Brief Of Amicus Curiae Chamath Palihapitiya In Support Of Defendant-Appellee

7/28/2019 Brief Of Amicus Curiae Chamath Palihapitiya In Support Of Defendant-Appellee

1/25

QHniteti &fates' Court of appeals'For the Second Circuit

UNITED STATES OF AMERICA,Appellant,

-against-LAWRENCE DICRISTINA,

Defendant-Appellee,

STEFAN0 LOMBARDO, also known as MITZIE,

Defendant.

On Appeal From The United States District CourtFor The Eastern District ofNew YorkBRIEF OF AMICUS CURIAE CHAMATH PALIHAPITIYAIN SUPPORT OF DEFENDANT-APPELLEE

Lisa S. BlattMatthew C. PhillipsR. Stanton JonesARNOLD& PORTER LLP555 Twelfth Street, NWWashington, DC 20004(202) [email protected] 28, 2013

Case: 12-3720 Document: 77 Page: 1 03/28/2013 891395 25


2/25

TABLE OF CONTENTS. ..TABLE O F AUTHORITIES ......................................................................................1

IDENTITY AND INTEREST OF AMICI CUR IAE .................................................ARGUMENT . 3I. THE SAME SKILLS CONTRIBUTE TO SUCCESS FOR POKER

PLAYERS AND INVESTORS ........................................................................11. OUTCOMES IN BOTH POKER AND INVESTING AREPREDOMINANTLY DETERMINED BY SKILL, NOT CHAN CE .............. 16CONCLUSION ...........................................................................................................9CERTIFICATE OF COMPLIANCECERTIFICATE OF SERVICE



3/25

TABLE OF AUTHORITIES

Ian Ayres, SUPERCRUNCHERS: HYTHINKING-BY-NUMBERSS THENEWWAYTO BE SMART2008) ..................................................................................Rich Blake, Wall Street Traders Go All In For Poker, ABC NEWS Dec. 7,2009), http://abcnews.go.com /Business/wall-street-traders-poker/story?id=9260685 ..........................................................................., 17-18

Rachel Croson & James Sundali, The Gam bler's Fallacy And The HotHand: Empirical Data From Casinos, 30 J. RISK& UNCERTAINTY95(2005), available at http:Ncbees.utdallas.edu/-crosonr/researc[3 l].pdf ..........9Bob Frick, How P oker Can Make You A Better Investor: Learn T o AvoidEmotional Traps By Playing A Little Texas Hold 'E m , KPLINGER(Jan. 7,2010), available at http://www.kiplinger.com/article/investing/TO31-C000-SO01-how-poker-can-make-you-a-better-investorht .........................7-8Bob Frick, How Texas Hold 'E m Simulates Investing: Both Are Based O nIncomplete And Unfolding Info/m ation, KIPLINGERJan. 7,2010 ),available a t http://www.kiplinger.com/article/investing/T052-C000-

S001-how-texas-hold-em-simulates-investing..........................................3Robert C. Hannum & Anthony N. Cabot, Toward Legalization of Poker:The Skill vs. Chance Debate, 13 UNLV GM INGRESEARCH REV. J. 1(2012) .................................................................................................................7Denis J. Hilton, The Psychology of Financial Decision-m aking: Applicationsto ~ r a d i n g , ' ~ e a l i n ~ ,nd Investm ent ~ n a l ~ s i s ,J. OFBEHAVIORALIN.37 (2001) ..............................................................................................................Carrie Hojnicki, The 22 Biggest Poker Players On W all Street, B u s ~ E ~ ~INSIDER (July 10, 2012), available at

http://www.businessinsider.com/the-22-biggest-poker-players-on-wall-............................................................................................treet-20 12-7?op=1 17Robert Huber, Beating the Odds - Susquehanna International - eff Yass,PHILADELPHIA AGAZW ESeptember 2009), available a thttp://www.phillymag.com/articlesibeating-the-odds .......................................8



