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IN-DEPTH 21 April 2017
Casino cheating laws: Is clarity being lost?
According to US and UK courts, world-renowned poker player Phil Ivey’s recent methods of winning at a casino game were on the wrong side of the law. However, the decision drastically split the judges in the UK Court of Appeal; so was this truly an open and shut case?
By Nicole Abbott

In 2014, Genting Casinos claimed that Phil Ivey used a technique known as “edge-sorting” during a game of baccarat (or more specifically Punto Banco) which took place in the summer of 2012. The method Ivey used gives the player a “first card advantage”. The company claimed this was an illegitimate strategy and they had no legal responsibility to hand over the £7.7m Ivey won playing the game.

Ivey, ten-time winner at the World Series of Poker, lost his subsequent High Court case against the owners of London's Crockfords Club and his winnings were withheld. Last November, Ivey had lost his appeal against the previous ruling, but not without splitting the judge’s view of the matter.

Shortly after Ivey was ordered to repay the sum of $10.1m to Atlantic City’s Borgata Casino and Hotel after a New Jersey court ruled that he had once again used “edge sorting” to cheat at baccarat. The repaid sum included the $9.6m winnings of the initial game, plus the $504,000 which Ivey won with his winnings during a game of craps. Ivey has not yet commented on whether he will appeal the court’s decision.

These two cases have triggered debate among law and industry experts alike, who are now questioning the clarity of US and UK law on cheating in casinos. In order to paint a clear picture of the two incidences in which Ivey was allegedly cheating, it is necessary to consider the method of “edge sorting” which Ivey himself admitted to using. “Edge sorting” is the ability to read subtle differences in the intricate designs on the back of playing cards, in order to ascertain which card the opponent is holding. Ivey, along with his accomplice Cheng Yin Sun, requested the house use a certain brand of playing cards and with an automatic shuffling machine in order to carry out this method on both occasions.

Of course, it is easy to see how Ivey’s accidentally-on-purpose stratagem may incite debate. On the one hand, Ivey has not actively marked the cards or behaved untruthfully in order to win his advantage over the house. On the other hand, by removing the essential element of luck from the game, Ivey did not honour the intended style of play that is traditionally associated with baccarat.

Indeed, Judge John Mitting of the UK High Court stated that his verdict was ultimately dependent upon the fact that Ivey had swayed the odds in his favour: “He gave himself an advantage which the game precludes. This is in my view cheating.”

Judges in the US also ruled that the element of luck and a slight house edge are defining characteristics of the game of baccarat. Ivey’s removal of these crucial ingredients means the game cannot be classified as baccarat, is not regulated by the New Jersey Casino Control Act, and is not permitted to be played in a New Jersey casino: “By using cards they caused to be manoeuvered in order to identify their value only to them, Ivey and Sun adjusted the odds of baccarat in their favour,” US District Judge Noel Hillman said in his ruling. “This is in complete contravention of the fundamental purpose of legalised gambling.”

However, Kyle Sammin, a lawyer from Pennsylvania and writer at thefederalist.com, has taken issue with the fact that the house is gifted a natural edge:“The broadness of the statutory provision, and the court’s willingness to construe it against the party that never touched the cards, much less marked them, shows the extent to which casinos and the government work together to make sure all the players, in the long run, will lose.”

Sammin continues by outlining the various ways in which casinos are granted exceptions from other regulatory laws, such as limits on drinking and smoking, as the government ultimately ends up reaping a generous profit from the casinos themselves.

Steve Donoughue, Consultant at GamblingConsultant.co.uk, passionately argues against this point, upholding that the house rules must always take precedence in such situations:“I think that if Ivey has been edge-sorting then they should throw the book at him. I think it is cheating; he should play the game as it’s meant to be played. Plus, I believe in ‘My House, My Rules’. If you want to use tricks, then play with people who allow it.”

Sammin disagrees that it can be permissible for the house to relinquish all responsibility of its acceptance of Ivey’s terms prior to the game: “The casino supplied the cards, a brand of cards that they use on a regular basis and which were not altered in any way, but it was Ivey and Sun who were held to have violated the law.”

He further argues that the house “allowed the requests, and thereby exposed themselves to Ivey and Sun’s advantage”, and therefore must face the consequences of their oversight.

However, he fails to take into account that the casino was completely unaware of the minute flaw in the deck which granted Ivey and his accomplice the ability to determine which cards the opposition held, and perhaps could be forgiven for neglecting to notice a 0.78 millimetre anomaly in the un-opened pack of cards.

Even if the court ruled that the game was authorised to be played at the casino, the Casino Control Act that is currently effective in the United State clearly bans anyone from knowingly using cards which “alter the normal random selection of characteristics or the normal chance of the game which could determine or alter the result of the game”. Therefore Sammin’s questionable argument that this law was purely intended for marked cards does not hold up in Ivey’s New Jersey case. However, is the UK law’s description of cheating as immovable as the US?

