- The Washington Times - Tuesday, September 20, 2011

The nation’s largest casino trade group is going all in to legalize online poker, calling Tuesday for a proposed regulatory framework even as the Justice Department continued its crackdown on offshore gambling websites.

Frank J. Fahrenkopf Jr., president of the American Gaming Association, which until now has opposed the legalization of online poker, said in a statement that “there are no longer any good reasons to put U.S. citizens at risk by continuing to outlaw online poker in the U.S.”

He called on Congress to approve the group’s proposed online poker code of conduct, which includes conducting background checks for website operators, identifying all U.S. players in order to keep out teenagers and other illegal gamblers and implementing procedures to stop money laundering.

Hours later, the Justice Department filed a motion accusing executives at Full Tilt Poker, including celebrity players Howard Lederer and Christopher Ferguson, of defrauding customers of more than $300 million while they “lined their own pockets.”

“Full Tilt was not a legitimate poker company, but a global Ponzi scheme,” Preet Bharara, U.S. attorney for the Southern District of New York, said in a statement.

The billion-dollar world of online poker was rocked April 15 when the Justice Department shut down gambling on three of the largest offshore websites: Full Tilt Poker, PokerStars and Absolute Poker. Prosecutors charged the companies with bank fraud, money laundering and illegal gambling.

The 2006 Unlawful Internet Gambling Enforcement Act bans online poker websites, although individuals are not prohibited from gambling online. Industry insiders say that while the federal indictments may have closed down a few websites operating illegally in the United States, others have since sprung up to take their place.

The result has been an intensified effort to take online poker out of the shadows by legalizing it. Republicans have in the past represented the biggest obstacle to online gambling, but two House bills introduced this year to regulate the industry are sponsored by Republicans, Reps. Joe Barton of Texas and John Campbell of California.

Mr. Fahrenkopf said he is hoping to work with Congress to develop a third bill based on the AGA’s proposed code of conduct. “I think there’s interest,” Mr. Fahrenkopf told The Washington Times.

At least one Republican presidential candidate, former New Mexico Gov. Gary Johnson, has come out in support of legalized online poker, saying on his website, “The federal government should not be involved in restricting lawful commerce that doesn’t harm anyone.”

The movement also has won the support of some top names in federal law enforcement. Former FBI Director J. Louis Freeh and former Homeland Security Secretary Tom Ridge drew headlines Thursday when they joined the advisory board of FairPlayUSA, a newly formed advocacy group pushing for a regulatory framework for online poker.

Critics of the online gambling prohibition describe the current atmosphere as “the wild, wild West,” an industry dominated by shady offshore companies with no legal obligation to their U.S. clientele.

“Current laws that attempt to prohibit Internet gambling have failed to stop the illegal Internet gambling market from growing to $6 billion in the United States, exposing minors to Internet gambling sites of all kinds and leaving consumers at risk,” Mr. Freeh said in a statement explaining his decision to join FairPlayUSA.

Tuesday’s motion expanding the scope of the indictment against Full Tilt Poker could be viewed as a red flag on the dangers of allowing online poker to operate openly. But Mr. Fahrenkopf disagreed, saying, “There’s no better example of why we should be licensed here in the U.S.

“As you can see from what the Justice Department did [Tuesday] morning, there’s no protection for consumers whatsoever,” Mr. Fahrenkopf said.

PokerStars has issued a statement on its website explaining to players how to cash out their accounts, but Full Tilt Poker has been criticized for failing to refund its players’ balances after the Justice Department crackdown. PokerStars also is offering U.S. players the option of gambling for “play money” on its website.

John Pappas, president of the Poker Players Alliance, called on the Justice Department on Tuesday to ensure that any settlement resulting from the crackdown is “first dedicated to reimbursing players.” He also renewed a request for Full Tilt Poker executives to “ensure the prompt payment of players as their first priority.”

Critics of expanded gambling worry that legalizing online poker will increase gambling addiction and its fallout, such as divorces, bankruptcies and suicides.

“People may not understand how highly addictive it is, when you’re alone in your home,” said Jerry Prosapio, co-founder of Gambling Exposed and a self-confessed gambling addict who quit 28 years ago. “Online gambling is just another way you’re going to create more addiction, and then you’re going to see more crime. It’s just no good for America.”

But online poker supporters say there never has been a better time to legalize the industry, given the job market and the potential for adding a billion-dollar industry to the flagging economy.

“We’re talking about jobs, tax revenue,” Mr. Fahrenkopf said. “It’s sort of a no-brainer.”

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