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Online poker players face legal questions

As the World Series of Poker was in full swing at the Rio hotel-casino, Internet poker site officials danced around an issue looming over the tournament: Is online poker legal?
A poker player tapes over the .com logo on his hat just before he begins playing at the World Series of Poker in Las Vegas. Tournament rules require that no .com can be visible during play because of the question of legality of online gaming. Laura Rauch / AP file
/ Source: The Associated Press

Last week, Tao nightclub was swathed in red and black as music pulsated and go-go dancers gyrated on raised platforms along the wall. Everything from the "reserved" signs to the billiard table felt to the models' Chinese-style dresses bore the "" label.

The only thing missing was the online gambling site's flamboyant founder, 45-year-old Canadian Calvin Ayre, who was nowhere to be found.

"He'd have girls all around him and he'd be the life of the party," said Ronn Torossian, a publicist and acquaintance familiar with Ayre's celebrating ways.

But the billionaire who graced Forbes magazine's March cover decided to make himself scarce after federal authorities arrested online gambling site BetOnSports PLC executive David Carruthers on July 16 as Carruthers transferred planes at Dallas-Fort Worth International Airport. A federal judge ordered BetOnSports to stop accepting bets placed from within the United States, and prosecutors are seeking the forfeiture of $4.5 billion, plus several cars, recreational vehicles and computers from Carruthers and 10 other indicted defendants associated with the Costa Rica-based sports-betting operation.

As the World Series of Poker was in full swing at the Rio hotel-casino, Internet poker site officials danced around an issue looming over the tournament: Is online poker legal?

Tournament organizers and the U.S. Justice Department say no. The players, thousands of whom qualified in cash-paying Internet tournaments, say yes.

"I've got no certainty whatsoever," said Ayre, speaking by telephone from Canada, days after Carruthers' arrest.

"I don't believe any senior executive of any online gaming company is going to be going into the United States for the foreseeable future," Ayre said. "It's not just me, and I've talked to a lot of them."

The World Series of Poker's uncomfortable relationship with online gambling took center stage in May 2003, when an unknown accountant named Chris Moneymaker qualified through a $40 online satellite tournament and went on to win the $2.5 million main event to become the poster child for the online poker revolution.

Advertising by poker sites on mainstream television exploded — and then the Justice Department intervened.

In a June 11, 2003, letter, deputy assistant attorney general John Malcolm warned the National Association of Broadcasters that the department considered Internet gambling to be illegal, and said, "any person or entity who aids or abets" online betting "is punishable as a principal violator."

Major networks reacted by forcing online poker companies to create "dot-net" sites, on which poker was played only for fake money and no reference or link would be made to the "dot-com" versions, where billions of very real dollars are wagered every year.

Thus,, the so-called "World's Largest Poker School," has become an official sponsor of the tournament, its logo visible every time a flop hits the felt., the moneymaking reason for its existence, lurks in the shadows.

By some counts, about half of the some 8,700 field of players in the World Series' main event qualified through online satellite tourneys. boasted more than 1,600 qualified on its satellites. is reported to have sent more than 800 qualifiers and says it sent some 700. Other sites also contributed to the huge number of players filling the tournament's tables.

"I don't talk to the dot-coms, I don't," said tournament commissioner Jeffrey Pollack, when asked about the thousands who qualified online through dot-com sites.

He insisted that those who qualify in tournaments simply pay cash as individuals to enter the $10,000 per seat event.

"Online gaming is illegal," he said. "Everything we do, whether it's selling hospitality at the Rio or selling product placement with on our felt, is done with a sharp eye on the regulatory environment, the rule of law and standards embraced by other companies that engage dot-nets, namely every major broadcasting company in the United States."

The televised tournament's first day was even delayed by several minutes as organizers announced that anyone sporting a "dot-com" logo would not be allowed to play.

About half that day's field of more than 2,000 players flipped shirts inside-out, and workers circulated with rolls of black tape, covering any "dot-com" symbols they could find.

"Tape or not, I still look good," said David Daniel a 31-year-old player from Bristol, Tenn., who qualified by winning $10,000 in a $160 "double-shootout" satellite tournament online and was wearing a "PokerStars___" hockey jersey. "I think they should have given them notice, because they have dot-net shirts, too."

Last month, the U.S. House passed a bill that bans Internet gambling, except for horse race betting and state lotteries, in an attempt to close what many consider to be a legal loophole in the 1961 Wire Act, one of a series of laws meant to crack down on racketeering.

The Wire Act explicitly forbids businesses from using a wire communication facility to assist in placing bets on "any sporting event or contest." But the wire law doesn't cover other types of casino betting, a federal appeals court in New Orleans has ruled, leaving some doubt whether prosecutors can shut down Internet poker and other casino games.

With or without a new law from Congress, the Justice Department interprets all online gambling, including poker, to be an illegal trade. Other countries allow Internet gambling, so online companies have set up operations outside the U.S. and its laws but with easy access to U.S. players and their computers.

"Online poker is online gambling. And online gambling, we would say, is illegal," Justice Department spokeswoman Jaclyn Lesch said.

Poker advocates suggest the department's enforcement practices don't back up that assessment. Indictments dating to 1998 have focused on operators of online sports books, not sites that offer only poker.

Not only are there hurdles arresting the operators of such sites in Costa Rica, Aruba, the Isle of Man and Gibraltar, but many argue poker tournaments online are not gambling.

"You get a prize for a competition," said Howard Krent, dean of the Chicago-Kent College of Law at the Illinois Institute of Technology.

Prosecuting a business for promoting a dot-net site which does not have direct Web links to its dot-com cousin also makes for difficult legal work in court, he said. "That's a pretty good ruse, as they say," he said. "This is an area with lots of line-drawing that's uncomfortable."

Large numbers of poker players who make a living from the online game have joined a group called the Poker Players Alliance to lobby Congress to stop the Internet gambling bill from passing the Senate.

Since the House passed the bill July 11, membership in the alliance more than doubled to 75,000. Alliance president Michael Bolcerek warned the bill would "drive the business of poker underground."

For now, it remains out in the open.

Jon Friedberg, a 31-year-old business owner who lives in Las Vegas, makes $150,000 a year playing poker mostly on Winning several online tournaments earned him a seat at several events at the World Series, one of which he won for $526,185.

The specter of the House bill going forward is not putting him off his game, nor did it seem to bother the thousands of players and fans roaming through the halls of the Rio hotel-casino, which was covered with displays touting sites from to

"I'm really not worried at all," Friedberg said. "Part of being a poker player involves just fearing nothing in life. It's probably not the best approach in life in certain things, but it works well in poker."