Given Washington’s strict anti-online poker law and recent Supreme Court ruling upholding it, it was only a matter of time before the hammer started to fall.  Well, it’s fallen.  Forbes reports that approximately $8 million has been seized by the federal government in an effort to curb poker-related payment processors.  You don’t have to be Nostradamus to predict this is not the end of enforcement measures in Washington.

Hot on the heels of Washington’s high court rendering a ruling potentially devastating to online poker, federal agents have moved to seize approximately $553,000 from a payment processor for moneys distributed to Washington residents.  The government’s complaint states that the money is related to “illegal gambling” and “constitutes a violation of [anti-]money laundering provisions.”  Not good.

As you’ve probably heard by now, 6 poker players from Illinois, including some top players, are being sued by a Florida resident to recoup gambling losses.  The Plaintiff, Scott Crespo, alleges that he is entitled to not just the money he lost to these players, but to the money (and other forms of damages) any player lost to any of these six players.  He pins his action on an Illinois statute that states that “If within six months, such person [who] is entitled to initiate action to recover his losses does not in fact pursue his remedy, any person may initiate a civil action against the winner.”  Crespo claims that a house located in Illinois that at least some of the defendants reside in is a house of illegal gambling — hence his hook to use Illinois law.  Crespo claims also that the defendants colluded when playing online.  Let’s talk about some of the obvious and perhaps less obvious ramifications of these allegations. 

First, the general claim that any person is entitled to recover from any person that won money as part of an illegal gambling engagement.  The statute, similar to the one being litigated in Kentucky, seems designed to allow private citizens to police certain actions when the state and/or directly aggrieved person does not prosecute itself/himself.  This method occurs occasionally in other areas of the law.  Deterrence of the underlying ill — i.e., the gambling — is the ultimate objective.  With regard to the use of such a method in the gambling context, frankly, no legalese is needed.  The whole thing is just absurd.  If you voluntarily sign on to a poker website, voluntarily deposit money, voluntarily register for a tournament, voluntarily play that tournament, and lose, you should not be allowed to recover the money you lost fair and square, let alone the money other people lost (others who engaged in the same voluntary acts, and likely many of whom hail from countries in which gambling is unquestionably legal).  Kind of reminds me of the bank commercials that make you think how would a 5-year react?  I’m guessing little Timmy would say this is BS.  Still, the law, antiquated as it is, is on the books and the lawsuit must be taken seriously.

Second, Plaintiff Crespo alleges collusion.  I think we all realize this is a different ball of wax.  Merely alleging cheating gives online poker a bad name.  If it actually is true, and provable, aside from the kick to the gut our game will suffer, Crespo may have a stronger legal claim.  Cheating is cheating, and the law is designed to punish cheaters.  But ponder this:  Crespo will be asking the courts to punish cheating in a game he claims ultimately is illegal.  Would the Illinois court be willing to parse the happenings of a game that itself is or, at the very least, may be illegal?  To analogize, would the Illinois courts be willing to punish operators of underground craps games for using weighted dice?   I’m guessing the courts would not venture into this legal gray area.  There is a more devastating scenario, however.  What if the Illinois court does not want to operate in a gray area, so it deems a determination of whether online poker is legal necessary to its decision and then holds online poker to be illegal?  This, obviously, would be a significant setback for the legalization movement.  Heck, even stating in dicta (dicta is a statement by the court that does not have precedential value, but which the court wishes to make) that online poker likely is illegal under Illinois law could have a calamitous effect in terms of the momentum it could give to online poker opponents and/or the potential that it could be cited by future court decisions as persuasive thought.

Bottom line, the 6 defendants are not enjoying this weekend.  And until we know more about this lawsuit everyone in the online poker world — especially those living in Illinois – should pay close attention to it because you never know when someone might attempt to use the statute to recover losses from a tournament you won.  Then again, those of us that never win are safe.  But every poker player always wins, right…, so maybe we’re all in trouble.

Stay tuned for more posts on this story as it develops over the coming months.

Goldwater Bank in Arizona recently “agreed” to forfeit $733,804 it received from services related to the transfer of money to and from poker websites.  Granted, scrutiny on Goldwater Bank was heightened because it is a recipient of TARP money, but this is not a positive development for proponents of online poker legalization.  What gets me is the lack of uniformity in prosecution.  Either enforce the law completely or do not enforce it at all.  Arbitrary enforcement is a death knell for respect and raises the possibility of abuse.

