Which side is right? It’s important to note that anyone who speculates about the ultimate impact of the compliance deadline is doing exactly that – speculating. The financial industry is a tremendously large and complicated entity made up of thousands of operators, each with their own systems and processes. Essentially, how one bank interprets and reacts to the UIGEA may be quite different that how the bank across the street does.

What we’re attempting to do with this article is address the most commonly asked questions regarding the UIGEA and lay out what appear to be the most likely scenarios for online poker in the immediate aftermath of the deadline. Where possible, we’ve provided links to sources for further reading; if you know of a resource that should be included or a question we’ve ommitted, feel free to contact us.

So What Exactly Happens on the day UIGEA compliance becomes mandatory
There’s a good deal of misinformation surrounding June 1st. The UIGEA has been in effect since January 1st, 2009. June 1st does not bring with it any new laws, per se’ – it is simply the deadline for banks (and other financial institutions) to be in compliance with UIGEA regulations (also referred to as the ‘Final Rule’ of the UIGEA) or face penalties. Online poker does not become illegal on June 1st, nor does cashing out or depositing money into an online poker room (unless any of the preceding was already illegal where you live).

The UIGEA Final Rule is simply the final draft of UIGEA regulations.

What Will My Bank Be Doing Differently?
The Final Rule of the UIGEA primarily directs banks to screen new commercial customers and reject applicants who plan to operate as an illegal gambling entity.

Banks are not required nor directed to review individual accounts (or existing commercial accounts). Nothing about the Final Rule of the UIGEA (for banks) suggests that transactions made by individual account holders will be subject to any additional scrutiny above the status quo. From the American Bankers Association’s UIGEA FAQ:

Your bank is not required to block ACH, wire, or check payments related to unlawful Internet gambling to be in compliance with the Final Rule. Your bank will be allowed to rely on the policies and procedures established by the card networks to block restricted debit and credit card transactions. In other words, if your customer is the gambler, you do not have to block gambling transactions except for debit and credit card transactions. In those cases, you may rely on the network policies and procedures and merchant codes [...] Banks will not be required to make blocking decisions on individual transactions.

Will My Bank Close My Account Because I Play Online Poker?
It’s important to note that each individual bank is likely to have their own policy regarding online gambling, and that an individual bank can choose to reject customers due to online gambling deposits (or for a number of unrelated reasons) regardless of whether or not a law requires it.

That said, absolutely nothing about the UIGEA requests or requires banks to identify non-commercial customers engaging in online gambling deposits or withdrawals or to penalize account holders found to be doing so. Again from the ABA FAQ:

Does my bank have to monitor my customers’ accounts to make sure that they are not gambling illegally on the Internet? No [...] Your bank is not required to monitor or determine whether its customer is a gambler except that it must ensure that unlawful credit and debit card transactions are blocked.

Will I Still Be Able to Deposit After Compliance With the UIGEA Becomes Mandatory?
It might be a bit hairy in the immediate aftermath, but once the kinks are worked out it seems reasonable to assume that card rooms will be able to continue to stay a step ahead of credit card company coding schemes and accept deposits with relative ease.

That fairly optimistic view is based on the following logic: that it’s difficult for a credit card company to be penalized by the US Government for not blocking deposit transactions, as the companies are generally only required to do so if they have direct knowledge that a transaction is for that purpose. As a result, companies will be fairly unmotivated to proactively squash such transactions, as it will require time, resources and money to do so and the penalty for doing nothing seems minor or nonexistent. Meanwhile, non-US processors will continue to provide a backbone of deposit support.

The Treasury Dept reached a similar conclusion:

The Agencies expect that a coding system to identify and block restricted transactions will be the method of choice for the vast majority of card system participants to comply with the Act. In addition, the Agencies note that most Internet gambling businesses that use card systems for funding do so through non-U.S. merchant acquirers that are not subject to the Act or the final rule and likely would not conduct due diligence regarding Internet gambling on their merchants [...] While card system operators may choose to create new codes for such transactions, the Agencies believe that the establishment of codes for particular merchant transactions is a business decision for the
card system operators and their participants. Accordingly, the final rule does not specify the establishment of such codes in the coding example for card systems.

Will I Still Be Able to Cash Out?
It’s important to note that online poker rooms are not banks, so you don’t have any ironclad guarantee of access to your funds at any point. That said, the Final Rule of the UIGEA does not require banks to screen existing commercial customers, only to screen new applicants. It also does not request or require banks to monitor individual consumer transactions (i.e. you depositing a check from a poker room). Basically, nothing about compliance with this law on the part of banks, on face, should prevent you from cashing out. From the Treasury Dept regarding the UIGEA Final Rule:

Under the final rule, the term “restricted transaction” would not include funds going to a gambler, and would only include funds going to an Internet gambling business.

