Poker Law Archives - Page 3 of 4

A Law Professor Looks at Online Poker’s Black Friday

May 9, 2011

In a previous blog, I wrote that the timing was suspicious. Why did the federal Department of Justice (“DoJ”) make its big show on Friday, April 15, 2011, when the grand jury had been meeting for more than a year?

We might not know the reasons for the timing. But we can understand why the prosecutors structured their cases as they did.

I often act as a consultant and expert witness for governments and industry. But I am also a professor of law, teaching not only Gaming Law, but also Criminal Law. So, here’s my view of why the DoJ’s indictment reads the way it does.

The 52-page document contained nine counts: violation of the Unlawful Internet Gambling Enforcement Act (“UIGEA”), conspiracy, illegal gambling business (“IGB”), bank and wire fraud, and money laundering. The criminal charges were carefully structured for maximum legal and public relations impacts.

The UIGEA was used because it covers money transfers, and to reinforce the false message that it made Internet gambling illegal. The UIGEA is actually only an enforcement act. It requires there be a violation of some other federal or state anti-gambling law.

The UIGEA was rushed through Congress by then-Majority Leader Bill Frist (R.-TN) and is a mess, with typos and other problems. For example, the UIGEA is expressly limited to payments going from players to operators for illegal online gambling, not the other way around. Do all the bank accounts that were seized only contain money being sent by players in New York to the poker sites? Was none of it money won by players?

Conspiracy is often called the prosecutor’s friend. All you need to prove is an agreement and an act in furtherance of the conspiracy. You don’t need to show any other crime was actually committed or even attempted. Conspiracy also makes trials easier for prosecutors. For example, testimony by a cooperating witness, “He told me he was going to take poker bets from the U.S.,” would normally not be allowed in as evidence under the hearsay rule. But, “He asked me if I wanted to help him set up a site to take poker bets from the U.S., and I agreed” comes in, to prove there was an agreement.

Almost all of the DoJ’s legal claims depend on the underlying activity, online poker, being illegal. The problem for prosecutors is that the main federal anti-gambling statue, the Wire Act, has been held in a published federal Court of Appeals decision to be limited to bets on sports events and races. Since the Wire Act won’t work, prosecutors used the IGB. That statute makes it a federal felony if five or more people do more than $2,000 in business a day in violation of state gambling laws.

The only ones mentioned in the indictment are New York’s misdemeanor anti-gambling statutes. These clearly do not apply to players, which means the DoJ may not have had the right to seize players’ bank accounts. More importantly, the New York laws have never been tested, to see if they overcome the strong presumption that a state law does not reach beyond its borders. It also raises the issue of whether poker is a “contest of chance,” as required by Penal §225.00.

Note the repeated use of the word “fraud.” With Internet gambling, prosecutors have tried to find ways to include fraud whenever possible. For example, among the 22 counts in the criminal complaint filed against BetOnSports was a charge of mail fraud, for the weak claim of falsely advertising that sports betting was legal. (The website reached the whole world, including places where sports betting is, in fact, legal.) I believe, the DoJ’s emphasis on fraud is designed, in part, to create the impression among players that online sites cannot be trusted.

Most of the mail and bank fraud counts are actually weak. They involve defendants lying to banks to disguise the fact that online poker was involved. Phony companies were allegedly created and transactions labeled as sales of dog food and golf balls. There will be factual issues whether the banks actually knew what was going on – billions of dollars is a lot of dog food. And are we to believe no player ever mentioned online poker to his bank?

The bank fraud statute requires a scheme to either “defraud a financial institution” or to obtain any money owned or held by the bank. The second one won’t work. Lower courts have said the law was designed to protect the integrity of the banking system. But, the U.S. Supreme Court ruled that part of the statute means what it says: prosecutors have to show the victim lost money. Here, the banks were supposedly tricked into making millions of dollars. Talk about a victimless crime.

So, the DoJ is left with having to show that banks were “defrauded.” Again, there will be an issue of what exactly did the banks lose? Even after the UIGEA a bank cannot be charged with a crime for unknowingly facilitating online poker. As of June 1, 2010, there are regulations the banks have to follow. But, almost all the events took place prior to that; and, the final regulations do not provide for fines.

