I spend a lot of time at Reason magazine when I surf the web. Today they have a blog post about the story of Daniel Tzvetkoff, an Australian entrepreneur who founded Intabill , a payment firm that I’ve never heard of (but that doesn’t mean anything).

Apparently he made the mistake of visiting Las Vegas last week, and got himself arrested – the first person ever thus charged – for violating the UIGA:

When the U.S. Attorney’s Office in Manhattan unsealed Tzvetkoff’s indictment on Friday, it was the first time anyone had been publicly charged with violating the Unlawful Internet Gambling Enforcement Act (UIGEA). The UIGEA, enacted in 2006, makes it a federal crime for someone “engaged in the business of betting or wagering” to accept a payment in connection with “unlawful Internet gambling.”

Since Tzvetkoff did not run any gambling businesses, he is accused of conspiring with others who do, including the operators of such popular websites as PokerStars and Full Tilt Poker. The indictment also alleges a conspiracy to violate the Illegal Gambling Business Act.

Based on the same transactions, U.S. Attorney Preet Bharara threw in two money laundering counts and a bank fraud charge, which alleges that Tzvetkoff misled American financial institutions about where money drawn from their customers’ accounts was going. Since the only gain from the alleged fraud was the banks’ usual services at their usual rates, this charge seems legally questionable.

When you add together all the maximum sentences—five years for the gambling conspiracy, 20 years for each money laundering count, and 30 years for bank fraud—you see that Tzvetkoff faces up to 75 years in prison for the crime of helping Americans play poker. To top it off, Bharara is demanding more than $2 billion in asset forfeiture, representing the four criminal counts multiplied by $543 million, which he says is the total amount of payments the company processed in the U.S., most of which involved gambling.

Jesus Christ.

I’ve said it before, my own personal preference is that I don’t want a casino or poker room – and the hookers and mobsters and petty criminals that come with them – within 100 miles of my own house, but I also don’t think that gambling is some moral vice that needs to be regulated by any government level above my city or county, either. If people want to play games of chance with their own money, whether in a casino or their own homes, they should be able to do so and that decision should not be any business of the federal or state government. Until state lotteries and state-owned casinos or OTB parlors are eliminated, and until every politician outside of Nevada turns down lobbying money from casino corporation, every bit of anti-gambling enforcement from the any level of government is nothing more than hypocrisy.

Although I think the argument is eminently better when you discuss the potential for government tax revenues from legal poker, it’s always nice to see a major journalistic figure throw a bone to the cause in a major Sunday newspaper, so I can’t nitpick too much. George Will is always about the hypocrisy, anyway, and, as we all know the UIGEA is full of it:

In 2006, Congress, cloaking cunning with moralizing, effectively outlawed Internet gambling by making it illegal for banks or credit-card companies to process payments to online gambling operations. This was more than moral pork for social conservatives. It also blocked online competitors from poaching gamblers from the nation’s most aggressive promoters of gambling — state governments. They are increasingly addicted to revenue raised by lotteries — the 42 states that have lotteries spent $520 million in 2007 promoting them — and from taxation of other legal gambling. The law exempted Internet state lotteries and two powerful and vocal interests — online betting on horse racing and some fantasy sports betting online.

Having turned gambling, which once was treated as a sin, into a social policy, government looks unusually silly criminalizing online forms of it.

If she wasn’t here at home taking care of the Baby Johnnymac #2, I could swear she was probably on this jury, along with Ned Flanders, the Church Lady, and Roger Goodell.

Bwarney Fwank had his PPA buddies up for a visit yesterday:

Poker Players Lobby Lawmakers To License Online Games

WASHINGTON (Dow Jones)–Poker enthusiasts are visiting the Capitol this week to make their case to lawmakers that online gaming can be regulated effectively and doesn’t need to be banned outright.

John Pappas, head of lobbying group Poker Players Alliance, said legislation to license and regulate online poker would ensure protections for compulsive gamblers and minors.

All the protections that online sites in the U.S. use now are voluntary, Pappas said Monday at a congressional briefing.

Pappas wants lawmakers to act before December to clarify a law that could ban banks from helping online poker sites distribute money among players. Without action, banks could vacate the market and leave the money distribution to less-reputable organizations, he said.

U.S. law prohibits most forms of Internet gambling. State prosecutors recently seized millions from online poker sites, angering players and advocates who believe their online gaming activities are legitimate.

The European Commission also has threatened to challenge the U.S. ban on Internet gambling at the World Trade Organization, saying the prohibition violates international trade rules.

Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, has proposed legislation to legalize and regulate Internet gambling so revenue could be taxed and consumers would have some protections.

A similar bill is expected to be introduced in the Senate by Sen. Robert Menendez, D-N.J., Pappas said.

According to the Poker Players Alliance, there are 10 million Americans who play online poker for money, spending about $6 billion a year.

The alliance has argued in court that online poker doesn’t violate the existing law because it is a game of skill, rather than a game of chance.

Wagers are made against other players of varying ability, not against a “house” as an illegal gambling game might be run, the alliance argued in petitions to U.S. attorneys in New York and California. Moreover, a poker “bet” mischaracterizes the actual activity in poker, the petition stated, saying a poker bet is more like a “move” in any other game.

