Online Poker Black Friday(TM): Separating Myths from Facts

Time to start cleaning up some of the myths and redefining what Black Friday is all about...

The Department of Justice (DoJ) left a Chicxulub crater on the U.S. online poker industry on April 15th.

And when something like that hits, there’s typically a lot of misinformation to sift through in the rubble.

We plan to get back to regular poker news reporting this week, but before we do, here’s the biggest myths/misconceptions we’re hearing about the events of Black FridayTM. We’ll continue adding to this post as needed.

Myth: The DoJ has declared war on online poker.

Fact: The DoJ has not declared war on online poker. The Southern District of New York (SDNY) and DoJ spent years building a money laundering and bank fraud case against PokerStars, Full Tilt Poker, and AP/UB. If the allegations are true, then the Big 3 operators purchased/invested in at least part of a bank and miscoded their transactions to dupe banks into processing non-gaming related charges. In bringing these indictments, the Government will likely realize a financial windfall of over a billion dollars. That’s what happened on April 15th. There was no war against online poker.

Myth: The DoJ busted PokerStars, Full Tilt, and AP/UB to help clear the way for the U.S. Government to regulate online poker.

Fact: The indictments against PokerStars, Full Tilt, AP/UB happened completely independently of any legislative actions happening at the state or Federal level.

Had Senator Harry Reid pushed the Reid BillTM through in December of 2010, these indictments still would’ve occurred. The only way these indictments wouldn’t have occurred is if Stars/Tilt hadn’t (allegedly) purchased/persuaded/invested in a bank and (allegedly) miscoded transactions and laundered money.

If you need more info on how many levels deep the sites went to allegedly commit fraud, read this.

Myth: Your 65,000+ electronic letter submissions to our elected officials helped quickly spur the DoJ into striking deals with Stars/Tilt to unfreeze funds.

Fact: Stars/Tilt eagerly cooperating with the DoJ, as well as angry calls from Federal officials to the SDNY to unfreeze accounts so they could get their money out, is why the agreements happened so quickly.

The PPA tried to take some credit here (likely to keep themselves relevant and your donations coming in) and should be applauded for their Action Center (which should be FRONT & CENTER on the homepage and not something we needed to Google search to find–face palm) and making it as easy as possible for you to voice your displeasure with our elected officials, but those electronic letters had absolutely no bearing on the DoJ agreements with Stars and Tilt.

Myth: Once online poker is regulated in the United States, we’ll all get to play again right away.

Fact: If a bill is passed at the Federal level tomorrow, it’ll be at least a year until anyone is playing in the U.S. on a major, regulated  operator.

There will be a regulatory process/structure period, as well as licensing period, as well as ramp up period for licensees to launch. Further, there are about 15 states where you can’t even play subscription-based poker right now–so your state will also have to opt-in as well. It’s going to be awhile.

Myth: You can safely play poker just as you did on Stars and Tilt on other U.S.-facing sites right now.

Fact: This one is partly true, with some caveats.

As some of the less popular sites (as of two weeks ago) become more popular (as of today) they too will experience similar issues with payment processing (it’s not going to get easier, that’s for sure), and could eventually be shut down, or face other scenarios that will keep you from getting money out. We’re not saying don’t take your business to Merge or Bodog or Doyle’s Room, but if the hammer comes down, the chance of you getting your money out will be something close to nil, unlike with Stars, Tilt, and presumably AP/UB. How come? Those smaller operators have significantly less international presence (Bodog) and money in the bank to facilitate a mass evacuation of cash-outs.

Further, don’t expect any of these sites to reach any level of critical mass like Stars and Tilt were able to achieve. The DoJ indictments will scare away most of the casual players, and none of these sites have the money or desire to bankroll TV productions (like the PokerStars Big Game or Poker After Dark) that will reach and attract new players. Not to mention, well, there are not a lot of TV shows willing to accept online poker money (or programming, or advertising) right now.

Myth: This is the end of the road for PokerStars and Full Tilt.

Fact: This myth we hear more from people outside of the industry than within, but it’s still something we’ve heard enough to address.

Stars was doing only 25-30% of the business in the States. Tilt was around 45%. Clearly it’ll impact Tilt more (bye-bye 100+ random Red Pros) but both will survive and continue making money hand over fist in Europe and other emerging markets.

