Online Gambling

By David Wolberg

Two recent decisions by the Israeli Courts demonstrate the judiciary’s elaborate interpretation of the Israel Penal Law’s sections relating to gambling and unauthorized games.  The case of Shimon Dabush vs. Connective Group Ltd. et. al. (hereinafter: “Dabush”) demonstrates how elaborately the Courts define gambling.  The case of The State of Israel vs. Shauli et. al. (hereinafter: “Shauli”) demonstrates the Courts harsh view on online gambling.

Dabush

As demonstrated below, under certain conditions, a tender may be recognized as a “game of gambling”.  In the case of Dabush, Justice Ruth Ronen, within an interim proceeding, had to decide whether to allow a class action.  Inter alia, she was called upon to determine whether the organizers of online tenders, via a website titled “1BUY1”, were in fact organizing gambling activity under the pretence of a tender.

In the present case at hand, tender participants would forward their offers for the purchase of various goods, such as electronic appliances and vehicles.  Participants interested in a certain product had to pay a “participation fee” and thereafter, submit their offer for the purchase of a particular object.  If a participant offered a price which was identical to an earlier offer(s), all identical offers would be cancelled.  A participant which offered the highest bid, unequal to other bids, was declared the winner of the tender.

At the onset of the decision, Justice Ronen made it clear that the mere fact that the website’s organizers used the term “tender” to describe the organized activity, did not legally render it a “tender”.  The Israel Penal Law – 1977, subject to qualifications, outlaws unauthorized games, gambling and draws.  An unauthorized game is defined as a “game in which one may win money, its equivalent or a benefit due to the results of a game, and the results are more dependant on luck than on understanding or capability”. Gambling is defined as “any arrangement whereby one can win money, its equivalent or a benefit, and the winning is dependant on guessing, inclusive of a lottery connected to the results of games and sporting events”.

In an elaborate decision, Justice Ronen explained why the organizers were in fact conducting a gambling game.  One may argue, that all tenders, to a certain extent, form some sort of gambling.  Tender participants forward their offers without knowledge of their competitors’ offers.  Thus, there is a certain degree of guessing within tenders.  However, the prime objective of a bona fide tender participant is to submit the worthiest offer, which is often, the highest bid/offer.  While the prime objective of a 1BUY1 participant was to submit the highest offer which was not identical to any other offer(s).

Moreover, though the prime objective of bona fide tender organizers is to obtain the worthiest  bid, it enables equal competition which benefits society.  On the other hand, the 1BUY1 organizers’ main objective was to obtain as many offers as possible in order to profit from the participation fees.  All goods being offered for bids in the 1BUY1 website, had a set maximum price which could not be exceeded.  The maximum price was significantly lower than the real market price.  This would induce participants to take part in the bidding.

Once a bid was forwarded by a 1BUY1 participant, if it was not cancelled due to existing identical offers, the participant would be notified how many bids were higher and lower.  This would enable the participant to submit additional bids, all of which required additional participation fees.

The 1BUY1 tender was held to be similar to a “high low” game.  Though, participants could increase their chances of winning the “tender” due to a contemplated strategy, in essence, it was a game which was based on fate and luck.  When weighing the skill element against the luck element, Justice Ronen explained, the court must consider if the game is beneficial towards society or if it detrimental towards its participants.  In the present case at hand, it was held that 1BUY1 was detrimental towards its participants and not beneficial to society.  As mentioned above, Justice Ronen concluded that 1BUY1 tenders were in essence “games of gambling”.

Shauli

A recent ruling in the criminal law case of Shauli, demonstrates the Israeli Courts’ harsh view on online gambling.  The case involved multiple defendants, including the website’s owners and the technical personnel who helped maintain the site.

As expected, Justice Rafi Arania, convicted and sentenced the website’s owners under the Israel Penal Law, which outlaws gambling.  However, interestingly, the Court also convicted and sentenced individuals who were merely involved in the logistics of technically maintaining the website.  More precisely, though the technical personnel did not enjoy the website’s proceeds or directly induce gambling on the site, they aided in the site’s construction, maintenance, technical repairs and occasional upgrades.

Justice Arania explained that the internet holds many dangers.  Due to its accessibility, many crimes are easily committed via the web.  These crimes include defamation, privacy and intellectual property infringement, gambling, prostitution, pedophilia, obscenity and human trade.  It is extremely easy to commit online crimes, very profitable and less “risky” from a perpetrator’s point of view.

Gambling on the web has become very popular.  The web is saturated with sites that enable gambling, including of casino games, horse racing, sport events, lotto, bingo, etc.  Moreover, some sites teach the art of gambling.  Any individual, irrespective of age, may participate in gambling at any given hour from any given location.

The Penal Law explicitly outlaws the organization and the holding of gambling activity.  However, it also outlaws the participation, maintenance and management of gambling.  Thus, in an effort to send out a clear message against online gambling, the court convicted those involved in the technical maintenance of the website.

Conclusion

As demonstrated in the case of Dabush, website operators will often administer commercial schemes which they will title “tenders”, “skill based games”, “skill based competitions”, etc.  However, when examining the various schemes in light of the Penal Law, the courts will consider the true nature of the commercial activity.  As demonstrated in the case of Shauli, the courts take a harsh view of online gambling and will hold “secondary players”, such as technical personnel, accountable for gambling crimes.