I Fought the Law.....

and the law won. As I'm sure is the case in most other areas, the increasing popularity of poker has led to both positive and negative types of attention. I live in a college town/area, with UNC in Chapel Hill, Duke in Durham, and NC State in Raleigh. This means there's a lot of bars, and not a lot of business for them from Sun-Wed. Two promotion companies have spun up poker tourneys at various bars. You can essentially play in a 10-12 table MTT every weeknight. You play for points and (eventually) prizes. The competition is mostly college kids, with a few good players, but mostly chaff. Four of us from the home game played in the first tournament cycle, and three of us made it into the 'Champions' tourney by winning a nightly tourney or final table appearances, etc. That was a good test of the quality of our monthly get-together, we thought. We haven't played in any of the bar tourneys since, but it was a fun experience.

Recently, the North Carolina Attorney General's office, under pressure from the strong bible-thumper lobby, has taken action to eliminate these games. Citing hundred-year-old case law (what the hell is a 'carbolic smoke ball'?), and greatly stretching the concept of 'consideration' to include not only the crappy prizes the tournets offer, but even such nebulous items as just showing up at a bar or consuming a tasty malt beverage.

Stupid. Really, really, stupid. Aren't there some meth labs or hate crimes (a gay guy was assaulted right on Franklin Street recently by a group of drunk good-old-boy college kids who are still at large). Couldn't they focus on a few of these more important issues

The letter from the Asst. Atty General is below:

Reply To: David J. Adinolfi II

Special Prosecutions Section

(919) 716-6500

Fax: (919) 716-6760

February 22, 2005

Michael D. Parker
District Attorney
20^th Prosecutorial District
Post Office Box 1065
Monroe, North Carolina 28111-1065

Re: Poker questions

Dear Mr. Parker:

This letter is in response to your question regarding the legality of poker tournament promotions at your district’s sports bars and restaurants.

The poker tournament promotion you describe appears to be a mixed gambling / advertising scheme which does not include payment of an entrance fee, “buy-in,” or cover charge as consideration, yet includes the possibility of the winners receiving prizes based upon their appearance and performance at the tournament. It must be noted that, in the description of the tournaments, there is no statement either that the bar is closed during poker tournaments, or that the food and liquor are provided free of charge to the participants and / or their guests.

The general prohibition against gambling is contained in N.C.G.S. §14-292 - Gambling. It states:

Except as provided in Part 2 of this Article, any person or organization that operates any game of chance or any person who plays at or bets on any game of chance at which any money, property or other thing of value is bet, whether the same be in stake or not, shall be guilty of a Class 2 misdemeanor.

N.C.G.S. §14-292.

There is no case law which concerns a poker tournament exactly like the one you describe. It is, however, well settled in both the North Carolina Supreme Court and the Court of Appeals that poker is a game of chance, hence illegal under N.C.G.S. § 14-292, and running a poker establishment is a prohibited nuisance under N.C.G.S. § 19-1. See State v. Black, 94 N.C. 809 (1886); State v. Foster, 228 N.C. 72, 44 S.E.2d 447 (1947); State v. Goodman, 220 N.C. 250, 17 S.E.2d 8 (1941); In re: Inquiry Concerning a Judge, 308 N.C. 328, 302 S.E.2d 235 (1983); State v. Lowe, 178 N.C. 770, 101 S.E.2d 385 (1919); State v. McHone, 243 N.C. 235, 90 S.E.2d 539 (1955); State v. Miller, 16 N.C. App. 1, 190 S.E.2d 888 (1972); Matter of Walter Kidde & Co., 56 N.C. App. 718, 289 S.E. 2d 571 (1982).

The definition of gambling is refined and simplified in case law. Gambling is defined in three elements - games in which the players have tendered some consideration for a chance to win a prize.

