Front Page of the Jacksonville Paper Yesterday

[Reel Deal]

Article titled, "Online poker's Black Friday" was on the front page (above the fold) of the Florida Times-Union (Jacksonville's main newspaper). It was an AP story by Daniel Yee (Atlanta). The story mainly focused on players in the U.S. yanking their money out of their online accounts.

It had the following quote from Nolan Dalla, "It was really the Black Friday of the poker industry. This is clearly going to hurt the game, its players and people in the industry." I'm not really sure why Dalla is coming out with quotes like this. I would think the spokesman for the WSOP would want to downplay this legislation and pointout its flaws as opposed to his "the sky is falling" approach.

Anyway, pretty sad that you can pass a bill that really has very little bite to it and then have dumbshits in the press (and people like Dalla) help your cause by giving the appearance that there's more to this bill than there actually is.

[Talking Poker]

That's something that's really bothered me, too. When people "in the know" act like this, the average joe gets the wrong idea - and that's VERY bad for poker.

I have friends who think (thought) this new legislation made online poker illegal, and I was actually talking to an old local poker friend of mine the other day (for the first time in a year), and he informed me that he "heard" that Full Tilt told some people he knows with over $100k in their accounts to "get their money out ASAP!" OBVIOUSLY this isn't true (the LAST person that's going to tell you to cash out is a poker site, and especially one that is going to continue to allow U.S. players to play), but the point is, people will take the slightest bit of misinformation and run with it.

Even if this bill was 100% ineffective and NO sites freaked out and shut out U.S. players, it would still be bad for poker. Having a few of the biggest sites overreact (thanks, Party) makes things so much worse though.

[Penguinfan]

Relax, Nollan is a smart guy and knows what he's doing.

[Talking Poker]

Sure seems to me like he hasn't been speaking/acting in the best interests of poker recently. I know he got you all freaked out last week, as I'm sure he did countless others.

[jimmym]

I have to say to you guys in America how really stupid I find your goverment, I dont lke to get involved in politics but your guys in power (not all am sure) are really fucking stupid.
Ok its ok for them to ask you to Fight, pay your tax and be patriotic and compared to us brits your young guys cant smoke,drink and gamble. Yet you guys are more patriotic and caring about your country than us Brits.
Lets hope on the next round of elections you can all make some good changes and get someone who is in touch with the people in power.

Am sure there will be some sort of legal loophole that will allow you guys and the millions others to keep playing online meanwhile our Britisg goverment has realised that we can make on this, and have been planning this takeover for a while it seems. perhaps Bush and others agreed the ban as a nice pressent for our support for being so patriotic.

this is what our papers are saying --

PLANS to turn Britain into a “world leader” in internet gambling have been drawn up by ministers, according to internal Whitehall documents.

In stark contrast to America, where online gambling has in effect been outlawed, ministers want to attract offshore companies to Britain.

*
New legislation will lift the current ban on online gaming businesses in Britain from next year. But documents obtained under the Freedom of Information Act reveal that a government charm offensive is well under way. They show that the Department for Culture, Media and Sport (DCMS), has lobbied the Treasury on behalf of online betting and gaming firms to introduce a favourable tax regime.

Over the past two years, ministers and officials at the department have met representatives of the internet gambling industry on 26 occasions.

In July, Richard Caborn, the minister in charge of gambling, travelled at taxpayers’ expense to Gibraltar, the headquarters of Party Gaming and 888.com. At the end of the month, Tessa Jowell, the culture secretary, will host an international summit of politicians at Ascot racecourse to discuss regulatory standards.

Officials from the United Nations, the European Commission and the major credit card companies have been invited.

The government’s desire to take the lead in the online gambling sector is spelt out in a briefing note written for Caborn before a meeting in July last year with Mark Davies, managing director of Betfair, the online betting exchange.

The note says: “It is government-wide policy, and that includes HMT (Her Majesty’s Treasury), that Britain should become a world leader in the field of online gambling, in order to provide our citizens with the opportunity to gambling (sic) in a safe, well-regulated environment.”

