On April 15, 2011, thousands of Americans who played online poker woke to find three popular websites shut down by the FBI and millions of dollars in players’ accounts frozen.
The online poker industry survived its “Black Friday,” as the day became known, as the Obama administration declared online gaming legal later that year in states that approved it. But the aftermath should serve as a looming worst-case scenario to the millions of Americans who play daily fantasy sports, legal experts say, as many of those players who had money saved in online poker accounts had to wait years before they got it back.
There are a number of possible outcomes for the growing list of investigations into daily fantasy companies being mounted by federal and local law enforcement agencies across the country. These inquiries could conclude – as DraftKings and FanDuel officials adamantly maintain – that daily fantasy is legal, and that a DraftKings employee implicated in allegations of “insider trading” did nothing wrong and gained no competitive advantage.
But if a prosecutor in New York, Florida, Massachusetts, Nevada or elsewhere decides he or she has a winnable case involving daily fantasy companies, players who continue to leave large sums in online accounts risk not being able to access that cash for a while.
“It all depends on how aggressive they want to get,” said Lawrence Walters, a First Amendment and intellectual property lawyer and online gaming consultant in Florida.
Walters said a decision by federal prosecutors to pursue civil charges – which may not result in instant cash seizures – would be a more “humane” way for prosecutors to handle a potential case against a daily fantasy company. But Walter expects, if a federal agency decides to take action, it will be aggressive.
In a statement from FanDuel spokeswoman Justine Sacco, the company strongly disagreed with the idea federal law enforcement could freeze players’ accounts.
“We’ve heard nothing from anyone – anywhere – in a position to know indicating it is remotely under consideration, and there is no reason it would be. Offshore poker was a very, very different industry. Further, we segregate player funds into a dedicated master client funds account to ensure player cash is segregated and we have more than sufficient funds to meet any player’s withdrawal requests at all times,” Sacco wrote.
But Jeff Ifrah, a District of Columbia white collar criminal defense lawyer, agreed with colleagues that a financial seizure is entirely possible if federal prosecutors decide to press criminal charges.
“Most prosecutors don’t become prosecutors because they like to just slap people on the wrist,” Ifrah said.
Ifrah, who has counseled online poker companies, noted that the vast majority of poker players did get their money back, either in refunds, or through settlement agreements between the Justice Department and the companies.
But for many of those players, the waiting process took years. Last February – on a day that some poker players now call “Green Friday” – a court administrator distributed one of the last large chunks of cash held up from Black Friday, an estimated $80 million that went back to about 30,000 people.
Despite the uncertainty that surrounds daily fantasy, Ifrah maintains optimism the current controversy could ultimately strengthen the industry through the establishment of consumer protection regulations.
“Maybe this isn’t the worst thing in the world (for daily fantasy),” Ifrah said. “Consumers have a right to know that their money is safe, and that the product is fair.”
This post has been updated to include a statement from FanDuel.
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