Online poker players around the world breathed a collective sigh of relief in recent days as PokerStars, the world's largest online poker room, bought the assets of its one-time rival, Full Tilt Poker, in a deal that could have significance far beyond the online poker world.
The $730 million transaction uses the US Department of Justice as a middleman and presents a unique set of challenges that resonate throughout the Web.
Some background: The DOJ targeted Full Tilt Poker and PokerStars in an 11-man indictment in April 2011. Both sites vacated the US market, and PokerStars paid US players back immediately. Full Tilt did not have enough cash on hand to do the same, and so the Alderney Gambling Control Commission suspended its license in June 2011.
Last September, Full Tilt's license was formally revoked, the Feds labeled it a Ponzi scheme, and a saving grace was needed. Now, after the nearly three-quarters of a billion dollar sale to PokerStars, players will finally be made whole... well, sort of.
Non-US Full Tilt players will be able to withdraw their account balances through PokerStars directly, while US users will need to file requests with the DOJ in order to get refunded. So the latest issue is: Will US players receive their entire account balances back, or just the deposits they made?
Since online poker is a no-no, according to the Federal Government, lawyers working for the Government are not so sure that the Department of Justice should be paying out money that was won in online poker games.
For online poker players and Web users everywhere, the ramifications of the upcoming DOJ decision are quite large. Given that poker players' bankrolls exist in cyberspace, perhaps every time you put money online in any form, it's not necessarily secure.
For example, I doubt that many poker players examined the complex tangle of state and local laws prior to depositing on Full Tilt. And given given other situations, such as “surprise” taxes on Amazon goods,
one wonders whether virtual funds and purchases are really risk-free.
The legality of online poker in the United States makes the situation even dicier. While Forbes called online poker a "no-no," the DOJ released a memo last December claiming that the Wire Act of 1961, a major gaming law, only applies to online wagering on sports.
In essence, online poker seems to be green-lighted under the Wire Act, leading to states like Nevada and Delaware adopting regulations to offer games. The South Point Casino in Las Vegas claims it could launch a real-money online poker room by September.
Meanwhile, an attorney representing Full Tilt told me
that Full Tilt, along with PokerStars, admitted no wrongdoing as part of the recent settlement. He added, "The company takes the position that online poker was legal, and that's a position they felt very strongly about."
You can readily see the uncertainty US players face. The DOJ doesn't take issue with online poker in the Wire Act; the sites maintain that accepting real-money customers prior to April 2011 was within US law, and Full Tilt was labeled a Ponzi scheme. Therefore, how is it possible that player balances could still be considered proceeds of illegal gambling? And should you be doing due diligence every time you spend money online, just in case this happens to you?
To complicate matters further, the DOJ's agreement states that PokerStars and Full Tilt, which will re-launch as a standalone room (a.k.a. online poker site), can apply for licenses in the United States at the state or federal level. Whether such licenses would actually be granted remains to be seen, but this possibility makes the "illegal gambling" argument Forbes alluded to even more peculiar.
As one player from the United States pointed out on the PocketFives.com forum: Not allowing US players to cash out their full account balances could be catastrophic for those who have excelled in online poker: "Only refunding deposits would be a disaster for players that worked their asses off to get good and make money, only to get back nothing."
What do you think? I'd love to hear reaction by Internet gurus from outside of the poker industry.
If it's a "fair" game, only the house is going to win in the long run. Now, if the outfit was running a ponzi scheme, one would wonder why. The company should win big no matter what, so why pay off players with other player's money?
Whether online gambling patrons of the closed sites will eventually get back anything is unlikely after attorney's and government fines and fees eat up the assets.
As someone who's never had an interest in gambling, it is tough for me to see the constructive entertainment value of bringing casinos online. As you say, DukeW, the tax revenues may not outweigh the added pressure on law enforcement, health care, etc.
@DukeW Risks on motorcyles aside, of course the odds are against you in gambling. That's what makes it such a money-maker for those who host it. Anyone who does win too much usually finds himself banned from further participation. That's one example of not everyone liking a winner.
Mhhfive, you've a good point there. Gambling sites consider themselves to be very much like banks, with money coming in and money going out on a daily basis. The security and documentation requirements are consistent with those required of banks as well (having worked in both industries, I can state that categorically). Like a bank, online casinos take in a great deal of money, and put out very little in return. Unlike most banks, you can lose everything at an online casino, including your home, your car, and the rest of your life as well. I work far too hard for my money to waste it frivolously on things like gambling (I like a return on my investment, and I just don't see any return on gambling, says the man who rides a motorcycle in Los Angeles traffic). I'm not sure that any government world-wide will be interested in insuring people's gambling habits, and not sure they should. Not even the resulting tax revenues would make up for that kind of risk. This is probably one gamble they shouldn't take.
Looks like things are moving into position relative to online gambling. Facebook has started real-money gaming in the UK. And in California, a legislator talked this week about the chances of online poker becoming legalized soon.
None of this points to immediate action, but it's interesting that we're seeing so much emphasis on live gambling. It seems to be a focal point lately for sure.
Yes, revenue seems to be a big reason the Government would get involved with online gaming. But, taxing rooms or players too much could lead to a market that no one wants to take part in because it's too expensive to operate, so there's a fine line as well.
cjon, Yes, US players would need to submit a formal request with the DOJ in order to get paid. I'd assume that if taxes were taken out, they'd be automatically withdrawn before players see a dime. The question is how far back would the DOJ go? Would the IRS audit anyone who asked for a refund?
Well, for example, if you leave your winnings in the site, and the site is offshore, should you be taxed at that point, or is it like an unrealized capital gain -- such as you buy a stock and it goes up, but you haven't yet sold it?
