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Online gambling has taken another hit today with federal authorities arresting the founders of the three largest U.S. online poker companies--PokerStars, Full Tilt Poker, and Absolute Poker.
The eleven arrestees are accused of side-stepping federal law by creating an elaborate scheme to trick banks into processing bets and payments.
As any poker aficionado knows, in 2006 Congress passed the Unlawful Internet Gambling Enforcement Act, which made it illegal to place, receive or knowingly transmit a bet or wage over the internet if to do so is illegal in the state in which the bet is initiated, received or made.
Because online gambling is prohibited in the majority of the country, the "transmit" language of the bill essentially made it illegal for American financial institutions to transfer online gambling bets.
According to the indictment, PokerStars, Full Tilt Poker and Absolute Poker convinced small, local banks to process payments in contradiction of this law by offering large investments, reports The Wall Street Journal.
The companies also disguised bets as payments to fake online merchants to avoid detection.
The arrests come as a shock to some, as attitudes towards online gambling have seemed to ease up recently. Local online gambling was just approved in the District of Columbia and several other states have been considering legalizing it as well.
However, prosecutors are seeking $3 billion in money laundering fines, profit forfeiture, and are charging the defendants with bank fraud and illegal gambling. These charges appear to be more of a crackdown on criminal banking activity, not online poker.