Censored PFA thread about legality of bitcoin gambling -- removed in 2014 minutes after being posted

[Alvin Finklestein]

There is little question in my mind that running a bitcoin gambling site of any type (including poker) is illegal in the United State. The question remains whether the feds (or even possibly state-level authorities) will be interested enough to do anything about it.

Here are some questions you might have about the matter, which I will hopefully answer for you below.

Why is bitcoin gambling illegal in the US? Bitcoin gambling is illegal because a bitcoin is an item with value. Not only is it widely accepted that bitcoin can be traded easily for cash, but they can also be used as currency to purchase other items (including from legitimate merchants). There is mass public awareness that bitcoin have monetary value. "We are only gambling for meaningless online tokens" is not a valid defense, as it could be proven in court that nearly every bitcoin user is aware of its monetary value. Furthermore, many bitcoin gambling sites provide tutorials on how to buy and sell bitcoins for cash, thus again making it clear that they are marketing to real money gamblers, rather than those who had obtained bitcoin through non-monetary means.

Zynga Poker (popular play money site) chips are often bought and sold for real cash. Why isn't that illegal? There are a few reasons for this. First, all Zynga Poker members can get chips for free. Second, Zynga itself does not sell the chips, nor do they take any form of rake at their poker table. The chips are sold by third parties unrelated to Zynga. Third, Zynga chips do not have any value outside of Zynga Poker itself. Fourth, Zynga does not direct any of its members to sites where chips can be bought and sold, nor does it market itself as a replacement for existing online gambling sites. Fifth, and most importantly, Zynga chips are not assumed or presented to have any value. If Zynga Poker shut down tomorrow (and confiscated everyone's chips), nobody would have any civil or criminal claim against them, even if they purchased chips from a third party. However, if a bitcoin gambling site closed shop and kept everyone's bitcoin, there would definitely be cause for a criminal investigation against them.

I'm still not convinced that the feds can legally assign monetary value to bitcoin. They already have. In July, 2013, a man who ran a bitcoin scam (and stole only bitcoins -- no cash) was arrested and charged by the SEC. This could not have been done if bitcoin were simply meaningless tokens being traded online.

Does the .eu domain protect existing bitcoin sites from getting busted? No. It just presents one additional layer of protection against US authorities from seizing the domain. US-based domains (.com, .net, .org, etc) can easily and quickly be seized through a court order. The .eu domains are not under US jurisdiction, so they cannot be seized as quickly. However, as that top-level-domain is related to the European Union, it is highly likely that the company managing it (EURid) would cooperate with the US in helping seize it if it could be proven that the site was breaking laws in the United States.

Could a US citizen run a bitcoin gambling site by hiding the ownership and simply masquerading as an employee of the site? In most cases, no. The feds aren't easily fooled by ruses like this, and there are several ways to determine the actual ownership and power structure. In addition, acting as an employee of an illegal gambling operation is still against the law and can lead to jail time.

Is it likely bitcoin gambling sites will get busted? Unknown. Only the feds know their level of interest in this matter at the moment, which could change at any time. Many felt that US-facing online poker sites would never get busted, as they operated for 4 1/2 years after the passage of the UIGEA with virtually no problem. The fact that no bitcoin gambling site is too large at the moment makes the arrests less likely, but that also doesn't mean they are in the clear.

What will happen if a bitcoin gambling site gets busted? The sites will be seized and immediately go down. The bitcoin held by the site will also be seized, and it may be difficult (or impossible) for the players to recover their bitcoin, as many bitcoin gambling sites do not require real-name registration or verification. The owners and key employees of these sites will be arrested. They may or may not see actual prison time. It is possible they will be allowed to settle by essentially surrendering their entire body of profit from the site to the federal government.

[Dan Druff]

One of the last interactions I had with Micon was in August 2014.

He was absolutely furious about the above Alvin Finklestein post, claiming it was a swipe against him, and was basically a guide to bust him for owning/running Seals.

I told him that, while I admitted the post was referring mostly to Seals, it was just informational for people confused about the legality of bitcoin poker rooms, and not met in a hostile manner.

He didn't buy it, and told me I was declaring war by leaving up such a post.

I then admitted that I made the post shortly after hearing he was telling people at the 2014 WSOP that he "hopes Druff dies of a heart attack", when people unaware of our fallout asked how I was.

We then had some angry words back and forth about the entire situation.

Finally, he owned up to those comments earlier in the summer, and said he "didn't know why" he said that, and that "anger about the past" got to him when he heard my name mentioned.

At that point, the conversation cooled down, and I agreed to remove this post, very shortly after it was made. (He called me within minutes of when it appeared here.)

I just found it today, hidden in an area of the site only I can access. I decided to bring it back, as Micon has already been busted for Seals (this post was well before that occurred), and is kind of a moot point now.

[JoeD]

It's amazing how fast times flies by. It was actually the State of Nevada, which had just regulated online poker, that shut him down and not the Feds.

You have to wonder how successful Seals might have been if he had moved with his family and operated outside of the US and also maybe not accept players from those few states like New Jersey and Nevada that were just starting with regulated online poker. The Feds never seem all that motivated unless there is a large financial windfall to be had.

