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Black Friday: How the Feds Shut Down Online Poker
$2.5 billion industry cut off, taking livelihoods with it
There's also the question of why conservatives like Frist and Kyl would push a law so lush with the dreaded nanny-state overtones. "I believe in a smaller, more conservative role for government than telling me which card games I can play on my computer," Fritz says.
Frist declined to comment on his motives. Kyl didn't respond to repeated interview requests.
ILLUSTRATION BY JESSE LENZ
PHOTO BY WILL RICE
Maxwell Fritz: "I figured if gambling online is illegal, I might as well go to legalized gambling in the form of the stock market."
Most players cynically dismiss the senators' move as a strong-arm play. The feds want their protection money — i.e., taxes — and won't let the ride continue until someone pays up. But since government moves in slow motion, it's left a multibillion-dollar industry to rot from atrophy. Any remedy likely will take years.
"It's really frustrating," LaTour says. "It just seems they weren't seeing any of that money that was going out there, so they want to set it up so they can tax it. But the longer this takes, the more there will be people like me, who just give up on it and move on with our lives to find another way of making a living. I've pretty much stopped waiting around."
A solution seems rather simple. Since everything's handled electronically, Internet poker offers the possibility of instant taxation of winnings. And the feds could easily force sites operating in the United States to pay American taxes for the privilege of doing business here.
Yet the mom-and-pop poker enthusiast doesn't employ a battery of lobbyists on Capitol Hill. And even if he did, he'd still be confronted by the moralists, who believe any form of gambling is a sin.
"We're a pretty small minority," Wright says. "We don't have a big voice. We need to be louder. But we're talking American politics. We know it's going to take longer than it should, they're going to find a way to screw people, and they're probably going to make the taxing situation really complicated."
Brian Mogelefsky grew up on Long Island and joined his dad's mortgage business, Discount Funding Associates, out of high school in the early 1990s. It remained a small concern until the 2000s, when they took the business online, hiring 600 people at their peak.
But the mortgage industry was about to implode. By 2006, the Mogelefskys had closed shop.
Until then, poker had been little more than a hobby. Mogelefsky started playing after seeing the Matt Damon–Edward Norton film Rounders, and began showing up at house games on Long Island.
But when his company collapsed, Mogelefsky decided to play poker online for a month in earnest, a test to see if it could provide a living. He ended up making $7,000. A new career was born.
His new job offered geographical flexibility. He and his wife began making lists of where they'd like to raise their two kids. They settled on a perfect neighborhood in South Charlotte, N.C., where they could halve their cost of living and build their dream home.
"I want to be here when my kids grow up," Mogelefsky says. "For the things I wanted to accomplish, it was worth it to make the sacrifices. Even today, I don't really want to play poker for a living, but I sort of backed into it and it allowed the lifestyle and things that were important to me. ... It was going great until April 15."
Mogelefsky had the best week of his life just before Black Friday, earning more than $15,000. He generally never let his Full Tilt account rise above $10,000 before withdrawing the money. But by that time, the company was already experiencing financial problems.
Full Tilt refused a withdrawal at the beginning of April. By the time the feds seized its assets 15 days later, Mogelefsky had $28,000 in his account. It was frozen.
"I know how to pick them," he laughs ruefully. "I went from the mortgage industry to the poker industry, the two biggest collapses of the last 10 years. ... I was in shock. Not only am I not able to produce more money, but the money I basically earned the last three months is also gone."
The closest casino to his home is Harrah's Cherokee, three hours away in the middle of Great Smoky Mountains National Park. But it doesn't offer enough action to make a living. So Mogelefsky began flying to Florida, crashing at his in-laws' place in Fort Lauderdale and playing the poker rooms at dog tracks and Indian casinos. The competition isn't particularly tough, but the pots are small and he can't churn the hands that he could online.
Still, with a family of four to feed, he has no choice but to gut it out.
"It's hard because my expenses are through the roof, just from traveling, and then I have to eat. All the gas, all the extra costs, and I'm not able to put in nearly as many hours, and now I'm away from my family all the time."
Like most players, Mogelefsky has no illusions about the government riding to the rescue. The feds may have crushed a $2.5 billion industry, but they seem to have no idea how to resurrect it in a more palatable form. Nor do they seem to acknowledge all the families they've cast adrift.