It cannot be overstressed that different banks will approach compliance in different ways, with some being far more aggressive when dealing with any gambling-related transactions than others. Your best bet is to keep an eye on conversations in poker forums regarding individual player experiences with banks after June 1st and to use that information to help you decide how to handle your personal banking choices.

I Heard Banks Were Sending Out Notices About the UIGEA. What’s That About?
Banks are required by the regulation to notify all commercial customers that restricted transactions are prohibited.

Is it Illegal to Play Online Poker After the UIGEA Final Rule Becomes Mandatory?
Not because of the UIGEA Final Rule. Nothing about the UIGEA makes any type of gambling legal or illegal. From the Treasury Department regarding what the UIGEA thinks “unlawful internet gambling” is:

After consulting with the Department of Justice and representatives from the offices of several State attorneys general regarding this issue, the Agencies have determined that a single, regulatory definition of “unlawful Internet gambling” would not be practical. The Act’s definition of “unlawful Internet gambling” relies on underlying Federal and State gambling laws. The States have taken different approaches to the regulation of gambling within their jurisdictions and the structure of State gambling law varies widely, as do the activities that are permitted in each State. Accordingly, the underlying patchwork legal framework does not lend itself to a single regulatory definition of “unlawful Internet gambling.”

Shorthand: If you could gamble before the UIGEA legally, you’ll still be able to after compliance becomes mandatory.

Who Does The UIGEA Final Rule Impact?
The primary target of the UIGEA Final Rule is undoubtedly the casino operator and not the individual player. The first line of the UIGEA Final Rule makes that focus quite clear:

The Act prohibits any person engaged in the business of betting or wagering (as defined in the Act) from knowingly accepting payments in connection with the participation of another person in unlawful Internet gambling

Is Anything Being Done to Stop or Delay This Deadline?
Yes, visit the Poker Player’s Alliance webpage for updates and action items.

How Will Online Poker Rooms Be Impacted?
It’s hard to say. Most assessments seem to agree that payment processing will become an even trickier business, so the real question is exactly how much trickier it will become. An optimist could argue that with the amount of money at stake, poker rooms and payment processors will have a significant enough incentive to develop creative methods for keeping the flow of money in and out of rooms relatively undisturbed. A pessimist could make the case that getting funds to / from players, already a lengthy and expensive process for many rooms, could become prohibitively so for rooms and force them from the US market sooner than later.

Who’s right? Considering the aggressiveness of the DOJ in pursuing online gambling payment processors over the last year, it does seem as if the UIGEA Final Rule will have some teeth and as a result make it more difficult (perhaps effectively impossible) for payment processors to set up shop financially in the US. The likely impact for poker rooms is a higher tab for payment processing. The costs could be significant enough that some sort of charge on cash outs could become standard operating procedure in the industry, although larger rooms might absorb the additional cost as a way to secure player loyalty (and rake).

How Will Online Poker Players Be Impacted?
Online poker players aren’t directly impacted, but will almost certainly see some indirect impacts. It seems quite possible that cash outs and deposits will both be very unreliable in the weeks immediately following the deadline as poker rooms and their processing partners fully asses and absorb the impact of financial institution compliance with the UIGEA Final Rule.

Long-term, players should probably anticipate some sort of fee being placed on cash outs at some, if not all poker rooms. Players should also anticipate occasional ‘hiccups’ in processing similar the check cashing issues experienced by Stars and FTP in the summer and should prepare for a world where cash outs are more restricted in terms of size and frequency than they are in the status quo, and are possibly subject to longer holds at their bank upon deposit.

Where Can I Get Additional Information?

Here are some useful links:

- ABA’s FAQ for Banks on UIGEA Compliance (PDF, 4 pages)

- Full Text of Final Rule of UIGEA (PDF, 121 Pages)

- Poker Player’s Alliance Home Page

Ok, so what happened?
On June 9th, the AP reported that the U.S. attorney for the Southern District of New York (SDNY) instructed several banks, including Wells Fargo and Alliance Bank of Arizona, to freeze the accounts of payment processor Allied Systems Inc. Later reports confirmed that Citibank was also issued an order to freeze certain accounts and that a second payment processor, Account Services, was also targeted.

