Back in 2011, the U.S. government made its move. It froze bank accounts linked to Full Tilt Poker, PokerStars, and Absolute Poker, indicted 11 founding executives, and came after the industry for $3 billion in fines and restitution. The stated reason was that online poker was illegal gambling. The real reason, as one player put it perfectly at the time: “The government wants a piece of that money.”
He wasn't wrong. The online poker industry was generating an estimated $6 billion a year. Washington saw a revenue stream it wasn't taxing and decided to call all-in.
Fast forward to today, and the landscape looks completely different.
Online Poker Is Now Legal in Much of the U.S.
The 2011 crackdown, known in poker circles as Black Friday, turned out to be a temporary setback rather than a death blow. Since then, legal, regulated online poker has expanded significantly. New Jersey, Nevada, Delaware, Michigan, Pennsylvania, and Connecticut have all legalized online poker. More states are moving in that direction every year as legislators realize what the 2011 government already knew: there is serious money in this industry, and it is better to regulate and tax it than to pretend it doesn't exist.
PokerStars eventually returned to the U.S. market in regulated states. The industry cleaned up its act, implemented proper licensing, and players now have actual consumer protections. Your bankroll won't disappear overnight because the DOJ decided to make a point.
The irony is rich. The same government that tried to kill online poker is now collecting tax revenue from it. Funny how that works.
Is Poker Gambling? The Debate Still Rages
I've always believed poker is fundamentally different from gambling, and nothing has changed my mind.
In blackjack, roulette, or slots, you are playing against the house. The house has a mathematical edge. You cannot outskill a roulette wheel. You will lose over time, guaranteed.
Poker is different. You play against other people. The house just takes a small rake for hosting. Your edge comes entirely from being better than the people sitting across from you.
The proof is in the results. Phil Hellmuth has 17 World Series of Poker bracelets. Phil Ivey has 10. Daniel Negreanu has been one of the top earners on the tournament circuit for two decades. You don't accumulate that kind of record through luck. You only win 49% of the time in pure gambling. These players win at rates that defy any random distribution.
I once ran into Phil Hellmuth at a charity event and he mentioned that Phil Ivey was making around $2 million a month from his ownership stake in Full Tilt at the time. Whether or not that number was exact, it illustrated something important: the best poker players aren't gamblers. They're businesspeople who happen to use cards.
That said, let's be honest about the other side of the table.
Dumb Players Are Gamblers
If you sit down, lose money, and keep sitting down until you've lost a lot of money, you are gambling. The cards aren't the problem. The decision-making is.
Poker is a zero-sum game. Money flows from worse players to better ones. If you don't know who the fish is at the table, it's you. And if you're playing stakes that genuinely hurt you when you lose, the psychological pressure alone will make you a worse player. Fear is expensive in poker.
The 2011 crackdown actually provided an unintentional public service for a certain type of player. The AP profiled a 25-year-old planning to skip student loans and fund his community college education through online poker winnings. Another had a $3,000 bankroll and planned to turn pro. The government shutting them down probably saved both of them from a much more expensive education in variance and bankroll management.
A $3,000 bankroll to go pro is not a business plan. It's a countdown timer.
The Right Way to Think About Poker and Money
Whether you're playing live cash games at your local casino, home games with friends, or on one of the newly regulated online platforms, the financial principles are the same.
Your stakes should match your income and net worth. Not your confidence level. Not how well you've been running lately. Your actual financial situation.
I put together a detailed income and net worth guide to playing the right poker stakes that maps out exactly what buy-ins and bankroll sizes make sense at different wealth levels. The short version: your poker bankroll should never exceed 1% of your liquid net worth, with 3% as an absolute ceiling. And if you have less than 12 months of living expenses in liquid assets, you have no business funding a poker bankroll at all. That money has a more important job.
The players who get hurt aren't always bad players. They're often decent players who are simply playing too big for their financial situation. The psychological pressure of playing with scared money makes everyone worse. And when the losses sting too much, the game stops being fun and starts being dangerous.
The Government Got What It Wanted
The 2011 shutdown was never really about protecting Americans from gambling. It was about money and control. The industry has since proven it can operate legally, transparently, and with proper consumer protections. Players in regulated states now have recourse if something goes wrong. That's a genuinely better outcome than the Wild West era of offshore accounts and frozen bankrolls.
If you love poker, the landscape today is the best it's ever been for U.S. players. Legal platforms, regulated games, real protections. Just make sure you're sitting at the right stakes for your finances before you post your first blind.
Because the cards don't care about your rent.
Related: Inside The Mind Of A Gambling Addict
Check out my Top Financial Products page to help you build wealth the right way. And if you haven't reviewed your net worth lately, the free financial dashboard I've used since 2012 is a great place to start.
Readers, are you playing on any of the newly legal online platforms? Do you think poker is gambling or a skill game? And do you think the government's eventual embrace of online poker revenue was inevitable all along?
I LOVE poker, but don’t have the testicular fortitude for hard core games…the question I have is, who cares if it is gambling? Why is gambling a 4 letter word? Someone brought up lotteries before, but I can easily lose more by just going to one of the 12 casinos within 3 hours of my home.
