The day the poker world has feared since the UIGEA passed in 2006 has finally arrived.
On Friday, April 15th, the poker shit hit the fan as the U.S. Department of Justice released an indictment against PokerStars, Full Tilt Poker, and UB/Absolute.
By Friday evening, all three sites had their .com domains seized, along with 76 bank accounts. PokerStars and Full Tilt stopped allowing U.S. customers, and if you tried to withdraw money from Tilt, you got a message that read, “Players located within the United States will temporarily be restricted from withdrawing from Full Tilt Poker.”
Most of the poker world spent the weekend panicking, with rumors and misinformation floating around forums and on Twitter. I’ll do my best to break down the situation so you’ll know not only what happened, but what is likely to happen next.
Keep in mind that even though I am a freelance employee of the WPT (I'm their lead tournament reporter), these views are entirely my own and do not reflect any positions or views of the World Poker Tour. Also, Dr. Pauly's take on some of these issues might be different than mine, though I expect we'll hear his thoughts more fully when he returns to the U.S. later this week.
I. The Indictment: April 15th, 2011
When the UIGEA passed in 2006, it was designed to stop online gambling by cutting off the flow of money. Since it was passed, several payment processors were shut down, including Neteller. As the legitimate payment processors were forced out, shadier and shadier operations stepped in.
And, according to the indictment, that forced the online poker sites to get creative in less-than-legal ways to keep the money flowing.
The U.S. Attorney’s office in the Southern District of New York has been working on a case against online poker for a long, long time. According to this article, it seems that some of the key evidence came from Daniel Tzvetkoff, an Aussie who was arrested for online payment processing in 2010 -- and then cut a deal and turned witness for the prosecution. For online poker players, this guy may have replaced Russ Hamilton as Poker’s Public Enemy #1.
On April 15th, the Feds sprung their trap, making several arrests and seizing 76 bank accounts and the .com domains. The full indictment is available online, along with a shorter version that reads more like a press release.
The following 11 people were named as defendants, with charges of “Conspiracy to Violate the UIGEA,” “Operation of Illegal Gambling Business,” “Conspiracy to Commit Bank Fraud and Wire Fraud,” and “Money Laundering Conspiracy.”
PokerStars: Isai Scheinberg, Paul Tate
Full Tilt Poker: Raymond Bitar, Nelson Burtnick
Absolute Poker (UB): Scott Tom, Brent Beckley
Payment Processors: Ryan Lang, Ira Rubin, Bradley Franzen, Chad Elie, John Campos
As you can see, there were two people indicted for each of the three online poker sites. The first name listed is the top dog at each site (or “principal decision-maker”), and the second name is the person most directly responsible for payment processing. (Notice a theme yet? Follow the money …)
At its core, the charges aren’t about the legality of online poker -- they are about the movement of the money. According to the Feds, the online poker sites were doing some crazy shit to sneak our deposits past the UIGEA -- like disguising deposits as payments to non-existent companies that sold jewelry and golf balls. If this information is true, it seems like a fairly easy conviction in terms of fraud and money laundering.
You’ve probably also noticed a few things missing from the list of defendants -- smaller U.S.-facing sites like Bodog & Cake aren’t mentioned, nor are any of the high-profile players rumored to have partial ownership of affected sites. While they aren’t included in this indictment, they aren’t out of the woods yet. As arrests are made and more evidence is gathered, other indictments might follow.
Of the 11 people listed in the indictment, the three who live in the U.S. (Elie, Campos, Franzen) have already been arrested. The other eight defendants are currently overseas, and the Feds are working with foreign law enforcement agencies and Interpol to extradite them back to the U.S. The Feds are also trying to seize additional “criminal proceeds” in foreign countries. While foreign countries aren’t likely to extradite people for running an online gaming site, the charges of money laundering and bank fraud are much more serious.
The Feds are also seeking $3 billion in civil money laundering penalties. Why tax poker players when you can just take the money directly?
