Time To Fold

Internet gambling in the U.S. is dead.

Well, not dead. As with any "vice" with high demand someone will find a way. Somewhere in the ether, the ghost of Al Capone is cackling.

But with the arrest of former Neteller executives Stephen Lawrence and John Lefebvre American gamblers may be forced to visit brick and mortar casinos or seek less legitimate money transfer systems.

Neteller, based in the Isle of Man, offered U.S. citizens a method to tranfer funds to international accounts allowing those funds to then be transferred to popular online poker sites such as Pokerstars, UltimateBet, FullTilt and Bodog. Its InstaCash system offered security and legitimacy previously only seen in cold hard cash transactions in real world casinos.

Since passage of the Unlawful Internet Gambling Enforcement Act, federal agents have struggled with how to enforce the new code. The strategy is now apparent with the arrest of Lawrence and Lefebvre. Attack the money. Follow the old boxing maxim "kill the body and the head will die". Without a method to transfer funds in a secure, above board manner online gambling sites will wither and die.

Maybe. Maybe not.

Certainly online gambling has taken a hit. Since passage of the bill, Neteller's stock price has fallen 60%. All but a few rebel online poker sites immediately stopped allowing U.S. players in cash games. Now the rebels have also folded.

Pokerstars and FullTilt no longer allow cash transfers via NetTeller. Bodog, the most rebellios of the rebels, went further effectively freezing U.S. cash in current Neteller accounts.

So what will poker players do? Most will simply fold the tent. Some will seek other means of funding; possibly less legitimate means. The gamble will not only be in the cards but also in whether they will ever see their money again.

Those like me who primarily enjoy live play will be less effected. However, like me, those players who live in states without casinos will move further and further into the underground live games. It is in these dark places where they will face the volatile mixture of large amounts of cash poured into an illegal operation. It is not rare to hear tales of robbery, intimidation and even visits to the hospital or the morgue.

As for the government? All those who voted for the bill pat themselves on the back, congratulating themselves for saving the poor innocent masses from poverty of the wallet and poverty of the soul. Few will note the massive loss of revenue. It is not widely known, but winnings in gambling, even illict, are taxable. The primary problem with this revenue stream is collection. Maybe, just maybe, one brave politician will wonder aloud how much fiscal benefit could be realized by cooperation with gambling sites to accurately track winnings and ensure they are taxed.

Meanwhile, two businessmen await trial, gambling will continue and somewhere out there, Al Capone's ghost is wringing his hands wishing he could grab a piece of the action.