The History of Poker—Online Poker—UIGEA and Black Friday

THE HISTORY OF POKER

ONLINE POKER—UIGEA AND BLACK FRIDAY

The 2003 WSOP Main Event had a field of 839 players. The tournament was won by Chris Moneymaker, an accountant who got free entry by winning a PokerStars online satellite tournament. His legendary win led to a massive poker boom in the USA, both online and offline.

Within three years, the number of attendants at the tournament grew to 8,773 players. Online poker sites like PartyPoker, PokerStars, and Full Tilt Poker also thrived during this time.

However, the new booming industry received its first hit in the form of the UIGEA (Unlawful Internet Gambling Enforcement Act of 2006), a bill passed by the US government that prohibited financial companies from dealing with online gaming companies.

Some sites like PartyPoker ceased their operations because of the change in laws. Still, some like PokerStars and Full Tilt Poker continued serving their US customers, interpreting that the act didn't apply to online poker.

However, everything changed on April 15, 2011, when the US Department of Justice seized the domain names of the three biggest poker sites. This article looks at the situations that led to this day, dubbed "Black Friday" in poker history.

UIGEA 2006 AND ITS IMPACT ON ONLINE POKER

In 2006, a law was passed in the US Senate that prohibited financial companies from dealing with unlawful online gaming sites. At this point, the online poker industry was in full swing with several competing online poker sites.

The law instantly forced public companies like PartyPoker to cease their US operations. However, with no shareholders to appease, private companies like PokerStars and Full Tilt Poker decided to continue functioning in the American market regardless of the regulations.

Within three years of its passing, the bill became law, even though it had its share of harsh critics in the form of some US Senators and the World Trade Organization.

By 2011, a few online poker sites were still functioning in the USA regardless of the legal restrictions.

However, on April 15, 2011, the US Department of Justice seized the domain names of the biggest online poker sites, locking the players out of their accounts and starting legal proceedings against the companies.

APRIL 15, 2011—BLACK FRIDAY AND ONLINE POKER

April 15, 2011 has been dubbed as "Black Friday" for online poker. In many ways, it was akin to an economic or natural disaster. Eight years after the UIGEA was passed, the US DoJ shut down the websites of the leading poker sites at the time—PokerStars, Full Tilt Poker, Absolute Poker, and Ultimate Bet.

While the companies were affected, it could be assumed that they knew it was coming. It was the customers who lost access to funds locked in their accounts. Black Friday became a pivotal moment for online poker in the USA.

THE CHARGES BEHIND BLACK FRIDAY—UNITED STATES V. SCHEINBERG

In 2011, the US Government filed a federal criminal case against the three most prominent online poker companies in the USA at the time. These companies were PokerStars, Full Tilt Poker, and Cereus, which ran Absolute Poker and Ultimate Bet.

The government accused the companies of violating the UIGEA and engaging in bank fraud and money laundering. The government also filed a companion civil suit against the three companies, seeking recovery of assets worth more than $3 billion.

The indictment was unsealed on April 15, 2011, after which the sites immediately stopped accepting US customers. The domain names for the sites and the companies' bank accounts were also frozen, locking an unknown number of players' funds in them.

By September, the civil suit was amended to accuse the founders of Full Tilt Poker—Howard Lederer, Chris Ferguson, and Rafael Furst—of misappropriating player funds. The site was alleged to be more like a "Ponzi scheme" than an online cardroom.

When the site's bank accounts were frozen by the US government, it was discovered that Full Tilt Poker did not have enough funds to cover the players’ balances. Furthermore, the discrepancy was caused due to payments made by the company to their executives. This effectively meant that Full Tilt Poker was using its players’ funds to pay its employees.

To settle the case, PokerStars stepped in and offered a buy-out of Full Tilt Poker and to return all US players’ funds owed by the company. The case was finally settled in 2012 when the US government dropped all charges against Full Tilt Poker and PokerStars following a purchase of the former by the latter and a massive settlement.

HOW BLACK FRIDAY CHANGED ONLINE POKER

Online poker is far from dead today, and there have been steady albeit inconsistent steps towards legalization. While online poker is still nowhere near its peak today, online gaming verticals like sports betting and fantasy sports have been on the rise. with many hoping the same for poker in the future for the USA.

THE MANY REACTIONS TO BLACK FRIDAY

In the following article, we look at the aftermath of Black Friday and how poker companies and players dealt with the “new normal.” We also understand how this event led to changes in the country's online and live poker scene.

Note this is a reference article on the history of online poker in general. It is for information and entertainment only. It is not related to, nor a reflection of, Global Poker, its views, practices, products, content, or its games.