[Dan Druff]

It's amazing how fast times flies by. It was actually the State of Nevada, which had just regulated online poker, that shut him down and not the Feds.

You have to wonder how successful Seals might have been if he had moved with his family and operated outside of the US and also maybe not accept players from those few states like New Jersey and Nevada that were just starting with regulated online poker. The Feds never seem all that motivated unless there is a large financial windfall to be had.

Yeah, "Alvin" focused on the feds too much, and not enough on the state of Nevada, though to his credit, the state-level enforcement possibility was stated near the beginning of the post.

Regarding Seals, the bust did hurt them, but the truth is that it was never going to become huge as long as it was a bitcoin only site. It never had major traffic, and was never a major player in the online poker landscape.

It might have had a better shot at becoming something ACR-sized if Micon had moved earlier to Antigua and attempted to build it into a real US-facing poker site, accepting credit cards and other forms of payment typically taken by US-facing rooms, in addition to bitcoin.

I think Seals' biggest profit probably came from the rapid appreciation of bitcoin and the fact that a lot of people had small abandoned balances on there which became quite large after bitcoin's rise. So someone who made a throwaway account and left 0.5 bitcoin on there and forgot the login info left a few dollars behind back in 2011, but in 2016 that same account had thousands of dollars of value. So multiply that by a lot of accounts, and you have a shitload of unclaimed BTC, which the ownership eventually made off with shortly after the bust.

That was my biggest criticism of Seals. They gave a whopping 30 days after the bust for people to login and collect their bitcoin. At that point, the site would shut down and the owners would keep everything for themselves. They claimed that this was to protect their identities from being detected by authorities, but that's a big load of BS. They could have easily designated a third party to distribute the bitcoin, even for a fee. Or they could have just put Micon in charge of distributing the bitcoin, as he was the face of the site anyway, and was already known to authorities.

Instead, they gave a token 30 days, and then probably went off into the sunset with millions of dollars worth of unclaimed bitcoin.

People like Jesse Martin even experienced strange difficulties trying to collect, despite trying within the 30 day window. (Jesse ended up having a public fight with Micon on Twitter later on about this matter.)

It basically looked like the powers-that-be at original Seals wanted to do the absolute minimum to allow people to get their money, and they hoped as much would be left over as possible.

Micon's excuse was that he didn't control the money, and was just a glorified marketer. That's actually possible, but surely he knew the identities of the others involved, and should have threatened exposure if they didn't fairly distribute the unclaimed money in some way.

I still wonder how much of that unclaimed money Micon ended up with.

[snowtracks]

It's amazing how fast times flies by. It was actually the State of Nevada, which had just regulated online poker, that shut him down and not the Feds.

You have to wonder how successful Seals might have been if he had moved with his family and operated outside of the US and also maybe not accept players from those few states like New Jersey and Nevada that were just starting with regulated online poker. The Feds never seem all that motivated unless there is a large financial windfall to be had.

Yeah, "Alvin" focused on the feds too much, and not enough on the state of Nevada, though to his credit, the state-level enforcement possibility was stated near the beginning of the post.

Regarding Seals, the bust did hurt them, but the truth is that it was never going to become huge as long as it was a bitcoin only site. It never had major traffic, and was never a major player in the online poker landscape.

It might have had a better shot at becoming something ACR-sized if Micon had moved earlier to Antigua and attempted to build it into a real US-facing poker site, accepting credit cards and other forms of payment typically taken by US-facing rooms, in addition to bitcoin.

I think Seals' biggest profit probably came from the rapid appreciation of bitcoin and the fact that a lot of people had small abandoned balances on there which became quite large after bitcoin's rise. So someone who made a throwaway account and left 0.5 bitcoin on there and forgot the login info left a few dollars behind back in 2011, but in 2016 that same account had thousands of dollars of value. So multiply that by a lot of accounts, and you have a shitload of unclaimed BTC, which the ownership eventually made off with shortly after the bust.

That was my biggest criticism of Seals. They gave a whopping 30 days after the bust for people to login and collect their bitcoin. At that point, the site would shut down and the owners would keep everything for themselves. They claimed that this was to protect their identities from being detected by authorities, but that's a big load of BS. They could have easily designated a third party to distribute the bitcoin, even for a fee. Or they could have just put Micon in charge of distributing the bitcoin, as he was the face of the site anyway, and was already known to authorities.

Instead, they gave a token 30 days, and then probably went off into the sunset with millions of dollars worth of unclaimed bitcoin.

People like Jesse Martin even experienced strange difficulties trying to collect, despite trying within the 30 day window. (Jesse ended up having a public fight with Micon on Twitter later on about this matter.)

It basically looked like the powers-that-be at original Seals wanted to do the absolute minimum to allow people to get their money, and they hoped as much would be left over as possible.

Micon's excuse was that he didn't control the money, and was just a glorified marketer. That's actually possible, but surely he knew the identities of the others involved, and should have threatened exposure if they didn't fairly distribute the unclaimed money in some way.

I still wonder how much of that unclaimed money Micon ended up with.

I definitely had 1/3 of a bitcoin left on the site. I Logged in and found zero but it was like 1 year later.

[duped_samaritan]

Bryan should be thanking his lucky stars that Colonel Nigel Fabrisham didn't learn of his racket.