Some info on this guy to make the story clearer. He started an 'e-wallet' company specifically to cater to US poker players, who needed to use this style of online processor to get around having their transactions marked as being for gambling.
Intabill became popular quickly because of its low transaction fees. Tzvetkoff instantly became one of Australia's richest young men - purchasing a $25M home etc. etc. You may wonder how he became so rich so quickly from a company in a competitive industry - and it was because he was skimming money from the business and was not honoring withdrawls.
Full Tilt and Pokerstars finally stopped accepting Intabill and Tzvetkoff made off with the remainder of the deposits - which the poker companies had to cover players for.
When he visited the USA last year for a gambling conference in Vegas, Full Tilt and Pokerstars, ironically, tipped off his presence in the country to the FBI, who arrested him. He was surprisingly granted bail, and we now know why - he turned states witness in the case against the poker companies.
To the DOJ the online poker companies were bigger fish to catch rather than the guy who stole hundreds of millions of dollars.
And now:
> [accepting payments for poker] which has been illegal in the US since 2006
UIGEA was a rider on the Safe Ports Act of 2006[1], which means that it was never debated directly and was never voted on or approved directly. It did no come into effect until years after passing (the DOJ keeps quoting that the sites have been breaking the law since 2006, somehow not knowing that the law wasn't enforced until much later). The poker players association along with representatives who were working to overturn UIGEA, such as Barney Frank, worked tirelessly to continuously postpone enforcement of the act.
Frank was close to getting a bill passed last December that would have excluded online poker from UIGEA, Washington DC made it legal last week and a number of other states such as Nevada were about to do the same.
With it looking like online poker was about to be exclusively excluded from UIGEA, the DOJ knew that they had to act on their case now.
Most players have known for some time that there was a Grand Jury investigating the poker sites. It is known that a former member of Team Full Tilt, Clonie Gowen, testified against the company to the grand jury as part of a legal dispute she had with Full Tilt over compensation.
The poker sites relied on legal opinion which advised them that online poker is not considered 'online gambling'. Full Tilt went to the extreme of bringing in five separate firms to each give an opinion - and each found in favor of online poker not being online gambling. UIGEA makes specific mention of online gambling, but not poker specifically. The US Supreme Court and various higher courts have previously found that poker is a game of skill, as part of legal efforts by various states to legalize card rooms (see case law from the American Bar association[2])
The banks wouldn't take that risk though. They effectively shut out online poker transactions by not approving the poker sites as merchants. This didn't happen overnight - for eg. Citibank were one of the last to shut out online poker as late as a year ago.
Because there was effective collusion between the banks to lock online poker out of the market under vague threats from the DOJ - the poker sites had to work around it themselves by improvising and masking the transaction purposes by setting up their own banks and merchant accounts.
You have to ask yourself if this is fair - there are millions of online poker players in the USA, tens of thousands of whom play poker as a full time profession and make a living from it. The banks, with no direct law barring them from accepting the transactions, were persuaded by various lobby groups and the DOJ to lock the poker sites out of the market.
Some believe that what the banks did may have broken various WTO and free trade laws, not to mention the Sherman Act.
It is now apparent that in an effort to get around being blocked by the banks some of the sites and operators may have overstepped other laws such as money laundering, with new PATRIOT Act provisions - where you break the law even if you are the head of the company that is masking transactions in some way even if you were not directly involved or didn't know about it.
Online poker was weeks away from being legitimized in the USA. Pokerstars had weeks ago signed a new partnership agreement with the Wynn casino group. Full Tilt had struck similar partnerships. The Democrats were working to explicitly allow online poker transactions so that UIGEA would not have to be tested with online poker. Various states were working to legalize transactions for online poker. There is a strong chance that within a year or so online poker will be a legitimate, no-question-marks, fully transparent, billion-dollar online business.
When the DOJ dropped their case on Friday, Wynn announced that they had cancelled their partnership with Pokerstars and other companies/groups did the same with Full Tile and UB. All the effort from the players lobby, the companies themselves, the reps, etc. was blown up. Forget innocent until proven guilty, we are months away from any trial, only 3 of the 12 defendants are even in custody, yet domains have been seized and businesses destroyed by an 11-point case filing, of which only 2 or 3 points may ever get to trial
If the site owners are found guilty, they could be facing decades in jail. Penalties for money laundering that were increased as a way to lock up leaders of drug cartels and terrorist groups are being applied to people who built successful legitimate companies and had to work around all US banks being sacred of the vagueness of a law that was never directly enacted.
So even if online poker is found not to apply as 'online gambling' it will be too late for these entrepreneurs, who had to find their own way to work in the vacuum of nobody really knowing what was legal or not. The DOJ had a hell of a way of telling them that they didn't think it was.
