Last Friday, the CEOs of several major online poker sites were charged with fraudulent banking activities, and their sites had to stop allowing gambling with real money from within the United States.
The vibrant and lucrative world of online American poker is suddenly at a standstill. I’ve played a few hands in that milieu myself, and I have friends who play successfully and often, supplementing their income significantly. A cottage industry has grown around the success of online poker, ranging from educational Websites to books to software that helps users track their play. The demise of online poker, if it sticks, will affect the ledgers of many people who have no direct affiliation with the sites in question.
Technically, the charges against the online poker bigwigs have to do with using dummy companies to circumvent regulations that would otherwise prevent them from making bank transfers with their profits. But does anyone think that’s the real issue? The deeper question is, Does online gambling deserve to exist?
Poker (unlike, say, roulette) is a game that gamblers play, not against the casino/Website, but against each other. The site profits by taking a small percentage of the winnings, also known as the “rake.” The rake doesn’t make it harder to win; it’s more of a maintenance fee. The point is, there’s nothing about online poker that’s institutionally exploitative. The players are arguably capable of exploiting each other, but nobody has an unfair advantage.
The battle for the legitimacy of online poker connects to one of my central criteria for whether the Internet will turn out to be good or bad for humanity, whether it will become a system that facilitates and enables true entrepreneurship, artisanship, and the independent generation of surplus value, or whether it will be just another system of power and control through which the rich increase their own wealth and further disenfranchise everyone else.
As Marx would say, one of capitalism’s central injustices is that ordinary people are separated from the “means of production.” You may have a valuable skill, but to generate income, that skill probably requires you to have access to resources that you cannot afford to buy or create yourself. For a worker to be in that position makes him ripe for exploitation. Workers who are capable of generating revenue independently, however, are harder to take advantage of.
The online world is full of edge cases in that regard. For example, a small company that advertises with Google AdSense and fulfills orders through Amazon’s warehouses seems to be empowered by those services, but is also ultimately at the mercy of those two companies and is, in a sense, merely their extension.
Online poker is (potentially) empowering to the individual player. If you’re good, the platform provides a means for you to generate income with nothing more than an Internet connection and a credit card, from anywhere on Earth (except, as of last Friday, from within the United States).
Conventionally endorsed gambling platforms such as casinos and lotteries, on the other hand, are generally exploitive and disempowering. And offline, gambling in America has long been compartmentalized by strange laws. It’s illegal in most states, but not in Nevada, and not on some Indian reservations or riverboats. Home games are common, but rarely are they broken up by law enforcement.
If there is any consistent message in the regulation of American gambling, it’s this: Gambling can never be a mainstream industry. If online gambling finds a way to stay legal, we as a society will be forced to re-examine that standard. After all, if I can play online from my apartment in Brooklyn, shouldn’t it be legal to build a casino in Queens?
The controversy over online poker sits at the nexus of many issues: what the Internet is for, whether America truly values online freedom, and the extent to which morality and commerce can be legislated across national, cultural, and technological boundaries.
Hopefully, the virtual tables will be open to real American money games again soon.
— Michael Bennett Cohn has a range of creative, business, and technical experience in online publishing. He is on Twitter at http://twitter.com/miconian.
Here are two issues that may have something to do with the shutdown
U.S. Patriot Act, Title III of the Act, titled "International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001," is intended to facilitate the prevention, detection and prosecution of international money laundering.
The poker aficionados argue that the card game isn't gambling, but a game of skill, the IRS still wants details on how well you played Texas Hold 'Em. The IRS now requires all poker tournament sponsors to report competitors' winnings of more than $5,000.
Great point, nathanwosnack. So it seems that instead of being righteous, governments seeking to block online gambling may have their eye on ways to parlay vice into victory for their own bottom lines.
I am more open-minded on the arrow of causation. Enterprises become attractive to criminals when they get criminalized, selling liquor being an obvious examples. This doesn't mean no enterprises should be criminalized, of course.
You got it, Kim, regardless of what form it takes, be it online Poker, casinos, or whatever. Gambling attracts vice and criminality like flies to a candy bar. Yet its adherents will shamelessly defend it pulling out all the stops: free enterprise, human rights, liberty, motherhood, puppies, our boys, additional income for the states, online freedom, blah,blah,blah.
I haven't looked closely enough at the facts of this particular case to have an opinion, but I sympathize with the thrust of the blog, which is that gambling is one of a number of enterprises which is not treated like others because of historic associations with "vice."
Interestingly enough, in our country of Canada in my province of British Columbia, the government bans corporations and individuals from setting up online gambling sites within this jurisdiction yet they have a monopoly on online gambling activities via the BCLC. That's right, our own provincial government offers online gambling services, and it seems the province of Saskatchewan is seriously considering it too. So much for free enterprise.
The reason the sites were shut down was not because they allowed US citizens to play poker, but because of the methods they used to pay players.
I wanted to respond to this specifically. It may be technically true, but the controversy/scandal in general is all of a piece. The reason the sites were using allegedly illegal methods to transfer money between international banks (and thus to pay both players and themselves) was because they couldn't do it legally. And that's because the money was to be used for the payment of online gambling debts.
So, yes, it's not that online poker is against the law, exactly. It's that the methods of payment that make online poker practical are (or are alleged to be) against the law. But I don't think it's a stretch to say that the reason those activities became illegal to begin with was because of the politics of gambling, not banking.
It is silly that ESPN cancelled their poker programming. I never watched it--while I understand why someone may want to play poker, I don't understand the allure of watching other people play it--but apparently a lot of other people did. I don't see the connection between their live-action poker tourneys and online gaming sites.
Certainly, it will be hard for prosecutors to show that this is anything but a victimless "crime." They were operating within a loophole, and the question we should be asking is why that was even necessary.
Indeed. The defense will probably go for jury nullfication (now, they cannot do that blatantly, but attorneys can and do surreptitiously push juries in that direction).
I do not play online poker. In fact, I don't gamble at all, but gambling--including online poker--absolutely should be legal. People should have every right to do things with their money that I may think are stupid or wasteful, the same way I may do things with mine that they feel are stupid or wasteful.
And as the article says, poker is arguably the least "exploitative" of any type of gambling, because you are playing against individuals, not the house. You may end up playing against people who are more skilled than you, and therefore the odds may be against you in a particular game, but the odds aren't automatically stacked against you every single time you play. The same thing cannot be said about slots, roulette wheels or horse racing.
Hopefully, these arrests will result in a court case that will deteremine if internet gaming is legal. If it's legal, how is it regulated, who has legal jurisdiction and how is it taxed?
Indeed, it's likely that that's exactly what's going to happen, and that relates to what I said in the post about systems of power and control. They'll be allowed to turn the tables back on, as soon as it's clear how the business will be regulated and taxed. And, more significantly, how the players and their winnings will be regulated and taxed.
ESPN taking down their poker programming is pretty ridiculous.
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