Iowa

I. Definition of Gambling

The Iowa Code provides definitions for both illegal lotteries and illegal forms of gambling.

1.   An illegal lottery is “any scheme, arrangement, or plan whereby one or more prizes are awarded by chance or any process involving a substantial element of chance to a participant, and where some or all participants have paid or furnished a consideration for such chance.” Iowa Code § 725.12 (2005).

Based on the definition of an illegal lottery under Iowa law, it appears that the State applies a predominance test where prize, chance and consideration are the essential elements. In an Iowa Court of Appeals case, the defendants were found guilty of conspiracy to establish an illegal lottery, where the elements of prize, chance and consideration were all proven. State v. Khalsa, 542 N.W.2d 263 (Iowa Ct. App. 1995). The court looked at each element individually: chance is present when there is an absence of skill – the manner in which the chance is applied to the distribution of the prize is immaterial. Id. at 265. Prizes were not awarded under this scheme unless the winner paid a substantial processing fee, the court determined that this processing fee was sufficient to satisfy the element of consideration. Id. Finally, the prize element was clearly present, as prizes were awarded following the payment of the substantial fee. Id.

2.   Except as permitted by other chapters of the Iowa Code, the below forms of gaming all constitute illegal forms of gambling:

a.   Participation in a game for any sum of money or property of value;
b.   Make any bet;
c.   For a fee, either directly or indirectly, give or accept anything of value to be wagered within or outside of Iowa;
d.   For a fee, deliver anything of value received outside of a licensed racetrack, to be placed as a wager in a pari-mutuel wagering system; or
e.   Engage in bookmaking. Iowa Code § 725.7 (2005).

3.   In contrast to the predominance test contained within the definition of lottery, Iowa also has statutory guidelines of what constitutes illegal gambling. In Parker-Gordon Importing Co. v. Benakis, the court indicated that it need not be determined whether or not the game is one of skill or chance, rather the determination of whether a game is gambling turns on whether a sum of money or other property of value is put up. 238 N.W. 611 (Iowa 1931). This statement by the court is consistent with the first criteria stated in § 725.7 of the Iowa Code.

II. Definition of Bookmaking

1.   Bookmaking is defined under Iowa’s Criminal Law and Procedure statute as

[A]dvancing gambling activity by accepting bets upon the outcome of future contingent events as a business . . . . These events include, but are not limited to, the results of a trial or contest of skill, speed, power, or endurance of a person or beast or between persons, beasts, fowl, motor vehicles, or mechanical apparatus or upon the result of any chance, casualty, unknown, or contingent event. Iowa Code § 725.13 (2005).

2.   The definition of bookmaking does not include:

Excursion gambling boats, pari-mutuel wagering, games of skill or chance and raffles when legally conducted under the rules set forth in Title III: Public Service and Regulation; Subtitle 4: Gambling. See id.

In State v. Harrison, the court distinguished bookmaking from the act of making a gambling contract by addressing the differing language in § 725.7 and § 725.10 of the Iowa Code. 325 N.W.2d 770 (Iowa Ct. App. 1982). The court determined that the activity of bookmaking is criminalized under § 725.7 of the Iowa Code where the language of that section requires the taking or receiving of a bet or wager. Id. at 773 (emphasis added). Bookmaking differs from the making of a gambling contract, which is a violation of § 725.10, where the statutory language requires a recording or registering of bets or wagers. Id. (emphasis added). In Harrison the court held that the evidence offered failed to show that the taking or a receiving of a bet or wager occurred, as such, an essential element of bookmaking was lacking and subsequently the conviction for bookmaking could not stand. Id.

III. Specific Gaming Device Definitions

1.   A gambling device is defined by Iowa Code § 725.9:

A gambling devise is defined as “a device used or adapted or designed to be used for gambling ….” The definition includes devices such as roulette wheels, klondike tables, punchboards, keno layers, slot machines, pinball machines and pull tabs. Iowa Code § 725.9 (2005). Although not exhaustive, the definition of gambling device has been modified throughout the state’s history to specifically include certain types of games. See Parker-Gordon Important, Co. v. Benakis, 238 N.W. 611 (Iowa 1931) (dealing with punchboards), State v. Doe, 290 N.W.518 (Iowa 1940) (covering slot machines).

