Blog

On April 15, 2011 — a date that would soon be known as “Black Friday” within the poker world — the U.S. Department of Justice initiated a grand sweep of the three major online gaming sites — PokerStars, Absolute Poker/UltimateBet (which had merged in 2008), and Full Tilt Poker — seizing their domain names and unveiling indictments against eleven stakeholders. Visitors to the online sites were greeted with nothing but images of the Department of Justice and FBI seals, along with a simple message stating that the site had been seized, along with assertions about the alleged activities and admonitions against illegal gambling. (The wording in the Quorum script is excerpted directly from this message.)

So what had changed? The wording of the law had not been altered to formally define poker as a form of gambling. But under New York state law, it was a misdemeanor — punishable by up to a year in prison — to operate any game of chance where bets are placed within the state. Under this rationale, even though none of the sites actually operated out of New York, because they accepted bets placed in New York, the U.S. Attorney for the Southern District of New York, Preet Bharara, was able to obtain felony UIGEA indictments.

The FBI was aided by the testimony of Daniel Tzvetkoff, who had run an Australian payment processor, Intabill. Tzvetkoff had been arrested in Las Vegas and charged with money laundering, bank fraud, and wire fraud. Moreover, the government had evidence that several of the executives behind the gaming sites had collectively used fraudulent means in an attempt to substantially invest in a bank in Utah, SunFirst, with the intent of using that bank to handle player deposits and payouts directly (while simultaneously disguising the transactions’ true nature).

The result was immediate — U.S. players lost all access to their deposited funds, and the sites were unable to conduct any business within U.S. territory. Though it would eventually be revived in a substantially limited form, the online poker business within the United States was effectively shuttered. The poker world was floored — as much by the lack of warning as by the action itself. A prominent player affinity group, the Poker Players Alliance, immediately went into action, urging members to contact their congressional representatives. And they had allies across the political spectrum, including former Republican Senator Al D’Amato and Democratic Congressman Barney Frank. Antigua and Barbuda weighed action with the World Trade Organization, arguing that the United States was taking action against foreign nations for engaging in activity that was perfectly legal under international law.

The domain names for Full Tilt Poker and PokerStars were allowed to reopen a few days later, but only to facilitate the withdrawal of U.S. players’ funds. And on April 26, PokerStars did indeed begin paying back players’ funds. Full Tilt’s actions, however, revealed a far more sinister reality.

The principals behind Full Tilt Poker — including prominent poker personalities Howard Lederer and Chris Ferguson, among others — had apparently been engaging in a Ponzi scheme whereby they had illegitimately paid themselves and other owners a staggering  $400 million of players’ money. Although they now had the mechanism to return players funds, Full Tilt did not have the actual money to do so. And with U.S. operation shut down, they could no longer continue to hide the shortfall (let alone work toward any kind of recovery). In September, the Department of Justice amended its filing to include charges of fraud against the Full Tilt executive team. Though the individuals accused argued that it was a question of mismanagement rather than actual fraud, the writing was on the wall: Full Tilt Poker was unquestionably finished, and not just in the American market. The scandal — coming as it did on the heels of the initial closures — rocked the poker world, dealing a dramatic blow to the previously favorable reputations of the players involved.

Fortunately for online players who had been left in the lurch, PokerStars eventually arranged to buy out Full Tilt, agreeing to reimburse players and exit the U.S. market, settling with the Department of Justice in the process (and paying fines on the order of six figures). On the other hand, Cereus Poker Network (the parent company behind Absolute Poker and UltimateBet) declared bankruptcy, shuttering while still owing players more than $50 million.

In the years that followed, some states began to develop strictly regulated online poker systems — systems that could only be accessed by people within the physical boundaries of those states (as verified by IP address tracking). Nevada and Delaware kicked off this trend in 2012, with New Jersey following suit in 2013, all three states effectively pooling their players. (Pennsylvania has recently opened the doors to both live casino and online poker, but the details are still being ironed out.) Still, the number of players is a tiny fraction of what it was in the heyday of online play.

Oddly enough, despite testing the waters in the pre-Black Friday days, the larger tourist-oriented casinos — perhaps keenly aware of the minuscule player pool still available — have largely stayed out of the online market (though some may be petitioning for access to the upcoming Pennsylvania market). The first post-2011 online site in the United States, Ultimate Poker, was set up by the Station Casinos group (which had always targeted local residents at its physical casinos, rather than tourists), but the site shuttered once revenues fell far short of projections. Real Gaming, run by the South Point Hotel and Casino, similarly faltered. WSOP.com, directly connected to the World Series of Poker, remains available (at least as of this writing) for online play in those states.