The U.S. Government has just settled with two online payment processors and their owner for $13.3 million.  This is the final resolution of seizures that occurred back in June 2009.  Will these parties have the distinction of being the last to forfeit money before the U.S. changes its laws….?

Slowly, details about the federal government’s criminal investigation of online wire transfers/payment processors are coming to light.  On May 19, federal authorities in Maryland filed suit against a Missouri man alleging crimes of money laundering and gambling.  The Complaint notes that the government is relying on multiple confidential informants to support its case.  Information, such as this, previously had been sealed by the courts.  Confidential informants, as anyone who watches the now (say it ain’t so) canceled Law & Order series know, are fairly common in investigations.  Still, the use of them in this type of case and just the fact that we are gaining more knowledge of the investigation is very interesting. 

For the government’s sake, I hope the laundering charges involve laundering to support another criminal enterprise (say, arms smuggling), cause then I could get behind the claims.  If the laundering is to hide money between poker players and poker sites, as I suspect many of you will agree, I’ve got issues.  Just legalize poker already.  Get aboard the freight train before too many needed social programs dry up and the country is irreparably damaged.

Some big things happening in the poker legal world. 

(1) Rep. McDermott (D-WA) unveiled a new bill that would tax online gambling.  8% of all deposits would be taxed with 6% going to state and tribal governments and 2% going to the federal government.  This is a tough call for poker players — pay the G-men and play legally or operate on the fringes and keep that 8%.  Here’s a thought that could help all poker players, the sites, and the government.  If this bill passes, maybe there will be more reload/deposit bonuses available.  That would enable individuals to minimize their taxable amount and the sites to increase the pool (and their rake).  And the government still to get taxes.  A win-win-win. 

(2) Pennsylvania is sending mixed signals.  On the one hand, the state is moving rapidly toward legalizing live poker and table games.  Yet on the other, a Pennsylvania appellate court just overturned by a vote of 2-1 a lower court’s decision, in the process ruling that poker is a game of chance, even if skill elements are involved.  This is not good.   Especially because it is another precedent future cases might site when looking to rule poker a game of chance.  How about these judges sit in a room with Ivey, Durrr, and Antonius for some PLO.  Then let’s see whether they think poker is predominantly a game of chance.

(3) The Kentucky iMEGA case takes another turn.  An appellate court has granted a motion that could return the case to the State’s high court very quickly.  The thinking is that the court wants to determine the standing issue (legal gibberish for whether the correct party is suing) in case the case ultimately gets sent to the U.S. Supreme Court.  Hard to tell how this will play out, but it’s probably good news for poker players since the last ruling hinted at siding with poker players on the merits of the lawsuit.  Then again, reading courts is almost as difficult as reading facial tells online. 

(4) The American Gaming Association (AGA) has changed its stance and now is “open to” legalized online gaming sites.  This is a powerful ally in the war to legalize poker.

On January 20, 2009, the Kentucky Court of Appeals, by a 2-1 majority, ruled that internet domain names are not “gambling devices” under Kentucky law.  Therefore, the State of Kentucky could not lawfully seize them.  Oral argument on the State’s appeal is scheduled to be heard before the Kentucky Supreme Court on Thursday, October 22, 2009.  Poker Law Bulletin will update this story as developments occur.

Update: On October 22, 2009, the Kentucky Supreme Court heard oral argument on iMEGA’s appeal.  The below link summarizes the hearing and opinions of certain people in attendance and/or with knowledge of the event, including PPA Executive Director John Pappas, PPA Kentucky State Director Rich Muny, and iMEGA Chairman Joe Brennan.  Their general view is that the hearing was favorable to iMEGA (and poker overall).  There is no indication as to when the Court will release its ruling.

George F. Will – A New Deal Worth Fostering
This article highlights the U.S. Government’s hypocrisy in outlawing internet poker while spending hundreds of millions on lottery promotion and allowing horse racing and fantasy sports.  Howard Lederer and the Poker Players Alliance argue this point and contend that game theory differentiates poker from luck-based gambling such as slots or roulette.
http://www.washingtonpost.com/wp-dyn/content/article/2009/08/14/AR2009081401933.html

Christopher Costigan – Health Insurance for Online Poker Players?
Health insurance is difficult to come by for online poker players who are not otherwise employed.  However, the World Poker Association (WPA) provides members with comprehensive coverage at affordable rates.
http://www.gambling911.com/poker/health-insurance-online-poker-players-083009.html