Poker Legislation Post

 Hello fellow poker players. This is the PPA's Litigation Support Director "Skallagrim" and I am posting this at the request of TheEngineer.

The recent seizure of funds by the US government and the resulting disruption in echecks and paper checks has a lot of poker players rightly concerned; they want to know: is it a violation of Federal Law for me to play online poker, to cash out,  and/or to deposit?

I will try and make sense of these question in this post. Unfortunately, virtually all of the law in this area is open to debate. So until the courts make actual decisions on these issues, nothing is completely for certain.

Lets start with the big question: Is playing online poker illegal under Federal law?

The answer to that question is the only one that is pretty straight forward: there is a general legal consensus that even the DOJ agrees with that merely participating in a poker game online does not subject a US resident to a federal prosecution, In other words, THERE IS NO FEDERAL LAW MAKING PLAYING ONLINE POKER A CRIMINAL OFFENSE.

- Please note, State laws are an entirely different matter and will be the subject of a later post -

The reason I can say the above with some certainty is that there are only 4 Federal laws that affect "gambling" and thus arguably poker. They are the recently passed Unlawful Internet Gaming Enforcement Act (UIGEA), and the older Wire Act (WA), the Illegal Gambling Business Act (IGBA), and the Travel Act (TA). ALL OF THESE FEDERAL LAWS TARGET THE BUSINESS PROVIDING THE GAMBLING, NOT THE PLAYERS PARTICIPATING IN THE GAME.

I must note that is is also arguable that none of these four acts apply to online  poker at all, for either the player or the site (that again is for another post), but I want to concentrate this post on player's money, not on money held by the sites.

The UIGEA is, of course, the act most people have heard of. It was passed in Oct. 2006 and shortly thereafter a number of large online poker sites left the US market. THE UIGEA, HOWEVER, DID NOT MAKE ONLINE POKER  ILLEGAL. The UIGEA expressly states in the law that it was not making any game illegal that wasn't already illegal, nor was it making any illegal game legal. So despite those sites that left the US, either they had already broken US law by running a poker site before the UIGEA passed, or they were not breaking the law and the UIGEA does not apply to them. As you well know, some sites believed they were not breaking the law and continued to offer poker to US residents.

The evil of the UIGEA, as it affects your money, is found in the provisions that relate to banks. These provisions also do not "make" poker transactions illegal; they either already were or they already were not. But the provisions encourage the banks to block any transaction that might be related to "illegal online gambling." If they block a transaction that has anything to do with any game on the internet (including as was recently publicized, credit card purchases of State Lottery tickets!) they cannot get in trouble. If they knowingly allow a gambling transaction, however, they get in big trouble. Obviously if you run a bank its far easier to just not handle any transaction that's related to gambling than to try and figure out which ones are legal ones and which ones are illegal ones. But at least when a bank declines your transaction, they don't take your money. At worst they will hold it for a time while investigating, then return it to you and maybe close your account.

And one last point, the UIGEA, if it applies to poker at all, only applies to deposits to sites, it says nothing about player withdrawals from sites. It even says this in the regulations. But you try telling that to your bank's manager.

Taking your money for keeps can only be done by the government. They can seize money while investigating if they have "probable cause" to believe its "illegal proceeds." That's what they have done so far in the recent case. But they can only make it theirs for good by starting a legal Forfeiture action and proving in court by "a preponderance of the evidence" that the money is "illegal proceeds." This has not happened ... yet.

"Illegal proceeds" thus becomes the key. But generally speaking, illegal proceeds in the gambling context must be proceeds of the gambling business, not winnings or other money returned to the players.

Of course, its hard to prove whose money it is when its solely in the hands of the gambling business. So, for example, if you bet $50 with an online sports book on the Giants to win, and the Feds bust that book before the game and seize that money - the Feds are not going to give it back to you if the bet money is actually in the hands of the bookie.

But that's not the same as when that same sports book sends you back $75 because the game happened and in fact the Giants did win. At some point that becomes your money. And under Federal law your money (so long as you are not a "gambling business" like being another bookie) is not "proceeds." Again ignoring state law issues, and using sports betting as an example because it is clearly illegal under federal law, even your illegal gambling winnings are NOT illegal gambling business proceeds, and so not subject to Federal Forfeiture.

And that's the irony of what is currently going on. It is painfully obvious reading all the posts about the players who have had checks bounce and incurred overdraft fees or couldn't pay other bills, that the recent action by the Federal Government directly affected you players! It cost you your money! It was certainly not site proceeds.

And while the sites have for the most part taken it upon themselves to restore lost funds in players' accounts, that was probably not something they were legally required to do. For example, when you get a paycheck and someone steals it from you and cashes it before you can stop payment on it, you don't get a new paycheck (unless you have a very generous employer). Usually you are the one out the money. What the government did to poker players isn't exactly the same, of course, but the general principle still applies IMHO.

And that's why this action by our government has to be the last such action; we must stop this if we can, one way or another. This case will really set the standard for the future. If the Government can get away with this one, your poker money is not safe. If poker money isn't safe, who will play?

So, I say it is time to FIGHT. For us lawyers, we are preparing to go to court. For the rest of you, DO EVERYTHING YOU CAN!  Join the PPA, write letters, call your congressperson, and let your friends know so they can join the fight too.

As for specific help fighting for your rights to your money, for that information I will turn things over to my friend and fellow PPA member, TheEngineer.

Thanks for your time reading this,

Skallagrim

Very well said and tyvm for clearly stating whats going on right now.

Please keep us informed as this fight unfolds in court.

JPFisher55:

Excellent article Skall. IMO, if a player receives a check from a payment processor and the check fails to clear, then the maker of the check, not the poker site, is liable to the player.  OTOH, if an echeck withdrawal fails to clear, then the player never received payment and the site still owes him the money.

Either way, players have clearly suffered harm and costs.  Many still do not have cash in hand and a question has been raised about the value of online poker accounts.  If the DOJ does not reverse this seizure and its position on the legality of online poker, then IMO it is time to litigate.

I look forward to future article on the federal laws, but my understanding is the the IGBA and Travel Act depend on a violation of state gambling law.  IMO, the ability of states to prohibit online gambling will be an even more important legal issue then the Wire Act if litigation against the DOJ is necessary.

 I don't know how accurate it is, but G911 has an article claiming that online poker players are still having trouble actually receiving cash from their accounts at FTP and PS.

OK..so what are the chances that the Feds agree that this is seized player money and not site money, and allowing any player that had money seized to make a claim and be paid. How do you think the online sites would handle this bad scenario for them given that they already reimbursed the players?

ChipLeeder:

OK..so what are the chances that the Feds agree that this is seized player money and not site money, and allowing any player that had money seized to make a claim and be paid. How do you think the online sites would handle this bad scenario for them given that they already reimbursed the players?