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Current through Dec. 1, 2016

A press release issued by North Dakota Representative James Kasper is reported in eGaming Review. North Dakota Bill Moves Closer to Legal US poker.  The text in the left hand column is the report of the press release.  My responses and observations are in the column on the right.

[RECENT FURTHER DEVELOPMENTS:  On March 8, 2005, the ND House approved HCR 3035, 50 to 44, to allow the people of ND to vote in a primary election in 2006 on an amendment to the state's constitution that would mandate the legislative adoption of an internet poker licensing bill.

The ND Senate Judiciary Committee held hearings beginning March 8, 2005  On March 18, 2005, that committee deadlocked, 3 to 3, on whether to recommend that the ND Senate vote for or against the bill.  An Associated Press story notes: "The Judiciary Committee did agree on a set of changes to the Internet poker measure, including more specific language on the attorney general's regulatory power. The amendments also require that the state collect at least $1 million in licensing fees before any poker site may operate.

On March 21, 2005, the ND Senate voted overwhelmingly, 44 against, 3 for, thus defeating this bill.  See AP Wire | 03/21/2005 | Senate defeats Internet poker measure ]

 

Egaming Review Article

gambling-law-us.com Comments

In a landmark move congressmen in North Dakota have passed a bill that may allow online poker operators to be licensed in the US for the first time.  The bill was passed by a vote of 49 for, 43 against, in the North Dakota House of Representatives.
The Internet Poker Bill, HB1509, would allow poker firms to locate servers in the state and offer their services to a global audience. The bill, as amended during the short time it was debated in the ND House, contains a definition of “live internet poker” and permits that game to be conducted by a “licensed internet live poker establishment.” 
The bill contains these two definitions:

"Internet live poker " means a card game played by players who are dealt cards by an online nonplayer dealer with the objective of each player betting the superiority of the player's own hand and winning the other players' bets by either making a bet no other player is willing to match or proving to hold the most valuable cards after the betting is over. The internet live poker games include Texas hold'em, Omaha high/low, Omaha high, draw, stud, low ball, any combination of these games, or any other similar poker game.

"Licensed internet live poker establishment " means any premises licensed by the attorney general pursuant to this chapter to conduct games of internet live poker.

Internet live poker authorized. Internet live poker games are authorized and may be operated by a licensed internet live poker establishment in accordance with this chapter. The attorney general shall license and regulate the playing of internet live poker at licensed internet live poker establishments in the state. The attorney general shall adopt rules for the licensure, regulation, and operation of internet live poker in the state.

"We only have one chance to be the first state in the nation that's going to regulate and license this industry," Jim Kasper, the sponsor of the Bill, said. “On June 14, 2001, Nevada [enacted its] Assembly Bill (A.B.) 466 and opened the door to a potential new frontier for gaming on the Internet.  This legislation enables the Nevada Gaming Commission to adopt regulations upon the advice and assistance of the Nevada Gaming Control Board. However, before such regulations may be promulgated, the Legislature clearly instructed the Commission to first determine, among other things, whether “interactive gaming” is legal.”   Internet Gambling in Nevada: Overview of Federal Law Affecting Assembly Bill 466, by Jeffrey R. Rodefer.

The licensing provisions in the Nevada law have never become effective.  The Nevada regulatory authorities have never become satisfied that U.S.-based internet real-money gaming was lawful.  The U.S. Department of Justice wrote to Nevada authorities expressing its view that the Nevada bill would violate several federal anti-gambling statutes. [A similar letter was sent to the attorney general of North Dakota after the ND House passed its bill and while the bill was being considered in the the ND Senate Judiciary Committee.]

Operators will be permitted to accept bets from the remaining 49 US states, although Kasper conceded they would be forced to honour any requests for states that had a legal objection. Under the bill passed by the ND House, North Dakota would not prohibit a licensed operator from accepting bets made by players in other states.  However, the laws of those other states do prohibit the operation of the betting website in their respective jurisdictions.  Indeed, the laws of all fifty states presently prohibit, directly or indirectly, the offering of this type of gambling in their respective states unless there is a law authorizing it.  There are presently no laws in any state that have authorized the operation of an Internet gambling business.  The operation of an interactive website that targets people in another state is subject to the laws of that state.  For an analysis see my article: Asserting Legal Jurisdiction Over Online Gambling Site.
However, he said he “did not believe” state laws would be applicable outside of their own borders. Representative Kasper is not well informed on this point.  For example, as I noted in the article cited above: “Personal jurisdiction was found lacking in Pound v. Airosol, Inc.  No. 02-2632-CM, recently decided in a Federal District Court in Kansas.  The court there found that the sellers of the products involved had only minimally interactive websites (e.g. they did not offer an online shopping cart through which any of the products could be ordered and paid for), limited contacts with residents of Kansas, and that there was no evidence any of the defendants targeted Kansas resident or that any of defendants products had ever in fact been sold to a Kansas resident.”