Bank fraud carries a maximum sentence of 30 years and a $1,000,000 fine. Money laundering also can lead to hefty penalties. It is another commonly used count in gambling prosecutions, because the prison sentence is based on the volume of money that was transferred, not on the gaming operations’ actual profit and loss. A defendant faced with 50 years in prison can be persuaded to plead guilty to illegal gambling charges that would otherwise be dismissed.

The indictment sets forth facts that would seem to call for a count of bribery, if true. Some of the defendants paid a small Utah bank $10 million to buy 30% of the bank, so the bank would transact online poker payments that the bank was reluctant to do. An officer and part-owner allegedly asked for, and received, $20,000. The indictment is careful to call this payoff a “bonus” rather than a bribe. The banker was charged with conspiracy and being part of the other activities constituting crimes. This avoids the question of who exactly was the victim, since it was the banker who solicited the payment. It also gets around the problem of whether a briber and bribee can also be charged with being coconspirators.

The DoJ has done what it could to make this indictment as frightening as possible. But we will probably never know just how strong the government’s case actually is. The payment processing defendants who are now in the U.S. will fight for a while, but will eventually have to agree to plea bargains.

The others, especially the big fish, also won’t stand trial. They would like to settle, even paying hundreds of millions of dollars and admitting they violated the law, but only if they won’t serve long prison sentences and risk losing their licenses in other countries. The operators have one major bargaining chip: If the DoJ won’t make a deal they can live with, they will simply stay away from countries where they might be extradited.

Republished with permission © Copyright 2011, I. Nelson Rose, Prof. Rose is recognized as one of the world’s leading experts on gambling law, and is a consultant and expert witness for governments and industry. His latest books, Internet Gaming Law (1^st and 2^nd editions), Blackjack and the Law and Gaming Law: Cases and Materials, are available through his website, www.GamblingAndTheLaw.com.

Blanca Games Issues Statement on Raids

May 7, 2011

ST. JOHN’S, ANTIGUA and BARBUDA–(Marketwire – May 7, 2011) – Blanca Games Inc. (“Blanca”), operator of online poker rooms Absolute Poker and UB, issued the following statement today:

Blanca can confirm that Costa Rican officials visited the office of Innovative Data Solutions (“IDS”), the former customer service centre of Absolute Poker and UB in Costa Rica. The Organismo de Investigaciones Judiciales (“OIJ”) took action yesterday to further their investigation of Olman Rimola, the owner of IDS, Scott Tom, who was also recently named in the indictment list issued by the Department of Justice on April 15^th, and a third lesser known party, Oldemar Vargas. The reported OIJ ‘raids’ of IDS and various associated private residential addresses were in relation to their search for Rimola, Tom and Vargas, and do not involve Blanca or the operations of Absolute Poker or UB.

Poker Sites Accepting US Players

A company spokesperson said: “We want to correct the rumors being reported in poker circles and the wider community that yesterday’s events are related to the recent Department of Justice indictments. Our understanding is that this is not the case, and that they were driven by local investigations of a separate matter in Costa Rica that involves a concerted effort to locate and apprehend Rimola, Tom and Vargas for questioning in relation to a money laundering investigation.”

Blanca has terminated its supplier contract with IDS after discovering that Rimola has misappropriated millions in IDS severance payments. The company is currently exploring all legal options available to recover the lost funds. Furthermore, Blanca is cooperating fully with the local Ministerio de Trabajo (Department of Labor Officials) in Costa Rica in order to coordinate an alternative method to remit all severance payments to IDS employees, thereby bypassing the facilities of IDS and Rimola to ensure that all obligations to former employees are fulfilled.

As stated previously, Absolute Poker and UB continue to operate their non-U.S. facing business around the world. The company is engaged in ongoing discussions with the Department of Justice and the U.S. Attorney’s office regarding an agreement that will facilitate the return of funds to U.S. players.

Absolute Poker, UB and Pokerstars Offices Raided by Police

May 6, 2011

According to our sources in Costa Rica and several web reports from @KevMath and @TaoPauly we’ve learned that the Costa Rican offices of Pokerstars, Absolute Poker and UB were raided earlier today by the OIJ, which is similar to the FBI in the U.S.. Police also raided several homes that are linked to the owners of Absolute Poker and UB.

