As a skill game, poker should be regulated differently from higher risk gambling

Skill Vs. Luck Debate Is Back: One Country Adds Poker To List Of Recognized Sports

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Several news sites have reported that the Ukraine has restored poker to its official Ministry of Youth and Sport list of recognized sports.

I’ll be honest, my Ukrainian language skills are not as good as they should be, so confirming this story has not been easy. The document, No. 3780 The Register of Recognized Sports can be found here.

It consists of a simple list with paragraph II.119 simply saying “Спортивний покер.”

Google translates that as “sports poker,” whatever that may encompass, although one source says this means “Match Poker.”

Match Poker is the game promoted by the International Federation of Match Poker (IFMP) that operates a bit like duplicate bridge. Players formed into teams play the same cards as their opponents on different tables.

This removal of the randomness resulting from dealing cards removes the element of chance leaving the winners to be decided by skill alone.

The redefinition doesn’t automatically mean that poker is not subject to the online gambling ban that has seen poker rooms such as those on the iPoker network leave the country. That will still have to be tested, but it is a strong indication that the government is softening its position.

The debate over whether poker is a game of skill or chance has raged for years, but apart from the rarefied levels of high-level legal proceedings, the truth is that it really doesn’t matter.

What matters is whether governments at state or federal level should get involved by imposing laws and regulations, and what those regulations should be.

The Ukrainian experience is typical

The Ukraine’s gambling market was essentially unregulated for over a decade after it gained its independence from the former Soviet Union in 1991. Naturally gambling flourished with every manner of unsavory characters getting involved.

In 2003, the government took the natural step and decided that tax and regulation was necessary. Law N 4204 “On Gambling Games in Ukraine” was passed permitting regulated bingo, horse racing, roulette, slots, cards and dice games.

A different government decided that gambling was wholly bad and in 2009 passed another law “On the Prohibition of Gambling Business in Ukraine,” and made pretty much everything illegal. This law got an extra kick in 2011 when internet gambling was added to the list of prohibited activities.

Behind all of this legislative activity the argument continued as to whether poker should be included in the permitted or prohibited gambling activity lists.

Until 2010, poker was generally considered to be a game of skill, a mind sport, and not classified as gambling, but then it was removed from the list of sports and became gambling again.

The federation of Ukrainian poker clubs challenged the decision in the courts and won a partial victory when in 2013 the Supreme Court determined that tournament poker should not be classified as gambling.

The US has followed the same path

The same story can be seen in the US. Perhaps the closest the US has got to taking a federal decision on whether poker is a game of skill or not came in the DiCristina case which the Supreme Court ultimately decided it would not hear.

Lawrence DiCristina was convicted under the Illegal Gambling Business Act, for running poker games at a warehouse in Staten Island, NY.

Within the flow of appeals and judgments, Judge Jack Weinstein of the Second US Circuit Court of Appeals in New York determined that the law was “ambiguous,” and that Texas hold’em poker was a game of skill not subject to the anti-gambling law.

He still ruled that DiCristina should be prosecuted, but that’s another story. The Supreme Court’s decision to not take the decision leaves the question of whether poker is a game of skill or not untested in America’s highest court.

Underlying the whole issue is how the law and regulators should treat poker, particularly online poker. Here there are two distinct issues: Should poker be regulated and if so how?

Online poker players need regulatory protection regardless of whether it is a game of skill

Black Friday in April 2011 was the day when the Department of Justice (DOJ) virtually shut down the online poker industry in the US.

The disruption directly led to the collapse of Full Tilt, Absolute Poker and UltimateBet as it became apparent that their businesses had been using player funds for operational spending, and there wasn’t enough money in their accounts to refund player balances.

Thousands of players lost money, although PokerStars quickly made good the balances of non-US players when it reached an agreement with the DOJ to buy Full Tilt. US players had to wait to be reimbursed by the DOJ.

The post-Black Friday analysis made it obvious that poker operators could get away with such practices because of the lack of regulation. Black Friday exposed the weaknesses of no regulation matched with a lack of legal redress because the companies involved were often legally based offshore.

Poker needs regulation if only because poker operators hold many millions of dollars in customer accounts. US states that haven’t regulated online poker have left their citizens exposed to the risks highlighted on Black Friday.

Poker regulation can be light touch because it is a game of skill

Studies on gambling addiction show that poker, especially tournament poker is a comparatively low-risk activity.

The concept of risk-based regulation has been firmly established in EU law by the European Commission, and internationally regulators are beginning to recognize that not all the activities within their purview need the same level of oversight.

The Malta Gaming Authority (MGA) has taken this to the next step and produced regulations that distinguish between the risks that different games pose.

In introducing the new concept, the MGA consultation paper stated:

“Type I skill games are currently considered as being licensable in terms of the Act and the Regulations. Concurrently, however, the Authority is of the understanding that the risk to which a player is exposed when playing Type I skill games, as opposed to other forms of gambling-type games, is different, and in general, reduced. In this regard, the licensing and compliance requirements imposed on such operators should reflect the extent of consumer and other regulatory risk.”

The MGA went on to explain what it meant by lower risk games:

“Games which are based on a random number generator at the start of the game, such as cards or dice, but which rely on skill as the game progresses, such as is in the case of games such as belote, tarot, rummy or backgammon, should be licensed, but in such a way as to be deemed different to gambling.”

There’s a lesson here for US regulators. Regardless of legal definitions, not all activities classified as gambling are the same. A “one size fits all” set of gambling regulations is not necessarily the most appropriate response.

Skill versus luck has normally been seen in the context of whether or not poker is gambling. It is time to redefine the issue and recognize that its importance is in not whether to regulate, but how to regulate.

- A former founder of Poker Industry Pro and Head of Content at PokerNews publisher iBus Media, Joss Wood is a graduate in English from the University of Birmingham. Joss also holds a master’s degree in Organisational Development from the University of Manchester. His career path has taken him from the British Army, through business and finance to seven years as a successful professional poker player.
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