2.   Machines that are excluded from definition of gambling devices:

The definition of gambling device also specifically excludes certain machines from its meaning: antique slot machines and pinball machines or a device regularly manufactured and sold as a toy. Id. For a pinball or slot machine to qualify as an antique it must be twenty-five years or older. Id. Although there is an exception for antique pinball machines, case law has held that all pinball machines even though they offer varying degrees of prizes – free games, balls or tokens – are all condemned by the statute because they all possess the element of chance. State v. Doe, 123 N.W.2d 400 (Iowa 1963).

Possession of a gambling device for manufacturing or distributing purposes, where the device will be sold out of state into a jurisdiction where that device is legally permissible under Iowa Law. Id.

In H & Z Vending v. Iowa Dept. of Inspections & Appeals, H & Z Vending, a Nebraska proprietor developed an electronic amusement device for use within the State of Iowa. 511 N.W.2d 397 (Iowa 1994). Despite approval of the machine, pursuant to Chapter 99B, for use in Iowa by the Department of Inspections of Appeals, the agency subsequently ruled that the device was unlawful under Iowa’s criminal code. Id. The issue before the court was whether a device qualifying under § 99B.10 could concurrently be an illegal gambling device under § 725.9. Id. The court concluded that although the machine, classified as a “slot machine”, is made illegal under § 725.9, if it satisfies all the categorical requirements of § 99B.10 then it will be a legal gambling device as used under Chapter 99B. Id. at 398. The court also indicated, that just because a device is expressly listed by name as an illegal device under § 725.9 it will not preclude that device from qualifying under another chapter of the Iowa Code that has created exceptions for certain devices when certain conditions are met. Id.

In a Supreme Court of Iowa case the court addressed the meaning of a bucket shop as defined in § 4975-d of the 1913 Supplement to the Code. Lamson Bros. & Co. v. Mensen, 174 N.W. 688, 689 (Iowa 1919). The essential portions of the definition of bucket shop as set forth by the Court, according to the applicable section is “‘[a]n office, store or other place wherein the proprietor or keeper thereof . . . conducts the business of making, or offering to make, contracts, agreements, trades or transactions respecting the purchase or sale of any stocks, grain, provision, cotton, or other commodity . . .’” Id. at 689. Wherein both parties intend that such transaction shall be settled upon the basis of public market quotes made on a board of trade or exchange. Id. The court affirmed that the statute is intended to prohibit and punish both bucket shop establishments and the activity of bucket shopping. Id. In Harper & Ward v. Kurtz, the Iowa Supreme Court emphasized the portion of the bucket shop statute referring to “both parties intend”; without a mutual intention on behalf of both parties to the transaction to conduct a bucket shop activity then there will be no finding of such an illegality. 175 N.W. 45 (Iowa 1920).

Although Iowa did have governing bucket shop statutes in the early 1900’s it does not appear that such law has been continued into modern day. The case law dealing with the topic is centralized in the early 1900’s and there does not seem to be a current statute governing the practice of bucket shops.

V. Prohibition of Games of Skill

Please look under Section 6: Express Exemptions, Subcategory: Games of Skill or Chance, and Raffles for an indepth look into the statutory guidelines governing games of skill in the State of Iowa.

VI. Express Exemptions

1.   Games of Skill or Chance, and Raffles:

Pursuant to Chapter 99B of the Iowa Code, various games are deemed permissible, legal forms of gambling. The chapter establishes the types of gaming that are permissible, the location and manner in which the gaming may be conducted, and when licensing is required. Amusement devices, bingo, bookmaking, games of chance, games of skill, raffles, and social games are all permitted under Chapter 99B provided the guidelines and restrictions of the chapter are followed. See Iowa Code § 99B.1 (2005).

a.   A “game of chance” is defined by this section of the Code as the following:
    A “game whereby the result is determined by chance and the player in order to win aligns objects or balls in a prescribed pattern or order to make certain color patterns appear . . . and does not include a slot machine.” Id.

