Subject: Poker has recently been told of planned US Department of Justice action against the Merge Gaming Network or some part of it.
According to our sources, the US Attorney’s Office for the District of Maryland plans to seize the assets of payment processors who facilitated transactions between the Merge Network and its US customers. It is unclear exactly which payment processors are reportedly being targeted, whether indictments are planned in addition to seizures, or whether the DOJ intends to seize domain names as well.1
The seizures were reportedly initially planned for mid- to late-September. However, such timelines are extremely fluid and sensitive to the particulars of the financial activities of the targets and the DOJ’s bureaucracy. So, an earlier or later date would certainly be possible. It is also unclear whether the DOJ will follow through with its reported plan now that it is public and, if so, how its publication would affect the timeline
Since the indictments on Black Friday, the Merge Network has made half-hearted attempts to avoid conflict with the DOJ. In particular, on May 24th, Merge stopped accepting new players from some US states with strict anti-gambling laws. This is likely in response to the Unlawful Internet Gambling Enforcement Act and the lesser-known 18 USC §1955, which use state laws to define federal crimes.2 However, by still allowing existing players from these states to continue playing for real money and ignoring many other states, such as Hawaii, that have strict gambling laws of their own, Merge has clearly failed to avoid the DOJ’s strict interpretation of violation of the UIGEA, which maintains that it is illegal to provide real money poker games to residents of these states.3
It is not immediately clear what will happen next and how players should react to this news. If the DOJ does follow through on its reported plan on roughly the same timeline, it is unlikely that customers would be able to withdraw before seizures occur because withdrawals on Merge currently take over a month to reach customers. Indeed, since payment processors are reportedly being targeted, a withdrawal could potentially move a player’s money into the reach of the DOJ. If Merge and its payment processors begin to move funds in an attempt to avoid potential DOJ action, this could lead to further processing delays and possibly even bounced checks. Again, because of the slow withdrawals on the Merge Network, it is unlikely that players withdrawing now would be able to avoid such problems; they may instead simply be subject to delays and possible failed transactions.
Subject: Poker does not know at this time whether the Merge Gaming Network keeps players’ funds in segregated accounts.4 If the DOJ does seize Merge funds, clearly marked segregated accounts may be spared. The US Attorney’s Office for the Southern District of New York, the prosecutors behind Black Friday, released a statement in which it suggested a policy of not seizing segregated accounts and encouraging sites to repay players: “No individual player accounts were ever frozen or restrained, and each implicated poker company has at all times been free to reimburse any player’s deposited funds. In fact, this Office expects the companies to return the money that U.S. players entrusted to them, and we will work with the poker companies to facilitate the return of funds to player.” However, the Maryland USAO, the prosecutors behind the May 23rd seizures and the reported plans discussed in this article, has made no such statement and has generally shown players much less sympathy. So, it is not clear whether the Maryland USAO would seize segregated player funds, and if such a seizure (or any seizure) could cause the Merge Network to become unable to meet its obligations to players.
Subject: Poker will continue to monitor this story as it develops.
Edited on 9/8/2011 5:50 PM EDT: Removed the word “exclusive” from the title because it was being misinterpreted.
- Most skins on the Merge Network have moved their websites to the country code top-level domains of either the European Union (.eu) or Antigua (.ag), and their generic (.com) domain names now redirect. Merge’s own website and those of some skins still use the generic domain names. So, it is unclear what effect seizure of the generic domain names would have on the Merge Network and its players. ↩
- The Unlawful Internet Gambling Enforcement Act defines “unlawful Internet gambling” as “to place, receive, or otherwise knowingly transmit a bet or wager by any means which involves the use, at least in part, of the Internet where such bet or wager is unlawful under any applicable Federal or State law in the State or Tribal lands in which the bet or wager is initiated, received, or otherwise made.” Though it does not ban “unlawful internet gambling” explicitly, it goes on to ban the transfer of any money related to such activity. Some people, including the DOJ, interpret this as an extension of state law concerning individuals gambling, which typically does not apply to the internet and interstate commerce, to federal law concerning gambling companies and payment processors, which does. Many state laws are quite explicit. For example, Maryland Criminal Code §12-102 says in part simply, “A person may not bet, wager, or gamble.” ↩
- It is not clear whether a site could successfully avoid DOJ actions by further restricting its US real money player pool to certain states. The DOJ has argued that the Wire Act in connection with the UIGEA and 18 USC §1955 make it illegal to provide interstate real money online poker games in the US. However, the Fifth Circuit Court of Appeals has ruled that the Wire Act only applies to sportsbetting. ↩
- The Merge Network has repeatedly refused to comment on how it keeps player funds. They are currently licensed by the Kahnawake Gaming Commission, which does not require fund segregation. However, they received a letter of intent in early July suggesting that they would soon be able to secure a license from Malta’s Lotteries and Gaming Authority, and Merge Gaming Malta Ltd was recently added to the LGA’s list of class four licensees. Many Merge skins, including Lock Poker, Carbon Poker, and Hero Poker, have already added the LGA’s logo to their websites. The LGA has quite strict policies about segregation. However, neither Merge nor the LGA have confirmed the acquisition of a license, and the LGA recently released a statement in which it said unambiguously “Lockpoker.eu is not licensed by the LGA” and ”the website http://lockpoker.eu/ has no connection whatsoever with the Authority and therefore any mention of the Authority or license issued by the Authority on the mentioned website is false and misleading.” So, it is not clear whether Merge does indeed have an LGA license, and if so, whether the license applies to the entire network or simply a part of it. ↩