Easy Come . . . Easy Go?

A Michigan man who won $1.7 million at an offshore Internet casino now faces the possibility of losing his winnings to the state.

"Essentially, by being on his computer placing a bet and gambling while in the state of Michigan, he went against Michigan statute, which regulates and controls gambling."

- Nate Bailey
Michigan AG's Office

Tim Pollack, a 45-year-old bartender from Newaygo County, won the jackpot at Caribbean-based Casino Tropez in January. Now Michigan's Attorney General Mike Cox is challenging the legality of Pollack keeping his earnings.

Cox's office learned of Pollack's good fortune through reports by local television stations, which were contacted by the casino following Pollack's win.

"He violated the Michigan gambling law that regulates the use of gaming and casinos in the state," said Nate Bailey, a spokesman for Cox. "Essentially, by being on his computer placing a bet and gambling while in the state of Michigan, he went against Michigan statute, which regulates and controls gambling."

While Cox is questioning the legitimacy of Pollack keeping his winnings, he is not willing to pursue action pertaining to illegal gambling because doing so would result in a case of legislative hot potato between jurisdictions.

Internet gambling is illegal in Michigan, according to Public Act 235 of 1999, which became law Dec. 31 of that year. It outlaws the use of a "computer, computer network, computer program or computer system to commit or solicit another person to commit illegal gambling." Further, Michigan state law outlaws all forms of gambling, except those specifically permitted under state law, of which Internet gambling is not one.

The grey area lies in determining which jurisdiction's laws apply. Cox's office said that because Casino Tropez is based in the Caribbean, the state has no authority in the matter and should be handled by the federal government.

The U.S. Attorney's office has reportedly said that the case belongs to the state because there are no clear federal laws governing individual bettors. But Cox's office said that because the gambling site is in an offshore jurisdiction, it is almost impossible for the state to manage.

"We very quickly run into jurisdictional issues because it's a multinational situation," Bailey said. "The federal regulations are clear that it's illegal to operate a gambling operation online. It's less clear how the individual bettor is dealt with. Typically the interest would be in shutting down the illegal operation, which would be the cause of the problem, not the individual gambler."

Bob Stocker, a lawyer at Dickinson Wright in Lansing, Mich. who specializes in gaming law, said he would be surprised if charges were actually brought against Pollack.

"Governments are very selective in the cases they have decided to prosecute," Stocker said. "Internet gambling is a violation of the Wire Act, but I don't see the federal government going after him. If anything, it would be up to the county prosecutor to bring a case against him."

He added that state law could punish a person for simply using the Internet to place a wager with an Internet site, but he is skeptical that the state will try to use this case to set a precedent.

Further complicating the case, not only was Pollack gambling on an offshore site, but his winnings were deposited into a London bank account that he accessed via ATM. Whether Pollack will report his winnings to the Internal Revenue Service remains to be seen.

"While state law enforcement officials are unlikely to use resources to go after casual bettors, high-profile awards can trigger a response. We can only hope that the law enforcement officials in Michigan have more important issues than to attempt to rain on one of its citizen's good fortune."

- Tony Cabot
Lewis and Roca

Stocker pointed out though that all income is taxable, regardless of the source.

Pollack has reportedly already quit his job and purchased a new car with some of his winnings. No charges have been brought against him because Cox is only conducting a preliminary inquiry.

"I would doubt that anyone is going to jail over this incident," Tony Cabot, a partner with the Las Vegas firm Lewis and Roca, said. "It appears more to be the workings of an overactive media that wants to create issues to create news. The state governments would soon become very unpopular if they decided to take active enforcement efforts to dictate the private behavior of their citizens."

Cabot said that while online gamblers in the United States should not rely on the status quo, he doesn't see Pollack's case setting a precedent in gambling law.

"Persons who gamble online should be aware that their activity is subject to state law," Cabot said. "While state law enforcement officials are unlikely to use resources to go after casual bettors, high-profile awards can trigger a response. We can only hope that the law enforcement officials in Michigan have more important issues than to attempt to rain on one of its citizen's good fortune."

Cox's office could not be reached for comment.