Federal Crackdown on Internet Poker Makes Little Sense

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Online poker won’t go away any time soon, and placing artificial obstacles in its way is bad for players and worse for government, which wastes scarce resources in pointless regulatory pursuits.

By its nature, gambling is an uncertain proposition for the player. But here’s a bet you can’t lose: If a U.S. gambling regulation is on the table, put your money on the side that says it will be confused, hypocritical and costly.

Case in point: “Black Friday.”

On April 15, federal prosecutors threw the book at three major online poker websites and their principals, unsealing a 52-page indictment charging 11 defendants with bank fraud, money laundering and operating illegal gambling businesses.

The websites — Full Tilt Poker, PokerStars and Absolute Poker — are all based overseas. The indictment declares that to get around federal laws that prohibit U.S. banks from helping to move money for illegal games, the defendants cooked up schemes to make billions of dollars flowing through the banking system between the websites and American players look as if the money was for other purposes.

In a single draw of the cards, the indictment encapsulates those three characteristics of U.S. gambling regulation: Confusion, hypocrisy and costliness.

Let’s look at each:

Confusion: It’s not illegal for Americans to play poker, even for real money. Whether it’s illegal to play poker online for money is murky — if the law were clear, the Justice Department could have indicted 10 million players or more. (No one’s quite sure of the size of the for-money poker market in the U.S.)

Hypocrisy: Gambling is legal in every state but two, Hawaii and Utah, and I’d wager that poker rooms are an integral feature of casinos in most of them.

Costliness: Leaving aside the prosecutorial man-hours expended in unraveling the international banking fabric to back up the indictments, the potential federal take from taxing a legalized online poker business runs into the billions.

Far from quelling interest in online poker, the Black Friday indictments have whetted the appetite for California to step into the lead in legalizing the business. California may be one of a very few states hosting a critical mass of players. Californians accounted for as much as 15% of the U.S.-based business for the poker sites shut down this month, estimates Howard Dickstein, a Sacramento gaming attorney who represents several Indian tribes hankering for a piece of the action.

It has been estimated that legalizing online poker for play within California could generate tax revenue for the state of $100 million a year. This figure comes from state Sen. Louis Correa (D-Santa Ana), who’s pushing a bill to do just that.

 

For any questions, concerns, or opinions,  please email Chris Wilcox at chriswilcoxpoker@gmail.com
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