b.   A “game of skill” is defined as:
    A “game whereby the result is determined by the player directing or throwing objects to designated areas or targets, or by maneuvering water or an object into a designated area, or by maneuvering a dragline device to pick up particular items, or by shooting a gun or rifle.” Id.

c.   Social games include the following:
    Card games such as poker, pinochle, pitch, gin rummy, bridge and hearts, and also dominoes, checkers, chess, pool, darts and backgammon. Iowa Code § 99B.12 (2005).

d.   Company games are permitted, licensed or unlicensed under Chapter 99B. Iowa Code § 99B.18 (2005).
    The company game can be a game of skill or chance, or a card game provided there is a bona fide social, employment or professional relationship. Id. Furthermore, participants in the game pay no consideration, the sponsor of the games receives no consideration and wagers are made with money or items of no intrinsic value that have been provided to the participants for free. Id.

e.   Licensing Required:
    Some of the types of gaming that are permitted under this chapter also require that a license be obtained prior to conducting the gaming.

i.   Games of skill or chance are permitted when conducted by a person at an amusement concession and the individual possesses the required licensing. Iowa Code § 99B.3 (2005). The prizes cannot be cash, and the value of an individual prize item cannot exceed fifty dollars. Id.
ii.   In order to conduct a raffle at a fair, either the fair or a qualified organization must be properly licensed pursuant to this section and must also receive permission from the fair sponsor to conduct the raffle. Iowa Code § 99B.5 (2005). Raffle prizes cannot exceed $1,000 in value, individually or in the aggregate. Id.
iii.   As a supplier of bingo equipment and other legalized gaming devices in Iowa, the supplier must be in possession of a valid manufacturer’s license. Iowa Code § 99B.7A (2005).
iv.   For an individual or entity possessing a liquor license, gaming cannot be conducted on the premises unless numerous factors are all satisfied. Iowa Code § 99B.6 (2005). The factors are as follows: a license for gaming must be validly possessed and posted on the premises; the holder of the liquor license or the employees of the licensee does not promote in any manner in the gambling activities except as a player being treated like all other participants; social games are the only permissible form of gambling on the premises; there is no control device, concealed numbers, conversion charts or other devices of manipulation of the game; game is conducted in a fair and honest manner; no person has a right to receive any amount wagered except as a winner of the game; there is no cover charged, participation charged, or discounts offered to participants; no participant wins or loses more then fifty dollars in a twenty-four hour period; no participant is acting as an agent for another person; law enforcement representatives have access to the premises without advanced notice; and no participant is under twenty-one years of age. Id. Where a liquor licensee conducts gambling operations on the premises and fails to meet the statutory requirements to conduct gambling activities and possess a liquor license, then a nuisance will exist as defined in § 99.1. Iowa v. Audino, 260 N.W.2d. 279 (Iowa 1977). Lottery tickets issued under the state lottery gaming laws, may be sold at a liquor establishment. Id. In an Attorney’s General Opinion, the statutory language was addressed in order to determine what types of establishments with liquor licenses could also permit the sale of lottery tickets on the premises. 86 Op. Atty Gen. Iowa 44 (1985). The Attorney’s opinion concluded, after breaking down the statutory language, the Class C beer permittees may also be licensed to sell lottery tickets pursuant to § 99B.15. Id. However, the opinion also concluded that Class B license holders are not permitted to have a license to sell lottery tickets or to sell the tickets on the premises under § 99B.6. Id. Licensed pari-mutuel wagering may be conducted on a racetrack that also possesses a liquor license. Id. Also, the holder of a liquor license may conduct sports betting pools provided the game and its rules are publicly displayed, and the wagers and winnings do not exceed the statutory limits. Id.
v.   Gaming nights may also be conducted under this chapter, provided that a valid license is obtained. Iowa Code § 99B.8 (2005).

