Why Shutting Down Online Poker Was a Bad Move

Money, Politics, Rights, Taxes

Last April, the U.S. government indicted eleven online poker executives and shut down the three biggest poker sites with operations in the U.S.: Full Tilt Poker, Absolute Poker, and Poker Stars. When players tried to log in, they were met with the FBI seal.

The reasons behind the shutdown included illegal gambling, bank fraud, and money laundering. The FBI claims that the Internet-based poker companies tricked and bribed banks, and used the payments for online merchandise like golf balls and jewelry to disguise funds received from U.S. poker players.

The indictment isn’t as clear-cut as it may seem, though. Poker players and entrepreneurs claim that poker is a game of skill, not gambling, and many Americans made their living through online poker sites. Questions of government hypocrisy arise as well, given the revenues that the U.S. enjoys from other gambling outlets.

Don’t hate the players…

Online poker is more than just a hobby for many Americans. Poker, arguably a game of skill and strategy, has practically become a sport in the U.S., with high-profile, televised tournaments like the World Series of Poker and World Poker Tour. Those who made a living as professional poker players online are now struggling to support their families. While the younger, single pros may be able to shift to live casino games or travel abroad to play, people like Brian Mogelefsky have families and mortgages, making extensive travel and/or relocation a non-option.

Show me the money

The shutdown has also hurt thousands of players who had significant amounts of money, either won or deposited for future play, sitting in accounts on these sites, which are now inaccessible. Some players have deposits in the six- and seven-figure range, and don’t know if they will ever get it back, despite the fact that the money is rightfully theirs. Until a full accounting is done and the Department of Justice unfreezes the accounts, players are out of luck—and it could take a very long time.

Prohibition vs. regulation

The sites that have been shut down in the U.S. still operate in Canada and Europe, where they originated, so they’re unlikely to go bust—the shutdown mostly hurts the average Americans who used them. While it’s understandable that the U.S. government can’t condone illegal activity, we question prohibiting poker sites rather than regulating them. Why can’t the government set up rules and regulations like those that casinos must follow, and take a piece of the pie? In the worst American economy in decades, the timing of the shutdown—not only for the players who have few other employment options, but also in the lost financial benefits the country could reap from regulation and taxation—is unfortunate.

Skill or luck?

It is especially galling to former players that illegal gambling is one of the reasons for the shutdown, when the government both condones and profits from gambling through lotteries and casinos. Furthermore, the question of whether poker is a game of chance or a game of skill puts the label of “gambling” into question. Under U.S. law, online gaming that is based on skill rather than chance is legal—and the arguments as to the skill and strategy required to win at poker are convincing.

Estimates say that up to 10 million people played poker online in the U.S. before the shutdown—most for fun and under the impression that it was a legal enterprise. Even among those who didn’t make a full living from the game, many were able to count on poker as a secondary income. While the executives of Full Tilt Poker, Absolute Poker, and Poker Stars should be punished if they were, in fact, engaging in bank fraud and money laundering, shutting down the sites themselves was a mistake. Reform may be needed, but prohibiting online poker altogether in America is a bad move.