A Bank is a Bank

By: Steven Eichorn

Do you remember when I wrote about how a federal district court had ruled that an online poker account was akin to a bank account and should therefore be subject to FBAR reporting?

It seemed nonsense to me at the time—and I also worried about whether the court’s expanded definition of a “financial institution” would be applied to other types of escrow accounts beyond gaming.

So I’m relieved to hear that the Ninth Circuit just reversed the district court’s ruling and clarified that a bank means a bank; not an online poker site.

In its decision, the Ninth Circuit explained:

Hom’s PokerStars and PartyPoker accounts do not fall within the definition of a “bank, securities, or other financial account.” PartyPoker and PokerStars primarily facilitate online gambling. Hom could carry a balance on his PokerStars account, and indeed he needed a certain balance in order to “sit” down to a poker game. But the funds were used to play poker and there is no evidence that PokerStars served any other financial purpose for Hom.

Duh.

I hope this provides comfort to online poker players who might have been alarmed by the district court’s half-baked decision. I would also like to see this put to rest any other worries about escrow accounts. The Ninth Circuit concluded that “there is no evidence that PartyPoker and PokerStars were established for any of those purposes, rather than merely for the purpose of facilitating poker playing.” By the same rationale, escrow accounts are there merely to hold escrowed funds and not for any other purpose.