Coincidence? Or Chicago-style strong arming by the Federal Government? Or both?

Just days after Washington D.C. approves online poker gambling, the Justice Department, FBI hands out indictments to three major online poker sites charging them with bank fraud, money laundering and illegal gambling offenses. (via The Hill)

“Executives at PokerStars, Full Tilt Poker and Absolute Poker have been charged with bank fraud and money laundering.  The FBI shut down three of the largest poker websites Friday in what appears to be the largest crackdown on illegal online gambling to date.  Eleven executives at PokerStars, Full Tilt Poker and Absolute Poker have been charged with bank fraud, money laundering and illegal gambling offenses. Prosecutors are seeking to immediately shut down the sites and recover $3 billion from the firms.”

A related L.A. Times story explains how “the bust” went down, the effects among online gamblers, and the ramifications of the Federal law passed in 2006 under the direction of then Senate Majority Leader Bill Frist when he added the measure to a port security bill.

“The FBI had shut down two of the sites, Full Tilt Poker and PokerStars, by Friday evening and were working to do the same with the third, Absolute Poker. Online visitors were greeted with a message saying, “This domain name has been seized by the F.B.I. pursuant to an Arrest Warrant,” and an enumeration of federal anti-gambling statutes and penalties.

An estimated 8 million to 10 million Americans play poker online for money; thousands of them earn their living on the sites, according to a players advocacy group.

Congress tried to shut down the industry by enacting an anti-gambling law in 2006, but most sites found ways to work around the vaguely worded measure. Since then other members of Congress have proposed bills to legalize Internet gambling, but they have failed to reach a floor of either chamber.

“These defendants concocted an elaborate criminal fraud scheme, alternately tricking some U.S. banks and effectively bribing others to assure the continued flow of billions in illegal gambling profits,” Preet Bharara, the U.S. attorney in Manhattan, said in a statement.

The 2006 law did not directly outlaw online poker sites, but instead barred businesses from taking payments for “unlawful” online gambling, leaving the definition of what is unlawful to others.”

And Bill Frist motives were certainly questionable at the time, still leaving online gambling sites wondering how the law was to be interpreted:

Senate Majority Leader Bill Frist, in pushing the measure through Congress as part of a port security bill just prior to adjournment last weekend, seemed more intent on pleasing social conservatives than truly gutting online gambling.

Joseph Kelly, a law professor at Buffalo (NY) State College and an attorney for online gaming concerns, calls the law “highly unenforceable.” The act makes it illegal for banks to transfer money from customer accounts to online gambling firms. But for the most part, bettors don’t pay their online bookies directly. Payments usually are routed to offshore firms through an online intermediary such as Canadian-based Neteller, the biggest money-transfer firm in this sphere. In addition, American banking lobbyists insisted that the most basic form of payment be exempted if the industry was to support the law. That’s the good old-fashioned check — both paper and electronic versions — whose volume made them impossible to monitor. So checks are exempted.

Fast forward to the new king of “legal” online poker:

The District is becoming the first U.S. jurisdiction to allow Internet gambling, trying to raise millions of dollars from the habits of online poker buffs and acting ahead of traditional gambling meccas like New Jersey and Nevada.  Permitting the online games was part of the 2011 budget and a 30-day period for Congress to object expired last week, said D.C. Council member Michael A. Brown, who authored the provision. The gaming would be operated by Intralot, a Greek company, and would be available only to gamblers within the borders of the District.

……………The move to legalize the games comes despite a 2006 federal law that effectively banned Internet gambling. The law basically prohibited banks and credit card companies from processing payments from gambling companies to individuals. But the law is murky, and gambling experts say it created enough grey areas to open the door for a deeper expansion into the multibillion dollar industry.

“There was really no clear law that said we could not do this,” Brown said Wednesday. D.C. hopes to tap those millions to help offset budget cuts and help social services programs, Brown said.

Jeff Ifrah, a lawyer whose firm represents online gaming companies, said he was dubious about any revenue estimates since they naturally assume that online poker players will migrate from their favorite site to a new one endorsed by a state.  “Players are really loyal in this industry,” Ifrah said. “You really have to ask yourself what is the incentive a player is going to have to leave a trusted site with global competition to play in a site that’s untested and kind of unknown and doesn’t offer you the same level of play.”  (emphasis mine)

Oh boy, the “incentive” was initiated by the full thrust of the DOJ and the FBI, who are playing their hand just like a skilled poker player. But, has D.C. stacked the deck?   The whole “deal” reeks of Federal Cronyism, and I’d “bet” others are asking questions about the timing of the FBI bust, and who else might have been “sitting at the table”.

Related story via Hot Air December 8, 2010 by Ed Morrissey—Harry Reid is either fuming over these developments or might have been well aware of them—who knows?

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