I find that I'm having another bout of insomnia (a more frequent problem of late), so I might as well write something.
In Oliver Stone's 1991 movie "JFK," Joe Pesci (as David Ferrie) famously says, "It's a mystery! It's a mystery wrapped in a riddle inside an enigma!"*
Apparently that's approximately what Shamus is feeling about this week's announcement of the guilty plea and staggering $300 million fine for Party Poker founder Anurag Dikshit. If you haven't already heard the basic facts from any of the many poker-related sites discussing them, go read the Hard-Boiled Poker post about it to get up to speed.
I share his sense of perplexity. Nothing about it makes sense to me. Here are some of the questions that keep running through my mind, in no particular order:
If Dikshit's attorneys convinced him that his offering of various onling gaming opportunities to U.S. residents was in violation of the Wire Act, why didn't they stake out this position before launching the service here? Surely Dikshit and his fellow investors did due diligence on questions as basic as whether the business they were commencing would land them all in federal prison. Didn't they?
On what basis does the Department of Justice--and, apparenlty Dikshit and his counsel--conclude that offering casino games over the Internet violates the Wire Act? As I explained here, that statute explicitly relates exclusively to "bets or wagers on any sporting event or contest." Even if you grant that what was originally intended to prohibit telephone communication of bets can be extended, without additional congressional action, to the Internet (and it's probably reasonable to guess that courts would make such extension), I don't know how you put online poker, blackjack, roulette, etc., into this category. Sure, I'm aware that the DOJ has steadfastly maintained, when asked, that the law relates to all online gambling, but I've never seen a reasoned, detailed explanation from them for how they get to that interpretation. I have a hard time believing that they would succeed in persuading a court of that broad reading, especially in light of the principle of lenity or strict construction, which mandates that when a criminal law is ambiguous as to whether it prohibits any specific defendant's actions, the doubt must be resolved in favor of the defendant and against the government.
The only court case to date on the question was a slam dunk against the DOJ's position. You can read the appellate decision here. The pertinent sentence is this: "Because the Wire Act does not prohibit non-sports internet gambling, any debts incurred in connection with such gambling are not illegal." This decision is not officially binding on courts outside the federal fifth circuit (south central states), but typically courts in the rest of the country would consider it "persuasive authority," and would have to have strong reason to come to a contrary reading.
Note that whether poker is a game subject to chance--predominantly, or slightly, or otherwise--is not a relevant question here. For purposes of the Wire Act, there is no legal distinction between poker and any other casino game. The mix of luck and skill does not matter, nor does the fact that in poker one is pitted against other players rather than against the house. It doesn't even matter whether poker or whatever other game is involved can or should be considered "gambling." All that matters for the Wire Act is whether the bets in question were placed on a "sporting event or contest."
At first glance, one might think that poker (and, for that matter, blackjack and other casino games) is a "contest" and therefore falls under the statute. But a common rule of interpretation in law says that when a specific term is grouped with and followed by what might otherwise be seen as a general word or term, the restrictive/descriptive nature of the former is deemed to be applied also to the latter. Here's Widipedia's brief explanation:
It is presumed that a statute will be interpreted so as to be internally
consistent. A particular section of the statute shall not be divorced from the
rest of the act. The ejusdem generis (Latin for "of the same kind") rule applies
to resolve the problem of giving meaning to groups of words where one of the
words is ambiguous or inherently unclear. The rule results that where "general
words follow enumerations of particular classes or persons or things, the
general words shall be construed as applicable only to persons or things of the
same general nature or kind as those enumerated." 49 F. Supp. 846, 859. Thus, in
a statute forbidding the concealment on one's person of "pistols, revolvers,
derringers, or other dangerous weapons," the term "dangerous weapons" may be
construed to comprehend only dangerous weapons of the kind enumerated, i.e.,
firearms, or perhaps more narrowly still, handguns. Here, the term "dangerous
weapons" must be given a meaning of the "same kind" as the word of established
In other words, the Wire Act would be read as if it said "sporting event or sporting contest." It would not be reasonable to believe that Congress had in mind poker or blackjack when it used the phrase "sporting event or contest," and if it was not within the intent of the legislature, then it is not properly within the scope of the statute. (It is granted that determining the intent of any legislative act is fraught with problems, but in this particular case it's hard to make a plausible argument that casino games were intended to be included, when it would have been so easy to add a few words explicitly to include them had Congress so desired.)