II. The Immediate Effects on the Poker World
Online poker in the United States is dead. (At least for a while.)
PokerStars and Full Tilt have already shut down real-money games for all U.S. players. UB and Absolute are reportedly still accepting U.S. players, though most people expect that to be temporary -- and not recommended for U.S. residents. (I haven’t had any success logging into UB from Atlanta to test it.)
Even if poker is eventually legalized in the United States, it’s unlikely that any of these three sites will ever return. Seriously, do you expect any gaming commission to license a company that has been charged with fraud and money laundering?
If you’re a U.S. player and have money on these sites, the general consensus seems to be that you’ll probably get it back -- though it may take months instead of weeks. Be patient. If they want to continue operating in international markets (and they do), they’ll eventually return your money. Their entire business model is based on the trust of their customers -- nobody would ever send money to a poker site with a proven record of not sending it back.
Of course, there are no guarantees, and I know I’ll feel a lot better when I finally receive my (relatively small) checks from these sites -- and those checks successfully clear my bank.
There are some smaller sites serving the U.S. that weren’t included in the indictment, like Bodog and the Cake network, but I wouldn’t recommend playing on those sites if you’re in the U.S. The risks are just too high right now. At least one smaller site, Victory Poker, has already taken action to stop serving U.S. customers.
Repercussions spread throughout the industry over the weekend:
1. Indicted sites have moved their homepages to new domains.
Since the U.S. government seized their .com domains, all three sites have moved their homepages. You can now find them at PokerStars.eu, FullTiltPoker.co.uk, UBPoker.eu, and AbsolutePoker.eu. (To see the DOJ’s notice of domain seizure for yourself, visit their original .com web addresses.)
2. Guaranteed prizepools for online tournaments are dropping.
Non-U.S. players can still play on PokerStars and Full Tilt, though the guaranteed tournaments aren’t as big as they used to be. The PokerStars Sunday Million had a $1.5 million guarantee last week, and it dropped down to $1 million this week. Over on Full Tilt, FTOPS event #1 dropped from a $3 million guarantee to $1 million. This has affected daily guaranteed tournaments as well.
3. The recently-announced Onyx Cup has been cancelled by Full Tilt.
The Onyx Cup was only announced a month ago as a series of ultra-high-stakes tournaments with buy-ins ranging from $100,000 to $300,000. Given the situation, it’s no surprise that it’s been cancelled.
4. The Wynn Resorts and Fertitta Interactive pulled out of their pending deals with PokerStars and Full Tilt, respectively.
These deals were both announced in March, and were hailed as landmarks because they formed partnerships between the online poker rooms and brick-and-mortar operations. Well, those deals are dead -- nobody wants to be associated with these sites now.
5. There will be fewer poker shows on TV.
The NBC Heads-Up Poker Championship aired as scheduled on Sunday afternoon, with (pre-paid) PokerStars.net commercials during most of the breaks. One advertiser should be fairly easy to replace, so the NBC-HUPC should continue its broadcast as scheduled.
Andrew Feldman of ESPN.com confirmed today that ESPN would still be at the WSOP, and I’d be shocked if the WSOP Main Event disappeared from TV coverage anytime soon. The World Poker Tour isn’t as strong as the WSOP, but I’m confident that the WPT will continue broadcasting on FSN this season and begin Season X tournaments after the WSOP. (DISCLOSURE: I work for the WPT in a freelance capacity as their lead tournament reporter.)
Other poker TV shows are more uncertain. “The Big Game” and “High Stakes Poker” are fully funded by PokerStars and “Poker After Dark” is fully funded by Full Tilt -- these shows will probably go on hiatus and stop producing new episodes. I’m not sure when we’ll stop seeing these shows on TV, but my understanding is that some of their time slots are paid for by the online sites, so some of them could go off the air as early as this week.
