Markus Kypreos
An update on gambling laws, poker tournaments (both private and charity), and dog-fighting
While every state bordering Texas, as well as Mexico, has casinos within 50 miles of the Texas border, such establishments are illegal here. But district and county attorney’s offices in Texas aren’t exactly light on cases when it comes to gambling. Criminals continue to attempt more intricate schemes, including the use of technology, to protect themselves and (more importantly) to elude prohibitions in the Penal Code. Here is an overview of what is happening in the gambling arena.
8-Liners, video lottery terminals (VLTs), and slot machines
They may not be as sexy as underground poker rooms, but these cases are much more prevalent around the state. There has only been one Texas Court of Appeals case involving gambling in the last two years, and it concerned 8-liners. In Pardue v. State,1 J.J’s Game Room in Lacy Lakeview (near Waco) operated 8-liners, but instead of paying out cash to the players, it distributed gift cards to various stores, such as Wal-Mart, as rewards (a very common practice to circumvent the Penal Code). The owner of J.J.’s argued that under Texas Penal Code §47.02, gift card payouts qualify for the “fuzzy animal” defense to prosecution applicable to “noncash merchandise prizes, toys, or novelties that have a wholesale value available from a single play of the game or device of not more than 10 times the amount charged to play the game or device once or five dollars, whichever the lesser amount.” The appeals court rejected her argument, and her conviction was affirmed.
Texas Penal Code §47.01(4) provides a hypertechnical definition of “gambling device” that has been the subject of litigation like this for over a decade. The key to the problem can be found in the exclusions from the definition, which include “any electronic, electromechanical, or mechanical contrivance designed, made, and adapted solely for bona fide amusement purposes if the contrivance rewards the player exclusively with noncash merchandise prizes, toys, or novelties, or a representation of value redeemable for those items, that have a wholesale value available from a single play of the game or device of not more than 10 times the amount charged to play the game or device once or $5, whichever is less.” Herein lies the difference between, say, illegal 8-liner operations and a video arcade that hands out candy and coffee mugs in exchange for tickets.
There appears to be a belief among game room operators that as long as they don’t pay out cash, their operation is perfectly legal—or at least they won’t raise suspicions with local authorities. This argument has been struck down several times, most clearly by the Texas Supreme Court in 2003, holding that “devices, known as ‘8-liners,’ that dispense tickets redeemable for cash, even if used only for additional play, or for gift certificates redeemable at local retailers do not, as a matter of law, meet the gambling device exclusion under §47.01(4)(B).2 Pardue, One Super Cherry, and Hardy are three good cases to review when presented with an 8-liner case involving a game room.
It’s also important to note that the McLennan County Criminal District Attorney’s Office charged the owner of J.J.’s with engaging in organized criminal activity as well, arguing that the employees, in combination with the owner, committed or conspired to commit the underlying offense of gambling promotion by handing out gift cards and earning bonuses for the performance of the business. The employees testified that they did not believe their activities were illegal and/or that the law was unclear. The court held that despite receiving instructions from an employer, an employee can still agree to collaborate to commit criminal activities.3 The lesson here is that should your office ever be presented with an 8-liner case, always check to see if the owner/operator had at least two other employees who committed an overt act to satisfy the organized criminal activity statute.4
Eight-liner manufacturers and electronic gaming companies are pushing the limit in Texas. (See Potter County Attorney Scott Brumley’s upcoming nuisance case against Aces Wired, a manufacturer and operator of electronic 8-liners). While the Texas Courts of Appeals and the Texas Attorney General seem to be in agreement on why these non-cash payouts are illegal, hundreds of thousands of dollars are spent on lobbying and personal meetings with state and county officials to convince them otherwise. Though operators of gaming rooms are using creative payouts and unconventional prizes to avoid prosecution under a very specific gambling statute, now more than ever, prosecutors will need to use just as much ingenuity in applying the Penal Code to the ever-changing technologies and schemes of these operators. The more 8-liner cases that are affirmed by the Texas courts of appeal concerning non-cash and unconventional payouts, the easier it will be for prosecutors to overcome defendants’ “gift card” arguments in the future.
Dog fighting
As Michael Vick brought national attention to the underground sport of dog fighting, it’s important to remember the available avenues of prosecution when presented with a dog fighting case. The obvious criminal offense relating to dog fighting falls under Texas Penal Code §42.10 (dog fighting). The punishments for this crime were revamped in the last legislative session. Specifically, 1) attending a dogfight as a spectator or 2) owning or training a dog with the intent that the dog be used in a dog fight changed from Class C misdemeanors to Class A offenses. Causing a dog to fight with another dog, participating in the earning of or operating a facility used for dog fighting, or using or permitting another to use any real estate (building, room, tent, arena, or other property) for a dog fight are now state jail felonies.
