It seems that there are 2 issues. One is the unlawful internet gambling act and the shutting down of the major poker websites. Another is the alleged Ponzi scheme which Howard Lederer denies. I don't know if there is sufficient evidence that this occurred and it seems improbable that someone would try something like this as it would be only a matter of time before it was discovered.

But regarding the first issue, poker is a game of skill and therefore not subject to the unlawful internet gambling act. There was a case in 2012 in which a judge ruled that poker is a game of skill, but setting that aside, it is still clear to everyone that poker is a game of skill and can be easily proven. This being the case, and considering that the 3 major poker websites lost hundreds of millions of dollars in the FBI seizure, why don't they band together (or the WPT or PPA) and sue the federal government for hundreds of millions to a billion for damages, as well as the right to run their businesses? I don't see why there is any interest in regulation of online poker. Poker is not a contest and not a sporting event and why would one want to settle for regulation? Chess tournaments are not regulated, nor are other game tournaments. Taxes are high enough as they are, there were already rakes in these sites, and there is no reason to further reduce deposits. It seems the clearest way to make progress would be a direct legal challenge to the UIGEA. Ideally this would have been before the DOJ action but one could hold that it was never being violated.

No one can really blame the government for what has happened either because the government is elected by the people. Whatever way one looks at it, anyone who voted for Romney or Obama contributed to the current environment, including the tax increases that we will all see in 2013. Overall voter turnout is low, and secondly bad candidates are elected. If better candidates are elected to all levels of government then we will start to see more freedoms and I could see a return to unrestricted online poker within the next decade.

bank fraud and money laundering tho

If it is now all of the sudden legal to operate an online poker site in the US nation wide where are all the new sites with massive ad campaigns. Instead of crappy little ones dodgin the DOJ?

b/c they have no chance and it would be a waste of money.

poker sites are still subject to uiga- the recent ruling hasn't changed that. Doesn't matter if it's a game of skill.

Poker sites offering real money to US would be abundant if this were not the case.

Game of Skill ≠ Not Gambling under all laws.

The UIGEA depends on other laws for its definition of Unlawful Gambling, including state laws. Under many state laws, online poker is expressly or interpretively illegal. Sometimes offering wagering on any game including skill games is illegal under state law (unless licensed); sometimes poker simply fits the state's statutory definition of gambling despite the fact that the outcome is predominantly determined by skill.

Notice that there are online poker sites operating legally in the U.S. - the ones like ClubWPT which take subscriptions and offer games under sweepstakes laws in states where such are legal.

There might be an opportunity for an online poker site to offer real-money wagering in a very limited number of states where arguments could be promulgated that it is not illegal under those states' laws. However, the site would still be liable to governmental attack, and would likely spend far more on legal defense than the rake it could generate.

In the case of existing sites that have offered US-facing play, it is clear that in one way or another they have violated some laws, either state or federal. Or at least the legality is murky enough that the DOJ has had the upper hand in courts (for seizure warrants and indictments) and settlement negotiations. Few sites want to take the legal risks of continuing US-facing operations, or to run the risk of making themselves ineligible for licensing as new laws are passed, either state-by-state or federal, for US-licensed and regulated online poker.

Aside from a few glaring first amendment exceptions (churches and porn sites, e.g.), the 'right to run your business' - even if that business in nothing more than growing food on your own land for your own consumption - has been declared trumped by the government's 'right' to regulate the economy by the courts going all the way back to the New Deal.

I don't know where this theory that 'since winning at poker consistently requires skill, the government has no right to regulate the business of it' originated, but it has absolutely no merit, successful hunting requires skill, that doesn't give hunters an inalienable right to gather food whenever or wherever they choose without government regulation.

Challenging a law that did nothing more than restrict the poker sites from convenient access to the US financial system for accepting deposits has about as much chance of success as you suing your State for lowering it's speed limit in the name of your right to convenient transportation of perishable goods, and for damages for melted ice cream.

No, the government doesn't regulate chess, but if raking online chess suddenly became a billion dollar per year offshore industry then they would probably find some 'save one child' excuse to start, and no lawsuit could stop them.

Based on your response, it sounds like this comes down to what the government has a right to regulate. There is a provision in the Constitution to allow regulation of commerce and ample prior cases on this topic, but poker is not commerce, and the question is whether the government has the right to regulate personal behavior.

