Some US States Protect Player Funds Better Than Others

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Wednesday, July 27th, 2016 | Written by Shane Larson

After Black Friday sounded the death knell for Full Tilt, Ultimate Bet and Absolute Poker, their customers were initially unable to determine what had happened to their funds, and in some cases, never did get their money returned to them. With three US states now offering regulated online poker industries, and at least four more considering legalization, players may believe that the problems of the past are finished, and that their money is now fully protected.

Unfortunately, a closer look at the laws governing online poker reveals that this isn’t the case. In fact, history has shown that in the event of a bankruptcy, players are usually the last to be paid, and that the only true way to safeguard player funds is to have all deposit account funds placed in a trust that cannot be considered assets by a bankruptcy court. Nevertheless, most states continue to not mandate this type of protection.

Gamblers Have More Appetite For Risk

Ultimately, the attitude towards player fund protection varies across the industry, with one of its most extreme views expressed by the UK Gambling Commission (UKGC) after launching a consultation in September 2013. As a subsequent UKGC statement read:

“..the loss of funds held with a gambling operator is not directly comparable to the severe financial hardship which might be the result of lost pensions for example. Gamblers may have more appetite for risk.”

That said, thousands of US players did find themselves severely disadvantaged post-Black Friday, as quite often poker players will have a significant amount of their bankrolls kept in their poker accounts. Furthermore, the whole of the poker industry subsequently suffered the fallout of so many players being unable to access their playing funds, as well as being cut-off from international playing pools.

Individual State Rules

Let’s take a look at the laws currently governing the USA’s regulated online poker markets, as well as some of those of the country’s next potentially regulated states:

Nevada

Nevada’s regulations do the most to protect player funds held in the accounts of online poker sites. The law has very specific consumer protections in place, and all money must be kept in a separate reserve, with the balances calculated on a daily basis. Every month, operators must submit reports to the Nevada Gaming Control Board to prove that they are not in danger of insolvency, and that player funds are being managed appropriately.

New Jersey

In New Jersey, player funds must be kept in an account separate from all other company funds, and operators are not permitted to move money from that account into other accounts. The law does not have any requirements that would protect players from bankruptcy scenarios; however, New Jersey did ensure that when the Trump Plaza went bankrupt, player funds held in deposit at the casino’s Betfair online casino were not impacted.

Delaware

Delaware only has one poker operator, 888 Holdings, and under the law all funds in the players’ accounts are placed in a separate bank account, with the Delaware lottery responsible for overseeing the account. As a result, although there is no specific legal requirement for a trust in place in the state, it is unlikely that players would end up losing money in the event of insolvency.

Michigan

The legislation that is currently being debated in Michigan has no specific requirements for player fund protection, leaving it up to the regulatory arm of the Michigan government to set standards. Since the legislation hasn’t passed, there is no way of knowing what protections might be put into place.

California

California’s proposed online gambling law mandates that player funds be kept in a separate account, but it does also allow operators to use the money to pay certain taxes. This is unlikely to inspire player confidence, and may negatively impact online gambling in the state if the law ever passes.

Pennsylvania

Like Michigan, Pennsylvania’s proposed online gambling law has no specific requirements for player protection; however, the state mandates that funds owed to the state be placed in a trust, causing critics to argue that lawmakers in Harrisburg realize there is a risk for loss, and have not done enough at the legislative level to protect players.

New York

If successful, New York’s online gambling law could offer the strongest protection for players in the United States. The proposed legislation requires that player funds be held in accounts that would not only provide the protection of a trust against insolvency, but that would also protect funds if criminal or civil legal action was taken against the operator.