Not without causing some controversy between the judiciaries. Ivey was judged by the UK appeals court to have indeed cheated at Crockfords casino, and therefore must forfeit his £7.7m in winnings. The primary issue that the famous poker player had taken with the UK court’s ruling was their claim that deceit is not essentially an attribute of the definition of cheating: "This decision makes no sense to me,” Ivey protested. “The trial judge said that I was not dishonest and the three appeal judges agreed but somehow the decision has gone against me.”

Ivey, questioning the oxymoronic nature of the High Court’s findings that “Mr. Ivey was honest; but that looking at the matter objectively, he had cheated”, contested the decision at the UK Court of Appeal, entreating the court to consider how he could have cheated honestly.

Lady Justice Arden of the Court of Appeals stated that: “Mr Ivey achieved his winnings through manipulating Crockfords’ facilities for the game without Crockfords’ knowledge. His actions cannot be justified on the basis that he was an advantage player.”

Lady Justice Arden approved the initial ruling. “I do not consider that dishonesty is a necessary ingredient of the criminal offence of cheating”.

Lady Juctice Sharp disagreed with Lady Justice Arden’ final verdict, stating that the law in this case is very much open to interpretation: “There is a dearth of  authority on the meaning of ‘cheat’ in relation to gaming contracts in the civil context”.

Lady Justice Sharp expressed her belief that dishonesty “is an essential ingredient of the criminal offence of cheating”, and added: “I find the suggestion that someone can be guilty of the criminal offence (in effect) of ‘honest cheating’ at gambling to be a startling one which is not mandated by the language of the statute itself”.

This strong disagreement between the two judges demonstrates that the definition of “cheat” in relation to The Gambling Act 2005 – which Lady Justice Sharp asserts is “a modern statute”, and thus overrides judgements made on “older cases” –is disputable, and thus lacking in clarity.

Mr Ivey's lawyer, Matthew Dowd of Archerfield Partners LLP, strongly believes that the wording of the statute needs further revision and clarification: “The Court of Appeal’s decision leaves the law totally unclear as to what constitutes cheating at gambling. Four judges have looked at this issue now and none of them have been able to agree on the correct interpretation of Section 42 of the Gambling Act. It's essential that the law is clarified and in light of today's decision we are seeking permission to appeal to the Supreme Court.”

Donoughue approaches this issue with a brief history lesson on gambling laws in the UK: “So the real issue here for the UK is that the Gambling Act 2005 made gambling debts enforceable in law for the first time since 1845. Back then, the government decided that the sheer volume of litigation arising from accusations of cheating could cause the legal system to collapse, so it was up to gentlemen to sort out their disagreements as a matter of honour. When we legalised gambling in the 1960s, we kept gambling debts unenforceable, as gambling operators would lose business if they failed to pay out, but they would be protected from cheats by not being forced to pay out.

“The 2005 Act changed this,” Donoughue continues. “As the Act was going through parliament, the Ritz case – in which laser scanners were used by Eastern Europeans to help them win at roulette – was in the news. Speculation arose in both Houses as to why there wasn’t a clearer definition of what cheating was, and so here we have a perfect example of legislation that was rushed and important detail ignored.”

Donoughue believes this is exactly the matter that Lady Justice Sharp was referring to. “As there is no definition or guidance in the legislation (s.42) as to what is cheating, the courts have to make case law and that can take decades to hone,” Donoughue explains. “Lady Justice Sharp was putting her view forward, but it was the minority. Given another case with different judges the outcome could have been different. It will take time before there is a unified view. The people who will suffer are those in the industry, as cheating costs money and that is money that could go on wages.”

This indicates that the law may actually lean in favour of the player, as the definition of cheating is ambiguous and therefore easily malleable to a skilful defence lawyer. However, regardless of whether you side with Ivey or the casinos on this matter, it may be beneficial to both parties and the legal system if a clear-cut definition of cheating was established in UK law.

Commenting more generally on the UK laws concerning cheating in casinos, Melanie Ellis, Senior Associate at Harris Hagan, implies that ambiguity in definition of cheating is critical to the uniqueness with which every case should be treated: “Section 42 of the Gambling Act 2005, which creates the offence of cheating, states that it may, in particular, include “actual or attempted deception or interference” with the process of a game or with an event to which gambling relates. This is not intended to be an exhaustive definition of the term, merely an example of what might constitute cheating.

The term “cheating” is not actually defined at all, but the explanatory notes to the Act state that it should be given its normal, everyday meaning. Most people would consider that the normal, everyday meaning of the word “cheating” involves doing something dishonestly, however this concept is not actually incorporated into Section 42 and this does not appear to be the interpretation taken by the courts.

“The offence also does not incorporate any requirement for there to be an intention to interfere with a game or event, leaving open the possibility of inadvertent cheating (for example by accidentally seeing an opponent’s cards and benefitting from that knowledge),” Ellis continues. “The lack of a clear definition has resulted in uncertainty as to the circumstances which might constitute cheating at gambling in Great Britain, but it does have the benefit of allowing the courts the flexibility to determine whether a person has cheated by taking into account the particular circumstances of each individual case.”

