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Black Friday: A Wakeup Call for a Broken Nation

I intend for what follows to be treated as a living document. I highly encourage active participation in the comments, and I intend on make periodic revisions to this. Who knows, maybe this blog post will evolve into being my platform if I ever decide to run for public office ;)


By now, the following screen is familiar to online poker players across the world who have attempted to visit PokerStars.com, FullTilt.com, UB.com, and AbsolutePoker.com:

The domains of the three top US-facing online poker sites were seized by the F.B.I. on 4/15/2011 (which is now being referred to as Black Friday), and the following charges are being filed against various parties associated with PokerStars, Full Tilt, and UB/AP:


1.) Violation of UIGEA

2.) Operation of Illegal Gambling Business

3.) Conspiracy to Commit Bank Fraud and Wire Fraud

4.) Money Laundering Conspiracy


Many online poker players are quite emotional over everything that’s happened. Facebook pages and Twitter feeds are filled with rants. Some rants are decently thought out. Other rants are on the order of “FU FBI.” In today’s internet culture, it’s really easy to say the first thing that comes to mind. However, negative one-liners aren’t going to bring about change. Times like this require coherent and logical thought.


The Department of Justice (DoJ) has a vital function: to enforce existing laws. Without law enforcement, laws are meaningless. I’m not going to take a legal position on the issue. However, if the DoJ believes that they have legitimate cases against PokerStars, Full Tilt, and UB/AP for violating existing laws, then the DoJ is simply doing its job. If we don’t like certain laws, then our complaints should be directed towards those who create the laws in the first place: our legislators (i.e. the House of Representatives and the Senate). And with respect to our legislators, the real issue at hand isn’t simply the status of online poker in the US. Instead, the real issue at hand is how legislators are no longer representing the best interests of the people. Black Friday should be a rallying call not only for those passionate about online poker, but also for those who are simply frustrated by government that’s broken at all levels (federal, state, and local).


At the very least, the situation with online poker in the United States exemplifies how:


1.) Personal freedoms are stifled with no logical justification

2.) Government acts as a for-profit business by concerning itself with revenue generation


Personal freedom is the ability is do whatever one wants. It’s the ability to make choices – choices that may carry good or bad consequences. With complete personal freedom comes immense responsibility. For example, if I were to have complete personal freedom, I couldn’t simply play video games 24 hours per day. I’d still have to make enough money to provide for my wife and myself (or alternatively, move to a place where I could live off the land and be completely self-sufficient – and even then, I still wouldn’t be able to play video games 24 hours per day). I’d also have to be proactive in eschewing things that are bad for me. For example, if the distribution of heroin was legal, it still wouldn’t be a good idea to inject it into my body. Big Macs and Red Bulls are legal, but since I choose to take care of myself, I opt not to put that junk into my body.


Living with complete personal freedom requires discipline and sound decision-making. Not everybody can be relied upon to always exercise discipline and sound decision-making, so laws become necessary – because sometimes, the decision-making of some can adversely affect the life quality of others. The types of laws that are immediately obvious when it comes to protecting people from others are laws against things like murder, robbery, rape, and fraud. Laws having to do with issues like property rights also come to mind. Though I’m probably best classified as an extreme libertarian, I acknowledge that laws like these are necessary. Of course, the introduction of any laws implies a restriction on personal freedoms. Therefore, the question at hand is to what degree is it okay for government to restrict personal freedoms.


Let’s use the term “first degree law” to refer to a law that


1.) Prohibits an individual, a group of individuals, or a business from partaking in an activity that adversely affects another person – without consent from the one who is possibly being affected adversely

2.) Protects protects property rights

3.) Prohibits government corruption


The enforcement of first degree laws serves to protect the masses from the few who have malevolent intentions.


Let’s use the term “second degree law” to refer to a law that ensures safety in a public setting. An example of a second degree law would be requiring everybody flying on commercial flights to submit to full body x-rays. Though such laws can violate personal privacy, doing things in a public setting implies a certain forfeiture of the right to complete personal privacy. In a world where technology can be used for creation or for destruction, second degree laws become necessary for the same reason that first degree laws are necessary: to protect the masses from the few who have malevolent intentions.


Let’s use the term “third degree law” to refer to a law that requires licensing for a certain type of business to be legally conducted. Though licensing requirements place a restriction on personal freedoms, there’s probably a need for a system that guarantees that various service providers (doctors, lawyers, casinos) are providing competent and fair services. And while there exists the possibility for government corruption, the possibility of corruption is (unfortunately) always going to exist in any system. The best we can hope for is that first degree laws against government corruption are enforceable as a result of people willing to stand up for the greater good.


