By Monica Goyal and Jonathan MacKenzie

Next time you log on to PokerStars or Full Tilt Poker – be aware that you play at your own risk.

The Canadian Criminal Code explicitly makes the offering of gambling services by unlicenced private individuals (including companies) a crime. Despite this, the numerous gambling sites that are available to Canadians draw large amounts of traffic from this country. This creates a complex legal situation in which users of these gambling sites are left without any legal recourse if they have a dispute with one of these sites.

Many of the world’s largest online gambling sites are located in the Isle of Man, a self-governing British dependency with its own parliament, laws, and court systems. The Isle of Man has positioned itself as a haven for gambling operations. The Isle of Man’s official Web sites states that “The Isle of Man Government actively encourages the development of gambling and e-gaming business on the island.” Because of this, PokerStars and Full Tilt Poker have relocated to the Isle of Man.

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These gambling sites have constructed their End User License Agreements (EULAs) in such a way as to prevent being sued in Canadian courts. For instance, PokerStars has a jurisdictional clause which stipulates that the EULA and any disputes arising from it will come within the exclusive jurisdiction of the Isle of Man court system. It is unclear whether Canadian courts would actually not take jurisdiction, if the parties involved were Canadian. There has been cases where Canadian courts have taken jurisdiction over a case even where the Web site was hosted and owned by a foreign company.

Canadian litigants have advanced the argument that because PokerStars’ operations in Canada are forbidden by the Criminal Code, that their EULA should be rendered invalid. However, a clever trick that PokerStars has used when drafting their EULA has prevented this from happening. The PokerStars EULA includes a statement that they are “not able to verify the legality of the Service in each jurisdiction and it is the User’s responsibility to verify such matter.”

Canadian courts have read this to mean that until the user verifies the legality of PokerStars in their jurisdiction, the EULA obligates them not to participate in poker games on PokerStars (Bérubé v. Rational Entertainment Limited, 2010 ONSC 5545). Essentially, PokerStars has used the fact that their operation is illegal in Canada to escape liability.

So, if PokerStars is unwilling to pay a Canadian user the money they have won playing poker, what recourse do they have? Isle of Man law currently has no legislation requiring gambling operators to pay users the monies they have won. As such, bringing an action against one of these companies in the Isle of Man is a bleak proposition.

Realistically, the only way to resolve a dispute with PokerStars is to work with them directly, or to take your complaint to one of the “regulatory” services that exist to monitor these sites, including the Interactive Gaming Council or the Isle of Man Gambling Supervision Commission. Unfortunately, these dispute resolution services resolve disputes by referencing the operator’s EULA.

Most online gambling sites have drafted their EULA in a way that prevents any meaningful dispute resolution. Specifically, these sites have clauses in their EULAs that give them almost unfettered discretion as to whether or not to pay out winnings to their customers. As such, it is doubtful that these organizations will be able to provide an adequate resolution for many of its complainants.

Jonathan MacKenzie is a lawyer specializing in civil litigation and corporate work with a special interest in small business and entrepreneurship.