Online Poker Players Face Legal Issues


Dec 6, 2004
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Online Poker Players Face Legal Issues

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Aug 5, 5:09 PM (ET)


(AP) PokerTek CEO Lou White demonstrates one of his PokerPro tables at the company's headquarters in...
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LAS VEGAS (AP) - With the nightclub Tao swathed in red and black, music pulsated and go-go dancers gyrated on raised platforms along the wall. Everything from the "reserved" signs to the billiard table felt to the models' Chinese-style dresses bore the same label: "" The only thing missing was the online gambling site's flamboyant founder, 45-year-old Canadian Calvin Ayre, who was nowhere to be found.

"He'd have girls all around him and he'd be the life of the party," said Ronn Torossian, a publicist and acquaintance familiar with Ayre's celebrating ways.

The billionaire who graced Forbes magazine's March cover decided to make himself scarce after federal authorities arrested David Carruthers, the head of rival Web gambling operator BetOnSports PLC, as Carruthers changed planes at Dallas-Fort Worth International Airport on July 16.

A federal judge ordered BetOnSports to stop accepting bets placed from the United States, and prosecutors are seeking the forfeiture of $4.5 billion, plus several cars, recreational vehicles and computers from Carruthers and 10 other people associated with the Costa Rica-based gambling operation.

Around the same time, the U.S. House passed a bill that would ban most Internet gambling. Though the bill's future in the Senate is uncertain, the issue loomed over the World Series of Poker in Las Vegas: Is online poker legal?

Tournament organizers and the U.S. Justice Department say no. The players, thousands of whom qualified in cash-paying Internet tournaments, say yes.

"I've got no certainty whatsoever," said Ayre, speaking by phone from Canada, days after Carruthers' arrest.

"I don't believe any senior executive of any online gaming company is going to be going into the United States for the foreseeable future," Ayre said. "It's not just me, and I've talked to a lot of them."

The World Series of Poker's uncomfortable relationship with online gambling emerged in 2003, when an unknown accountant named Chris Moneymaker qualified through a $40 online tournament and went on to win the $2.5 million main event, becoming the poster child for the wild popularity of online poker.

Advertising by poker sites on mainstream television exploded - and then the Justice Department intervened.

In a June 11, 2003, letter, deputy assistant attorney general John Malcolm warned the National Association of Broadcasters that the department considered Internet gambling illegal. "Any person or entity who aids or abets" online betting "is punishable as a principal violator," he wrote.

Major networks reacted by forcing online poker companies to create "dot-net" sites, on which poker was played only for fake money and no reference or link would be made to the "dot-com" versions, where billions of very real dollars are wagered every year.

Thus,, the so-called "World's Largest Poker School," has become an official sponsor of the World Series of Poker, its logo visible every time a flop hits the felt., the moneymaking reason for its existence, lurks in the shadows.

By some counts, about half of the 8,700 players in the World Series' main event qualified through online satellite tournaments. boasted more than 1,600 qualified on its satellites. is reported to have sent more than 800 qualifiers and says it sent some 700.

But tournament commissioner Jeffrey Pollack insisted that an online tournament isn't what puts a player into the World Series - it's the $10,000 cash he individually pays for a seat at the table.

"I don't talk to the dot-coms, I don't," he said. "Online gaming is illegal. Everything we do, whether it's selling hospitality at the Rio (the hotel-casino hosting the World Series) or selling product placement with on our felt, is done with a sharp eye on the regulatory environment."

The televised tournament's first day was even delayed by several minutes as organizers announced that anyone sporting a "dot-com" poker logo would not be allowed to play. About half that day's field of more than 2,000 players flipped shirts inside-out, and workers circulated with rolls of black tape, covering any "dot-com" symbols they could find.

"Tape or not, I still look good," said David Daniel, a 31-year-old player from Bristol, Tenn., who qualified by winning $10,000 in a $160 "double-shootout" tournament online and was wearing a "PokerStars---" hockey jersey.

The House bill that would ban Internet gambling - except for horse race betting and state lotteries - is an attempt to close a perceived loophole in the 1961 Wire Act, one of a series of laws meant to crack down on racketeering.

Similar legislation failed in the House in 2000, but many blame that on the efforts of disgraced lobbyist Jack Abramoff, who is accused of spending lavishly to get the bill killed on behalf of an online lottery company.

The Wire Act explicitly forbids businesses from using a wire communication facility to assist in placing bets on "any sporting event or contest." But the wire law doesn't cover other types of casino betting, a federal appeals court in New Orleans has ruled, leaving some doubt whether prosecutors can shut down Internet poker and other casino games.

Of course, with or without a new law from Congress, the Justice Department interprets all online gambling to be illegal. Other countries allow it, so online companies have set up operations outside the U.S. but with easy access to U.S. players and their computers.

"Online poker is online gambling. And online gambling, we would say, is illegal," Justice Department spokeswoman Jaclyn Lesch said.

Poker advocates suggest the department's enforcement practices don't back up that assessment. Indictments dating to 1998 have focused on operators of online sports books, not sites that offer only poker.

Not only are there hurdles in arresting the operators of such sites in Costa Rica, Aruba, the Isle of Man and Gibraltar, but many argue poker tournaments online technically are not gambling.

"You get a prize for a competition," said Howard Krent, dean of the Chicago-Kent College of Law at the Illinois Institute of Technology.

And prosecuting a business for promoting a dot-net site which does not have direct Web links to its dot-com cousin makes for difficult legal work in court, he said. "That's a pretty good ruse, as they say," he said. "This is an area with lots of line-drawing that's uncomfortable."

People who make a living playing online poker have joined a group called the Poker Players Alliance to lobby Congress to stop the Internet gambling bill from passing the Senate.

Since the House passed the bill July 11, alliance membership more than doubled to 75,000. Alliance president Michael Bolcerek warned the bill would "drive the business of poker underground."

For now, it remains well in the open.

Jon Friedberg, a 31-year-old business owner who lives in Las Vegas, makes $150,000 a year playing poker mostly on Winning several online tournaments earned him a seat at several events at the World Series, one of which he won for $526,185.

The specter of the House bill going forward is not putting him off his game, nor did it seem to bother the thousands of players and fans roaming the Rio, which was full of displays touting sites from to

"I'm really not worried at all," Friedberg said. "Part of being a poker player involves just fearing nothing in life. It's probably not the best approach in life in certain things, but it works well in poker."

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