failed to convince that judge to issue the injunction. No new proof of the need for haste was offered (or could be) to the appellate court; indeed, the appellate court specifically refused to address the issue of the potential of "irreparable harm" should the injunction stopping Delaware not be granted.
The fact of the matter was that there was no hurry. The NFL and the NCAA in particular, whose games are already subject to widespread and much-discussed betting action, would likely suffer no harm at all (never mind "irreparable" harm) should Delaware have been allowed to go forward with its lottery scheme. To imply that there would be harm and that Delaware's lottery plan required emergency judicial intervention seems doubtful, if not incorrect.
What we're left with is the claim that, because in the court's view no factual issues remained for resolution and because the legal issue was "straightforward," then the appellate court should proceed to conclusively resolve Delaware's statutory authority. This is not the law that the Supreme Court decision from which this authority is derived, the 1986 Thornburgh decision (about which I've written previously), expressly established. The Thornburgh decision did allow for final appellate resolution of a case on an emergency basis. But in a majority opinion (that collected only four votes) Thornburgh made clear that such an intervention "deviated from the stated norm" and that an appellate court should "ordinarily limit its review to abuse of discretion," and not to a resolution on the merits. The Supreme Court made plain that such intervention was justified in a "constitutional case" where "the unconstitutionality of the particular state action is clear." The Court also noted in Thornburgh that the appellate process in that particular case was benefitted by "an unusually complete factual and legal presentation from which to address the important constitutional issues at stake."
Obviously, no issue of constitutional rights, important or otherwise, was presented by Delaware's plan to expand its state lottery. No "unusually complete factual and legal presentation" was available, particularly considering that the entire case was litigated in a matter of weeks. Prudence did not "dictate" that the appellate court act with dispatch; it dictated the opposite. The claim that the stakes were high militated in favor of holding a trial on the merits, not rushing forward without one.
On the merits of the federal law, the appellate court limited Delaware to offering a lottery game "to the extent" it offered a game in 1976. Thus Delaware may offer parlay bets involving at least three games, and only on NFL games, because that is "the extent" to which Delaware offered bets in 1976. However, the court continued, Delaware's new game may differ from the 1976 game in "certain aspects," such as at what betting locations the game is offered. In short, the court held that Delaware may introduce changes to the game "as long as they do not effectuate a substantive change from the scheme that was conducted" in 1976.
This reasoning begs the question. The whole issue in the case was whether or not shifting from a three-game bet to a single game bet constitutes a "substantive change" from the 1976 game. For the court to tell Delaware that it may make non-substantive changes but not substantive changes tells Delaware nothing new. And when the appellate court holds, as a matter of law, that a change from a three-game bet to a single-game bet is a "substantive change," then the appellate court is resolving a factual issue, and is doing so without the benefit of a trial record.
Here's the factual issue: Is a three-game bet all that different (and different enough to be "substantive") from a single-game bet? The outcome of both bets involves a lot of luck; certainly the three-game bet involves more luck, but most sports gamblers would say that even winning a single-game bet against a point spread involves a lot of luck as well. Is the limited skill involved in a sports bet all that more prevalent in a single-game bet as opposed to a parlay? Is the greater degree of skill in a single-game bet enough of a difference to make the bet "substantively" different than that made in 1976? That's the issue the appeal presented. The issue presented cannot logically supply the rationale for the court's decision. Yet in the Third Circuit it did.
A trial on this point would have been very illuminating. Experts would have testified as to the mathematical differences between parlays and single-game bets; a trial judge would have marshaled and assessed the evidence in creating a record for appeal. Instead, the appellate court resolved the appeal on the merits because the court decided that there were no factual issues left in the case.
Assuming factual issues away doesn't make them go away, not really.
Tuesday, August 25, 2009
Delaware's Next Step
I have only a few minutes this morning, but with the phone ringing and emails chirping I want to try to offer a few comments on the dark day in Delaware.
1. The decision of the appellate court to convert the preliminary injunction appeal into a decision on the merits is problematic. But it's not unprecedented. Federal courts may do this, as the Supreme Court allowed in the 1986 Thornburgh decision involving a statute limiting abortion. The court can rule on the merits "when the facts are established or of no controlling relevance." It's a controversial decision and should be used only in "unusual cases," as the Court admonished in the Thornburgh opinion.
2. It appears from reports in the popular media that Delaware's counsel conceded that the facts were established, thus obviating the need for a trial. This concession, if true, befuddles me. (Granted, I get confused easily.) Why would Delaware's counsel essentially tee the ball up for the appellate court to rule on the merits? Especially when it appeared, from the (reported) tenor of the hearing, that this particular panel of judges was strongly inclined to rule in favor of the sports leagues? Really, without a trial record (there's never been a trial), how could the appellate court know that the "facts are established" unless the appellate counsel conceded as much?
3. What facts could be developed at a full trial that are relevant to Delaware's statutory exemption from the federal PASPA statute? First, what bet exactly will Delaware offer? I understand that Delaware's plans on this point are incomplete at this time. If they are incomplete, then it is possible that Delaware could devise a game that fit within the PASPA exception. Second, what game exactly did Delaware offer back in the mid-1970's? Delaware offered several games, and changed one in mid-season. All of these games involved NFL bets. Which 1975 bet defines the lottery game that Delaware may now offer? One game involved parley bets requiring picking winners of at least four contests and also picking the point spread for the game. Is that game all that Delaware may offer today? Third, a trial court would take evidence, in the form of expert opinion, as to whether a single-game bet was different in some meaningful, qualitative or quantitative way from a parlay bet. Does the game involve different outcomes, or put the counterparties to the bet in a significantly different position than they were in 1975?
4. The most significant problem with the appellate court's apparent decision on the merits is that the briefing on which it ruled was incomplete. The only element of a preliminary injunction that has anything to do with the legal merits of the case is that the court is to determine if the plaintiff is "likely to prevail" at trial. Lawyers briefing this issue will of course discuss the law as it relates to this element. But they will also spend much of their brief and much of their oral argument discussing the other issues relevant to a preliminary injunction, most notably the possibility of irreparable harm to the plaintiff and the chance of undue hardship on the defendant. In other words, the key legal issue, here the issue about the scope of Delaware's exception under the federal statute, gets only partial consideration in a preliminary, emergency action. The briefing and argument on this legal point is nowhere as substantial as it would be on an appeal devoted to that issue exclusively.
