Nanny State

The Government Blames Full Tilt Poker for the Disruption the Government Deliberately Created

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It is not clear to me whether Full Tilt Poker actually defrauded its customers, as Preet Bharara, the U.S. attorney for the Southern District of New York, claims. Although he says the company failed to properly segregate poker players' funds and did not have enough cash on hand to pay them all off at once, he does not cite any specific victims who lost money as a result of these alleged failures. But at least what he is now claiming sounds like it could be a real crime, in contrast to the offenses listed in his April 15 indictment of 11 people associated with Full Tilt and its two leading competitors, which boil down to helping Americans play poker. "Full Tilt was not a legitimate poker company," Bharara says in the press release (PDF) he issued yesterday. Don't be fooled: In Bharara's eyes, there is no such thing as "a legitimate poker company," at least not in the Internet context. According to him, any company that serves online poker players in the U.S., no matter how scrupulously honest it is with its customers, is a criminal enterprise.

The anti-poker crusader's disingenuousness is further illustrated by his comparison of the consumer fraud he is now claiming, which could actually have ripped someone off, to the bank fraud alleged in his April indictment, which consisted of tricking financial institutions into handling poker transactions in exchange for their customary fees—a "fraud" that did not deprive anyone of a single penny. And consider the puzzling lacunae in this passage from the press release (emphasis added):

In addition to its failure to segregate funds and its constant stream of distributions to owners, the proposed Amended Complaint alleges that the company faced a growing shortfall in 2010 related to its inability to collect funds from U.S. players, a fact which it did not disclose to players. Beginning in August 2010, Full Tilt Poker's payment processing network in the United States was so disrupted that the company often could not withdraw money from U.S. players' bank accounts in order to fund credits to their online gambling accounts. In order to maintain its false image of financial security, Full Tilt continued to credit player accounts without disclosing its inability to fund those credits

It was the U.S. government, of course, that deliberately disrupted Full Tilt Poker's payment processing network in the United States in the name of preventing Americans from playing online poker, which explains the company's "inability to collect funds from U.S. players." The government created the very situation it is now blaming on Full Tilt Poker. Furthermore, if it turns out that Full Tilt did something that fits the common-sense understanding of fraud (as opposed to the government's arbitrary, victimless definition), that only reinforces the point that prohibiting online poker exposes players to hazards they would not face in a legal, open market. As with drugs and prostitution, legalization is the antidote to black-market ripoffs.

Nick Gillespie discusses the new Full Tilt allegations here and here. For more on the crackdown that disrupted the system for transferring money between players and poker sites, see my 2008 Reason story "Some Bets Are Off."