6. The North American Poker Tour (NAPT) is probably dead.
With live casinos distancing themselves from the indicted sites, the NAPT (owned by PokerStars) will probably be shut down or postponed indefinitely. There are unconfirmed reports that ESPN is trying to find programming to replace NAPT episodes scheduled to air this week. Even if those episodes get on the air, the recent NAPT Mohegan Sun (with the spectacular back-to-back victories of Vanessa Selbst and Jason Mercier) will likely be the last NAPT event ever held in the United States.
7. The European Poker Tour (EPT) and other non-U.S. PokerStars tours are probably fine.
Right now, there are no signs that the EPT will have any problems. There won’t be any online qualifiers from the U.S., though it’s possible that more American pros will make the overseas trip to play in these events.
8. The World Poker Tour should be fine.
The WPT is actually positioned fairly well, as it hasn’t been dependent on online qualifiers for several years (one reason why field sizes have been smaller in recent seasons). The WPT is owned on the corporate level by PartyPoker, which played by the UIGEA rules, left the U.S. market in 2006, and cut a $105 million deal in 2009 as part of a “non-prosecution agreement.” PartyPoker and the WPT appear to face no legal danger.
It’ll be interesting to see the effect on field sizes, whether they shrink (as players and backers can’t access online funds) or grow (as more online players transition to live play). The next WPT event will be held near Miami, Florida, and it starts on April 27th. We’ll know more then.
9. The World Series of Poker is in really good shape.
Harrah’s/Caesars has been very good about playing by the UIGEA rules, and kept their noses clean. If and when poker is legalized in the United States, WSOP.com becomes even more valuable because it won’t have to compete in the U.S. with former powerhouses PokerStars or Full Tilt.
Everyone expects the WSOP Main Event to have a much smaller field this year, as online satellites usually funnel a few thousand players into the event. Online satellites have effectively stopped in the U.S., and players who already won seats may have trouble accessing their funds in time. I’m expecting at least 5,000 entrants, but not a lot more than that. That’s a healthy number, and it’ll still create an exciting event.
While the WSOP Main Event will see fewer players, turnout for the entire WSOP (counting non-bracelet events and cash games) may actually increase. Former online grinders may head out to Las Vegas for the summer to take part in the constant cash games and tournament action.
10. Sponsored mid-level American pros can kiss their sponsorships goodbye.
Now that PokerStars and Full Tilt have been shut out of the U.S. market, they have no reason to market to U.S. players. Take a good look at the long list of Full Tilt Red Pros and Team PokerStars Pros -- most of the ones from the U.S. will not be wearing those patches at the WSOP. The international players will likely keep their deals, as will the biggest names with international appeal like Phil Ivey and Daniel Negreanu.
The topic of player sponsorships is covered best by super-agent Brian Balsbaugh (who reps the biggest players in the game) over at Poker Royalty: “Black Friday & Poker Player Sponsorships.”
11. The Annie Duke-Jeffrey Pollack professional league is sort of hurt and sort of helped by this.
The key thing for Annie Duke’s league has always been securing a good TV deal -- without that, it’s hard to see the business model working. As mentioned above, the TV poker landscape is about to be a lot less crowded, which might make this league slightly easier to sell to a cable network. On the other hand, any channel that picks up this show won’t be able to sell ad time to Full Tilt or PokerStars.
Many of the U.S. players who qualify for tour cards will probably be the same ones who just lost online sponsorships, making them much more eager to support and participate in a professional poker league like this.
12. The Poker Media -- Shit Rolls Downhill.
While this situation sucks for the online players who were riding the semi-legal gravy train for a while, it sucks even worse for those in the poker media, who struggle to get by even at the best of times. PokerStars and Full Tilt fund a lot of the poker media (directly and indirectly), and there will be a lot of (a lot more?) poker writers and reporters out of a job by the time the WSOP rolls around.
Bluff, Card Player, and PokerNews will probably survive this, though employees should expect layoffs. Some of the smaller media sites are more vulnerable, and may be forced to shut down for good.