As for AP/UB, this may be the end of the road. We’ll have to wait and see.

We’ll continue adding to this post as needed and welcome your myth/fact suggestions in the comments.

 

 

6 Responses

  1. Patrick Fleming

    May 6, 2011 2:03 am, Reply

    I generally respect the opinions here, but this time almost everything you have said is either wrong or misleading.

    1) There is really little question that the DOJ is at war with online poker. They have basically said they are on numerous occasions. Prior to 4/15 the war had basically been a series of skirmishes and small battles with payment processors of various repute. But in everyone of those payment processor cases the claim that offering online poker in the US is an “illegal gambling business.” Likewise 7 of the 9 specific charges brought on 4/15 are based on that same assertion: offering online poker in the US us illegal. 1 of the 9 charges, bank fraud is both significant and independent of poker. But if bank fraud is what you want to punish there is no legal requirement that you also assert that online poker is an illegal business. The final charge, money laundering, is about 90 to 99% based on online poker being an illegal business because the proceeds of that business are what constitute 90+% of the money at issue. You can also launder the proceeds of bank fraud, but proceeds does not equal the amount of the transactions, but the amount gained by the fraud. If such a number can be generated (and it well may – we have to wait and see the details), it will pale in comparison to the money attributed to poker.

    That’s not a war? it seems to me that what really happened is that the DOJ got a big help in this war by being able to build probable cause of bank fraud too, not that bank fraud is what’s central here. Poker is still the vast majority of the case.

    2) I tend to agree that the second point is probably a myth. The SDNY has had this anti online gambling/poker task force for years and while US assistant attorney generals can be wrong and can be jerks, they are not prone to corruption or doing specific political favors.

    3) I am confused about your third myth. because you at one point say “as well as angry calls from Federal officials to the SDNY to unfreeze accounts so they could get their money out”. You are right to credit Stars and FTP with aggressive negotiating, you are also right to credit pressure put on DOJ from Federal officials. But it is hard for me to imagine that many Federal officials had their own money on the sites, so I believe they were calling to express concern that their CONSTITUENTS money was frozen, namely their poker playing constituents. This is where the 65,000+ emails and other efforts made a difference, they prompted certain Federal officials to make inquiries about insuring the safety of player funds. DOJ will respond to that kind of political pressure to a degree, and the did, to a degree. So it seems to me that the emails clearly helped, though they were surely not the only factor.

    4) Your 4th myth is pretty much correct. An additional point is that if the DOJ is successful in these indictments, it can bring identical indictments (except for the bank fraud) against any other site taking US players.

    5) And no dispute on the final myth.

    t least that’s my take on the situation, hope you will consider it. And otherwise keep up the good work and great stories.

    Patrick Flemng
    PPA Board Member and Litigation Support Director

    • Anonymous

      May 6, 2011 9:04 pm, Reply

      Frank, appreciate the comments. However, the U.S. is at war with, let’s say, terrorism. The U.S. is not at war against online poker. It’s a nice thing to say to drum up support and membership, but the U.S./SDNY saw an opportunity to see a financial windfall by cracking down against the (alleged) bank fraud committed by PokerStars, Full Tilt, and AP/UB. If they didn’t stand to seize hundreds of millions from the indictments (or if Stars/Tilt had maybe been a bit less careless, allegedly) then said indictments would not have happened.

      We respect the platform the PPA has created for its members to reach out to their elected officials, but your organization is kidding itself if it thinks it played even the slightest role in the Stars/Tilt agreements.

      • Patrick Fleming

        May 7, 2011 3:12 pm,

        Appreciate the response. Quickly, unless someone from the DOJ is willing to come forward and say “so long as you don’t commit bank fraud we won’t indite you for operating an illegal business if you offer online poker in the US” I don’t see any other way to view their actions except as an attack online poker. Maybe calling it a “war” can be quibbled with, but the only fact we know for certain is what is in the indictments, 8 of 9 of which directly declare online poker illegal.

        And I wouldn’t even respond to your second point had you not said not ” even the slightest role.”

        The email campaign played a role. How big of a roll can never be quantified. But it is pretty well known that at least a couple of congresspersons contacted DOJ to inquire about “seized player funds” as result of the emails. That’s at least a “slight role.”

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