4/25

Lucas Kawa, The 13 Poker Concepts That Every Investor Needs To Know ,BUSINESSNSIDERDec. 5,2012 ), available athttp://www.businessinsider.com/poker-truths-investors-need-to-know-2012-12?op=1 ....................................................................................................0Letter from W arren Buffett, Chairman of the Board , Berkshire HathawayInc., to Shareho lders of Berkshire Hathaway , Inc. (201 2), available athttp://www.berkshirehathaway.cqm/letters/2012ltr.pdf ....................................4Steven D. Levitt, Thomas J. Miles & Andrew M. Rosenfield, Is Texas Hold'Em a G ame of Chance? A Legal and Economic Analysis, 101GEORGETOWN. J. 581 (2013) .....................................................................0, 17Steven Levitt & Thomas J. Miles, The Role of Skill versus Luck in Poker:Evid ence from the World Series of Poker, J. OF SPORTS CON . 2012) .............17Nathaniel Popper, Trading Firms Put Their Money o n Poke r Experts, LO SANGELES MES (May 16,2010 ), available athttp://articles.latimes.com/20lO/may/16/businessAa-fi-poker-traders-20100516 ............................................................................................................8Rob R ussell, Investing Like A Poker Player, MONEYMay 17,2012),available at http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investorl2012/05/17/investing-like-a-poker-player.............................. 8- 10Jack D. Schwager, THENEWMARKETWIZARDS:CONVERSATIONSITHAMERICA'S OPTRADERSreprint ed. 1994) ...................................................0Hersh Shefrin, How Psychological Pigalls G enerated the Global FinancialCrisis, THEFW. ROF'LS'POST 201 I), available athttp://post.nyssa.org/nyssa-news/2011/12/how-psychological-pitfalls-generated-the-global-financial-crisis.ht ...........................................................Jason Z weig, How to Ignore the Yes-M an in Your Hea d, WALLST.J . (Nov.19,2009), available at

http://online.wsj.com/article/SB 00014240527487038116045745336800..................................................................................................7778184.html 8-9



5/25

IDENTITY AND INTEREST OF AMICI CURIAE'Amicus curiae,Chamath Palihapitiya, is the Founder and Managing Partner

of the Sociali-Capital Partnership. Founded by Mr. Palihapitiya in 2011,Sociali-Capital is a highly successful venture capital fund that identifies andincubates companies with the potential to revolutionize the healthcare, education,and financial services sectors. Mr. Palihapitiya and Sociali-Capital take anunusually bold and calculated approach to identifying and nurturing innovativenew companies. The fund focuses on long-term concepts, particularly those thathave the potential to achieve philanthropic goals. Moreover, Sociali-Capitaloperates like an investor collective, rather than a typical venture capital firm, inwhich a group of managers typically administers the wealth of nameless investors.As a result, some of the most prominent technologists and industry insiders in thecountry have partnered with and invested in the fund.

Mr. Palihapitiya's pioneering approach and skill in identifying investmentopportunities has led to extraordinary success for Sociali-Capital. One investmentalone, in a social networking tool for businesses called Yammer, yielded more than

' No party's counsel authored this brief in whole or in part. No party or aparty's counsel made a monetary contribution intended to fund the preparation orsubmission of this brief, and no person other than Amici or their counsel madesuch a monetary contribution. All parties have consented to the filing of this brief.



6/25

$80 m illion in profits. And in M arch 2013, Social+Capital raised m ore than $275million for a second fund, further demonstrating its success and profitability.

In addition to his career as a venture capitalist and investment professional,Mr. Palihapitiya is also a superb poker player who competes against professionalpoker players from around the world in marquee poker tournaments. In 201 1, Mr.Palihapitiya placed 10 ls t out of 7,000 in the main draw of the W orld Series ofPoker. In 2012, Mr. Palihapitiya placed 11th out of 1,001 in a W orld Series ofPoker event. Since 2011, M r. Palihapitiya has won more than $160,000 in pokertournaments sanctioned by the World Series of Poker or the W orld Poker Tour.

Mr. Palihapitiya's unique perspective as both a preeminent investor andpoker player provides h im with special insight into the striking similarities betweenthe two activities. Mr. Palihapitiya understands, from his own personal experiencein both investing and poker, that successful investors and poker players rely uponthe sam e skills, and that skill-not chance-predominantly determ ines outcomesin both activities. Because the Governm ent defines "gambling" so broadly that itcould encompass activities like investing, Mr. Palihapitiya has a strong interest inseeking to have this Court affirm the district court's decision that poker, likeinvesting, is a game of skill, not of chance.



