Last week, while many people reported their income to the Internal Revenue Service, others suddenly found their source of income shut off. On a day now known among online poker players as “Black Friday,” the Department of Justice did us Americans the favor of saving us from ourselves by shutting down the three most popular and trusted online poker platforms.
Not only did the department seize the three domain names, it also froze 77 accounts around the world and charged the founders of PokerStars, Full Tilt Poker and Absolute Poker, among others. What’s there crime? While the charges very carefully center on bank fraud, the heart of the department’s clampdown on Internet gambling stems from the Unlawful Internet Gambling Enforcement Act (UIGEA). Passed during a midnight vote in 2006, the UIGEA doesn’t actually prohibit online gambling but rather bans credit-processing companies from processing payments from “unlawful” online gambling activities. However, the bill never clarifies what it means by “unlawful” activities.
After the law’s passage, several online poker companies continued to operate in the United States, and Justice has turned the prosecution of those entities into a very lucrative endeavor. United Kingdom-based SportingBet, an online betting platform, signed a non-prosecution agreement with the U.S. government last year in return for a payment of $33 million, and in 2008, the co-founder of PartyGaming.com paid authorities $300 million in a settlement. In last week’s indictment, Justice announced that it was seeking a total of $3 billion from the poker companies. Compare this with the $105 million fine that Wachovia, which was found to be laundering billions of dollars in drug money, paid to the U.S. government, and one must wonder what kind of metric Justice uses when deciding which injustices to pursue.
While the accusations of bank fraud and money laundering that authorities are asserting against the poker companies are serious, the root cause of their criminal activity (if there is any) is their attempt to circumvent a regulation that is confusing to the point of killing an entire industry. Most online poker companies moved offshore, and while some continued to offer services to American players, most banks and credit-processing companies began blocking any transaction related to any type of online gambling because they could not know for sure which would be considered “unlawful.” The banks in last week’s indictment chose to look the other way while players sent money to online gambling websites and the websites sent money to players. Was there fraud? Possibly. Is there a victim here? Not likely.
In the end, it comes down to whether or not Americans should have the right to decide for themselves if they want to play a game for money or fun. When the government makes activities illegal, they don’t go away, the law simply makes criminals where before there were none - as in the case of the poker companies. Authorities then have to waste countless hours and taxpayer dollars bringing to “justice” businesses and average Americans who voluntarily engage in an exchange of goods and services.
Despite last week’s announcement that Justice plans to allow the poker companies to temporarily unfreeze the gambling domains in order to allow players to cash out their accounts, the indictment brings to light the gross injustice of the current state of U.S. law. The uncertain legal status of online gambling in this country that is the result of the UIGEA needs to be resolved so Americans can act freely and appeal to their government when they are victimized instead of being treated like criminals for voluntarily playing a game. Thus far, President Obama has been woefully silent on this issue. In the president’s Facebook town hall this week, Mr. Obama didn’t address the Justice shutdown despite the hundreds of questions on the topic posted on his wall. (Ironically, Facebook hosts the Zynga Texas HoldEm poker game, which has more than 7 million players a day.)
If the administration really wants to protect jobs and the rights of citizens and even collect a little extra tax revenue from the income earned playing online poker, it is time to get rid of UIGEA, legalize online poker and rein in the power-mad Department of Justice.
Michelle Minton is the director of insurance studies with the Competitive Enterprise Institute.