Department of Justice Seizes Domains of Major Online Poker Sites
Yesterday afternoon, shockwaves rippled throughout the online poker community following the U.S. Department of Justice’s seizure of the internet domains of three online gambling giants, Full Tilt Poker, PokerStars, and Absolute Poker. Several of these sites’ principals as well as individuals processing financial transactions to and from these sites were indicted for bank fraud, illegal gambling, and money laundering. For an excerpted version of the indictment, check out this press release issued by the DOJ yesterday.
The Unlawful Internet Gambling Enforcement Act (UIGEA) makes it a federal crime for gambling businesses to “knowingly accept” various forms of payment “in connection with the participation of another person in unlawful Internet gambling.” Essentially, the indictment charges the defendants with “tricking” U.S. banks and other financial institutions into processing gambling transactions for the offshore online casinos, by disguising the nature of the transactions. If the allegations are true, certainly laws were broken.
Yes, this is plainly horrible news for the online poker community in the United States. At least in the short-term. Simply put, U.S. players are now unable to play online poker. I feel for those who make a living from online poker or its associated secondary markets of businesses and media coverage.
For the long-term, however, I view this DOJ crackdown as the major turning point towards facilitating the federal legislation of online gambling in the United States. It’s more than evident that the principals of the major offshore gaming sites were up to no good. There’s no way the DOJ would have allowed these companies run by dirty hands to take their operations to U.S. soil. So, here we are, wiping the slate clean to start anew. Something will happen. The online gaming industry in the U.S. is too large to ignore. It may just take awhile.
Back to Full Tilt, PokerStars, and Absolute Poker. I’ve heard many players have been unable to withdraw funds post-DOJ website seizure. A question becomes, are those funds currently sitting in the online gambling accounts taxable income? Maybe.
Why yes: Prior to yesterday, you could have withdrawn the funds like usual. Applying the tax law doctrine of “constructive receipt,” because those funds were easily accessible, it was as if they were sitting in your bank account.
Why no: Because now those funds aren’t accessible.
One can only speculate whether the funds will be returned, but past experience indicates that they ultimately will. If that’s the case, then the answer is simply yes. Given the potentially billions of total dollars deposited by consumers with these casinos, I certainly hope I’m right.
News surrounding the indictment is still flowing rapidly, so I’ll most certainly be keeping you apprised of major developments. For faster receipt of news, follow me on Twitter.