5. The federal statute at issue is a complicated one, and the legislative history that surrounds it is fairly voluminous. Many statements can be found in that history that support Delaware's position; many also can be found that favor the position of the leagues. To resolve this complex legal issue on the basis of incomplete briefs and no factual development, and to rule that Delaware is permanently stopped from enjoying its exception under PASPA in the way that Delaware interprets that exception, strikes me as unnecessary judicial lawmaking. This isn't an abortion case: no salient legal rights or human lives might be affected by the court's ruling. There was no need for the court to take this hasty action, based on a spontaneous and probably ill-advised concession by Delaware's counsel during oral arguments.
I hope Delaware has the wherewithal to fight this decision, either by direct appeal or by a collateral attack on the federal statute.
1. The decision of the appellate court to convert the preliminary injunction appeal into a decision on the merits is problematic. But it's not unprecedented. Federal courts may do this, as the Supreme Court allowed in the 1986 Thornburgh decision involving a statute limiting abortion. The court can rule on the merits "when the facts are established or of no controlling relevance." It's a controversial decision and should be used only in "unusual cases," as the Court admonished in the Thornburgh opinion.
2. It appears from reports in the popular media that Delaware's counsel conceded that the facts were established, thus obviating the need for a trial. This concession, if true, befuddles me. (Granted, I get confused easily.) Why would Delaware's counsel essentially tee the ball up for the appellate court to rule on the merits? Especially when it appeared, from the (reported) tenor of the hearing, that this particular panel of judges was strongly inclined to rule in favor of the sports leagues? Really, without a trial record (there's never been a trial), how could the appellate court know that the "facts are established" unless the appellate counsel conceded as much?
3. What facts could be developed at a full trial that are relevant to Delaware's statutory exemption from the federal PASPA statute? First, what bet exactly will Delaware offer? I understand that Delaware's plans on this point are incomplete at this time. If they are incomplete, then it is possible that Delaware could devise a game that fit within the PASPA exception. Second, what game exactly did Delaware offer back in the mid-1970's? Delaware offered several games, and changed one in mid-season. All of these games involved NFL bets. Which 1975 bet defines the lottery game that Delaware may now offer? One game involved parley bets requiring picking winners of at least four contests and also picking the point spread for the game. Is that game all that Delaware may offer today? Third, a trial court would take evidence, in the form of expert opinion, as to whether a single-game bet was different in some meaningful, qualitative or quantitative way from a parlay bet. Does the game involve different outcomes, or put the counterparties to the bet in a significantly different position than they were in 1975?
4. The most significant problem with the appellate court's apparent decision on the merits is that the briefing on which it ruled was incomplete. The only element of a preliminary injunction that has anything to do with the legal merits of the case is that the court is to determine if the plaintiff is "likely to prevail" at trial. Lawyers briefing this issue will of course discuss the law as it relates to this element. But they will also spend much of their brief and much of their oral argument discussing the other issues relevant to a preliminary injunction, most notably the possibility of irreparable harm to the plaintiff and the chance of undue hardship on the defendant. In other words, the key legal issue, here the issue about the scope of Delaware's exception under the federal statute, gets only partial consideration in a preliminary, emergency action. The briefing and argument on this legal point is nowhere as substantial as it would be on an appeal devoted to that issue exclusively.
5. The federal statute at issue is a complicated one, and the legislative history that surrounds it is fairly voluminous. Many statements can be found in that history that support Delaware's position; many also can be found that favor the position of the leagues. To resolve this complex legal issue on the basis of incomplete briefs and no factual development, and to rule that Delaware is permanently stopped from enjoying its exception under PASPA in the way that Delaware interprets that exception, strikes me as unnecessary judicial lawmaking. This isn't an abortion case: no salient legal rights or human lives might be affected by the court's ruling. There was no need for the court to take this hasty action, based on a spontaneous and probably ill-advised concession by Delaware's counsel during oral arguments.
I hope Delaware has the wherewithal to fight this decision, either by direct appeal or by a collateral attack on the federal statute.
Monday, August 24, 2009
Ruling in Delaware Case
I posted my thoughts on today's ruling in the Delaware sports lottery case over at my other blog, the sports law professor. Here's a link.
Monday, July 27, 2009
Poker As A Game of Skill
It is a question the answer to which is worth many millions of dollars, and that may be an understatement. Under American law, generally speaking, a gambling game is illegal is if it "predominately" a game of chance, or to put it the other way, it is legal if the game is predominately one of skill. A pure lottery (pick the winning number) is a game of pure chance; despite superstitious beliefs, the fact is that no amount of cunning in selecting the numbers on your ticket will affect the chances of winning. Chess (which can be a gambling game) involves no luck at all. Somewhere between these extremes lies poker. Does winning at poker predominately require skill or luck?
I'm writing an academic paper on this question currently. The legal test sounds like it asks an empirical question. I'm starting to think it does not.
One attempt at an empirical anwer was the study released by Cigital, linked here. The study examined over 100,000 low-stakes Texas Hold'em hands culled from the Poker Stars website. The data show that the great majority of Hold'em hands, about 75%, are terminated by a fold. Of those hands that extended to completion (the showdown), only about half of those winners had the best hand among all the hands. This data, the study argues, shows the importance of player decisions over luck in determining poker winners and losers.
I'm a little unsure of the import of this data. Decisions to fold are not made in a vacuum. They are made in light of the cards dealt and the community cards, and reflect the possibility of a showdown. Certainly a player may bluff, in varying degrees. But I would guess few players bluff as a routine matter; most decisions to fold or to bet are made in light of the cards dealt. Of course there is much skill involved in the decision to fold, including the probabilities of making a hand, the money in the pot, the size of one's stake, etc. No one is saying that skill is absent from the game; the question is whether or not examining the percentage of hands that terminate in a fold tells us much about whether skill predominates over luck. In other words, it is debatable that the winner of a particular hand could have won the hand irrespective of the cards he was dealt, just by making the same bets. His opponents folded on account of his bets, but also on account of the hands they were dealt and the community cards played. Luck, not just the bettor's skill, plays heavily into decisions to fold.
So to my mind the question is which of the two aspects of the game, cards or bets, is more decisive. Would you rather, over the run of games, prefer to have the ability to make betting decisions with average skill but be dealt above-average cards, or instead be an above-average decision-maker who is dealt the average run of cards?
