US government shuts down online poker; the case for legality
Apr 16, 2011

US government shuts down online poker; the case for legality

The US government has just launched an assault that has temporarily shut down the largest online poker operators in the US. This historic decision implements in a meaningful way for the first time the 2006 UIGEA law that effectively outlawed running a poker site and provides an existential crisis for online poker in the US with potential spillover effects into many other countries.


At peak times, a half million people are playing poker at once on the US's big three sites of PokerStars, FullTilt Poker and Absolute Poker/Ultimate Bet - all of which have temporarily suspended real money play for US players. The prevalence of people desiring and wanting to play online poker is simply enormous. Given this fact, the burden of proof to demonstrate why the government should be able to take this away this freedom, to demonstrate why this is a bad thing, lies entirely with those advocating for the illegality of online poker. When there is such widespread demand, the case for restricting freedom must come with compelling reasons.

Unfortunately, the illegality of online poker never got a chance to have such a burden of proof explained. The Unlawful Internet Gambling and Enforcement Act was an eleventh hour act snuck into a port security bill by a few republicans literally the day before the 2006 midterms resulted in congress dissolving and eventually the Democrats taking over. In the post 911 era, no politician could afford to vote against port security during elections and there was no time to maneuver the online poker inclusion out of the package before congress was dissolved. Today, despite some movements from Harry Reid and Barney Frank in the senate and a Democratic president who is known to play poker, discussion about legalizing poker remains firmly at the fringes. It is a difficult topic to touch politically because it is largely a neutral issue or a big loser for different demographics.

Of course, the act of closing down and charging these sites is entirely appropriate. They are undoubtably breaking the law (even if I disagree with it) and, perhaps more importantly, the way they are going about it is - if the allegations are true - full of all sorts of nefarious and fraudulent banking tricks. They should be charged and stopped for that. However, there needs to be a larger conversation about the fact that the laws combined with the enormous demand for online poker result in a large pressure to circumvent the laws as these companies did. That broken system is what needs to change.

Consider the comparison between alcohol and poker. For both, one spends money for a particular experience that is pleasurable. A night at the clubs or a night playing poker might cost the same order of magnitude for a causal player. For most people, it is just entertainment in both cases with few extra problems. For a small minority, these vices become a problem as people become alcoholics or gambling addicts. Just as prohibition failed with alcohol and we now consider it a violation of the freedom to restrict it; just as prohibition of marijuana is clearly failed and many correctly view it too as a violation of freedom to restrict it; so too must we realize that prohibition of online poker fundamentally a violation of freedom. I acknowledge there is some potential harm from poker just as there is with brick and mortar casinos, lottery tickets, alcohol, cigarettes and marijuana, but this cannot be sufficient for an outright ban; the hypocrisy is striking.

Legality is not enough. Legality reverses the fundamentally amoral position of restricting a high demand for something with relatively small consequences. We can go beyond thus and improve the situation. Poker companies should be taxed, for instance, just like any other form of luxury; that billions of dollars in profit escape the US tax free is unacceptable but banning it is the first and worst response.  I would even accept an argument that as a luxury vice with no productive output, poker is in the category with cigarettes and alcohol that should be taxed more than other products to account for negative external costs. There should be legal protections of players to protect against fraud and abuses such as the infamous Ultimate Bet superuser scandal. There is currently no avenue for redress.

Beyond legality, taxation and protections, there should also be regulation of poker to protect and help those with genuine gambling addictions. The policy of offering self exclusions periods is common but should be required. Easy access on the sites to a range of gambling addiction help services should be requires. Perhaps warning advertising along the lines of cigarettes packaging should be required to increase awareness of gambling addiction problems. One can speculate on possible restrictions for example coming up with a risk profile when signing up that establishes deposit restrictions that can only be changed with time. These, and other, regulations must be coupled with services provided independently to combat addiction through education, awareness and retroactive assistance. These programs could possibly be supported by some of the tax revenue from poker sites.

The result of the 2006 UIGEA law put a widespread entertainment industry with many millions of players into a state of undetermined illegality. The recent sting operation has the potential to completely destroy the ability to play online poker in the United States and leaves people with undetermined status about the funds left in these accounts. The effects will go far beyond just online poker. The most successful poker television shows are dependent on extensive advertising from the big three poker sites. The WSOP - with its over 12 million dollar main event win picture above - is made possible because of the popularity and entrance of players from online poker. As we have seen, there has not been presented and indeed cannot be a reasonable case against the legality of online poker and as such the questionable implementation of making online poker illegal must not be allowed to stand.

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