I think it’s clever to redefine the meaning of “bet” as a “move” but I don’t think it’s going to work. You’re still putting a variable amount of money into the game and whether or not you receive that money back is at least partially a teeny weeny bit dependent on a random occurrence. It’s a bet and in the loosest sense of the term, it IS gambling.

(”this blog will self destruct in 10, 9, 8, …”)

At least according to the way most state laws are written.

(”Abort self destruct”)

That said, I do think that there is hardly any difference between horse racing and poker – you’re not betting against the house with odds against you, you’re betting against other people’s opinions on an outside event – so why is the former legal and the latter not?

The same argument could be made for sports betting, too, although the potential for corruption is a lot higher because said outside event is beyond the control of the party hosting the betting game or a regulatory body that would be tasked with its administration, and, frankly, I don’t want to see a U.S. Deparment of Sports Gaming Administration patrolling the sideline at Rice Stadium just to make a legal football bet in Texas.

Regardless of ALL of this, I think the PPA is doing a good job and I think they’re fighting the good fight. What has to happen is that a brand new law with brand new poker-specific definitions will need to be written – it’s kind of clever to try and play the semantics game and hope a judge somewhere buys in (like people THINK is the case in California, but not really).

And while I like the effort, that seems to be too complicated compared to just lobbying a few Congressmen and promising a new source of money to spend on airports. They’ll jump at that.

This is classic Malcom Gladwell:

Cohan asked Cayne about the last days of Bear Stearns, in the spring of 2008. Wall Street had become so spooked by rumors about the firm’s financial status that investors withdrew their capital, and no one would lend Bear the money required for its day-to-day operations. The bank received some government money, via J. P. Morgan. But Timothy Geithner, then the head of the New York Federal Reserve Bank, didn’t open the Fed’s so-called “discount window” to investment banks until J. P. Morgan’s acquisition of Bear was under way. What did Cayne think of Geithner? Picture the scene. The journalist in one chair, Cayne in another. Between them, a tape recorder. And the savviest man on Wall Street sets out to salvage his good name:

The audacity of that prick in front of the American people announcing he was deciding whether or not a firm of this stature and this whatever was good enough to get a loan. Like he was the determining factor, and it’s like a flea on his back, floating down underneath the Golden Gate Bridge, getting a hard-on, saying, “Raise the bridge.” This guy thinks he’s got a big dick. He’s got nothing, except maybe a boyfriend.

What’s the poker lesson? This:

[British Commander at Gallipoli] Hamilton, it seems clear, was simply overconfident—and one of the things that happen to us when we become overconfident is that we start to blur the line between the kinds of things that we can control and the kinds of things that we can’t. The psychologist Ellen Langer once had subjects engage in a betting game against either a self-assured, well-dressed opponent or a shy and badly dressed opponent (in Langer’s delightful phrasing, the “dapper” or the “schnook” condition), and she found that her subjects bet far more aggressively when they played against the schnook. They looked at their awkward opponent and thought, I’m better than he is. Yet the game was pure chance: all the players did was draw cards at random from a deck, and see who had the high hand. This is called the “illusion of control”: confidence spills over from areas where it may be warranted (“I’m savvier than that schnook”) to areas where it isn’t warranted at all (“and that means I’m going to draw higher cards”)…

Most people are inclined to use moral terms to describe overconfidence—terms like “arrogance” or “hubris.” But psychologists tend to regard overconfidence as a state as much as a trait. The British at Gallipoli were victims of a situation that promoted overconfidence. Langer didn’t say that it was only arrogant gamblers who upped their bets in the presence of the schnook. She argues that this is what competition does to all of us; because ability makes a difference in competitions of skill, we make the mistake of thinking that it must also make a difference in competitions of pure chance. Other studies have reached similar conclusions. As novices, we don’t trust our judgment. Then we have some success, and begin to feel a little surer of ourselves. Finally, we get to the top of our game and succumb to the trap of thinking that there’s nothing we can’t master. As we get older and more experienced, we overestimate the accuracy of our judgments, especially when the task before us is difficult and when we’re involved with something of great personal importance. The British were overconfident at Gallipoli not because Gallipoli didn’t matter but, paradoxically, because it did; it was a high-stakes contest, of daunting complexity, and it is often in those circumstances that overconfidence takes root…

This is what social scientists mean when they say that human overconfidence can be an adaptive trait. “In conflicts involving mutual assessment, an exaggerated assessment of the probability of winning increases the probability of winning,” Richard Wrangham, a biological anthropologist at Harvard, writes. “Selection therefore favors this form of overconfidence.” Winners know how to bluff. And who bluffs the best? The person who, instead of pretending to be stronger than he is, actually believes himself to be stronger than he is. According to Wrangham, self-deception reduces the chances of “behavioral leakage”; that is, of “inadvertently revealing the truth through an inappropriate behavior.” This much is in keeping with what some psychologists have been telling us for years—that it can be useful to be especially optimistic about how attractive our spouse is, or how marketable our new idea is. In the words of the social psychologist Roy Baumeister, humans have an “optimal margin of illusion.”

Gladwell is always good for poker blog content.

I’m only your friend because I want to tax you.