The meeting took place as the Treasury was deciding a new tax regime for online betting exchanges, which are already allowed to operate onshore. Although bookmakers, such as Ladbrokes and William Hill, were arguing that online companies should pay higher rates of tax, Davies told Caborn such a move would “kill” Betfair.

Six months later, the chancellor announced a 15% tax on gross profits for online operators — the same regime that applies to traditional bookmakers. The move apparently “delighted” Betfair, according to another DCMS document.

Documents released by the Treasury under the Freedom of Information Act showed officials are considering ways to attract betting firms.

Briefing notes for one speech said: “The industry needs clarity on taxation issues, as this is a crucial factor shaping investment and location decisions, especially for remote operators.”

Luring online poker and casino firms into Britain may prove difficult. The industry has told Caborn that anything more than a 2% tax on gross profits would be unacceptable. Some companies have asked the government to consider a system of “secondary” licensing, which would give them the British regulatory “stamp of approval” while retaining the tax benefits of remaining offshore.
# Sportingbet, whose shares fell 64% last Monday in the wake of the new American law, has received takeover approaches for its US business.

The company has commissioned legal opinions to determine the impact of the American legislation.

The firm has been contacted by several people wanting to buy its US operations, although a sale is not the only option being considered.


---


Losing more than half the value of shares in a day is not as rare as we could wish. Usually, it comes with the receivers or when shares are suspended pending “financial restructuring”, a phrase that says we shall end with virtually nothing. A million learnt that blue chips such as Railtrack are not immune, in spite of their eminent status and solid assets. Occasionally, catastrophic loss is the result of a liability lawsuit or the failure of a pharmaceutical maker’s main drug. Police raids did for Polly Peck. Companies can suffer the imperial thumbs down when monopolies are being doled out, if they lose their licence to run a rail franchise, a lottery or, in old days, regional television.

Short of violent revolution or foreign invasion, however, it is hard to think of anything to compare with the panic that swamped an entire subsector of the London stock market on Monday, a day that will live in speculative infamy. London’s flotilla of internet gambling companies suffered a series of crippling torpedo hits after the US Senate effectively made all internet gambling illegal in America. Against smart, premium-cost predictions, it backed a House of Representatives move making it illegal for banks and credit card companies to handle payments to offshore gambling websites.

*
Shares in PartyGaming, the FTSE internet poker champion, dropped by 58 per cent. Sportingbet dropped 65 per and smaller companies followed suit. 888 shed a more modest 26 per cent because, unlike most of the others, nearly half its business is not in the United States. The odd Canadian internet gaming software company lost three quarters of its value.

World Gaming was the unlucky soldier not meant to be there when the attack happened. It was in the process of being bought by Sportingbet, which understandably cancelled its bid, since 95 per cent of World Gaming’s turnover came from America. Within 36 hours the company had admitted that it could be in technical default on its debt.

By then, Dresdner Kleinwort, which had a buy recommendation for its client Party-Gaming with a target price of 180p per share, was reviewing its position. It reckoned that, using what seems a wildly optimistic valuation basis, Party-Gaming’s remaining non-US business could be worth 38-50p per share. That would have it dismissed from the FTSE 100, losing the only company not audited by one of the big four global accountancy firms.

Within hours, however, PartyGaming shares had lost a further 4.75p to 40.25p after the company revoked its interim dividend for the January to June period to help reorientate its business. An obvious target for such moves is Gaming VC, which is aimed at Germans, or any outfit with a base in Asia.

From all this, you would think that the torpedoes from Washington came out of clear blue sea, if not sky. Not so. The critical warning came ten weeks ago, after David Carruthers, then chief executive of BetOnSports, was snatched by federal officials during an an airline transfer in Dallas. Investors were soon reminded that distance gambling on sports was illegal across the US, that any sort of distance gambling was illegal in an array of states and that both federal and state officials were getting agitated and trigger-happy about the rapid build-up of offshore websites targeted at US punters.

