Feds Crackdown on Online Poker

by Carson Cashman | April 15, 2011

Federal authorities unsealed an indictment against eleven people today, including the founders of Pokerstars, Full Tilt Poker and Absolute Poker. The charges range from bank laundering to wire fraud to violations of the UIGEA.

US Attorney Preet Bharara said in a statement that the defendants "concocted an elaborate criminal fraud scheme, alternately tricking some U.S. banks and effectively bribing others to assure the continued flow of billions in illegal gambling profits." Federal prosecutors are also seeking $3 billion (with a b) in civil money laundering penalties.

Prosecutors claim that online poker rooms were deliberately miscoding prohibited online poker transactions as other legal types of transactions, such as jewelry and flower purchases. In addition to the indictments, several domain names were seized as well as an estimated 75 bank accounts associated with the tainted transactions. Prosecutors also allege the defendants established bank accounts under false pretenses with the intention of processing online poker transactions.

News of the indictments is spreading fast. Wynn Resorts, who had recently announced a partnership with PokerStars just last month, immediately canceled said arrangement. Poker players are asking questions about their deposits and no one seems to know what's happening.

We've reached a new stage in the history of online poker. It's uncertain how far-reaching this crackdown will be. Also unclear are the ramifications for future regulation of the industry. Is this the dawn of the terminal decline of online poker? History would say no. Prohibition of ubiquitous activities tends to fail (alcohol prohibition, anyone?).

Perhaps this latest action by the government is the first step to a legitimate federal regulation of online Texas Hold'em poker. These prosecutions will certainly galvanize the millions of people in the U.S. who are affected by poker prohibition. Perhaps more important is the political environment as we approach the 2012 presidential election. Politicians on the right will have a hard time convincing their libertarian base that the government needs to monitor their banking transactions just as politicians on the left cannot reject the billions in additional revenue online poker regulation could bring.

We will continue to follow this story closely as news develops.

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