I suspect most of us would take the cards. I think Hold'em poker is a game of some difficulty, but not great difficulty. In other words, it's not too hard to get substantially competent at the decision-making part of the game. Making further improvements in one's decision-making beyond that point of "substantial competence" (perhaps by more accurately configuring odds and making slightly better investments in greater expected values for a hand, or by use of refined psychology or what have you) will not have that great of an impact on determining winners. Even over the long haul. Every year we see non-expert, yet competent, decision-makers win the World Series of Poker. Some expertise is needed; the pure beginner will lose often. But once the players all acquire a certain substantial level of expertise, further refinements in skill are unlikely to add much to one's chances of victory. At that point luck gains importance.
So the attempt to answer the legal question about which element "predominates" in determining poker outcomes begs the question about what one means by "poker." Skill predominates, but only to where all players have achieved enough skill. There is a limit to the value of skill in poker; unlike chess, poker does not present a limitless opportunity for increasing one's chances by increasing one's skill.
I'm writing an academic paper on this question currently. The legal test sounds like it asks an empirical question. I'm starting to think it does not.
One attempt at an empirical anwer was the study released by Cigital, linked here. The study examined over 100,000 low-stakes Texas Hold'em hands culled from the Poker Stars website. The data show that the great majority of Hold'em hands, about 75%, are terminated by a fold. Of those hands that extended to completion (the showdown), only about half of those winners had the best hand among all the hands. This data, the study argues, shows the importance of player decisions over luck in determining poker winners and losers.
I'm a little unsure of the import of this data. Decisions to fold are not made in a vacuum. They are made in light of the cards dealt and the community cards, and reflect the possibility of a showdown. Certainly a player may bluff, in varying degrees. But I would guess few players bluff as a routine matter; most decisions to fold or to bet are made in light of the cards dealt. Of course there is much skill involved in the decision to fold, including the probabilities of making a hand, the money in the pot, the size of one's stake, etc. No one is saying that skill is absent from the game; the question is whether or not examining the percentage of hands that terminate in a fold tells us much about whether skill predominates over luck. In other words, it is debatable that the winner of a particular hand could have won the hand irrespective of the cards he was dealt, just by making the same bets. His opponents folded on account of his bets, but also on account of the hands they were dealt and the community cards played. Luck, not just the bettor's skill, plays heavily into decisions to fold.
So to my mind the question is which of the two aspects of the game, cards or bets, is more decisive. Would you rather, over the run of games, prefer to have the ability to make betting decisions with average skill but be dealt above-average cards, or instead be an above-average decision-maker who is dealt the average run of cards?
I suspect most of us would take the cards. I think Hold'em poker is a game of some difficulty, but not great difficulty. In other words, it's not too hard to get substantially competent at the decision-making part of the game. Making further improvements in one's decision-making beyond that point of "substantial competence" (perhaps by more accurately configuring odds and making slightly better investments in greater expected values for a hand, or by use of refined psychology or what have you) will not have that great of an impact on determining winners. Even over the long haul. Every year we see non-expert, yet competent, decision-makers win the World Series of Poker. Some expertise is needed; the pure beginner will lose often. But once the players all acquire a certain substantial level of expertise, further refinements in skill are unlikely to add much to one's chances of victory. At that point luck gains importance.
So the attempt to answer the legal question about which element "predominates" in determining poker outcomes begs the question about what one means by "poker." Skill predominates, but only to where all players have achieved enough skill. There is a limit to the value of skill in poker; unlike chess, poker does not present a limitless opportunity for increasing one's chances by increasing one's skill.
Friday, July 24, 2009
Big Battle Looming on Sports Wagering
All of the major professional sports leagues plus the NCAA today filed suit in federal court in Delaware. The "Leagues" as I'll call them are suing the state of Delaware for its plan to offer sports wagers as part of its lottery as soon as this fall, just in time for that bettors' paradise known more commonly as the National Football League. (I received a copy of the complaint courtesy of Chad Millman of ESPN.) The complaint seeks preliminary and permanent injunctive relief on two theories: (1) that Delaware's plan to offer sports wagers offends the federal Professional and Amateur Sports Protection Act (PASPA) and (2) that the proposed wagering scheme violates Delaware's constitution.
Delaware is one of the few states that is explicitly authorized by PASPA to offer lottery games based on sports contests. PASPA "grandfathered" Delaware (and Oregon, Nevada and New Jersey) when it created the general federal prohibition on sports bets on the grounds that those states had at the time more or less existent sports lotteries. (I've written about challenges to PASPA here.) The plaintiff Leagues are not challenging Delaware's grandfathered status; indeed the Complaint implicitly concedes that Delaware could offer lottery games based on the outcomes of sports contests. What is new and different about Delaware's plan, and what has drawn the Leagues' ire, is that Delaware plans to offer "lotteries" based on the outcome of single games, either by picking the winner (a sides bet) or picking the over/under on the total score (a totals bet). Back in the mid-1970's, Delaware had offered only "parleys" in its brief foray into sports lotteries. A parley requires the bettor to pick the winners of several games in order to win a single bet.
This litigation could prove enormously important for the world of sports and the world of gambling (two worlds I tend to inhabit). My first-blush thoughts:
1. The Leagues' federal PASPA claim rests on a rather ambiguous phrase in the statute. In the section relevant to Delaware's grandfather status, PASPA states that its prohibitions are not to apply to a "lottery, sweepstakes, or other betting, gambling, or wagering scheme in operation in a State or other governmental entity, to the extent that the scheme was conducted by that State or other governmental entity at any time during the period beginning January 1, 1976, and ending August 31, 1990." The Leagues state that the phrase "to the extent" essentially limits the grandfathered states to offering (roughly) the same games that were actually offered at the time prior to or surrounding PASPA's passage. In other words, these states weren't grandfathered; rather, the particular games in those states were grandfathered.
