Longform

Jon Kyl's Attack on Online Poker and Livelihoods

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She made $40,000 that first year. By 2010, she was pulling in six figures annually.

When Black Friday hit, Peng was one of the top money-makers on Ultimate Bet, with $30,000 in her account. She'd also just won $12,000 in a Full Tilt tournament. All told, she saw $80,000 frozen in the crackdown.

Peng was better situated than most to weather the storm. She and her boyfriend — who also plays — moved to Windsor, Ontario. The Canadian town sits next to Detroit, allowing her to play online while still traveling to live tournaments here and abroad.

Nearly a year after the feds froze her money, Peng, who planned to use it to start a used-jewelry business on eBay, still hasn't seen a penny of it.

Within a month of the federal crackdown, PokerStars returned $100 million to U.S. players and continued to operate abroad.

Full Tilt was cleared to offer returns but never did, since it doesn't have the money.

In September, the feds accused owners Howard Lederer and Chris "Jesus" Ferguson of running a "global Ponzi scheme."

"Banks fail for not having sufficient revenue to cover customer deposits all the time," the company's lawyer, Jeff Ifrah, said at the time. "No one refers to such failures as Ponzi schemes. And there was no Ponzi scheme here."

The court battle rages on.

Last fall, the French company Group Bernard Tapie stepped in to buy Full Tilt for $80 million, promising to pay off the debts to international players. The feds have assumed responsibility for paying American players. They've announced no timetable for repayment.

Absolute Poker — formed by four frat brothers at the University of Montana — wasn't liquid enough to continue either. None of its players has been reimbursed.

In December, Absolute Poker co-owner Brent Beckley pleaded guilty to lying to banks about the nature of his transactions. He's expected to receive 12 to 18 months in jail.

His accomplice, Ira Rubin, ran a payment-processing company in Costa Rica that disguised gambling proceeds through fake merchants and suppliers. He pleaded guilty in January and is expected to receive up to two years.

Rumors have circulated that Absolute Poker will be repay players soon, though payoffs may be as little as 25 cents on the dollar.

"If you had a federally/state regulated system that wouldn't happen," says Congressman Joe Barton, a Republican from Texas. He's also pushing a law to legalize online poker. "This is one of those rare congressional bills that's not a Republican-Democrat issue. There are people for it and against it on both sides, but there are many more people for it."

The general sentiment, from players to politicians, is that something will get done . . . eventually.

Meanwhile, poker has gathered some powerful advocates. Casinos that once guarded their turf are hoping to get in on the online action. They're pushing Senate Majority leader Harry Reid, a Democrat from Nevada, to get something done, but the prospect of new revenue sources is anathema to many Republicans. They squashed Reid's attempt to pass online poker regulation in 2010.

It may come down to the states legalizing it within their borders (much like medical marijuana) and daring the feds to step in. Nevada already has begun issuing online-gambling licenses. Washington, D.C., passed a plan for running its own online-poker site. And in December, the Justice Department reversed its longstanding view that the 1961 Wire Act banned online gaming, a move many experts see as opening the door to state-regulated poker.

So the future remains cloudy. Maybe, one day, players again will be able to provide for their families. Until then, they're out of luck.

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Chris Parker
Contact: Chris Parker