{"id":770,"date":"2011-04-19T12:02:37","date_gmt":"2011-04-19T16:02:37","guid":{"rendered":"http:\/\/www3.law.harvard.edu\/journals\/hlpr\/?p=770"},"modified":"2015-10-02T15:58:05","modified_gmt":"2015-10-02T15:58:05","slug":"forget-about-your-house-of-cards","status":"publish","type":"post","link":"https:\/\/journals.law.harvard.edu\/lpr\/2011\/04\/19\/forget-about-your-house-of-cards\/","title":{"rendered":"Forget About Your House of Cards"},"content":{"rendered":"

Anthony Kammer\u00a0<\/span><\/em><\/p>\n

On Friday of last week, the Department of Justice issued an indictment charging the founders of\u00a0Full Tilt Poker, PokerStars, and Absolute\/UB Poker, as well 8 other individuals in the online poker industry, with\u00a0bank fraud, money\u00a0laundering, and illegal gambling offenses.\u00a0The government also announced $2 billion in civil money laundering charges and in rem forfeiture actions against\u00a0the defendants and their assets and issued injunctions that would\u00a0seize 5 online domain names and 76 bank accounts. The DOJ\u2019s press release is here (pdf<\/a>).<\/p>\n

The online poker community is still reeling from the government\u2019s move. The domains for\u00a0UB.com<\/a>,\u00a0Poker Stars<\/a>,\u00a0and\u00a0Absolute Poker<\/a>\u00a0have already been seized and now display a notice from the DOJ.\u00a0 Many players\u00a0found<\/a>\u00a0that they could not get access to money they had in their online accounts.\u00a0 Less than a day after the indictment, Full Tilt and Poker Stars issued\u00a0announcements<\/a>\u00a0that customer account balances were safe and that they would continue processing customer withdrawals. But not everyone has been able to recover their money.\u00a0Online poker has become a major, if not the primary, income stream for thousands of Americans in recent years, and the indictments have a number of people\u00a0worrying<\/a>\u00a0about where their next paycheck will come from.<\/p>\n

<\/p>\n

<\/span>The indictment filed by Preet Bharara, U.S. Attorney for New York\u2019s Southern District, contains nine counts.\u00a0Of the charges, four are alleged violations of the\u00a0Unlawful Internet Gambling Enforcement Act of 2006 (or\u00a0UIGEA)\u00a0(31 U.S.C. \u00a7\u00a7\u00a05361<\/a>\u20135367<\/a>), and three are in connection with a federal prohibition on \u201cillegal gambling business\u201d (18 U.S.C.\u00a0\u00a7 1955<\/a>). The eighth count is for conspiracy to commit bank and wire fraud (18 U.S.C.\u00a7 1343<\/a>), and the ninth is for money laundering conspiracy (18 U.S.C.\u00a7 1956<\/a>).\u00a0 A breakdown of which defendants were charged with which of these violations can be found\u00a0here<\/a>.<\/p>\n

The theory behind the UIGEA and \u201cillegal gambling business\u201d charges is that poker is gambling.\u00a0 The merits of these charges could hinge on whether courts determine that poker is a game of\u00a0skill or chance<\/a>. Freakonomics had a\u00a0series of posts<\/a>\u00a0on the question, and Harvard\u2019s own Charles Nesson discussed the issue a few years back with the Wall Street Journal (pdf<\/a>).\u00a0 At the moment, courts around the country remain split on the issue, but most people who\u2019ve spent any time playing recognize the skill-component involved. Poker is arguably more a game of skill than much of what goes on in our financial sector, which is perhaps why Congress provided a statutory exemption to all SEC-regulated activities in the UIGEA.<\/p>\n

The other claims are more straightforward allegations of fraud.\u00a0 According to the indictment, \u201cdefendants\u2026arranged for\u00a0the money received from U.S. gamblers to be disguised as payments\u00a0to hundreds of non-existent online merchants purporting to sell\u00a0merchandise such as jewelry and golf balls.\u201d The DOJ further has alleged that the online poker companies incentivized banks to cooperate in these payments by paying bribes. These disputes will probably turn on the particulars of the payment arrangements involved and the degree of transparency and honesty that existed between parties.<\/p>\n

There is a longstanding\u00a0movement for the legalization of poker that\u2019s probably about to pick up some steam. A lot of the criticisms speculate that Congress only acted against online poker because of pressure from physical casinos (consider Reid\u2019s\u00a0proposal<\/a>\u00a0to move online poker into the hands of U.S. casinos during the Dec. 2010 tax debate). But the arguments for legalization are most powerful when they emphasize that poker is a safe, consensual arrangement between adults. It\u2019s hard to find principled reasons why online poker should be illegal.<\/p>\n

But what, to me, remains the most remarkable about these prosecutions is this:<\/p>\n

Why is the DOJ using bank fraud and money laundering statutes to go after poker websites but not any of the most significant participants in a multi-trillion dollar financial crisis?\u00a0Poker is arguably more a game of skill than stock and derivatives trading,\u00a0and any negative social utility is nothing compared to the financial crisis or the risks associated with speculation in housing or commodities markets. There is one\u00a0explanation<\/a>that relies on the political influence of domestic casinos who want less competition, but part of it might be that online poker offers prosecutors easy targets and low-hanging fruit.<\/p>\n

The\u00a0New York Times<\/a>\u00a0and\u00a0Matt Yglesias<\/a>\u00a0have questioned the DOJ\u2019s inaction regarding the financial crisis, and they give the most weight to the Obama Administration\u2019s fears that financial prosecutions could derail the economic recovery. That explanation proves too much and, as Bill Black\u00a0observed<\/a>, it ignores the fact that not prosecuting derails public confidence in our government and erodes the rule of law. Maybe going after online poker companies helps preserve the appearance that the government has an interest in prosecuting financial crimes.<\/p>\n","protected":false},"excerpt":{"rendered":"

Anthony Kammer\u00a0 On Friday of last week, the Department of Justice issued an indictment charging the founders of\u00a0Full Tilt Poker, […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[2],"tags":[],"class_list":["post-770","post","type-post","status-publish","format-standard","hentry","category-blog"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/peZQka-cq","_links":{"self":[{"href":"https:\/\/journals.law.harvard.edu\/lpr\/wp-json\/wp\/v2\/posts\/770","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/journals.law.harvard.edu\/lpr\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/journals.law.harvard.edu\/lpr\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/journals.law.harvard.edu\/lpr\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/journals.law.harvard.edu\/lpr\/wp-json\/wp\/v2\/comments?post=770"}],"version-history":[{"count":0,"href":"https:\/\/journals.law.harvard.edu\/lpr\/wp-json\/wp\/v2\/posts\/770\/revisions"}],"wp:attachment":[{"href":"https:\/\/journals.law.harvard.edu\/lpr\/wp-json\/wp\/v2\/media?parent=770"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/journals.law.harvard.edu\/lpr\/wp-json\/wp\/v2\/categories?post=770"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/journals.law.harvard.edu\/lpr\/wp-json\/wp\/v2\/tags?post=770"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}