Poker: Luck or skill? A recent decision in the French court of appeal again ruled in favour of skill

By Diane MULLENEX, Avocat à la Cour – Solicitor England & Wales and Guillaume BELLMONT, Avocat à la Cour

The question of whether poker is a game of luck or skill is one that has been asked around the world and one that could have significant ramifications for the way that poker is regulated. It is currently illegal in France to offer gambling products, including poker games, to the public without state authorisation. A recent case in France has again brought the issue of the classification and regulation of poker to the forefront of regulation discussion, challenging its legal qualification as a game of chance.

In June 2011, Jean-Pierre Gleize and his friends Claude Marbleu, Christian Fedou and Jean-Claude Sabatie were accused of offering the public gambling products through the organization of poker tournaments without proper authorisation. As poker was and usually is considered a game of chance, it is subject to certain rules. French case law has progressively defined a game of chance as a game in which chance outweighs skills and intelligence. This definition was also used in the 2010 laws on online gambling. This was in contrast to the definition used in the 1979 tax code which stated that all games involving money, whether they are card games or any other sort of game, were to be considered as games of chance. This was also in contrast to the recent analysis of poker from a tax standpoint by tax administration in Clermont-Ferrand. The administrative court of Clermont-Ferrand considered that a player’s winnings that had been made through the frequent practice of online poker should be taxed as non commercial profits as poker is a game of skill. (October 21, 2010, n°09-640)

Given those contrasting definitions of poker, the defendants’ lawyer cleverly challenged the definition of poker as a game of chance. The court heard testimonials from a professional chess player and a mathematician in order to help qualify whether poker is indeed a game of skill or a game of chance. The first instance judge ruled that the evidence showed that poker is predominantly a game of skill. This decision was  appealed and the 18th January 2013 saw this decision upheld in the court of appeals. It was decided that for an amateur, poker may be more of a game of chance but for the experienced player it involves decisions based on probabilities, strategies and knowledge of psychology. The decision grants that there is some luck involved in the initial hand of cards but that a skilled player can overcome the luck of their hand through skill. As criminal law must look at the bigger picture and have general rules that are universal, it was decided that even among amateurs skill is more important than luck as it is skill that will enable players to improve and win.

This decision, which is in direct contrast to the regulator’s position, could have significant ramifications for the current regulatory framework. A similar case recently occurred in America. In the criminal case of the U.S v. Dicristina, poker was defined as a game of more skill than chance. Previous to this, poker had been classified as a game of chance and thus the defendants would normally have been subject to the American Illegal Gambling Business Act of 1955. Some observers noted that it could reduce the number of prosecutions against online poker websites in certain states in the US.

Nevertheless, let us not get ahead of ourselves. This decision is still not final. It is reasonably likely that it will be appealed for a second time and thus brought in front of the Supreme Court (“Cour de cassation”). However, the Supreme Court is not there to rule on the merits but instead to judge if the lower courts have correctly applied the law to the case. If the Supreme Court decides that the law has been  appropriately applied then the Court of appeal decision will become final. However, if the Supreme Court decides that the law has not been appropriately applied, then the case must be reheard before a Court of appeal. Therefore, there remains a chance that this ruling could still be overturned.

In the event that the Supreme Court deems that the law was applied appropriately then this could have a significant impact on the legislation surrounding poker, especially if more French Courts are to follow the same reasoning.

First, it could mean that it would no longer be a criminal offense to allow the public to play poker games, either online or in land-based gaming clubs, without a state license, or at least that Courts would no longer condemn people for organising such games. This argument could be used by operators to defend themselves against ARJEL’s repeated attempts to close any website which does not seem compliant with French law, provided that such websites only offer gambling products. To a greater extent, this argument could equally be used by social gaming operators. For instance, if poker is indeed a skill game, Zynga Poker should not be considered as an illegal gambling product under French law.

It could also serve the tax administration, which has been trying to include poker gains as a part of the taxable income. If classified as a skill game, it could mean that any profit made through poker could be regarded as an income and thus be taxed. Perhaps, this is partly responsible for the change of definition of games of chance in the tax code to include only games that rely more on luck than skill. Some Members of Parliament have already suggesting creating taxes on poker gains. For instance, Yann Galut, the left-wing deputy has already suggested a tax of 15 % on all poker winnings over 30.000 euros. As previously mentioned, there is some precedent of this with the Clermont-Ferrand case.

On the other hand, although in this case poker was deemed a game of skill, ARJEL (The French Regulatory Authority for Online Gaming) has maintained that this means little as the law remains the same. However, it could mean that poker is subject to different rules if the decision that was upheld in the Court of appeals is also upheld in the Supreme Court. It could pave the way for significant changes in the legislation surrounding, and the regulation of poker in France towards a distinct and less stringent regime. There are other indicators of such a potential change in the regulation of poker. For example, the contemplated opening of player pooling that would allow players in France to play with people in other European countries provided that a suitable agreement had been made and approved by ARJEL. This, in addition with the constant development of new technologies such as mobile gambling means that regulation will need to change and evolve to keep up with the changes in how online poker is played.

One should wait for ARJEL’s position on this issue, which will undoubtedly be released in the coming weeks. It is unlikely that ARJEL will consider this decision as limiting its prerogatives. We will keep you updated on the future developments on this topic and are obviously available to answer any question that you may have.

Source: Ichay & Mullenex Avocats

Ichay & Mullenex Avocats is a French law firm focusing on all legal issues related to new technologies in France and abroad. They are  considered experts in intellectual property and Internet law, e-commerce, online gaming, data protection. Ichay & Mullenex Avocats also assists its clients on all issues related to financing, mergers & acquisitions, restructuring, etc. and advises them on their litigation and arbitration procedures.

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