Archive for March, 2011

We were discussing the fact that there are multitude of grey areas with regard to online poker, UIGEA and the law in the US; well, at least this is according to legal opinion on the matter. As far as the Department of Justice is concerned, there are no grey areas at all – playing online is simply illegal, but it is actually not all that simple. In the last article we mentioned that both Party Poker and Full Tilt had no intention of pulling out of the US market based on the legal opinions they have sought. Doyle Brunson, also has no intention of pulling his site, although his reasons may differ slightly. He is of the opinion that he is already 78 years old so if the Dept. Justice wants to throw down the gauntlet, he is too old to give a damn.

What is notable about the law and online poker in the US; is that PartyPoker pulled out of the country shortly after the promulgation of UIGEA and they did this based on advice from legal counsel. At the time they were one of the largest online gambling brands in the world; and had listed on the London Stock Exchange and the FTSE 100 by 2005. At this point in time they were earning reported revenues of $977 million and profits of $293 million. When they exited the US market PokerStars and FullTilt stepped into the void and has continued to benefit from it since. Obviously not as squeamish as the then CEO of PartyGaming – Mitch Garber!

When this took place, PartyGaming stock collapsed and the company still operates at a 1/7^th of what it once did. When PartyGaming left the US, a number of other large online poker and other gambling concerns followed its lead. Mitch Garber now runs the online gaming unit for Harrah’s Entertainment. PartyGaming also voluntarily cooperated with the Dept. of Justice and paid over $105 million in a non-prosecution agreement for continuing to take wagers after the promulgation of UIGEA. PartyGaming’s ex partner Anurag Dikshit rolled over; plead guilty to violating a 1961 Wire Act and handed $300 million over to the government, he also created a dangerous precedent but co-founders have not been indicted.

PokerStars and FullTilt shareholders are made of much sterner stuff; they have handed over no money to the Government and still continue to operate in the US. Full Tilt did eventually move its operations to Dublin and PokerStars can be found on the Isle of Mann. So far the way both these operations is run, continues to pay off, and both have expanded world-wide.

Last summer federal prosecutors froze $34 million in funds in payment processing companies, owed to as many as 14,000 players. Both PokerStars and FullTilt took the loss and reimbursed their members. The Feds are playing tough, but why have they not cracked down on these sites and their owners? The feeling is that US Justice stands the chance of losing an indictment against these massive moneyed concerns. They are playing a game of poker and bluffing rather than showing their hand to a jury. But they are also bluffing against some of the biggest bluffers in the business.