2. This interpretation of PASPA, although certainly plausible, is nonetheless contestable, on three grounds. First, the phrase "to the extent" as a grammatical matter seems to refer to and is part of the clause describing the time period concerning which putatively any state could have qualified for the grandfather exception. States could be grandfathered to the extent (meaning "if," they offered games during that time period. The phrase does not seem to modify or qualify the types of games that are listed in the first clause; indeed, if it were meant as a delimitation on the first clause, it would be a clumsy way to do it. (Admittedly it's a clumsy phrase no matter how you view it.) Second, the only states to which this entire clause could apply are Oregon and Delaware. No other state had offered such games in the relevant time period, and New Jersey and Nevada have their own grandfather clauses in PASPA. Oregon and Delaware at the time offered only parley wagers. If the PASPA legislature wanted to limit Oregon and Delaware to parley wagers only, then why did the statute list "lottery, sweepstakes, or other betting, gambling, or wagering schemes" to describe the scope of Oregon's and Delaware's exception? Either these words are surplusage or they describe the exception. If it's the latter, then it seems Delaware has a pretty good argument to make.
3. Third, even assuming the Leagues are correct and that PASPA's "to the extent" limits Delaware to the betting games it offered back in the 1970's, the question is whether or not parley bets are really all that different from single-game bets. Here is, quite literally, the multi-million dollar question. If Delaware has permission to offer bets on the winner of three games, may it also offer bets on the winner of one game?
4. Before I suggest how the court will answer, we should look briefly at the Leagues' state law claim because it raises a similar question. The issue here is one seen in lots of gaming cases throughout U.S. history. Basically, Delaware (like most states) has a clause in its state constitution (original version) that prohibits gambling in all its forms. Like most states, Delaware sometime back in its history amended its constitution to permit state-run lotteries. Like most states, after the passage of the "lottery exception," Delaware's state legislature commenced to push the limits of the exception by offering to the public all kinds of betting games that bear scant resemblance to the common conception of a traditional state lottery, with its weekly drawings of winning numbers and such. Although the judicial outcomes are decidedly a mixed bag, for the most part the states succeeded. A "lottery," courts have held, doesn't have to include spinning balls and winning numbers and smiling television hosts. A lottery is a game where the player provides (1) consideration for a (2) chance at a (3) prize. Many games apart from the traditional lottery fit this legal definition. As did Delaware's old sports parley game. You see, we've been down this road before, in Round I.
5. In 1977, the NFL sued Delaware (I suspect the NFL has it in for Delaware; Wilmington will not be awarded a football franchise anytime soon) on the grounds that Delaware's parley sports lottery did not fit within the Delaware's constitutional lottery exception. The key issue in that case, which will be the key issue in the new litigation, is whether or not the sports bet is at bottom a "game of chance." Remember, to constitute a lottery, the game must be one of chance. (The other two elements, consideration and prize, will undoubtedly be conceded.) In the 1977 decision, Delaware won. The federal court decided that in a parley bet, although some measure of skill was obviously involved, chance was the "dominant factor" in deciding the outcome of the bet. Picking the winner (against the spread) of three or more contests was predominately a manner of chance, not skill.
[6. Interestingly, before signing the new scheme into law, Delaware's governor recently asked the Delaware Supreme Court for an advisory opinion on whether or not a single-game bet fell outside this "game of chance" rule from the 1977 federal court decision. Helpfully, the supreme court conceded that this was a good question that it would presently decline to answer. Now, with this new federal lawsuit, the federal judge might well decide to certify this exact question, which involves state law, right back to the very same state supreme court. Usually certified questions are treated more seriously than requests for advisory opinions from the attorney general, so this time the Delaware court will make a decision.]
7. Not afraid of tough questions (and with a little less riding on my decision), I'll attempt an answer. I think the Leagues will win the state law claim and that Delaware will win the federal law claim. A split decision. The champions will have to fight again in Round III.
8. On the federal PASPA claim, I think the Leagues will be hard-pressed to convince a judge to read the ambiguous "to the extent" language as constituting a complete, permanent ban on Delaware's offering any sports wager other than the parley games it offered in 1975. This reading seems to put too much weight on words that do not make the ban explicit, particularly when explicitness would have been so easy to accomplish as a linguistic matter. (Of course, the federal Congress could, in response to such a decision, amend PASPA to make this ban more explicit, and presumably if it did so the Leagues might win in the next battle, Round III.)
9. On the state constitutional law claim, here I think the smart money will be put on the Leagues. Delaware won this fight in Round I (the 1977 litigation), with the court finding that the parley bet comprised a game of chance and therefore fit within Delaware's lottery exception. But if some sports bets are indeed games of chance, then logically some other sports bets must not fit the bill. Some bets must be games of skill. Is winning a bet on a single game predominately a matter of luck or skill? (Depends on if you're talking to the winner or loser.) Certainly winning this single-game bet involves more skill than does a parley bet. Trying to pick winners against point spreads for three or more contests is the quitessential crap shoot. (Actually, I'd have a much better chance shooting craps.) For a single game, fewer breaks have to fall in one direction. Reduced opportunities for luck necessarily means enhanced opportunities for skill.
10. Of course, just like the Leagues could induce the Congress to amend PASPA should Delaware prevail on the federal claim, so could Delaware induce its voters to amend the state constitution should the Leagues prevail on the state law claim. And we'd be off to Round III.
Delaware is one of the few states that is explicitly authorized by PASPA to offer lottery games based on sports contests. PASPA "grandfathered" Delaware (and Oregon, Nevada and New Jersey) when it created the general federal prohibition on sports bets on the grounds that those states had at the time more or less existent sports lotteries. (I've written about challenges to PASPA here.) The plaintiff Leagues are not challenging Delaware's grandfathered status; indeed the Complaint implicitly concedes that Delaware could offer lottery games based on the outcomes of sports contests. What is new and different about Delaware's plan, and what has drawn the Leagues' ire, is that Delaware plans to offer "lotteries" based on the outcome of single games, either by picking the winner (a sides bet) or picking the over/under on the total score (a totals bet). Back in the mid-1970's, Delaware had offered only "parleys" in its brief foray into sports lotteries. A parley requires the bettor to pick the winners of several games in order to win a single bet.
This litigation could prove enormously important for the world of sports and the world of gambling (two worlds I tend to inhabit). My first-blush thoughts:
1. The Leagues' federal PASPA claim rests on a rather ambiguous phrase in the statute. In the section relevant to Delaware's grandfather status, PASPA states that its prohibitions are not to apply to a "lottery, sweepstakes, or other betting, gambling, or wagering scheme in operation in a State or other governmental entity, to the extent that the scheme was conducted by that State or other governmental entity at any time during the period beginning January 1, 1976, and ending August 31, 1990." The Leagues state that the phrase "to the extent" essentially limits the grandfathered states to offering (roughly) the same games that were actually offered at the time prior to or surrounding PASPA's passage. In other words, these states weren't grandfathered; rather, the particular games in those states were grandfathered.
