Contracts And Poker: Compulsive Gambling

In the March 20, 2024 issue, Card Player reported on a federal court decision that threw out a case brought by a gambler in New Jersey who claimed that the casino encouraged him to continue to bet in spite of the fact that it knew he was a compulsive gambler.

Should compulsive gamblers have recourse against the casino?

Compulsive gambling is clearly a social problem. Under the name of “Gambling Disorder,” it is recognized as a mental illness by the American Psychiatric Association. It is estimated to affect 1-2% of the American population.

We don’t see it too often at the poker table, however. One reason may be that most males with a gambling disorder are “action gamblers,” and, let’s face it, poker does not provide all that much action.

(As an aside, there have been some great movies about compulsive gamblers. Some of my favorites are a bit obscure: The Great Sinner (1949) with Gregory Peck as a character based on Dostoyevsky’s novel The Gambler; Owning Mahowny (2003) with the late great Philip Seymour Hoffman as a bank employee who embezzles funds to finance his weekend trips to – yes – New Jersey; and maybe best of all, the British TV series Cracker (1993) with the late great Robbie Coltrane as a crime-solving psychiatrist – you will love the scene where he attends a Gamblers Anonymous meeting.)

Compulsive gambling is a problem for the gaming industry to self-regulate, for casinos have a financial interest in compulsive gamblers since they provide a share of casino revenue that is out of proportion to their share of the gambling population. Most jurisdictions therefore address the problem with some form of regulation.

Most require that a certain percentage of casino revenue or licensing fees be allocated for the treatment of compulsive gambling. You have probably seen the posters in the casinos, usually sensibly located next to the ATM machines, suggesting that self-identified compulsive gamblers call a help line. Another technique is self-exclusion, a system in which gamblers put themselves on a list that will bar them from the casino. If they have done so, and the casino admits them anyway, then they may have recourse.

Compulsive gamblers often raise defenses to contract formation, particularly when they try to avoid collection of a “marker” – the credit the casino extended them in order to gamble. This defense will not work in Nevada, where a state statute bluntly provides:
A patron’s claim of having a mental or behavioral disorder involving gambling … is not a defense in any action by a licensee or a person acting on behalf of a licensee to enforce a credit instrument or the debt that the credit instrument represents [and] is not a valid counterclaim to such an action.

New Jersey, however, has no such statute. One of the defenses casinos in New Jersey raise to claims by compulsive gamblers is that there is a complex web of gambling regulations that provides the last word on the subject. The issuing of markers is subject to regulation, and those regulations are silent on the ability of a gambler to assert defenses to them. Therefore, the casinos argue, the legislature must have determined that those defenses are not available.

The courts have determined that this is a losing argument. They hold that the regulations do not pre-empt the field, and they can be supplemented by claims that arise in the common law, such as breach of contract or negligence.

Nevertheless, gamblers claiming to be impaired by drunkenness or gambling disorder have not fared well in raising these defenses in New Jersey. In one case that I consider particularly outrageous, the court would not let the gambler proceed with claims that his markers were invalid because of his gambling disorder but did let him proceed on grounds of unconscionability and duress.

“Unconscionability” means that the contract had an outrageous term in it. Exactly what is outrageous about a contract that essentially says, “I promise to pay the casino $50,000,” I have no idea. And duress means that you entered the contract because of an unlawful threat.

I suppose the casino may have said, “We won’t provide you with chips unless you sign this marker promising to pay us $50,000!” That threat does not sound unlawful to me. In spite of this generous holding, the court concluded by stating: “This court in so holding finds no support in legislation or case law that the disorder of compulsive gambling should, in and of itself, be recognized as a defense to capacity to contract which will render a contract void.”

The latest claimant was Sam Antar, who claimed the casino’s actions in encouraging his gambling when it knew that he was a compulsive gambler was an unconscionable practice in violation the New Jersey Consumer Fraud Act (CFA).

Antar may well have some expertise when it comes to fraud, because while his case was progressing, he was in prison for fraud! (It apparently runs in the family – his uncle was Eddie Antar of “Crazy Eddie” fame, who also served time for fraud).

Nevertheless, the court never reached the merits of his claim and dismissed it because the CFA was pre-empted by the more specific regulations of the New Jersey Casino Control Act (CCA).

Antar also claimed that the casino was negligent in allowing him to gamble when it knew he was a compulsive gambler. This claim was not preempted by the CCA. As explained above, New Jersey courts allow claims based on the common law even though there is a regulatory scheme in place.

But when you claim negligence, you have to show that someone who owes you a duty neglected to perform or badly performed that duty. However, the New Jersey courts have held that casinos owe no duty to patrons who are incapacitated either by drunkenness or mental illness. Therefore, it also dismissed the negligence claim.

Antar has appealed the decision, but he is unlikely to meet with success. ♠

Scott J. Burnham is Professor Emeritus at Gonzaga University School of Law in Spokane, Washington. He can be reached at [email protected].