On that day the U.S. Department of Justice seized
the web domains and shut down the domestic operations of the three biggest
online poker sites that were serving U.S. customers at the time – PokersStars,
Full Tilt Poker, and Absolute Poker. The D.O.J. unsealed indictments which
included both criminal and civil charges, and froze dozens of bank accounts
associated with the sites. But as with many things related to the legalities of
online gambling, the reality of what exactly did and didn’t happen and why, and
the ramifications of it all, are a bit unclear.
What exactally happened?
Eleven people were named in the indictment, and the charges
have primarily to do with bank fraud and money laundering, focusing on various
activities of the three sites that facilitated payment processing from U.S.
citizens after the passing of the controversial 2006 UIGEA Act.
The timing of the indictments and seizures did raise some eyebrows
in internet poker circles as well as the general gambling world. The momentum
regarding the legality of online gambling in the U.S., and specifically online
poker, had recently begun to swing in favor of legalization, and this was
particularly true in certain states.
Washington D.C. itself, ironically, had
just recently legalized online poker within the confines of its district. And Wynn
Resorts, which had retained state lobbyists in Nevada to work on the issue of
online poker, had only a few weeks earlier announced an intended partnership
with PokerStars. That partnership was hastily cancelled on news of the
indictments.
What does this mean?
What’s on the immediate horizon at this point is not
entirely clear. The Prohibition-like
efforts of the DOJ has left a vacuum where a strong demand for internet poker still
exists. There will, of course, be natural market pressure to fill the vacuum
very quickly, and a number of smaller untouched online poker operators are
still operational and taking U.S. players. These sites do have, at least
temporarily, the opportunity to expand in the U.S. market as much as they dare
to with little to no competition.
Some have speculated that lobbying by parties that would
stand to gain long-term from a shutdown of the three big sites had influence in
how and when everything went down.
The charges
One issue central to the indictments - and likely a critical
misjudgment by the sites that were shut down -
was their decision to actually invest in a small U.S.-based bank, to use
for payment processing. The sites bought 30% of a bank in the state of Utah,
and executed payment processing through that bank. An executive from the bank
is one of people charged with money laundering in the indictment. Regardless of
any arguments that can be made regarding the UIGEA and the former, current or future
legal status of online poker in the U.S., the money laundering charges as a
result of those banking activities are pretty clear cut.
Greatly enhancing the FBI’s ability to nail the targeted
sites was the involvement of 28-year-old Australian Daniel Tzvetkoff, who reportedly
processed over $500 million for various poker sites over a 2-year period. Mr.
Tzvetkoff is rumored to have begun embezzling funds from the sites he was
working with, which led them to turn him in to U.S. authorities, perhaps an
ultimately ill-advised move by the poker sites for the long-term. Mr. Tzvetkoff
began providing the investigators with a wealth of essential insight and information
that allowed the FBI to prepare a thorough and relatively “easy” case against
the three poker sites.
What does this mean for Online Poker?
In the end, the momentum towards legalization for online
poker lumbers on, and most people in the online gambling world believe that relatively
soon online poker will be legalized, taxed and regulated in the U.S., at least on
the state level in various jurisdictions. Land-based casinos, existing compliant
overseas poker sites, and possibly even other large mainstream business
entities in the U.S. may try to get a piece of whatever pies become legitimately
available.
As for the fate of the 11 named in the indictment, however, 8
are not presently in the U.S., and they have likely already disappeared to locales
without extradition treaties with the U.S. They may permanently escape criminal
charges, as long as they are careful to never accidentally set foot in the U.S.
or any other jurisdiction with an extradition treaty.
The U.S. government will likely wind up with some money from
the seized accounts, although far less than the $3 billion it is seeking from
the poker sites in the civil suits. The DOJ recently released a statement
indicating all player funds on deposit by U.S. citizens will be fully returned
as soon as possible.
U.S. poker players now have the option to wait
for legalization in the U.S., move out of the U.S., play at brick and mortar
casinos with card rooms, or take a shot with playing at the lesser sites that
are still operational in the U.S. But one thing that is clear is that the U.S.
government has no interest in taking any action whatsoever against individual
U.S. poker players, only against businesses they see as in violation of U.S.
law.