2. This interpretation of PASPA, although certainly plausible, is nonetheless contestable, on three grounds. First, the phrase "to the extent" as a grammatical matter seems to refer to and is part of the clause describing the time period concerning which putatively any state could have qualified for the grandfather exception. States could be grandfathered to the extent (meaning "if," they offered games during that time period. The phrase does not seem to modify or qualify the types of games that are listed in the first clause; indeed, if it were meant as a delimitation on the first clause, it would be a clumsy way to do it. (Admittedly it's a clumsy phrase no matter how you view it.) Second, the only states to which this entire clause could apply are Oregon and Delaware. No other state had offered such games in the relevant time period, and New Jersey and Nevada have their own grandfather clauses in PASPA. Oregon and Delaware at the time offered only parley wagers. If the PASPA legislature wanted to limit Oregon and Delaware to parley wagers only, then why did the statute list "lottery, sweepstakes, or other betting, gambling, or wagering schemes" to describe the scope of Oregon's and Delaware's exception? Either these words are surplusage or they describe the exception. If it's the latter, then it seems Delaware has a pretty good argument to make.
3. Third, even assuming the Leagues are correct and that PASPA's "to the extent" limits Delaware to the betting games it offered back in the 1970's, the question is whether or not parley bets are really all that different from single-game bets. Here is, quite literally, the multi-million dollar question. If Delaware has permission to offer bets on the winner of three games, may it also offer bets on the winner of one game?
4. Before I suggest how the court will answer, we should look briefly at the Leagues' state law claim because it raises a similar question. The issue here is one seen in lots of gaming cases throughout U.S. history. Basically, Delaware (like most states) has a clause in its state constitution (original version) that prohibits gambling in all its forms. Like most states, Delaware sometime back in its history amended its constitution to permit state-run lotteries. Like most states, after the passage of the "lottery exception," Delaware's state legislature commenced to push the limits of the exception by offering to the public all kinds of betting games that bear scant resemblance to the common conception of a traditional state lottery, with its weekly drawings of winning numbers and such. Although the judicial outcomes are decidedly a mixed bag, for the most part the states succeeded. A "lottery," courts have held, doesn't have to include spinning balls and winning numbers and smiling television hosts. A lottery is a game where the player provides (1) consideration for a (2) chance at a (3) prize. Many games apart from the traditional lottery fit this legal definition. As did Delaware's old sports parley game. You see, we've been down this road before, in Round I.
5. In 1977, the NFL sued Delaware (I suspect the NFL has it in for Delaware; Wilmington will not be awarded a football franchise anytime soon) on the grounds that Delaware's parley sports lottery did not fit within the Delaware's constitutional lottery exception. The key issue in that case, which will be the key issue in the new litigation, is whether or not the sports bet is at bottom a "game of chance." Remember, to constitute a lottery, the game must be one of chance. (The other two elements, consideration and prize, will undoubtedly be conceded.) In the 1977 decision, Delaware won. The federal court decided that in a parley bet, although some measure of skill was obviously involved, chance was the "dominant factor" in deciding the outcome of the bet. Picking the winner (against the spread) of three or more contests was predominately a manner of chance, not skill.
[6. Interestingly, before signing the new scheme into law, Delaware's governor recently asked the Delaware Supreme Court for an advisory opinion on whether or not a single-game bet fell outside this "game of chance" rule from the 1977 federal court decision. Helpfully, the supreme court conceded that this was a good question that it would presently decline to answer. Now, with this new federal lawsuit, the federal judge might well decide to certify this exact question, which involves state law, right back to the very same state supreme court. Usually certified questions are treated more seriously than requests for advisory opinions from the attorney general, so this time the Delaware court will make a decision.]
7. Not afraid of tough questions (and with a little less riding on my decision), I'll attempt an answer. I think the Leagues will win the state law claim and that Delaware will win the federal law claim. A split decision. The champions will have to fight again in Round III.
8. On the federal PASPA claim, I think the Leagues will be hard-pressed to convince a judge to read the ambiguous "to the extent" language as constituting a complete, permanent ban on Delaware's offering any sports wager other than the parley games it offered in 1975. This reading seems to put too much weight on words that do not make the ban explicit, particularly when explicitness would have been so easy to accomplish as a linguistic matter. (Of course, the federal Congress could, in response to such a decision, amend PASPA to make this ban more explicit, and presumably if it did so the Leagues might win in the next battle, Round III.)
9. On the state constitutional law claim, here I think the smart money will be put on the Leagues. Delaware won this fight in Round I (the 1977 litigation), with the court finding that the parley bet comprised a game of chance and therefore fit within Delaware's lottery exception. But if some sports bets are indeed games of chance, then logically some other sports bets must not fit the bill. Some bets must be games of skill. Is winning a bet on a single game predominately a matter of luck or skill? (Depends on if you're talking to the winner or loser.) Certainly winning this single-game bet involves more skill than does a parley bet. Trying to pick winners against point spreads for three or more contests is the quitessential crap shoot. (Actually, I'd have a much better chance shooting craps.) For a single game, fewer breaks have to fall in one direction. Reduced opportunities for luck necessarily means enhanced opportunities for skill.
10. Of course, just like the Leagues could induce the Congress to amend PASPA should Delaware prevail on the federal claim, so could Delaware induce its voters to amend the state constitution should the Leagues prevail on the state law claim. And we'd be off to Round III.
Tuesday, March 24, 2009
PASPA Under Fire
A state senator in New Jersey has filed a federal lawsuit to challenge the constitutionality of the Professional and Amateur Sports Protection Act. Here's a link. (Note the nutty professor quoted toward the end.)
PASPA, signed into law in 1992, prohibits states or any person from offering or authorizing a lottery or other betting game based on the results of any competitive game in which amateur or professional athletes participate. Read literally (and statutes are meant to be read literally), PASPA outlaws five-dollar bets at your local golf course. In practical effect, the law prohibits states from raising revenue by permitting Las Vegas-style sports books, or lottery games like the NFL parley lottery game Oregon recently discontinued. (Four states were implicitly exempted from PASPA: Nevada, Montana, Oregon and Delaware.)
