$30 Million Seizure: Big Deal or Not?
THE WEEKLY SHUFFLE, 2009-06-14, by TwoGun, OzoneThe Seizure Is Not A Big Deal
The online poker industry is not one that is commonly viewed rationally by most industry observers. Neither the customers (the players), the government, the advertisers, and sometimes even the firms themselves can look at the industry and coldly and calmly make a rational guess about online poker's future. We have those that are overly optimistic and foolishly think the UIGEA will be overturned and online poker will be free and regulated everywhere in the US, even in states that are so anti-gambling they don't have a state lottery (like Hawaii and Utah).
Then, there are those that think online gambling is the root of all evil, and think the government can and will be able to shut down the industry... just like how they were able to shut down liquor during Prohibition and how they are able to stop high schoolers from smoking marijuana today.
Much is made about the difference in law between sports betting and online poker in the United States. This is because the Wire Act is more easily applied to sports betting than online poker. What most people fail to realize is that the Wire Act is not the only law in the US regarding internet gambling. Gambling is primarily a state activity, and pretty much all state laws are hostile to online gambling. Some states even have laws explicitly prohibiting the activity. In short, too much is made about the difference between sports betting and online poker. The only reason the government has primarily gone after sports betting is because it is easier for them to do so. They can still go after online poker.
Due to all of the attempts to stop sports betting, all of the US-facing sports betting websites operate with a low profile and attempt to be under the government's radar. If online poker places operate 'above ground' and do not try to shield themselves and hide away from the government like the sportsbooks do, then suddenly it may become easier for the government to go after online poker sites. While they have less laws to apply to the online poker sites, there are still plenty they can use to shut down these firms.
What point am I trying to make? Basically, I think US-facing online poker sites will be forced to act more like US-facing sportsbooks. They will need to keep a low-profile. Cashouts, for Americans, will likely become slower but will still occur. Americans may also have to pay higher fees for cashing out, but that's about it.
In a game of cat and mouse, the government is going to lose to the online poker sites. The government doesn't have the resources or will to chase these guys down. They will be able to shut down a few payment processors, but others will just pop up and operate with a lower profile. American sports bettors still have plenty of betting sites to choose from, and it is still relatively easy for them to deposit and withdraw; it's just a little harder in comparison to poker rooms.
Until the government arrests someone that works for PokerStars, Full Tilt, or another US-facing room, I think the status quo will remain intact. Worst case scenario for US players, it takes a little longer to get paid and it is a little harder to deposit. Not a big deal.
Of course, if the owners or operators of one of these US-facing poker rooms gets pinched, all bets are off.
The Seizure is Devastating News for Online Poker
For the first time ever, the U.S. Department of Justice (DOJ) has gone after a poker-only online gaming outfit. This occurred while many in the poker community (erroneously) believe the UIGEA will soon be overturned. Overturning the UIGEA? Dream on! Poker players should shift their rooting interests to something more practical: hoping the DOJ doesn't wipe out online poker altogether through a couple of well executed seizures.
Will the $33 million seizure that took place last week in and of itself ruin online poker? No. The online poker market is too big to be slowed significantly from this seizure. What makes this seizure bad news for the poker world isn't the money that was confiscated, but the message that was sent by the DOJ. Never before has the DOJ gone after a poker-only enterprise. Previously, their actions targeted online sports books and casinos. This policy enabled many in the poker world to grow a sense of arrogance that what they're doing is "legal" and won't be touched by authorities. Again, dream on!
The DOJ could make online poker a thing of the past for Americans and it wouldn't be too difficult. Let's ignore the fact that the chief owners of the second largest illegal U.S.-facing poker room are currently walking around Las Vegas and pretend the DOJ can only execute seizure tactics. There are two ways, one direct and one indirect, in which seizures alone (no arrests required!) can cripple online poker for Americans.
First, they can directly bring poker operations to a halt. A $33 million seizure isn't 'Game Over' for online poker rooms, but it's definitely a punch in the gut. If the DOJ can manage to make seizures of that magnitude every couple of weeks, online poker rooms will have no choice but to say "we give up" and stop servicing American players. At some point, the DOJ can just seize so much money that online poker rooms no longer view it as profitable to operate in the U.S. Is this a legitimate threat? Probably not. For years, the DOJ has failed to seize funds from a poker-only outfit. Why wait to do it now if they could have been doing it all along? Odds are they just got lucky on this one. Or maybe not. Maybe growing budget concerns with the American government is forcing the DOJ to look for easy targets that lead to an influx of cash. I can think of no easier target than online poker payment processors.
Seizing money from poker payment processors can indirectly ruin online poker by making players too skittish to gamble online. Casual players (read: fish) may hear some news briefing about online poker funds being confiscated and think to themselves, "well I guess I won't be doing that anymore." Whether or not they are fully informed of the situation doesn't matter. They just need to see one headline about online poker money being seized by the government and they'll go running for the hills. They were already probably reluctant to play on account of the fact that they "never seem to win" and suspicions that it might be "rigged". The extrapolation of this mass fish exit from online poker means the games get even tougher than they already are. Suddenly average to above-average players start to question if it's worth grinding out the small edges as opposed to just getting a "real" job. Before you know it, the games are but a mere fraction of their current glory all because a couple of well timed seizures by the DOJ spooked people just enough to send them packing.
The problem with online poker in America is that most Americans have a sense that it is illegal, or at the very least, shady. "Regulars" can delude themselves with how the next Barney Frank bill is going to change everything, but they aren't the ones that matter. They're bad for the game anyway because of how good they are. The players who matter are the ones who exist on the fringe and like to play for fun. They are numerous and they are easy to spook. A few news headlines or friendly anecdotes about how you can't get paid your online poker winnings will turn online poker into a skeleton of its former self.
The Weekly Shuffle is our Sunday column with our observations and commentary on the poker world. Have an idea for an article? Leave a suggestion on the feedback page.
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