That’s not to say that traditional brick-and-mortar casinos didn’t benefit significantly from the events of Black Friday — even if they themselves aren’t rushing to fill the void left by the collapse of online poker, they are no longer competing for that business. Moreover, in January of 2019, the Trump administration reversed the Department of Justice’s 2011 determination that the Wire Act only applied to sports betting — an effort championed by casino mogul and GOP megadonor Sheldon Adelson, owner of the Las Vegas Sands corporation. The impact that this reversal will have on those states that have legalized online poker remains uncertain.

And after everything else, PokerStars is going strong, clearly dominating the online poker market, even without the benefit of American players — or at least most of them. Players in New Jersey can once again play on the site, and plans are underway to allow play in Pennsylvania in 2019.

Though Quorum is likely to be moving on from the world of online poker in future installments, the real-world roller coaster of events provided some truly fantastic fodder for our inaugural season. (For those interested in additional material — since we’ve really just scratched the surface here — I recommend the book Straight Flush, by Ben Mezrich, which covers the saga of Absolute Poker in compelling detail.) Thanks to all of our listeners for coming along for the ride.

~William R. Coughlan, writer/director of Quorum

With the rising success of online poker, the U.S. Government decided to act — though support for such action was split, with some politicians arguing that they should in fact move to decrease obstacles to the industry. Central to that argument was the contention that poker was not truly gambling but fundamentally a game of skill.

Even so, the government made initial forays into pursuing the online gaming sites. Early efforts included the assertion, made by way of thinly-veiled threats of prosecution, that online gaming violated (or at least might violate) 1961’s Wire Act — an assertion that would later be undermined by the Department of Justice’s own determination that the Wire Act’s restrictions only applied to sports betting… though more on that later. These threats were enough to keep the online sites on their toes (and sufficient to deter some smaller operators from venturing into the market, even in a support capacity), but not enough to undermine their activities entirely.

In early 2006, the online poker world was hit with its first major “multiaccounting” scandal (with which Quorum listeners may find a familiar parallel to Jimmy Harmon’s history). Online player Josh Field opened several different accounts on PartyPoker and entered the same tournament using two of those accounts — ultimately winning with one of them. Because this setup allowed Field to effectively “collude” with himself (for example, playing one account in a manner that would benefit the other), PartyPoker froze the winning account and ultimately confiscated more than $180,000. That same year, another online poker player, Justin Bonomo, used six different accounts to enter a tournament, and was similarly caught and fined.

In October of that year, President Bush signed the SAFE Port Act, ostensibly intended to improve port security; attached to that act was a seemingly unrelated rider called the Unlawful Internet Gambling Enforcement Act of 2006, or UIGEA. While this didn’t go directly after the online poker sites — which, again, were located outside U.S. jurisdiction — it made the knowing transfer of any funds related to online gambling in any state where such gambling would otherwise be illegal a crime in and of itself. While the law was technically directed against “gambling businesses,” the wording encompassed financial institutions as well. In effect, this prevented any American bank from handling any funds going to or coming from these sites.

This was a blow to the industry — several online sites (including PartyPoker and 888) quickly shut down U.S.-facing operations — but ultimately not a fatal one. In fact, the departure of these sites presented a huge opportunity for those that remained. Payment processing companies located outside U.S. jurisdiction (including processors originally set up to handle adult-website traffic) took over the task of handling transactions, despite the legal risk. Moreover, that risk was mitigated by the general interpretation that (DOJ assertions aside) the UIGEA explicitly did not apply to poker: no definition of “gambling” had been codified into law (other than sports betting), and it could reasonably be argued that poker was a game of skill and not gambling. Believing that the government would be biting off more than it could chew if it attempted to bring an actual case, business went on as usual.

Another blow came in 2007 and 2008 with the revelation of cheating at both UltimateBet and Absolute Poker (which had apparently been going on since 2005). In each case, cheating software or “superuser” accounts allowed insiders to see the normally hidden “hole cards” of all players at a table, and transmit that information to online collaborators. (Estimates of illicitly obtained funds were approximately $10 million in the Absolute Poker case; a preliminary figure of $6 million in the UltimateBet instance was later revised to more than $22 million.) Both sites ended up addressing the issues, paying fines, and making payments to affected players, but the critical trust that allowed the sites to retain players had been damaged. Even so, the damage proved temporary. In the case of UltimateBet, an investigation determined that the main perpetrator of the hack was former World Series of Poker Champion Russ Hamilton, who steadfastly refused to make any effort at restitution (and has effectively been blackballed from the game since).

