Two Way Hard Three | Las Vegas Casino & Design Blog

Big news.
Onkine poker community: Commence freakout.
http://www.marketwatch.com/story/doj-indicts-founders-of-top-us-online-poker-sites-2011-04-15-1358350?link=MW_latest_news

US Atty's press release:
http://www.justice.gov/usao/nys/pressreleases/April11/scheinbergetalindictmentpr.pdf

Very interesting. I wonder how this if this is clearing the field for a renewed push for legalization.

Based on today's events, Wynn has severed ties with PokerStars - their "alliance" didn't even last a month...

http://blogs.forbes.com/stevenbertoni/2011/04/15/steve-wynn-cuts-ties-with-embattled-online-poker-site-pokerstars/

This was bound to happen and the US even gave players ample warning to get their funds out of these sites and cash in! This can't be a shocker as the US government will get in the game of online wagering and tax it, and rightfully so! This is all about collecting the tax money and helping to lower a debt that will never shrink. I am on a new website called Gamboozle.com, its an online site but its subscription based. I pay $20 a month, play poker, fantasy sports, other betting games and even Pac Man. There are many prizes and even cash awards, but the most I can lose is my $20 a month fee. Great Idea, and now I have a cheap form of entertainment for those friday nights I want to stay in and do something inexpensive. Heck with online gaming, which is probably rigged somehow. I have better things to do with my money and dont need Uncle Sam to tax me either!

1) Hunter's link to the poker fourms does not work at 7:15AM EDT---"temporarily unavailable." Overload or pulled down?

2) I haven't read enough yet to understand it all, but is this a purely political move by the administration possibly meant as a warning shot for Steve Wynn? Would the FBI under the Bush administration have taken the same action, or am I being a conspiracy theorist?

As in previous seizures, players will most likely not get their funds returned. This is not the first time the feds have gone after online poker sites and their owners.

This is not a prelude to legalization, regulation and taxation. There are significant political entities that honestly believe online gaming is dangerous and cannot be legalized. Too many people were acting as if legalization was imminent and it embarrassed the wrong people. It will be years before these cases work through the courts and legalization efforts can begin again.

I find some of the greater policy and conspiracy theories laughable on their face. First, this investigation seems to have taken a long time. Think of all those little pieces of paper from each transaction that need to be matched up and then constructed to form the stream of money to the companies, and doing so in such a way that would be legally submittable evidence in a court of law. It almost treads into X-files territory to think "Wynn needed to be taken out".

Is this a first step to the US taxing on a national basis online gaming? Perhaps, but it might be hard to do that politically. Given so many states have their hands in some gaming kitty, one that federal regulation would muck-up, there would be a fight at the local level (not only to mention the finer Constitutional implications of any specific law). Finally, I think that one of the reasons gaming has been "sell-able" to populations is because it is local. Gaming is one of those activities that many think "they" (personally and people they immediately know) are comfortable with, but the rest of America would go crazy with it (witness the head scratch "What's wrong with Kansas" debate a few years ago). This would be another huge influence against the idea.

What I want to add here is from the press release, owning a freaking bank? Really? You can argue it is an "minority stake", but $10 million so the bank will do things they know are wrong (and therefore blackmail), sound buying it to me. This is beginning to sound like another gambling movie staring Pechi and DeNiro. Is Campos the new Glick?

As for the internet deals signed by Wynn and the like, I have the same thought I had when I heard about them "What in the hell are they thinking". While I do not know the content of the deals, if anything was on paper, I hope it was contingent on due diligence to make sure everything was legal. As you can tell, likely it would be found it was not so. These deals would have blew up anyway. What this does leave the door open for though is ops with non-US affiliated companies. Getting the brand out there, you know.

On a final thought, if I were Wynn I would be reading Macau gaming law very, very carefully now. In Macau your license can be yanked if you are conspiring on any level with a criminal operation or alleged criminal operation. This may qualify, and Macau is already a little irate at the Sands. The problem is the Sands has not done anything blatantly wrong. Wynn's online poker adventure might be the place for Macau's regulators to send a message (I doubt his license would be revoked, but I would not be surprised at some fine).

Sounds like this is about to get a lot more interesting...
http://www.businessinsider.com/boy-genius-online-poker-scandal-2011-4

Posted by Hunter

I agree - this has nothing to do with going after Wynn or any other possible political enemies.

On the face of it, it seems to me that it's very likely that these companies did break US law. I mean, come on - did they really think they could get away with it forever? This was bound to happen.

You can argue if the UGIEA should have ever existed but hey... it *does* exist and by not playing by the rules, they put themselves at risk.

What I think is more dangerous are the domain name seizures. While the US Government is tied into ICANN via the Department of Commerce, it just feels wrong to have them seizing assets that feel international in nature. These businesses are licensed and legal in other parts of the world. I'd feel a lot better about this if it were just indictments and didn't include the domain name seizures.

You're being a conspiracy theorist, detroit.
Wynn is just a very small, bit player in this -- or he was one.
(Besides, even if SW has had a lot of negative things to say about the President, the Obamas, esp. Mrs. O, really like Elaine. She's an equal shareholder.)
This is about a longstanding pissing match between the southern district of NY's AAG and the online gambling business. I don't think there's any politics at play -- just federal prosecutors who don't like the poker sites thumbing their noses at U.S. law.

Thanks, guys. I'll take off my tinfoil hat now.

I can't post the link as I am on my mobile, but i saw the flight history for Wynn's jet this week and it (he?) spent a night in the washington dc area this past week--I think on wednesday. Coincidence?