Any one individual may only conduct a gaming night one time per year and not for a period longer than twelve consecutive hours. Id. Furthermore, games of skill and chance and card games are the only permissible forms of gabling at a gaming night. Id.

f.   Licensing Not Required:

Other games permitted under this chapter do not have the prerequisite of obtaining a license prior to conducting the gaming.

i.   Electrical and mechanical gaming devices for use at amusement parks are permissible without licensing. Iowa Code § 99B.10 (2005). All though a license is not required the statute still sets forth guidelines and restrictions on areas such as prize limits and types, redemption of prizes, and operation of the gaming device by the player. Id. Furthermore, registration, different from licensing, of the gaming device may be required. Id.
ii.   Various types of contests are permissible under this chapter and do not require licensing. Iowa Code § 99B.11 (2005). Provided the contest is not held at an amusement concession, does not involve a gambling device, is not conducted on school property, and is conducted in a fair and honest manner, then awards may be paid to the winners of those contests regardless of whether entry or participation fees were required. Id. Some of the activities that qualify as a contest under this section include sporting leagues and tournaments, golfing, horse shows, cooking and livestock exhibitions, cribbage, chess, checkers, and skiing and boating races. Id.
iii.   Social gambling occurring between individuals in a social, friendly type of relationship is permissible without licensing. Iowa Code § 99B.12 (2005). This portion of the statute essentially permits friendly poker nights and games of that nature between friends and colleagues where the wager amounts are minimal and there are no participation or entry fees.
iv.   Finally, there is one small sector of bingo game playing that does not require licensing provided all elements of the statute are satisfied. Iowa Code § 99B.12A (2005). Bingo gaming will not require a license when the participants are not charged to enter the premises where the bingo game is conducted; participants are not charged to play; prizes awarded are donated; and the bingo game is conducted as an activity and not as a fundraiser. Id. In State v. Mabrey, the case arose as the result of a bingo night where some of the attendees purchased a “dinner ticket” which subsequently allowed them to participant in the bingo activities and a smaller portion of the attendees were not required to purchase a “dinner ticket” in order to participate in the bingo game. 60 N.W.2d 889 (Iowa 1953). The court held that the element of non-paying attendees had no effect of balancing out the impermissible action of some attendees being caused to pay. Id. Therefore, the unlicensed bingo event was held to be an illegal lottery. Id.

2.   Pari-Mutuel Wagering:

Under Chapter 99D of the Iowa Code the Pari-Mutuel Wagering Act sets forth the guidelines for legal wagering on horse and dog racing, including quarter horse, thoroughbred and harness racing. See Iowa Code § 99D.2 (2005). This Act legalizes pari-mutuel wagering provided the wagering occurs within the confines of the racetrack that is duly licensed to engage in pari-mutuel wagering. Iowa Code § 99D.4 (2005), see also Iowa Code § 99D.11 (providing guidelines on the wagering system). The licensing guidelines requirement that the organization be “qualifying” as defined by § 513(d)(2)(c) of the IRC or be a non-profit organization promoting or conducting agricultural and educational fairs or expositions. Iowa Code § 99D.8 (2005). Licenses have a life span of three years, and the commission makes the determination as to what type of racing will be permitted. Iowa Code § 99D.9 (2005).

Pari-mutuel wagering was significantly impacted and changed as the result of a 1994 bill permitting expanded forms of gambling and casino-style gaming at the racetrack. 2002 Iowa AG LEXIS 7. The next section will go into further detail into the types of gaming that is allowed and the licensing that is required in order to have gambling devices at a racetrack.

3.   Excursion Gambling Boats and Racetracks:

Chapter 99F of the Iowa Code establishes that the State Racing and Gaming Commission will be the governing body to establish rules and regulations for the operation of excursion gambling boats as well as govern the operation of gambling games that take place within a racetrack enclosure. The types of gambling games that are permissible at a racetrack enclosure that are limited by the commission do not serve to affect the pari-mutual wagering system governed by Chapter 99D. In an Attorney’s General Opinion it was determined, that although the section defining permissible racetrack games does not specifically include “slot machines” that the commission had the authority to promulgate rules and regulations making slot machines permissible. 2002 Iowa AG LEXIS 7.

a.   Gambling games are legal when conducted on gambling boats
   Gambling games as defined under Chapter 99F are legal when conducted on licensed excursion gambling boats in authorized locations. Iowa Code § 99F.3 (2005), see also, Iowa Code § 99F.5 (stating the qualifications for licensing of gambling boats). Furthermore, this chapter does not affect, restrict or enhance the rules regulating the pari-mutuel wagering system as set forth in Chapter 99D, instead this chapter provides the rules for other types of gambling games that are permitted by the commission to be operated at a racetrack. Iowa Code § 99F.2 (2005). The holder of a license for dog or horse racing may apply to the commission to be additionally licensed for the operation of gambling games to take place within the enclosure of the racetrack. Iowa Code § 99F.4A (2005).