A lot of people here on HN are entrepreneurs, so I hope you would support online poker entrepreneurs by lobbying your local reps, etc. Imagine if the industry you were in was being manipulated and artificially barred from trading by a small minority of those in positions of power. An industry which in this case is one of the largest and most popular passtimes in the USA. to me this is all sheer madness
This is why I keep coming to HN - you've taken a considerable amount of time to further explain some of the details of an article that already explains a lot, with references, and in doing so have added massive value to my reading and understanding the news of the day.
Unfortunately, I can't see how many points you've received to recognise that contribution, so I'm writing this in case you haven't been fully recongised by other users voting with their mouse. Thanks nikcub.
> It did no come into effect until years after passing (the DOJ keeps quoting that the sites have been breaking the law since 2006, somehow not knowing that the law wasn't enforced until much later).
The effective date is a statutory thing. If "wasn't enforced" is a reference to DOJ policy/behavior, that's irrelevant.
> The poker players association along with representatives who were working to overturn UIGEA, such as Barney Frank, worked tirelessly to continuously postpone enforcement of the act.
In other words, they lobbied but the law as in force.
I agree that it looks like the folks involved are being mistreated. Sadly that's just SOP.
> You have to ask yourself if this is fair
You do know that fair is irrelevant.
> tens of thousands of whom play poker as a full time profession and make a living from it.
Is anyone else not very outraged that these poker sites have been shut down (or at least domains seized)? They were indeed knowingly selling their services to US customers despite that being illegal.
They could have used GEO IP blocking to stop people from countries were online gambling is illegal from using the site, but they didn't -- instead they chose to create an elaborate scheme with shell companies used to hide transactions from prying eyes (which all came undo when Tzvetkoff talked).
Whether or not you agree with online gambling being illegal in the US is not the point. I don't think there should be speed limits, but there are, and so I have to deal with the consequences of ignoring those laws.
Very simply, because the domain blockade also affects people in countries where it is legal. They don't care whether it is illegal in the US and shouldn't have to care.
Many people regard '.com', '.net', etc as country-neutral international domains. This will obviously change now.
I agree that many people regard .com, .net, etc, to be country neutral -- and I personally would prefer it if they were -- but that isn't really the way they've been used for the past couple of decades. I think most people would agree that .COM domains at the very least have been associated with US organizations or foreign businesses who want to do business in the US.
Though granted, it's not black and white obviously, there are German language only sites (and many others) that have .COM domains and are only targeting Germans speaking peoples.
It's a messy situation... made messier by the fact that the US has significant control over the Internetz.
If a law is so silly that it makes criminals out of millions of regular people, you expect it to be changed, not enforced. Several European countries where online poker became popular are legalizing it.
Banning online gambling doesn't really make sense if you still permit gambling at a state level, so I think this law is probably going to be toast in the long run.
Banning online gambling is essentially protectionism of the state-level gambling industries. A number of countries and WTO denounced the US a number of years ago for this policy, but the US just ignores WTO when it's convenient and uses it as a hammer against other countries when it is convenient.
The legitimate purpose of law is to protect rights, or at least to benefit society. Eg, speed limits should be in place for safety. What makes people angry is when the law is used for plunder. When speed limit laws are used to raise revenue, ie, when tickets are issued not because people driving unsafely, but simply to extract money from them, people get upset. Governments who do this are acting more like mafia than protectors.
In this case the banning of online gambling has actually resulted in the Government receiving less revenue from tax because the online gambling sites have moved offshore. So I'm not sure in this case that the law has been used for plunder.
I think there was probably some significant lobbying efforts from casinos in the US that contributed to the 2006 federal ban. So someone has been a plundering for money, I just don't think it was the Gov in this case.
The legality in the US is uncertain. If it were not online, it wouldn't be gambling, so proving that online poker is online gambling in court is not going to be easy.
Geo IP wouldn't have made a difference. You can buy an anonymous VPN account in Europe very easily, defeating the geographical lock. As with anything on the Internet (and in real life), people do what they want to, not what the law prescribes.
Using Geo IP wouldn't have been foolproof as you've pointed out, but it would have at the very least shown an intent to comply with the laws in the US.
The poker sites did not use Geo IP because they did not want to lose the revenue stream from the US, not because they thought it was technically insufficient... and thus the problem (or part of it).
It's not that the poker sites failed to block countries where online gambling is illegal, it is that they allegedly committed bank fraud (and money laundering) by masking payments from gamblers in the US as non-gambling related items so as to avoid the attention of the banks and authorities.
So for example, instead of a credit card statement showing a $100 payment to PokerStarts.net, it showed a $100 purchase of a teddy bear from a shell company.
They were not passively enabling US based people to break local laws, they were actively assisting.
Fair enough, and they probably deserve to have their US assets frozen. But a .com shouldn't automatically be a US asset simply because the .com root happens to fall in US jurisdiction.
Intabill became popular quickly because of its low transaction fees. Tzvetkoff instantly became one of Australia's richest young men - purchasing a $25M home etc. etc. You may wonder how he became so rich so quickly from a company in a competitive industry - and it was because he was skimming money from the business and was not honoring withdrawls.