But don’t forget that the motivation behind dog fighting is money. Organizers of these fights often serve as the “casino,” taking wagers on the dogs and violating §47.02 by keeping a gambling place (§47.04) and committing the offense of gambling promotion (§47.03). Also, as described in the 8-liner analysis, should the operator of a dog fighting ring employ at least two others or have partners in organizing the fights, you may be able to prosecute them under the organized criminal activity statute (§71.02).
Poker
It would seem the poker craze has somewhat died down. Attendance at the 2007 World Series of Poker Main Event dropped by 27 percent from 2006.5 A large part of that decline is believed to be a result of the 2006 federal Unlawful Internet Gaming Enforcement Act (UIGEA) which prohibits the transfer of funds from a financial institution to an Internet gambling site. Many Internet gambling sites offered entry into the World Series of Poker as prizes; with the enforcement of the UIGEA, these sites saw a decline in online participation, as well as an inability on their part to offer as many entries.
Another consequence of the UIGEA is that it has forced poker players to seek other venues, often in private card rooms or clubs. On its face, a private card game in someone’s home does not violate the Texas Penal Code, as long as the participants follow the exceptions listed under §47.02(b)(1-3), namely, that the gambling is in a private place, that no person received any economic benefit other than personal winnings, and except for the advantage of skill or luck, the risks of losing and the chances of winning were the same for all participants.
If you’re a prosecutor in Houston or Dallas or the surrounding areas, you’ve probably experienced cases with SWAT raids of underground poker rooms. Those games in “back rooms” of public businesses are the easiest to prosecute because the defendant has clearly violated the private place exception; putting a bouncer in front of a curtain and monitoring who goes in and out doesn’t make the establishment or room private when the business itself is open to the public.6 Poker games in private residences are a little more difficult. It’s conceivable that million-dollar hands could legally be played in the living room of someone’s house, but such a scenario is unlikely. The higher the stakes, the more people want a piece of the action, whether it’s for organizing the game, hosting, or promoting.
Poker in restaurants and bars
The Texas Attorney General has stated that as long as participants do not risk money or anything of value to try to win any prize, the game is not illegal under §47.02, which is how bars and restaurants hold legal tournaments.7 Texas Penal Code §47.02(a)(3) states that a person commits an offense if he plays and bets for money or other thing of value at any game played with cards, dice, balls, or any other gambling device.
On more than one occasion, I have been confronted, while playing poker, with the question of what purpose law enforcement serves when they crack down on high-stakes poker games. Whether gambling should be legalized in Texas is a separate argument from why gambling should be regulated. Regulation of gambling can be best supported by the necessity of the recent number of card room raids throughout Texas. Converting a home into a card room and inviting strangers to play is asking for trouble, especially when large amounts of money are involved. Further, those who operate the card rooms frequently charge or take a percentage of each hand as a fee for their hospitality, a clear violation of the §47.02(b) exception. A quick search of news stories relating to crime in poker rooms in Texas over the last few years shows that assaults, murders, and robberies related to the games themselves are all too common occurrences among these underground poker rooms.8 Consider this a counterargument for the defendant who argues that the police are wasting time and taxpayer money by raiding their home, or 8-liner game rooms for that matter, to break up a friendly game that happens to have tens or hundreds of thousands of dollars lying around in one place. Odds are the next time a person breaks down the defendant’s door and is armed with a shotgun, he’ll wish he was just being arrested.
Charity poker
The Charitable Raffling Enabling Act in Chapter 2002 of the Texas Occupations Code will rarely, if ever, apply to Texas Hold ‘Em fundraisers. Often, the business or association holding the event does not meet the requirements of a qualified organization (non-profits, fire departments, emergency medical services, and education). Even if the organization meets the stipulated requirements, the charity exception requires that a raffle be conducted to award prizes. Because a raffle is defined as “the award of one or more prizes by chance at a single occasion among a single pool or group of persons who have paid or promoted a thing of value for a ticket that represents a chance to win a prize,”9 players are prohibited from receiving prizes based on how far they advance or what place they finish in a poker tournament. Additionally, the code prohibits cash as a prize. The Attorney General has also made it clear that even nonprofit organizations that sponsor a “poker run” violate gambling statutes.10 Therefore, unless the raffle results are completely separate from the outcome of the poker tournament—begging the question, why play at all?—charities and other groups should not rely on Texas Hold ‘Em tournaments to raise funds.
