Gambling debts valid

Listen to this article

What happens in Vegas doesn’t always stay in Vegas. Gambling debts, for example.
On June 17, the Seventh Circuit rejected the attempt by a gambler/debtor to defeat a casino’s claim via sec. 895.055.

The Wisconsin statute provides that gambling contracts are void and unenforceable in this state.

So, when Robert B. Jafari gambled his way into Wisconsin bankruptcy court, he attempted to defeat the claims of Wynn Las Vegas, LLC and Caesar’s Place — combined value of almost $1.5 million — by arguing that they were unenforceable gambling debts under Wisconsin law.

The bankruptcy court initially agreed, concluding that it was bound by Wisconsin law.

But the district court reversed, and remanded the case to determine whether the claims were valid under Nevada law. On remand, the banktruptcy court applied Nevada law and allowed the claim.

Jafari appealed, but the Seventh Circuit affirmed in an opinion by Judge Joel M. Flaum.
The court found that every relevant factor weighed in favor of applying Nevada law, save one:

Jafari was in Nevada when he negotiated for and reached agreement on the credit lines; the credit agreements were executed and consummated in Nevada; the creditors do business in Nevada; Jafari used the proceeds of his loans to gamble at the casinos; and the debts were payable in Nevada.

The only factor the court found to weigh in favor of Wisconsin law is that “Jafari happened to reside in Wisconsin at the time he entered into the agreements.”

Because Nevada law permits the enforcement of gambling debts, the court held that the casinos’ claims were valid.