Legality of Online Poker Is on the Table

With the nightclub Tao swathed in red and black, music pulsated and go-go dancers gyrated on raised platforms along the wall. The reserved signs, the felt on the billiard table and the models’ Chinese-style dresses bore the same label: Bodog.com.

The only thing missing was the online gambling site’s flamboyant founder, 45-year-old Canadian Calvin Ayre, who was nowhere to be found.

“He’d have girls all around him, and he’d be the life of the party,” said Ronn Torossian, a publicist and acquaintance familiar with Ayre’s celebrating ways.

The billionaire who appeared on Forbes magazine’s March cover decided to make himself scarce after federal authorities last month arrested David Carruthers, the head of rival Web gambling operator BetOnSports.

A federal judge ordered Costa Rica-based BetOnSports to stop accepting bets placed from the United States, and prosecutors are seeking the forfeiture of $4.5 billion, plus several cars, recreational vehicles and computers from Carruthers and 10 other people associated with the gambling operation.

Around the same time, the House of Representatives passed a bill that would ban most Internet gambling. Although the bill’s future in the Senate is uncertain, the issue loomed over the World Series of Poker hosted by hotel-casino Rio in Las Vegas: Is online poker legal?

Tournament organizers and the Justice Department say no. The players, thousands of whom qualified in cash-paying Internet tournaments, say yes.

“I’ve got no certainty whatsoever,” said Ayre, speaking by phone from Canada, days after Carruthers’ arrest.

“I don’t believe any senior executive of any online gaming company is going to be going into the United States for the foreseeable future,” Ayre said.

The World Series of Poker’s uncomfortable relationship with online gambling emerged in 2003, when an accountant named Chris Moneymaker qualified through a $40 online tournament and went on to win the $2.5-million main event, becoming the poster child for the wild popularity of online poker.

Advertising by poker sites on mainstream TV exploded -- and then the Justice Department intervened.

In a June 11, 2003, letter, Deputy Assistant Atty. Gen. John Malcolm warned the National Assn. of Broadcasters that the department considered Internet gambling illegal. “Any person or entity who aids or abets” online betting “is punishable as a principal violator,” he wrote.

Major networks then forced online poker companies to create “dot-net” sites, on which poker was played only for fake money and no reference or link would be made to the “dot-com” versions, where billions of very real dollars are wagered every year.

Thus, PartyPoker.net, the “World’s Largest Poker School,” has become an official sponsor of the World Series of Poker, its logo visible every time a flop hits the felt, while PartyPoker.com, the moneymaking reason for its existence, lurks in the shadows.

By some counts, about half of the 8,700 players in the World Series’ main event qualified through online satellite tournaments. PokerStars.com boasted that more than 1,600 qualified on its satellites. PartyPoker.com is reported to have sent more than 800 qualifiers, and Bodog.com said it sent about 700.

But tournament commissioner Jeffrey Pollack said that an online tournament didn’t put a player into the World Series: It was the $10,000 cash payment for a seat at the table.

“I don’t talk to the dot-coms, I don’t,” he said. “Online gaming is illegal. Everything we do, whether it’s selling hospitality at the Rio or selling product placement with PartyPoker.net on our felt, is done with a sharp eye on the regulatory environment.”

The televised tournament’s first day was delayed several minutes as organizers announced that anyone sporting a “dot-com” poker logo would not be allowed to play. About 1,000 players flipped shirts inside-out, and workers circulated with black tape, covering any “dot-com” symbols they could find.

“Tape or not, I still look good,” said David Daniel, a 31-year-old player from Bristol, Tenn., who qualified by winning $10,000 in a $160 “double-shootout” tournament online and was wearing a “PokerStars------” hockey jersey.

The House bill that would ban Internet gambling -- except for horse race betting and state lotteries -- is an attempt to close a perceived loophole in the 1961 Wire Act, one of a series of laws meant to crack down on racketeering.

The Wire Act forbids businesses from using a wire communication facility to assist in placing bets on “any sporting event or contest.” But the law doesn’t cover other types of casino betting, a federal appeals court in New Orleans has ruled, leaving some doubt on whether prosecutors can shut down Internet poker and other casino games.

Of course, with or without a new law from Congress, the Justice Department interprets all online gambling to be illegal. Other countries allow it, so online companies have set up operations outside the U.S. but with easy access to U.S. players and their computers.

“Online poker is online gambling. And online gambling, we would say, is illegal,” Justice Department spokeswoman Jaclyn Lesch said.

Poker advocates suggest the department’s enforcement practices don’t back up that assessment. Indictments dating to 1998 have focused on operators of online sports books, not sites that offer only poker.

Not only are there hurdles in arresting the poker site operators in Costa Rica, Aruba, the Isle of Man and Gibraltar, but many argue that poker tournaments online technically are not gambling.

“You get a prize for a competition,” said Harold Krent, dean of the Chicago-Kent College of Law at the Illinois Institute of Technology.

And prosecuting a business for promoting a dot-net site that does not have direct Web links to its dot-com cousin makes for difficult legal work in court, he said.

People who make a living playing online poker have joined a group called the Poker Players Alliance to lobby Congress to stop the Internet gambling bill from passing the Senate.

Since the House passed the bill July 11, alliance membership more than doubled to 75,000. Alliance President Michael Bolcerek warned that the bill would “drive the business of poker underground.”

For now, it remains well in the open.

Jon Friedberg, a 31-year-old business owner from Las Vegas, makes $150,000 a year playing poker mostly on PokerStars.com. Winning several online tournaments earned him a seat at several events at the World Series.

The specter of the House bill going forward is not putting him off his game, nor did it seem to bother the thousands of players and fans roaming the Rio.

“I’m really not worried at all,” Friedberg said. “Part of being a poker player involves just fearing nothing in life. It’s probably not the best approach in life in certain things, but it works well in poker.”