2012 the Year of Online Poker’s ‘Official’ Return?

Much ado over the Christmas break regarding the Department of Justice’s vampire drop — late Friday afternoon preceding the holiday weekend — of its admission that the 1961 Wire Act applies only to sportsbetting and not to other forms of online gaming.  This, of course, is the argument that online poker sites made all along, and the implications of the admission are profound, given that every federal statute passed since then, including 2006’s UIGEA, is built upon the Wire Act’s tenets.

It wasn’t the first time, either, since Missouri attorney and former DOJ official Catherine Hanaway had made the same declaration about a year ago.  Hanaway led the prosecutions against the BETonSports fraudsters several years back, but since she waited until after leaving the DOJ to make her statement, there was no official seal of approval about the Wire act’s inapplicability.  So things like Black Friday happened, even though, in retrospect, they maybe shouldn’t have.

What’s happened is that the DOJ has run out of wiggle room.  They can no longer make the claim to interested state governments that online lotteries and similar offerings were legal, while at the same time continuing to hammer on international online sites, particularly since words such as “poker” never even appeared in the language if the UIGEA.

Such gross protectionism takes place only in giant countries like our good ol’ US of A, simply because our government is big enough to get away with it.  If you think that the USA is even more grossly in violation of its own World Trade Organization accords, you’re right.  If you also think that it won’t matter in the least, because the pols fighting this one still have no interest in honoring their own agreements, then congrats — you’ve just gone two for two.

Where do the latest developments leave online poker?  That’s where it gets a bit murky, though the short-term prospectus for formally regulated online poker opening up across much of the USA are much, much brighter, and could very well happen early in 2012.  And as for online sites that also exist, there’s going to be a lot less pressure on them in the form of onerous DOJ legal threats.

The problem, though, continues to be the flow of money, and the DOJ has promised to continue in its Black Friday prosecution against bank officials and executives of PokerStars, Full Tilt and Absolute Poker.  Those prosecutions are going forward under the presumption of bank fraud and money laundering, but the real intent was to drive the last of the major players out of the US market and open the way for American casinos and tribal games.

It seems the DOJ has finally resigned itself to the concept that it cannot declare US sites legal and international ones illegal — at least at the federal level.  Bear in mind that this is exactly what the pols wanted the DOJ to do all along, to get the money for themselves, but even the worst laws can only be tortured so far.

What will the future bring?  Probably a landscape where depositing onto US-based sites is very easy, but where depositing/withdrawing to international sites is lengthier and more expensive for the sites themselves.  The intent will continue to be to drive the sites from the US market through this indirectly applied protectionism.

Looking into the rearview mirror, it’s hard to see who looks like a bigger bozo than PartyGaming (now merged with bwin), who ended up making a $300 million donation to DOJ coffers and suffering billions of dollars in stock devaluation under a pretense of guilt the DOJ now admits never existed to begin with.  That’s one damned expensive omelet to be wearing around as face cream.  The funny part is that Party’s payment was intended to be a poison pill for the US market and hurt remaining poker-only sites such as Stars, but Party themselves ended up sucking down more of the hemlock juice than anyone else… all because they were cowardly and refused to mount a legal fight for the market they once dominated.  Well done!

Even then, despite all its pimples, the new regulated regime will bring some positive change.  Unregulated online poker does not work, and regulatory agencies need to be more than simple rubber stamps designed only to delude potential depositors.  PokerStars earned a generally solid market reputation, but AP, UB, FTP… they all needed to go.  AP/UB has long been exposed as a scumhole of the first order, and the feds may actually have been right about Full Tilt being a Ponzi scheme.  Given the way in which money was being funneled out of the operation and into owners’ pockets, the site would probably have collapsed in a year or two anyway, taking with it even more hundreds of millions in customer deposits.

There’s still a chance that US depositors will see their bankrolls returned — or at least their original deposits.  That distinction may have had a role in Friday’s DOJ admission as well, representing the hard place against which the rock was being pushed: The DOJ could not authorize the return of actual player balances without it being a tacit admission that playing online poker was and has always been fully legal.  Original deposits yes, but current balances, no.

Whether its original deposits or current balances, and all or just part, Full Tilt players should get something back, somewhere down the road.  The flip side is that had FTP been allowed to run unchecked for a couple more years, there would have been no chance at all.  We can thank the DOJ boys and girls for that, though it was Tilt’s own unchecked greed that paved the way for its downfall.

2012 represents a new year and a burgeoning new market.  While states on both coasts and in many places in between are already plotting their online gold rush, the usual hidebound exceptions will remain.  Utah and Kansas legislators have already served up bills planning to ban online gambling, which is par for those states.

Currently, 13 of the 50 states have some sort of law on the books making online gambling a crime, the worst by far being the State of Washington’s ridiculous felony statute, but most of these states’ laws have been deemed by legal experts to be unenforceable or unworkable for various reasons, and even Washington State authorities have declined to charge anyone under their statute, a clear indication that they think they’d have trouble winning a case.  Some of these formally excluding states may come online, particularly in the Midwest, while a couple of others may draw new lines in the ether.  37 of 50 might well be a reasonable estimation of how many states have formally regulated online poker when we look back in a couple of years.

And since a lot of the could-have-been powers turned tail and ran, it’ll be an American game like never before.


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