Busted flush: The poker firms whose gamble didn't pay

Industry in turmoil after FBI shuts down America's three largest gaming sites

Thousands of young American professionals arrived at their place of work last week to find it declared a crime scene by the FBI and their entrance barred. Their precise number is unknown, but among them were some of the country's richest and most youthful self-made millionaires, suddenly fearing not only for their future prosperity, but also for the security of hundreds of thousands of dollars now locked beyond their reach in the vaults of alleged international criminals.

The US government's clampdown on the three largest online poker companies – representatives of which face charges including bank fraud and money-laundering – effectively put out of work far more than just the 11 founders and executives listed on the FBI's "wanted" list.

Over the past 10 years or so, online poker has become more than just a pastime for thousands of Americans. For many, it has become a viable employment option, with dizzying sums available to the most dedicated and skilled exponents.

Until last week, they needed only to open their laptops to wager vast amounts of money at the online tables and, for the best of them, earn extraordinary pay days. The very élite (or the most marketable) could also hope for sponsorship deals from the online poker sites, television exposure and a first-class ticket around the world to play.

Over the weekend, however, players logging on to the .com domains of PokerStars, Full Tilt Poker and Absolute Poker, the indicted sites, would have found the insignias of the US Department of Justice and the FBI above a warning that a federal crime had been committed. According to industry analysts, those three sites account for 95 per cent of the US online poker market and they are all now closed to American customers. Moreover, many of the companies' bank accounts have been frozen, leaving players wondering whether they will be able to retrieve funds and when.

Operators have assured US players that their money is safe and the sites continue to function normally overseas. However, the knock-on effect for what is being dubbed "Black Friday" in the industry has already been profound. Casino groups severed fledgling partnerships with online operators; US television stations pulled their heavily subsidised poker programming and dropped advertising from the companies involved. Reporters from the poker media, which rely almost exclusively on advertising from online sites, have joined players on discussion forums, blogs and Twitter to express both panic and anger.

The charging of the poker executives has, at least temporarily, halted one of the most remarkable industry booms of the early 21st century. Most of the major online poker sites were founded in the early part of the last decade and harnessed the unique powers of the internet to offer a vast selection of games for all stakes, 24 hours a day across the globe. Their expansion was rapid, and in 2003, online poker received an even more spectacular boost when a 27-year-old accountant from Tennessee named Chris Moneymaker won the main event of the World Series of Poker (WSOP), the game's most prestigious tournament.

Moneymaker was draped in the branded clothing of PokerStars, and it quickly emerged that he had won his $10,000 entrance ticket to the Las Vegas jamboree in a $40 "satellite" event on the website. He had essentially parlayed the price of a couple of rounds of drinks into $2.5m and suddenly everyone wanted to make money like Moneymaker. In 2006, online qualifiers swelled the field of the WSOP main event to 8,773 and the winner earned $12m. Ten years earlier, the first prize was $1m, contested by 295 players.

The online operators subsequently sponsored tours of major live poker events across the globe, often recorded for television. But the core business remained online, where it was common to find more than 200,000 players at once, many of them "multi-tabling" – playing at more than one table simultaneously. In this way, the internet-savvy players could gain as much poker experience – and money – in a couple of months as some of the old school had accrued in their entire 40-year careers.

Operators also licked their lips. Like their bricks-and-mortar counterparts, online poker rooms are financed by a "rake", a small fee levied on every hand dealt or tournament entered. The overheads for online poker are much less than in real-life rooms, and so the rake is comparably lower. But automated dealers take far less time than their human counterparts, so many more hands can be played. Last month, PokerStars celebrated the dealing of its 60 billionth hand since 2001, each of which will have earned the site some fee.

In the middle of the last decade, the two clear market leaders were PokerStars and PartyPoker, which (as Party Gaming) floated on the London stock exchange in 2005 for £5bn. But there was no legislation governing online poker in the US until the Bush administration passed the Unlawful Internet Gambling Enforcement Act (UIGEA) in May 2006, which attempted to make online poker illegal. Party duly closed its doors to US players but other operators did not, and they were supported in their defiance not only by careful legal teams, but also by lobby groups fronted by senior politicians.

"Online poker is not a crime and should not be treated as such," declared the former senator Alfonse D'Amato, the chairman of the Poker Players Alliance, even after the unsealing of indictments on Friday last week.

The Department of Justice disagrees. The charges – which could cost the operators $3bn and their indicted executives 30 years in prison – are more serious than simply organising poker games. The FBI alleges that to circumvent the UIGEA, poker operators created dummy companies to conceal the true nature of their business, and offered backhanders to struggling banks to process payments.

"If the allegations are true, the operators brought this on themselves, by lying and bribing bank officials," wrote I Nelson Rose, a professor of law at Whittier Law School, California, and an expert in gambling law, on his website.