Pokerstars VIP Manager Steve posted this on 2+2 a couple of hours ago, “PokerStars continues to operate the world’s largest poker room, business as usual. It is true that the OIJ is currently at the PokerStars Costa Rican office and has sent employees home temporarily, but employees will be able to return in a few hours. PokerStars expects the office to return to business as usual in short order as this action was most likely taken as a response to problems experienced by other local companies in the same industry.” He’s of course referring to Absolute Poker and UB. Police left the Pokerstars offices shortly after arriving. Pokerstars is based on the Isle of Man and only have a small support staff in Costa Rica

Absolute Poker and UB seem to be the main focus of today’s raids of the OIJ. The Absolute Poker and UB employees went to the “Ministry of Work” fearing they wouldn’t be paid by Absolute Poker/UB COO Paul Leggett. Most of today’s action seems to have been spurned on by this and Costa Rica’s very strict labor laws.

We’ll stay on top of this story and continue to bring you the latest.

Poker Prohibition Is Not Regulation

April 29, 2011

When people want something, businesses arise to fill the demand. How much more so when the activity, online poker, is not even clearly illegal?

If the commercial goods or services are not legal, then by definition, the organizations will be criminal. Prohibition created modern organized crime, by outlawing alcoholic beverages.

When Prohibition was repealed, organized crime turned to things people wanted but could not get legally: prostitution, drugs and gambling.

When legal gambling began to spread, with insufficient safeguards to keep out the bad guys, organized crime used its experience to infiltrate.

Over the years and around the world, governments realized they had few options. The only way to completely outlaw gambling would be to crack down on players almost as hard as operators. This is not politically possible in a democracy.

Since prohibition does not work, the next best choice is to legalize gambling and put in strict regulations.

The federal government of the United States has decided to ignore these lessons of history and take the worst aspects of the choices available.

Every action by the federal government makes it more difficult for it to go after the next operator. The UIGEA, rammed through by the failed politician Bill Frist (R.-TN), scared all of the publicly traded gaming companies out of the U.S. market. Then prosecutors went after payment processors, making it more difficult for players to find legitimate ways to send their money to betting sites.

Now the feds have seized .com domain names and charged operators with bank fraud. So, gaming sites are switching to .eu and .uk, and cutting off all physical contact with the U.S. Even the present American operators can’t be extradited, so what hope is there for the DoJ to bring future foreign operators here to stand trial?

The criminal indictment against PokerStars, Full Tilt, Absolute and their founders, was unsealed by the U.S. Attorney for New York on April 15. Why now?

Maybe this just happened to be when the cases came together, when investigators had verified all the information about bank accounts they got almost exactly a year before. Daniel Tzvetkoff was arrested in April 2010, apparently turned in by these very same websites for embezzling tens of millions of dollars while doing payment processing.

So, maybe it was merely a coincidence that recent developments had given Internet poker an air of respectability, a feeling that legalization was inevitable. Nevada regulators approved Caesars Entertainment’s partnership with 888, a company that used to take bets from the U.S. Steve Wynn upped the stakes by announcing a joint venture with PokerStars, which was still accepting American poker players. The Nevada Assembly Judiciary Committee approved a bill to regulate online poker. And the District of Columbia actually made it legal.

The DoJ has been waging a war of intimidation against Internet gambling for years, successfully scaring players, operators, payment processors and affiliates into abandoning the American market. Lacking the two essentials to any prosecution – a statute that clearly makes the activity illegal and a defendant physically present in the U.S. – the feds have announced showy legal action against easy targets about every other year.

Online poker is not an easy target, since a federal Court of Appeal ruled the Wire Act is limited to bets on sports events. And tricking financial institutions into processing poker payments seems a technicality, especially since the banks made millions without ever facing any criminal charges or even paying a penny in fines. Talk about a victimless crime!

But getting a Utah bank to agree to process gambling transactions in return for a $10 million investment is an easier case, if true. The bank was so small that the officer and part-owner who allegedly arranged the deal, asked for, and received, only $20,000 for his “bonus.”

Even if there was a bribe, the feds are still going to have to prove that the poker was illegal. Since the Wire Act won’t work, prosecutors used 18 U.S.C. 1955, which makes it a federal felony if five or more people do more than $2,000 in business a day in violation of state gambling laws. The indictment relies on “New York Penal Law 225 and 225.05 and the laws of other states.” There is an obvious problem with using a state misdemeanor to charge federal felonies against foreign corporations licensed by foreign countries.

