Online poker: Federal crackdown is a bad bet

Who wants to bet that the recent federal crackdown on Internet poker sites won’t stop Americans from playing poker online for money?

Federal agents seized the websites of three of the world’s most popular online poker companies Friday, indicted 11 of their executives and associates, and filed a lawsuit seeking at least $3 billion in penalties. It was the most extensive enforcement action taken by the government since Congress enacted a law in 2006 to prohibit banks, credit-card companies and others in the financial industry from processing online gambling transactions.

The indictment accuses PokerStars, Full Tilt Poker and Absolute Poker (also known as Ultimate Bet), all of which are based overseas, of violating money-laundering, bank-fraud and state anti-gambling statutes by collecting payments from U.S. players disguised as purchases from bogus e-commerce companies. It also alleges that PokerStars and Full Tilt Poker persuaded several small, struggling banks to process undisguised payments for them in exchange for unusually high fees.

The companies say they’ve done nothing wrong, and one even contends that online poker isn’t illegal. That’s based on the tenuous argument that some states ban online betting only on games of chance, and poker is partly a game of skill. But prosecutors are expected to allege that the sites also took bets from players in states where online poker is explicitly forbidden.

The bigger question is whether taking down the U.S. operations of three global websites will solve whatever problem Congress was trying to solve when it declared a prohibition on most forms of Internet gambling. U.S. authorities are swimming against a powerful tide of contrary policies overseas — online gambling is a multibillion-dollar business welcomed by several countries, including England and Ireland. And trying to fence off America from a popular part of the Internet only invites people to find new ways around the law.

Nor does it help matters that U.S. laws are wildly inconsistent on the subject of gambling, with different jurisdictions outlawing different types of wagers. In fact, lawmakers in California and a handful of other states are seeking to legalize — and tax — online betting within their borders, which will only add to the confusion. Rather than encouraging a bustling underground economy for U.S. bettors, Congress should repeal the 2006 law in favor of a legal but tightly regulated online gambling industry.