The federal government, and to a lesser extent Texas, expends a vast amount of energy and resources prosecuting individuals associated with gambling crimes. This includes bookmakers and companies that assist in the placement of bets and collection of gambling debts.
Pop culture has drawn a distinction regarding gambling that has become an urban legend. That is, there is a perception that somehow poker, as a game, does not necessarily constitute gambling because it is a game of skill rather than chance. The following two examples set the stage.
Matt Damon’s character asks, “Why do you think the same five guys make it to the final table in the world series of poker?” What, are they the luckiest guys in Las Vegas? It’s a skill game, Jo.”
Jessica Chastain who plays Molly Bloom states, “Poker is a game of skill, not a game of chance.”
While the contrast between skill and chance makes for great theater, it is not necessarily recognized in courtrooms. Federal law has consistently applied 18 USC 1955, a statute outlawing the operation of a gambling business, to poker. One case out of New York, United States v. Dicristina, contains a long list of such cases. In fact, in Dicristina the Second Circuit Court of Appeals specifically rejected the distinction between games that are predominantly games of chance and games that involve some measure of skill.
Put simply, the legal question is not whether an activity is predominantly based on chance versus skill. Rather, federal law applies the definition of gambling to games that contain some measure of chance. An examination of Texas state law and federal law illustrate the fallacy of the urban legend shielding poker from criminalization based upon its inclusion of elements of skill.
One of the most common federal statutes used to prosecute interstate gambling crimes is found in 18 USC 1084 which criminalizes using any wire medium, such as phone lines or the internet, to transmit wagering information. This statute also makes the proceeds associated with gambling subject to asset forfeiture.
For example, if a bookmaker uses the internet to place a bet online on behalf of customers and does so from a state where such a wager is illegal, then that person transmitted wagering information is in violation of federal law. Many online poker sites have been targeted for such prosecutions.
In terms of gambling prohibitions, federal law is largely based upon state law. That is, federal law prohibits activity that is already prohibited in a given state. 18 USC 1955 prohibits a person from conducting, managing, supervising, directing, or owning “all or part” of an illegal gambling business. Thus, the operative question becomes what constitutes an “illegal gambling business?” Under 1955(b)(1)(i), such a business is one which operates in “violation of the law of a state or political subdivision in which it is conducted” and involves 5 or more persons who conduct or finance such business and has a gross revenue in excess of $2,000 in a single day. In other words, federal law prohibits gambling activity at a higher threshold than most state laws.
Violation of 18 USC 1955 carries a penalty of up to 5 years imprisonment and a fine up to twice the pecuniary gain of the enterprise.
While the statutory sentencing boundaries include sentences between 0-5 years, the United States Guidelines envision sentences shorter than five years. Even though the Guidelines are no longer mandatory, they are consulted by judges in every case. Violations of this statute involve a base offense level of 12 which envisions anywhere from a 10-month sentence to a 37-month sentence, depending upon the criminal history of the particular person charged.
Under the same section, any property used in violation of Section 1955 may be forfeited to the United States. This would include all money involved in bets as well.
These statutes often intersect the ever-growing landscape of the internet. In the last several years, the U.S. Government has prosecuted people from all over the country for the operation of an illegal gambling business. These prosecutions often include accusations that bookmakers and other participants engaged in acts of money laundering under 18 USC 1956 and 1957.
It is not uncommon for cases to be based upon people taking bets and relaying such bets to offshore gambling websites. These sites can track bets, wins, losses, lists of persons owed and persons owing.
Even individuals who take bets and do not place money in the sites may still be prosecuted. People who use the sites to simply serve as a ledger have been prosecuted.
Also controversial is the government’s use of 1955 to pursue per head players. This is a term that describes a compensation arrangement whereby bookmakers pay for a service per month per player to set betting lines and tracking wins and losses and amounts of such.
Ultimately, state and federal authorities still retain the power to prosecute a fair amount of gambling activity.
People facing charges under 1955, 1956, or 1957 need to take immediate action to counteract the government’s case. It is important to differentiate money and accounts involved with any betting activity and those that do not. It is also important to consult tax payment history and take other steps to evaluate whether the government can establish that more than five individuals were actually involved in the alleged enterprise. It is also important to gather and examine records pertaining to assets and accounts that may have received deposits from sources that are not traditional or look like gambling activity.
These steps are critical in any challenge to an accusation that a person engaged in the operation of an illegal gambling business. It’s also important to begin a dialogue with government prosecutors and agents to examine case discovery. It is also necessary to have a working understanding of federal law, federal procedure, and advocacy within federal courts.
In step with federal law under Dicristina, the State of Texas defines the term “bet” as “an agreement to win or lose something of value solely or partially by chance.”
The definitions under Texas Penal Code 47.01 describe gambling in Texas:
47.01(2)(B) defines bookmaking as acts where a person (or entity) receives and records or forwards offers to bet totaling more than $1,000 in a period of 24 hours.
