Gambling Law US
California Lottery v. Gambling
California: Lotteries versus Gambling
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Last Reviewed Oct. 1, 2016
There is an abiding misconception in the gambling community about the legal history of games like poker in the State of California. It is improperly assumed that poker is permitted because it is a game of skill, as opposed to a game of chance. Misstatements abound that California courts have so held.
The truth is that California law bans (i) most lotteries, (ii) a few specific games and (iii) all unlicensed “banked” or “percentage” games played with cards or dice. There is no mention of “games of skill” in the last two categories The “raked” games are all played for money where the host, or “house,” makes money on the game other than as a mere player competing on equal terms with the other players. All other games are legal.
Article IV, Legislative, Section 19 of the California Constitution  bans most private lotteries. The language of the Constitution shows that card games and other casino-style games are not viewed as lotteries. An expansive reading of the meaning of “lottery” to include card and various casino-style games is the law in many states, but California is not one of them.
The basic California gambling prohibitions are in Sections 319 (lotteries) and 330 (other gambling) of its Penal Code. Section 330 was originally enacted in 1872, and has been amended several times since. In 1885 the statute was amended to add “stud-horse poker” (which has now been removed) to the specific games prohibited. No definition of “stud-horse poker” was included in the statute. In an opinion in 1947 the attorney general of California said that “stud-horse” poker was the same as stud poker, and thus gambling at stud poker was barred by the statute. Attorney General Opinion No. 47-25 (March 11, 1947) Note that this Opinion did not address any aspect of the predominance of skill over chance, or vice versa.
The only California case I have found that squarely addresses the issue of skill versus chance in a card game is In re Allen, 59 Cal.2d 5, 377 P.2d 280, which held that the game of bridge is a game of skill, not a game of chance. Neither the California Constitution nor the California Penal Code was in question in this case.
The case involved “a petition for a writ of habeas corpus on behalf of a defendant who was arrested and charged with a violation of section 22 of article 2 of Los Angeles County Gambling Ordinance No. 461. The section provided: ‘A person shall not knowingly permit any game prohibited by this ordinance to be played, conducted, or dealt, in any house or other premises, owned by, rented by, or in the lawful possession of such person.’ Section 21 of article 2 provides, in part: ‘A person shall not deal, play, carry on, open, cause to be opened, or conduct any game of chance played with cards, dice, or other device for money, checks, credits, or other thing of value.’
The Court had no difficulty in finding bridge was widely recognized as predominantly a game of skill. The Court said: “The term ‘game of chance’ has an accepted meaning established by numerous adjudications. Although different language is used in some of the cases in defining the term, the definitions are substantially the same…. It is the character of the game rather than a particular player's skill or lack of it that determines whether the game is one of chance or skill. The test is not whether the game contains an element of chance or an element of skill but which of them is the dominating factor in determining the result of the game. Id at 6. 
Tibbetts v. Van de Kamp, 271 Cal.Rptr. 792, 222 Cal.App.3d 389 (1st Dist. Ct. Appeal, 1990) held that Texas Hold’em was not a stud poker game and therefore, under Section 330, could be played at the Oaks, a licensed cardroom. 
"A game is not to be regarded as one of skill merely because that element enters into the result in some degree, or as one of chance solely because chance is a factor in producing the result. The test of the character of a game or scheme as one of chance or skill is, which of these factors is dominant in determining the result?” People v. Settles, 29 Ca App Supp 2d 781, 78 P 2d 274 (Appellate Department, Superior Court, County of Los Angeles, 1938.)
In Bell Gardens Bicycle Club v. Dept. of Justice, 42 Cal.Rptr.2d 730 36 Cal.App.4th 717 (Court of Appeal, Second District, Division 7, California, July 11, 1995.Rehearing Denied Aug. 1, 1995. Review Denied Oct. 26, 1995) the issue was the legality of “jackpot” poker. In 1989 the California attorney general notified licensed cardrooms, which were offering jackpots, of his opinion that jackpot poker was unlawful because it violated California constitutional and Penal Code proscriptions against lotteries. Various state officials sued a number of the licensed cardrooms seeking to have the jackpot declared illegal.
In “jackpot” poker the “house” withholds money from pots in lawful poker games to fund the “jackpot,” which is won and then split among several players in a game when a specified rare hand is beaten by a better rare hand.
