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The Perils of Semi-Legal Poker

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Postby Kirn В» 17.01.2020

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Daniel Kebort first thought of opening his own poker club on a cool night in the fall of He and a friend, Sam Von Kennel, were on an expedition. On the Web site HomePokerGames. Committed poker players who yearned for bigger, more glamorous games with higher stakes had two choices: they could drive to another state, where gambling was legal, such as Louisiana or Oklahoma, or they could use sites like HomePokerGames.

At Poker Social Club, the two friends got out of their car and walked around to the back of the house. Accordingly, Kebort and Von Kennel filled out membership forms. They noticed a sales-tax license on the wall—a sign of putative legitimacy.

Inside, they found two grimy tables, where some shirtless players received massages from young women in revealing dresses. Afterward, Kebort ruminated about Poker Social Club and its claims to legality. He had heard, generally, about the social-gambling defense. Now he looked up the law. It seemed clear that, by taking a rake, Poker Social Club had overstepped the bounds of the law.

But Kebort found himself wondering whether a differently designed poker club might be legal. Kebort, affable and earnest, with thinning hair, was thirty-one at the time. His personality—ambitious yet gun-shy, daring but a little cautious—carried over to the poker table, where he was a conservative and methodical player who preferred to watch the cards and run the numbers in his head before placing a bet.

Von Kennel was ten years younger, an Austin native, and the son of a successful oil-and-gas lobbyist. Together, the friends discussed the possibilities. Would a country club qualify? It occurred to them that, by lobbying, they might widen the social-gambling loophole. Separately, they proposed the creation of a gambling commission, which would regulate the new clubs. The Texas legislature meets for only five months every two years—a prophylactic measure designed to prevent the passage of laws.

Kebort and Von Kennel knew, moreover, that any legislator sponsoring their proposal would have to reckon with out-of-state casino owners and religious constituents, both of whom would oppose any legalization of gambling. The session came and went. Neither proposal gained traction.

The next session, nineteen months in the future, felt remote. He was uncomfortable with the idea of opening a business in a gray area of the law. He took a job installing poker software and equipment in casinos and on cruise ships and moved to Houston. After both Sam and Tim Von Kennel attended his wedding, in , he lost touch with them. In , Kebort was at sea when he got an e-mail from a friend that linked to a post on a local Austin blog.

Kebort was beside himself—it seemed to him that his friend had stolen his idea and abandoned their partnership. From the cruise ship, he called both Von Kennels; Sam sent him an apologetic text. Kebort filed a lawsuit against Sam Von Kennel, which was settled out of court. He tried to move on, and even started his own corporate catering business.

In , Kebort decided to open a club of his own. As a lobbyist, Tim Von Kennel understood the importance of connections. At first, business was slow.

Von Kennel had set up his club in a renovated shack; he begged friends and family to come, just to get games going. Then, about two months in, KVUE, a local television station, aired a news segment about the club and the legal loophole it was exploiting.

The next morning, though, he found a line of customers waiting out front. No one raided the club or shut it down; in fact, a group of businessmen offered to invest in it. With outside funding, the club moved to a mid-tier strip mall. As of , it had seventy-five hundred poker-playing members and sixty employees. He and his wife, Lindsay, simply drove around Houston in their white pickup, looking for somewhere to open a club. As the council members looked down from a raised dais, Kebort introduced himself, his blond hair sticking out in all directions.

The Golden Nugget in Lake Charles, Louisiana, is just a two-hour drive from Houston, and Texan poker aficionados often go there to play. Fertitta holds an annual fund-raiser for the Houston Police Department at his mansion. Players flocked to Post Oak as soon as it opened, in part because of its downtown location. SIGH does not disclose the identities of its staff or funders; a spokesperson for Tilman Fertitta said that Fertitta had no knowledge of the Web site.

Kebort also heard through the grapevine that Sam and Tim Von Kennel were trying to get his club shut down. He had contacted a celebrated Houston private eye, Tim Wilson, who was part of a P. Not long after hiring the Wilsons, Kebort was at a strip mall, getting fingerprinted at a T.