In November of 2009, a mysterious online player known only as “Isildur1” (later identified as Viktor Blom) sent shockwaves through the industry after amassing net winnings of nearly $6 million, beating several prominent professional players in the process. But shortly thereafter, he set the record for the greatest single-day loss in online history, losing $3 million… and then turned around and broke it again just weeks later, losing more than $4 million. Later investigation discovered that three of his opponents had data-mined more than 30,000 of Isildur1’s past hands, giving them an illegitimate advantage. The players were fined and censured for their behavior, but the results of the games in question were left to stand.

Still, even after these setbacks, online poker, as an industry, seemed to be a permanent part of the poker world. Professional live players still leapt at the chance to garner sponsorships from various sites, wearing site logos prominently at public appearances, lending tournament play an almost NASCAR-like atmosphere. Online sites regularly sponsored live tournaments and continued to advertise on televised events — though to skirt advertising restrictions, they only promoted their free-to-play “.net” sites as opposed to their real-money “.com” counterparts, a distinction that fooled precisely nobody. Full Tilt Poker set up a whole league of professional players — “Team Full Tilt” — and regularly positioned those players on ostensibly “educational” television shows, shows that actually served as direct marketing for the site.

But these ups and downs were nothing compared with the absolute game-changer that was on the horizon…

~William R. Coughlan, writer/director of Quorum

As is readily apparent from the opening episode, online poker plays a significant role in the world of Quorum: The Gambler’s Tale. But while our story is most assuredly a work of fiction, it does take place against the backdrop of real historical events — and while we take more than a few creative liberties in the interests of storytelling, I thought some background on its real-world underpinnings might prove illuminating.

Poker has historically been thought of as necessarily an in-person activity. At least part of the game’s allure has always been in the interactions between players, and popular wisdom holds that winning is less about the cards a player holds than it is about the ability to “read” the opposing players. And a game whose primary purpose is not just the activity itself, but the opportunity for camaraderie and personal engagement. The fact that it doesn’t require any specialized casino equipment — and doesn’t advantage a “house” over any individual player — makes it ideal for venues ranging from a casino operation to a friendly neighborhood gathering. So on its face, it seems an odd choice of game to transition to digital play (except perhaps as a learning exercise or a modest diversion), where the social aspect is removed almost entirely.

Still, there was at least some incentive for capitalizing on the game’s enthusiastic player base. Most people (at least in the American market) don’t live within range of a casino, making (legal) play options a fraction of what they could otherwise be. Moreover, traditional casinos were not especially interested in promoting the game, given its comparatively low margin compared with other games (even with a house percentage, or “rake”). And just about everyone knows how to play, at least in broad strokes, making it a potential draw for a large number or people of varying skill levels.

This last point actually led to another major (if largely unspoken) appeal: For those experienced players interested in making significant money playing the game, a larger player pool — especially one made up of capable but comparatively inexperienced players — could significantly expand the amount of “easy money” in play. Combine that with the increased rate of play online, where savvy players can play multiple “tables” at once, and the potential financial payoff for such players is substantially increased.

From the organizing site’s perspective, with revenue based on percentages of each game’s winnings, the massive number of potential tables in play made for a commensurately large revenue opportunity — as contrasted with live casino play, where physical space (and time) constraints limited such potential.

Early on, one of the biggest obstacles to setting up an online poker site was the questionable legality of such an enterprise. Given the differences in state laws (not to mention less-than-clear federal guidance), it was an open question as to whether such an operation would be on stable legal footing. Would a player physically located in a state where such games were illegal even be able to play on a site located in a state where it was legal? Or would federal limitations on interfering with interstate commerce render everything legitimate?

Another obstacle to establishing a credible online game — particularly where real money is involved — is the issue of trust. How could players know the systems running the game (not to mention the people behind those systems) were handling both the game and the players’ accounts responsibly?

Despite these obstacles, several entrepreneurs opted to give it a try. By establishing companies headquartered (even if largely on paper) outside the United States, they attempted to skirt around the ability of U.S. (or individual state) regulators to interfere. And by recruiting top-notch coders and slowly building trust in their computer systems, these sites gradually built up a significant player base, apparently outside the reach of American law.

