In recent days, there has been much talk in the media about the ruling in Civil Appeal 476/17 Rafi Amit v. Tel Aviv 4 Assessing Officer. This is the first sign of a sobering up in the justice system. It is now appropriate for the legislature to address the issue and "pick up the gauntlet" in order to advance a bill that will regulate the popular game.
Background
In Israel today, according to Section 224 of the Penal Law, 1977, games of luck and gambling are prohibited. The exact definition is:
"A game in which a person may win money, money's worth, or a benefit according to the results of the game, and the results depend more on fate than on understanding or ability"
Additionally, there is also the Penal Law Amendment (Prohibited Games, Lotteries and Betting) Law, 1964, which reinforces the prohibition on games of luck when there is a profit in money or money's worth.
What the aforementioned laws have in common is that the game of poker in general, and "Texas Hold'em" in particular, are not mentioned in them at all, meaning that those who decided that poker is "illegal" and falls under the definitions of the laws are the courts in Israel in various criminal rulings. The prevailing assumption until now was that it is a game whose results depend more on luck than on ability and skill, and therefore it is sweepingly considered "gambling."
Although the game is legal and supervised in many countries, it seems that in Israel the courts have chosen to ignore this fact and even certain facts such as:
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Mathematicians have proven that it is indeed a game of skill and understanding much more than luck. For example, the opinion of Professor Zvi Gilula from the Department of Statistics at the Hebrew University:
"The probability of an intelligent player with strategic skills winning a Texas Hold'em tournament when competing against a player without these skills far exceeds 50%"
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The simple, observable fact that requires no academic knowledge: Today in the world (and also in Israel), there are many people who have been making a living from the game for years. If you look at their winnings threshold, you can clearly see that at the end of each year they make a profit (some even profit millions), prompting the following questions:
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If it is a game of luck, are these people so "lucky" that they constantly make a profit (why don't they play the lottery if "Lady Luck" is constantly and sweepingly on their side?)
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Has anyone ever heard the term "professional roulette player"? Probably not, but have you heard the term "professional poker player"?
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As stated above, the courts have decided to treat the game of poker in all its variations as a "single game," and therefore no importance should be attributed to statistics and skill.
Today there are many styles of poker, the most popular being the multi-table tournament where the player sits at a table with other participants and tries to eliminate competing players one by one until reaching the "final table," where usually the 9 players who managed to survive compete against each other for first place. A poker tournament can last anywhere from a few hours to several days of play. The Main Event tournament of the World Series of Poker, held annually in Las Vegas, spans over 10 consecutive days of play.
In most tournaments, there is no need to finish in first place to win money or prizes, and depending on the size of the tournament and the number of participants, one can also finish in lower places and still profit. Usually, about 12% of all participants in a tournament win a cash prize or some cash equivalent.
Besides tournaments, there is another style of play known as "cash", where a person sits at a table and usually plays against the same people all evening. If the player loses, he can buy back his participation at any given time throughout the evening. Such games usually last a few single hours.
Whether you are playing in a tournament or in "cash", it is never a "single game," meaning a single poker hand. Those people who travel to tournaments (and sometimes play in "cash" games along the way) around the world (and even underground in Israel) are not necessarily defined as "professional players," but what they all have in common is the large number of games (poker hands) in which they participate. Whether they are amateur players or players trying to make a living from the game, all poker players play hundreds, if not thousands and tens of thousands of poker hands a year.
And here we return to the ruling in question. We will refer to the method of taxation in which the Honorable Supreme Court chose to tax Mr. Amit's profits. The court ruled that Mr. Amit's profits should be taxed as income from a business or occupation according to Section 2(1) of the Income Tax Ordinance [New Version] and not under Section 2A as income from lotteries and gambling.
