Gambling Voucher Is Bearer Paper
Description A New York court held that gambling vouchers bought at racetracks to make bets is freely negotiable bearer paper that does not require identification by holders in due course. When the racetrack cashed out a stolen voucher, it was not responsible to the real owner for failing to identify the holder of the voucher.
Topic Negotiable Instruments/Commercial Paper
Key Words Bearer Paper; Holder in Due Course; Gambling Vouchers
C A S E   S U M M A R Y
Facts Chung was at Belmont Park, a racetrack operated by the New York State Racing Association. He bought a gambling voucher for use in SAMS, which are "automated machines which permit a better to enter his bet by inserting money, vouchers or credit cards into the machines, thereby enabling him to select the number or combination he wishes to purchase. A ticket is issued showing those numbers." The money credited to a voucher can be bet at once or can be used over time to make bets on SAMS. Chung forgot his voucher in a SAMS machine; it had several thousands of dollars credit on it. Someone found the voucher and traded it in for cash. The betting system does not link a person to a voucher, so the thief is unknown. Chung sued, contending that the racetrack should be liable for failing to check the identity and ownership of vouchers prior to their use.
Decision Judgment for defendant. "As opposed to instruments such as ordinary checks, which are typically made payable to the order of a specific person and are therefore knows as 'order paper,' bearer paper is payable to the 'bearer,' i.e., whoever walks in carrying (or 'bearing') the instrument." As UCC 3-111 states, "an instrument is payable to bearer when by its terms it is payable to ... 'cash.'" Since the voucher is labeled "Cash Voucher" and says "Bet Against the Value or Exchange for Cash," the voucher is bearer paper. The defendant is the holder in due course of the voucher, and is "deemed to have taken it free from all defenses that could be raised by the plaintiff" under UCC 3-302. To hold otherwise would require extensive verification procedures to be under taken by all transferees of bearer paper, which would impede negotiability, which is the essence of bearer paper.
Citation Chung v. New York State Racing Association, 2000 N.Y. Slip Op. 20486 (2000 WL 1577229, Dict. Ct., N.Y., 2000)

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