7/25

ARGUMENTThe similarities between poker and investing are many and manifest. Two

key similarities demonstrate the connection between the two activities. First, thesame skills contribute to success in both activities, as successful investors andpoker players skillfully interact with other participants, exercise remarkablepersonal discipline, amass a body of specialized knowledge regarding probabilityand statistics, and implement all of those skills instantaneously under tense

conditions. By contrast, gambling games such as blackjack and sports betting donot share these distinguishing traits with investing or poker, and have little incommon with either activity. Second, skill clearly predominates in determiningoutcomes in both activities, as studies repeatedly and conclusively establish thatskilled players consistently outperform others, and skilled participants often thrivein both fields simultaneously.I. THE SAME SKILLS CONTRIBUTE TO SUCCESS FOR POKER

PLAYERS AND INVESTORSProfessional poker players and professional investors alike have observed

that the same set of skills contribute to success in both pursuits. Successful

participants in both fields are able to interact skillfully with other participants andaccurately evaluate their opponents' circumstances. The successful participantmust also exercise great personal discipline, dispassionately assessing strategy andrisk while exercising control over emotional impulses and biases. In both fields,



8/25

participants must accumulate a body of specialized knowledge regardingprobability and statistics, and must be able to dynamically adjust their calculations.And these skills must be successfully implemented in split-second decisions oftenunder immense pressure.

1. Skillful interactions with other participants contribute to success inboth poker and investing. The fundamental talent driving these interpersonalrelationships is the ability to accurately assess a counterparty's status andnegotiating position, often under conditions fraught with pressure and risk.Investors must be able to evaluate the negotiating positions of counterparties toobtain favorable terms for investment transactions. For example, by skillfullyevaluating a potential venture capital investment opportunity, an investor coulddetermine that a company's principals lack the acumen to execute a concept thatholds potential only on paper. Similarly, poker players must engage in complexperson-to-person interactions and adjust their betting decisions and game playaccordingly. This requires, among other things, an understanding of humanpsychology, patience, a perceptive nature, sensitivity to the importance of timingand pacing, keeping in mind the bigger picture, a strategy for action based on one'sobservations of other participants, a process for achieving a favorable result basedon observation and past experience, and an ability to behave in a controlled andintentional manner.



9/25

In addition to assessing counterparties, successful poker and investmentprofessionals are also able to recognize and exploit their opponents' mistakes andirrational behavior. In both fields, other participants often do not behaverationally, either because they lack or have misinterpreted therelevant information,have emotional reasons for acting, or do not have the experience to make sounddecisions. Investors often strive to identify opportunities in the market created bythe irrational behavior of other investors. See, e .g . , Ian Ayres, SUPERCRUNCHERS:WHY THINKING-BY-NUMBERSS THE NEW WAY TO BE SMART148-149 (2008)(quoting hedge-fund manager's comment that "[wle make our fortunes byidentifying small imperfections in the marketplace. * * * If we can discover thesethings and * * * throw massive resources at these opportunities, fleeting and smallthough they may be, we end up making lots of money before the efficiency of themarketplace closes out that opportunity"). In poker, small imperfections in themarketplace arise as the skillful player recognizes his opponent's irrationalbehavior and the reason for the behavior. By accurately assessing counterparties,the successful player will discern profitable opportunities that a less skillful playerwould overlook, and by capitalizing on those imperfections, he can, like a hedge-fund manager, maximize his return.

By contrast, in pure games of chance, like roulette, there is no room tonegotiate, no interaction with other players, and no ability to manipulate odds or



10/25

exploit mistakes. Similarly, in blackjack there is no peer-to-peer interaction.Participants play against the house, and the house in turn plays by a pre-establishedset of rules that do not vary, regardless of the player's actions. The size of thewager is determined at the beginning of the game and can be modified in only avery limited manner, based entirely on the cards and not on the strategy of otherplayers or the house. In poker, on the other hand, the amount of the wagerincreases during the game, and part of the skill is not only knowing when to

continue playing and when to fold, but whether and how much to bet if not folding.As another example, in sports betting, the sports bettor is unable to assess

the counterparty's status or negotiating position through complex interpersonalinteractions. A bookmaker is not like a counterparty in a negotiation or anadversary at the poker table because bookmakers do not act irrationally and are notsubject to the influence of face-to-face interactions. The typical bettor has noability to "bluff' a bookmaker. Instead, only an exceedingly small number ofsports bettors-who have massive bankrolls and clout--can actually manipulatethe betting line. They are not typical sports bettors. Indeed, the Government citedonly one individual who has managed to beat the system in this way, and arespected bookmaker, when asked if there were any other sports gamblers like him,said "[nlo one close, no one close." Gov't Br. 31-32 (citing a 60 Minutes storyabout Bill Walter). Moreover, even an unusually knowledgeable sports bettor



11/25

cannot affect the likelihood that a particular side will win a sporting event. Theend result is still left entirely to chance.

