Indictments could be the death of online poker industry

LAS VEGAS — America's multibillion-dollar run at the online poker tables has been interrupted by what could be a killer hand: federal prosecutions of the three biggest websites.

The government has blocked U.S. gamblers from logging on to the offshore sites, which are accused of tricking and bribing banks into processing billions of dollars in illegal profits. Now gamblers who dreamed of enormous prizes in Las Vegas, or even used online poker to make a living, can't access online bankrolls that in some cases reach six figures.

Some predict the American online poker industry, estimated to be worth up to $6 billion, may fold under the weight of the investigations as it threatens amateur and professional players, televised tournaments and the marketing machine that helped Texas Hold 'em emerge from smoky casinos to become a dominant form of gambling on the Internet.

"It just cut the head off of everything," said Robert Fellner, a 27-year-old Las Vegas poker pro whose roughly $250,000 bankroll on PokerStars was frozen after the indictments. "It's scary."

Pay-to-play poker sites have been on shaky legal ground for years in the United States, but the government hadn't prevented gamblers from playing on the three biggest sites — PokerStars, Full Tilt Poker and Absolute Poker — before last week's indictments of 11 executives and bank officials. More than 75 company bank accounts in 14 countries have been frozen, and authorities are seeking $3 billion in fines and restitution.

Poker players, meanwhile, now see an FBI notice where the websites once were. Some had treated their poker accounts like savings accounts, leaving significant portions of their net worth online and ready to wager anytime.

It appears that they will get that money back, though it's not clear when. The government said Wednesday it had reached agreements with PokerStars and Full Tilt Poker to restore the companies' domain names so they can return money to U.S. players.

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. U.S. Attorney Preet Bharara of the Southern District of New York said in a statement that "no individual player accounts were ever frozen or restrained."

Federal authorities consider the poker sites illegal and follow a 2006 law that made it a crime to process financial transactions related to illegal online gambling. But last week's indictments are the government's first attempt to hold poker site operators to that law. Players and companies have long argued that the 2006 law didn't properly define illegal gambling or outlaw online poker, which many consider a game that involves more skill than luck.

PokerStars and Full Tilt have stopped offering real-money play in the United States, while Absolute has not, according to PokerScout.com, a site that tracks traffic and real-money play on online poker sites. All three have free sites using ".net" domain names, and have switched to European domains.

Indictments could be the death of online poker industry 04/20/11 [Last modified: Wednesday, April 20, 2011 10:54pm]

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