The DoJ also included a “thank you” to the Washington State Gambling Commission, indicating that the DoJ is probably going to piggyback on that state’s 2006 law outlawing all Internet gambling, as well. At least Washington state makes Internet gambling a felony.

Still, there are problems. State laws are presumed not to reach beyond their borders. And even if Internet poker is illegal in that state, it is quite a leap to seize domain names for the entire country and threaten bank accounts in places like Panama.

The only state with a law better than Washington’s is Nevada, because it expressly says it reaches beyond the borders of the state. But basing this attack on Internet poker on Nevada law would look like it was motivated by the landbased casinos. After all, who are the big winners here?

The operators will never stand trial, unless they voluntarily return to the U.S. or make some other mistake. The only U.S. extradition treaty I have found that covers illegal gambling is with Hong Kong. Calling it bank fraud won’t work, since the defendants can show their local courts that it is based on gambling. And the activity must be illegal in both countries. No nation will extradite an individual to be tried for the very activity that that nation licenses.

But what is the federal government accomplishing with going after foreign licensed poker operators?

The DoJ is raking in lots of dough for itself. For example, it received $405 million from PartyGaming and one of its founders, without even filing any criminal charges. And Party Poker had pulled out of the U.S. years earlier.

Certainly the prosecutors are scaring a lot of people and making it difficult for average citizens to even get their money to a foreign site, let alone place and collect a bet. But when the public relations campaign turned against it, the DoJ quickly backed down.

The DoJ’s seizure of .com names around the world, even in countries where online poker is 100% legal, led to international outrage. It also creates a dangerous precedent. Can an Islamic country, which outlaws alcohol, seize the worldwide domain names of every retailer that advertises beer or wine?

And the DoJ made it nearly impossible for players to get their deposits back. Even in the U.S., there is no federal law against merely playing poker on the Internet.

Five days after Black Friday, the DoJ announced that an agreement had been reached with PokerStars and Full Tilt Poker. The companies will be permitted to operate money games outside of the U.S., which they always had the legal right to do anyway. American players will be able to go to the .com sites and get their deposits back.

The problem for the DoJ is that prohibition is not regulation. Getting rid of publicly traded operators created a vacuum that was quickly filled by companies whose owners were difficult to trace. Scaring away well-known poker names means that newcomers, some of whom will undoubtedly be sleazy, will take their places. If the multi-billion-dollar U.S. online poker market becomes too hot for licensed companies, operators without any licenses, who won’t even reveal what country they are in, will be glad to run the games.

Meanwhile, like a raid by Elliot Ness on bootleggers and speakeasies during Prohibition, there are now wonderful opportunities for individuals you would not want to meet in a dark alley.

Unless, of course, Americans are actually going to stop playing poker on the Internet.

Become a Poker Activist

April 27, 2011

Since Black Friday, the online poker forums like ours have been breaking all-time traffic records. It seems that anyone with accounts on any of the Big 3 have wanted to come and share their story. While it is great to see that so many people are motivated, there are, in fact, better ways to spend the energy.

It is nice to hear stories and know each of us are not alone in our struggle to figure out where to go in this New World Order, but that does not bring about change. Many of the things that the Big 3 were doing were wrong and illegal, by the letter of the law. They knew of these laws, and knew the whole time that they were breaking them. In order for things to recover, governmental regulation will be necessary to pick up the pieces.

But, how do our legislators know that we, as a public, want this to happen? How do they know that our outcry is so large, that so many people are affected? I doubt too many spend their days idly browsing the numerous poker forums on the net.

Click Here for Online Poker Sites Accepting Players from the US

Since the indictments, it has been reported that over 70,000 letters have been sent to various governmental officials related to the changes in the poker world. While it is easy to fall into the trap of believing that your voice does not count, those who wrote those letters did not. What did their actions accomplish? Simply visit any of the Big 3 and you will see that have all reclaimed their domain names, that the DoJ has promised to help facilitate cash-outs. This shows just how much power a vocal group can have.

If you want to see changes, if you want your Congressman to know what you think on the issue, write to them! That is the only way that Congress can know what you want, can ever hear your voice. Take a few minutes and take what you were about to write here at Holdem Poker Chat and make it so your voice will be heard by those who can make a difference.

Absolute Poker and UB Not Backing Down

April 25, 2011

The owners of Absolute Poker and UB are not following the lead of Pokerstars and Full Tilt Poker. All four online poker sites had their bank accounts seizured along with their domains by the United States Department of Justice. Absolute Poker and UB have decided not to agree with any offer from the U.S. Department of Justice including the return of player’s money because they are insisting that this seizure on their domain name and bank accounts is illegal.

