BLACK FRIDAY BLINDSIDED EVERYONE...OR DID IT?


...some of the reaction and commentary


LET'S GO OVER some of the aspects of this with two prominent online gaming attorneys. Lawrence Walters lays out the basics of the story here:
"The Department of Justice (DoJ) is once again flexing its muscle in an effort to shock and awe the online gaming industry, in the hope that it will have some tangible impact. But that train left the station long ago. The time for the US to have acted was back in the year 2000, when the industry was just starting to coalesce, and rational regulatory efforts would have paid big dividends. The US could have been the epicentre of legal online gambling, with large license fees paid to the Department of the Treasury, and larger taxes paid to the IRS, by operators, on the gaming profits. Instead, US lawmakers turned to the failed policies of prohibition, and after years of trying, eventually passed legislation in 2006 making receipt of illegal online gambling funds, well... illegal. So now the DoJ has turned its attention to online poker, making a big splash by seizing big money and bigger domain names. But the legal basis supporting the government's prosecution is highly questionable.

"The indictment, and corresponding civil forfeiture complaint, make veiled references to misdemeanour New York gambling statutes (which themselves do not reference Internet gambling), along with certain other unspecified state laws. Basing a multi-million dollar, international white collar conspiracy case on some outdated state misdemeanour seems a bit tenuous, to say the least. Federal law does not outlaw online poker. That's why the feds are scrambling to find some state law (or maybe a city ordinance) that criminalises the actual gaming activity at issue. Even if they dust off some state gambling statute, adopted before the Internet was even a glint in Al Gore's eye, they have other major problems with obtaining jurisdiction over individuals and companies that are located in foreign countries - some of which enjoy substantial economic revenue from licensed Internet gambling activity.

"The DOJ has a pretty impressive conviction rate, overall, but this one will be an uphill battle for federal prosecutors." Lawrence G. Walters, Esq., www. GameAttorneys.com.

So, it is near impossible to gain jurisdiction over individuals residing in foreign countries, especially if their activities are legal and licensed in their countries. Attorney Nelson Rose adds another aspect:

"On Friday, April 15, 2011, the DoJ seized the .com names of five of the biggest poker sites. It is not even clear that online poker is illegal in every state and territory of the US. But players in countries like England, where it is indisputably legal, also found themselves unable to access their favourite sites. This is a door the US should never have opened. The next to step through could be an Islamic country, which outlaws alcohol, seizing the worldwide domain names of every retailer and restaurant that advertises beer or wine." Professor I. Nelson Rose, www.GAMBLINGANDTHELAW.com.

What about the DOJ freezing all these player accounts, the monies that belong to innocent citizens? Nelson Rose has this to say:
"On April 20, Preet Bharara, the US Attorney in Manhattan who had seized the domain names, announced that an agreement had been reached with PokerStars and Full Tilt Poker. Technically, the .com names remain seized. But the DoJ will now permit the companies to operate money games outside of the US, which they always had the legal right to do anyway. American players can also go to the .com sites and get their deposits back.

"Bharara issued the following statement 'No individual player accounts were ever frozen or restrained, and each implicated poker company has at all times been free to reimburse any player's deposited funds.'

"Technically true, but misleading. Exactly how were players supposed to get their money, when they could not log on to the seized .com sites? Did Bharara tell the operators they could refund players' deposits, and how they were suppose to do that? Even today, the DoJ has not worked out all the details on what it will allow. Notice that the announced agreement is only with PokerStars and Full Tilt. Those companies have licenses and approvals by foreign jurisdictions, including France, Italy and Alderney, which they want to protect. They also would like to someday return to the US, once the laws are changed. Absolute is licensed by the Kahnawake tribe in Canada and has always taken the position that it does not have to be overly concerned with the laws of Canada, the US, or any other jurisdiction. So it is standing tough."

"What will happen next in the US is wide open for speculation. Was this a final swoop to open the market for the Las Vegas giants?"


So then, what does Absolute have to say about this? Here is the company's statement:
"Absolute Poker has retained Blank Rome LLP as United States counsel to provide legal advice in relation to civil and criminal matters filed in federal court in Manhattan and made public on April 15, 2011. Absolute Poker is aware that on April 19, 2011, the US Attorney for the Southern District of New York entered into separate agreements with Full Tilt Poker and PokerStars. These agreements concern the use of the respective www.fulltiltpoker.com and www.pokerstars.com domain names. The US Attorney, in a press release dated April 20, 2on, stated that the government is willing to enter the same agreement with Absolute Poker and UB."

Indeed, at time of writing, an agreement has been announced, although as mentioned in the Editor's note, slightly different in nature to that reached with PokerStars and Full Tilt.

The official release stated that: "Absolute Poker has reached an agreement with the United States Attorney's office for the Southern District of New York (SDNY). Under the agreement, the US Attorney's Office has agreed to provide all necessary assurances that third-parties may work with Absolute Poker to facilitate the return of funds to players located in the US. This provision is an important first step to returning US player funds.

"The Company has also notified the SDNY that it has closed its US-facing operations, and it has agreed to the cessation of real money poker play in the US. As such, Absolute Poker has not requested the return of its worldwide domain names, www.AbsolutePoker.com,
www.UltimateBet.com and www.UB.com, and today's agreement does not provide for their return."

Meanwhile, Costa Rica's version of the FBI, Organismo de Investigaciones Judiciales (OнJ), raided the offices of Absolute Poker and PokerStars and some private residences, accompanied by some US officials. Rumour has it that PokerStars was raided by mistake. The raids were short and employees were sent home for just a few hours. This is alle.it 1 because Absolute had laid off a lot of employees without the required severance pay and these employees went to complain to local authorities.

There was some fallout in the online gaming industry. The white label Rival casinos withdrew from the US market, as did BetUs and Bingo Entertainment I haven't seen many affiliates leave the market.

What will happen next in the US is wide open for speculation. Was this a final swoop to open the market for the Las Vegas giants? What will happen to affiliates once the US market does open up? Looking at all the various bills submitted in the political arena as of late, one thing seems fairly certain - regulated online poker will soon come to several states, if not the entire US.
 
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