Full Tilt and Pokerstars finally stopped accepting Intabill and Tzvetkoff made off with the remainder of the deposits - which the poker companies had to cover players for.
When he visited the USA last year for a gambling conference in Vegas, Full Tilt and Pokerstars, ironically, tipped off his presence in the country to the FBI, who arrested him. He was surprisingly granted bail, and we now know why - he turned states witness in the case against the poker companies.
To the DOJ the online poker companies were bigger fish to catch rather than the guy who stole hundreds of millions of dollars.
And now:
> [accepting payments for poker] which has been illegal in the US since 2006
UIGEA was a rider on the Safe Ports Act of 2006[1], which means that it was never debated directly and was never voted on or approved directly. It did no come into effect until years after passing (the DOJ keeps quoting that the sites have been breaking the law since 2006, somehow not knowing that the law wasn't enforced until much later). The poker players association along with representatives who were working to overturn UIGEA, such as Barney Frank, worked tirelessly to continuously postpone enforcement of the act.
Frank was close to getting a bill passed last December that would have excluded online poker from UIGEA, Washington DC made it legal last week and a number of other states such as Nevada were about to do the same.
With it looking like online poker was about to be exclusively excluded from UIGEA, the DOJ knew that they had to act on their case now.
Most players have known for some time that there was a Grand Jury investigating the poker sites. It is known that a former member of Team Full Tilt, Clonie Gowen, testified against the company to the grand jury as part of a legal dispute she had with Full Tilt over compensation.
The poker sites relied on legal opinion which advised them that online poker is not considered 'online gambling'. Full Tilt went to the extreme of bringing in five separate firms to each give an opinion - and each found in favor of online poker not being online gambling. UIGEA makes specific mention of online gambling, but not poker specifically. The US Supreme Court and various higher courts have previously found that poker is a game of skill, as part of legal efforts by various states to legalize card rooms (see case law from the American Bar association[2])
The banks wouldn't take that risk though. They effectively shut out online poker transactions by not approving the poker sites as merchants. This didn't happen overnight - for eg. Citibank were one of the last to shut out online poker as late as a year ago.
Because there was effective collusion between the banks to lock online poker out of the market under vague threats from the DOJ - the poker sites had to work around it themselves by improvising and masking the transaction purposes by setting up their own banks and merchant accounts.
You have to ask yourself if this is fair - there are millions of online poker players in the USA, tens of thousands of whom play poker as a full time profession and make a living from it. The banks, with no direct law barring them from accepting the transactions, were persuaded by various lobby groups and the DOJ to lock the poker sites out of the market.
Some believe that what the banks did may have broken various WTO and free trade laws, not to mention the Sherman Act.
It is now apparent that in an effort to get around being blocked by the banks some of the sites and operators may have overstepped other laws such as money laundering, with new PATRIOT Act provisions - where you break the law even if you are the head of the company that is masking transactions in some way even if you were not directly involved or didn't know about it.
Online poker was weeks away from being legitimized in the USA. Pokerstars had weeks ago signed a new partnership agreement with the Wynn casino group. Full Tilt had struck similar partnerships. The Democrats were working to explicitly allow online poker transactions so that UIGEA would not have to be tested with online poker. Various states were working to legalize transactions for online poker. There is a strong chance that within a year or so online poker will be a legitimate, no-question-marks, fully transparent, billion-dollar online business.
When the DOJ dropped their case on Friday, Wynn announced that they had cancelled their partnership with Pokerstars and other companies/groups did the same with Full Tile and UB. All the effort from the players lobby, the companies themselves, the reps, etc. was blown up. Forget innocent until proven guilty, we are months away from any trial, only 3 of the 12 defendants are even in custody, yet domains have been seized and businesses destroyed by an 11-point case filing, of which only 2 or 3 points may ever get to trial
If the site owners are found guilty, they could be facing decades in jail. Penalties for money laundering that were increased as a way to lock up leaders of drug cartels and terrorist groups are being applied to people who built successful legitimate companies and had to work around all US banks being sacred of the vagueness of a law that was never directly enacted.
So even if online poker is found not to apply as 'online gambling' it will be too late for these entrepreneurs, who had to find their own way to work in the vacuum of nobody really knowing what was legal or not. The DOJ had a hell of a way of telling them that they didn't think it was.
A lot of people here on HN are entrepreneurs, so I hope you would support online poker entrepreneurs by lobbying your local reps, etc. Imagine if the industry you were in was being manipulated and artificially barred from trading by a small minority of those in positions of power. An industry which in this case is one of the largest and most popular passtimes in the USA. to me this is all sheer madness
[1] http://en.wikipedia.org/wiki/SAFE_Port_Act
[2] http://apps.americanbar.org/buslaw/committees/CL430000pub/ne...