47.01(2)(C) defines bookmaking as a scheme by three or more persons to receive, record, or forward a bet or an offer to bet.
47.01(3) defines a gambling place as “any real estate, building, room, tent, vehicle, boat, or other property whatsoever, one of the uses of which is the making or settling of bets, bookmaking, or the conducting of a lottery or the playing of gambling devices.
These definitions become important in both Texas and federal courts because federal law largely bases its rules upon state standards for gambling activity.
In Texas, a person commits the offense of gambling if the person makes a bet on the partial or final result of a game or contest or on the performance of a participant in a game or contest. A bet is an agreement to win or lose something of value solely or partially by chance. It specifically excludes an offer or a prize or award to the actual contestants in a bona fide contest for the determination of skill, speed, strength, or endurance or to the owners of animals, vehicles, watercraft, or aircraft entered in a contest. It is a defense to prosecution if no person received any economic benefit other than personal winnings. Under Texas Penal Code sections 47.01 through 47.06, the state also criminalizes gambling by disallowing any bookmaker to record or forward more than five bets in 24 hours. Operating establishments that qualify as gambling places or possessing gambling devices is also illegal.
Penal Code Section 47.02 outlaws gambling in the state of Texas with very limited exceptions. Specifically, it is illegal to make a bet on a sporting event or “game played with cards.” The only exceptions to this statute exist where a bettor places a bet in a private place or pursuant to a raffle, a bingo game/contest, or a raffle.
A violation of Texas Penal Code 47.02 is a Class C Misdemeanor which carries a penalty of a fine up to $500.
Penal Code 47.03 creates an offense for gambling romotion. That is, it is an offense to knowingly “operate or participate in the earnings of a gambling place,” “engage in bookmaking,” or even “become a custodian of anything of value” related to a bet.
Violation of Texas Penal Code 47.03 is a Class A Misdemeanor which carries a penalty of up to a year in jail and a fine up to $4,000.
Penal Code Section 47.04 creates an offense for keeping a gambling place. That is, it is an offense to use or permit another to use any real estate, building, room, or other property whatsoever as a gambling place. There is a limited exception for persons who use a private place and receive no economic benefit other than personal winnings.
In Texas, it is illegal to operate a casino. Keeping a place of gambling, communicating gambling information, or possessing a gambling device with intent to further gambling (such as renting slot machines for parties) are all illegal actions that are punishable by the Texas law. There is an exception for Indian reservations, where casino-style facilities are allowed in some locations.
Violation of Texas Penal Code 47.04 is a Class A Misdemeanor which carries a penalty of up to a year in jail and a fine up to $4,000.
In both the federal and Texas systems, these offenses can support the forfeiture of any proceeds or equipment linked to gambling crimes. Further, crimes associated with gambling, such as money laundering and wire fraud, often accompany internet gambling cases.
Under Article 18.18(a) and (b) of the TCCP, all gambling proceeds and equipment are subject to forfeiture to the State of Texas. This is the case regardless of whether a criminal prosecution takes place for the underlying offenses.
On the other hand, a Texas resident cannot be penalized for social gambling. This is considered gambling in games such as bingo or in raffles that are sponsored by charitable organizations. Also, bona fide contests of skill where money is involved are also allowed in the state.
There are also racetrack licenses for greyhound racing in the state. Those who participate in simulcast races and on-track pari-mutuel wagering are not breaking the law and will not be penalized for their actions. Also, licensed horse racing is permitted in the state of Texas and residents are permitted to bet on simulcast races and on-track pari-mutuel wagering.
It is a crime to steal, forge, or alter tickets for the lottery, and to sell tickets at a greater price than originally listed. Also, it is considered fraud to influence the selection of the lottery winner. Individuals who attempt to do this can be penalized. In addition to this, in Texas it is illegal to sell lottery tickets to minors or to make lottery ticket sales over the phone.
Not surprisingly, gambling cases often begin the same way most white collar crimes begin. That is, sometimes people are named as co-conspirators by targets of already existing federal investigations. Another common method federal agents use to locate targets is through the massive Currency Transaction Reporting Requirement apparatus that exists. Financial institutions, including casinos, are required to report various cash transactions. More important than such transaction reports are Suspicious Activity Reports (SARs). Casinos and banks are required to report any activity they deem suspicious. Oftentimes, people will purchase a lot of chips at a casino and then cash in those chips without engaging in much gambling activity. Ironically, this is a situation where choosing to gamble too little can actually put a person on the Government’s radar.
Regardless of how a case is started. Once a person is a target, agents will likely examine bank records, credit reports, and other financial documents to begin to develop the names of potential bettors who placed money with the target. If such named people cooperate, a case prosecution could result. Obviously, these types of actions are taken without the target’s knowledge. This means that if a federal agent approaches a person that person should assume the agent knows a significant amount about the person’s employment history and finances.
Are you or a loved one facing charges related to gambling? Call us today at (817) 203-2220 for a complimentary strategy session. Our team of former prosecutors and Board Certified Criminal Lawyers are here to help. During this call we will: