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Poker as a Game of Chance Memo in the James Davitt Case

Poker as a Game of Chance Memo in the James Davitt Case

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Published by citypaper

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Published by: citypaper on Dec 16, 2010
Copyright:Attribution Non-commercial


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The United States of America, by and through undersigned counsel, hereby submits thismemorandum to outline the legal basis for the plea in this case. The Information charges thedefendant with conducting an illegal gambling business in violation of 18 U.S.C. section 1955. Thismemorandum discusses the operation of section 1955 in conjunction with Maryland gambling law.
In the plea agreement, the defendant has agreed that he and others made arrangements withrepresentatives of Full Tilt Poker to make payments to internet gamblers through a company calledHMD Inc. Full Tilt Poker is a company that offers online gambling on the internet; it is located inDublin, Ireland, and has several hundred employees that conduct, manage, and direct the onlinegambling activity. During at least 2008 and 2009, Full Tilt Poker accepted funds from peoplelocated in Maryland and elsewhere (“gamblers”) to open accounts. The plea agreement also statesas follows:These gamblers then played games, including Texas Hold‘Em poker, onlinewith other gamblers and, as each game was played, gamblers won money that wascredited to the winner’s account. Gamblers with a positive account balance thatincluded winnings routinely requested a payout of funds by check or by electronicfunds transfer. Because most gamblers play online poker with the hope of winning
Case 1:10-cr-00751-CCB Document 3 Filed 12/16/10 Page 1 of 20
money, the movement of winnings to online gamblers is essential to the success of the gambling business.Texas Hold ‘Em poker is the most commonly hosted and played form of Internet poker. In TexasHold 'Em Poker: “each player is dealt two private cards face down. The cards are referred to as the
cards. [After this first deal], the initial betting round takes place. After that, three public cards(the
) [are] placed face up in the middle of the table. The second betting round follows. Whenthe betting round has finished, another public card (the
), is placed alongside the flop. Next isthe third betting round. After that, the final, fifth, public card (the
) is turned up, followed bythe final betting round. Each player still remaining in the pot now combines the public cards withher hole cards to obtain a five card poker hand. When doing so, it is possible to use one, both or none of the hole cards to obtain a five card poker hand. Naturally, the player now (at the
)having the best poker hand wins the pot.” This sequence of deals and placing bets is true of poker 
 played on the Internet as well as with live play, with the main difference being that in Internet poker,the players can not see or hear each other to observe facial expression, body language, or tone of voice.In order to facilitate the movement of funds to and from their customers, Internet gamblingoperators use money-processing businesses generally called “Payment Processors.” Typically, anInternet gaming operator sends a large check or wire transfer directly to the payment processor whothen distributes the money, at the direction of the gaming site operators, to gamblers for their winnings. This is accomplished either by check or electronic transfer. The government submits that
 Pennsylvania v. Dent 
, 2010 Pa. Super 47, *P3 (2010) (internal citations omitted)
(emphasis in original).
Case 1:10-cr-00751-CCB Document 3 Filed 12/16/10 Page 2 of 20
Full Tilt Poker is an illegal gambling organization within the meaning of 18 U.S.C. section 1955,and that it operates in violation of Maryland law. Because the defendant performed a function thatwas essential to the gambling business by moving money to winning gamblers, the facts and the lawsupport the plea in this case.
An “illegal gambling business” is defined in section 1955 of title 18 of the United StatesCode as a gambling business which: (1) violates the law of the State or political subdivision in whichit is conducted; (2) involves five or more people who conduct, finance, manage, supervise, direct,or own all or part of the business; and (3) has operated or operates on a substantially continuous basisin excess of thirty days, or has a gross revenue of $2,000 in any single day. 18 U.S.C. § 1955. Asis mentioned above, Full Tilt Poker has several hundred employees that conduct, manage, and directthe online gambling activity. Also, as is set forth in the plea agreement, the defendant’s business,HMD Inc., moved approximately $3.9 million on behalf of Full Tilt Poker in June 2009; these factssatisfy elements (2) and (3) above. Therefore, in this case, the question of whether the defendant wasengaged in an illegal gambling business in violation of section 1955 depends on element (1): whether the business activity violated the law of the jurisdiction within which the business was conducted.Under Maryland law, gambling is prohibited by section 12-102 of the Maryland CriminalCode. This section prohibits a person from: (1) betting, wagering, or gambling; (2) making or sellinga book or pool on the result of a race, contest, or contingency; or (3) receiving, becoming thedepository of, recording, registering, forwarding, proposing, agreeing, or pretending to forwardmoney or other consideration of value to be bet, wagered, or gambled on the result of a race, contest,or contingency. Further, section 12-101(d) of the Criminal Law Article states in relevant part that
Case 1:10-cr-00751-CCB Document 3 Filed 12/16/10 Page 3 of 20

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