Because big government knows what’s right and wrong for us all forever!
sounds like an opportunity. tax it, regulate it and make it win win for all.
the government has done the right thing by taking the first step, but whether it is the right step i don’t know.
and yes poker is gambling, whether you are playing against each other, or the house. one makes money at the expense of someone else, either singularly or collectively
that said, i love poker. heading to vegas next weekend! NBA / NHL finals, blackjack, poker, the wheel – can’t wait~
I am totally clueless when it comes to gambling in general. However, for some reason, many of the soccer coaches in my area are absolutely hooked on it. As a matter of fact, one guy is training to be a house dealer of some sort, which gambling constantly along the way. Talking to these coaches taught me how some people really are hooked.
This is obviously all about money. If it was about addiction or the good of the people, then smoking would be outlawed too, along with the lotteries as mentioned above. Instead, the government gets tons of money from lottery and cigarette taxes.
It’s just another money grab. The government already endorses gambling with HORRIFIC odds which targets the poor – Lotteries. It’s really quite ridiculous the amount of advertising and availability of lottery tickets when it’s purely a government operation.
Totally hypocritical.
That’s right! Lotteries are such a money making scam! Good point there mate! Furthermore, it’s generally the middle to lower income folks who play the lottery. What an insult!
Isn’t that gonna be Obama’s new slogan for ’12? Since Hope and Change is totally hackneyed, the new slogan will be:
Obama ’12
All you need is a dollar and a dream.
Good point about lotteries! They really do advertise like crazy and the odds are ridiculous. So many people throw away hundreds if not thousands of dollars on tickets and scratchers each year when they’d be so much better off putting that money towards paying off debt.
Is the crackdown due to the depressed economy? Are they just looking for revenue? In this difficult economy, I notice the cities raise all their fees. I think it is purely an extension of insufficient tax dollars. Next they will institute sales tax on Internet purchases.
Sales tax on internet purchases is definitely coming. I can’t believe it’s not here already!
I think poker can be fun, but you have to treat is as a recreational activity – like going to the movies. I like going out to the Indian Casinos now and then, and I take about $100, and when it is gone, its gone. I sometimes come out ahead, sometimes I don’t. But I do always get a nice afternoon of entertainment, and usually a free buffet!
Free buffet? Nice! Yeah, it’s really a zero sum game, so just go have fun. The majority of people who think they can make a living being a poker pro are so misinformed.
Er, uhm, last time I opened a brokerage account, there were several regulations that had to be met. For instance, if you have less than $25k in the account, then the SEC can freeze it should you exhibit a “day trading pattern”. If I’m a securities/financial professional, then the SEC has a whole bunch of other regulations to meet.
I’m sure they’ll come to a deal at some point and the poker actions will go back to normal once the government get a slice of the pie. Make the casino pay fine and back taxes in installments and then any forward earning will be taxed. They’ll still make plenty of money so I’m sure a deal can be had.
I think poker is gambling because, while skill is huge, it still comes down to chance a lot of the time.
I am not a fan of the government’s actions here, but I see the reasoning behind it. I think there is a better way to do it than freeze the sites, but the government does deserve its share of tax revenue.
@JT McGee My understanding was that the companies in question WERE offshore (I heard Ireland as the location for at least one of them.) Maybe Sam could correct me on that point, but I thought the issue the US government was arguing was that they have the ability to regulate gambling done by US citizens, regardless of where the physical location of the casino is. It’s an interesting look into international law at a time when the internet can effectively erase many borders, in any event.
Sam,
It’s not totally zero sum because the house takes a small rake of every pot.
It’s a zero sum game at your buddy’s house (minus chipping in for beer and pizza of course) but not at a casino, online or brick.
-Mike
That’s zero sum game. If you chop the pot, you players still lose b/c a rake goes to the house.
Ok, I agree. Zero sum including the take for the house.
As far as the players go, it’s less than a zero sum.
When playing a $1/2 no limit Holdem game at the casinos unless there is new money coming in (and hopefully you are deep stacked compared to new money) there is no point sticking around as the total pool of money will slowly be transferred to the house.
I never believed that people could actually make a living doing this, but then again, I know there are people who write blogs for a living, and who would have thought that was possible either?
I never really got involved with playing poker. I knew I would lose money. I am glad these got shut down because I know so many guys in college who see poker as a legitimate income source instead of a game.
Why not tax and regulate it heavily like they do for Casinos? If the government is going to take the high ground why single out only poker?
They should and will. The gov’t would be STUPID to close down all the sites. Just take em at 40% and make $2.4 billion in extra revenue a year. No brainer.
Is this satire? You said it yourself – you don’t consider it gambling because it is between two consenting adults. Look, the government doesn’t want to shut it down, they just realized they’ve been missing out on their piece of the pie. It’ll be regulated and it’ll be back.
I don’t play poker online personally, but I see the appeal of it. It’s no different than the casino that’s twenty minutes away, nor is it any different than putting your investments on the stock market in my opinion. Just another way to spend your money.