Offshore Poker Sites Shut Down In Expansive DOJ Probe
Friday, April 29, 2011

Three offshore gambling companies, Antigua-based Absolute Poker, and industry behemoths Alderney-licensed and Ireland-based Full Tilt and Isle of Man-based Pokerstars, are embroiled in a legal dispute with US authorities after allegedly creating sham payment-processing frameworks to unlawfully provide Internet gambling services to the United States.

Under the terms of the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006, offshore operators are effectively blocked from access to the lucrative US internet gambling market. Specifically, the Act prohibits gambling businesses from knowingly accepting payments in connection with unlawful internet gambling, including payments made through credit cards, electronic funds transfers, and checks.

US authorities allege that the three companies - two of which are industry leaders - circumvented federal laws and ‘tricked’ banks into processing illegitimate payments. The three sites are to be charged with illegal gambling, bank fraud, and money laundering accordingly, US prosecutors said. The US government is thought to be seeking USD3bn in compensation from the companies.

Although the sites' domains were temporarily seized, US authorities have taken no action to deter the three companies from disbursing online cash back to players. US users of the sites have been reassured that funds are safe.

Concerns have been raised over the companies’ financial stability as in some cases advertising on televised events has been pulled. There is particular concern in the case of Full Tilt Poker which is said to have cancelled some of its events.

Pokerstars, suffering from the lack of US online players, was forced to reduce guaranteed prize pools on a number of its weekly highly-subscribed, large-pay-out tournaments, which take place over the weekend. The forthcoming high stakes Onyx Cup, which was expected to have buy-ins of between USD100,000-USD300,000 was confirmed cancelled.

It is reported that Antigua and Barbuda, on behalf of Absolute Poker, will take the matter to the World Trade Organization, arguing that the UIGEA goes beyond the realms of what is acceptable in international law, particularly with respect to market access and in regard to discriminatory national treatment, as it did previously in 2006 when it won compensation after a long battle.

Shares in gambling companies who can lawfully serve US clients skyrocketed on news of the probe, some of them receiving an influx of US players shortly after the three companies’ US domains were pulled.

The repeal of UIGEA has long been discussed since its introduction in 2006, with some describing it as unenforceable. Analysts have surmised that the latest crackdown may in fact present the offshore gambling industry with hope that US authorities are preparing to remove the legal barriers to outside gambling operators in favour of more stringent controls on operators targeting the US market.