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FBI Busts Top Online Poker Firms - But Legalization Is 'Increasingly Likely'

Posted On: 4/19/2011

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Internet gambling, online wagering, Barney Frank, John Campbell, Internet gambling legalization, online poker, amusements, PokerStars, Full Tilt, Abosolute Poker

WASHINGTON -- The political and legal tug of war over Internet gambling in the U.S. intensified this month. On April 15, the FBI indicted the three leading online poker companies for running illegal casinos.

Separately, a top credit agency said Congress is more likely than ever to legalize online wagering. And a prominent Democratic congressman slammed the Justice Department for "an incredible waste of resources" in pursuing the crackdown.

The FBI said it has charged 11 people at PokerStars, Full Tilt Poker and Absolute Poker with fraud, money laundering and of running illegal casino operations. Dozens of player accounts in 14 countries were frozen, and it's unclear when or if those players will be able to recover their money.

Technically, online gambling is not illegal per se in the U.S. But casino licenses are still required and the three indicted Web companies don't have them.

Under the 2006 Unlawful Internet Gambling Enforcement Act, it is illegal for U.S. banks to use such financial instruments as credit cards or electronic banking services to facilitate online wagers. The indicted firms are accused of fraudulently manipulating bank records to get around this law.

Collectively, millions of American players wagered an estimated $16 billion with PokerStars, Full Tilt and Abosolute Poker last year, according to some sources. The U.S. is seeking $3 billion or more in forfeited funds and penalties from the three online poker companies, said the FBI.

Following the FBI action, Wynn Resorts -- a leading casino operator in Nevada and Macau -- immediately said it was cancelling its plans for an alliance with PokerStars.

In Congress, Rep. Barney Frank (D-MA), the senior Democrat on the House Financial Services Committee, charged the Obama administration with wasting time and money to crack down on online poker.

Frank jeered that the White House was "protecting the public from the scourge of inside straights." The Justice Department should focus more on mortgage industry fraud and the resulting national financial meltdown, he said.

Earlier this year, Frank and Rep. John Campbell (R-CA) reintroduced Frank's bill of prior years to fully legalize, license and regulate online wagering in the U.S., along with bank instruments that support the activity. Last year, the Frank bill garnered at least 50 cosponsors and was rated as having a fair chance of passage under a Democrat-controlled Congress.

Fitch Ratings, a top credit rating agency whose reports are often cited by Massachusetts and other states, said passage of online gambling is "increasingly likely" at the federal or state levels.

Iowa recently tabled its online poker bill until next year -- lawmakers there are waiting for results of a newly commissioned study. Florida's poker legalization bill also died in committee. However, online wagering laws are still pending in California, Nevada and Hawaii, among other states.

Online poker was legalized this month in Washington, DC, but observers say this move is likely to be overruled by Congress, which has ultimate jurisdiction there. | SEE STORY