[toc]As several states inch closer to legalizing and regulating online gambling, a blast from online poker’s past could provide politicians in those states with a stark reminder of why regulation is needed.
Last week, Absolute Poker founder Scott Tom voluntarily surrendered to US authorities and pleaded not guilty to several charges in a Manhattan court room.
Tom was released on a $500,000 bond (posted by his father) while a plea deal is worked out. Whether Tom will avoid jail time is unclear.
According to Tom’s lawyer, James Henderson, “There’s going to be a resolution in this case quickly.”
His half-brother Brent Beckley, who handled AP’s payment processing, was recently released after serving 14 months in prison related to similar charges.
Rumor has it Beckley is already back in the offshore online gaming business, working for BetOnline.
Other indicted individuals, most notably several high-profile Full Tilt owners, simply paid fines.
Tom’s surrender comes nearly six years after he was indicted on Black Friday and the company he founded went belly-up, unable to pay its players.
His surrender and upcoming trial should act as a clarion call for legalization and regulation.
Online gambling regulation ensures security of player funds
Following the crackdown on offshore online poker sites operating in the US on April 15, 2011, it came to light that Absolute Poker, UB Poker, and Full Tilt were using significant amounts of player deposits for other operational expenses.
Only PokerStars was truthful about how it segregated player funds, and it was the only online poker site indicted on Black Friday to repay its US players in the aftermath.
Ultimate Poker in NJ and NV
Contrast this with licensed and regulated online gaming site Ultimate Poker (not to be confused with Ultimate Bet), which closed up shop in both New Jersey and Nevada in 2014.
The difference between Ultimate Poker and its unregulated predecessors couldn’t be more striking.
In Ultimate Poker’s case, both states from which it pulled out, Nevada and New Jersey, have strict regulatory requirements that force operators to segregate player funds.
Because of this, Ultimate Poker promptly paid out players down to the penny, whether they requested a withdrawal or not.
To be clear, online gambling sites being unable to pay their customers wasn’t a one-time incident caused by a government crackdown. A number of sites have gone bust and run off with player funds without any interference from law enforcement.
Lock Poker is one of the most high-profile casualties.
Lock shut down in 2015 owing an estimated $15 million to players.
There are dozens of other examples:
- PitBull Poker
- Everleaf Gaming
- Full Flush Poker
And on and on.
Regulation prevents insider cheating
Absolute Poker is also notorious within the poker community for an insider cheating scandal that was uncovered roughly a decade ago.
The cheating scandal was carried out by insiders at the site (Tom is one of the people implicated in the scandal) who were using a backdoor program to view other players’ hole cards.
This became known as “super-using” in the poker world, evidenced in the video below, which led to the scandal being uncovered.
A similar scandal occurred at Ultimate Bet Poker, where the cheaters, once again insiders at the company, allegedly pocketed over $20 million (that we know of) during a period of several years.
This type of insider cheating is nearly impossible at a regulated site, where outside audits of software and other security features are required. Anyone within the company cheating players would be quickly found out.
If lawmakers want to protect their constituents, they should take a serious look at Scott Tom and what occurred on his watch at Absolute Poker.
Without legal, regulated online gaming, it’s only a matter of time before the next Lock Poker or insider cheating scandal occurs.