It appears to be universally agreed that UK gambling laws which address cheating and gamesmanship are ambiguous. Although this means that both casinos and players are left to scramble in the dark with this matter, there is an argument for the law to curb heavily descriptive explanations of cheating in order for each case to be considered with distinct individuality. It is a tough call, but this is how the courts have decided to address this matter for all cases. Unfortunately, this matter touches upon an ongoing debate in the nature of law itself: should everyone be judged according to immovable, standardised laws, or by the thorough consideration and analysis of each circumstance? In this case it seems that the latter took precedence in the UK and the former in the US, but both came to the same conclusion. Nevertheless, professional players should make sure that their methods of play are crystal clear in future; in regards to this particular law, you never know what cards you may be dealt.
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IN-DEPTH 4 September 2019
Virtual reality: Creating next-gen experiences for players

Singular CEO George Shamugia discusses a new revenue stream for casino operators

The competition in online gaming is intensifying, with players becoming more and more demanding. In some markets, single-customer acquisition costs can reach up to €400 ($440) alongside growing churn rates. Furthermore, the online gaming sector struggles to attract one of the most lucrative groups of players – millennials. The experience provided by casinos no longer appeals to the younger generation.

On  the other hand, the video gaming industry perfectly understands the needs of millennials and by introducing elements of luck in their games offers the best of both worlds. With the launch of loot box systems and Grand Theft Auto’s in-game casino, we have seen their first successful steps in targeting the online gaming sector. GTA V online, with 33 million active players, recently opened an in-game casino, where players gamble real money on games such as poker, roulette, slots, etc. As a result, churn users returned and GTA Online reached the highest number of active players since its launch in 2013.

The online gaming industry has almost fully utilised the potential of the mobile medium. The time has come to look for new, innovative ways of delivering a next-gen experience to customers.

The potential of VR

Could the next big thing for online gaming be a fully fledged virtual reality (VR) casino delivering an immersive experience and limitless new opportunities?

Although not widely adopted yet, VR has a sizable number of customers. Analysts predict it’s poised for explosive growth to become mainstream in about five years. According to market intelligence firms, the VR market will be worth $117bn by 2022, and according to Juniper Research bets made through VR will reach $520 billion by 2021. Upcoming 5G mobile network technology will propel VR’s mass adoption by allowing the development of fully portable untethered and affordable VR headsets.

Different level of social interaction

The captivating nature of gambling comes from its social aspect. Unfortunately, personal interaction is widely missing from online gambling sites. VR technology creates multiple opportunities to bring back and even enhance that social moment. The ability to connect with other players is one of the main reasons behind Fortnite’s popularity. This form of co-experience is the next generation of entertainment. Research conducted by Facebook has found participants spend more time on VR compared to any other medium. This directly translates into increased profits for casinos.

Pokerstars has made efforts in this direction by implementing Voice UI. Instead of using hand controllers to make a call, pass, or raise, players give voice commands.

Another opportunity for bringing in the social element are the players’ avatars. They enable players to build their identity reflected in the avatars’ appearance, but also the avatar's social, competitive and community status. For instance, players are willing to pay real money for virtual drinks at the bar. Operators can offer these social touchpoints for free to VIP customers as an act of appreciation.

VR also brings a new dimension to customer support. Customer support can also be represented with avatars to assist the player in person. The social moment increases the LTV of players and contributes towards lower churn rates.

Rethinking game design

VR is a way more capable medium than a 2D mobile or desktop screen. Instead of copying the existing online experience, games must be redesigned from the ground up for a competitive advantage with VR. For example, a VR slot game can become fully immersive by teleporting the user into the slots’ world of Ancient Egypt. Next, enrich the experience with high-fidelity graphics, realistic spatial sounds and animations. When betting on virtual race cars, the user can be teleported inside the car he/she made a bet on and experience the race firsthand.

New revenue streams

VR casino lobbies create new revenue stream opportunities: ad placement of brands on the venue walls, company logos decorating the bar etc. This kind of branding is not intrusive in the VR space and feels natural from the user's perspective. VR also gives users the ability to change venues from a Las Vegas casino today, to Macau or even Mars casino, the very next day. The dynamic and diverse experience increases retention rates.

The majority of profits for online gaming operators come from their high-roller players. Although they represent a small subset of active players, an operator can launch a separate VR casino brand for them. Providing exclusive VR gaming experiences to high rollers/VIPs, the operator can minimise churn and maximise VR efforts for these player demographics.

The catch with VR is to focus on quality, rather than scale. The target audience might be limited yet, once these players experience it, they will become ambassadors for your offering.

Surely, the opportunities and possibilities offered by the VR medium truly exceed anything offered by mobile and desktop. VR is a new frontier not just for gaming but for every industry, and it’s exciting to see where it takes the industry and what kind of innovation it brings upon us.

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