The licensing fee, to be collected by Wilson, would be two hundred and fifty thousand dollars. At the same time, he was skeptical of the promise of a golden ticket. He terminated their relationship with a final check, for five thousand dollars, written from his personal account.

As the year drew to a close, Kebort worried that storm clouds were gathering. Still, Post Oak was thriving. That December, Tilman Fertitta hosted a Christmas fund-raiser for a local hospital at his sprawling River Oaks estate. Through a friend, Kebort landed a spot on the guest list. He decided to leave early. On the way out, he ran straight into Fertitta. The billionaire offered Kebort his hand, and Kebort shook it. He introduced himself as the owner of Post Oak Poker Club.

In a article published in the Southern California Law Review , two professors, Elizabeth Pollman and Jordan Barry, coined a term for an increasingly popular business strategy: regulatory entrepreneurship.

In theory, this opens the market to law-abiding rivals. There are now more than fifty poker clubs in the state, situated in Austin, San Antonio, Houston, and several small towns. Soon after Post Oak opened, a new Houston club, Prime, quickly established itself as one of the best poker clubs in the state.

Unlike Post Oak, which was B. Meanwhile, as the clubs spread, their business models diversified. Clubs started charging a combination of fees. These new payment structures made the establishments more lucrative; they also ran the risk of undermining the legal theory behind them. They started looking more like gambling businesses than country clubs. The only pro-club briefs came from a player, who argued that shutting down the clubs would drive people back to underground games, and a few owners.

On Instagram, Steinbach had been posting photos of his winnings: in one image, he held his winning cards—an ace and a ten of diamonds—in front of a pile of chips worth seventy-five hundred dollars.

In the parking lot, after he left the club, Steinbach was confronted by a man with a gun. When he turned to run inside, the man shot him in the back. A police investigation charged a security guard at Texas Card House with being complicit in the robbery. After the lawsuit was filed, it went dormant, with neither side pushing for a trial.

Still, Paxton announced that, because of pending litigation, no opinion would be forthcoming—he would let the courts work it out. Many in the Texas poker community see the lawsuit as the canny product of a similar alliance among competitors. Around the time the lawsuit was filed, Ryan Crow, a Tesla-driving former product manager at Rackspace who made money in real estate before investing in Texas Card House, founded an organization called Social Card Clubs of Texas; its board has included Hearn, Von Kennel, and Kebort.

The organization has hired lobbyists and drafted a new piece of legislation, HB, which would legalize poker clubs and create a gaming commission to regulate and license them. The outcome they envision is not unlike the one Kebort recalls Wilson describing: ideally, the commission would cap the number of clubs allowed in each city, and the clubs unable to obtain licenses would be frozen out. Ryan Guillen, a state representative from Grande City, agreed to sponsor it.

As it happened, the Licensing Committee ran out of time in its meeting, and the bill was left pending. The next day, Kebort was out delivering orders for his catering company when he got a phone call from the general manager at Post Oak. The manager said that Prime had been raided. He drove home and found the police waiting. They had raided his house, guns drawn, while Lindsay held their new baby in her arms. The officers handcuffed Kebort and put him in the back of their cruiser as his neighbors looked on.

At the station, Kebort joined his partners, who had also been arrested, in a holding room. They told him that, at Prime, the police had walked employees out in handcuffs, seizing computer equipment and a hundred and seventy-five thousand dollars in cash. At that point, Post Oak was doing so poorly that police were able to seize only five thousand dollars from its register and bank account. Kebort learned that Kim Ogg, the Harris County District Attorney, was charging him and the other club owners with felony money-laundering.

In the D. If he were convicted, Kebort could face anywhere from five to ninety-nine years in prison. Kebort and the other owners were released on bail. They started comparing notes almost immediately. Unlike Post Oak, Prime had paid Wilson; when the license failed to materialize, the club had fired the security firm, refused to pay the final bill, and threatened to report Wilson to the authorities.

Shortly afterward, both clubs had been raided—and yet a dozen other Houston clubs remained open.

Ep. 178 - Daytona Beach Kennel Club & Poker Room (2/2) - October 9, 2011, time: 45:28
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