2013-01-03 businessweek.com - Bitcoin: Making Online Gambling Legal in the U.S.?

[Akka]

Michael Hajduk had sunk one year and about $20,000 into developing his online poker site, Infiniti Poker, when the U.S. online gambling market imploded. On April 15, 2011, a day now known in the industry as Black Friday, the U.S. Department of Justice shut down the three biggest poker sites accessible to players in the U.S., indicting 11 people on charges of bank fraud, money laundering, and illegal gambling. Player accounts were frozen, leaving thousands of Americans without access to their funds. “It was like a bomb went off,” Hajduk says. To continue gambling, “U.S. players were uprooting their families and moving to Malta. Crazy stuff was happening.”

Hajduk, though, was barely fazed. Calgary-based Infiniti Poker, like several other new online gambling sites, plans to accept Bitcoin when it launches later this month. The online currency may allow American gamblers to avoid running afoul of complex U.S. laws that prevent businesses from knowingly accepting money transfers for Internet gambling purposes. “Because we’re using Bitcoin, we’re not using U.S. banks—it’s all peer-to-peer,” Hajduk says. “I don’t believe we’ll be doing anything wrong.”

...(general Bitcoin explanation)...

Hajduk says Infiniti Poker will accept credit cards, wire transfers, and other payment options, but players in the U.S. will be able to play only using Bitcoins. He originally included the currency not to get around U.S. law but to reduce the time it takes to cash players out. Bank transactions can take up to 12 weeks; players who use Bitcoin can get a payout in a matter of hours, he says...

So Bitcoin would be awesome for gambling, but beware:

In recent months hackers have pulled off several Bitcoin heists, and this summer Bitcoin Savings & Trust, billed as a “Bitcoin hedge fund,” made off with more than $5 million entrusted to the site by investors, in what appears to be a Ponzi scheme. Also, Bitcoin wallets can vanish as a result of hard-drive crashes or other computer problems. That’s how at least one user lost 50,000 Bitcoins, according to Peter Vessenes, chairman of Bitcoin Foundation, an organization that helps develop and promote the virtual currency.

Well, only ~1/12 of the Article is FUD, we are really getting better.

The bottom line: Bitcoins may help satisfy Americans’ appetite for online gambling—if using the online currency to place bets remains legal.

Full Article: http://www.businessweek.com/articles/2013-01-03/bitcoin-making-online-gambling-legal-in-the-u-dot-s-dot

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[hazek]

It's the type of article the we need: reporting on actual use cases where Bitcoin shines and people have no alternatives.

[kiba]

Hajduk says the ability to store Bitcoins on players’ computers is appealing. “At the end of the day, [the government] cannot freeze your account because they cannot kick down the door to Bitcoin,” he says.

* kiba faceplams.

Yes, if you are living in the US and they know that you have bitcoin!

[kiba]

There are other risks as well. In recent months hackers have pulled off several Bitcoin heists, and this summer Bitcoin Savings & Trust, billed as a “Bitcoin hedge fund,” made off with more than $5 million entrusted to the site by investors, in what appears to be a Ponzi scheme.

There's a site called bitcoin saving & trust? 

[FreeMoney]

What's the name of that bitcoin poker site... maybe I should google 'bitcoin poker' and see..

[DannyHamilton]

- Deleted Post -

Foolishly missed the fact that a question was rhetorical.  Deleted long-winded unnecessary response.

[hazek]

DannyHamilton.. if there's anyone who knew all that on this forum it's certainly kiba His question was rhetorical..

[kiba]

There was one run by someone who went by the name of pirate40 on bitcointalk and IRC.  He promised literally unbelievable interest rates on deposits earned by him by using the deposited money in some undescribed secret investment.  A surprising number of people fell for the ponzi scam and deposited a not insignificant sum of bitcoins with him.  Then one day, he decided that he was going to keep all the deposited money.  Lots of unhappy complaining resulted.

I knew what the scam was, I am just questioning the existence of a website operated by pirate40 for his scam.

[runlinux]

yup, btcst.com

[Mike Hearn]

I doubt Bitcoin will make much difference to online gambling prohibitions. They happen to be enforced by the banks currently, because that was the simplest way to implement the bans, but as seen with Intrade and Wegelin the US is not against threatening (or even prosecuting) companies that have no US assets at all and exist entirely outside US jurisdiction. In theory this is impossible, in practice it isn't because the US is willing to throw its weight around.