PokerLawyer, a blogger, found and posted a warning to online poker operators I made five years ago in a Las Vegas Sun column:

"If the poker community keeps whistling past the graveyard, pretending that there's nothing wrong with flouting the law in pursuit of easy money, even tougher crackdowns are ahead."

http://pokerlawyer.blogspot.com/2011/04/whistling-past-graveyard.html

Wynn and the Fertittas should have known better. It's unbelievable that they simply ignored the illegal activity being conducted by their "partners." And Nevada regulators should be hanging their heads as well for failing to call them on it.

My takeaway:

1) I imagine that this hurts Harrahs and the WSOP indirectly, as so much of their US participation comes from online qualifiers.

2) I wonder how many professional players just basically had their entire bankroll wiped out.

3) Expect to start seeing the big games come back to the brick and mortar casinos now, where they had largely been abandoned. (Daniel Negreanu's and Doyle Brunson's first twitter reaction to the news was to get busy setting up a game at Aria for that evening)

4) Glad I lost that $50 on pokerstars a few years back. Smart move.

I find all of these developments very fascinating. Super interesting to follow along. If this is a precursor to legalization or legislation, I wonder now if the existing online poker companies will be licensable, as originally it was thought through AB258 that they would not be excluded solely for operating existing websites. I also think it will be interesting to see how this effects the brick and mortar casinos who jumped into bed so quickly with these companies, specifically Caesars, who last I read had not broken ties with 888. Wynn got out quick, which was probably smart, and Station's deal hinged on licensing so they are probably in the clear. Caesars is also probably going to take a hit with the WSOP brand as mentioned above ^. Also, thanks Mattk for mentioning the big poker guys who are showing up at casinos to play again, that is an interesting side effect that I hadn't thought of yet.

Erin,
Caesars partner, 888, was one of the companies that exited the US after UIGEA passed in 2006. That was an important consideration for Nevada regulators before they voted to allow Caesars association with 888 last month.

Separately, I'm not that confident in the expectation that the indictments will be a net positive for brick-and-mortar cardrooms. Most of the online poker pros, whether they played tournaments or regular raked poker games, will find it tough to duplicate the kind of conditions they had online. Not only are the games a lot slower (quite tedious for the younger online players) but they won't be able to play four or more games or tournaments at a time to reduce variance. To match the kind of play they had online in a live poker game, a typical player would have to play at much higher stakes (to account for playing only one game at a time at much slower speed -- i.e. far fewer hands per hour). That would greatly increase volatility, something most of these online players try to avoid.

The same effect will apply to tournaments. An online tournament specialist who previously played 25 tournaments a day at buyins ranging from $20 to $200 will only be able to play one or two in brick-and-mortar settings, and will in many markets have a hard time finding tournaments big enough on a daily basis (outside of big events like the WSOP) to match the expected win of a good online player.
Variety of games will be another big issue. People who specialized in the less popular games or game sizes will have few or no options in most casinos, which by-and-large offer hold'em and a little Omaha and stud. Tournament players who don't play no-limit hold'em will have almost no opportunity to find their games.

I predict the more likely result is that fewer players will play online, but many former PokerStaers, FullTilt, Absolute Poker and UB players will move to existing, smaller sites that continue to accept action from U.S. players (Doyle's. Cake, Bodog and many more). As those sites grow they'll become more appealing as they will be able to offer more games and tournaments at a wider range of price points.

Another negative for live cardrooms is that, without as much televised poker (shows will disappear without online advertisers) and with fewer players playing online and learning the game when they're too young to play in a live casino cardroom, the entire pool of poker players will start to shrink.

Jeff,

I think that many people who played on PS, FTP, AP will not move over to the smaller sites. What's to stop the DoJ in simply including the smaller sites to these indictments?

Update: http://www.justice.gov/usao/nys/pressreleases/April11/pokerdomainnameuseagreementspr.pdf (I hope this link shows)

FTP, PS, to get their respective .com domains back, to help facilitate US players get their money back. I think this pretty much confirms that the DoJ can't determine how much a player has won/lost.

Javi,
I don't disagree with you. I probably should have chosen a better defined word than "many":
"I predict the more likely result is that fewer players will play online, but many former PokerStars, FullTilt, Absolute Poker and UB players will move to existing, smaller sites that continue to accept action from U.S. players (Doyle's. Cake, Bodog and many more).

Of the hundreds of thousands of U.S. players who regularly played online, I would bet tens of thousands (20k?, 40k?) will choose to play on other sites. That certainly isn't most of the players, but it's nothing to sneeze at, either.

It looks like individual US players on these sites will be able to cash out their accounts. That's good news. If they hadn't, it would be difficult for players to justify switching over to a new poker site, not knowing if your money would still be there the next day.

But this is still very grim news for online poker. Pokerstars and the others will now see a "run on the bank", probably depriving them of most of their operating funds. The thinning of the online herd that happened after the Port bill passed is probably about to happen again. Average Joes who are a) unsure of the legality of the game and b) unwilling to go through all the complicated steps to make a deposit will abandon the effort. Only dedicated players will continue to find places to play online. This has the self-reinforcing effect of making the games even tougher than they already were and providing even more of a barrier to entry for new and novice players.

Like Jeff said, it might come out as a wash for the brick and mortar rooms. Poker rooms in casinos are flexible things. They can grow and shrink with demand. Hard Rock's 20 table room got no action and ended up becoming a 4 table room in the peacock lounge. The Hilton ditched theirs entirely and made it a Wheel of Fortune room. And that was during poker's peak. Meanwhile the Venetian's room, huge to start with, keeps expanding deeper into the casino, and is always packed when I visit. Personally I think casino poker's peak is behind it, but I think it's going to settle on a plateau of popularity that's much stronger than before the boom started. And that should be good for Las Vegas, since poker has shown that it can bring in new visitors to the city.