9 comments
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Great information. Thank you for shedding light on this story! I'm glad you are providing information on the tragedy that was our Black Friday. It is well past time to license and regulate this industry in the US. Most of the world is able to play this game of skill and strategy online and Americans, of all people, should be free to play as well.
This article is journalistically shabby and, frankly, would be laughed out of any college journalism course.
1. It merely gives us anecdotal accounts of people who have managed to make online poker work, but it does not discuss how many thousands, tens of thousands, hundreds of thousands, etc, may have lost substantial sums gambling online.
2. It blithely blames the religious nuts for the shutdown of online poker in the U.S. However, there is zero direct evidence provided in this article of this. There are no statements, for example, from the usual suspects in the evangelical or other faith based crowds. Mere name calling with no evidence is not journalism.
3. It is fine to go after Kyl and Frist, two clowns who I don't particularly like myself, for this, but where this article REALLY fails is to discuss if there was any Abramoff-style lobbying by casinos in the U.S. to have their online competitors taken out. To read this article, it was almost as if Kyl and Frist just one day got up on the wrong side of the bed and decided to take it out on online poker sites. Now the combination of this kind of lobbying, if it happened, and pressure from the religious nutbars could have been the hammer that made the crackdown happen, but this piece just does not give us any clear picture as to whether that is, in fact, what happened.
4. The article thus reads too much like it was written by a public relations firm for the online providers. The online poker sites are cast, in a very simple way, as victims here without any sense of skepticism on the part of the writer that the truth may be more complex than that. Consequently, this article is little more than glorified spam---Make Money Gambling Online! should have been the real header here.
One of the things dogging the mainstream media is that it has gotten so lazy it often rips, reads and reprints corporate press releases as worthy news articles when they are anything but. The L.A. Weekly has thus fallen into that same lazy habit, or so it appears.
- Thanks for this informative article about online poker and what the government did to it. An entire industry was destroyed last year. This is the first article that really illustrates the situation. We need federal legislation that licenses and regulates online poker in the U.S. and brings back an industry. -
Mr.Parker:
You really, REALLY don't get it.
When someone builds a car, or grows some wheat, or performs a cabaret act on the Sunset Strip, there is an exchange of cash for goods and/ or services. Gambling is not like that. It is not an "industry" employing people as you suggest, it's nothing more than shuffling money around from one set of hands to another, with no product or service provided. If one person such as Walter Wright, Maxwell Fritz or Michael Minkoff can make enough money from their activities to provide for a lavish lifestyle, it's because they understand card counting or some other version of an inside track that is sapping the life from other households-- there is no free lunch. If someone gets rich by building fancy furniture, or selling push-up bras or cleaning carpets, it's because someone got something in exchange for that money; when Mr. Fritz gets rich playing cards, it is only because someone else is getting poor playing with him, thinking he, too, can ride a gravy train. But whenever anyone wins in gambling, it's because someone else is losing... and getting nothing out of the deal but a bit closer to bankruptcy, or divorce, or Gambler's Anonymous.
When I buy junk food from a fair-- cotton candy, as in the story-- it might eventually give me diabetes, but I at least get something for my money. All I might get from Mr. Fritz is the wrong lesson-- that I need to learn to play better, and waste my money on Mr. Minkoff's books so that next time, Mr. Fritz will be the one who can't pay his mortgage, not myself.
There is no winning in gambling... not overall. There is only money shifted from one soulless sap's pocket to another.
These men are all obvuously more intelligent than normal in some way or another. I hope that Fritz and others like him can use their greater ken of numbers, averages, odds or whatever to find other outlets for their talents that actually provide benefits for someone besides themselves-- that's the difference between win-win, and win-lose. It's also what defines personal satisfaction-- when you're getting someone else's money because you're helping him, it's much easier to sleep at night than knowing you have his money just because you beat him AND HIS FAMILY with a deck of cards.
There is definitely winning in poker. Ever hear of entertainment? There is no reason why I shouldn't be able to play a $3.30 tournament from my home. That $3.30 tournament on a Friday night is my entertainment (I'm disabled and don't get out much). And I usually win enough to not have to re-deposit. Sometimes I even win enough to withdraw, which is quite the headache right now. We need licensing and regulation in the U.S.
That's a very informative article about what happened to online gambling. I like your work, Chris Parker. To any law makers paying attention: I favor legalizing online poker; I vote.
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