The case finally reached the California Court of Appeals in 1995. The appellate court held that the jackpot feature is an illegal lottery under Penal Code section 319 given the predominance of the element of chance in winning a jackpot. The Court distinguished this from the legal game of poker under section 330. The analysis of skill versus chance in this case went to the question of whether the jackpot feature could avoid the status of being held to be a lottery, not to whether the game of poker itself is legal or illegal on the basis of skill predominating over chance.
 Article IV, Legislative SEC. 19.
(a) The Legislature has no power to authorize lotteries, and shall prohibit the sale of lottery tickets in the State.
(b) The Legislature may provide for the regulation of horse races and horse race meetings and wagering on the results.
(c) Notwithstanding subdivision (a), the Legislature by statute may authorize cities and counties to provide for bingo games, but only for charitable purposes.
(d) Notwithstanding subdivision (a), there is authorized the establishment of a California State Lottery.
(e) The Legislature has no power to authorize, and shall prohibit, casinos of the type currently operating in Nevada and New Jersey.
(f) Notwithstanding subdivisions (a) and (e), and any other provision of state law, the Governor is authorized to negotiate and conclude compacts, subject to ratification by the Legislature, for the operation of slot machines and for the conduct of lottery games and banking and percentage card games by federally recognized Indian tribes on Indian lands in California in accordance with federal law.
Accordingly, slot machines, lottery games, and banking and percentage card games are hereby permitted to be conducted and operated on tribal lands subject to those compacts.
(f) Notwithstanding subdivision (a), the Legislature may authorize private, nonprofit, eligible organizations, as defined by the Legislature, to conduct raffles as a funding mechanism to provide support for their own or another private, nonprofit, eligible organization's beneficial and charitable works, provided that (1) at least 90 percent of the gross receipts from the raffle go directly to beneficial or charitable purposes in California, and (2) any person who receives compensation in connection with the operation of a raffle is an employee of the private nonprofit organization that is conducting the raffle. The Legislature, two-thirds of the membership of each house concurring, may amend the percentage of gross receipts required by this subdivision to be dedicated to beneficial or charitable purposes by means of a statute that is signed by the Governor.
 Penal Code Sec. 319. A lottery is any scheme for the disposal or distribution of property by chance, among persons who have paid or promised to pay any valuable consideration for the chance of obtaining such property or a portion of it, or for any share or any interest in such property, upon any agreement, understanding, or expectation that it is to be distributed or disposed of by lot or chance, whether called a lottery, raffle, or gift enterprise, or by whatever name the same may be known.
 In similar words, another Court said: “A game is not to be regarded as one of skill merely because that element enters into the result in some degree, or as one of chance solely because chance is a factor in producing the result. The test of the character of a game or scheme as one of chance or skill is, which of these factors is dominant in determining the result?” People v. Settles, 29 Ca App Supp 2d 781, 78 P 2d 274 (Appellate Department, Superior Court, County of Los Angeles, 1938.)
 The Court said: “Section 330 thus proscribes certain specifically identified card and gambling games, as well as "any banking or percentage game." 4 (A banking game is one in which the " 'house' " or " 'bank' " is the principal participant in the game, taking on all players, paying all winners and collecting from all losers. A percentage game is one in which the " 'house' " does not directly participate in the game, but collects a percentage from it which may be computed from the amount of bets made, winnings collected, or the amount of money changing hands. (Sullivan v. Fox (1987) 189 Cal.App.3d 673, 678-679, 235 Cal.Rptr. 5.)) Thus, a card game played for money not specifically listed under section 330 and not played as a banking or percentage game is not prohibited. (See In re Hubbard (1964) 62 Cal.2d 119, 126, 41 Cal.Rptr. 393, 396 P.2d 809; Monterey Club v. Superior Court (1941) 48 Cal.App.2d 131, 148, 119 P.2d 349; 9 Ops.Cal.Atty.Gen., op. cit. supra, at p. 109.) Id at 794
 In this case the game of Lowball was involved. In Lowball a “wheel” (A,2,3,4,5) is the best possible hand and a hand of A,2,3,4,6 is second best. The jackpot is awarded when a player has the second best hand and is beaten by someone holding the best possible hand. Experts, including Mike Caro, testified that the odds of winning a jackpot were one in 23,692.
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