The end result being that if you want to run a gambling site that takes Americans you may have to accept that you can never enter or even fly over the US again, and/or may be subject to US trade sanctions in future, possibly applied recursively through its allies. That's a pretty steep penalty to pay.

There is also this remarkable story in Wired:

  http://www.wired.com/threatlevel/2013/01/coder-charged-for-gambling-software/

where US law enforcement wanted the developer of software used on gambling sites to backdoor his own work and hack his own clients to find American gamblers. The DA apparently sees this sort of thing as being perfectly moral and legal! That particular guy stood up to it but presumably there are others who are being presented with the same "deal" who did not.

[ssaCEO]

I was going to bring up that article in Wired today. The amazing thing about that is, the main felony charge the NY state prosecutor leveled at the guy -- the thing he's looking at 35 years for -- was that he was "promoting gambling in New York". Not running a gambling site, mind you; not even aware which of his software clients might have been breaking New York law. This means that right now, Mavens could be indicted for providing software to Seals. It's completely possible that none of this guy's clients broke NY or US law, and that they define "promoting gambling" as simply writing software. We don't know because they won't unseal the indictment.

And this goes to the heart of the misunderstanding about Bitcoin, and why some operators and lots of gamblers think it's legal to gamble with it in the US. This case has nothing to do with Federal law. Yes, Bitcoin gets around the federal UIGEA, because it's not "money". But every state in the country has a law on the books against promoting untaxed, unlicensed gambling, and against running a game where a consideration is staked on a game of chance in exchange for something redeemable for value. Read that last sentence carefully. Only NY state, ironically, considers poker to not be a game of "chance", therefore making it technically not illegal to run a Bitcoin poker game in NY -- but that's down to some fluke ruling by a District Court judge in September, and probably won't be tested anywhere else for some time to come. As it stands, other states regulate poker by requiring licenses and/or regulating rakes, or even considering the game to be one of chance and banning it altogether. Any other game besides poker, where chance is involved, is definitely illegal gambling in all 50 states no matter if you're betting dollars or donuts on it.

The takeaway here, the thing to remember, is that any bored district attorney in any county of any one of those 50 states can get an indictment and have a casino owner extradited from anywhere else in the country; or, if they're a US citizen, from anywhere else in the world with an extradition treaty. This has nothing to do with US Federal law regulating currency; it's 50x as much jeopardy and Bitcoin does not alleviate it in the slightest.

[Junko]

...Calgary-based Infiniti Poker, like several other new online gambling sites, plans to accept Bitcoin when it launches later this month....

OMG, finally! Cannot wait for this. Please let this be true.

[ssaCEO]

...Calgary-based Infiniti Poker, like several other new online gambling sites, plans to accept Bitcoin when it launches later this month....

OMG, finally! Cannot wait for this. Please let this be true.

Said it before and I'll say it again... there's something not right about it. It doesn't take that long to build poker software. I know because I'm one coder and I did it myself with no prior experience, and it took about six months. I'm not sure what the point of this endless marketing campaign is, other than to show they have more money to spend on advertising and press than they do on building software. But if and when they do launch that's probably a good time to duck and run for cover; because what kind of never-launched, not-even-beta poker site has the connections and money to run media blitzes for a year solid? The kind that's an FBI decoy, lol.

[Junko]

...Calgary-based Infiniti Poker, like several other new online gambling sites, plans to accept Bitcoin when it launches later this month....

OMG, finally! Cannot wait for this. Please let this be true.

Said it before and I'll say it again... there's something not right about it. It doesn't take that long to build poker software. I know because I'm one coder and I did it myself with no prior experience, and it took about six months. I'm not sure what the point of this endless marketing campaign is, other than to show they have more money to spend on advertising and press than they do on building software. But if and when they do launch that's probably a good time to duck and run for cover; because what kind of never-launched, not-even-beta poker site has the connections and money to run media blitzes for a year solid? The kind that's an FBI decoy, lol.