Will this litigation test the issue? I hope the Senator has the wherewithal to pursue the question through the appeals process. The trial litigation should be relatively inexpensive, since the legal question can probably be raised on a stipulated factual record, obviating the need for extensive discovery and fact-finding. I would imagine the district judge will issue an opinion on the question and hurry the case along to the appellate courts, the inevitable destination.
And what will the courts say? Is PASPA unconstitutional? I'd rather try to pick a four-game parley on an NFL weekend than predict judicial results. But here are some thoughts:
1. One infirmity in the statute is that it treats states differently from each other; specifically, those four states mentioned above get special treatment. The argument is that the federal Congress has an obligation under the commerce clause to treat states equally. This theory was raised a few years ago in an article in the Virginia Law Review. I just don't see it, although I'm of course willing to be convinced. The commerce clause in the federal constitution does not explicitly require that the Congress deal with states uniformly. Since other clauses of the constitution do contain such an explicit requirement, its absence from the commerce power is telling. Congress' authority to regulate commerce is plenary; as long as the law is rational, it's good to go. I think this argument loses. (Take the points.)
2. I think the more interesting constitutional argument arises under the tenth amendment: that PASPA violates the principles of federalism that the federal courts have come to recognize in the tenth amendment. Specifically, the tenth has been held to prohibit the federal government from forcing states to enact specific laws. What does PASPA do if not compel states to prohibit sports betting games? Put it this way: if PASPA were nationally uniform, then Nevada would have to change its laws to conform with the federal law. In this sense, a state (other than Nevada or one of the other exempted ones) in passing a lottery law must include a provision prohibiting games based on sports contests. So PASPA in effect requires states to pass state laws to conform with federal law. This poses a substantial tenth amendment issue. (Give the points.)
New Jersey's governor has said, according to the link above, that he will wait for the federal law to be tested before backing any plans to institute sports bets. He should throw his support behind the proposal now, in order to ensure that the federal court finds that New Jersey is sufficiently serious about sports wagers to present a real conflict for the court to resolve with a declaratory remedy. I would hate to see this important test case fail for lack of justiciability.
PASPA, signed into law in 1992, prohibits states or any person from offering or authorizing a lottery or other betting game based on the results of any competitive game in which amateur or professional athletes participate. Read literally (and statutes are meant to be read literally), PASPA outlaws five-dollar bets at your local golf course. In practical effect, the law prohibits states from raising revenue by permitting Las Vegas-style sports books, or lottery games like the NFL parley lottery game Oregon recently discontinued. (Four states were implicitly exempted from PASPA: Nevada, Montana, Oregon and Delaware.)
Will this litigation test the issue? I hope the Senator has the wherewithal to pursue the question through the appeals process. The trial litigation should be relatively inexpensive, since the legal question can probably be raised on a stipulated factual record, obviating the need for extensive discovery and fact-finding. I would imagine the district judge will issue an opinion on the question and hurry the case along to the appellate courts, the inevitable destination.
And what will the courts say? Is PASPA unconstitutional? I'd rather try to pick a four-game parley on an NFL weekend than predict judicial results. But here are some thoughts:
1. One infirmity in the statute is that it treats states differently from each other; specifically, those four states mentioned above get special treatment. The argument is that the federal Congress has an obligation under the commerce clause to treat states equally. This theory was raised a few years ago in an article in the Virginia Law Review. I just don't see it, although I'm of course willing to be convinced. The commerce clause in the federal constitution does not explicitly require that the Congress deal with states uniformly. Since other clauses of the constitution do contain such an explicit requirement, its absence from the commerce power is telling. Congress' authority to regulate commerce is plenary; as long as the law is rational, it's good to go. I think this argument loses. (Take the points.)
2. I think the more interesting constitutional argument arises under the tenth amendment: that PASPA violates the principles of federalism that the federal courts have come to recognize in the tenth amendment. Specifically, the tenth has been held to prohibit the federal government from forcing states to enact specific laws. What does PASPA do if not compel states to prohibit sports betting games? Put it this way: if PASPA were nationally uniform, then Nevada would have to change its laws to conform with the federal law. In this sense, a state (other than Nevada or one of the other exempted ones) in passing a lottery law must include a provision prohibiting games based on sports contests. So PASPA in effect requires states to pass state laws to conform with federal law. This poses a substantial tenth amendment issue. (Give the points.)
New Jersey's governor has said, according to the link above, that he will wait for the federal law to be tested before backing any plans to institute sports bets. He should throw his support behind the proposal now, in order to ensure that the federal court finds that New Jersey is sufficiently serious about sports wagers to present a real conflict for the court to resolve with a declaratory remedy. I would hate to see this important test case fail for lack of justiciability.
Monday, March 9, 2009
Wyoming Defeats Lottery Bill Because Poor Will Play
A variety of factors appeared to doom Wyoming's attempt to institute a lottery. Here's a link to an account in a local newspaper. Some opponents thought the bill did not go far enough, as it apparently precluded participation in the multistate Powerball game. Others thought the bill went too far. Here's the part I can't understand:
Of course opponents of lotteries use the term "regressive tax" loosely. What they are concerned about is the fact that poor people disproportionately prefer to gamble on the lottery. Why do poor people have this preference? They may like taking chances, and people who take chances may tend to end up on either extreme end of the salary scale. They probably like the payoff structure, with its promise of unimaginable rewards. Finally, they may prefer the undemanding style of gambling that the lottery offers: perfect for easy entry and for people who might feel disadvantaged playing a more sophisticated game.
In short, it's in the nature of lotteries that poor people will play them.
As in the past, some opponents of the bill rejected the lottery for ideological and religious reasons. Rep. Matt Teeters, R-Lingle, voted against the bill in part because it is a "regressive tax" that creates no wealth and is largely paid by the poorest state residents.This makes no sense to me. The "poorest state residents" pay no tax at all, either on their income or on their lottery purchases. As far as I know, every state exempts lottery tickets from the sales tax. The only person "taxed" in the lottery business is the winner, and by definition the winner is no longer a poor person. The lottery creates the most "progressive tax" imaginable.
