Recent developments involving Bodog, and the federal indictment against four of their top employees, underscore the fact that the online poker business that serves the United States is a fragile house of cards that could topple at any time. We never saw the first Black Friday coming, nor did we expect the lesser-known site closings that followed soon after. We probably won’t see the next Black Friday coming either.
It’s possible that there won’t be another major Black Friday. The Department of Justice made nearly a billion dollars from the Black Friday seizures and that kind of money just isn’t available any more, but they have still gone after some smaller sites in addition to the Bodog indictments. Smart money is on another series of site closures at some point, but it’s impossible to predict when that might be.
The Bodog indictments were easy to get, and similar charges could be created in an afternoon against any online poker site. Every offshore site that I have played on in the past few years has done exactly what Full Tilt and PokerStars were charged with and they will do it for anyone who opens a new account. A single federal agent opening an account, just like the Bodog case, is more than enough to shut down an online poker site.
The Law is the Law
The UIGEA is pretty clear. Making transactions for online poker sites, and covering up where those deposits are going in order to fund an online poker account, is illegal in the United States. We could argue about where these transactions are actually taking place when they happen online, but the Department of Justice doesn’t work that way. They prosecute what they want to prosecute, and they don’t lose a lot of cases. If they go after the offshore poker sites, then the sites will be shut down regardless of the arguments they may have about the legality of their business in the world market.
If you have any doubts, go ahead and start an account at an offshore site that serves customers in the United States and make a deposit using your bank card. If you find one that works, the debit from your bank account will not be from an online gaming site. It may appear to be from a clothing company in China, or a tech company in India, but it won’t be from an online gaming site. This is an exercise that someone from the federal government has undoubtedly already done, probably years ago.
These sites are serving a market that comes at great risk to them, but the reward is great. With substandard software and very little security in most cases, they are able to open an online poker site and serve a market that is already starving. They don’t have to be good at what they do, and most of them aren’t, they just have to offer a service that the bigger sites won’t – online poker in the United States.
That’s a Lot of Cash
The rake numbers at these offshore sites are nothing compared to the industry giants, but they are significantly more than a live poker room. Their expenses are drastically lower as well, with very few employees, a much less expensive physical location, and very little regulation to deal with. When you don’t have to pay a light bill, pay US tax rates, or hire dealers and floor people and maintenance people and cocktail waitresses, poker can be remarkably profitable.
So what will happen if these sites are shut down? Some of them are run by upstanding people who will do what they can to make sure that their players get paid, although they may not have much choice in the matter if the DoJ seizes their assets from offshore bank accounts. Then you are stuck trying to get your money back from the government, and we all know what a struggle that can be and how long it can take if you even get your money.
The bigger problem is that in a business that is less than completely legitimate, the people who run these businesses are often unscrupulous and some of them will be outright thieves. When the business is shut down, any assets they can hide from the United States government are also hidden from their players. This sets up a wonderful situation for the owners of these online poker sites.
You see a business where you hold a huge quantity of money in a place that is well-hidden. You know that the whole thing will probably be shut down at some point. You can set it up so that your business appears to be broke when the shutdown comes, and keep tens of millions of dollars for yourself. I wouldn’t do it, and you might not either, but we also wouldn’t take the risk of starting an online poker room and serving customers in the United States when we know we could end up in jail.
What happened to the money at Absolute Poker or UltimateBet? We know the Full Tilt money wasn’t there, and with AP and UB there was literally nothing for the government to seize. The same has been true of a number of much smaller sites that have been shut down. Whether through a lack of responsibility, or outright theft, owners of unregulated online poker sites have not taken good care of the money that players entrust to them and we can’t assume that will change with the next round of shutdowns.
While the sites may be shut down, and your money may disappear, will the owners actually be prosecuted? Probably not. Any time there is a lot of money in one spot, people and government agencies will try to find ways to get their hands on it. The people who end up with it don’t usually get in any significant trouble for taking it.
Full Tilt, Absolute Poker, and UltimateBet are all perfect examples of how this may play out. The owners don’t have your money, the government threatens them with prosecution if they don’t get some of that cash, they get some, and somehow no one goes to jail. Who gets screwed? You, the player, the guy who should legitimately own that money. You may or may not get some of that cash back, but only after the government gets their bite of whatever the owners are willing to give up.
Sometimes I’m Right
It may lend some gravity to my arguments to remember that I was the most vocal opponent of UltimateBet for years before the cheating scandal and Black Friday. Ultimate Bet offered a pro deal to everyone at PokerXFactor except me, the head cash game instructor, because they knew I wanted nothing to do with them and they hated me.
Of course, I am wrong sometimes too. I got my money off Absolute Poker at the right time, and told my friends to do the same thing, but like a fool I moved most of that money on to Full Tilt. It is certainly possible that unregulated offshore poker will continue to be safe for many years and everything will be fine, but if that is likely to be true, why are all the major players in the industry staying out of such a lucrative market?