In 2006 Bill Frist and a handful of ultra conservative senators added the UIGEA to the must pass Safe Port Act. This was done in the middle of the night without ever being debated by Congress. The legislation could not be passed on its own but Bill Frist, named one of the “Most Corrupt Senators” in Congress by a watchdog group, decided that he would force his agenda through.
Two polls were conducted in 2006. A Wall Street Journal poll found that 85% of the participants in the poll opposed government bans on online gambling. A Zogby International poll found the percent to be 87%. Despite huge public opposition to the bill it was buried in the Safe Port Act, never debated, and never even proof read. According to Professor I. Nelson Rose it did not clarify anything. It did not appear to make any types of gambling a crime. It simply made it illegal for banks to process illegal gambling transactions, ones that were already illegal. It also did not make it illegal for players to gamble. It left more questions than answers.
The 5th Circuit Court of Appeals has ruled that the Federal Wire Act of 1961 only applies to sports gambling. It does not apply to any other online gambling. With that ruling one would assume that online poker is legal. Something cannot be illegal simply because it is not specifically legal.
While this explains the Blue Monday domain and bank seizures related to Bookmaker, Beted and others I am going to use this ruling to break down what the feds were up to when they went after PokerStars, Full Tilt Poker and Absolute Poker. Please note that while True Poker and DoylesRoom were involved in Blue Monday and are primarily poker rooms it seems that they are owned or at least heavily involved with Bookmaker, a very large sportsbook that caters only to U.S. players.
Going back to the poker rooms in question let’s go back to where it all began. In 2006, when President Bush signed the Safe Port Act, he enacted the UIGEA at the same time. Almost immediately major online poker rooms left the U.S. market. These included Paradise Poker, Party Poker, Pacific Poker, Boss Media, iPoker and Ongame. Most of the poker rooms and networks that left the U.S. market were publicly traded. A notable exception is Ultimate Bet which brought their company private.
Some online poker rooms decided that if they did not offer sports gambling they were not covered by the UIGEA. Several online poker rooms exploded overnight. Full Tilt Poker and Absolute Poker come to mind. Both were smaller online poker rooms that decided that this was the opportunity of a lifetime.
Neteller, the processor of choice for most online gamblers, was busted by the feds in 2007. At the time most industry observers figured that the reason Neteller was brought down was because they were processing sports gambling transactions. Although Neteller left the Canadian market eventually they are still in business today serving much of the rest of the world’s online gambling market.
In April 2008 Epassporte, Neteller’s replacement in the U.S. online poker world, announced that they would no longer process online poker transactions. They stated that there was an investigation by the U.S. Attorney’s Office in the Southern District of New York (SDNY) and they feared that they would be targeted. It appears that charges were never brought in any case against Epassporte.
For the next year or so things were quiet in the online processing front. In 2009 cashouts started to slow. Then $49 million was seized in two different processing seizures that affected tens of thousands of online poker players. Even though some of that money may have been tied to sports gambling poker was also involved. It started to become apparent that the feds were going to harass online poker rooms without any case law and no federal law that appeared to be on their side. Online poker players assumed that the feds were just going to take online poker cash grabs when they were easy to pick up but not prosecute anyone.
For the next two years cashouts were very slow. It was a cat and mouse game. Players would cash out by check and sometimes it would bounce, sometimes it would take weeks or months and sometimes it would just get credited back to player’s accounts without much of an explanation. Online poker rooms always refunded player’s money when seizures or processor issues would occur.
In 2010 Full Tilt Poker started to have their own individual problems. They were accepting echecks that they knew at the time they could not cash. Some players reported depositing thousands or more into their Full Tilt Poker accounts without it ever being deducted from their poker accounts. Apparently the feds made it next to impossible to process online poker payments. Then on April 15th, 2011 we all know what happened. U.S. online poker changed forever.
There is no telling how much money the Department of Justice seized in the more than 75 bank accounts they seized on Black Friday. It was certainly well into the tens of millions of dollars. This primarily affected U.S. players. While PokerStars paid quickly players at Full Tilt Poker, Absolute Poker and UB have yet to get paid.
In 2006 Washington State passed a ban on all online gambling. In 2008 the law was upheld. It is possible that the Washington State ban, which made even playing online poker a class C felony, helped the feds with their case as one could argue the UIGEA could be applied here. The problem is that using a vague federal law to enforce a state law is not common. The Washington State law made online poker the same class of crime as possession of child pornography, drive by shootings and other serious violent crime.
Nearly six weeks after Black Friday that is where we are today. In my next post I will give my opinion of the U.S. government’s behavior.