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US Government Seizes Poker Player’s Funds: Questions and Answers

It’s the story that most of the online poker world is currently focused on: this week, word came down that the US Government had moved to seize millions of dollars in funds intended as cash outs for online poker players. While the story is still developing, there’s enough confusion on the issue that we figured we’d put together a quick FAQ on the events so far and what the implications are for online poker rooms and players.

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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