State v. Nixon

DeBRULER, Justice,

dissenting.

The trail is clearly marked in this case by prior Indiana cases, historical considerations, and the case law of other jurisdictions; and it leads to the conclusion that pari-mutuel wagering on the outcome of horse racing does not constitute a lottery within the prohibition of Article 15, § 8, of the Indiana Constitution. The question presented is not a new one. The courts of thirteen jurisdictions have reached the conclusion that such betting, while certainly a form of gambling, does not constitute a lottery within constitutional or statutory prohibitions. Opinion of the Justices, (1971) 287 Ala. 334 , 251 So.2d 751 ; Oneida County Fair Board v. Smylie, (1963) 86 Idaho 341 , 386 P.2d 374 ; Gandolfo v. Louisiana State Racing Comm., (1954) 227 La. 45 , 78 So.2d 504 ; Ginsberg v. Centennial Turf Club, (1952) 126 Colo. 471 , 251 P.2d 926 ; Long-streth v. Cook, (1949) 215 Ark. 72 , 220 S.W.2d 433 ; Rohan v. Detroit Racing Assoc., (1945) 314 Mich. 326 , 22 N.W.2d 433 ; People v. Postma, (1945) 69 Cal.App.2d Supp. 814 , 160 P.2d 221 ; Engle v. State, (1939) 53 Ariz. 458 , 90 P.2d 988 ; People v. Monroe, (1932) 349 Ill. 270 , 182 N.E. 439 ; Multnomah County Fair Assoc. v. Langley, (1932) 140 Or. 172 , 13 P.2d 354 ; Commonwealth v. Kentucky Jockey Club, (1931) 238 Ky. 739 , 38 S.W.2d 987 ; Utah State Fair Assoc. v. Green, (1926) 68 Utah 251 , 249 P. 1016 ; Reilly v. Gray, (Sup.Ct.1894) 77 Hun. 402 , 28 N.Y.S. 811 ; Courts in two jurisdictions have held that such wagering to constitute a lottery. State ex rel. Moore v. Bissing, (1955) 178 Kan. 111 , 283 P.2d 418 ; State ex rel. Sorensen v. Ak-Sar-Ben Exposition Co., (1929) 118 Neb. 851 , 226 N.W. 705 .

The grounds upon which these cases have been decided have varied. Needless to say, it is the weight of reason and not the weight of numbers which must govern our decision. Nonetheless our task is facilitated by the abundance of reasoning available for our consultation.

Hoosier Horse has undertaken an extensive historical analysis of the development of constitutional prohibitions against lotteries with the purpose of demonstrating that the framers of our constitutional provision did not contemplate the prohibition of betting on races. Lotteries were first made illegal by statute in 1832. Acts 1832, ch. CLXXIX at 269, Laws of the State of Indiana, 16th Session of the General Assembly, Indianapolis: Douglas & Maguire (1832). In 1850 the Indiana Convention voted 41 — 27 to insert the ban against lotteries in the Constitution, Report of the Debate and Proceedings of the convention for the revision of the Constitution (Indianapolis, 1850), II, 1286, 1294, 2076. During the colonial period in America wide use had been made of the lottery by both governments and private persons to raise money. During the 19th Century opposition to lotteries grew in this country. The anti-lottery forces contended that the lottery was bad because it encouraged mass gambling and that drawings *163 were fraudulent and on occasion never did take place. Encyclopedia Brittanica 1977, Lottery, V. 22, p. 113. Lotteries sanctioned or operated by the government or private persons during the period followed a common pattern. The sale of lottery tickets, the prizes to be offered, and the use to which the retainage was to be put by the operators, received wide publicity in the community in which the lottery was to be held. Each lottery ticket sold was designated by a number. Numbers were randomly selected at a drawing and the winners were thereby determined. Such schemes were conducted so as to minimize to the utmost the ability of the operators to effect, and the players to predict the outcome. To be sure lottery schemes differed, however, the thought prevalent in the middle of the last century distinguished between and separately identified gambling enterprises conducted as lotteries and other forms of gambling. The definition of a lottery announced by this Court in Tinder v. Music Operating, Inc., (1957) 237 Ind. 33, 40 , 142 N.E.2d 610, 614 , is consonant with this historical overview of the lottery. There we said:

“What is lottery? The courts of Indiana have placed no other interpretation on the word ‘lottery’ than its commonly accepted meaning, defined in Webster’s New International Dictionary, as follows: ‘A scheme for the distribution of prizes by lot or chance; esp., a scheme by which one or more prizes are distributed by chance among persons who have paid or promised a consideration for a chance to win them, * * * A game in which prizes are given from a pool to holders of cards matching others reserved for that purpose.’ Lotteries are a species of gaming, and, although lotteries are gambling, not all forms of gaming or gambling are lotteries.”

As can be seen history provides strong support for the conclusion that the framers of the Indiana Constitution did not mean to encompass pari-mutuel wagering on horse racing within their prohibition of lotteries.

An analysis proceeding from universally accepted criteria of a “lottery” leads to the same result. Courts everywhere, construing both constitutional and statutory lottery prohibitions, agree that a lottery is characterized by three elements: consideration (paid for a chance to win); prize (awarded to winner); and chance (in determination of winner). Tinder v. Music Operating, Inc., supra, and cases cited at 237 Ind. 40 , 142 N.E.2d 615 ; Williams v. Weber Mesa Ditch Extension Co., (Wyo.1977) 572 P.2d 412 ; Morrow v. State, (Alaska 1973) 511 P.2d 127 , and cases cited at 129; People v. Postma, supra. There is some disagreement among the courts, however, as there is among the parties, as to the parameters of each element.