Online gambling
As mentioned above, the UIGEA has significantly reduced the number of online casinos and available forums to gamble. Putting the UIEGA aside, Texas law still prohibits online wagering for a variety of reasons. First, sports wagering is clearly illegal under §47.02(a)(1), making a bet on the partial or final result of a game, contest, or the performance of a participant in a game or contest illegal. In addition, all sportsbooks charge a certain percentage for every wager made (commonly known as vig, juice, the take, the rake, commission, etc.). When the sportsbook takes that percentage of the wager, it receives an economic benefit, thus negating the defense under §47.02(b)(2).
A quick note on office pools is appropriate here because the same analysis applies: Technically, all office pools are illegal in Texas because you’re wagering on the final result of a game or contest, a clear violation of §47.02(a)(1). The real issue is whether the exception applies, specifically whether your office is a private place. Office pools that don’t involve the outcome of a game or contest are usually not illegal under the statute. For instance, wagering on how many smoke breaks a coworker in your office will take in the next four hours is perfectly legal and at times, entertaining. However, unless you shut your doors to the public in March for college basketball, April for the Masters, May when TDCAA Director of Operations John Brown races in the Congress Avenue Mile, June for the U.S. Open, fall for college football, and January for the Super Bowl, you will almost certainly run afoul of Texas gambling law.
When placing a bet online, a defendant may argue that the bet itself is placed in the confines of his home—a private place—and thus the exceptions under §47.02(b)(1-3) apply. Attorney General Opinion No. DM-344 addresses this argument directly and states:
“Just as a private residence would not be a ‘private place’ for purposes of the defense if the public has access to gambling there, neither would it be consistent with the defense here if, for example, anyone who knew the proper ‘telephone number’ and had a computer with a modem could join the games.”
The opinion also notes that the physical presence of bettors at a game is not required. Most online poker sites operate in a similar way. Players log in and join any table they wish. Tables are open to the public as long as participants have registered and deposited money to gamble. Thus, using the analysis above, the privacy defense under §47.02 would not apply, and players violate the gambling statute by participating in online poker games.
Perhaps in an attempt to circumvent this law, most sites offer the opportunity to establish private rooms in which the creator can control who may participate in a game. While this act might be sufficient to establish privacy under §47.02(b) (1), it also defeats the purpose for many poker players simply looking for a game, those trying to make money in tournaments, or those trying improve their skill in bigger games. Private rooms, as well as those open to the public, also usually cost each entrant a percentage of each hand raked or an entry fee, thus creating an economic benefit other than personal winnings and violating §47.02(b)(2).
Conclusion
At the end of the day, gambling cases, while exciting, are not as easy to prosecute as they may initially seem. Prosecutors must overcome defendants’ technology and creativity using a somewhat archaic and, at times, unhelpful Penal Code statute. Further, juries may be less than enthusiastic about convicting an operator of a game room or card room when, in their minds, no one was injured and no victims were involved. Of course, these operators are violating the law and making thousands, if not hundreds of thousands, of dollars off of their own illegal enterprise. It’s only a matter of time before this criminal activity invites myriad related crimes such as assaults, robberies, and murders, none of which are “victimless.”
Endnotes
1 2008 Tex. App. LEXIS 2421 (Tex.App.—Texarkana, 2008).
2 State v. One Super Cherry Master 8-Liner Machine, 102 S.W.3d 132 (Tex. 2003)(citing Hardy v. State, 102 S.W.3d 123 (Tex. 2003)).
3 Pardue at 26.
4 Tex. Penal Code §71.02.
5 www.worldseriesofpoker.com.
6 See A.G. Opinion No. DM-112 explaining that “private place” as defined by §47.01(7) is a place “to which the public does not have access.” See also A.G. Opinion No. DM-344 (1995) (holding that whether a place is private for such purposes has been determined by the scope of access by others. Citing Comer v. State, 10 S.W. 106 (1889) (private room at inn); Heath v. State, 276 S.W.2d 534 (Tex. Crim. App. 1955)). See also A.G. Opinion No. H-489 (1975) (whether the quarters of clubs or other organizations are “private places” for purposes of the gambling laws depends on whether the public in fact does not have access).
7 A.G. Opinion No. GA-0385 (2005).
8 Twenty-two trips to Las Vegas and counting, and I’ve never been assaulted, shot at, or robbed in a casino poker room … coincidence?
9 Tex. Occupations Code §2002.002(1).
10 A.G. Opinion No. GA-0385 (2005).