Poker and the Law

On March 25, 2010, Governor Steve Beshear of Kentucky launched his latest attack against online gaming companies. He previously tried to seize Internet domain names using ancient anti-slot-machine laws. Now he is suing Pocket Kings, operator of Full Tilt Poker, for all the money lost by Kentucky online poker players, times three.

This article is limited to the one or more Federal tax issues addressed in the opinion. Additional issues may exist that could affect the Federal tax treatment of the transaction or matter that is the subject of this article and the article does not consider or provide a conclusion with respect to any additional issues. With respect to any significant Federal tax issues outside the limited scope of this article, the article was not written, and cannot be used by the taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer.

This article is limited to the one or more Federal tax issues addressed in the opinion. Additional issues may exist that could affect the Federal tax treatment of the transaction or matter that is the subject of this article and the article does not consider or provide a conclusion with respect to any additional issues. With respect to any significant Federal tax issues outside the limited scope of this article, the article was not written, and cannot be used by the taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer.

Whether you play poker at a brick and mortar casino or online in the privacy of your own home, you have some lawmaker, some lobbying group, or some trade association, to thank for that ability. And if you want to continue to be able to play poker, you should be aware of what threats there are to that right and who is fighting to protect it for you.

It started with the usual rumblings. Several players wrote on poker forums that their withdrawal payments from Full Tilt Poker and PokerStars were invalid. Checks were bouncing and funds transfers were not completing. But the number of complaints grew at an unusually rapid pace until it became a full-blown concern. Then the truth came out: More than $30 million in funds were seized from major U.S. banks, all of which pertained to online poker companies, and it was ordered by the Southern District of New York.

The American Bankers' Association outlined their issues with UIGEA on their website. Despite repeated requests from members of Congress, Internet gaming sites, and the financial industry itself-the group saddled with the unfunded mandate to manage this situation-neither UIGEA nor the rules written to implement it contain a definition of unlawful Internet gambling.

Utah legislators are eager for the repeal of the UIGEA, and it's not for the reasons you might think. They want to see online casinos legalized and regulated too-though probably not for the same reasons you do. Utah, a state that does not want online gaming made available to their residents, is wary that eventual federal regulation of online gambling would take away their right to control it within their borders.

Here's a quote that should scare anyone involved with any form of legal gaming.

The federal Department of Justice ("DOJ") got Google, Microsoft, and Yahoo to agree to pay $31.5 million in fines to settle claims that they had promoted illegal gambling by running ads on the Internet. The DOJ announced that the fines were "for corporate conduct the government found in violation of the Federal Wire Wager Act, federal wagering excise tax laws, and various states' statutes and municipal laws prohibiting gambling."

The Poker Players Alliance has been collecting and analyzing information about congressional support for poker and has produced a Congressional Rating Guide that you can access online, at http://www.congressionalpoker.org/. Every member of the US House and Senate is graded from "A+" to "F-" based on their position on poker. A question mark is given when a position could not be determined for a Congressional member.

Legal gambling can be one of most profitable businesses around.

Take for example Penn National Gaming. The company owns four Argosy and four Hollywood casinos; manages the 200,000 square foot Rama Casino in Canada; owns three other casinos, including the Empress Joliet; operates telephone and internet wagering on races, and owns nearly a dozen OTB facilities and racetracks, some with slot machines, including Penn National Race Course. All this legal gaming brings in revenue of about $1.5 billion a year.