Daniel Kebort first thought of opening his own poker club on a cool night in the fall of 2010. He and a friend, Sam Von Kennel, were on an expedition. In Austin’s northern suburbs, they drove up to a brick house the color of sand and pulled onto its lawn, which had been transformed into a makeshift parking lot. On the Web site HomePokerGames.com, the house had been advertised as the location of Poker Social Club—an underground venue that claimed to operate legally, despite the fact that gambling businesses have been outlawed in Texas since before it became a state. View more Earlier that fall, Kebort and Von Kennel had bonded over their shared love of Texas hold ’em. Hold ’em is a variant of poker that travelled from its namesake state, in the early nineteen-hundreds, to become, by many accounts, the most popular version played in casinos around the country; it differs from standard “stud” poker in that players share five cards (they hold just two in their hands) and have multiple opportunities to bet (and bluff) before a hand is finished. Every Thursday night, Kebort and Von Kennel played hold ’em with friends in a barn south of Austin. Such games, held in what the law sees as a “private place,” are sheltered from the state’s anti-gambling rules by what’s known as the social-gambling defense. 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.com to explore the state’s underground scene. At Poker Social Club, the two friends got out of their car and walked around to the back of the house. They were buzzed through the back door and into a small holding room, then buzzed in again, through an inner door—a system designed to insure that they hadn’t been followed. The man who ran the game, identified only as Ali, seemed to be positioning the house as a private place which only “members” could enter. Accordingly, Kebort and Von Kennel filled out membership forms. They noticed a sales-tax license on the wall—a sign of putative legitimacy. But the place didn’t strike them as legit. Inside, they found two grimy tables, where some shirtless players received massages from young women in revealing dresses. When Kebort and Von Kennel sat down to play, they found that the house took a percentage of every pot—a money-making method called a “rake,” which is commonly employed by casinos and poker rooms but not often seen in a home game. 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. He found that it was indeed true that gamblers could receive a “defense to prosecution” if their games met certain conditions: gambling had to happen in a private place; players had to assume equal risk (in some games, such as blackjack, this is mathematically impossible); and the economic benefits had to flow only to the winners and not to the house. 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. He had grown up in a blue-collar family in Virginia Beach; eager to make it big, he’d moved to Austin, working as a delivery driver for a catering service while launching an Internet company, which didn’t work out. 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. Cushioned by family money, he had a bluffer’s attraction to risk. Together, the friends discussed the possibilities. Could a poker club that made its money only from membership fees and not from a rake be considered a “private place”? Would a country club qualify? How big could a “social group” be? They discussed their questions with Von Kennel’s father, Tim, drawing on his experience as a lobbyist. It occurred to them that, by lobbying, they might widen the social-gambling loophole. Kebort registered as a lobbyist; he and Von Kennel drafted a new version of the state’s anti-gambling law that would strengthen the social-gambling defense (in place of the phrase “defense to prosecution,” it substituted “exception to the law”) and, for the next two years, tried to get it adopted by the Texas state legislature. 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 2013 session came and went. Neither proposal gained traction. The next session, nineteen months in the future, felt remote. Kebort didn’t want to proceed without more legal assurance. 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 2014, he lost touch with them. In 2015, Kebort was at sea when he got an e-mail from a friend that linked to a post on a local Austin blog. It was about a new “legal poker room,” Texas Card House, that charged its members twenty-five dollars a day to play. The post described it as the “brainchild” of Sam Von Kennel. 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. (“I hope you won’t lose sleep or stress out over this,” he wrote.) 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. But Von Kennel’s success burned him up. A cautious gambler can only be so cautious; he can’t win if he doesn’t sit at the table. In 2017, Kebort decided to open a club of his own.

