US Poker Legality

US Poker Legality Section Articles

The world of online poker in the United States has been gripped these past few years by an ongoing legal battle. The passage of the UIGEA had a massive impact upon the worldwide poker industry, and the position of online gambling in the USA continues to be a major issue. Below is a timeline and short summary of all the major events that took place dating back to June 2006 to present (last updated July 2009.) If you would like more details on each event, you can read the section articles above.

To read all of FTR's news articles on law and legislation, please see our Gaming Law News Archives. These articles contain reported news since December 2007 and is updated on a weekly basis.

Washington State Bans Online Poker – June 2006

The first signs of trouble came in June 2006 when Washington state brought in legislation that made playing online poker a crime. The state government made gambling online a Class C felony; equivalent to torturing an animal or possessing child pornography. Although officials revealed that anyone prosecuted would likely face only a fine. In the three years since this law was passed no one has been arrested or fined for playing online poker. Read the full Washington Bans Online Poker article.

US Government Passes the UIGEA – October 2006

The Unlawful Internet Gaming Enforcement Act was surreptitiously attached to a must-pass Port Security bill in September 2006. This bill was totally unrelated to online gambling, but was used as an unethical method of sneaking the proposed legislation through Congress. It was signed into law by President Bush in October, and signalled a massive shift for the online poker industry. Although gambling online remained technically legal, it was now illegal for financial institutions to process payments to or from gambling companies. Read the full US Government Passes the UIGEA article.

PartyPoker Leaves the US Market – October 2006

Following the introduction of the UIGEA a number of companies decided to withdraw their services to US customers. The most high profile of these was PartyGaming, who at that point had a 41% market share. This move drastically cut their player base and saw their stock plummet around 70% overnight. Read the full PartyPoker Leaves the US Market article.

PokerStars and Full Tilt Poker Remain in the US Market - October 2006

Unlike PartyPoker, the two other big online poker rooms, PokerStars and Full Tilt Poker both release statements saying they plan keep doing business as usual and will not pull out of the US market. They argued that as their companies were not based on American soil they did not fall under American law. Poker Stars in particular has grown rapidly since the UIGEA was passed.This brings some relief to the players over the very stressful situation. Read the full PokerStars and Full Tilt Poker Remain in the US Market article.

NETELLER Funds Seized – January 2007

In January 2007 the US government took its first definite step against online poker. The owners of Neteller, a popular payment processor, were arrested and their funds seized. This left about $55 million worth of cash owed to players around the world in the hands of the government. The company reached a settlement later in the year and barred any US citizens form accessing its services.

Poker Player’s Alliance – March 2007

The Poker Player’s Alliance began in 2005 as a grassroots group designed to fight for the rights of individual poker players. By March 2007 they had around 100,000 members and were announcing the appointment of former New York Senator Alfonse D’Amato as chairman. D’Amato would go on to become an extremely important figure in the fight for legal poker in the US. His charismatic personality and unflinching dedication helped the PPA’s membership rocket to over 1 million in 2008.

Barney Frank Introduces Pro-Gambling Bill – April 2007

Arguably poker’s best hope for legalization comes in the form of House Financial Services Committee chief Barney Frank. He made his allegiances clear in April 2007 when he introduced the first of many bills designed to combat the UIGEA. The Internet Gambling Regulation and Enforcement Act of 2007 proposed an amendment to the UIGEA which would provide for the licensing of Internet gambling facilities by the Director of the Financial Crimes Enforcement Network. However, the bill failed to make it out of the Financial Services Committee.

WTO Rules in Favor of Antigua – January 2008

In January 2008 the World Trade Organization arbitrated in a dispute between the United States and the tiny island nation of Antigua. Thanks to its lenient taxation system the country is home to a number of online poker sites. They argued that the UIGEA had unfairly denied its companies and its government billions of dollars in revenue. The WTO heard the case and decided that the US should pay Antigua $21,000,000. The US government is yet to award any compensation.

Absolute Poker and Ultimate Bet Scandals – January 2008

Also in January 2008, online forums across the Internet were buzzing with the news that cheating scandals had been revealed at Absolute Poker. It transpired that certain players had been using software that allowed them to see their opponents hole cards. A few months later a similar controversy was discovered at Absolute’s sister company Ultimate Bet. Neither site could be held accountable by law and were only regulated by the Kanhawake Gaming Commission - whose chiefs were entangled with the ownership of the two sites. This episode brought home the desperate need for official regulations to protect the player.

Frank Tries Again with Ron Paul – April 2008

For his second attempt at combating the UIGEA Barney Frank teamed up with fellow Senator Ron Paul in April 2008. The pair concocted the Payment System’s Protection Act, which was designed to block the UIGEA from being implemented. It reflected the concerns of many in the financial services industry that the new rules would place an unmanageable burden upon the banks. It fared a little better than his previous attempt, but could only draw the vote 32 to 32 in the House Financial Services Committee.