III. What Does the Future Look Like?
While many of us have expected something like this for years, it’s still shocking. Just because you know you’re about to get punched in the face doesn’t make it hurt any less.
We’re still in the initial shock-and-denial phase, though we should get more information on the situation in the next week or two. That will paint a clearer picture of what the next year or two will look like. Having said that, here’s my look into poker’s future ...
As I said earlier, online poker in the United States is dead. (At least for a while.)
All signs indicate that PokerStars, Full Tilt, and UB/Absolute will fight these allegations in court, though that’s unlikely to change anything in the short term. Even a settlement would likely force them to leave the U.S. market, and if they were to somehow win in court, it would likely take more than a year.
In the U.S., our best hope is regulation and full legalization.
As bad as things seem right now, these indictments don’t take legalization off the table. Several states are already pushing bills to allow intrastate poker (where Californians can only play other Californians, for example), and with no other legal options, those intrastate poker sites will probably attract a lot of players (and tax revenue). Hopefully, the pro-poker Congressmen can use the coming intrastate examples to get some more votes on our side. Arguing for additional tax revenue (even from gambling) couldn’t hurt in a Congress struggling with budgets and rebuilding the economy.
So we may have intrastate poker sites popping up in a few states in 2011 and 2012, but the earliest I expect anything to happen on the federal level is 2013. Online poker may be too tumultuous for Congress to act right now, and 2012 is a presidential election year, making it unlikely for lawmakers to touch an issue like this.
What does the future look like outside of the United States?
As we all know, UB and Absolute Poker have had problems on top of problems on top of problems. The company survived massive cheating scandals, but may not survive this. If any of the big three online sites were to fail as a result of this, it’s UB/Absolute.
Full Tilt and Pokerstars should both survive long-term in the international market. Obviously, Stars has a big advantage over Tilt here, as they had a smaller percentage of U.S. customers and are well-positioned with regional tours like the EPT, the LAPT, etc.
However, there’s a chance that international players will consider these sites to be too risky while the U.S. government goes after them, and move over to safer options like PartyPoker. Remember, Party was the biggest poker site in the world when the UIGEA hit in 2006 PartyPoker followed the rules and pulled out of the U.S. market, and in 2009, even paid $105 million to the U.S. as part of a “non-prosecution” agreement.
Now that Tilt and Stars are shut out of the U.S. market, they will need to compete more directly with PartyPoker and other non-U.S. sites like Betfair, Ladbrokes, and Everest. If they wanted to be dicks, these sites could start running ads like “We’ve never been indicted,” or “Our customers’ bankrolls have never been seized by the U.S. government.”
Friday, April 15, 2011 is a day that will live in poker infamy, and history will mark events as happening before or after it the same way it has with Chris Moneymaker’s WSOP victory.
“Remember when so many people showed up for Day 1d of the WSOP Main Event that they had to turn people away? Of course, that was before the Poker-pocalypse.” Or “Black Friday,” or “4/15,” or whatever people eventually settle on calling it. It’s too bad that the Feds didn’t wait until Wednesday, or we could have referred to our day of doom as “4/20” -- a much easier number for most poker players to remember.
Without any warning, professional online players in the U.S. have lost their careers -- and in some cases, at least temporarily, their bankrolls. Many of them have no transferable job skills and huge gaps on their resumes, in an economy already facing an unemployment rate around 9.2%.
It’s a bleak picture any way you look at it -- some will move to Vegas to play live games, some will move out of the country to continue playing online, and some will leave the poker world and never come back.
Those of us who stay in poker will continue our efforts pushing for legalized online poker, as it seems to be the only hope for U.S. players. But while there might be the light of legalization at the end of the tunnel, it’s probably going to be a long, dark tunnel.
There will be a lot of pain, on all sides and all levels, because the money from online poker flowed like water into all crevices of the poker industry. Things will be in limbo for a while before the rebuilding process can begin -- but make no mistake, the poker industry will rebuild.