2. Personal discipline is another skill that is essential to maximizesuccess in both poker and investing and is vital to the development and executionof strategies, ongoing risk management, and emotional control. See, e.g., RichBlake, Wall Street Traders G o All In For Poker, ABC NEWS (Dec. 7, 2009),http://abcnews.go.com/Business/wall-street-traders-poker/sto?id=9260685(quoting the cofounder of a day trading firm: "Roulette, blackjack, those are basedmore on luck. But with a game like No Limit Texas Hold 'Em, you need patienceand discipline, or in other words the exact same skills needed to be a goodtrader.").

Consistent emotional control is critical for investors, who must avoid"emotional investing" and remain level-headed at all times to ensure that futureinvestment decisions are not driven by an emotional reaction to past results. Pokerplayers, too, must make rational decisions in the face of disappointing results(rather than "going on tilt7'-playing too aggressively, often in anger), and mustbluff in appropriate circumstances in order to maximize profits. And just as aninvestor's discipline can be stretched to the limits by exhausting negotiatingsessions or nerve-racking situations, the demanding conditions of a pokertournament-tense situations stretching over hours and even days-further test the



12/25

endurance of a player's em otional discipline. Accordingly, "[s]uccess at bothinvesting and gambling, it turns out, has much to do with controlling emotions."Bob Frick, How Poker Can Make Yo u A Better Investor: Learn T o AvoidEmotional T raps By Playing A Little T exas Hold 'E m , KIPLINGERJan. 7, 010),available at http://www.kiplinger.com/article/investing/TO31-C000-S001-how-poker-can-make-you-a-better-investor.html; Rob Russell, Investing Like A PokerPlayer, Money (May 17, 2012), available athttp://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2012/05/17/investing-like-a-poker-player"Investing, like poker, shouldbe emotionless. The hardest thing for novice and expert traders is to not let theiremotions get the best of them, causing them to deviate from their disciplinedstrategy.").

Personal d iscipline also affects the ability of a player or investor to view riskobjectively and make rational, calculated decisions. Studies clearly demonstratethat inexperienced or unskilled participants in both fields are subject to severaltypes of biases in judgment and decision-making. See, e.g., Denis J. Hilton, ThePsychology of Financial Decision-making: Applications to Trading, Dealing, andInvestment Analysis, 2 J. OF BEHAVIORALIN.37, 7-39 2001); How Poker CanMake Yo u A Better Investor, supra . A participant who becomes overconfident-either in winning a particular hand or successfully investing in a particular stock-



13/25

often suffers from confirmation bias, ignoring negative information or evidencethat his strategy will result in loss. See, e.g., The Psychology of FinancialDecision-making, supra, at 37-39; Jason Zweig, How to Ignore the Yes-Man inYour Head, WALL ST. J. (Nov. 19, 2009), available athttp://online.wsj.com/article/SB0001424052748703811604574533680037778184.html. Likewise, an inexperienced or unskilled participant is likely to be swayedby recency bias or pattern thinking, and, based on recent successes, depart fromestablished methods to take on more risk. See, e.g., Rachel Croson & JamesSundali, The Gam bler's Fallacy And The Hot Hand: Empirical Data FromCasinos, 30 J. RISK & UNCERTAINTY 95, 196 (2005), available athttp://cbees.utdallas.edu/-crosonr/researc[31] pdf.

