A while back a federal judge in New York decided that poker wasn’t illegal gambling under federal law, and we discussed it here, and so I feel a certain sense of responsibility to all of the Dealbreaker readers who quit their jobs to start poker rooms. So I should tell you that that decision was reversed today on appeal, and poker is illegal again, so you’d better shut down your poker room and go back to trading derivatives ha ha ha.
Other than that I don’t have much to say about the decision. The lower court’s decision declaring poker legal was very scholarly about how poker is predominately a game of skill, not of chance, and so is not “gambling.” But it was pretty loony on the law: poker is undisputedly illegal gambling under New York law, so the question of whether it was illegal under federal law turned on whether it’s a “gambling business which is a violation of the law of” New York. The district court said, well, it’s a violation of New York’s gambling law, but it’s not a “gambling business” under my reading of the word “gambling,” because it’s a game of skill, so you’re free to go. The appeals court ignores all the chance vs. skill stuff and just says “it’s gambling under New York law, so it’s gambling under the statute, so you’re hosed.” That’s sad but also probably right.
Here you can read Floyd Norris complaining that synthetic CDOs, and by extension most derivatives trades, are just gambling, the equivalent of a bank’s “put[ting] together a betting book and taking out the bookie’s cut.” Read more »