One very important note about third degree laws is that government licensing should not be viewed as a vehicle for revenue generation. In fact, it’s debatable whether licensing fees should exist at all. Can we really count on government to restrict licensing fees to an amount that only covers the cost of granting a license? Whenever the topic of legalized online poker in the US comes up, it’s almost tied in with how much tax revenue it can generate. Shutting out foreign businesses in an industry because of the potential for US-based businesses in that industry to generate substantial taxes is a perversion of what government should be. A government doesn’t serve the people by sucking money out of the economy (national and worldwide) and distributing some of that money back to the people. A government serves the people by providing a minimalist set of services and allowing people to live the lives they want to lead.


Let’s use the term “fourth degree law” to refer to any other type of law. I assert that all fourth degree laws are superfluous. Examples of fourth degree laws include alcohol prohibition, personal safely laws (like motorcycle helmet laws), and gambling laws. I’m open to exceptions existing to what I’m about to propose, but I assert that third degree laws primarily stem from:


1.) Moral considerations

2.) Religious groups

3.) Special interest groups

4.) The desire to prevent first degree laws from being committed

5.) Large corporations trying to protect their business interests



When it comes to moral considerations, religious groups, and special interest groups, we have to acknowledge that different people have different beliefs. And abiding by one’s beliefs is a fundamental right that we should all be entitled to- so long as those beliefs don’t involve harming others.  In order to function as a society, it’s important to embrace differences instead of trying to pass laws that attempt to force everybody to act the same. Even if a majority votes a certain way on an issue, the majority should never be able to infringe on the rights of a minority (in other words, majority votes are not okay for issues involving morals, religion, or the wants of special interest groups). Proposition 8 in California, which sought to make gay marriage illegal via public election, is a great example in recent times of attempts to restrict the rights of a group by majority rule. Though Proposition 8 was passed in the election, US District Judge Vaughn Walker later reversed the election’s results, citing that:


Proposition 8 fails to advance any rational basis in singling out gay men and lesbians for denial of a marriage license. Indeed the evidence shows Proposition 8 does nothing more than enshrine in the California constitution the notion that opposite sex couples are superior to same sex couples.


Basically, Judge Walker’s ruling supports to notion that the will of the majority can’t be used as grounds to restrict the personal freedoms of a minority group. Fourth degree laws stemming from moral considerations, religious groups, and special interest groups all unnecessarily restrict personal freedoms. Those passionate about their causes would assert that fourth degree laws serve to enhance things like living standards, comfort, and safety. However, fourth degree laws ultimately take power from the hands of individuals and give that power to the government. And given the potential for corruption within government, extending government’s reach beyond where it’s absolutely necessary is extremely dangerous.


One rationale that’s often cited in the passage of fourth degree laws is that the enforcement of fourth degree laws can protect people from being victims of first degree crimes. For example, a modern advocate of alcohol prohibition may say that banning alcohol consumption could reduce the number of drunk driving incidents that occur. Even though an enforceable first degree law against drunk driving already exists, a modern advocate of alcohol prohibition would state that not everybody is responsible for making good choices on the matter – making an outright prohibition necessary. The problem with fourth degree laws is there’s no logical distinction between which fourth degree laws are an acceptable restriction on personal freedoms and which ones aren’t. Education should always be the viable alternative to a fourth degree law. Education equips people to make decisions that are better for themselves and for society – without restricting personal freedoms.


Taking this discussion back to online poker, gambling in the United States has a long and complicated history – stemming all the way back to when Europeans first began arriving in the New World. Some groups arriving viewed gambling as a harmless diversion. Other groups (mainly the Puritans) viewed gambling as a dangerous vice and expressly prohibited it. Over the past few hundred years, lotteries have oscillated back and forth between being illegal and being viable ways of generating revenue. Westward expansion in the 1800s ushered in an era of adventure and gambling – which featured its fair share of professional gamblers. And unlike professional poker players of today, a good chunk of professional gamblers form the 1800s were cheaters (who were known as “sharps”). Meanwhile, organized crime had a large part in gambling operations in the 20th century.


Not all gambling was rooted in dishonest activity. However, dishonest dealings in gambling have created a rift between advocates of personal freedom and advocates of consumer protectionism. The Wire Act of 1961 – which prohibited interstate transmission of sports betting information via electronic communications – was passed mainly to provide legislative means to attack members of organized crime since organized crime elements were heavily involved in bookmaking. The problem with the Wire Act is that it makes interstate bookmaking illegal for everybody. It’s logically equivalent to making a law against selling food since participants in organized crime need to eat. The Wire Act of 1961 was an indirect means of trying to achieve a direct end. And as it turns out, the RICO Act of 1970 ended up being a much more effective legislative weapon against organized crime. Instead of having a climate where gamblers can choose to do business with legitimate licensed operators (including those overseas – since we can’t be participants in a worldwide economy if we don’t respect participants from other countries), we have a climate where personal freedoms are unnecessarily constrained by fourth degree laws (such as UIGEA) that prevent legitimate operators from being able to provide a service that people want.