Frank Redrafts Bill – September 2008

Later in the year Frank put together a new Payment System’s Protection Act. This time he succeeded in pushing it thought the HFSC with little trouble. The next step was Congress, but the bill was not given the opportunity to be debated before the Congressional Session ended, and so was withdrawn.

Some Online Poker Rooms Ban 13 States - September 2008

While some rooms decided to pull out and others stay, there were some poker rooms that took it one step further. Well after the initial ban, Microgaming (aka Prima) network started to enforce the state laws on its players. Up until this point, Microgaming was still accepting US players from all locations. The 13 states that were banned were Illinois, Indiana, Kentucky, Louisiana, Michigan, Nevada, New Jersey, New York, Oregon, South Dakota, Washington, Wisconsin, and Utah. Read the full Some Online Poker Rooms Ban 13 States article.

Kentucky Attempts to Seize Gambling Domain Names – October 2008

In October 2008 Kentucky Governor Steve Beshear began a crusade against online gambling websites. He claimed that they were operating illegally by offering their services to Kentucky residents and so attempted to take control of their domain names. The list of his targets included the likes of PokerStars, Full Tilt, and Bodog. The Governor’s legal challenge was initially upheld.

iMEGA Takes the UIGEA to Court – November 2008

In the same month, a legal battle began on the other side of the divide. The Interactive Media Entertainment & Gaming Association took the US government to court over the UIGEA. The legal contest, which still rages on, began with a defeat for iMEGA. However, they took their case to the appeal courts, seeking to prove that the UIGEA is so vague it should be deemed unconstitutional.

UIGEA Midnight Rules – November 2008

After the election of President Obama the Bush administration used its last few days in power to force through rules that allowed for the proper implementation of the UIGEA. These clarifications attempted to clear up some of the vague notions and set a deadline of December 2009 for the banks to comply. Critics argued that it had failed to address the UIGEA’s main flaw, that it offers no definition for “illegal online gambling.”

PartyGaming Founder Arrested – December 2008

Anurag Dikshit, the major shareholder in PartyGaming, was arrested in the United States and forced to pay a massive fine for his involvement in providing online gambling services. In December 2008 he paid around $300 million to the US government despite the fact that his company had withdrawn from America immediately after the UIGEA was passed.

Kentucky Defeated in Appeal Court – January 2009

A combined effort from iMEGA, the Interactive Gaming Council, and the PPA saw Kentucky defeated in the Franklin Circuit City Court. The January 2009 hearing concluded that as domain names did not constitute a “gambling device” they could not legally be seized.

PartyGaming Agree Settlement – April 2009

In April 2009 PartyGaming paid $105 million to the US government in order to clear themselves of any criminal prosecution. Many observers saw this as preparation for re-entry into the US market.

Barney Frank Returns with new Bill – May 2009

After helping America to cope with the deepening economic collapse, Barney Frank once again turned his attention to the UIGEA. His latest bill was unveiled in May 2009 and seeks to carve an exemption for companies who are properly licensed and regulated. The act specifies what a company would need in order to be allowed to legally operate within the United States. The bill is currently scheduled for a hearing in September 2009.

EU Threatens WTO Action – June 2009

In June 2009 the European Union completed a report assessing whether or not they had a strong case against the UIGEA. The report concluded that the EU does have grounds for a WTO hearing. Specifically, the fact that some US-based online gambling sites have not been banned, while all EU based companies have been. Both sides are currently negotiating the issue in the hope that a WTO hearing can be avoided.

Department of Justice Seizes $30 million – June 2009

The Department of Justice made the decision to freeze funds belonging to sites such as Full Tilt and Poker Stars in June 2009. The government claimed that the money in question was being used for illegal online gambling and money laundering. Thousands of players across the country were unable to withdraw the money they had won or deposited on these sites.

Payment Processor Files Motion to Return Funds - July 2009

One of the payment processors that was affected by the seizure of over $30 million in payouts to online poker players by the Department of Justices files a motion in court to request the immediate return the funds. They claim that the funds were seized unlawfully and also state that if funds are not returned then the company may be forced to close its doors forever.

Senator Robert Menendez Introduces Pro Online Poker Bill - August 2009

Senator Robert Menendez introduced a bill to Congress that would effectively legalize, regulate,and tax online poker in the United States. He has long been a supporter of online poker and has fought alongside Barney Frank to repeal the UIGEA.

Payment Processor Charged by US Attorney - August 2009

The founder and owner of several payment processing companies that do business with online poker sites, such as Full Tilt Poker, PokerStars, and Ultimate Bet, was charged with three crimes. The illegal acts he was charged with were bank fraud, money laundering, and gambling conspiracy. The charges against the owner, Douglas Rennick, appear to be in direct retaliation for his previous court motion to release the funds that were seized from one of his companies, Account Services Corp.

Current Developments

Please see our Gaming Law news articles for all the up to date legal developments: http://www.flopturnriver.com/blogs/category/poker-news/gaming-law.

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