Of course opponents of lotteries use the term "regressive tax" loosely. What they are concerned about is the fact that poor people disproportionately prefer to gamble on the lottery. Why do poor people have this preference? They may like taking chances, and people who take chances may tend to end up on either extreme end of the salary scale. They probably like the payoff structure, with its promise of unimaginable rewards. Finally, they may prefer the undemanding style of gambling that the lottery offers: perfect for easy entry and for people who might feel disadvantaged playing a more sophisticated game.
In short, it's in the nature of lotteries that poor people will play them.
Tuesday, February 24, 2009
Next Time Bring a Lawyer to the Casino
Here's a recent decision involving the winner of a slot machine jackpot. (Eash v. Imperial Palace of Mississippi, LLC, --- So.2d ----, 2009 WL 331615 (Miss. 2009).) When the jackpot was hit, the electronic screen and LCD display indicated that the customer had won $1,000,000. Celebration time. The signage on the machine, however, indicated that the maximum jackpot payout was but $8,000, and it is the signage that forms the casino's contract with the patron. So of course, consistent with many decisions, the casino's decision to pay the customer $8000 was upheld, although not without a long court battle.
Sounds like an easy case. But there was a subtle twist. It turns out that the reason that the machine indicated a payout of one million dollars was due to a programming error. The programmer, despite the signage on the front of the slot machine, programmed the machine as a "stand alone progressive payout" slot with a one-million dollar jackpot. Thus, although the casino and the slot customers thought they were counterparties on a bet involving a payout frequency and schedule consistent with a maximum jackpot of $8000, in fact they were counterparties to a progressive jackpot of one million dollars. In a progressive jackpot, the payouts would be less frequent but more sizable.
The court's decision mentioned the fact that the machine was mis-programmed but made nothing of it. Apparently, neither did the lawyers. But what we have here is a classic contractual defect, a mutual mistake of fact, the staple of the first year law school curriculum. The parties formed an agreement around a supposition that was in fact false and was unknown to either of them. The customer was playing a slot game which neither she nor the casino intended to play. She did however (unintentionally) play the game and beat the game's bad odds. She won, at least on the casino floor. But the casino got to keep the money.
How was the court not aware of this classic example of contractual defect, a defect that should have at a minimum derailed the court's apparently straightforward application of contract law?
The winning customer argued the case pro se.
Sounds like an easy case. But there was a subtle twist. It turns out that the reason that the machine indicated a payout of one million dollars was due to a programming error. The programmer, despite the signage on the front of the slot machine, programmed the machine as a "stand alone progressive payout" slot with a one-million dollar jackpot. Thus, although the casino and the slot customers thought they were counterparties on a bet involving a payout frequency and schedule consistent with a maximum jackpot of $8000, in fact they were counterparties to a progressive jackpot of one million dollars. In a progressive jackpot, the payouts would be less frequent but more sizable.
The court's decision mentioned the fact that the machine was mis-programmed but made nothing of it. Apparently, neither did the lawyers. But what we have here is a classic contractual defect, a mutual mistake of fact, the staple of the first year law school curriculum. The parties formed an agreement around a supposition that was in fact false and was unknown to either of them. The customer was playing a slot game which neither she nor the casino intended to play. She did however (unintentionally) play the game and beat the game's bad odds. She won, at least on the casino floor. But the casino got to keep the money.
How was the court not aware of this classic example of contractual defect, a defect that should have at a minimum derailed the court's apparently straightforward application of contract law?
The winning customer argued the case pro se.
Thursday, February 19, 2009
Can Horse Racing Survive Without Racinos?
It appears the horse racing industry is in trouble in Michigan. The reason? Limits on gaming expansion has precluded the horse tracks from adding video poker and other casino-style games. It's hard to see this limitation on expansion as anything other than protectionist of other gaming venues. In this day of fluid and overlapping gambling games, do the old distinctions among forms of gambling make sense any more? Are the distinctions important enough to justify differences in policy?
Here's the link. Here are the key paragraphs:
Here's the link. Here are the key paragraphs:
The inability to generate additional, taxable income gave casino interests a decided advantage, and that uneven playing field led directly to Jackson Harness Raceway's demise, said Brett Boyd, a horseman and president of the Michigan Harness Horsemen's Association.
"Mountaineer Gaming (owner of the license to race and simulcast at Jackson) decided to cut its losses because it couldn't expand gaming," Boyd said. "It decided to cut its losses. It has been successful in other states where they are allowed to expand gaming." Mountaineer employee Dan Rakietan, who resigned after the closure, declined to comment on the decision at this time.
The real shame about the Jackson closing, Boyd said, was that attendance was increasing at the track.
Monday, February 9, 2009
Could Casino Gaming Happen On Hawaii?
Sun, surf, relative proximity to deep Asian markets, and casino-style gaming? Could Hawaii become the new destination of choice for the gaming consumer?
The change in federal administrations has brought new life to the Akaka Bill, which has been hanging around for nearly a decade. The bill would confer certain self-government rights, including some sovereign control of lands and other resources, to native Hawaiians. Of course, one of the acute questions to which the bill gives rise is whether native Hawaiians would be able to open casinos, much like tribal governments have on Indian nations. Here's a link to an article and here's the gambling-related punchline:
The 2007 version of Akaka's bill explicitly banned a future native Hawaiian government from taking private land or setting up casinos. Yesterday's version does not explicitly ban gambling, but Akaka aides said that since gambling already is illegal in Hawaii, such a provision is unnecessary.
Well now. Given that Hawaii currently does not have a state lottery and has no parimutuel horse tracks, I suppose, on balance, a federal court would uphold the state's putative claim against a "native Hawaiian government" that attempted to establish a casino. (Question: would a state governor in Hawaii have the political gumption to try to deny an initiative of a new native Hawaiian government? Without an explicit ban in the bill, could a governor, citing the expense and uncertainty of litigation, simply decline to object to the creation of a casino?) But the conclusion that the state of Hawaii would win in court is a prediction at best. Why not make the ban explicit?
If Hawaii ever did allow some relatively tame form of gambling on the islands, perhaps in the form of a lottery, then the native Hawaiians' decision to offer casino gambling would likely be upheld despite the objections of the state. In gaming law, strangely, the lesser includes the greater. The Cabazon Band of Mission Indians established this point rather forcefully in their victory in the U.S. Supreme Court in 1987.
Are these "Akaka aides" leaving the door open to native Hawaiian casinos?