The irrational decisions that triggered the global financial crisis in 2008illustrate the risks of undisciplined decision-making. Hersh Shefrin, HowPsychological Pitfalls Generated the Global Financial Crisis, THEFIN. PROF'LS'POST (201 I), available at http://post.nyssa.org/nyssa-news/2011/12/how-psychological-pitfalls-generated-the-global-financia1-crisis.html. The crisisresulted from a globally accepted-but ultimately incorrect-belief that the U.S.housing market could never experience a significant decline. Id. ("specificpsychological phenomena-reference point-induced risk seeking, excessiveoptimism, overconfidence, and categorization-were at work"). On a smaller



14/25

scale, investors must limit losses and maximize gains through the skillfulassessment of risk. Russell, supra. ("Casinos and Wall Street have one thing incomm on: They can't control when you cash in and get up from the table. The mostimportant thing you can do as a trader is limit your losses. In other words, whenyou place a trade, know your exit strategy."); Jack D. Schwager, THE NEWMARKETWIZARDS:CONVERSATIONSITH AMERICA'S OP TRADERSreprint ed.1994) (quoting Jeff Yass of Susquehanna International Group) ("The basic conceptthat applies to both poker and option trading is that the primary object is notwinning the most hands, but rather maximizing your gains.").

In poker, the discipline to avoid psychological pitfalls and to assess riskdispassionately manifests itself in the strategic decision to either fold or stay in aparticular hand. "The best poker players lose more hands than they win, but theylimit their losses by folding early on, and the big money is made on w inning handswhen the odds are in their favor." Russell, supra. Accordingly, the best pokerplayers in the world fold over 90% of their starting hands. Lucas Kawa, The 13Poker Concepts That Every Investor Needs To Know, B u s m s s INSIDER Dec. 5,2012), available at http://www.businessinsider.com/poker-t~s-investors-need-to-know-2012-12?op=1. By contrast, a less-skilled player who "plays more handsto com pletion (rather than folding early) and who bets more liberally accrues morelosses." Steven D. Levitt, Thomas J. Miles & Andrew M. Rosenfield, 1s Texas



15/25

Hold 'E m a Game of Chance? A Legal and Economic Analysis, 101 GEORGETOWNL. J. 581,585 (2013).

Unlike in investing and poker, personal discipline does little or nothing tochange the odds of winning in gambling games. In games of chance, disciplineaffects only whether a person opts to play or not to play; it cannot affect the endresult. And once the participant opts to play a game of chance, discipline does notaffect the outcome; results are completely out of the participant's hands.

In both poker and investing, a skilled participant plays for long-term gains,understanding that profit derives from a multitude of complex decisions based onever-changing circumstances. This is simply not the case for gambling.

3. The successful investor and poker player must also accumulatespecialized knowledge of probability and statistics. A poker player must be able tocalculate the probabilities of winning based on his own cards and the likely cardsheld by his opponents. The skillful player's calculations are sensitive to hisassessment of his opponents' positions, based on experience and complexinterpersonal interactions. He must also determine the "pot odds" by comparingthe amount he will win against his likelihood of winning and by adjusting thoseodds to incorporate the future betting he predicts will occur. These calculationsmust all be performed instantaneously, without betraying emotional or physical



16/25

response. His knowledge of statistics further enables him to analyze his play afterthe fact to determine strengths and weaknesses and improve his game.

An investor similarly must understand probabilities and statistics in order tocalculate the expected value of holdings based on his knowledge of all factorsaffecting those holdings. He must also compare the risks involved againstpotential rewards to make appropriate investment decisions. And he must analyzethose decisions after the fact to identify weaknesses and adjust his investmentstrategy.

By contrast, any knowledge of probability and statistics can only helpparticipants in gambling games, in a simplistic manner with very little effect onoutcomes. For pure games of chance, the odds generally remain the same. So thechance of winning a slots game or roulette bet remain constant, and knowledge ofthat fact does nothing to minimize or affect the odds. Similarly, in blackjack, thereis a single statistically optimal option for any given distribution of cards. Althoughit is helpful to be aware of the optimal strategy, it is unnecessary for a player toactively calculate probabilities during the game, and he is unable to affect ultimateoutcomes.

In sports betting, a bettor may think his knowledge of probability helps himselect games to bet on, but his ability to use that knowledge to win is virtually non-existent because bookmakers set the line so that the typical bet essentially stands a



17/25


18/25

pertinent information. For exam ple, a value investor may obtain quantitative datathrough stock screens or fundamental analysis, but the information is incompleteand constantly unfolding. The investor must accurately and dynam ically analyzethat incomp lete information and determ ine the odds of suc cess.