Additionally, players should like online for tax purposes because in real life, each winning requires the casino to submit W-2G, telling the IRS how much you won. However, while you can deduct losses, you have to keep track of those yourself. Online, obviously can give you a statement of gains and losses automatically.
Indeed, I think it's entirely likely that the government will aggressively seek to get the most out of the transactions in terms of taxation. Otherwise, why else would it be so interested in getting involved in online gambling?
The ThinkerNet does not reflect the views of TechWeb. The ThinkerNet is an informal means of communication to members and visitors of the Internet Evolution site. Individual authors are chosen by Internet Evolution to blog. Neither Internet Evolution nor TechWeb assume responsibility for comments, claims, or opinions made by authors and ThinkerNet bloggers. They are no substitute for your own research and should not be relied upon for trading or any other purpose.
JC Penney may have been behind one of the biggest SEO snafus of the Internet, but it's certainly not alone in making search engine optimization errors.
If you want to game SEO, think again. I recently wrote about the growing importance of content and the constant SEO crackdown coming from major search engines like Google. Organic growth, viral links, and a natural progression are revered in today's SEO world. (See: The Changing Face of SEO.)
Link building, link buying, and focusing obsessively on keywords were once ways to build your presence in the online world. Nowadays, Google and other search engines have wised up and the effectiveness of traditional SEO strategies has deteriorated. Today, interesting content is king.
If your company has something important to announce, there’s no better way to do it than through an online press release. And spreading your company’s message isn’t the only purpose; an online statement is about building relationships and your brand.
New York's Metropolitan Transit Authority is conducting a pilot test of digital kiosks to guide subway users to where they want to go more efficiently and at lower cost.
Some say that exposure to violence in gaming, online video, etc., is creating a violent culture. Tom says it's not that straightforward. Rather than regulate violence, we should understand it better.
Ray Kurzweil's Blio and Apple's iPad tablet will make it easier than ever to have books "read" to us, says Dr. Kim, who believes that talking tablets will become interwoven into our consciousness as we "merge" with the increasingly elegant machines we hold in our hands.
New York's Metropolitan Transit Authority is conducting a pilot test of digital kiosks to guide subway users to where they want to go more efficiently and at lower cost.
The whole Amazon.reader debate is a double-stupid. It's stupid to think that there's any e-book buyer who doesn't know Amazon's URL, and it was stupider to let ICANN launch the whole free-form TLD initiative to start with.
While NFC's original goal was to enhance mobile commerce applications, it is finding its way into a number of other uses, which is creating both opportunity as well as challenges for IT departments.
Enterprises would like to move to cloud computing but are hesitant because they are concerned about providers’ ability to secure company data. Here are some tips that help to ensure that if breaches occur, the business is not left holding the bag.
Edmunds separates customers into segments based on the info it collects on its site and from partners, and uses that to push out custom content, said Brian Baron, director of business analytics for Edmunds.com, at Predictive Analytics Innovation Summit.
The automotive website uses propensity modeling to target ads and customer registration forms, said Brian Baron, director of business analytics for Edmunds.com, at Predictive Analytics Innovation Summit.
Ushering in a new era of cognitive computing systems, IBM announced today the IBM Watson Engagement Advisor, a technology breakthrough that allows brands to crunch big data in record time to transform the way they engage clients in key functions such as customer service, marketing, and sales.
Expert Integrated Systems: Changing the Experience & Economics of IT In this e-book, we take an in-depth look at these expert integrated systems -- what they are, how they work, and how they have the potential to help CIOs achieve dramatic savings while restoring IT's role as business innovator. READ THIS eBOOK
your weekly update of news, analysis, and
opinion from Internet Evolution - FREE! REGISTER HERE
Wanted! Site Moderators Internet Evolution is looking for a handful of readers to help moderate the message boards on our site – as well as engaging in high-IQ conversation with the industry mavens on our thinkerNet blogosphere. The job comes with various perks, bags of kudos, and GIANT bragging rights. Interested?
To save this item to your list of favorite Internet Evolution content so you can find it later in your Profile page, click the "Save It" button next to the item.
M2M: Rise of the Machines? Not Yet David Weldon In the 1970 science fiction thriller Colossus: The Forbin Project, two giant supercomputers from the United States and Soviet Union secretly join forces to take control of the collective nuclear might of the two countries. In the film, the two machines discover each other's existence, communicate back-and-forth, share their collective data, and cut their human creators out of the process. It is the ultimate example of machine-to-machine communications, or M2M. CLICK FOR MORE
M2M: Rise of the Machines? Not Yet David Weldon In the 1970 science fiction thriller Colossus: The Forbin Project, two giant supercomputers from the United States and Soviet Union secretly join forces to take control of the collective nuclear might of the two countries. In the film, the two machines discover each other's existence, communicate back-and-forth, share their collective data, and cut their human creators out of the process. It is the ultimate example of machine-to-machine communications, or M2M. CLICK FOR MORE
M2M: Rise of the Machines? Not Yet David Weldon In the 1970 science fiction thriller Colossus: The Forbin Project, two giant supercomputers from the United States and Soviet Union secretly join forces to take control of the collective nuclear might of the two countries. In the film, the two machines discover each other's existence, communicate back-and-forth, share their collective data, and cut their human creators out of the process. It is the ultimate example of machine-to-machine communications, or M2M. CLICK FOR MORE
M2M: Rise of the Machines? Not Yet David Weldon In the 1970 science fiction thriller Colossus: The Forbin Project, two giant supercomputers from the United States and Soviet Union secretly join forces to take control of the collective nuclear might of the two countries. In the film, the two machines discover each other's existence, communicate back-and-forth, share their collective data, and cut their human creators out of the process. It is the ultimate example of machine-to-machine communications, or M2M. CLICK FOR MORE
Email This