The change in federal administrations has brought new life to the Akaka Bill, which has been hanging around for nearly a decade. The bill would confer certain self-government rights, including some sovereign control of lands and other resources, to native Hawaiians. Of course, one of the acute questions to which the bill gives rise is whether native Hawaiians would be able to open casinos, much like tribal governments have on Indian nations. Here's a link to an article and here's the gambling-related punchline:
The 2007 version of Akaka's bill explicitly banned a future native Hawaiian government from taking private land or setting up casinos. Yesterday's version does not explicitly ban gambling, but Akaka aides said that since gambling already is illegal in Hawaii, such a provision is unnecessary.
Well now. Given that Hawaii currently does not have a state lottery and has no parimutuel horse tracks, I suppose, on balance, a federal court would uphold the state's putative claim against a "native Hawaiian government" that attempted to establish a casino. (Question: would a state governor in Hawaii have the political gumption to try to deny an initiative of a new native Hawaiian government? Without an explicit ban in the bill, could a governor, citing the expense and uncertainty of litigation, simply decline to object to the creation of a casino?) But the conclusion that the state of Hawaii would win in court is a prediction at best. Why not make the ban explicit?
If Hawaii ever did allow some relatively tame form of gambling on the islands, perhaps in the form of a lottery, then the native Hawaiians' decision to offer casino gambling would likely be upheld despite the objections of the state. In gaming law, strangely, the lesser includes the greater. The Cabazon Band of Mission Indians established this point rather forcefully in their victory in the U.S. Supreme Court in 1987.
Are these "Akaka aides" leaving the door open to native Hawaiian casinos?
Saturday, February 7, 2009
Who Will Regulate the Regulators?
Rhode Island considers buying out a failing racino. State ownership of casino gambling operations? Turns out the government rake was so high that the track couldn't stay afloat.
For states, the choice facing Rhode Island starkly illustrates the dangers that accompany the rewards of legalized gambling. Twin River provides Rhode Island's third-largest revenue source, behind only the income and sales taxes. For state officials grappling with huge deficits created by the recession, it has become, in the recent parlance applied to bank bailouts, too big to fail. "We're so deep into it," said John J. Cullen, a Lincoln resident and longtime critic of expanded gambling who nonetheless sees the logic of a state buyout. "The state has become addicted to the revenue source."
A gambling addiction; so what's new? And why shouldn't the logic (if not the dollars) of government bailouts apply to the gaming industry?
For states, the choice facing Rhode Island starkly illustrates the dangers that accompany the rewards of legalized gambling. Twin River provides Rhode Island's third-largest revenue source, behind only the income and sales taxes. For state officials grappling with huge deficits created by the recession, it has become, in the recent parlance applied to bank bailouts, too big to fail. "We're so deep into it," said John J. Cullen, a Lincoln resident and longtime critic of expanded gambling who nonetheless sees the logic of a state buyout. "The state has become addicted to the revenue source."
A gambling addiction; so what's new? And why shouldn't the logic (if not the dollars) of government bailouts apply to the gaming industry?
Monday, February 2, 2009
Is It Possible to Beat the Bookies?
Can a bettor really beat the market? (It all sounds so dubious to me, but then I gave the points in the Super Bowl.) The sports betting market is so big and so efficient that it's hard to believe that anyone can beat it. I guess taking arbitrage advantages where there are small movements in the line or perhaps delays in adjusting the line do present small opportunities to profit. Here's a pretty interesting insider account, made especially notable because the writer quotes me as an expert. (Doesn't he know I lose money every week?)
Link
Link
Sunday, November 23, 2008
Kentucky To Govern Internet?
The Commonwealth of Kentucky appears poised to take over the internet. Government abhors a vacuum, which means any unregulated activity. Check this out:
This makes no sense. The authority for this act is Kentucky's statutory authority to seize illegal gambling devices. How is an internet domain name a device? The device, if there is one, is the software on a server far from Kentucky's border. I could understand the court's zeal if Kentucky were one of the states maintaining a prohibition on gambling. But Kentucky's motivation is to protect its local businesses and its fisc. Lots of stuff is free on the internet, no? Is this Gambling Law Memo, if read by a Kentuckian, cheating Kentucky out of its excise tax on the local newspaper?The appeals, filed in the past two weeks, say Franklin Circuit Court Judge Thomas Wingate had no standing to order the seizure of the domain names and that Kentucky has no jurisdiction over international companies — many of which are organized in foreign countries.
The state, in an effort to clamp down on the betting businesses that officials say drain money from the state's legitimate gambling interests, filed legal action against the sites in August. Wingate ordered the seizure of 141 domain names by Kentucky and later set the November date for further forfeiture proceedings.
Saturday, November 15, 2008
UIGEA Regs Announced
Here's a story from the Wall Street Journal commenting on the new UIGEA regulations. Here's the part that catches my eye:
A fundamental flaw in the proposed regulations to enforce UIGEA is that they leave U.S. financial service companies to interpret ambiguous State and Federal gambling laws, which do not clearly differentiate between legal and illegal Internet gambling activities or transactions, according to a report issued by the Center for Regulatory Effectiveness.
A "flaw"? That's a bit of an understatement. Law professors have made tenure explicating the complex mix of state and federal laws that regulate gambling. Good luck figuring out national gaming law (on the fly no less) to our (remaining) financial institutions.
One good aspect of keeping online gambling illegal is that, for U.S. citizens at least, their business is driven underground to low-budget, short-lifetime offshore internet casinos. What's good about that? Well, Barney Frank's proposal to regulate (and thus legalize) internet gambling had attached to it a bill to ensure the taxation of casino winnings (by withholding taxes from gains). How strange. The purpose of Frank's regulation was to protect problem gamblers, those who lose lots of money at casinos. Well, if we add a federal withholding to the casino rake, we're just breeding more losing problem gamblers.
For a full text of the new regulations, click here.
One good aspect of keeping online gambling illegal is that, for U.S. citizens at least, their business is driven underground to low-budget, short-lifetime offshore internet casinos. What's good about that? Well, Barney Frank's proposal to regulate (and thus legalize) internet gambling had attached to it a bill to ensure the taxation of casino winnings (by withholding taxes from gains). How strange. The purpose of Frank's regulation was to protect problem gamblers, those who lose lots of money at casinos. Well, if we add a federal withholding to the casino rake, we're just breeding more losing problem gamblers.
For a full text of the new regulations, click here.
Subscribe to:
Posts (Atom)
Posts
