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Head Office UK Cecile Park Publishing Limited, 17 The Timber Yard, Drysdale Street, London N1 6ND tel +44 (0)20 7012 1380 fax +44 (0)20 7729 6093 info@e-comlaw.com
www.e-comlaw.com

US
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The US Department of Justice has moved its public spotlight away from online sports wagering. While news reports would lead to think only online poker is in the spotlight, a look at the recent activities of the US Attorney’s
Office (‘USAO’) for the Southern
District of New York (‘SDNY’) reveals that online poker is not the only target. Online casino games are also in the picture. Not only does it appear the target has changed, but also the law being used.
The swing from online sports wagering to online poker and casino wagering started in
December 2008, when Anurag
Dikshit - a former Principal
Shareholder, Officer, and Director of PartyGaming Plc - entered into a plea agreement with the USAO for the SDNY. Mr. Dikshit agreed, among other things, to plead guilty to violating the Wire Act, 18 U.S.C.
§1084(a) and to forfeit $300 million to the US, as a result of ‘his participation, from 1998 until July
2008, in the affairs of PartyGaming
PLC and its affiliates’. The ‘affairs’ of PartyGaming and its affiliates are alleged to be, in the information filed against Mr.
Dikshit, the ‘operat[ion] [of] an internet gambling business that offered casino and poker games, among other games of chance, to
[US] customers who wished to wager online’.
There is no federal court decision that directly concludes that poker, or casino games, are covered by the
Wire Act. So it is not surprising that the Wire Act is not the law being used by the US Government in
2009 as it takes action in connection with activities related to online poker and casino games.
The primary replacement appears to be the Illegal Gambling Business
Act (IGBA), 18 U.S.C. §1955, which, as one of its elements, requires the violation of a state (or local) anti-gambling law.
On 6 April 2009, PartyGaming, entered into a non-prosecution agreement with the USAO for the
SDNY after a two-year courtship.
PartyGaming admitted, among other things, that:
G
‘[f]rom 1997 until 13 October
2006, PartyGaming offered internet gaming to players in the United
States, including real-money poker and casino gaming’; and
G that its conduct during the relevant time frame violated the
IGBA, the Wire Fraud Statute (18
U.S.C. §1343), and the Bank Fraud
Statute (18 U.S.C. §1344).
PartyGaming agreed to forfeit $105 million to the US.
A person (or entity) violates the
IGBA if:
1. he conducts, finances, manages, supervises, directs or owns all or part of a gambling business;
2. the gambling business is a violation of the law of a state or political subdivision in which it is conducted;
3. the gambling business involves five or more people who conduct, finance, manage, supervise, direct or own all or part of the business; and
4. the gambling business has been or remains in substantially continuous operation for a period of more than thirty days or generates a gross revenue of $2,000 in any single day. PartyGaming’s admissions in its agreement meet all the elements except (2). There is no admission of violation of a state
(as opposed to federal) antigambling law, a necessary predicate for a violation of the IGBA.
Using the IGBA as tinder, the
USAO for the SDNY seems to be turning up the heat on online poker and casino games.
In June 2009, the USAO for the
SDNY, acting pursuant to warrants issued by a federal district court judge, seized funds from accounts held by the Account Services world online gambling law report august 2009

US
Corporation (ASC) at two banks
(Wells Fargo and Union Bank) located in California. The seizure warrants were issued based on allegations that the funds were connected to activities that violated the IGBA but did not identify the underlying state law that was arguably violated, an element required to prove a violation of
IGBA. The amounts seized are reported to be in the neighborhood of $30 million.
On 10 July 2009, ASC moved, in the Federal District Court for the
Southern District of California, for return of the seized funds. The motion was supported by a
Declaration from Douglas Rennick, who stated he was the owner of
ASC and that ASC’s business was
‘processing of checks for individuals who have played online poker’. ASC, among other things, argued the seized funds should be returned because no criminal indictment had been filed. The
IGBA could not have been violated, in part, because online poker is a skill game and, therefore, not illegal gambling under any state law. The
Poker Players Alliance sought and received permission to participate as amicus curiae in support of
ASC’s Motion and filed a brief focused on why poker is a game of skill.
The lack of a criminal indictment was soon cured.
On 5 August 2009, the USAO for the SDNY filed an indictment against Douglas Rennick, charging him, as the owner of various payment processing companies, with conspiracy to commit bank fraud, money laundering, and illegal gambling offenses. The indictment alleges that Rennick, from 2007 to June 2009, ‘[was] in the business of providing payment services for internet gambling businesses through several companies under his control, including’ ASC. More specifically, world online gambling law report august 2009
Rennick’s business is alleged to be
‘receiv[ing] funds from offshore internet gambling companies, caus[ing] those funds to be wired into United States bank accounts, and then caus[ing] the funds to be disbursed through checks payable to United States residents who are seeking to cash out their gambling winnings’. The total amount alleged to have been transferred is ‘more than...$350 million’. The specific types of online gambling alleged to be offered by the offshore internet gambling companies are ‘poker, blackjack, slot machines, and other casino games’.
Among other charges, Rennick and others are alleged to have conspired to violate the IGBA by
‘unlawfully, willfully, and knowingly...conduct[ing], financ[ing], manag[ing], supervis[ing], direct[ing], and own[ing] all and part of an illegal gambling business, namely a business that engaged in and facilitated online poker and casino games, in violation of New York
State Penal Law (NYPL) sections
225.00 and 225.05’.
The choice of New York law is not surprising, because the USAO for the SDNY is bringing the charge. It is also not surprising that online casino games, as well as poker, are included in the indictment. The promotion of casino games to New
York residents would appear to violate New York’s prohibition on the promotion of gambling. The promotion of poker may not.
Section 225.05 of the NYPL, in relevant part, provides: ‘A person is guilty of promoting gambling in the second degree when he knowingly advances or profits from unlawful gambling activity’. A person (or entity) ‘advances gambling activity’ when, acting other than as a player, he engages in conduct which materially aids any form of gambling activity. Such conduct includes but is not limited
Linda J. Shorey Partner
Dennis M.P. Ehling Partner
Anthony R. Holtzman Associate
Ashley J. Camron Associate
K&L Gates LLP linda.shorey@klgates.com
dennis.ehling@klgates.com
anthony.holtzman@klgates.com
ashley.camron@klgates.com
to conduct directed...toward the arrangement of any of [the] financial or recording phases [of the particular game, contest, scheme, device, or activity involved]’. NYPL §225.00(4). A person (or entity) engages in
‘gambling’ when ‘he stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome’.
NYPL §225.00(2). A ‘contest of chance’ is ‘any contest, game, gaming scheme or gaming device in which the outcome depends in a material degree upon an element of chance, notwithstanding that skill of the contestants may also be a factor therein’. NYPL §225.00(1).
It does not appear there is any
New York case law that directly addresses the issue of whether poker (other than video poker) is covered by NYPL §225.05, as informed by NYPL §225.00 - and the issue may not be resolved in the Rennick case. One thing is becoming clear, because most states have anti-gambling laws that would capture online casino games and many states have laws that prohibit the operation of an unlicensed casino, the IGBA is a tool that federal authorities may turn to when an online casino operation is targeted. Just as the presence of online sports wagering made the federal Wire Act a tool of choice, the presence of online casino gaming is bringing the
IGBA to the forefront.
11

Head Office UK Cecile Park Publishing Limited, 17 The Timber Yard, Drysdale Street, London N1 6ND tel +44 (0)20 7012 1380 fax +44 (0)20 7729 6093 info@e-comlaw.com
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