See State v. DeBoy, 117 N.C. 702, 23 S.E. 167 (1895); Winston v. Beeson, 135 N.C. 271, 47 S.E. 457 (1904); State v. Perry, 154 N.C. 616, 70 S.E. 387 (1911); State v. Lipkin, 169 N.C. 265, 273, 84 S.E. 340 (1915); Brevard Mfg. Co. v. W. Benjamin & Sons, 172 N.C. 53, 89 S.E. 797 (1916); Animal Protection Society v. State, N.C. App. 258, 382 S.E.2d 801 (1989).

The element of illegal gambling which the proprietors of the poker tournaments you describe seem determined to avoid is that of consideration. There is no statutory, or explicit case law definition of the term “consideration” as it pertains to gambling in North Carolina. However, there is some mention in our gambling cases of “valuable” as opposed to “pecuniary” consideration, suggesting that the terms are mutually exclusive. State v. Perry, 154 N.C. 616, 619-621, 70 S.E. 387 (1911). It appears, by this rule, that money is not the only form of consideration the law contemplates in the context of gambling. This would seem to comport with the common law definition of consideration as an action or forbearance. “In consideration that the plaintiff would use the carbolic smoke ball three times daily for two weeks according to printed directions supplied with the ball, the defendants would pay to her £100. if after having so used the ball she contracted the epidemic known as influenza.” Carlill v. The Carbolic Smoke Ball Company, [1892] 2 Q.B. 484; See also F.C.C. v. ABC, Inc., 347 U.S. 284, 74 S. Ct. 593, 98 L. Ed. 699 (1954):

The courts have defined consideration in various ways...Some courts -- with vigorous protest from others -- have held that the requirement is satisfied by a "raffle" scheme giving free chances to persons who go to a store to register in order to participate in the drawing of a prize, and similarly by a "bank night" scheme giving free chances to persons who gather in front of a motion picture theatre in order to participate in a drawing held for the primary benefit of the paid patrons of the theatre.

F.C.C. v. ABC, Inc., 347 U.S. 284, at 293.

A court or district attorney could lawfully decide that the purchase of drinks and / or food at a tournament would constitute consideration for the purpose of N.C.G.S. §14-292. A court or district attorney could also decide that appearance and performance at the tournaments are, by themselves, consideration, even in the absence of the purchase of anything at the bar. A strikingly similar scheme appears in a Virginia case - Maughs v. Porter, 157 Va. 415, 161 S.E. 242 (1931). In it, an auctioneer attempting to sell lots of land ran a lottery for a free automobile:

The object of the defendant unquestionably was to attract persons to the auction sale with the hope of deriving benefit from the crowd so augmented. Even though persons attracted by the advertisement of the free automobile might attend only because hoping to draw the automobile, and with the determination not to bid for any of the lots, some of these even might nevertheless be induced to bid after reaching the place of sale. So we conclude that the attendance of the plaintiff at the sale was a sufficient consideration for the promise to give an automobile, which could be enforced if otherwise legal....The purpose of the scheme was to attract bidders to the auction sale, and as an inducement to attend the sale each white person over sixteen years of age who attended the sale, whether he bought or not, was given a chance in the lottery...

Maughs v. Porter, 157 Va. 415, at 421, 426.

The poker tournaments are clearly a promotion to induce patrons into a bar or restaurant, to increase the tournament providers’ business at the time of the tournament and thereafter. Holding the tournaments out as free of charge is a transparent effort to dodge the strictures of the General Statutes as they pertain to gambling:

[I]t will appear, from the many cases decided upon the subject, to be difficult, if not impossible, for the most ingenious and subtle mind to devise any scheme or plan, short of a gratuitous distribution of property, which has not been adjudged as in violation of the lottery or gambling laws of the various States, which are mostly alike. And we say that no sooner is a lottery defined, and the definition applied to a given state of facts, than ingenuity is at work to evolve some scheme of evasion which is within the mischief, but not quite within the letter of the definition. But, in this way, it is not possible to escape the law's condemnation, for it will strip the transaction of all its thin and false apparel and consider it in its very nakedness. It will look to the substance and not to the form of it, in order to disclose its real elements and the pernicious tendencies which the law is seeking to prevent. The Court will inquire, not into the name, but into the game, however skillfully disguised, in order to ascertain if it is prohibited, or if it has the element of chance. It is the one playing at the game who is influenced by the hope enticingly held out, which is often false or disappointing, that he will, perhaps and by good luck, get something for nothing, or a great deal for a very little outlay. This is the lure that draws the credulous and unsuspecting into the deceptive scheme, and it is what the law denounces as wrong and demoralizing...

