Phil Ivey, a professional poker player who has won several major tournaments, has in the last few years turned his attention to baccarat. He has been wildly successful, winning $9.6 million from casinos in 2012.
It’s somewhat surprising that he could make the transition from one game to the other, but a professional gambler being good at gambling is not the craziest idea. Where the story gets twisted is when casinos, most prominently the Borgata in Atlantic City, refused to give Ivey what he had won. Instead of paying him, they sued him.
“Professional Gambler In Trouble With the Law” would not always have been an unusual headline, but in twenty-first-century America casino gambling is legal almost everywhere. Ivey was not charged with a crime: the gambling itself was legal, part of a protected industry that is flourishing as never before in the United States.
Instead, the Borgata alleged that Ivey’s actions, which the casino agreed to in advance, constitute cheating. In fact, they merely constitute a gambler getting a legitimate advantage over the casino. In this age of cozy cooperation between the state and the gaming industry, that’s something that’s just not allowed.
The House Always Wins
Unlike poker, baccarat is purely a game of chance. The rules are fairly simple. As Ben Guarino explained in the Washington Post last month, “A croupier deals himself or herself a pair of cards, and another pair of cards to a player. The cards in hand are added together — face cards and tens are worth zero, while aces have a value of one — with the twist that only the last digit of the sum matters. A hand of an eight and a six, for example, would be worth four points. Unlike blackjack, a player cannot ask for a third card. An additional card is automatically dealt to a hand of five or fewer points. There are a few ways to bet, though whoever gets closest to a value of nine, the highest possible score, usually wins.”
The game seems a poor fit for a poker player whose typical milieu is a game that has some element of chance but also requires skill. That, perhaps, should have been the Borgata’s first clue that something was amiss. When someone like Ivey, who has made millions in a skill-based competition, suddenly takes up a game that is based purely on chance, it might be a sign that he has found some angle or advantage to work.
That, indeed, was the case. Working with another gambler, a Chinese woman named Cheng Yin Sun, Ivey arrived at various casinos to which he had wired money ahead of time. The pair had a list of demands about the game that the casinos were all too happy to accommodate. Perhaps because the game relies on chance, baccarat players are notorious for believing in luck and rituals. Further, as Sun told the New York Times Magazine in an article last summer, Asian players are also viewed in the industry as superstitious.
So when the pair specified certain conditions, the casinos always obliged. In this case, as recounted in court documents, the conditions they asked for were “(1) a private area or ‘pit’ in which to play; (2) a casino dealer who spoke Mandarin Chinese; (3) a guest [Sun] to sit with him at the table while he played; (4) one 8-deck shoe of purple Gemaco Borgata playing cards to be used for the entirety of each session of play; and (5) an automatic card shuffling device to be used to shuffle the cards after each shoe was dealt, which retained the orientation of each card that Sun requested to be turned.” Again, these conditions might have tipped off a counterparty knowledgeable about gambling (like a casino!) that something was up. But again, Borgata agreed to everything.
They did not agree out of the goodness of their hearts. Casinos love to indulge high-rollers because they know that the longer a player spends at the table, the more money he will lose. So they allowed the requests, and thereby exposed themselves to Ivey and Sun’s advantage: the cards in question had a minute flaw. It was just a 1/32 of an inch deviation in the pattern on the back, but Sun had trained herself to spot the tiny variation. By getting the dealer to rotate certain cards before adding them back into the deck, she and Ivey could more accurately figure out which way to bet the next time around.
The practice, known as “edge sorting,” did not violate any of the rules of baccarat, nor did it conflict with the terms agreed upon by the casino and the gamblers. Nevertheless, Borgata cried foul and sued, claiming Ivey and Sun “knowingly engaged in a scheme to create a set of marked cards and then used those marked cards to place bets based on the markings.”
Judge Noel Hillman of the U.S. District Court of New Jersey agreed in a decision handed down last month. Despite never marking the cards or even touching them, Hillman held that Ivey and Sun had violated New Jersey’s Casino Control Act by using marked cards.
Heads I Win, Tails You Lose
Get that? 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.
How is that possible? Part of the problem lies in a section of the Casino Control Act that bans anyone from knowingly using cards ”which have in any manner been marked or tampered with, or placed in a condition, or operated in a manner, the result of which tends to deceive the public or tends to alter the normal random selection of characteristics or the normal chance of the game which could determine or alter the result of the game.” Any contract that violates the Casino Control Act is unenforceable.
The rule is clearly intended to prevent players from marking cards, or working with a casino employee to help them cheat. Ivey and Sun did neither of these things, nor did they violate any rule of the game. They found a loophole and, after getting the casino to agree in writing that they could, they exploited it.
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. In even more common ways, casinos will keep sophisticated players from winning and bar them from the premises to keep them from winning any more. Counting cards in blackjack, something completely legal and within the rules, will get players ejected and their photographs circulated to warn other casinos that they play the game too well to be allowed to compete.
The odds of nearly every sort of casino gambling are such that the advantage lies with the house. That’s not a secret. Even without reading up on the subject or breaking down the math, players can tell just by looking at the magnificent palaces casino companies build that gambling is profitable, and the profits are almost all on one side of the table.
Governments acquiesce in this unfairness because it also profits them. The industry paid more than $300 million in taxes to Atlantic City and the state of New Jersey in 2015. Since gambling was legalized there in 1978, they have paid $12 billion in total. That gives Trenton a lot of reasons to keep things operating in the casinos’ favor.
We’ll Let You Skin People If We Get a Cut
Casinos are permitted to operate almost as separate sovereignties. Most businesses like them operate as public accommodations, and are required not to discriminate. New Jersey casinos, beyond being required to eject certain people with criminal records, may also throw out “any person who disrupts the operations of its premises, threatens the security of its premises or its occupants, or is disorderly or intoxicated.” In their case “disrupts the operations” has been construed to mean “wins too much.”
Beyond that, they are also exempt from all sorts of other laws. New Jersey prohibits smoking indoors at any workplace or public place. But there’s an exception for casinos. The Division of Alcoholic Beverage Control rigorously regulates everything to do with the sale and consumption of alcohol in New Jersey. Guess which kind of business is allowed to vary these rules because of the “uniqueness” of their industry? Yes, casinos have an exception for that, too. The state of New Jersey has found reasons to regulate a lot of things they find harmful, but when it interferes with casinos’ operations, they turn into libertarians.
Singling out New Jersey in this may be unfair. Other than Nevada, they were the first to legalize gambling, so they figured out early how to skim the most money from them and their patrons. But the other states are catching up. As competition dilutes the market and reduces each state’s tax take, look for them to side with casinos even more in disputes against individual gamblers. Support for legalized gambling seems like a pro-liberty impulse, but with the government is on their side, casinos and the government have stacked the deck against the average citizen.