As this Court said in Tinder, a lottery awards prizes “primarily, if not solely, upon chance”; no distribution of prizes or winnings upon the basis of a “substantial degree of skill or judgment” can be a lottery. 237 Ind. at 41 , 142 N.E.2d at 615 . The trial court supported its conclusion that pari-mu-tuel betting constituted a lottery with the following finding of fact:

“13. That furthermore the individual takes risks in choosing a particular bet in that the individual does not know until the betting is closed what the payout will be in the given pool nor what the final odds will be. Furthermore, the individual does not know the outcome of the horse race prior to the race itself. These items are variables totally beyond the control of the individual as he places his bet.

14. The evidence establishes that favorites in races win less than % of the time and the track handicapper at the Michigan Raceway, defendant’s Exhibit B, demonstrates that that expert who handicaps all races for that particular date was only able to pick 36% of the payouts that date.

15. That there is no skill or judgment of the bettor which has any influence whatever over the determining events, namely, the horse race or the amount in the pool, or the odds on the payout of any given pool.”

*164 The trial court’s findings and conclusions and Nixon’s arguments indicate that the court below found the deficiencies in parimutuel betting to lie in three areas.

First the trial court discounted the skill and judgment of the bettor in selecting his bets. It is true that the bettor cannot be certain of the outcome of the race when he bets. But the bettor can decide whether to bet, on which horse, and in which finishing position, all based upon his consideration of the information provided by the racing form or program and his observations. Numerous courts have held that such an educated guess as to the race result constitutes the exercise of skill, or conversely does not reflect distribution of winnings by chance. Engle v. State, supra; Longstreth v. Cook, supra; Ginsberg v. Centennial Turf Club, supra; People v. Monroe, supra; Rohan v. Detroit Racing Assoc., supra. These courts discount the effect of the lack of absolute guarantees of success by offering examples of elements of chance which enter into everyday activities which are nonetheless not considered games of chance. No future event is certain, but it does not follow that every decision contingent upon future events is a lottery.

Nixon argues, however, that these well-reasoned cases are inconsistent with this Court’s decision in Hudelson v. State, (1884) 94 Ind. 426 , defining “lottery” in a statutory prohibition. A merchant offered a prize to the customer guessing nearest the number of beans in a glass globe. The Court held that chance, and not mathematical skill, determined the winner of the contest, because the deficiencies in the data available to the guesser (the irregularity and uncertain sizes of the beans, and the unknown thickness of the globe wall) would frustrate mathematical computation, and any attempted calculation would be no more than a guess.'

Hudelson does not stand for the proposition that only mathematical precision and certainty in prediction of race results would constitute an exercise of skill in pari-mutuel betting. Most human decisions are made in areas to which mathematical techniques have not yet been successfully applied. In Hudelson the Court was considering a mathematical problem, estimation of a number, incapable of solution by mathematical means. Such a problem can properly be said to be dependent upon chance for its solution, but it does not follow that all problems incapable of solution to mathematical certainty are games of chance.

Nixon argues that even if information is available permitting rational efforts at prediction, many if not most, bettors ignore such information and trust in hunches or arcane “systems”. This may be true, but it does not show that pari-mutuel involves the legal element of chance. It is required that pari-mutuel offer an opportunity to influence the likelihood of winning by the use of skill, and judgment in order that it not be based upon chance, but it is not necessary that every bettor avail himself of the opportunity. “It is the character of the game and not the skill or want of skill of the individual player which determines whether the game is one of chance or skill.” Engle v. State, supra at 53 Ariz. 469 , 90 P.2d 993 . See also Longstreth v. Cook, supra; Morrow v. State, supra at 511 P.2d 129 .

The trial court also found, quite correctly, that the bettor’s winnings are limited by and dependent upon the total amounts bet and the distribution of those bets. Courts which have considered this factor have generally not found it to vitiate the bettor’s opportunity to exercise skill and judgment. Rohan v. Detroit Racing Assoc., supra; People v. Monroe, supra; Utah State Fair Assoc. v. Green, supra; contra, State ex rel. Moore v. Bissing, supra.

While these factors operate to limit the amount which can be won by the bettor in the exercise of his skill and judgment, and while they are beyond his control and largely beyond his prediction, I do not believe that they thereby render the betting a lottery. Regardless of the total amount and distribution of the bets, the bettor’s skill in selecting winning horses influences the amount of his winnings. That skill and the factors in question at most operate independently in determining the bettor’s winnings. *165 The Alaska Supreme Court’s perceptive analysis of the role of chance in Morrow v. State, supra, suggests that a determining factor dependent on chance may vitiate the effect of the opportunity to employ skill only when it intervenes between the skill used and the final result and insulates them from one another. In few human endeavors is the return completely isolated from chance and wholly dependent on the efforts expended.

Finally the trial court’s. Finding No. 14 suggests an attempted empirical demonstration of the absence of influence of skill and judgment on the outcome of the betting. On a given date an expert at a Michigan racetrack selected “paying” horses in only one-third of his selections. Contrary to Nixon’s assertions, this showing establishes nothing. A demonstration that presumably highly skilled bettors do no better on the average than bettors who use some means of random selection would tend to show an absence of influence of the “skill” asserted by appellants. But we are shown only the success rate of the skilled bettor, and cannot determine how his rate compares with that of an “unskilled” bettor. There is no absolute rate of success which is a requisite of “skill.”

The trial court’s holding that the system or pari-mutuel wagering authorized by the Pari-Mutuel Wagering Act constitutes a lottery and that the Act contravenes Article 15, § 8, is erroneous, and the judgment cannot be supported on those grounds. I would reverse that judgment.

HUNTER, J., concurs.