There are some mentions about bank fraud and money laundering. I specifically separated these two issues and I would be suggesting a lawsuit based on playing poker online which has nothing to do with money laundering.

A couple ppl have mentioned that the government would win. The government has lost federal cases in the past. And the easiest way to get trampled is to be passive and allow the government to extend its reach and do whatever it wants. A big lawsuit would accomplish several things. It would occupy some government attention when it already has a lot of other things to deal with. In addition it would raise public awareness. With problems like crime, education, and wars with other countries, I think a lot of Americans would be dismayed to find that the government is expending significant resources to shut down poker websites (I was when I first heard about this). I also don't know that there is clear evidence that a Ponzi scheme occurred.

I wasn't aware about states having various laws against poker but a federal lawsuit would also be the clearest way forward for this as well. I am not suggesting that websites try to operate in certain jurisdictions and avoid being caught if they might be in the wrong; this is the situation that provoked the DOJ actions and that we are trying to avoid. I also realize that the UIGEA is still in effect which is why I suggested a lawsuit to counter its constitutionality. The argument might be that the government may not regulate personal behavior. Therefore it has no right to restrict financial transactions involving this behavior, making the UIGEA unconstitutional. There are other possible arguments. Poker tournaments could be classified as not gambling (as opposed to cash games), and thus not under the UIGEA.

Another question is where popular opinion is. If the public is in favor of poker, or if this can be looped under the umbrella of personal liberties, then this kind of stuff has influenced cases before.

Feel free to start a poker site and sue the government.

There is nothing in the relevant law stopping someone from offering or playing poker online, there is also nothing stopping individuals from betting on their poker play, they could challenge each other on free sites and keep track of their wins/losses on the side.

There is however a prohibition on those in the business of (commerce) poker (betting or wagering) accepting deposits (commerce) through a US financial institution (facility of interstate commerce).

As far as fighting back and/or refusing to lay down and/or opposing regulation, there are sites you can play on right now (sealswithclubs) that use non-government currency to buck the system, completely free of regulation.

It bills itself as the wild west of online poker, freedom, no cheat detection, RNG auditing, bot/collusion detection, etc, and (surprise!) nobody wants to play there.

The ability to fly under the radar is not a desirable goal for a business that depends on mass audience liquidity, MMA used to bill itself as proudly being illegal in 40+ States, and it's PPV numbers reflected that, it wasn't until new ownership chose to stop being rebels and seek regulation/legitimacy that it became a mainstream sport.

I suppose if someone had a site that allowed no use of money on the site itself but they charged people a fee to set up games and for the the site to keep track of wins/losses, the site could be charged with something similar to what the website developer was recently charged with?

I thought about Sealswithclubs but what's keeping me off there is the funky currency they use as I didn't know about the other things, but now there are more reasons for me not to play.

I doubt it, while both 'gambling', poker software is to sports betting software what a poker table is to a slot machine - or a hand gun to a rocket launcher - one has both a legitimate private use as well as a potentially illegal commercial use, whereas the other has no residential purpose.

Congress specifically enumerated sports betting paraphernalia (which courts have held to include software) as a forbidden area of commerce in the US, "It erects a substantial barrier to the distribution of certain materials used in the conduct of various forms of illegal gambling" therefore unreported transporting/transmitting it across State lines is a crime.

The fact that he claims to have only leased it to jurisdictions where sports betting is legal may be irrelevant, the Ninth Circuit in Mendelsohn held sports betting software to be like a controlled substance or military grade weapon, unless you have a license to sell it and the purchaser has a license to buy it, you can't.

Poker software might be used legitimately and might be used illegally, the crime would be committed by the operator not the provider, but an American in Arizona supplying sports betting software to out-state/US sites may have already committed a crime before any bet is ever placed.

I'm not sanguine about the chances for bitcoins to survive. I'm not totally familiar with currency laws, but I suspect that anyone utilizing bitcoins likely violates these laws (and had better get a good attorney who is familiar with them real soon). While it may take years (given how the DOJ "works"), I expect indictments sometime in the future.

There's an NVG thread about a Bloomberg Businessweek article that talks about Bitcoins and one thing mentioned in the article is they're being used to facilitate the sale of illegal drugs.

