The Feds Attack Online Poker

On Black Friday, The Justice Department killed a $2.5 billion industry.

There's also the question of why conservatives like Frist and Kyl would push a law so lush with the dreaded nanny-state overtones. "I believe in a smaller, more conservative role for government than telling me which card games I can play on my computer," Fritz says.

Frist declined to comment about his motives. Kyl didn't respond to repeated interview requests.

Most players cynically dismiss the senators' move as a strong-arm play. The feds want their protection money — i.e., taxes — and won't let the ride continue until someone pays up. But since government moves in slow motion, it's left a multi-billion industry to rot from atrophy. Any remedy will likely take years.

Jesse Lenz
Maxwell Fritz rebounded on Wall Street.
Will Rice
Maxwell Fritz rebounded on Wall Street.

"It's really frustrating to me," LaTour says. "It just seems they weren't seeing any of that money that was going out there so they want to set it up so they can tax it. But the longer this takes, the more there will be people like me who just give up on it and move on with our lives to find another way of making a living. I've pretty much stopped waiting around."

A solution seems rather simple. Since everything's handled electronically, internet poker offers the possibility of instant taxation of winnings. And the feds could easily force sites operating in the United States to pay American taxes for the privilege of doing business here.

Yet the mom and pop poker enthusiast doesn't employ a battery of lobbyists on Capitol Hill. And even if she did, she'd still be confronted by the moralists who believe any form of gambling is a sin.

"We're a pretty small minority," Wright says. "We don't have a big voice. We need to be louder. But we're talking American politics. One, we know it's going to take longer than it should, they're going to find a way to screw people and they're probably going to make the taxing situation really complicated."


Brian Mogelefsky grew up on Long Island and joined his dad's mortgage business, Discount Funding Associates, out of high school in the early '90s. It remained a small concern until the 2000s, when they took the business online, hiring 600 people at their peak.

But the mortgage industry was about to implode. By 2006, the Mogelefskys had closed shop.

Until then, poker had been little more than a hobby. Mogelefsky started playing after seeing the Matt Damon-Ed Norton film Rounders and began showing up at house games on Long Island.

But when his company collapsed, Mogelefsky decided to play poker online for a month in earnest, a test to see if it could provide a living. He ended up making $7,000. A new career was born.

His new job offered geographical flexibility. He and his wife began making lists of where they'd like to raise their two kids. They settled on a perfect neighborhood in South Charlotte, North Carolina, where they could halve their cost of living and build their dream home.

"I want to be here when my kids grow up," Mogelefsky says. "For the things I wanted to accomplish, it was worth it to make the sacrifices. Even today, I don't really want to play poker for a living, but I sort of backed into it and it allowed the lifestyle and things that were important to me. ... It was going great until April 15."

Mogolefsky had the best week of his life just before Black Friday, earning more than $15,000. He generally never let his Full Tilt account rise above $10,000 before withdrawing the money. But by that time, the company was already experiencing financial problems.

Full Tilt refused a withdrawal at the beginning of April. By the time the feds seized its assets 15 days later, Mogolefsky had $28,000 in his account. It was now frozen.

"I know how to pick them," he says, laughing ruefully. "I went from the mortgage industry to the poker industry, the two biggest collapses of the last 10 years. ... I was in shock. Not only am I not able to produce more money, but the money I basically earned the last three months is also gone."

The closest casino to his home is Harrah's Cherokee, three hours away in the middle of Great Smoky Mountains National Park. But it doesn't offer enough action to make a living. So Mogelefsky began flying to Florida, crashing at his in-laws' place in Fort Lauderdale and playing the poker rooms at dog tracks and Indian casinos. The competition isn't particularly tough, but the pots are small and he can't churn the hands that he could online.

Still, with a family of four to feed, he has no other choice but to gut it out.

"It's hard because my expenses are through the roof, just from traveling, and then I have to eat. All the gas, all the extra costs, and I'm not able to put in nearly as many hours, and now I'm away from my family all the time."

Like most players, Mogelefsky has no illusions about the government riding to the rescue. The feds may have crushed a $2.5 billion industry, but they seem to have no idea how to resurrect it in more palatable form. Nor do they seem to acknowledge all the families they've cast adrift.

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