Affiliates and Poker's Black Friday

So far, no affiliates have been arrested. That is what passes for good news, these days, in the world of Internet gambling.

The problem for affiliates, operators, payment processors and even players is that the world has become unpredictable, because the U.S. Department of Justice (DoJ) has decided to wage a war of intimidation against Internet gambling. The reasons for the war are clear. The DoJ is missing the two essentials to any prosecution: a statute that clearly makes the activity illegal and a defendant physically present in the US. So, the feds have announced showy legal actions against easy targets about every other year.

Online poker would normally not be an easy target, since a Court of Appeals ruled the main federal anti-gambling statute, the Wire Act, is limited to bets on sports events and races. And the US does not allow trials in absentia: a defendant must be physically present in court. The US cannot extradite someone unless he falls under the terms of an extradition treaty. Very few treaties include ‘gambling’ on their list of crimes. Even then, the activity must be illegal in both countries. No nation would extradite someone it has licensed, to be tried for the very activity for which it is licensed.

So, instead, the DoJ has decided to scare everyone into abandoning the American market. And it has been strikingly successful – and yet, also, a horrible failure. The problem for everyone associated with the industry, as well as for the DoJ itself, is that prohibition is not regulation.

Every action by the federal government makes it more difficult for it to go after the next operator. The UIGEA, rammed through by the failed politician, Bill Frist (R.-TN), scared all of the publicly traded gaming companies out of the US market. This vacuum was quickly filled by companies whose owners were difficult to find. Then, prosecutors went after payment processors, making it more difficult for players to find legitimate ways to send their money to betting sites. Now, unknown operators, with no connection to the US, are handling millions of Americans’ dollars, with no way for the federal government to trace the funds.

On Black Friday, the feds seized .com domain names. Gaming sites immediately switched to .eu and .uk, and cut off all physical contact with the US. Even the present American operators can’t be extradited, so what hope is there for the DoJ to bring future foreign operators here to stand trial? Scaring away well-known poker names means that newcomers, some of whom will undoubtedly be sleazy, will take their places. If the multi-billion-dollar US online poker market becomes too hot for licensed companies, operators without any licenses, who won’t even reveal what country they are in, will be glad to run the games.

When people want something, businesses arise to fill the demand. How much more so when the activity, online poker, is not even clearly illegal? If the commercial goods or services are not legal, then by definition, the organisations will be criminal. Prohibition created modern organised crime, by outlawing alcoholic beverages.

So, what are affiliates supposed to do?

Since the DoJ is acting like this is Prohibition, the answer is to think like someone who wanted to be involved in the liquor business, but did not want to be arrested as a moonshiner or bootlegger. If the gaming site is not violating any law, there is little danger in being associated with it. There are some archaic state laws that can be read as prohibiting the advertising of even legal gambling. But there are not very many of these, and they are of questionable constitutionality. But if the gambling is illegal, anyone associated with it risks being charged with a crime. There are three main legal theories for finding criminal liability for someone who is not actually taking bets:

1) Aiding and abetting, also known as accomplice liability, is a legal doctrine that makes a person liable for crimes committed by another. Referring residents of the US to a site where they can make real money bets could lead to a charge of running an illegal gambling operation, even though the affiliate never takes a wager itself. If the gaming site is breaking the law, so is the affiliate, especially if it is paid for referrals by receiving a share of the money wagered or lost.

2) Conspiracy, unlike aiding and abetting, is a separate crime. There is greater risk to society when two or more people agree to commit a crime than when one person is acting alone. Conspiracy is often called the prosecutor’s friend, since it takes so little to get a conviction. The crime that is the goal of the conspiracy need not be completed, or even attempted. All that is required is an agreement and an act in furtherance of the conspiracy. Of course, agreeing to help with online poker can only be a conspiracy if online poker is illegal.

3) Special gambling crimes. US federal law is limited to people who are in the business of gambling. This means that mere players cannot be charged. But it also means that anyone who is involved in the business can be, completely apart from theories of aiding and abetting or conspiracy. The indictments of Black Friday included charges under the federal Illegal Gambling Business Act. This makes it a federal felony if five or more people do more than $2,000 in business a day in violation of state gambling laws. The only state law cited is New York’s misdemeanour anti-gambling laws. There is an obvious problem with using a state misdemeanour to charge federal felonies against foreign corporations licensed by and operated in foreign countries. But the point here is that courts have held that a person who helps an illegal gambling business and shares in the revenue is in that business.

In my books, INTERNET GAMING LAW, both first and second editions, I discuss how affiliates and others can decrease their risks of being named in an indictment. It is not necessary to avoid linking with gaming operators. But even the most legitimate sites should be careful about how they structure their arrangement so that there is no possibility of being found to be aiding and abetting, conspiring, or in the business of gambling. The more a non-gambling website shares in the profits, the more likely it will be found to be a partner of the gambling business. Charging the gambling website a flat fee for referrals, not contingent on whether the patron wins, loses, or even places a bet, allows the non-gambling web operator to argue that it was just acting like the phone company.

Unless the DoJ is making one of its showy attacks on major operators, it is only interested in easy cases, organised crime and consumer scams. Easy cases mean sportsbetting, with defendants who can be found in the US. Even in the recent poker indictment, the DoJ immediately arrested three defendants in Utah, Nevada and New York. Think how embarrassing it would have been to the DoJ to make a big announcement and then have to admit that it could not extradite anyone to stand trial.

Prosecutors do make mistakes. So it isimportant to stay far away from anything that smells of organised crime. The same with consumer fraud. Online gaming is the one business where even when the patron is wrong, he is always right. You want to avoid having complaints made with state or federal attorneys general.

Avoidance

Since the DoJ is thinking like revenuers during Prohibition, you have to stay away from anything you know is illegal. Of course, knowing what is illegal and what is not is very difficult, when it comes to Internet gambling. But a good gaming lawyer should be able to not only tell you what is illegal, but what the DoJ thinks is illegal, even if it is not, like interstate horseracing.

It is best to only work with licensed gaming operators. Advertisers are rarely targets; they get dragged in when prosecutors go after someone else.

Stop immediately if a government official tells you to stop, and contact your legal counsel. Do not do anything involved with the daily business of gambling. For example, never help with the collection of gambling debts.

Get a ‘reasoned Legal Opinion’. The UIGEA has accidentally given affiliates and others an additional weapon. Regulations require operators to obtain a reasoned Legal Opinion from a licensed gaming lawyer before they can open a bank account. This has allowed affiliates and others to also get these Opinions. It is not complete protection, but it increases your sense of security. After all, if it’s good enough for a bank, it’s good enough for an affiliate.

It may help to remember that even during Prohibition, a lot of legal alcoholic beverages were consumed in the United States. Doctors made millions of dollars writing prescriptions for medicinal whiskey, and the consumption of sacramental wine increased by 800,000 gallons a year. Church bingo, anyone?