In the ruling, the court made an effort to separate and emphasize that tax laws differ from criminal law, as stated by the Honorable Justice Hendel:
"The purposes of tax laws are different from the purposes of criminal law. This is particularly true when dealing with offenses relating to prohibited games. The legislature prohibited a 'game in which a person may win money, money's worth, or a benefit according to the results of the game, and the results depend more on fate than on understanding or ability' (Section 224 of the Penal Law), for different purposes than those for which Section 2A of the Ordinance was established, which determines tax liability for income derived 'from gambling, lotteries or prize-winning activity'. While the purposes of the criminal offense deal with the recognition of possible addiction to gambling and games of chance, and the desire to regulate and supervise these games - the taxation purposes of income from gambling, lotteries and prizes are different. It seems that the main purpose of Section 2A is to bring into the Israeli tax base also incidental income from gambling, lotteries and prizes, which were not necessarily taxed in the past. It should be noted that there are gambling and lotteries that are permitted by law, by virtue of Section 231 of the Penal Law which allows the granting of a permit for such."
It can be seen that the court tries to avoid as much as possible the question of whether it is a game of luck or skill, and whether it is indeed a criminal offense or not.
However, later in the ruling, the Honorable Justice Willner argues:
"This court has not yet substantively addressed the issue of the classification of the game of poker in criminal law (except in Criminal Appeal Leave 7761/01 Elkan v. State of Israel (Nov. 26, 2001) (in which the discussion of the question itself was not exhausted), and it seems to me that the issue has not yet been fully clarified. This is, among other things, paying attention to questions - which are also matters of expertise - that have not yet been decided, whether there is indeed a different ratio between the effect of skill and the effect of fate on the results of the single game - compared to the results of a sequence of games, as well as whether the said ratio is different with respect to the amateur player compared to the professional player. Important and interesting questions that will surely be discussed further."
From this we can learn that the court is beginning to understand that the big "luck or skill" question has not yet been clarified and resolved in the Israeli justice system and requires a deeper discussion. This opens a door for a considerable number of poker enthusiasts and players in Israel who have so far feared the threat of the law, and it seems that the court's ears have "opened," and the time has now come to raise and discuss these issues in depth in the hope that it will be possible to create regulation and legality for the poker sector in Israel.
The Honorable Justice Willner also criticized previous decisions on the subject:
"The few criminal rulings that addressed the question of classifying the game of poker, in its various shades, dealt mainly with the single poker game, to distinguish from a sequence of games and tournaments in which professional players participate. In this ruling, it was noted on several occasions that in the single poker game, which - it was determined - Section 224 of the Penal Law deals with (a determination that to my mind is not free from doubt), the relative share of fate in affecting the results of the game is greater than the share of understanding or ability. Alongside this, it was commented that this ratio may change in a sequence of games and tournaments so that the relative share of ability and understanding in affecting the results of the games will increase. The aforementioned judgments did not attribute practical importance to this possibility."
I believe that the ruling of the Honorable Justice Willner emphasizes and illustrates the lacuna and gaps that currently exist between the current situation in Israeli society, where the game of poker has become routine, and the law and case law on the subject. Hundreds of thousands of Israelis play, whether abroad or in "friendly" games at homes on weekends, and it is a familiar and known social norm. In fact, according to the current situation, there are hundreds of thousands of "criminals" in Israel today who break the law every week and play a game that, as mentioned, is legal and regulated in many countries around the world.
Conclusion
This is the first sign of sobering up in the justice system and in Israeli society. The road is still long, but it seems that reality is beginning to seep into the walls of the court, and it seems that there will be no escape and very soon the court will have to deal with the luck/skill question and the facts, and make a decision. Furthermore, it is appropriate for the legislature to address the issue and "pick up the gauntlet" in order to advance a bill that will regulate the popular game. It is no longer possible to close one's eyes and ignore reality, and the time has come for the State of Israel to intervene in the issue because, at the end of the day, laws were intended to regulate social norms and not to cause injustice to hundreds of thousands of citizens whose only sin is a love for the most popular card game in the world.
It should be emphasized that the solution is regulation and supervision, not full legalization that will allow anyone to do whatever they please, exactly like in any other field that involves a risk of addiction and loss of funds, such as the stock market, for example.