Online poker players recently took what in their parlance would be called the ultimate bad beat.
When they went to cash checks that had been issued to them from poker Web sites, the checks bounced. It turns out that the Department of Justice had seized more than $30 million in assets related to online poker.
Legal Gray Area
Online poker exists in something of a gray area of legality, though just how gray depends on what cards one is holding.
Former New York Sen. Alfonse D'Amato, chairman of the Poker Players Alliance, wants everyone to know that playing poker online is not illegal.
True enough, but last week the U.S. Attorney's Office for the Southern District of New York added a little addendum: You can play poker online, you just can't legally collect your winnings.
The seizure of assets controlled by such banks as Wells Fargo and Citibank is a new gambit in anti-gambling enforcement. Until now, the federal government relied on the Wire Act, which prohibits certain types of betting in the U.S., to go after offshore bookies, says Joseph Kelly, a professor of business law at Buffalo State College.
"Most lawyers would say that the Wire Act only applies to sports betting and not other types of gambling," Kelly says. "This is going to be one of the arguments that all the payment processors will be using — that this is poker, it has nothing to do with sports betting and, therefore, the Wire Act is inapplicable."
'A Terrible Law'
Three years ago, Congress did pass the Unlawful Internet Gambling Enforcement Act, but gambling experts such as Kelly, who is co-editor of Gaming Law Review and Economics, say that despite the tough-sounding name, the law is a bit toothless. It also doesn't seem to be coming into play in the latest seizure. More likely, the Department of Justice is relying on a few different federal statutes, like the Wire Act, but also laws designed to stop money laundering.
The Justice Department has always maintained that any form of online gambling is illegal, even if it never went after the assets of poker players themselves.
Benham Dayanim, a lawyer with the Washington firm of Paul Hastings who has represented online poker sites, says he believes the U.S. attorneys have legal backing in defining poker as gambling, and online gambling as illegal.
"Most poker aficionados and professional poker players would tell you that skill really determines the outcome over the long term," he says. "Nonetheless, if you look at the court decisions that have examined this question, they almost uniformly determine that poker is a game of chance for purposes of gambling, and therefore is considered gambling."
Not that Dayanim agrees with the courts, or even agrees with the Unlawful Internet Gambling Enforcement Act.
"It's a terrible law," he says. "Absolutely terrible."
The Poker Players Alliance thinks so, too, and says a better one is needed. It wants a law that legalizes and regulates a potential source of tax revenue.
New Measure In Congress
Rep. Barney Frank (D-MA) has authored a bill that would legalize online poker. D'Amato supports the bill even if he hasn't always seen eye-to-eye with Frank on issues that don't include one-eyed jacks.
"These kinds of prosecutorial tactics sometimes gain great headlines for those who are pushing them, but doesn't really advance the cause of justice," D'Amato says.
"To try to stop people playing poker on the Internet should be one of the last considerations of government."
Dayanim predicts that the issue will be resolved when the poker sites find a way to quietly reimburse their customers and establish more elaborate payment methods far outside the reach of U.S. authorities.
Until then, the Justice Department has pushed its chips forward and is daring anyone to call.