United States v. Scheinberg, commonly known as the “Black Friday” case, was a landmark legal proceeding in the United States that had a significant impact on the online gambling industry, particularly in relation to online poker.
The case revolved around the prosecution of the founders and executives of three major online poker companies: PokerStars, Full Tilt Poker, and Absolute Poker. The trial took place in 2011 and marked a turning point in the regulation and legality of online gambling in the United States.
Pokerstars case with USA
In the early 2000s, online poker experienced an explosive growth in popularity, attracting millions of players worldwide. However, the legal status of online gambling, including poker, remained ambiguous in many jurisdictions. In the United States, the Unlawful Internet Gambling Enforcement Act (UIGEA) was passed in 2006, which prohibited financial institutions from processing transactions related to online gambling activities.
Despite the UIGEA, online poker operators continued to offer their services to US players, exploiting loopholes in the law and maintaining that poker was a game of skill rather than chance. This led to a surge in online poker’s popularity in the US market, making it one of the most lucrative segments of the online gambling industry.
In 2011, the US Department of Justice (DOJ) took decisive action against the leading online poker operators by unsealing indictments against the founders and executives of PokerStars, Full Tilt Poker, and Absolute Poker. The charges included bank fraud, money laundering, and violating the UIGEA. The federal authorities also took over the domain names resulting in hundreds of thousands of players unable to play poker on a Friday night. These actions became known as “Black Friday” and sent shockwaves through the online poker community.
As a result of the indictments, the three major online poker companies suspended their operations in the US market, leading to the freezing of player funds and the collapse of the Full Tilt Poker platform. The case not only affected the companies themselves but also had a profound impact on millions of online poker players who were left without access to their accounts and funds.
United States v. Scheinberg brought to the forefront the complexities of regulating online gambling in a digital age. It highlighted the challenges faced by lawmakers in reconciling federal and state laws, as well as addressing the borderless nature of online activities. The case also sparked discussions on whether online poker should be considered a game of skill or chance, and whether it should be subject to different regulations than other forms of online gambling.
Following “Black Friday,” the landscape of online poker in the United States underwent significant changes. Several states began exploring the possibility of legalizing and regulating online poker within their jurisdictions. Nevada, Delaware, and New Jersey were among the first to establish intrastate online poker platforms, allowing residents of those states to play poker legally online. New York, the state responsible for this case, legalised online gambling in 2022.
PokerStars finally settled the case at $731 million with federal prosecutors and also taking over Full Tilt’s players whole. PokerStars and Scheinberg did not admit to any wrongdoing. All others in the case pleaded guilty.