Recent Legal Developments 2006-09-17
The poker world has recently been hit with a slew of lawsuits, court cases, and proposed laws. Unless you have been paying close attention to poker news lately, chances are you've missed out on a few of these stories. This Shuffle will briefly describe some of the more major developments, as well as how they may affect the average player.
Jamie Gold Case
The past three WSOP champions made headlines in a positive way. Chris Moneymaker's Cinderella story launched the online poker boom. Both Raymer and Hachem are very well-liked and respected people in the poker community. Unfortunately, this year's WSOP champion now finds himself riddled with controversy.
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Jamie Gold's WSOP entry was paid by Bodog, an online gambling company. In exchange for the buy-in, Bodog expected Gold (who is an agent) to find several celebrities that would sport Bodog gear during the WSOP. In order to accomplish this, Gold allegedly sought help from Crispin Leyser. In exchange for getting a couple of celebrities to wear Bodog apparel, Leyser alleges that Gold promised him half of whatever he won at the WSOP.
Leyser claims to have a voicemail from Gold, where Gold assures Leyser he'll get half of Gold's winnings. So far, Gold's response has only been that he is disappointed that Leyser filed the lawsuit. Gold has been issued half of his WSOP winnings ($6 million), while the other half is still being held by Harrah's due to a temporary restraining order.
This case will likely not affect the poker world in any major way. If there is an ongoing court case, it will reflect negatively on poker players since it will reinforce the old cheater-gambler stereotype for poker players. If the two parties are able to amicably settle this case relatively soon, I predict that this story will be merely a footnote in poker history. From what I can tell, a settlement seems likely, as Gold has not publicly denied Leyser's right to the $6 million.
In the poker world, players frequently make deals with each other. The buy-ins of poker tournaments are often so high that combined with variance, deals are the only way tournament players are frequently able to continue playing. Both Raymer and Moneymaker made deals prior to the WSOP (Raymer had backers and Moneymaker sold a portion of his winnings prior to the WSOP to his dad and his friend). Both of these players made good on their promises, which is probably why they didn't make headlines in this department.
Richard Lee Case
At first glance, this year's sixth place finisher at the WSOP seemed like the only finalist not at all involved in the gambling industry. While other finalists inked deals with online poker sites, Richard Lee chose to remain independent. Donning a San Antonio sweatshirt at the final table, he is famous for saying "The only thing I'm going to endorse is god, my family, and the city of San Antonio."
Apparently, his love towards San Antonio is unrequited, as San Antonio police raided his home recently. Lee is suspected of running an extensive illegal bookmaking operation. Few developments have occurred since the raid, and Lee has still not been arrested.
While this case is a human interest story, it really has no effect for the average poker player. Someone who just finishes at the final table does not in any way represent the poker world like the WSOP winner does. Each year, the WSOP winner becomes an instant celebrity, but few people remember the guys who came in fourth, fifth, and sixth place.
About two months ago, the CEO of BetonSports, David Carruthers, was arrested in the United States. The Department of Justice is accusing him and his company of multiple crimes. BetonSports is a sports betting company that advertises heavily in the United States. The owner of the company has been accused of having mob ties in the past, which is why many suspect this company was targeted by the feds.
Much of the charges against this company relate to the Wire Act, an act passed in the 1960's that was aimed at combating organized crime. The feds also accuse this company of money laundering, as well as tax-related crimes.
This case has so far completely devastated BetonSports. Their website is no longer functional, and bettors have so far not been able to retrieve their funds from the company. Some suspect that the company is insolvent, as it does not seem to be mounting much of a fight against the case. This case obviously greatly affects anyone who has an account with this business (they also had a small poker room), but it's not clear if it will have much, if any effect on anyone else.
HR 4411: Unlawful Internet Gambling Enforcement Act of 2006
Passed by the House by a vote of 319-93, this bill would force banks and other financial institutions to block payments by Americans to online gambling sites. Essentially, this bill aims to prevent Americans from gambling online, which includes playing poker. In a hypocritical twist, carveouts are made for horse racing, fantasy sports, and state lotteries. So while the proponents of this bill espouse the evils of online gambling, they look the other way if the gambling is in the form of horse racing, fantasy sports, or state lotteries.
This bill has received a lot of publicity recently. While legislation similar to this has been proposed in previous Congressional sessions, the proposed bills were largely ignored, since online gambling was not as popular then as it is now. Ten years ago, a bill like this was not voted into law because most people just did not care about the legislation, so Congress did not take the time to pass it. Now, the fate of a bill like this is much more controversial.
Two formidable groups oppose this legislation. The brick and mortar casinos oppose it since the online poker boom has been very beneficial for them indirectly. People commonly start practicing poker online, get better and more comfortable with poker, and eventually go and visit a brick and mortar to play live poker. If this legislation is passed, brick and mortar casinos would lose these types of players, which would significantly damage their bottom line.
The banking industry also opposes this bill. To comply with this bill, they would have to re-structure the way they handle ACH transactions (electronic funds transfers). To say that banks would be annoyed at being forced to invest the time and money to completely overhaul the ACH system is an understatement. The costs for the banking industry, especially for small banks, are simply too much in their eyes.
The chances of this bill passing independently are unknown. The Senate is scheduled to adjourn October 6, meaning the bill would have to be passed in the next three weeks. There appear to be holds on the bill which are preventing it from coming to the floor, but Senate Majority Leader Bill Frist is attempting to insert some of the language from the bill into the conference report for the Department of Defense Authorization Bill, which would bypass the holds.
It would be much more difficult for a senator to hold the DOD bill, and such a hold would probably not be attempted. On the other hand, the Armed Services Committees are generally opposed to the insertion of any non-germane language, as it would add controversy and draw opposition to the overall Defense Authorization bill. We will probably find out early next week to what extent Frist's efforts are successful; he may get the entire bill inserted, he may get a watered-down version, or he may not be able to add any language on internet gambling at all.
Peter Dicks Arrest
The chairman of Sportingbet, one of the largest online gambling companies, was recently arrested in the United States. The state of Louisiana is accusing him of violating their law of "gambling by computer." Sportingbet, which operates several sportsbooks as well as Paradise Poker, accepts bets from Louisiana, but it's not clear what other connections it has with the state. Lousiana may have a difficult time extraditing Mr. Dicks. On Sept. 14, Gov. Pataki's office withdrew a warrant necessary for the extradition, and the New York court allowed Mr. Dicks to return to the UK. Shortly after the hearing, he resigned his position as Chairman of the Board. Mr. Dicks must return to New York for another hearing on Sept. 28. We are likely to find out much more information at that time.
Unlike BetonSports, Sportingbet seems to be running business as usual. It is likely that the company will aggressively defend Dicks. A guilty or not guilty verdict in this case can send a strong message, as well as set a precedent for operators of online gambling sites. How this case plays out will likely strongly affect how much some sites focus their marketing efforts towards Americans.
Sportingbet is a publicly-traded company on the London Stock Exchange, and it temporarily suspended trading of its stock after the arrest. However, it now trades openly again. Because of the arrest, the stock plummeted 40% the day after it resumed trading. Combined with the drastic drop the stock took after the BetonSports case, the stock last traded at 172p, down from 400p prior to these legal developments.