Sunday, July 11, 2010 | 2 a.m.
It’s another sweltering afternoon in Las Vegas, and a 33-year-old woman is sitting in front of her home computer wearing pink fuzzy slippers as she breaks federal law yet again.
Two cats brush up against her sweatpants as she pulls up a website called PokerStars.com and clicks “cashier” and then “buy chips.” She enters her bank routing number and checking account number onto the site, along with a promotional code grabbed from a magazine ad. Within seconds, she has deposited $10 into an online gambling account, with PokerStars matching that amount. The money is instantaneously available for play — no schlepping to the casino, sitting down at a table or waiting for the dealer to shuffle cards. With a click of the mouse, she enters a fast-moving game, becoming one of more than 200,000 people worldwide — many of the them in the United States — playing for money on PokerStars at this very moment.
As the World Series of Poker tournament draws thousands of poker aficionados to Las Vegas this month, many gamblers prefer to play in the privacy of their homes despite efforts by the federal government to make that more difficult.
Hundreds of thousands of Americans are still gambling online weeks after a federal law prohibiting Internet gambling transactions went into effect June 1 — nearly four years after it passed Congress in October 2006.
“It’s not stopping people who have an online checking account and a high speed Internet connection,” said John Pappas, executive director of the Poker Players Alliance, a group of more than 1 million poker players that is lobbying for the legalization of online poker. “This has really been a bump in the road rather than a major disruption,” said Pappas, adding that many members have successfully migrated to various underground payment methods over the past three years.
The Las Vegas woman who frequently plays poker online isn’t familiar with the rocky regulatory history of gambling on the Internet. But she knew something was awry a few days ago when she tried to deposit money on PokerStars using her debit card. Although that method previously worked on another gambling site, PokerStars told her that U.S. banks wouldn’t accept the transaction. The site suggested she try “Instant eCheck” instead, a quick fix that involved clicking a different box on the website and entering her checking account information.
Electronic checks are among ways poker sites and customers are bypassing federal restrictions on online gambling. Some players are wiring cash from bank accounts using services such as Western Union and MoneyGram. Others have gone a step further, setting up bank accounts in countries that are not subject to U.S. banking laws.
Although the Justice Department has long maintained that Internet gambling is illegal, regulators and enforcement agencies have not targeted individuals for prosecution, giving many gamblers the impression that what they are doing is legal, or at least acceptable enough to let friends and colleagues know they are doing it.
And yet, there’s no mistaking what the federal government’s position has been for years. In 2007, a U.S. attorney in Missouri testified before Congress that Internet gambling “poses an unacceptable risk due to the potential for gambling by minors and compulsive gambling” and is ripe for fraud, money-laundering and involvement by organized crime. As an example, federal prosecutors in New York in 2005 charged alleged associates of the Gambino crime family with setting up false, offshore Internet gambling accounts that allowed them to deduct losses on their income taxes using anonymous messenger bettors — part of an illegal gambling and money-laundering scheme that resulted in multiple guilty pleas.
Such concerns are far off the radar for the Las Vegas woman, who talks about playing online as one might discuss playing Scrabble, reading magazines or surfing the Internet. Nor does she feel as if she’s breaking any laws — although she has declined to reveal her identity, just in case.
“I can sit at home and play whenever I want and whatever I want. I play for fun, for pennies. Or I’ll play $1 or $5 tournaments,” she said. “I can just wake up and play without having to take a shower and leave the house.”
Rather than targeting players, websites or even banks, the Justice Department is focusing enforcement efforts on the middlemen who process Internet gambling transactions for Web casinos.
The latest evidence is the April arrest of an Australian man in Las Vegas on charges that he processed $500 million in Internet gambling transactions for U.S. players. According to a federal indictment, Daniel Tzvetkoff processed the bets using a primary U.S. banking system for electronic fund transfers called the Automated Clearing House network, wiring the funds to offshore Internet gambling companies. Tzvetkoff disguised the transactions so that banks wouldn’t know they were gambling-related by creating dozens of shell companies with unrelated names and phony websites. He stopped processing gambling transactions in March 2009 after major Internet gambling sites accused him of stealing from them, according to the indictment. He is charged with four counts including bank fraud, money laundering and violating the Unlawful Internet Gambling Enforcement Act.
Online gambling slowed in the United States after the 2006 passage of the act, which prompted some high-profile gambling websites to stop accepting wagers from Americans and instead restrict their business to foreign shores. But traffic picked up once players found other ways to gamble online. In the years leading up to the law taking effect last month, some websites have continued to serve the U.S. market as they used high-profile poker players to lobby Congress to legalize Internet gambling, especially online poker.
Well before 2006, many U.S. banks responded to a growing crackdown by voluntarily blocking credit and debit card transactions for online gambling transactions, which are identified by a specific banking code.
Some sites that still take U.S. bets are using loopholes in the 4-year-old law to their advantage, online gambling proponents say. Although the act specifically prohibits credit and debit card transactions, it doesn’t rule out electronic checks, mailed checks or some of the other creative ways players are funding gambling accounts.
Moreover, those who handle the bets and payouts are figuring out how to disguise the nature of Internet gambling transactions despite banking efforts to block those that are coded as such. That’s one of the many reasons why the banking industry has always opposed the law. The law turns banks into “police, prosecutors and judges in place of real law enforcement officers,” said Jonathan Snowling, a spokesman for the American Bankers Association.
The act “exposes banks to unwarranted liabilities and leads to compliance traps that damage the competitiveness of the American payments system,” Snowling said. “This is really an unprecedented delegation of governmental responsibility with no prospect of practical success in exchange for the burden it imposes.”
Besides spurring several Internet gambling providers to get out of the business, the 2006 law has slowed online gambling profits by spooking some U.S. players fearful of further enforcement efforts by the federal government.
Some casual players no longer play online, in part because they had grown accustomed to using credit cards that are now off-limits, said Dan Michalski, editor of poker blog Pokerati.com in Las Vegas. “The crackdowns have weeded out some of the more recreational players,” resulting in more difficult games for occasional players, he said.
And yet, the majority of games available for play on PokerStars and FullTilt, the two largest poker sites available in the United States, are small-stakes games for pennies or a few dollars per hand.
Which makes the Las Vegas woman — who doesn’t fit the stereotype of the online gambler as a bleary-eyed, cash-poor professional — closer to a typical online poker player.
Playing penny-ante games that bricks and mortar casinos couldn’t afford to offer, even in a recession, she might lose or win a few bucks a day.
Instead of organizing home games as she did in her home state of Michigan, the four-year resident of Las Vegas, like many of her local friends, can easily find a low-stakes game online.
Live poker is more social than online play, but she likes having the option of disabling the “chat” mechanism online to prevent unwanted comments and undesirable personalities at the poker table.
She also likes variety, trying poker offshoots such as Badugi that aren’t commonly available in casinos, especially at low stakes.
“It’s more relaxed. And it gives me absolute freedom,” she says, leaning over to pet one of her cats. “I don’t have to go down to the casino and park the car.”
Even if online gambling is against federal law, authorities have yet to turn up the heat on players; the temperature outside, on the other hand, is 106 degrees.