Here’s a brief summary of last Friday’s federal government offensive against online gambling.
- Federal prosecutors brought fraud and-money laundering charges against the three largest online poker sites: Full Tilt Poker, PokerStars, and Absolute Poker. The government also seized their domain names, terminating their presence online–until they obtain another domain name.
- All three sites are located outside the U.S. Full Tilt is based in Alderney (an island in the English Channel and part of the U.K., ) PokerStars is on the Isle of Man, and Absolute Poker is in Costa Rica.
- According to the Wall Street Journal online poker sites last year took in about $16 billion in wagers from about 1.8 million U.S. residents who play poker online.
- The Unlawful Internet Gambling Enforcement Act of 2006 made it a crime for U.S. financial institutions to process payments for online gaming businesses. The NY Times reports “[t]he online poker operators sought to avoid detection by banks and legal authorities by funneling payments through fictitious online businesses that purported to sell jewelry, golf balls and other items, according to the indictment. It says that when some banks processed the payments, they were unaware of the real nature of the business, but the site operators also bribed banks into accepting the payments.”
- The legal environment is online poker is hardly clear. Disagreement exists over whether poker and blackjack are even illegal under federal anti-gaming laws, since some argue they are games of skill, not chance.
- The NY Times again:
- “Prosecutors seemed to skirt the issue. They based parts of their prosecution on state laws in New York and elsewhere that prohibited unlicensed gambling, including poker. Legal experts said the prosecutors needed to rely on such prohibitions as a foundation for going after the claims of money laundering and fraud. But Mr. Walters [a lawyer whose clients include other online gaming sites] said this strategy might face challenges. He said it was not clear that the state laws applied to foreign-based gambling operations, given that under federal law, international commerce was regulated at the federal level.”
- According to the WS Journal the sudden enforcement action surprised the sites’ customers, quoting a professional poker player who said “we understood there were issues. We never assumed there’d be some type of black-out overnight.”