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Poker Website Is a Legal Gamble

WPT, producer of TV's World Poker Tour, ventures online but has to bar U.S. residents.

November 27, 2005|Josh Friedman | Times Staff Writer

American players drive the $2.4-billion online poker market, but the profits they generate flow overseas to the foreign companies that dominate the business.

Now, Los Angeles-based WPT Enterprises Inc., whose televised World Poker Tour helped touch off the poker craze, wants a piece of that pot -- and to get it the company has ventured into uncharted legal territory. From its Wilshire Boulevard offices across from the Los Angeles County Museum of Art, WPT has quietly launched an overseas gambling website that it believes will flourish even though the rules of the game are stacked against it.

WPT bars U.S. citizens, an estimated 80% of its potential customer base, from its Europe-based WPTonline.com poker site. The company has no desire to rile the Justice Department, which considers it illegal to accept online bets from U.S. residents on sports and casino games other than horse racing.

Even with that precaution, however, WPT appears to be taking a "calculated risk," said David S. Levine, residential fellow at Stanford Law School's Center for Internet and Society. "All of the law in this area is pretty unsettled," Levine said. "If you're engaged in this activity, you're really making a bet yourself as to what the law is and what authorities will do."

So far, the Justice Department has not brought any cases against online poker players or the companies that take their money. A Justice Department spokesman in Washington declined to comment on WPT but said companies couldn't presume that what they were doing was legal just because their customers weren't U.S. citizens.

"Existing state and federal statutes cover many forms of Internet gambling," said the spokesman, Paul Bresson. "It is the position of the Department of Justice that online gambling activity occurs both where the gambling business is located and where the bettor is located."

Scholars call online gambling law murky, however, because most of the relevant federal statutes, including the 1961 Wire Communications Act, were written long before the Internet era.

Bill Thompson, professor of public administration at the University of Nevada, Las Vegas, and author of "Gambling in America: An Encyclopedia," said the Wire Act was written to combat sports betting over the phone. That makes it unclear whether any company -- U.S. or foreign -- could be prosecuted for casino-type games.

He said he knew of only three people who had been convicted of Wire Act violations related to Internet gambling, and in each case the focus was on sports wagering.

Even if casino games are covered, Thompson said, the law still might not apply to poker, which he considers a game of skill rather than of chance.

WPT asserts that its operations are legal under the Wire Act because online poker is permitted in the Channel Islands -- British dependencies in the English Channel, where its online operation is based -- and in countries such as Britain, where its customers live.

"The Justice Department has done nothing but muddy the waters," said WPT Chief Executive Steve Lipscomb. "We're out here trying to play by the rules, and now they're rattling sabers but giving no guidance about what we're supposed to do."

Some companies have bowed to pressure from regulators.

Major U.S. credit card companies and EBay Inc.'s PayPal service have stopped letting U.S. customers transfer money for online wagering.

Many broadcasters stopped accepting advertising for online wagering after the U.S. attorney's office in Missouri subpoenaed media companies two years ago. No charges have been brought, but the move had a chilling effect on broadcasters, spurring many to stop taking ads for wagering, said Mark Balestra, an analyst at gambling research firm River City Group in St. Charles, Mo.

Where one door has closed, however, others have opened. Companies including Neteller, an online money-transfer company based on the Isle of Man, a British dependency in the Irish Sea, have stepped in to handle money-transfer services.

And poker companies have responded to advertising bans by setting up play-for-free sites with ".net" rather than ".com" addresses. That way, the companies can safely advertise such "educational" sites as PartyPoker.net and ParadisePoker.net, which drive traffic to the parallel ".com" sites where the games are for money.

Aaron Kanter in Elk Grove, Calif., parlayed a $50 buy-in at PartyPoker.com into $2 million this summer when, by playing on the website, he won his way into the World Series of Poker in Las Vegas and took fourth place in that event, the richest casino tournament.

At home, Kanter, who recently ditched a real estate career to play poker full time, competes in as many as four games at once on his 23-inch computer monitor. "Any more than that, it's hard to pay attention," he said.

Freight train conductor Scott Buller, 49, of Lincoln, Neb., enjoys the freedom of the Web game, in which you can play in your pajamas through the wee hours of the night.

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