The House of Representatives had already passed its version of the law outlawing credit payments to gambling websites. So most of the value of the sector depended on “intelligence” that the Senate was unlikely to follow suit, even in election year. BetOnSports was a special case, it was said, because its founder had been targeted. When Sportingbet’s chairman was arrested, optimists said that only sporting bets were at risk. With luck, readers of this column will not have been stuck with online gambling shares. As argued here, it is rarely worth holding shares in a business that labours under serious legal or political doubts unless they trade at a heavy discount to reflect the risk. Tobacco shares, for instance, may now face another round of huge lawsuits.

Sadly, investors in tracker funds will still be holding a shrunken stake in PartyGaming, just as they held on to Marconi, Maxwell Communications, Railtrack and British Energy. They have no choice. For the rest of us, catastrophic risk is usually worth avoiding for all but rank gambles.

As with online gambling, there is usually plenty of warning. We know, for instance, that all main UK political parties think that cheap air flights are environmentally bad and should be taxed. We know that terrorists attack landmark buildings and transport systems, frightening travellers away. We know that supermarkets are vacuuming sales from high street chains and non-smokers spend less in pubs. We have been warned.

[PShabi]

Millions?

Come on now. What most of the people on this forum and the others that are talking about this fail to understand is that we are not an all-powerful majority. Some of you need to get the fuck off the forums and realize there's a big world out there. A lot of people in this country (probably a majority) don't even know you can play poker online. How many times have you told someone about your online gaming and had people say they didn't know that you could do that online?

Most people don't know and even if they do, they don't give a flying fuck. That's the reality. The people that are going to change their voting habits because of this specific gambling legislation is a miniscule fraction of the overall number of voters.

[Reel Deal]

And he will prove his smarts when?

[Penguinfan]

Yea, I know, but he does tons to promote the game, including a consulting job with Stars in the past and not to mention all the work he does with the WSOP.

I know it doesn't look like he's doing a lot for us now, but I have enough faith in him to wait it out and see what comes.

[jimmym]

OK ,,perhaps not millions, but must be at least 1 million online poker players from America?? I dont know, I do know that they reacon 5 million Americans play poker.

[Robbie Robb]

I like that the UK has drawn up papers and such to promote the UK as a mecca for online gaming, but come on, do you really expect Bush will let that happen? He'll pick up his little phone and be connected to Blair. They'll talk for a few minutes and all of a sudden all that work will disappear. The same thing will happen here in Canada. Harper and Blair and far too deep in Bush's pocket to actually stand up to the man. (Harper more so than Blair)

[Talking Poker]

I understand and agree with the point you are making here, but don't kid yourself either - there are without a doubt "millions" od people who play poker online in the U.S. These may not all be big time, serious players like us, but there are millions who have at least tried it.

[PShabi]

And the fish who don't read 2+2 don't have any clue this legislation has even passed. Shit, they're still on Party funding the monster jackpot they aren't even going to play for!

[Talking Poker]

No, that's Mayhem. But he's Canadian.

P.S. What's 2+2? Never heard of it.

[Reel Deal]

I hope you're right bud, I hope you're right.

[Reel Deal]

Actually, I wouldn't worry about that RR... I think the fact that they've only budgeted a very, very small amount to enforce this is proof that Bush probably won't bother with this after the ink dries on his signature.

[Kurn]

--------------------------------------------------------------------------------

I have to say to you guys in America how really stupid I find your goverment, I dont lke to get involved in politics but your guys in power (not all am sure) are really fucking stupid.
Ok its ok for them to ask you to Fight, pay your tax and be patriotic and compared to us brits your young guys cant smoke,drink and gamble. Yet you guys are more patriotic and caring about your country than us Brits.
Lets hope on the next round of elections you can all make some good changes and get someone who is in touch with the people in power.

Jimmy. This isn't a patriotic rant. The US has 300 million people. A small fraction of those play poker online. Millions of people, sure, but a minority of the country.