Methinks you sound like someone who is worried about the competition. Maybe you are, maybe you're not, but either way it sure sounds like you are. Which for some weird reason makes me even more excited about Infiniti. Even if it flops or never even opens, at least we in good 'ole Soviet America still have Seals and BitZino. 

[ssaCEO]

I ain't worried about them, because we're not chasing the same market. StrikeSapphire isn't really a poker site. We do run some freeroll games, but we've never made anything from poker. It's just like a bonus to our casino players. If we'd decided a couple years back to focus on poker, and open to the US, it would be a different story. But no amount of money we could have made from that would have made it worth fighting the US Government on it.

I think Infiniti's phoney. That's my considered professional opinion. Seals is fine, and I wish Seals all the best, and always have, Freemoney's a good guy, and I tell everyone who asks that they're the best Bitcoin poker site out there and the place to find your best games. Especially if you're in the States. I don't view us as competition, because anything good for one Bitcoin site is good for another, there is so much room to grow. The whole Bitcoin economy including SR and all the trading sites is worth less than 1/1000th of the online gambling market. For every 10 new Bitcoiners that Infiniti or Seals gets into the game, probably 2-3 of them are from outside the US, and probably one of those feels like playing some roulette, craps, blackjack or video poker. And we have the best platform in the world for those people. So why wouldn't I be rooting for these guys at Infiniti unless I thought they were fake?

[Micon]

my response:

http://www.donkdown.com/an-open-letter-to-caroline-winter-regarding-her-recent-bitcoin-gambling-article-in-businessweek/

[ab8989]

Said it before and I'll say it again... there's something not right about it. It doesn't take that long to build poker software. I know because I'm one coder and I did it myself with no prior experience, and it took about six months. I'm not sure what the point of this endless marketing campaign is, other than to show they have more money to spend on advertising and press than they do on building software. But if and when they do launch that's probably a good time to duck and run for cover; because what kind of never-launched, not-even-beta poker site has the connections and money to run media blitzes for a year solid?

Yeah, you sure sound like a coder. Business people on the other hand understand that advertizing and marketing is maybe one of the most important part of the business that sure should be have big money spent on it. How they spent a year? Maybe part of that was testing. Would you know about that happening? Possibly not. Beta testing could probably better be done in secret as it might be crap kind of marketing if you are targeting general audience rather than geeks.

[ssaCEO]

Yeah, you sure sound like a coder. Business people on the other hand understand that advertizing and marketing is maybe one of the most important part of the business that sure should be have big money spent on it. How they spent a year? Maybe part of that was testing. Would you know about that happening? Possibly not. Beta testing could probably better be done in secret as it might be crap kind of marketing if you are targeting general audience rather than geeks.

I'm not a marketer, that's true; and I tend to evaluate things based on proof rather than promises.

I do think it's really bizarre that all these articles focus on Infiniti's vaporware, and never mention Seals which actually, like, exists and has a thriving community. When I spoke to Caroline, I think the hook with her for Inifiniti was that it would be the first Bitcoin poker site which was fully legal in another country and took currencies other than Bitcoin, and was preparing to stand up to the US government in court if necessary. But I mean, SwitchPoker already meets that definition, other than the part about taking US players, and you can use a proxy if you want with them. Seals meets most of that definition, other than taking non-Bitcoin currency. So Micon's question stands - why focus on the vaporware and not mention the fully functioning poker sites that are already in this space?

[acoindr]

There is also this remarkable story in Wired:

  http://www.wired.com/threatlevel/2013/01/coder-charged-for-gambling-software/

where US law enforcement wanted the developer of software used on gambling sites to backdoor his own work and hack his own clients to find American gamblers. The DA apparently sees this sort of thing as being perfectly moral and legal! That particular guy stood up to it but presumably there are others who are being presented with the same "deal" who did not.

I agree that story is remarkable, with emphasis on what those New York authorities wanted done:

“Sending something to backdoor people’s systems and to steal customer data would violate the CFAA and would without a doubt be crimes in any country in Europe, particularly any that are signatories to the Cybercrime Treaty,” she says. “Many of these people will not be Americans, and it’s not unlawful for them to gamble, but [authorities] are taking their usernames and passwords. Someone needs to be investigated, but I’m not sure it’s [Stuart]…. If I were his lawyers, I’d be investigating to see where they got the idea that this was okay.”