However, Professor Rose is also sceptical that the charges will stick. "Even if there was a bribe, the feds are still going to have to prove that the poker was illegal... Will this be the end of internet poker? Did Prohibition end drinking?"

Whatever the result of the recent prosecution, the future of online poker in the United States is unclear. Players and operators have long sought regulation for the game and some analysts now hope legislation will be hurried through.

Top-level players cannot wait, however, and some have intimated that they might be forced to move overseas. But without the vast number of recreational, typically losing, players of Middle America, who will presumably revert to exchanging their spare dollars in games over the kitchen table, the professionals' jobs will become much more difficult.

Sport
The Pipes and Drums of The Scottish Regiments perform during the Opening Ceremony for the Glasgow 2014 Commonwealth Games at Celtic Park on July 23, 2014 in Glasgow, Scotland.
Commonwealth gamesThe actor encouraged the one billion viewers of the event to donate to the children's charity
Sport
Members of the Scotland deleagtion walk past during the opening ceremony of the 2014 Commonwealth Games at Celtic Park in Glasgow on July 23, 2014.
Voices
voicesGood for Lana Del Rey for helping kill that myth, writes Grace Dent
Sport
Shinji Kagawa and Reece James celebrate after the latter scores in Manchester United's 7-0 victory over LA Galaxy
football
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
The Tour de France peloton rides over a bridge on the Grinton Moor, Yorkshire, earlier this month
film
Life and Style
fashion Designs are part of feminist art project by a British student
News
Very tasty: Vladimir Putin dining alone, perhaps sensibly
news
Life and Style
Listen here: Apple EarPods offer an alternative
techAre custom, 3D printed earbuds the solution?
Arts and Entertainment
Top guns: Cole advised the makers of Second World War film Fury, starring Brad Pitt
filmLt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a uniform
News
The University of California study monitored the reaction of 36 dogs
sciencePets' range of emotions revealed
News
Snoop Dogg pictured at The Hollywood Reporter Nominees' Night in February, 2013
people... says Snoop Dogg
Arts and Entertainment
A scene from Shakespeare in Love at the Noel Coward Theatre
theatreReview: Shakespeare in Love has moments of sheer stage poetry mixed with effervescent fun
News
Joining forces: young British men feature in an Isis video in which they urge Islamists in the West to join them in Iraq and Syria
newsWill the young Britons fighting in Syria be allowed to return home and resume their lives?
Arts and Entertainment
The nomination of 'The Wake' by Paul Kingsnorth has caused a stir
books
News
i100
Life and Style
food + drinkZebra meat is exotic and lean - but does it taste good?
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Teacher

£100 - £120 per day: Randstad Education Chelmsford: Supply Teachers Would you ...

BI Manager - £50,000

£49000 - £55000 per annum + competitive: Progressive Recruitment: My client is...

BI Project Manager - £48,000 - £54,000 - Midlands

£48000 - £54000 per annum + Benefits package: Progressive Recruitment: My clie...

VB.Net Developer

£35000 - £45000 per annum + competitive: Progressive Recruitment: If you're pa...

Day In a Page

Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform
Climate change threatens to make the antarctic fur seal extinct

Take a good look while you can

How climate change could wipe out this seal
Should emergency hospital weddings be made easier for the terminally ill?

Farewell, my lovely

Should emergency hospital weddings be made easier?
Man Booker Prize 2014 longlist: Crowdfunded novel nominated for first time

Crowdfunded novel nominated for Booker Prize

Paul Kingsnorth's 'The Wake' is in contention for the prestigious award
Vladimir Putin employs a full-time food taster to ensure his meals aren't poisoned

Vladimir Putin employs a full-time food taster

John Walsh salutes those brave souls who have, throughout history, put their knives on the line
Tour de France effect brings Hollywood blockbusters to Yorkshire

Tour de France effect brings Hollywood blockbusters to Yorkshire

A $25m thriller starring Sam Worthington to be made in God's Own Country
Will The Minerva Project - the first 'elite' American university to be launched in a century - change the face of higher learning?

Will The Minerva Project change the face of higher learning?

The university has no lecture halls, no debating societies, no sports teams and no fraternities. Instead, the 33 students who have made the cut at Minerva, will travel the world and change the face of higher learning
The 10 best pedicure products

Feet treat: 10 best pedicure products

Bags packed and all prepped for holidays, but feet in a state? Get them flip-flop-ready with our pick of the items for a DIY treatment
Commonwealth Games 2014: Great Scots! Planes and pipers welcome in Glasgow's Games

Commonwealth Games 2014

Great Scots! Planes and pipers welcome in Glasgow's Games
Jack Pitt-Brooke: Manchester City and Patrick Vieira make the right stand on racism

Jack Pitt-Brooke

Manchester City and Patrick Vieira make the right stand on racism
How Terry Newton tragedy made iron men seek help to tackle their psychological demons

How Newton tragedy made iron men seek help to tackle their psychological demons

Over a hundred rugby league players have contacted clinic to deal with mental challenges of game