Online poker sites use payment processors such as Account Services to process check cash outs to players. The freezing of the accounts essentially meant that any checks (including e-checks) issued to players that were drawn on said accounts were now worthless.

Wait, so poker players just lost their money?
No. All of the rooms impacted have, to the best of our knowledge, had the cash outs credited back to their accounts. So, if you had requested a $3,000 check from PokerStars in early June and it was drawn on one of the frozen accounts, PokerStars would have emailed you informing you not to cash the check and credited the 3k back to your account.

How much money was it?
Reportedly $34 million plus.

How many players were impacted?
The PPA is putting the number at 24,000 or so.

Are all rooms impacted by this action?
Apparently not. The mainstream media is citing four rooms – Absolute, Ultimate Bet, PokerStars and Full Tilt Poker. In interviews with PokerNewsDaily.com, Bodog and Cake Poker claim to have been unaffected by the action, and there have been no reports of issues with Merge checks.

Is this related to the check problems people were having over the last few weeks?
Yes, this action by the SDNY appears to be the cause of the rampant reports of poker room checks bouncing in late May and early June.

Is this related to that story I read about a payment processor owing PokerStars $30 million?
No, that payment processor was a company called Intabill, which is based in Australia. That issue appears to be independent of the actions taken by SDNY.

Why is the US Government seizing this money?
The precise answer to this is a little unclear. The simple answer is that the DOJ believes that online gambling is illegal and is working to confront offshore companies that they can’t touch directly by cutting off their ability to access the US market.

Some speculate that the DOJ is essentially trying to dry up the US market by instilling enough fear in the average player regarding their ability to cash out winnings to stop them from ever playing in the first place. I. Nelson Rose advanced this theory in an interview with Matt Richtel of the NYT:

When it comes to poker players, the government “wants to scare the hell out of them,” Mr. Rose said. And he thinks it will certainly have that effect for some players.

“Now, you not only have to find a way to get money to a place you trust and that’s going to be honest, you have to get money back and hope it doesn’t get seized,” Mr. Rose said.

In terms of the legal justification behind the seizure, the Poker Player’s Alliance is claiming that: “The seizure notice and subpoenas appear to allege violations of the Wire Act and the Illegal Gambling Business Act, even by .com sites that are exempt from Wire Act liability and by .net sites that do not accept money. These actions are not related to enforcement of the Unlawful Internet Gambling Enforcement Act (UIGEA.).”

As the US Government takes additional action against the companies involved, their exact legal position will become more clear.

What should I do with my online monies?
There’s a variety of opinions on that, and we’re by no means the final word. Some people are requesting cash outs as usual, as both Full Tilt Poker and PokerStars appear to be issuing valid checks again. Bank wire is also an option, but generally carries a fairly stiff (to most players) minimum withdrawal amount. Others are waiting until the scope of the SDNY action becomes more clear before attempting to cash out funds.

What is the SDNY?
From Wikipedia: “The United States District Court for the Southern District of New York (in case citations, S.D.N.Y.) is a federal district court. Appeals from the Southern District of New York are taken to the United States Court of Appeals for the Second Circuit (except for patent claims and claims against the U.S. government under the Tucker Act, which are appealed to the Federal Circuit).”

SDNY was also the office that spearheaded the Neteller and Party Poker actions.

Is anything being done to challenge the seizure?
UPDATE: On July 11th, Account Services filed a motion for return of the seized funds, claiming the seizure violated the Fourth Amendment. You can read the motion here.

Any reaction is currently in the strategy stage. The primary clearinghouse for information and response appears at this point to be the Poker Player’s Alliance. You can get the gist of what their likely approach will be from their official statement on the SDNY action:

“The PPA is disappointed that this unprecedented action has been commenced against law abiding poker players. The payment processor funds frozen by the Southern District of New York belong to individual poker players – not operators of poker websites – and do not represent the proceeds of any gambling activity, much less illegal gambling activity.”

“There are many legal issues that question the merit of the Southern District’s actions. Of greatest concern is that, in at least two cases, these actions were taken without first obtaining a seizure warrant. Seizure of money without judicial authority and litigation tactics inconsistent with previously stated Department of Justice policy appear to be the type of conduct that the Department has recently committed to change.”

“We are also concerned that the Southern District has selectively taken action against online poker when the current law regarding the activity is far from clear, and policies from various levels of government are inconsistent at best. In fact, no federal or state court has ever found a payment processor or a player accessing an Internet poker site to have violated the federal laws alleged by the Southern District in this case.”