This screwed up govt that you mention. These numbskulls get elected (by other numbskulls in many cases) for many reasons other than this issue. In fact, if you go to the websites of most US reps and senators, you won't find a position on this issue listed anywhere, because to most of the electorate, its just not a big deal.

One of the problems with the democratic process is that often the herd mentality takes over. Sure there's a core of social conservative Puritans out there (aren't you Brits happy you drove them out of your country 400 or so years ago ), and they don't want anybody gambling anywhere, anytime, but the reality is most Americans don't give a hoot about online gambling and the pols that represent them know that and tag along with the typical "protect the children" logic that permeates both authoritarian side of the aisle even if they don't agree with Frist, Kyl, Goodlatte, et. al. on the "bigger" issues.

If the social conservatives were the only problem here, we'd be in pretty good shape right now. The reality is that the majority of US voters who *don't* vote in lockstep with the conservative wing of the GOP also think restricting internet gambling is a good idea.

That's why when we say "maybe internet poker should be regulated and taxed" we don't really do the cause any good at all, because by saying that, we tacitly agree that it is indeed the province of the government to get involved.

And back to Jimmy (and other non-US posters), if you think this is bad, you should see how gambling income is taxed here.

Its conceivable that, under the right circumstances, a person in the US could have a winning year at online poker, and owe *more* than his winnings in taxes.

<rant off>

[Talking Poker]

I don't believe this is true, barring some crazy example where the person wins $5 or something and owes more than that in taxes. Please elaborate, and feel free to start a new thread if you like, since I doubt this was discussed in Reel Deal's paper the other day.

Don't get me wrong - I know how terrible our tax laws are on this subject, but I didn't think this was possible.

In somewhat related news - does anyone else find it odd how the IRS will allow you to declare yourself a professional poker player and write off expenses related to poker playing (travel, etc), clearly implying that they understand it is a legitimate game of skill (you can't be a professional lottery player, for example), yet poker gets lumped in with all the game of chance games in this recent legislation... while the lottery is specifically carved out???

[Penguinfan]

It happens with high dollar slot machines every day.

You COULD relate it to poker when playing NL easily.

In horse racing anything over $599 on a single wager is taxable and anything over $5999 they take out 38% on the spot (numbers vary state to state I think).

I may have played 300 combinations at $2 each to hit that $600 winner and it doesn't matter, I only mention that because the law reads anything that pays over 300-1, but they only count the one wager that wins, not the wagers that lose (go figure). So now I am even on the race, but owe tax on $600 at the end of the year.


Whats to say they want to tax a single pot over $600 and you win 10-12 of these during a session, but lose a bunch more small ones and break about even on your session.

Now you owe taxes on all those big pots, but didn't make any money on the session.

[Talking Poker]

I don't follow. Why aren't you writing off your losses like I do?

[Penguinfan]

I'm assuming he meant we weren't able to write off losses. I do write off horse losses to offset the winnings, it 's a giant sized pain in the ass and I have to save all those tickets in boxes just in case I get audited.

Playing on-line you would think it would be easier to keep track of wins and losses, I know the on-line, legal, US-Based thoroughbred place I wager through sends me a statement every month as well as a cumulative one at the end of the year.

[Talking Poker]

I use Poker Tracker for all of my online play, and I am certain that will be more than enough to make any auditor happy. My accountant was impressed with the sample reports I printed for her. For my live play, I track everything in a spreadsheet. But yes, you HAVE to write off your losing sessions if you are going to claim all of your winning ones (as you are supposed to). You're not supposzed to just say, "Yeah, I netted $10,000 last year playing poker" and try to pay taxes on that. You're supposed to declare your $160,000 in winning sessions and your $150,000 in losing sessions (I'm making up numbers, but you get the point). This ends up causing some problems for OTHER deductions you may have been able to take (because they are based on your Total Gross Income (BEFORE deductions), which is now grossly inflated), but I still don't think you should ever owe more in taxes on your poker winnings than the winnings themselves.

