- The Washington Times
Wednesday, April 20, 2011

The cards have gone cold on the nation’s booming poker industry since the Justice Department reshuffled the deck with a stunning crackdown on online poker gambling sites.

In the days since federal prosecutors shut down the three largest poker websites, the $6 billion industry has taken a hit that stretches from the homes of small-time recreational players to the biggest venues and priciest tables in the glittering world of high-stakes professional poker.

The two major cable stations carrying poker shows, ESPN and Fox Sports, have announced that they will remove poker-related advertising or programming after the Justice Department indicted gambling websites that serve as major sponsors of their televised tournaments.

“There is no direct sponsorship connection between the problematic websites and FSNs World Poker Tour series, but PokerStars had purchased some advertising time, which has been pulled as a result of the indictments,” said Lou D’Ermilio, a spokesman for Fox Sports Networks.

ESPN pre-empted this week’s “North American Poker Tour Presented by PokerStars.net” in the wake of the indictment against PokerStars, one of the three online companies facing gambling-related charges.

“We are aware of the indictment only through what has been announced publicly,” the ESPN sports cable channel said in a statement Tuesday. “For the immediate future, we are making efforts to remove related advertising and programming pending further review.”

The aftershocks of the surprise move continued Wednesday, as the Justice Department announced that it would release funds for two of the biggest online sites, PokerStars and Full Tilt Poker, which had been named in a civil money laundering and forfeiture complaint last week.

The government will restore the companies’ domain names so they can return money to U.S. players, and the deal permits them to continue to let players outside the United States gamble online. Government officials said they were prepared to enter the same agreement with a third company, Absolute Poker, if the company chooses to do so.

Full Tilt said in a statement that the agreement was a good first step, but that it won’t be able to give players refunds until the government gives up control of those funds.

Outraged online poker players had flooded the Internet with complaints after finding their favorite websites inoperative and their online accounts frozen. An estimated 10 million Americans play online poker at least once a year, according to figures from the American Gaming Association.

More than 75 company bank accounts in 14 countries have been frozen, and authorities are seeking some $3 billion in fines and restitution.

“They’re outraged because this came out of nowhere for them,” said John Pappas, president of the Poker Players Alliance. “The victims here are not the sites that are being targeted but the millions of people who play online.”

Mr. Pappas said that, despite the partial reopening of the two big sites, poker enthusiasts are “still in pain.”

“Even with todays announcement, millions of Americans are being denied their hobby, avocation and in many cases their livelihood because they remain unable to play poker on the Internet,” he said.

How the legal action will affect the wider economic and cultural boom in poker remains in doubt.

ESPN said it still plans to carry its “World Series of Poker” in July, while Fox Sports is going forward with plans for the “World Poker Tour,” only without ads from PokerStars.net. PokerStars and Full Tilt Poker spent $26.8 million in 2010 on television advertising, according to Bloomberg News.

International online poker gambling dropped precipitously over the weekend. “This week, and presumably from here on out, the guarantees were reduced by up to 75 percent, showing just how affected the sites will be by the loss of American players,” said ESPN poker blogger Andrew Feldman.

Before Friday, an average of more than 77,000 players were playing poker for real money in cash games online at any given moment over four days last week. That number dropped to just more than 60,000 between Saturday and Tuesday, according to the Associated Press.

Bodog.com, CarbonPoker.com and other sites have remained open to American players and reported spikes in traffic in the past week, but their increases are meager compared with the number of players who have stayed offline.

Prosecutors in New York issued indictments April 15 charging the founders of PokerStars, Full Tilt Poker and Absolute Poker, which operate offshore but represent the leading online poker houses with U.S. customers, with bank fraud, money laundering and illegal gambling.

The indictments contend that the online websites violated a 2006 law by laundering gambling payments as online “purchases” of items such as golf balls and jewelry.

Professional poker players are likely to receive smaller paychecks as sponsorships dry up, but it’s small-time gamblers who are making the most noise. An estimated 65,000 players have appealed to U.S. prosecutors with thousands of testimonies and complaints on poker-themed websites and the Justice Department Facebook page.

Many described how they supplement their incomes or college scholarships with poker earnings. Others have created side businesses with poker tutoring and publications, and contend that the indictments are putting their livelihoods in danger.

“What the government has done is worse than actually getting laid off. On top of taking away potential income that I have devoted so much time and effort to make, they have taken away what I thought I already earned,” said one blogger on twoplustwo.com. “I was fired plus ‘my boss’ decided to take back what I already made.”

Bryan Spadaro, 28, who began playing online poker as a student at Tulane University, said he has a total of $5,000 frozen in accounts.

“Pretty much everything that wasn’t paid for by my scholarship was paid for by poker,” said Mr. Spadaro, who now works for the Poker Players Alliance. “As a secondary income and hobby, it’s frustrating because every year I’ve put $5,000 to $10,000 in my pocket, which in my world is not chump change.”

Although posting gripes on the Justice Department’s Facebook page may let off steam, advocates say, the only real answer is congressional action. Pro-poker groups are calling on Congress to license and regulate the online poker industry.

Ironically, the District of Columbia budget includes a provision that allows residents to gamble online. States have moved forward with proposals that would ease restrictions on online gaming.

“Certainly the political trend has been toward loosening restrictions,” said Mr. Pappas. “Washington, D.C., is the first [jurisdiction] to allow for Internet poker. I think a lot of people felt that progress was being made, so for a lot of people this came out of left field.”

This article is based in part on wire service reports.

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