Lotteries and online wagering on horse racing is fine. Trading stocks online is fine. But playing poker and other casino games online isn’t fine? The problem with the fourth degree laws against internet gambling and the formation of gambling businesses is that no rational argument can be formed to distinguish between acceptable forms of gambling and unacceptable forms of gambling. If the US is truly to be the “land of the free,” we need to clear all fourth degree laws from the books – not just those having to do with gambling. When it comes to online poker and gambling in general, this means that:


1.) People should have the freedom to do business with online gambling (poker, casino games, sports betting, etc.) sites that are licensed in the US or overseas

2.) People should have the right to run licensed online gambling operations in the US


If we’re to be a free market economy – not just on the national level but also on the global level – it’s imperative that we don’t allow corporate protectionists or advocates of big government-run monopolies/oligopolies to dictate legislation. The fact that legislation can be passed based on a desire to protect profits and restrict competition within an industry is an abomination of the notion of free enterprise that the US supposedly stands for. If markets aren’t allowed to be naturally competitive, then innovation is stifled and quality of goods and services ultimately suffer. When Haig Papapian (CEO of Commerce Casino) says,”we also have an issue with offshore companies coming in and taking over the industry,” he’s basically asserting that he’s against the type of competition that’s ultimately good for consumers and the overall health of the economy. Economies don’t exist to make large corporations money. Economies don’t exist to serve as a means of income generation for governments. Economies exist to continually improve the quality of goods and services that are passed on from firms to consumers. Fourth degree laws that protect large corporations and government-run monopolies/oligopolies only serve to limit options.


Protectionist legislation not only makes it more difficult for entrepreneurs in the US, but also damages our standing in the world. We can’t expect other countries to obey our whim simply because we’re the US. The world has steadily been losing respect for the US, and if we refuse to play fair, we’re in big trouble when other countries decide that there’s no longer a reason to do business with us. We’re a nation of consumers that doesn’t produce nearly enough to be self-sufficient. Playing fair means allowing US citizens to do business with foreign websites. Playing fair also means respecting rulings from the World Trade Organization (WTO). The way that the US has responded to the WTO ruling in favor of Antigua is downright embarrassing. And suppose just for a moment that the US was self-sufficient. Even a self-sufficient US should play fairly on the world stage. Positive relationships with other countries can only serve to advance human civilization at a faster rate than it could otherwise.


Bank fraud and money laundering are serious offenses that I would classify as necessary first degree laws. If people involved with PokerStars, Full Tilt, or UB/AP are found to be guilty of such activity, it’s quite unfortunate. Even with the best of intentions, partaking in those activities can’t be tolerated. If people involved with PokerStars, Full Tilt, or UB/AP are found to be guilty of violating UIGEA or operating an illegal gambling business, it’s also unfortunate. However unjust a currently existing law is, a law is a law. PokerStars, Full Tilt, and UB/AP have been providing online poker players with great service for many years, and I wish those indicted the best in defending themselves against the charges brought forth. Online poker players and those concerned with the bigger picture of personal freedoms need to concern themselves with fighting to get UIGEA and all other fourth degree laws off the books.


May Your EV Always be Positive!


Tony Guerrera


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Feel free to repost this as long as you include the following author box (including hyperlinks):


Tony Guerrera is an established poker author, an instructor at PocketFives Training, a member of Team Moshman, and host of the popular poker strategy podcast, Killer Poker Analysis. Tony blogs about decision optimization on and off the felt at KillerEV.com.




  



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7 Responses to “Black Friday: A Wakeup Call for a Broken Nation”

  1. kimberly Boyer says:

    Great article Mr. Guerrera. Well thought out, and intelligent.

  2. Haig says:

    This is a great post, nice work Tony

  3. Allen D. Mayles says:

    Very well stated sir. I have felt this way for years but have never seen it laid out so well in one place.

    The other argument against our personal rights they are using is that it will promote addictive behaviors and lead to more crimes being committed, such as drugs and prostitution, if poker and other activities are legalized.

    Crimes are committed when opportunity arises, not as a result of a specific activity. During the Christmas season there are many times more parking lot carjackings and muggings than any other time of the year, should Christmas be outlawed to protect the unaware citizens? Or should we just close all the malls in America so that the environment won’t breed crime?