Poker Sites Still Accepting Players from the USA

A spokesperson for Absolute Poker has stated that management is reviewing the offers made by the US government and has retained Blank Rome LLP as United States counsel to provide legal advice. They also have the backing of the Antigua Government if they choose to fight the charges brought against them. The Antigua Government has suggested that Absolute Poker and UB should not concede to the US Government so quickly and wait for the World Trade Organization to intervene.

Pokerstars and Full Tilt Poker have signed an agreement with the US DOJ which includes the use of their domain name for returning players the funds that may be in their player accounts. The US DOJ is monitoring the sites so that no new players are registered or deposits taken. Absolute Poker and UB have so far refused to work with the DOJ and are looking for alternative solutions.

Black Friday: A Step Too Far?

April 22, 2011

Can a government be charged with war crimes, if the war is only one of intimidation?

The U.S. federal Department of Justice isn’t blowing up buses. No one has died. But while Palestinian terrorists can only close down Israeli pizza parlors; the DoJ stopped online poker sites from doing business anywhere in the world – including where poker is 100% legal.

On Friday, April 15, 2011, the DoJ seized the .com names of five of the biggest poker sites. It is not even clear that online poker is illegal in every state and territory of the U.S. But players in countries like England, where it is indisputably legal, also found themselves unable to access their favorite sites.

This is a door the U.S. should never have opened. The next to step through could be an Islamic country, which outlaws alcohol, seizing the worldwide domain names of every retailer and restaurant that advertises beer or wine.

And the DoJ also effectively froze the money deposited by hundreds of thousands of American players, who had done nothing wrong. There is no federal law against merely playing poker. Half the states do have mostly ancient laws on the books making it a crime, sometimes, to make a bet. But in the other half, it is not a crime to even bet with an illegal operation.

This is true of New York, where the DoJ’s legal actions were filed. The criminal indictments charged the online operators under a statute, 18 U.S.C. §1955, which makes it a federal felony to be a large business in violation of state anti-gambling laws. The only state laws cited are New York’s Penal Law 225 and 225.05, which clearly do not apply to mere poker players.

Black Friday saw widespread panic among players, and the threat of a worldwide bank run on online gaming operators. By Wednesday, the DoJ appeared to realize it had way overstepped its power, and that it is losing the public relations war.

On April 20, Preet Bharara, the U.S. Attorney in Manhattan who had seized the domain names, announced that an agreement had been reached with PokerStars and Full Tilt Poker. Technically, the .com names remain seized. But the DoJ will now permit the companies to operate money games outside of the U.S., which they always had the legal right to do anyway. American players can also go to the .com sites and get their deposits back.

Bharara issued the following statement: “No individual player accounts were ever frozen or restrained, and each implicated poker company has at all times been free to reimburse any player’s deposited funds.”

Technically true, but misleading. Exactly how were players supposed to get their money, when they could not log on to the seized .com sites? Did Bharara tell the operators they could refund players’ deposits, and how they were suppose to do that? Even today the DoJ has not worked out all the details on what it will allow.

Notice that the announced agreement is only with PokerStars and Full-Tilt. Those companies have licenses and approvals by foreign jurisdictions, including France, Italy and Alderney, which they want to protect. They also would like to someday return to the U.S., once the laws are changed. Absolute is licensed by the Kahnawake tribe in Canada and has always taken the position that it does not have to be overly concerned with the laws of Canada, the U.S., or any other jurisdiction. So it is standing tough. In fact, it is still accepting money players from the U.S.

Winners and losers:

Traffic on the seized sites seems to be down, but not precipitously. Americans must have quickly discovered that they can sign up to the same operators through .eu and .uk sites.

Hit as hard have been media outlets which depend on poker ads. No reason to spend money on PokerStars.net commercials if players can’t be converted onto PokerStars.com. That is probably the real reason for ESPN cancelling so many poker TV shows.

Traffic on rival sites that continue to take bets from the U.S. have increased, but not spectacularly. Players do have their favorites, and don’t necessarily trust the other sites. Plus, their money is still tied up.

