U.S. Government’s Misdeal in Online Poker Indictments

Guest blogger Chris Flood

Our gambling laws make about as much sense as the government banning gin, but not vodka, during Prohibition. 

Some laws allow gambling, some encourage it and some ban it. You can run an online business for people to bet on horse races, but not on a poker hand.  So, instead of collecting taxes on the $30 billion that is bet in this country every year on online poker sites run by offshore companies, our government is investing tax dollars in an attempt to close down the games. It’s time to fix this absurd system.

While our nation’s leaders fret over our debt, there are millions of American poker players willing to throw coins into tax coffers in order to test their skills. But the national love for Texas Hold ‘Em brings in no taxes while our prosecutors pursue the dealers. 

On April 15, a day the online poker world dubbed Black Friday, the Justice Department unsealed indictments against 11 players in the online poker world, including the founders of popular sites PokerStars, Full Tilt Poker and Absolute Poker. The government also, at least temporarily, seized and shut down the websites. Using the Unlawful Internet Gambling Enforcement Act, a law passed in 2006 but steeped in archaic concepts of virtue, the feds are looking to convict these defendants and reap forfeitures of some $3 billion.

To identify those forfeited dollars, prosecutors had to build a complex case based on how people paid to play, including securing restraining orders on 75 bank accounts. Now, they will have to prove these 11 defendants guilty beyond a reasonable doubt. This complicated and greedy grab by the Justice Department is totally unnecessary.

The government is spending millions of dollars on the chance of raking in $3 billion. Who is gambling now? Why not instead collect a steady stream of tax dollars on online poker, like many other countries do every day?

Because our laws now make some online gambling legal and other online gambling illegal, we have a likely unconstitutional Unlawful Internet Gambling Enforcement Act. We also have to appease leaders in other World Trade Organization member countries who are miffed at our illogical and short-sighted law that violates the treaty in spirit and has ensnared offshore companies that run online poker sites. It is likely that WTO countries will come after the U.S. again for the April 15 round up.

We need not make this a no-limit game. The estimated 2.5 million Americans who play online poker know there is some skill to the game, unlike other sports that can be rigged. There can be online safeguards built in to stop underage players and to warn and screen for problem gamblers, just like casinos do on a regular basis.

We don’t need more charges of bank fraud and money laundering against poker companies.  Instead, we need to end this madness with a solid challenge to the constitutionality of the Unlawful Internet Gambling Enforcement Act, which is aimed at preventing financial services firms from processing funds for online gambling. It’s worth noting that Congress hasn’t targeted the online poker players in this country, where lawmakers know full well its popularity.  

Forbeshas reported that in 2009, online poker took in revenue of about $1.4 billion in the U.S. with PokerStars and Full Tilt, whose founders are now indicted, bringing in about 70 percent of the total. Let’s stop taking a double hit here. Stop spending to prosecute under an inconsistent law and start taxing online poker sites under the proven model used by other countries.

The current poker prosecution echoes “the Noble Experiment” of Prohibition. It is an attempt to enforce a morality that average citizens don’t find immoral. Just as the 18^thAmendment to the U.S. Constitution begat the 21^stAmendment to repeal it, if Congress won’t legalize online Poker, we should go all in and let the U.S. Supreme Court take a good look at this cockeyed prosecutorial tool.

Chris Flood is a Houston-based white- collar defense attorney and former prosecutor who represented the owner of BetonSports.com in what was the largest online gambling case in U.S. history until last month.

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