A skillful poker player must also implement his knowledge of statistics toman age levels of risk and learn from his past performances. He m ust manageoverall risk by determining an appropriate bankroll relative to the limit levels at thetable, and his hand-by-hand risk by evaluating how the game has evolved inrelation to the money in the pot and the bets necessary to stay in the hand.Investors similarly must m anage their overall capital in relation to trade sizes, andtheir investment-by-investment risk based on the capital invested and the position'sexpected performance. In addition, both poker players and investors are able toassess and learn from performance data, which enables them to identify problemswith strategies and help imp rove future results. For exa mple, almost every annualBerkshire Hathaw ay shareholder letter from W arren Buffett analyzes the previousyear's performanc e data, including investing blunders or strategic failures, in orderto learn from mistakes and maxim ize future returns. See, e.g.,Letter from W arrenBuffett, Chairman of the Board, Berkshire Hathaway Inc., to Shareholders ofBerkshire Hathaway, Inc. @ow, available athttp://www.berkshirehathaway.com~letters/2012ltr.pdf.



19/25

Conversely, games of chance by their very nature do not require participantsto implement knowledge or execute skills. To the extent these skills factor in atall, they do so at a much less sophisticated level. For instance, in sports betting,the bettor certainly makes use of knowledge accumulated about teams, players,etc., but that information informs only the decision whether to participate bybetting on a particular team. There is no skill required to execute that decision-and, as noted, the bookmaker sets the line to counteract bettors' knowledge so that

the typical bet amounts to a 50-50 coin flip. In contrast, a poker player must usenegotiating skills to implement his knowledge during complex interpersonalinteractions-and that knowledge can actually help him achieve more success inthe game.

Also, in sports betting, and unlike in poker and investing, a participant's useof knowledge when deciding to place a bet is a one-time decision that cannot affectthe ultimate outcome of the game, which is out of the bettor's hands. By contrast,wagering is a central skill of poker and investing. It is an iterative and evolvingprocess that influences ultimate outcomes. Wagering in investing and pokerinvolves multiple iterations of betting whereas sports betting typically does not. Apoker player has five rounds to bet, and an investor can similarly decide when tobuy, when to sell, and in what quantity. Thus both are iterative processes wherethe participant continuously manages his level of investment in response to new



20/25

information, seeking to maximize profit. By contrast, the typical sports-bettormakes a one-time bet that either pays off or doesn't.

Moreover, the act of investing and wagering in poker actually influenceoutcomes, whereas the act of betting in sports betting does not. In poker, wageringcan determine whether a player wins or loses if he is able to induce all of hisopponents to fold (which is the most common result). Similarly, investing has areal effect on the actual performance of companies. After all, companies sell stockto acquire capital to grow their businesses, and stock price can have a significanteffect on a company's fortune. Conversely, a sports bettor's "investment" does notdo anything to aid the team he bets on. Sports betting would be like investing onlyif you bet on the Yankees by buying their stock, so that the Yankees could use yourinvestment to improve their team. And it would be like poker only if betting on theYankees could cause the Red Sox to fold before a game was played.11. OUTCOM ES IN BOTH POKER AND INVESTING AREPREDOMINANTLY DETERMINED BY SK ILL, NOT CHANCE

The second key similarity between investing and poker is that outcomes arepredominantly determined by skill, even though both activities involve someelement of chance.

Chance of course plays a role in both poker and investing. In poker, thatelement of chance stems from the random draw of cards. In investing, chancecomes from unexpected market events that cannot be anticipated.



21/25

However, in both poker and investing the role of skill is the primarydeterminant of victory or defeat. Participants in both activities who are seriousabout honing their skills are able to consistently make money, demonstrating thatskill predominates over chance. This is because more skilled poker playerssubstantially outperform less skilled players. Levitt, Miles & Rosenfield, supra, at585 ("The empirical evidence suggests that skill is the primary factor determiningthe distribution of player returns in no-limit Texas Hold 'Em."); Steven Levitt &Thomas J. Miles, The Role of Skill versus Luck in Poker: Evidence from the Wo rldSeries of Poker, J. OF SPORTSECON.(2012); Robert C. Hannum & Anthony N.Cabot, Toward Legalization of Poker: The Skill vs. Chance Deba te, 13 UNLVGAMINGESEARCHREV.J. 1 (2012). For example, a study of participants in the2010 World Series of Poker found "a substantial role for skill in poker," as thehigh-skilled players generated an average return on investment of more than 30percent, compared to a negative 15 percent return for all other players. Levitt &Miles, supra, at 4. The differential between the high-skilled players and the restwas statistically significant and exceeded the differential observed in studies ofskilled investors. Id .