Purely European companies, like Playtech, and the not-quite Internet poker sites are also doing well. PurePlay.com, a subscription poker site with free alternative means of entry, based in San Francisco, received $2.8 million in new funding after Black Friday. And Atlantis Internet Group Corporation, which is setting up legal closed-circuit computer linked poker on Indian land, saw its stock rise 400% in the last few days.

Brick and mortar card clubs and casino cardrooms have seen modest increases in the number of poker players. The first weekend after the online players’ funds are freed up will show whether the crackdown on Internet competition can help save Atlantic City.

In the long run it will probably be the largest landbased operators, like Caesars, and online sites which had already pulled out of the U.S., led by Bwin-Party and 888, that will be the biggest winners. The indictments reinforce proponents’ arguments that the states should legalize intra-state poker, so that the operators and their computers and payments processors will be physically here to be taxed and regulated.

The major obstacle is political. The same political and economic forces that allow us to even talk about legalizing Internet poker also stand in its way. There is so much legal gambling in the U.S. that allowing one more form is no big deal. But that also means there are well-established local operators who will fight to prevent outsiders from coming in to create new competition.

Each state will create its own formula for extracting as much money as possible without alienating existing local operators. Atlantic City casinos companies have enough money that there is no reason to open New Jersey online gambling to foreign bidders. In California there will be at least three licenses: one for a consortium of the state’s card clubs, the same for its gaming tribes, and at least one for an outside operator who can bring $200 million cash up front to the table.

Nevada casinos may want a federal law to prevent them having to compete against politically powerful local operators in 50 different states; 51 counting the District of Columbia. But the recent indictments and stalemates in Congress prove that the states are where the action is, and is going to be, until well after the 2012 election.

Republished with permission © Copyright 2011, I. Nelson Rose, Encino, California. All rights reserved worldwide. Gambling and the Law® is a registered trademark of Professor I. Nelson Rose, www.GamblingAndTheLaw.com.

Federal Poker Indictments: Revisiting Prohibition

April 20, 2011

The timing is suspicious.

March saw Nevada regulators approving a partnership between Caesars and 888, and Wynn announcing a joint venture with PokerStars. Now comes the indictments, three-billion-dollar civil suit and seizures of domain names by the feds. Wynn immediately cancelled his plans. Players were panicked.

Which was, of course, the goal.

If the allegations are true, the operators brought this on themselves, by lying and bribing bank officials. Of course, the prosecutors have the problem of convincing a jury that there is bank fraud when the “victims” are tricked into making millions of dollars.

And will this be the end of Internet poker? Did Prohibition end drinking?

Prohibition created modern organized crime, by outlawing alcoholic beverages. When people want something and it is illegal, organizations will arise to fill the demand. How much more so when the activity, online poker, is not even clearly illegal?

Every action by the U.S. federal government makes it more difficult for it to go after the next operator. The UIGEA, rammed through by the failed politician Bill Frist (R.-TN), can be seen as an anti-consumer-protection law, because it scared all of the publicly traded gaming companies out of the U.S. market. Then prosecutors went after payment processors, making it more difficult for players to find legitimate ways to send their money to betting sites.

The Grand Jury has been meeting for at least a year. The criminal indictment against PokerStars, Full Tilt, Absolute and their founders, was unsealed by the U.S. Attorney for New York on April 15, but bore a date-stamp of March 10. So why now?

Besides the Caesars-888 and Wynn-PokerStars agreements, the Nevada Assembly Judiciary Committee recently approved a bill to regulate online poker. And the District of Columbia actually made it legal.

But getting a bank to agree to process gambling transactions in return for a $10 million investment is an easier case, if true. I can understand approaching a small bank – so small that the officer and part-owner who allegedly arranged the deal, asked for, and received, only $20,000 for his “bonus.” But why would you do this in Utah, of all states?

There are lots of interesting nuggets in the legal papers. The DoJ claims that one-third of the billions of dollars players deposited went to the operators through the rake. That number seems high, but if true, it explains why everyone wants to operate an online poker room, with few expenses and no chance of losing to a lucky gambler.

Most of the activities cited occurred after the passage of the UIGEA. This is a subtle acknowledgment that operators who left the U.S. in 2006 have nothing to fear.