[Penguinfan]

OK, how about this, you play high stakes PLO8, say $1000/$2000 and we are going by the $5999 figure us horse players go by. You raise pre-flop with one caller, you guys raise and re-raise and finally build a $14,000 pot, you split it and drag a pot worth $7,000 which you have to pay taxes on.

You wouldn't have any real losses to show, but be obligated to pay the tax on the pot you "won".

Now I admit I am reaching here, but it could happen.

[Talking Poker]

The more you write, the less I think you have any understanding of poker and taxes.

1. You don't pay taxes on "pots," and certainly not on the gross amount of money in each pot. You pay on the totals from all of your winning and losing "sessions." I mean, how would people even track it the other way? Do you think there is a Bellagio employee sitting at every high stakes table handing out 1099s for each and every pot played all night? LOL...

2. Poker is not the same as horse racing, so I have no idea why you are comparing the two.

3. If, somehow, you played just ONE POT for the entire year and then quit, as described above, you didn't win $14,000 - or $7000. You broke even (I'm not couting any blinds that may have been in the hand, because you didn't mention any). So, you would claim $0 on your taxes.

You haven't really been claiming the GROSS amount from every single POT you have ever won, have you??? I mean, that would be millions and millions of dollars, even for a medium stakes player. That's ridiculous.


I STRONGLY suggest you do a little bit of research on poker and taxes. We've had some good threads on the topic in this forum in the past, but I'm sure there are countless other threads/articles on the subject elsewhere on the net as well. At a bare minimum, please call an accountant and have a 5 minute conversation with them on the BASICS of how to claim poker/gambling related winnings.

[Kurn]

[quote=Talking Poker]I don't believe this is true, barring some crazy example where the person wins $5 or something and owes more than that in taxes. Please elaborate, and feel free to start a new thread if you like, since I doubt this was discussed in Reel Deal's paper the other day.

QUOTE]

here's the example. let's call him Joe.

Joe has a job, but plays poker for a 2nd income. During year X, Joe has a tough year, but ekes out a $3,000 profit from poker, based on $25,000 in winning sessions and $22,000 in losing sessions. Since IRS publication 529 specifically forbids reporting your net as gambling income, Joe follows the law and reorts $25,000 as *other income* on form 1040.

Let's now assume that Joe is a renter, thus he does not itemize deductions on his tax return, taking instead, the $6,600 standard deduction for a single guy. let's also just consider Joe's marginal income from poker, but, for sake of discussion, we'll assume Joe makes $40K per year from his day job. let's also assume that Joe contacts a tax accountant who is familiar with IRS practices who advises Joe, that the IRS will likely deny him the right to treat his poker income as self-employment income, so he can't uses schedule C*

So, now, Joe uses schedule A so he can deduct his $22,000 in losses. However, he is only getting to use $15,400 in losses since the rest makes up for his lost standard deuction.

That makes Joe's marginal net income from poker for tax purposes $9,600. At his income level, these marginal dollars will be taxed at about 30%, making his marginal tax liability $2,880. Now, let's assume Joe is a resident of the Commonwealth of Massachusetts. The Mass DOR does not allow netting, nor does it allow deduction of losses. Now Joe, on his State return, must pay 5.75% on the full $25,000 of winning sessions, or $$1,437.50 for a total marginal tax bill of $4,317.50 on his $3,000 of net poker income.

Contrived example, sure. But it is possible.

* - With respect to treating gambling income as self-employment. The IRS has repeatedly taken a stand that to file as a "professional" gambling must either be your primary source of income or you must demonstrate at least 3-years of prior profitability to demonstrate an expectation of profit. At least one taxpayer has challanged this and won the case, but the IRS has not changed its policy as far as I know.

[Penguinfan]

Actually TP, I was just kinda rambling there, looking for an obscure example that might be able to happen but probably wouldn't.

For the record I have claimed horse winnings two years in a row and have not paid more in taxes than I won, I too doubt it could happen that way.