An online cardroom offering real-money poker games would certainly pass each of the tests the court found to be determinative of the ability to assert personal jurisdiction over a website operator.  Thus, an operator of a ND licensed online cardroom would be subject to being haled into court in any of the other 49 states for violations of the applicable anti-gambling statutes in those states as well as for recovery of gambling losses under state laws permitting such recoveries.  A number of state laws specifically authorize losers to recover all of their losses from illegal gambling.  Here is a link to a chart showing certain information about the reach and scope of those laws:  Gambling Loss Recovery Laws.

“This is one of the things we have to address in the later stages of the Bill,” Kasper said. The only legally sound solution would be for the North Dakota law to prohibit the acceptance of bets from players in any state where the operation of the website would be illegal.  If the bill were so amended and became law, that would effectively mean the ND licensed operator could only accept bets from players in North Dakota—not a highly attractive proposition to lure online cardrooms to relocate their computer servers to a physical location in North Dakota.  Undoubtedly a few operators would open a licensed site in North Dakota.  However, the revenue the state might earn would probably not be greater than that which might be earned by enacting a law authorizing the conduct of bricks and mortar cardrooms such as those operating in California, Montana, Washington and the like.
The state’s House of Representatives passed the bill with a slim majority and it now goes to the Senate for further debate. 49 yeas and 43 nays.  Hearings in the ND Senate are scheduled for March 15, 2005.  [The hearings were held on March 8, and that Committee reported the bill without a recommendation on March 18, 2005, after it split 3 to 3 on whether to recommend to the ND Senate a for or against vote.] Representative Kasper has issued a press release encouraging online cardroom operators and professional poker players to attend the hearings and lobby the Senators.
There are a number of shortfalls to North Dakota’s proposed regulation, including a requirement for all players to be licensed. The bill currently provides: “The program must include a license fee for each person that operates an internet live poker site and an annual licensing fee of ten dollars for each player who plays internet live poker at a site. A single annual licensing fee entitles a player to play internet live poker at any site licensed under this chapter.”  (Emphasis supplied.)

The penalty section of the bill provides: “Any individual playing internet live poker at any site licensed under this chapter…without first obtaining a license from the attorney general in that individual's name is guilty of a class B misdemeanor.”

The state plans on charging players a US$10 registration fee, and hopes to license as many as 50 million players. The licensing and penalty provisions of the bill are problematical, to say the least.  Assume I am a player from Colorado, where betting in this game would violate Colorado law.  Can the fact of my being “licensed” in North Dakota be used against me in a criminal prosecution?

Assume there are two or more ND licensed internet live poker establishments.  Are they required to share information as to who their customers are in view of the provision of the bill requiring only a single license for an individual to be able to play at all licensed poker establishments?

What inquiry will suffice to assure a licensed poker establishment that the person logging on to play is the licensed player?

A little more thought could well turn up a list of dozens of questions

But Kasper said it would be possible for operators to pay the licensing fee on behalf of their players. What inquiry will suffice to assure a licensed poker establishment that the person on whose behalf it is paying the licensing fee is in fact the person he represents himself to be?
The Bill also requires voters to approve an amendment to the state’s constitution in order for it to become law. I am not familiar with the process and timing required for a North Dakota constitutional amendment.  However, this is usually a costly and time-consuming process that frequently takes several years to come to pass.  [A companion bill has cleared the ND House which, if also passed in the ND Senate, would place an enabling amendment on the primary election ballot in 2006.]
Kasper said he estimated the bill would generate as much as U$40m in licensing revenue, and it has already been attracting industry interest. In view of the comments made above, I very much doubt that the bill will generate any substantial licensing revenue any time soon.
And Bruce Stubbs, marketing director of Paradise Poker, said he would theoretically be interested in locating in the state.“  Hopefully the tide is turning and we will begin to see other states follow North Dakota’s lead in recognizing poker as a game of skill,” Stubbs said. The recognition of poker as a “game of skill” would go a long way toward  legalizing the game under a number of different state laws.  However, no court that I am aware of has ever held poker to be a game of skill under the applicable legal predominance test.  That is, a game where the elements of skill, whatever they may be, predominate over the elements of chance, whatever they may be.  See my article Is Poker In the U.S. a Game of Skill?

It should also be noted that the bill as originally introduced contained a proposed amendment to the North Dakota anti-gambling statute that would have recognized licensed “live internet poker” games (not poker as such) as games of skill.  However, on recommendation of the ND Legislative Counsel Staff, that provision was stricken from the version of the bill that was actually passed by the ND House.