As far as I know, none of Mr. Dikshit's businesses involved sports betting. Even if they did, that isn't the only target of the criminal complaint, because apparently the guilty plea specifically mentions the offering of poker as one of the offenses confessed to.
What, if anything, is going on with the other Party Poker owners? Are they all being targeted, with Dikshit the first one to make a deal? Or is he the only one against whom official action has been taken to date?
I don't feel like trying to dissect the federal sentencing guidelines, but I'd sure be interested in opinions from anybody with experience in such matters on this question: Suppose there had been a trial and a verdict of guilty. For a presumably first-time offender, non-violent crime, with a max of 2 years in the statute, what would be the reasonable expected range of actual prison time he might have faced? I mean, if he'd be looking at something like 30 days, heck, I think I'd take that and keep the $300 million! (Yes, I realize that he might have gotten the prison time and the fine--but I'm just sayin'.)
OK, here's my biggest question. Why didn't Dikshit and his partners, along with the owners of PokerStars, Full Tilt, and all the others, long ago file a declaratory judgment action? I started asking this a few years ago when the DOJ first sent out that notorious letter to media outlets warning them that if they accepted ads from sites that offer poker or other online gaming they might be in violation of the Wire Act themselves, via a conspiracy or aiding/abetting theory. (Offhand I think that was 2004, but don't quote me.) That letter caused a widespread and nearly immediate change in policy of many broadcast and cable stations. In turn, it prompted the poker sites to start advertising the .net sites instead of the .com sites.
When one is facing a credible threat of prosecution, but one believes that one's actions are not illegal, one can go to court in a civil case and ask the court to rule on whether the actions are lawful. If one wins, it makes subsequent prosecution practically impossible. Of course, the down side is that if one loses, the government has a much easier case against you. But given the wording of the law in question, the online sites had a very high chance of prevailing, and winning would have meant that they could operate in the U.S. free and clear, with no fear of prosecution (as long as they weren't taking sports bets, of course, which means that sites like Bodog would still be in jeopardy).
Once the DOJ started rattling sabers with that media letter, the gaming sites had an obvious legitimate fear that they were in the prosecutors' crosshairs, and would therefore have had legal standing to pursue a declaratory judgment action.
I renew that question now. The Dikshit case provides even more tangible and compelling evidence that similarly situated site owners and operators need and deserve a court ruling on whether their activities do, in fact, violate the Wire Act. The government often responds to such cases by trying to prevent the court from answering the question through challening the plaintiff's standing; they say, often disingenuously, that they are not pursuing prosecution, though naturally they won't ever commit in writing to not pursuing it. The plaintiff has to be able to show that there is a real risk of prosecution, because otherwise the court would be handing down nothing more than an "advisory opinion," which it is forbidden to do by the Constitution's requirement that courts handle only actual "cases and controversies." The Party Poker prosecution, though, makes it effectively impossible for the DOJ now to pretend that it is not interested in going after the online gaming operators. I think it would be a breeze to establish legal standing now, even if it might have been somewhat tenuous before.
Not only would they be likely to win such a case, but the cost of bringing it would be much, much less than $300 million, even if it involved a circuit court appeal and Supreme Court appeal (the former is likely to be brought by whichever side loses; the latter is a lot less likely). I cannot understand why nobody has filed a case to answer the question before indictments get handed down and one's actual liberty is put on the line. I think if I were one of the site owners, I would have insisted that my lawyers do it as soon as the DOJ started to show interest in finding targets. I would much rather have the question addressed on my own terms in a civil case than on the prosecutor's terms, with prison time hanging in the balance.
One fairly wild theory is that Party Poker is acting to try to make it so that its competitors cannot operate in the United States, thus leveling the playing field. That strikes me as nutty. If that were the goal, a declaratory judgment action would be a lot easier. The result of the case would either be that it would be clearly OK for Party Poker to re-enter the U.S. market, or put the operators of Full Tilt et al. on clear notice that they were in deep trouble if they stayed in it. Either way, it would level the playing field for a whole lot less money and trouble than copping to a felony.
Shamus asked his questions and concluded with "You tell me." Sorry, my friend, I cannot. All I can do is join you in puzzlement, and add my questions to yours. Nothing about the guilty plea makes sense to me.
To put it more crudely, I can't explain Dikshit.
*My vast research--meaning about two minutes on Google--tells me that this phrase is not original to that movie, as I have long thought. It apparently dates back to Winston Churchill in 1939. See here.