Even if there was a bribe, the feds are still going to have to prove that the poker was illegal. Since the Wire Act won’t work, prosecutors used 18 U.S.C. 1955, which makes it a federal felony if five or more people do more than $2,000 in business a day in violation of state gambling laws. The indictment relies on “New York Penal Law 225 and 225.05 and the laws of other states.” There is a “thank you” to the Washington State Gambling Commission, indicating that the DoJ is probably going to piggyback on that state’s 2006 law outlawing all Internet gambling, as well.

The Washington statute was upheld by the State Supreme Court. Still, there are problems. State laws are presumed not to reach beyond their borders. And even if Internet poker is illegal in that state, it is quite a leap to seize domain names for the entire country and threaten bank accounts in places like Panama.

The only state with a law better than Washington’s is Nevada. But basing this attack on Internet poker on Nevada law would look like it was motivated by the landbased casinos. After all, who are the big winners here?

We will probably see the first attacks on the government’s cases in motions to free the bank accounts, especially those outside the U.S. And the poker operators will undoubtedly fight to get their .com names back for the rest of the world.

The operators will never stand trial. The only U.S. extradition treaty I have found that covers illegal gambling is with Hong Kong. Calling it bank fraud won’t work, since the defendants can show their local courts that it is based on gambling. And it is fundamental to all extraditions that the activity be illegal in both countries. No nation will extradite an individual to be tried for the very activity that that nation licenses.

There may not even be a settlement. The DoJ accepted $405 million from PartyGaming and one of its founders and $100 million from Neteller and its founders. But those companies had already left the U.S. gaming markets. The DoJ will insist on a guilty plea to something, which might kill the operators’ chances of getting licensed when American laws change. And no amount of money will buy them the right to open up again without a change in the law. So what would these operators get from a settlement, other than not having to be worried about getting arrested changing planes?

It will be interesting to watch the fallout. There are a lot of famous American poker players and others who are associated with the indicted operators. They should be getting their affairs in order.

Meanwhile, like a raid by Elliot Ness on breweries and speakeasies during Prohibition, there are now wonderful opportunities for new operators to fill the vacuum. Unless, of course, Americans are actually going to stop playing poker on the Internet.

Licensing Jurisdictions Speak Out About Online Poker Indictments

April 19, 2011

The Tuesday after online pokers “Black Friday” had some other big news in the online gaming industry. The Kahnawake Gaming Commission released a statement regarding their feelings on the sweeping indictments made towards four major online poker rooms. The United States Department of Justice seized online domains from Absolute Poker, UB.com, Full Tilt and PokerStars, not only did they seize domains, they arrested several people and charged them with felony crimes that could land the defendants in prison for 50 years.

Absolute Poker is licensed by the KGC, and the licensing jurisdiction wants players to know that they are concerned what will happen to players next, and they want to make sure that no player is affected by the decisions made by the USA DoJ. They also mentioned that they were in talks with Absolute Poker regarding player accounts and will release another statement in the near future.

Kahnawake Gaming Commission has been licensing online gaming operators for over a decade, and is located in the Mohawk Territory of Kahnawake, just outside of Montreal, Canada. They have recently been noted by huge player watchdog sites as becoming one of the leading licensing bodies available for online gaming.

Another licensing body is speaking out about the indictment as well. The Isle of Man Gambling Supervision Commission made their presence known and plans to handle things as professionally as possible with PokerStars to protect players, and the business model as a whole. PokerStars is still holding the license from the Isle of Man as of today, so their licensing status remains unchanged. Finally, it was also noted that players from the USA with funds in their PokerStars accounts will hopefully be able to withdraw their funds in the near future. As of now PokerStars suspended all cash game play for USA players.

Pokerstars has Suspended Real Money Play in the US

April 23, 2011

Pokerstars has finally issued an announcement to last week’s indictment and their leaving the US poker market. Several big name pros have come out and said that players should give the poker sites some time to get things worked out and that they would get their money as soon as possible.

Poker Sites that Accept Players from the USA

“As you may have heard, we have had to suspend real money poker services to people based in the U.S. due to legal developments there.”

“The developments are confined to the U.S. and do not have any impact on your ability to continue using our services. Please be assured player balances are safe. There is no cause for concern. For all customers outside the U.S. it is business as usual.”

“Please be aware that we are currently experiencing a very high volume of emails, so our response times are delayed. We will answer player emails as soon as possible. Thank you for your patience and understanding in this matter.”

April 17, 2011 Update:

Both the PokerStars.net Million Dollar Challenge and PokerStars.net Big Game have been cancelled.