    This argument is used frequently to rule against opening casinos or other gaming establishments in restricted communities. You are far more safer in a casino or upon its surrounding areas than you are in your local bank. Try walking into a casino grabbing a handful of chips and then running out with them, you won’t make it to the door before you find yourself face down with a half dozen private security officers on top of you. Then do the same thing at your local bank where the security consists of one old guy in the corner eating a pb&j sandwich, odds are you’ll make a clean getaway. Maybe we should outlaw banks and let casinos take over all their operations to ensure the safety of the customers. Better yet outlaw pb&j sandwiches as they tend to cause their victim to stop paying attention to whats going on them.

    I am a responsible adult, I work hard, pay taxes, support my community and love my family and friends. I have no problem if the government requires me to claim my winnings as income and tax it accordingly. If I cannot play poker online in the safety of my own home I will seek out games being run from other homes or establishments, which may not be quite as safe but I accept that risk and if something bad happens to me while crossing the street to play poker in a bad neighborhood I will not blame the government, thats called personal responsibility.

    I predict a boon in home run games because of Black Friday. I believe I may start selling tables and chips there is about to be a huge demand for them.

  4. Rextar says:

    Tony,

    I’ll just say I skimmed your article (means I only read once), but will re read a few times later for sure.

    It seems to me many are missing whats going on, and other are mixing it up.

    Your goverment wants to be able to tax and profit off the online gambling market (refered to as poker which isn’t really gambling in some senses). They aren’t shutting these sites down because they believe ‘gambling is wrong’.

    The fraud charges and the like are a backdoor way of doing this and a way of slandering the industry. But if the charges are true then yes thats unfortanate. note: One could maybe argue though that these companies were doing this to uphold a basic freedom of doing something that is morally fine (people profiting from online poker).

    To the rest of the world your government seems somewhat tyranical (not exactly sure if that is the right word). It seems like your government is pulling a treadstone/jason bourne type act and earasing the competition and forcing the pros to pay the us governement to play on a site the us owns.

    This is was what I was hoping you would research and shed light on.

    I feel like you and other US pro player (meaning poker is a living for you) are getting the short end of the stick when my peers explain to non poker players that PS and FT were laundering money-cause thats exactly what the online players in Canada that don’t actually understand whats going on say.

    thx.

  5. @Allen, I’m glad that you liked my libertarian arguments. Your examples in your comment just further stress how it’s pretty much impossible to draw logical distinctions between acceptable 4th-degree laws and unacceptable 4th-degree laws. @Rextar, there’s little doubt that the US government sees itself as a for-profit entity these days – trying to maximize revenue in every way possible. I would be shocked if a large part of what’s going on with online poker didn’t have anything to do with wiping out competition and opening the doors for operations that the US government generates income from. Granted, it would seem that the US government would have acted a lot sooner given the size of the online poker industry. However, swift and efficient action isn’t exactly something US citizens praise their government for ;)

  6. Tim Continenza says:

    Tony,

    I truly enjoyed read this blog, it was very thoughtful and presented to show a point of view that shows the hypocrisy politics. I have been told more than once that all politics are local. Which brings me to UIGEA which was create by Sen Bill Frist former US Senate Majority leader from Tennessee (2003-07).

    In 2009 conformation hearings of Eric Holder (US AG), more than once UIGEA was brought up by supporters of UIGEA. This should have been internet pokers players’ first warning. In that hearing, senators who had supported UGIEA wanted to know if Holder would follow the law and prosecute those who may be in violation of UIGEA. Holder’s basic response was I will uphold the laws of US Gov’t.

    Politics can be a very distasteful thing for many people but is a part of everyone lives. UIGEA was politics in its worst form using a back door, a rider, on a bill that had nothing to do with port security that was the main objective of the bill. The politics of riders are very big in the country and have been used in many bills that become laws. (its usually what you term 4th degree law) It is here where politics fails to be representative of the people. UIGEA was stalled in the US senate before becoming a rider. (it did not have the votes to move on as a stand alone bill) I personally believe it this needs to be understand by all US players how this became law and why.

    I live in the 6th district in Ohio where we recently replaced our congressman in the last election cycle, who supported last poker bill out of committee (2010) with his vote, My new congressman will not support internet poker. I know for a fact, Internet poker players in the US have lost a lot in the last election cycle. This brings my back to my point that all politics are local and elections have consequences. one of those consequences this time is internet poker.

  7. Rextar says:

    ok, apperently i missed your radio show on the black friday topic where you discussed exactly what i was refering to. and you did a great job giving a fair opinion and great advice.

    One thing I would like to hear about, is whether the field is softer now if the Americans can’t play. My mentors say yes. I feel like the edge is divided equally…no one moves up the ladder. But maybe if there are more American pros vs American fish than the other countries though then its softer…..I’m not sure what to think…..would be intersted in hearing the math, facts, and stats on this!

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