Playing Internet poker is supposed to be a gamble, but not like this.
After federal prosecutors late last week shut down the country’s three most popular online poker websites, millions of players wondered if the money stored in their online accounts — in some cases tens of thousands of dollars or more — would ever be seen again. The web domain names for PokerStars, Full Tilt Poker and Absolute Poker are now seized and frozen by the U.S. government.
Authorities have taken control of more than 75 company bank accounts in 14 countries, and are seeking $3 billion in fines and restitution. Frozen player accounts alone amount to billions of dollars — money that for the past few days has been in legal limbo.
The good news: the U.S. Attorney for the Southern District of New York on Wednesday announced a deal with two of the affected sites that eased players’ concerns somewhat — PokerStars and Full Tilt would be allowed to resume operations, but only to refund player accounts. And the U.S. Attorney’s office said it would be willing to strike a similar arrangement with the third affected website. It may be weeks or longer, though, before players have their money in hand.
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In poker circles, last week’s federal raid has come to be known as “Black Friday.”
“Literally within hours, an entire multi-billion-dollar industry was brought to its knees,” said Scott Long, publisher of the Florida-based Ante Up magazine. The three sites that were busted represented an estimated 70 percent of the U.S. online poker market.
For those still determined to play online, there are more than a dozen smaller poker websites — based overseas — that even today are accepting U.S. player deposits and wagers, despite the recent sting, and despite a 2006 federal law that placed poker sites on shaky legal ground in the first place. But players who use those sites risk another government shutdown that might make it difficult to collect their winnings.
Site operators themselves are at serious risk of going to jail. A total of 11 online gambling executives have been charged with crimes that include bank fraud, money laundering and illegal gambling offenses. If convicted, each potentially faces decades behind bars.
Federal law doesn’t ban the actual act of playing poker for money online, but it prohibits the online banking transactions that make such poker games possible. Still, it wasn’t until now that federal authorities actually used these restrictions to close site operators down.
Prosecutors say the three sites in question formed fake online businesses pretending to sell items such as jewelry and golf balls — essentially a money-laundering front for the real poker business. To get some banks to look the other way, site operators effectively bribed them, prosecutors allege.
Though casinos might see an immediate uptick in players at “real” poker tables, the relationship between the two forms of poker is generally complementary, not competitive. Online poker, for example, offers penny-ante games that casinos would never bother with — games that provide novice players a place to get their feet wet before visiting an actual casino.
Should the online-fueled pipeline of new players dry up, casinos might find their poker rooms shrinking in future years.
Right away, negative impacts are being felt in other parts of the poker universe. The online piece of the game raked in an estimated $13 billion or so annually — enough money to prop up poker magazines with reams of full-page glossy ads. Professional poker players often struck lucrative sponsorship deals with the big three websites — players would show up to games wearing website-emblazoned T-shirts and hats. That business model, for now, is dead.
Television networks, which played a huge role in boosting poker’s popularity in recent years, are backing away, with Walt Disney Co.’s ESPN sports network announcing this week it would no longer air poker advertising — and some entire poker shows — that are connected to the now-indicted companies.
“There’s just a big degree of uncertainty,” said North Miami Beach poker pro Steve Karp.
Karp, who primarily plays in live casino games, said he was lucky to have only $38 stashed in his online poker account before it was frozen. Karp said some of his poker-playing friends had as much as $150,000 in online accounts that couldn’t be accessed.
But online poker’s loss could be the state budget’s gain. The new poker landscape may boost the prospects of a proposed state law to establish an online poker portal exclusively for Florida players.
Earlier this month, the idea appeared headed nowhere in the Legislature: the Florida Sheriff’s Association likened online poker’s addictiveness to “Internet crack” and players themselves were unenthused about the prospect of playing only against in-state competition. Sites like Pokerstars offered a far-deeper global pool of players and therefore more variety in stakes and game format.
But with Pokerstars and the other big dogs of Internet poker now closed for U.S. business indefinitely, state Rep. Joseph Abruzzo, the Wellington Democrat sponsoring the Florida poker bill in the House, says the idea of an in-state network deserves a second look.
Abruzzo said previous estimates that his bill would create tax revenues of $58 million annually now have to be revised upward since Florida’s online poker room would be “the only legal game in town.” Given Florida’s roughly one million online players, annual taxes in the hundreds of millions are possible, Abruzzo said.
“We could have online poker up and ready in a matter of months,” Abruzzo said. “Gaming is a state right, we would not run into any trouble with the federal government.”
Congress has considered revising the online poker rules it created in 2006, but so far has taken no action. That 2006 law, the Unlawful Internet Gambling Enforcement Act, created a legal cloud over playing poker online by making it illegal for banks to process Internet gambling transactions. But states can pass their own online poker laws.
Other states besides Florida, such as New Jersey, have also considered creating in-state online poker hubs, and the District of Columbia has in fact approved such a network for D.C. residents and visitors.
Mike Glasser, a 39-year old online poker pro who lives in Boca Raton, said the smaller pool of players in a state system would surely make games less profitable. But even if a state system happened, it’d be months away, so Glasser’s most pressing concern is where to find a new source of income.
Six years ago, burnt out from years of work as a criminal defense attorney, Glasser began playing poker online full-time — and has been making comparable money at it. On the web, players boost their profits by playing multiple games at once, so Glasser said he can’t replicate his routine by driving to a local casino. Meanwhile, Glasser’s wife just found out she’s being laid off from her job as a public-school speech therapist.
It might be time to return to practicing law, Glasser speculated. Or maybe teach.
“We certainly rely on my ability to support the family, via the job I chose,” Glasser said