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Gambling in the Gray

The unregulated world of online poker may have to go legit or go bust
Michael Kaplan
From the Print Edition:
Paul Giamatti, January/February 2011

It is 10:45 on a Wednesday evening in November. At this moment, there are nearly 100,000 people logged on to the Internet poker site Full Tilt Poker. Twice as many participants occupy the virtual tables of PokerStars. Over the course of this night, commercials for both sites air on various television networks. Millions of dollars change hands online. Tracking software monitors strategies for players and for the sites themselves. Pros and amateurs brush up against one another in these digitized worlds. Though the tables are outfitted with chat boxes, nobody seems to comment about online poker’s most pressing issue: the legal limbo in which the sites and players find themselves.

Precariousness ignored, the rudiments of poker game management—accounting for buy-ins, dealing cards, and officiating hands—all go off with the kind of clockwork accuracy that humans are just not capable of. Optimal efficiency, after all, is part of online poker’s allure. It presents opportunities to play many more hands per hour, sometimes on multiple tables simultaneously, than one would be able to in an old-fashioned brick-and-mortar casino. Online poker sometimes feels like the perfect meshing of chance, skill, technology and competition.

It’s also the nucleus of a shadowy industry that is estimated to be worth billions of dollars.

Nearly 13 years after the first real-money hands were dealt on a nascent website called Planet Poker, the online card-rooms are mired in red tape and gray areas that have become murkier since 2004. That is when the U.S. government passed its Unlawful Internet Gambling Enforcement Act. Snuck through the legislature as part of the Safe Port Act, which was designed to protect American borders from terrorists and their money launderers, the vaguely worded UIGEA prohibits the transferring of funds from banks to online casino sites. Congressman Barney Frank, a booster of legalizing and regulating online poker, has described the legislation as being “dumb and oppressive.”

Hopes for clarity glimmered this past summer when Frank put forward a bill to legalize the online game. It passed through the House Financial Services Committee but stalled.

“This won’t be a priority of the Republican congress, and it wasn’t a priority of the Democratic congress either,” acknowledges John Pappas, executive director of Poker Players Alliance (PPA), a lobbying group for the regulation of online poker. “But there is the prospect of online poker bringing revenue to the table, via taxation. That is appealing right now.” Nevada Senator Harry Reid agrees. But as this magazine goes to press, he appears to have run out of string on his attempt to get poker approved during the lame duck session of congress.

Advocates for the sites point out that in 49 states there is nothing illegal about playing online poker. That said, federal enforcers have shut down payment processors that move money. More chillingly, a spokesman for the Department of Justice has stated that just because online poker operators have not been targeted at the moment, it doesn’t mean that they won’t be in the future.

At the same time, of course, online poker entities sponsor TV shows and pay money to logo-wearing players. Plus, the sites can be accessed as easily as a gmail account. How do they get away with it? For one thing, according to I. Nelson Rose, a California-based attorney who specializes in gambling issues and consulted with the Department of Justice on this matter, whoever owns the sites may not be breaking American laws.  “We have never seen a case on Internet poker go to trial,” says Rose. “You need a good law to make the arrest and you need the defendants to be in the United States. The Wire Act is not a good law to arrest these guys on and the Feds are not sure they can extradite. The Feds can’t guarantee that they will win, and if they lose the case, then they lose their intimidation factor.”

All of this raises a legitimate question: Why does it remain unregulated, untaxed and, maybe, illegal? That situation hasn’t been helped by all the special interest groups—ranging from brick-and-mortar casino folks in Vegas and Atlantic City to tribal casino operators across the country to people behind existing online sites to politicians—who all want it to happen (if at all) on their terms. Concurring with the PPA’s Pappas, Rose believes that it will come down to financial need. “The federal government can print more money, but the individual states cannot and they suffer as a result,” says Rose. “We voted on legalizing marijuana. Who cares about Internet poker? Gambling is seen as a painless tax, and as soon as one state legalizes online poker, the others will fall in line.”

Rose may or may not be a betting man, but he does prognosticate that Iowa, New Jersey and Florida all count among the first-in front runners. “Florida is desperate, and the Tea Party crazies there don’t necessarily mind people gambling at home,” he says. “It can happen in the coming year.”

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Comments   1 comment(s)

Alan Fuller March 15, 2011 4:27pm ET

The assertion that these sites are unregulated is false; all are based in countries that have laws in place to protect the players (to some degree). Also, the stigma of poker, a skill game, compared to the respectable, hit-by-lightning type odds of government run lotteries reeks of self-serving greed and political spin. By all means regulate and tax it but on a level playing field. The casinos are 10 years behind most big sites in terms of experience in a very different market place and should not be gifted a monopoly on an industry they have done everything to suppress. As it is, thank god I don't live in the state where a 5/10 cent poker game is regarded to be as dangerous as a knife fight.

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