b.   Persons under the age of twenty-one wagering or employed at racetracks or gambling boats.
   A person under the age of twenty-one may not place wagers on gambling games at an enclosed racetrack or on an excursion gambling boat. Iowa Code § 99F.9 (2005). However, a licensee may employ a person eighteen years of age or older to work on the gambling boat or at the racetrack. Id. A licensee shall not accept credit cards for payment of wagers, nor can the licensee accepts bets from individuals not physically present on the gambling boat or at the racetrack enclosure. Id.

c.   Penalties available to those licensee’s of racetracks or gambling boats.
    Chapter 99F sets forth various penalties that can arise against the licensee of the racetrack enclosure or the gambling boats, the employees of the licensee, or a participant in the gambling activities. Iowa Code § 99F.15 (2005). Some of the prohibited activities that resulting in an aggravated misdemeanor include operating a gambling excursion boat without being licensed; employing a person to act as a decoy to encourage and increase gambling; and operation of a gambling excursion that performs gambling games not permitted by the statute. Id. Use of a device in order to enhance a person’s game playing abilities is also prohibited pursuant to this section. Id.

d.   Manufacturers and distributors of gambling devises
    Manufacturers and distributors of gambling devices must annually apply to the commission for licensing. Iowa Code § 99F.17 (2005). A licensee for gambling on boats or at racetracks cannot also be licensed as a manufacturer or distributor. Id.

4.   Iowa Lottery Authority:

Chapter 99G sets forth the guidelines and rules for operation of Iowa’s State lottery as well as the lottery board. Under this section of the code Iowa defines ‘lottery’ as:

[A]ny game of chance approved by the board and operated pursuant to this chapter and games using mechanical or electronic devices, provided that the authority shall not authorize a player-activated gaming machine that utilizes an internal randomizer to determine winning and nonwinning plays and that upon random internal selection of a winning play dispenses coins, currency, or a ticket, credit, or token to the play that is redeemable for case or a prize. . . . Iowa Code § 99G.3 (2005).

Iowa’s lottery laws permit games such as instant tickets, on-line lotto systems, and pull tabs. Id.

In order to have an effective and successfully operated lottery the State Lottery authority has indicated the importance and necessity of having a strong network of licensed retailers that promote the sale of tickets and games while at the same time maintaining integrity in the operation of the State Lottery. Iowa Code § 99G.24 (2005). The statute governs many aspects on the sale of lottery tickets, including elements such as the purchaser of a lottery ticket must be at least twenty-one years of age and the tickets cannot be sold for a price greater than that price fixed by the lottery authority. Iowa Code § 99G.30 (2005).

VII. Specific Internet Prohibition

Although there do not appear to be any laws in Iowa that specifically govern or prohibit the act of internet gambling, research indicates that the act of participating in internet gaming will be punishable under other sections of the Iowa Code. In an opinion from the Superintendent of Securities of Iowa, Denis Benson was ordered to cease and desist in the activities of selling, offering, and aiding and abetting in the offers of units in an on-line sports wagering casino to an individual within Iowa. 1998 IA. Sec. LEXIS 28 (1998). The units at issue were determined to qualify as securities within the meaning of the Iowa Code § 502.102. Id. Furthermore, since the security was not registered as required by law, the selling of that unregistered security was found to be unlawful. Id.

VIII. Gaming Crimes/Penalties for Unlawful Gambling

1.   Houses Used for Gambling:

Under Iowa law, an individual who maintains, establishes, owns or leases a building for the purpose of gambling, is guilty of a nuisance. Iowa Code § 99.1A (2005). Any furniture or property that is used in maintaining the nuisance of gambling is also declared a nuisance an enjoined. Id. For purposes of determining the owner of the property declared a nuisance under this section, in order to maintain an action, the person who “stands on the books of the county auditor, for the purposes of taxation, shall be presumed the owner thereof . . . .” Iowa Code § 99.4 (2005). In State v. Rand the court held that the State was not required to prove ownership of the house subject to the nuisance of gambling in order to successfully convict. 25 N.W.2d 800 (Iowa 1947). The court held that the State’s showing that Rand had kept charged of, operated and attended to the gambling house was sufficient to convict him of keeping a house for gambling. Id.

