Can Players Take Advantage of Mistakes?

The explosive proliferation of legal gambling has led to a new problem: What should be done about bettors who have taken advantage of operators' mistakes?

The situation has been exacerbated by the increased popularity of automated games and gaming devices. Human dealers do make mistakes, but they know the difference between a quarter and a dollar. The misprogrammed slot machine discovered in a tribal casino in Southern California would still today be registering a player's bets as $1 when he had bet only 25 cents if it had not been fixed.

If the player had won a large hand-paid jackpot, the error would have been caught immediately. Instead, he just quietly won hundreds of dollars over a period of a few hours.

When the mistake was caught, the tribe was angry. It not only wanted its money back – it asked the local district attorney to bring criminal charges against the player, which the D.A. declined to do.

We have to be clear that we are not talking about cheating, at least in the traditional sense. No one doubts that a player cannot conspire with an insider at a state lottery to rig a game. Bettors at a racetrack cannot drug the horses. A dealer may never intentionally reveal to players cards dealt facedown.

But taking advantage of operators' errors is not a crime. "Cheating" is usually defined as a deliberate act, such as altering the criteria of a game, and often also requires the specific intent to cheat. Crimping cards is cheating. If a dealer accidentally flashes his downcards, players are not required to shut their eyes.

The difference for the player is guilt or innocence. For the operator, and maybe even its regulator, it is a question of liability for false arrest.

Michael Russo and James Grosjean were arrested in 2000 after winning $18,000 while playing poker. Russo sat in jail for 12 hours, Grosjean for four days. Charges were dropped, after it became clear the two were simply taking advantage of sloppy dealing.

No one doubts that the casino, Caesars Palace, can be sued. But the Nevada Supreme Court is deliberating whether the State Gaming Control Board and its agents can also be sued for false arrest.

It is not always clear where to draw the line. A player in Nevada was convicted for "handle popping," manipulating the handle on a defective mechanical slot machine. But the conviction was overturned on appeal when the state Supreme Court held he had done nothing to damage the machine or change the characteristics of the game, and the statute had not given adequate warning that handle popping was a crime.

Some of the law in this area is settled, but lawyers and executives are struggling to find answers for the rest.

The state lotteries are in the best position. They almost always have statutes and regulations clearly stating that mistakes, like misprinted tickets, do not have to be paid.

It may not be as clear what should happen if the lottery prizes have already been paid before the mistake is caught. Since state lotteries are probably the most carefully run and heavily scrutinized businesses in the civilized world – with an error rate at least as good, if not better, than the atomic energy industry – we do not have any binding precedents, only anecdotes.

For example, a state lottery once accidentally released two sets of winning numbers for a game. The lottery paid ticket holders of both sets, not because it legally had to, but for purposes of public relations.

Racetracks are similarly blessed. In the rare instances when bettors have been paid for winning tickets on a horse that is later disqualified, there is no way to find out who they are, let alone try to get the money back.

The reason this is so rare is that tracks will delay paying off tickets if there is a challenge. And once the dispute has been decided at the track, immediately after the race, there is almost no way to get that decision over-turned. The law clearly states that bettors never have the right to sue if they think there was a bad call and their horse should have been declared the winner.

Casinos are in the worst situation, in part because they have to make up the law as they go along. Often, the statutes and regulations that are on the books are no help, and may even be a hindrance. In New Jersey, for example, casinos are fined for paying off losing bets. This is a good law to prevent cheating by collusion, but it ignores the common situation of a casino executive paying a disgruntled player, once, if the player insists that he won. And the law gives little guidance as to what should happen to the players who are paid for losing bets, either intentionally or by accident.

In theory, if never in practice, players who have taken advantage of operators' errors should be forced to disgorge their ill-gotten gains. The law calls this "unjust enrichment," and it is well-established that a person cannot keep what has wrongfully been given to him. For example, there actually was a case in which a man by the name of John Smith had to return a check for many thousands of dollars from a brokerage firm that was supposed to go to a different John Smith.

Most problems are caused by players who think they are doing something wrong when they realize a mistake is being made in their favor. Of course, some patrons will report the mistake. The remaining 99.9 percent will take the money, but act so guilty that casino executives will suspect cheating.

The lesson for gaming executives is to be careful about calling the police. And double check that the slot machines are not programmed to think a quarter is a dollar.

™Copyright 2004, all rights reserved worldwide. Gambling and the Law® is a registered trademark of Professor I. Nelson Rose, Whittier Law School, Costa Mesa, California.

Professor I. Nelson Rose is recognized as one of the world's leading authorities on gambling law. His website is www.GamblingAndTheLaw.com.