I know first hand that Wal-Mart has good attorney's, and they've begun accepting bitcoins at some locations, as well as 7/11, so if they were in violation of any existing currency laws, I seriously doubt that would be the case.

I'd expect that at some point Congress will amend the drug and gambling paraphernalia laws making Bitcoins specifically illegal in US commerce, probably at the same time they finally get around to passing some type of interstate guidelines for online poker.

But it can't be retroactive or ex post facto, and there should be plenty of warning from the hearings and debates, so as long as they stop accepting them when/if it becomes illegal to do so, they should have no liability.

I would point out that Walmart seems to have broken Mexican law in some areas so it's not like they are law abiding in everything. In other words. just because Walmart is accepting Bitcoin doesn't make them legal.

OP,

In my opinion, in 2006 Party Poker should have sued for a declaratory judgment regarding whether operating a poker site constituted a business covered by the UIGEA, instead of simply torching $7 Billion in market value. Had they, or Stars or FTP or UB, done so, the DOJ might not have taken until December, 2011 to admit in a Letter that offering online poker did not violate the Wire Act.

Money laundering might not have arisen as an issue, altho State laws would have remained an area of legal concern.

Black Friday would have been a lot less likely an occurrence.

In short, we could have been much further along today, by several years, toward expressly legal games in many States.

This is why I urged the PPA to litigate the whole issue of the legality of online poker in the years 2009-10. The Weinstein decision on the IGBA shows that the PPA had a decent chance to win. Yes, it would have needed some small poker site to join the litigation, but IMO it might have prevented Black Friday.

The PPA choose to put all their resources into the fight for federal legislation. IMO, this major miscalculation has lead to the near irrelevance of the PPA.

I hate to break this to you, but any resources the PPA "had" came with strings attached. The PPA was funded to pursue federal legislation, pure and simple. Howard Lederer, for one, believed that not only would federl legislation pass, but that FTP would get licensed. PStars believed in federal licensng, not in litigation, which would upset the cash flow from grey area US play.

Whatever you thought the PPA might/should/could have done, it had no resources or independenc or leadership or mission to do so by litigating in opposition to the DOJ.

No, the plaintiff should have been a nice publicly-traded, non-US licensed company or trade partner or poker payment processor which had a preUIGEA business interrupted and could show definite injury from the vagueness of the UIGEA and Wire Act interaction.

That is water under the bridge, and the thread is about a poker company bringing suit.

Bribing regulatory officials in Mexico is almost accepted as just obeying the unwritten laws, the ones that actually count for something down there.

I don't claim to be a currency law expert, but like most laws written before the digital age, they would likely need to be updated to apply; coins or bills that might be confused with legal tender are effectively prohibited, but since no reasonable person could confuse a digital token with a physical device, Bitcoins would likely slip through the cracks of existing currency law.

I mentioned the idea of declaring them to be gambling or drug paraphernalia, Congress could also update the currency laws, declare them instruments or money laundering, tax evasion, or even digital munitions - then pressure other countries to treat them likewise or face trade sanctions.

They could also just take them out of circulation like any other unwanted currency by setting up an exchange and simply buying them - the entire bitcoin economy would only cost them $70M right now.

In strictly poker terms, Congress likely wouldn't even need to make them illegal or buy them out though, presuming they are something of value, then any new regulations that make raking online poker specifically illegal (as opposed to making accepting deposits from financial institutions illegal) would also allow them to shut down sealswithclubs type operations - for peer-to-peer poker to truly be legal, it would need to be truly peer-to-peer, with no one profiting for "organizing" the games.

In general terms, unlike other currencies, bitcoins have neither intrinsic value (precious metals) nor the promise of government enforced value, the only value they have is the promise of demand.

They have demand for three reasons, the ability to make transactions too risky to make with other currencies (drugs, gambling, camsex, etc), the ability to transfer "money" less expensively and the speculation that the first two demands will increase.

As society becomes more secular and governments follow, the ability to make those types of transfers with legal tender is going to become less problematic, making people willing to pay the extra fees (including relevant taxes) for government assurance.

So the government could choose to pop the bubble by criminalizing their acceptance, allow the air to let out slowly as demand falls when governments restrict fewer and fewer transactions, or buy the bubble before it becomes too large.