The sale of the ticket gave the purchaser the chance to obtain something more than he paid for it, and the other fact became an extra inducement for the purchase, making the general scheme more attractive and alluring. The difference between it and a single wager on the cast of a die is only one of degree. They are both intended to attract the player to the game, and have practically the effect of inducing others, by this easy and cheap method of acquiring property of value, to speculate on chances in the hope that their winnings may far exceed their investment in value. This is what the law aims to prevent in the interest of fair play and correct dealing, and in order to protect the unwary against the insidious wiles of the fakir or the deceitful practices of the nimble trickster. Call the business what you may, a "gift sale," "advertising scheme," or what not ... we cannot permit the promoter to evade the penalties of the law by so transparent a device as a mere change in style from those which have been judicially condemned, if the gambling element is there, however deep it may be covered with fair words or deceitful promises. If it differs ..., it is chiefly in the fact that it is more artfully contrived to impose upon the ignorant and credulous, and is, therefore, more thoroughly dishonest and injurious to society.

State v. Lipkin, 169 N.C. 265, 271, 273, 84 S.E. 340 (1915).

The fact that the poker tournaments purport to be totally free of charge is of no consequence. “It is the character of an activity which determines what it really is, not what the parties choose to call it.” Animal Protection v. State, 95 N.C. App. 258, 268, 382 S.E. 2d 801, 807 (1989).

In the Animal Protection Society case, patrons were provided bingo cards free of charge, while others paid for their chances:

Plaintiffs rely heavily on the fact that some patrons obtained bingo cards without first buying combs or candy. This alone did not transform the bingo games offered by plaintiffs into "free bingo" since patrons who obtained the cards without making a purchase received fewer cards than patrons who did buy the items; thus, it follows that the other patrons had to pay to obtain a greater number of bingo cards. "[A] game does not cease to be [gambling] because some, or even many, of the players are admitted to play free, so long as others continue to pay for their chances." Commonwealth v. Wall, 295 Mass. 70, 73, 3 N.E.2d 28, 30 (1936). Accord State v. Mabry, 245 Iowa 428, 60 N.W.2d 889 (1953); McFadden v. Bain, 162 Or. 250, 91 P.2d 292 (1939). See also People v. Williams, 202 Misc.2d 420, 113 N.Y.S.2d 167 (1952) ("free" bingo at which all patrons played without paying nonetheless involved consideration since some patrons paid for the use of chairs and table space).

Animal Protection v. State, 95 N.C. App. 258, 267-268, 382 S.E. 2d 801, 807 (1989).

Based upon the foregoing, under N.C.G.S. §14-292 these tournaments appear to be an inducement intended by the bar and restaurant owners to increase and advertise their liquor and food businesses. As such, consideration may be found in either the liquor and food sales at the tournaments, or the players’ appearance and performance at the tournaments, which is a form of advertising as it exposes them to the bar or restaurant. The game of chance element is, of course, the poker game itself, and the payoffs are the prizes won at the tournaments’ end. Therefore, all the elements of illegal gambling exist in these poker tournaments.

Of course, the District Attorney must determine whether to prosecute for the criminal offense. The ABC Commission must determine if the tournament warrants action against the holder of the ABC permit.

If you have any questions, please contact our office. This is an advisory letter. It has not been reviewed and approved in accordance with the procedures for issuing an Attorney General’s opinion.

Very truly yours,

David J. Adinolfi II
Assistant Attorney General