2. Possession of Gambling Devices:

a.   Intentional and willful possession of gambling devices:
    Intentional and willful possession of gambling devices, as defined by § 725.9 of the Iowa Code, upon any licensed premises, is cause for revocation of the licenses of that business. Iowa Code § 99A.2 (2005). Possession of gambling devices by an employee of the licensee on the licensed property will create a presumption of possession by the licensee. Id. Licensed premises constitute any property or adjacent land to which a licensed business operates. Iowa Code § 99A.1 (2005). In the situation of possession of a gambling device on licensed premises, the owner of the premises itself, will not be held accountable unless “it is established that the owner had knowledge of the existence of the gambling devices resulting in the license revocation.” Iowa Code § 99A.9 (2005). In other words, where the owner of the premises is not the licensee of the business, the owner cannot be penalized unless it is clearly shown that he was aware that the licensee of the business or the employees of said business were in possession of gambling devices.

b.   Licensed businesses
    In contrast, a licensed business may possess gambling devices on the premises where the possession is the result of the business being conducted for the manufacture of the gambling devices either out of state where use of the gambling device is permissible, or in state for use under an excepted gambling provision. Iowa Code § 99A.10 (2005).

3.   Gambling on Credit Unlawful:

Pursuant to Iowa Code a misdemeanor is committed when a person tenders or receives “any promise, agreement, note, bill, bond, contract, mortgage or other security, or negotiable instrument, as consideration for any wager or bet ….” regardless of whether or not they are lawfully engaged in gambling under the section Iowa Code permitting games of skill or chance, and raffles. Iowa Code § 99B.17 (2005).

4.   Underage Gambling:

Under Iowa Code both the underage individual who participates in the gambling and the person who permits the underage person to make the gambling wager or bet can be penalized. Iowa Code § 725.19 (2005). An underage individual, is someone under the age of twenty-one; and if such an individual makes or attempts to make a wager or bet they will have committed a scheduled violation under § 805.8C, subsection 5. Id. The person who permits the underage individual to make the wager or bet will be found guilty of a simply misdemeanor. Id.

IX. Statute of Anne/Recovery of Debts

Gambling Contracts

Case law supports Iowa statute indicating that gambling contracts are void. Under Iowa Code § 573A.4 “[a]ll promises, agreements, notes, bills, bonds, or other contracts, mortgages or other securities, when the whole or any part of the consideration thereof is for money or other valuable thing won or lost, laid, staked, or bet, at or upon any game of any kind or on any wager, are absolutely void and of no effect.” The statute excludes from its definition any contracts flowing from the operation of legalized forms of gambling pursuant to Chapters 99B, D, F or G of the Iowa Code. Iowa Code § 537A.4 (2005). The section also excludes the sale, purchase or redemption of a ticket or gambling device on Indian lands in Iowa. Id.

In McCarville v. Ream, the action arose because of a check given to a car dealer from the buyer. 72 N.W.2d 476 (Iowa 1955). The main dispute was what the purpose of the checks was; the dealer indicated that the checks were for payment on a vehicle and the buyer asserted that the checks were satisfaction of gambling debts. Id. The court, based on the evidence provided in the record, comfortably came to the conclusion that the disputed checks were in fact for gambling debts. Id. As such, the court found that the checks were void, as there purported intention was to satisfy a gambling debt. Id.

Plank v. Swift, an earlier case decided by the Supreme Court, and referenced by the court in McCarville, also dealt with what the purpose was behind checks issued by the defendant. 174 N.W. 236 (Iowa 1919). Based both on the evidence provided, and the fact that the plaintiff made no efforts to dispute said evidence, the court determined that the checks were issued for the purpose of satisfying a gambling debt. Id. As the checks were held to be for gambling purposes, and that is in violation of Iowa law, the Court found the checks to be invalid. Id.