What can I do?
The two primary lobbying groups for online gaming / poker are the Poker Player’s Alliance and the Interactive Media Entertainment & Gaming Association. The PPA provides several action paths for players to take and has a handy list of names / numbers of Congressmen, etc and talking points for players.

We’ll update this FAQ as warranted.

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First, it’s worthwhile to discuss HR 6663 itself. The main text of the proposed law states, “To effect the purposes and intent of the UIGEA, it is the sense of the Congress that the Attorney General should focus any prosecutorial efforts on those persons who (A) offer Internet sports betting in the United States or (B) process payments for illegal Internet sports betting in the United States.” In essence, if you’re a company such as Bet on Sports or Bodog, operate an online sports book, and accept real-money customers from the United States, you are in strict violation of federal law. It’s as simple as that. Unlike the UIGEA, HR 6663 states explicitly what is allowed and what is not allowed.

Moreover, HR 6663 grants an exemption from prosecution to online poker sites like PartyPoker and Pacific Poker that accepted U.S. customers prior to the UIGEA’s passage in October 2006, but have since pulled out of the American market. Here’s the text to prove it: “In light of the foregoing and in deference to long-standing constitutional requirements of fair notice and transparency in the criminal law, the Congress finds it necessary to clarify that criminal statutes applicable to gambling do not apply to any person who offered Internet gambling services that did not include sports betting prior to October 13, 2006, and who ceased offering Internet gambling services to persons in the United States upon passage of the UIGEA.”

The passage I just quoted from HR 6663 is critical. Remember that Party Poker and 888 (which is Pacific Poker’s parent company) are both publicly traded companies on the London Stock Exchange. You, as a consumer, can actually purchase shares of these two entities just as you would any major company like 3M or Ford. Each company is, for all practical purposes, in limbo concerning its relationship with the U.S. Government. If either wants to forge any strategic partnerships, doubts can be raised concerning their status in the eyes of the U.S. Attorney General’s office. I can tell you first-hand from poker rooms that work with PokerSourceOnline.com: This is a major issue.

One of the highlights of HR 6663 is its Rule of Construction, which is given at the very end of the document: “No provision of this Act, or any amendment made by this Act, shall be construed as clarifying or implying that Internet bets or wagers, other than sports bets or wagers, which were accepted subsequent to October 13, 2006, are in violation of Federal law.” If you’re a fan of legalizing online poker in the United States, HR 6663 is a real winner.

However, you’d think organizations like the online poker industry’s main lobbying group, the Poker Players Alliance (PPA), would be gung-ho about the prospects of bringing HR 6663 to the floor of the House of Representatives for discussion. You couldn’t be further from the truth. The PPA disagrees with the following statement given mainly as background information in HR 6663: “To date, all Federal Internet gambling prosecutions have involved sports betting, creating a lack of authoritative court decisions on the applicability of other federal criminal statutes to Internet poker and casino-style gambling.”

A press release distributed by the PPA and authored by its Chairman, Alfonse D’Amato, stated, “The PPA remains concerned with the implication HR 6663 asserts in that the UIGEA has made Internet poker an unlawful activity that needs special protection from prosecution.” I’ve done dozens of radio shows about the issue and every time, my comment is that the little piece of language inserted in HR 6663 has literally divided the industry.

I really don’t see a major piece of pro-online poker legislation passed without the PPA’s help. The organization is composed of over one million members from all walks of life. Its membership is spread out throughout the country. The PPA even launched a political action committee, Poker PAC, to influence Congressmen’s wallets directly. You can see what a challenge it would be to try to pass legislation without this powerful force behind it.

In case you’re wondering, the PPA cites a case regarding MasterCard in 2002. D’Amato claims that the Wire Act of 1961 was interpreted as applying “only to Internet sports wagering, and not to Internet poker. Thus, HR 6663 only confuses a clear judicial standing on this matter.” The UIGEA’s basic premise was that any activity that was illegal before it was passed remains illegal; no new illegal activities, such as online poker, were introduced.

However, I ask, is it worth it? Is it worth dividing an entire industry over a few words? HR 6663 clearly takes aim at sports books. Sure, our business at PokerSourceOnline.com would suffer somewhat, as we’d have to pick and choose what rooms we could offer to our American customers. However, in the process, online poker would essentially be free from prosecution by U.S. authorities. We could once again actively market to the largest group of poker players on the face of the Earth.

In the end, let’s work together. Encourage your Congressmen to support HR 6663.

Jay Lakin is Co-Owner and Vice President of PokerSourceOnline.com