The History of Poker—Online Poker—Post-Black Friday

THE HISTORY OF POKER

ONLINE POKER—POST-BLACK FRIDAY

On April 15th, 2011, now infamously known as “Black Friday” in the online poker community, the U.S. Department of Justice unsealed an indictment against the biggest online poker companies in the country and shut down their websites.

As we discovered in the previous article, the event became a pivotal one for online poker in the USA. This article looks at the aftermath and the effects of Black Friday on poker sites, professional and amateur players, and poker in general.

However, before we dive into the reactions to the day, let’s first quickly look at the events leading up to it that were in the making for years.

EVENTS LEADING TO BLACK FRIDAY

In 2003, online poker went through a massive boom never seen before. After qualifying for free with a PokerStars satellite tournament, Chris Moneymaker won the World Series of Poker Main Event that year.

Over the next few years, several online poker sites were catering to the ever-growing demand, with sites like PartyPoker, PokerStars, and Full Tilt Poker emerging as market leaders.

Things changed in 2006 when the U.S. government passed the UIGEA, prohibiting financial institutions from dealing with online gaming transactions. As a result, public companies like PartyPoker decided to leave the U.S. market. Still, some privately-owned companies chose to continue operating in the country, pretending that the UIGEA didn’t really apply to online poker sites.

On Black Friday, years after the passing of UIGEA, these sites were hit the most as the government seized their websites and, perhaps more importantly, their financial assets. In addition, the freezing of bank accounts locked players out of their funds until the legal case between the government and the poker companies was settled.

As for the legal aspect, the government filed a federal criminal case against the founders of the three-biggest online poker sites (“The United States v. Scheinberg”) and also a companion civil case (“The United States v. PokerStars et al.”). The government alleged the online poker sites violated the UIGEA and accused them of being involved in money laundering and bank fraud.

The indictment of the criminal case was unsealed on April 11th 2011, leading to the shutdown of the online sites.

However, it was only the first punch in a lengthy legal boxing match. Over the next few months, the case revealed several shocking facts and lead to PokerStars absorbing its biggest competitor.

THE FIRST DOMINO FALLS

Daniel Kim Tzvetkoff, the founder of Intabill, was arrested in April 2010 on his arrival in Las Vegas. Intabill was an online billing company that at the time was plagued with legal issues ever since the cash flows started drying up due to the aftermath of the Great Recession in 2008.

The company, already going through internal turmoil, was accused by the FBI of laundering money for online poker sites. Since the UGIEA was designed to target financial entities, it allowed the government to make a strong case against Tzvetkoff. Facing up to seventy-five years in prison, he was offered a much nicer alternative route—become a government informant and help bring down the biggest online poker sites in the USA.

He was offered a way out because the government needed his insider knowledge to create a compelling case. There were no federal laws against online poker, so the government decided to use the UIGEA and a few other niche laws as the basis for the case.

POST-BLACK FRIDAY FOR ONLINE POKER SITES

The immediate effect of Black Friday was the seizure of five URLs in total—PokerStars.com, Fulltiltpoker.com, Absolutepoker.com, Ultimate.com, and UB.com. These URLs were owned by the three most prominent online poker brands in the USA.

Additionally, the U.S. government also froze the bank accounts used by the companies, rendering their funds (and the players’ deposits) locked and inaccessible. However, by April 20th, 2011, the government started allowing sites like PokerStars to refund players’ balances.

For Full Tilt Poker, the indictment was one of the last nails in its coffin. The company faced several legal issues, and the investigation revealed the player-deposited funds were moved around by some executives at the company.

By June 2012, the case was settled with PokerStars buying out Full Tilt Poker and ultimately agreeing to pay back their customers. This move also made PokerStars huge.

POST-BLACK FRIDAY FOR PLAYERS IN THE USA

In general, most players were surprised to see the biggest online poker sites taken down without any warning. While UIGEA was passed in 2006, online poker was running successfully for years by 2011. It wasn’t uncommon for professional online players to have millions of dollars in their accounts, which were now locked.

On an individual level, players had no recourse but to wait for the case to settle, but organizations like the Poker Players Alliance lobbied against the government move.

The absurdity of the events on April 11th, 2011, and the chaos that followed for online poker players, made national news. They brought the issue of legalizing games of chance to the forefront of American politics. Unfortunately, many U.S.-based players ended up losing their livelihood over the case.

Yet, like all other days, Black Friday also passed for poker players, and many recovered their funds after the case was fully settled.

POST-BLACK FRIDAY FOR THE POKER MARKET IN THE USA

The 2011 World Series of Poker Main Event had the lowest percentage of American players. This was a direct result of Black Friday, as many players qualified by playing the PokerStars online satellite tournaments. According to some sources, the three companies indicted controlled up to 95% of the online poker market in the USA.

Additionally, the combined marketing spend for the three companies amounted to $200 million, which was lost as companies severed ties with them. Companies like ESPN and shows like Poker After Dark withdrew their sponsorship deals with the persecuted online poker companies.

Interestingly, the impact on live poker was limited in the wake of Black Friday. Most online poker players were used to the comfort and convenience and were not likely to visit a physical casino far away from their homes. While there was a short-lived pump in the live poker scene, it seemed to validate the theory that online poker and live poker can be two completely different games in many ways.

A PIVOTAL MOMENT BUT FAR FROM THE END OF ONLINE POKER

Even though Black Friday was a pivotal moment for online poker, it was far from the end of it. There have been several developments in the legal framework, and it continues to evolve to this day.

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.