04/21/2011 2:09PM

Vegas casinos get rude shock when feds come down hard on Internet poker companies


April 15 is a day of dread for many Americans as it’s the annual Tax Day, where you have to settle up with Uncle Sam. With an extension to the deadline to April 18 this year, it appeared last Friday would pass as uneventful, but then it turned far darker for millions of online poker players and an entire industry that was fighting hard (and seemingly making headway) to become legal in this country.

Federal prosecutors in New York City indicted the founders of PokerStars.com, FullTiltPoker.com and AbsolutePoker.com, charging 11 people with operating illegal gambling businesses, bank fraud, and money laundering. The bank charges come from violating the Unlawful Internet Gaming Enforcement Act (UIGEA) of 2006 that forbids banks from accepting transactions from Internet gambling companies.

The news came out slowly Friday morning and picked up steam, presumably when all those millions of people stopped playing poker long enough to check their news sites, Facebook home page, or Twitter feeds. It was quickly dubbed Black Friday.

The sites were shut down over the weekend and the thing most players worried about (at least in the short term) was if they would be able to withdraw their money. That appears to be resolved with Poker Stars and Full Tilt reaching agreements with prosecutors to reclaim their domain names to pay back U.S. customers and resume games for non-U.S. players.

The news was really big here in Nevada for the above reasons but for a lot of other ones, too. There have been pushes lately to fully legalize online poker on the national as well as state level. Poker Stars has been behind pushing Nevada Assembly Bill AB258 to regulate online poker in the state. It reportedly donated $272,000 in political contributions and flew lawmakers to Isle of Man, where Poker Stars is based, and the Bahamas. Just last month, Steve Wynn signed a deal with Poker Stars, while Fertitta Interactive, owned by the brothers who own Stations Casinos here in Vegas as well as the mixed martial arts company UFC, signed a deal with Full Tilt. The assumption was these companies were positioning themselves to be in place when online poker was inevitably (or so they thought) made legal.

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That all fell apart like a house of cards last Friday. Wynn and Fertitta said their deals were null and void with the indictments. Politicians stepped forward to announce they were shocked to find out those donations were from foreign companies and agreed to return them. Gov. Brian Sandoval, whom I know from his days as chairman of the Gaming Control Board, seems to be the only one who returned money from Poker Stars before last Friday.

It will be interesting to see what happens with the push for federal legalization, but it appears the Nevada legislation is moving forward with the assumption anything passed wouldn’t cross state lines as is the case with sports books’ use of phone accounts, smartphone apps (which Leroy’s sports books launched last year with Blackberry and now with Android phones) and intranet betting within our borders.

Obviously the goal of doing this is to be ready for legalization on a national level. The feeling has always been that the Vegas casinos would have an edge as customers might be more inclined to send their money to a known casino in Nevada than to an offshore company. With Nevada dropping the ball years ago to capitalize on the Internet boom, Americans have shown they might not have that reluctance, though Black Friday might also have a way of swinging that back in Nevada’s favor.

Though I wasn’t of gambling age at the time, this reminds me of when sports betting first came to Nevada. Illegal bookmakers came here from all over the country because they could ply their craft legitimately. The sports books needed people who had done that kind of work before it became legal. That’s what it looks like the casinos were trying to do with these companies. Whether Poker Stars and/or Full Tilt Poker end up getting the opportunity to do that down the road remains to be seen.

Other unknown consequences are how this will impact the World Series of Poker held at the Rio, starting May 31 with the $10,000 No-Limit Texas Hold’em Championship Event, aka the Main Event, starting on July 7. The Main Event was famous for a long time but exploded in 2003 when Chris Moneymaker topped a field of 839 players and won $2.5 million after earning his seat in a $39 online tournament. By the summer of 2006, the field was a record 8,773, but then several things happened. The passage of UIGEA definitely had a chilling effect, as well as the Rio forbidding third parties from directly paying entry fees (prior to 2007, if you won the $10,000 entry fee from an online site, they could just register for you and send the money to the Rio; since then, the online company has to pay you directly and you have to register yourself, so some people decide to keep the cash in hand). And the recession hasn’t helped either. Entries dropped into the 6,000s and saw an increase back up to 7,219 last year. There were estimates that half of the field was qualifying online, so it’s expected that this year’s Main Event field might shrink to between 3,000 and 4,000.

Earlier this week, ESPN announced it was pulling all its poker programming, much of which was sponsored by the indicted companies. ESPN then announced it will cover the WSOP, which fortunately has been able to secure other sponsorships in recent years such as Milwaukee’s Best Light Beer and Jack’s Links Beef Jerky.

The fact that ESPN isn’t pulling the plug on the WSOP is a pretty big deal. It reinforces the argument from poker officials, including lobbying group Poker Players Alliance, that it is a game of skill.

The biggest skill might have been shown by the biggest players: Howard Lederer, Phil Ivey, Daniel Negreanu, Phil Hellmuth, Doyle Brunson, etc. They have often been rumored to be part owners in some of these Internet companies and have made lots of money in endorsements, yet they have gone unnamed so far.

But we’re far from the endgame.