Because of the overlapping skill sets of poker and investing, in manyinstances the most skilled participants can make a living from both poker andinvesting. See, e.g., Carrie Hojnicki, The 22 Biggest Poker Players O n W all Street,



22/25

BUSINESS INSIDER (July 10, 2012), available athttp://www.businessinsider.com/the-22-biggest-poker-players-on-wall-street-2O12-7?op=1; Blake, supra (listing professional investors who excel at poker). Indeed,several Wall Street firms, such as Susquehanna International Group, haveexplicitly embraced the synergy between successful poker players and successfulinvestors: it hires poker players and requires poker training for other new hires.Robert Huber, Beating the Odds - Susquehanna International - Jeff Yass,PHILADELPHIA MAGAZINE (September 2009), available athttp://www.phillymag.com/articles/beating-the-odds; see also Blake, supra(reporting that a hedge fund requested recruits who were "proficient at onlinepoker"); Nathaniel Popper, Trading Firms Put The ir Money o n Poker Experts,LOS ANGELES TJMES (May 16, 2010), available athttp://articles.latimes.com /201O/may/16/businessAa-fi-poker-traders-2000516(Firms "look for job candidates who are quick-thinking, have nerves of steel and ahead for numbers-the very skills that lead to success in online poker.").

Despite the striking similarities between poker and investing, theGovernment's definition of "gambling" is so broad that it could be read to includeactivities like investing. The Government asserts that "gambling" means "bettingon an uncertain outcome." Gov't Br. 21. But investing involves betting onuncertain outcomes. Investors, like poker players, make reasonably educated



23/25

decisions about whe re, when , and how much to invest. But ultimately they bet onoutcomes that are uncertain and thus fall within the Government's unreasonabledefinition of criminal "gambling." Indeed, if the outcom es were certain, it wouldnot be called "betting" and everyone would make m oney investing.

No reasonab le person would conclude that Congress intended to criminalizeinvesting as unlawful "gambling." But that is a potential consequence of theGovernmen t's unreasonab le definition of the word. Investing cannot properly beregarded as gambling, because an investor's skill overwhelmingly predominatesover the element of chance in determining outcomes. In light of the similaritiesdiscussed above, the sam e is true of poker.

CONCLUSIONFor the foregoing reasons, the district court's decision should be affirmed.

Dated: March 28 ,2 01 3 Respectfully submitted,

IS/ Lisa S. B lattLisa S . BlattMatthew C. PhillipsR. Stanton JonesARNOLD & PORTER LLP555 T welfth Street, NWWashington, DC 20004(202) [email protected]



24/25

CERTIFICATE OF COMPLIANCEThis brief complies with the type-volume limitation of Fed. R. App. P.

32(a)(7)(B) because the brief contains 4,203 words, excluding the parts of the briefexempted by Fed. R. App. P. 32(a)(7)(B)(iii). This brief complies with thetypeface and type style requirements of Fed. R. App. P. 32(a)(5) and 32(a)(6),respectively, because this brief has been prepared in a proportionately spacedtypeface using Microsoft Word 2007 in Times New Roman 14-point font.

IS/ Lisa S. BlattLisa S.Blatt



25/25

CERTIFICATE OF SERVICEI certify that on March 28, 2013, I caused the foregoing Brief of Amicus

Curiae Chamath Palihapitiya in Support of Defendant-Appellee to beelectronically filed via the Court's CMECF System; all of the parties listed on theattorney service preference report have been served via the Court's CMECFsystem.

I further certify that on March 28, 2013, I caused six (6) copies of theforegoing Brief of Amicus Curiae to be delivered via Federal Express to the Clerkof the United States Court of Appeals for the Second Circuit.

IS/ Lisa S. BlattLisa S. Blatt


Documents

Brief Of Amicus Curiae Chamath Palihapitiya In Support Of Defendant-Appellee