The PokerStars Belated ‘Bad Actor’ Unconstitutionality Complaint

This week, public-relations representatives of PokerStars released a statement crafted by Harvard law professor Laurence Tribe regarding the constitutionality of the various “bad actor” provisions designed by would-be market competitors of Stars in an attempt to keep the worldwide online poker giant out of any US states that would formally authorize online poker.

The statement specifically references the Stars-blocking language inserted into both bills currently being debated by the California state legislature.  The bills are AB 2291, sponsored by CA State Rep. Reggie Jones-Sawyer, and SB 1366, the latest iteration of a bill sponsored by CA State Sen. Lou Correa.

Both bills were crafted with the backing and assistance of a coalition of powerful California tribes that are seeking to allow online poker only under stridently favorable and exclusive conditions that rid the future marketplace of all sorts of competition.  In the case of PokerStars, that’s the “bad actor” clause inserted into both bills, and the language also includes “tainted assets” provisions that would still block anything Stars-related in the wake of the company’s acquisition this week by Canada’s Amaya Gaming.

While PokerStars officials have made a bit some belated noise about the presumed unconstitutionality of these “bad actor” clauses, California represents the first real market opportunity for the site where a conflict with such a statute would occur.  Nevada’s online-poker regulations contain a similar bad-actor clause — tied, as with those proposed in other states, to a post-UIGEA cutoff date of Decemer 31, 2006 — but PokerStars had no dance partner in the Nevada land-based casino market, hence no pressing need to challenge that statute.

New Jersey did not include such a provision when it authorized online poker, and Delaware is a different beast altogether, since its online poker was authorized under the aegis of the state’s lottery office, and was never truly an open market to begin with.

That leaves California, an economic giant whose GDP would outrank all but six other countries in the world.  Its generally well-to-do population of 38 million is lucrative enough for a serious legal fight, particularly in the case of PokerStars, which has already agreed to software deals with the state’s Morongo tribe and three prominent Los Angeles poker rooms.

The statement by Harvard legal prof Tribe is designed to be something of a PR shot over the bow of the tribes opposing the possible PokerStars return to the Golden State, in the event online poker is legalized there at all.  Would PokerStars (Amaya), the Morongos, and the three LA rooms challenge the Jones-Sawyer and Correa bills in court, if either (or a close combination of both) are passed?  That seems likely, given the heightened battle that’s now shaping up.

The proposed California online-poker bills remain at an impasse of sorts.  The opposing tribes — the Pechanga, Pala and Agua Caliente nations prominent among them — have shown absolutely no indication of taking anything but the hardest of hard-line approaches, attempting to jam through the lousy Correa and Jones-Sawyer bills despite this and other problems, including the creation of criminal penalties for players who participate on unregulated sites.  (Such activity is not illegal in California at the present time.)

It turns out the Tribe statement isn’t so belated after all, but an indication that the California online-poker battle is likely to continue to be a long, drawn-out fight.

The complete statement follows:

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Legal Analysis of I-Poker Legislation by Harvard University Constitutional Law Professor Laurence H. Tribe

Laurence H. Tribe, Professor of Constitutional Law at Harvard Law School and one of the foremost U.S. constitutional scholars, has concluded that the “bad actor” provisions in two proposed iPoker bills in the California Legislature likely violate the U.S. Constitution.

Following a thorough legal analysis of Senate Bill 1366 (Correa) and Assembly Bill 2291 (Jones-Sawyer), Prof. Tribe concluded that both proposed bills are unlikely to survive a Constitutional challenge on several grounds. Among Prof. Tribe’s conclusions:

Constitutionally prohibited Bill of Attainder:

·         The Senate and Assembly bills both contain provisions clearly designed to exclude readily identifiable (even though not expressly named) entities such as PokerStars from the California online poker market. These provisions fly in the face of the U.S. Constitution’s command that “[n]o State shall … pass any Bill of Attainder.”

·         Under settled principles, a law is an unconstitutional bill of attainder if it “legislatively determines guilt and inflicts punishment upon an identifiable individual without provision of the protections of a judicial trial.” The Framers drafted theBill of Attainder Clause as “a general safeguard against legislative exercise of the judicial function, or more simply — trialby legislature.”…

It is indisputable that S.B. 1366 and A.B. 2291 exclude certain former Internet poker providers from California’s intrastate Internet poker market without any judicial trial.

·         My conclusion is that both proposed bills are, and would probably be found by a court to be, constitutionally prohibited bills of attainder.

Unconstitutional Takings

·         The bills also restrict the ability of entities like PokerStars to use their existing property, raising serious problems under the Takings Clause.

·         A court should also have little difficulty recognizing the harm to PokerStars’s intangible property – including harm that takes the form of rendering that property valueless as an object of sale or licensing to others – as actionable under the Takings Clause.

Equal Protection Violation

·         … the Equal Protection Clause invalidates the Senate Bill’s strikingly arbitrary cutoff date—a date which has the unusual effect of excluding entities like PokerStars that are most established in the market.

·        … the inapplicability of traditional rationales for the temporally inverted cutoff date, and the discrimination against a single out-of-state company all come together to create a significant prospect that a court could be persuaded to invalidate the cutoff date under the Equal Protection Clause.

Tribe concludes:

·         Taking all these infirmities in the bills into account, I believe that they should not, and would not, survive federalconstitutional attack.

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