The US government offered a decent risk and reward model for online poker websites to break laws
Last weekend the US Federal Government moved to disrupt players who enjoy playing poker online by seizing bank accounts run by illegally operating gambling websites but also shutting down a number of the biggest poker gambling sites in the US.
The move took 5 years to come into full effect after congressed passed a law back in 2006 that barred financial institutions from processing any financial transactions related to online gambling, which only resulted in gambling sites leaving the US and continued catering to their US players from overseas. Many operators openly mocked US government regulations as they felt not much could be done outside of seizing domains, so when baited the government took their advice and seized their domains.
You can see from the chart that PokerStars.com and Fulltiltpoker.com are reasonably heavy weight players in the market but both UltimateBet.com and AbsolutePoker.com barely make a blimp in terms of website traffic that will be affected but were still taken down. But according to WSJ article sites such as Bodog.com experienced a 21% increase in player activity as a result of the shut down, so did players just give up and the government won or are they waiting and playing their cards close to their chest before making the move to a new online poker site?
US encouraged risk
The US government began the arms race back in 2009 when they begun seizing bank accounts managed by 3rd party processors such as Account Services & Allied Systems but this meant the gambling sites took longer to payout players and cheques were issued under different account names. The increasing revenues and market potential made it very much a very large reward for what was at the time a very small but manageable risk by online poker operators. This arms race led to the creation of many of the mechanisms that brought down the gambling sites including the creation of fictitious websites for non-gambling products. The US regulators recent claim categorises these poker sites as illegal online gambling sites even though poker has typically being classed as a game of skill but it was compounded by what US regulators claim was bank fraud in how the money was accepted from players and paid back to them.
Who was affected?
While it’s likely that the take down will expand to cover 2nd and third tier gambling websites in time, the following have been taken down so far
What is the global impact?
The issue is that many of the sites were based in what are traditionally safe corporate tax havens outside of the reach of the US Justice department but it seems not their domains name records…
- PokerStars.com – Isle of Man
- AbsolutePoker.com – Quebec, Canada
- FullTiltPoker.com – Channel Islands
- UltimateBet.com – Malta
Down but not out?
While the government seized the domains it’s possible that using Browser plugins such as MAFIAA Fire that their users can still access the sites as users can visit the websites if they know their IP addresses.
Amazon is the current winner as all the sites are being redirected to one of their EC2 cloud hosted solutions located 220.127.116.11, reducing the impact against US government servers by those affected by the shutdown if they decide to strike back via DOS attacks. The other big winners are the US Casino’s and other online gambling websites who may have played a bit closer to the request of the US government and avoided the US market and tried not to try and get their hands on the $16 billion waged by US players in 2010.