The first major site to offer real-money play, PlanetPoker, debuted in 1998, endorsed by professional poker player and author Mike Caro. Despite early software issues, the site was able to keep its business by virtue of being (for a time) the only option available. That changed when a competitor, Paradise Poker, entered the market the following year, with improved software, more reliable servers, and a wider variety of poker variants available. But 2001 saw the biggest leap forward in terms of customer base with the launch of PokerStars and PartyPoker, both aided by widespread marketing campaigns (including television and print advertising). In 2002, PartyPoker instituted a tournament with a guaranteed $1 million prize, an absolutely unheard-of amount.

As a draw, online sites began offering “satellite” tournaments — games where in addition to taking the cash prize, the winner would earn a seat at a high-profile live poker tournament. This became a massive boon for the online poker industry when Chris Moneymaker won such a satellite tournament, and went on to win the Main Event of the World Series of Poker in 2003.

Other major players in the online poker world were UltimateBet (launched in 2001), 888 (2002, originally called Pacific Poker), Absolute Poker (2003), and Full Tilt Poker (2004). By this time, the marketing model for these sites was fairly well standardized, with professional poker players quickly aligning themselves with one site or another. In one case, Doyles Room, the site was inextricably tied to its namesake, poker mainstay Doyle Brunson. And in the case of Full Tilt Poker, professional poker players were not just spokespeople, but actual principals behind the site. Poker-themed television programs became synonymous with their online-site sponsors (and multiplied rapidly).

Online poker was now a reality. But in the years to follow, business would hardly be smooth…

~William R. Coughlan, writer/director of Quorum

In researching Las Vegas while writing Quorum, I was amazed to discover the existence of a hidden world beneath the city’s streets: the (officially) abandoned drainage tunnel network, which would prove critical to Jimmy and Peeps during their surreptitious return to the city. (Jimmy even gives a shout-out to one of several articles that introduced me to the subject.)

Originally conceived as a way to prevent flooding (which had become more common as Las Vegas construction intensified), some of the drainage channels date back to the mid-1970s. But the Hydro Conduit Corporation expanded the tunnels in the 1990s; the plan was to construct nearly 1,000 miles of tunnels over the next decades, but as costs increased, the project was scuttled. At present, there are about 300 miles of tunnels, out of about 450 miles of flood channels overall.

In 2002, murder suspect Timmy “T.J.” Weber used the tunnels in an attempt to evade police after murdering his girlfriend, a weeks-long manhunt that drew widespread public attention to the tunnels’ existence. This in turn prompted a series of articles on the tunnels — and the staggering homeless population that seek shelter there — by author Matthew O’Brien. O’Brien went on to write the book Beyond the Neon: Life and Death in the Tunnels of Las Vegas, and launched the Shine a Light Foundation to help the underserved population of the Las Vegas tunnel system.

There are, in fact, hundreds of homeless people living underneath the brightly lit streets of Las Vegas. An entire neighborhood culture has formed, with residents helping each other and forming communication networks to warn against the very real danger of flash flooding. But as is unfortunately common among the homeless nationwide, mental illness and addiction are all-too-prevalent afflictions, and civil and police oversight is effectively nonexistent. The world beneath the city is truly a world unto itself, almost entirely divorced from that of the streets above.

Curiously enough, the idea of accessing the casinos directly from the tunnels is not a bit of creative invention. Though the casinos rarely like to draw attention to the fact, the reality is that many of these tunnel exits offer near-direct access (though they are also frequently protected by motion sensors). And many of the tunnel denizens do venture up into the casinos in a nightly attempt to scavenge unclaimed slot-machine winnings (frequently gathering an average of $50 per day).

The character of Crunchy isn’t modeled on any particular person, but is an amalgam of various people whose stories were brought to light by O’Brien and others. One thing that struck me was how so many of these people tended to remain (on balance) positive, despite their circumstances. How they worked to form a community rather than pursuing self-interest at others’ expense. In a story populated by nefarious characters and pessimistic outlooks, I thought it might be a welcome break to take a brief interlude, to focus on the positive in spite of apparent adversity. Crunchy may be downtrodden, but he maintains his sanguine perspective throughout his time with Jimmy and Peeps. And that may leave a lasting impression on Jimmy that will prove significant in his adventures to come.

~William R. Coughlan, writer/director of Quorum