Hurry Up and Wait: FullTilt/PokerStars/Group Bernard Tapie Update

This post has nothing to do with taxes, but everything to do with online poker. You’ve been forewarned.

Today came news that Group Bernard Tapie has backed out of the deal to acquire the assets of FullTilt Poker. That is a fact, and that would normally be bad news for individuals who are waiting to be reimbursed by FullTilt. However, fresh on the heals of that news (and, in some cases, preceding that) came the rumor that PokerStars was acquiring FullTilt, and settling with the US Department of Justice for $750 million.

First, let’s deal with the facts. GBT says that they could not come to an agreement (with the DOJ) on repaying non-Americans and that there were issues regarding forfeiture laws outside of the US. I’ll take what GBT said at face value (though the reasons cited ring somewhat hollow with me). No matter, an acquiring company can always decide to walk away from a deal.

The next fact is that PokerStars is in negotiations with the DOJ to settle the criminal and civil charges filed against it. That’s not a surprise, as PokerStars would like to not have anything hanging over its head. This was confirmed by Eric Hollreiser, Head of Corporate Communications for PokerStars, in a corporate blog post today.

The rumored settlement amount, $750 million, feels right. Party Poker settled with the DOJ for around $300 million. If we consider that PokerStars operated in the US for five additional years after the UIGEA went into effect in 2006, the additional amount is reasonable.

It also feels right that the DOJ doesn’t want to deal with repaying Americans (or individuals outside of the US). Americans likely could file claims of rendition with the DOJ, and I suspect that the DOJ isn’t set up to deal with thousands of claims, so why not hand it off to PokerStars. That said, this part of the rumor could be wrong.

Let’s look at this from the DOJ’s point of view. “PokerStars operated for five years following implementation of the UIGEA. They committed bank fraud. They should pay at least double what Party paid,” might be how the DOJ looks at it. So the DOJ keeping $600 million and setting up a $150 million fund to repay Americans (the estimated amount owed US players by FullTilt is $150 million) also feels right. This is just speculation by me, and we’ll all have to wait for the press release by the DOJ.

And that’s the definite reality: Until the deal is signed off–and any deal with $500 million or more coming into the US will have to go up to the Attorney General (Eric Holder)–no one with concrete knowledge of the terms is going to say anything. This could be a matter of hours, days, or weeks. As my niece would say, “Hurry up and wait.”

There’s another certainty: No one in the US is going to be playing on PokerStars (or FullTilt Poker) if this deal goes through. This deal will not change current US law as interpreted by the DOJ. The DOJ believes that online poker is not legal under a variety of laws. Until legislation passes in Congress (or state legislation passes), there will be no legal online poker in the US. Nevada is in the licensing stage for intrastate online poker; the best hope for federal legislation will be in the lame duck session following the November election.

Finally, a brief comment about Ultimate Bet/Absolute Poker (remember them?): If the rumors are true about PokerStars purchasing FullTilt Poker, do not expect a repeat of them purchasing UB/AP.

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