My own speculation is that demand for anonymous and inexpensive transactions will decrease as the need for anonymity and cost of regulated transactions decreases, relegating bitcoins to a niche market of renegade dead fad enthusiasts without any government intervention.

All it would take though is one high profile scam, terrorist link or bitcoin gun purchased school shooting, and the bottom would fall-out through criminalization, making a bitcoin investment one with very little upside and a virtual cliff for a downside.

You go further off on a tangent from the thread ...., but, FWIW, for a US company, the act of "bribing regulatory officials in Mexico" is not only not accepted, it would be a violation of the US' Foreign Corrupt Practices Act, .... a felony.

The irony there is that Party had been responding to pre-UIGEA cease and desist letters by arguing that poker was not a contest of skill, it was a game of chance like any other casino game they offered, so the Wire Act the DOJ was threatening them with didn't apply.

Of course those responses then would have made it difficult for them to turn around and make the argument that poker was neither a sporting contest nor a game of chance, and that what it really is - a super-mutant-ninja conglomeration of both - was beyond the scope of State gambling laws to define.

The other problem is that the way the law was written, whose enforcement of it or what market barrier would they have even challenged? Since it defers to State gambling law, they likely would have had to challenge whether the gambling laws of each individual State applied to poker - one at a time.

Major banks and credit card companies had stopped processing poker transactions long before the UIGEA was passed, the UIGEA regulations requiring banks to enforce it didn't become effective until 2010, so it's doubtful that the speculative loss in stock value alone would have given them standing to challenge it at the Federal level.

One hope for challenging the UIGEA rested with third party payment processors, but none were charged with violating the UIGEA before BF, and on BF the UIGEA charges were the least of their concerns (the bank fraud charges alone threatened 30yr sentences).

The simple way to challenge an enforcement law is to keep doing what you believe is lawful - offering online poker - and get standing by being charged with violating it, but until BF, no one was ever charged with violating the UIGEA and even on BF, the UIGEA charges were merely an afterthought to the IGBA, money laundering and bank fraud charges.

As a publicly traded company, Party realistically had little choice but protect the value of shareholder assets by exiting 'the market' and reaching a settlement that would give investors hope that someday they could get back in - though had they understood that reentry would take years and online gambling was always going to evolve State-by-State, suing each State might have been worth a shot.

I should have put one of those at the end, I thought about it, but didn't really fit for tongue-in-cheek and I figured everyone would understand I wasn't being literal.

You write in great detail. I would like to see these preUIGEA "responses" by Party to whatever cease and desist letters you cite. Never heard of them before, and I have been following this industry since long before 2006.

I also know that your claim that all major banks had stopped processing ACH/debit card transactions for poker players preUIGEA is simply inaccurate. It is certainly NOT accurate that payment processors and banks had all abandoned processing US players' poker transactions "long before UIGEA".

I do know that Party had pre-2006 legal opinions from US counsel, including a large active poker-lobbying firm, that poker operations did not violate any US fedral laws.

In any event, you missed the argument that as a non-banking game, poker operators did not fall under the "outcome risk" criteria defining UIGEA-covered businesses engaged in betting or wagering. If poker was not a covered business model, then State law did not gain any NEW federal teeth by its passage. (That line, which lay in the In Re Mastercard reasoning preUIGEA, and which emerged in the DiCristino decision with respect to the IGBA, was the real strategic lesson you might take from the 2012 EDNY case.)


As for protecting Shareholder value, the Party management decision to "beat feet" without challenging the law at all, even post-exit, torched about $7 billion USD of that value.

Not sure why you think any of this, but I question the reliability of your sources.

while i appreciate everything the ppa has done, and it seemed they had good intentions and truly believed this was the best path forward, we shouldn't dismiss all the people that were saying this from day 1. many people saw the logical conclusion of the feds getting involved like high cost and low attention to player needs, and distaste for the bullying of a shaky interpretation of a terribly written law as well as the kowtowing and borderline corruption needed for licenses. not to mention the glacial pace of getting anything done: how long has it been since we've been fighting for online poker, and has anything changed from then until now? the reid bill might as well have been smoke and mirrors.

sure, water under the bridge, and no need to say "i told you so". but we lost a really huge opportunity to set things straight imo. that opportunity is now dead and buried, and we have to live with whatever the govt is willing to give us.