As a lobbyist, Tim Von Kennel understood the importance of connections. He urged his son to consult with local politicians before opening his own club, to gauge whether members-only poker clubs fell within their legal “comfort zones.” The Von Kennels talked with officials in towns around Texas; eventually, they decided that their best bet was to open a club in Manchaca, a two-square-mile unincorporated community near Austin that was outside the jurisdiction of most local authorities. Manchaca was situated in Travis County, so Sam Von Kennel sent an e-mail to its sheriff’s department, explaining his business plan and how, in his opinion, it squared with the law. “We got an e-mail back from him saying, ‘Thanks for the heads up,’ ” Von Kennel told me. Meanwhile, he investigated the worst-case scenario and concluded that, if his club were declared illegal, he’d be charged with a couple of Class A and Class B misdemeanors, at most. 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. (“One hundred per cent of the money that comes in with the players leaves with the winners at the end of the night,” Von Kennel said, on the air.) That night, Von Kennel couldn’t sleep; he imagined getting raided by the police. 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 2019, it had seventy-five hundred poker-playing members and sixty employees. Photograph by Brent Humphreys for The New Yorker Kebort didn’t have the benefit of Tim Von Kennel’s counsel. He and his wife, Lindsay, simply drove around Houston in their white pickup, looking for somewhere to open a club. Kebort settled on a historic, chandeliered space, situated in Houston’s prime shopping district, that had originally been occupied by a celebrity-magnet restaurant called Tony’s. He found partners and opened Post Oak Poker Club less than a month later, in August, 2017. It wasn’t until two weeks after opening that he tried to get local officials onboard, by explaining his business plan at a weekly meeting of the Houston City Council, at which members of the public could reserve time to speak. As the council members looked down from a raised dais, Kebort introduced himself, his blond hair sticking out in all directions. Councilman Greg Travis, a corporate lawyer, told Kebort that he was opposed to the club’s opening: in his view, he said, Post Oak was like a sex club where the sex was free but condoms cost three hundred dollars. “If you talk to Tilman Fertitta and people at Golden Nugget, they would say the same,” Travis said. Tilman Fertitta, a prominent Houston billionaire whose family has owned businesses in Texas for generations, was at that time building a thirty-eight-story skyscraper, the Post Oak, just down the street from Kebort’s club. Fertitta’s portfolio includes the Houston Rockets basketball team, the hospitality empire Landry’s (which owns McCormick & Schmick’s, Bubba Gump Shrimp Co., and many other restaurant brands), and a chain of five casinos called the Golden Nugget. 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. On CNBC, he is the host of “Billion Dollar Buyer,” an “Apprentice”-like reality show focussed on the hospitality industry, in which he auditions suppliers for his companies. “Restaurants, hotels, casinos, and night clubs,” Fertitta says, as the show begins. “I own ’em all.” Players flocked to Post Oak as soon as it opened, in part because of its downtown location. Still, Kebort—spooked, perhaps, by Fertitta’s looming skyscraper—kept looking over his shoulder. Stop Illegal Gambling Houston (SIGH), an advocacy group, launched its Web site soon after Kebort’s club opened; it featured Post Oak on its “illegal club list” and encouraged visitors to report poker clubs to local law enforcement. Kebort suspected, without evidence, that SIGH was funded by out-of-state casinos like Fertitta’s. (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.I. dynasty—Wilson’s father, Clyde, had been hired by Ivana Trump to expose Donald Trump’s infidelity with Marla Maples—to arrange security at Post Oak. Kebort hired a security firm run by Wilson’s son; meanwhile, flush from the club’s profitable opening weeks, he paid Wilson a “lobbying concession” of twenty thousand dollars. It seemed to him that, somehow, Wilson made the “Von Kennel problem” disappear. (Sam Von Kennel told me that, although they “would have got a good laugh out of it, not a single effort was made by me or my father to derail Dan’s efforts in Houston.”) Not long after hiring the Wilsons, Kebort was at a strip mall, getting fingerprinted at a T.S.A.-precheck enrollment center. As Kebort recalls, Tim Wilson called him when he was in the parking lot and said that he had just left a meeting with the Harris County District Attorney’s office. Wilson claimed they had agreed on a plan to put a license together for Kebort’s club. In a series of conversations that took place over several months, Kebort said, Wilson explained that the license would be modelled on a system set up for strip clubs in Houston, in which exemptions were granted to sixteen clubs—“the sweet sixteen”—allowing them to offer topless lap dances, which were otherwise illegal. (In 2018, after a club that wasn’t granted an exemption sued the city, a federal judge ruled that the licensing scheme was illegal.) Wilson, Kebort recalls, said that a similar system was going to be set up for Houston’s poker clubs: a commission would cap the number of clubs while allowing some licensed establishments to continue operating. The licensing fee, to be collected by Wilson, would be two hundred and fifty thousand dollars. To show that the licensing program was legitimate, Wilson introduced Kebort to Amir Mireskandari, a consultant for Kim Ogg, the Harris County D.A. Mireskandari, an Iranian-American businessman who ran a financial consultancy and a home-furnishing company, had raised money for Ogg’s campaign. Ogg’s office now paid him eleven hundred dollars a month, to help expand a “complex financial crimes” unit and to serve as a liaison to Houston’s international business community. Mireskandari’s involvement unnerved Kebort: he didn’t want to get on the wrong side of the D.A. At the same time, he was skeptical of the promise of a golden ticket. According to Kebort, Wilson called him repeatedly, pressing him to pay for the license; finally, Kebort told Wilson that he wouldn’t. 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. Inside, the Houston children’s choir sang carols on a curved staircase. There was an open bar and food from the Landry’s restaurant empire. Wandering through Fertitta’s mansion, Kebort felt a bit like he’d joined Houston’s élite and a bit like an interloper in enemy territory. 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 2017 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. Regulatory entrepreneurs, they wrote, build companies around “a plan to change the law—and, in some instances, to simply break the law in the meantime.” Companies such as Uber, Airbnb, Tesla, and DraftKings see opportunity within the risks of semi-legality. They dive into legal gray areas where less-daring competitors fear to tread; by the time lawmakers take notice, such companies are often “too big to ban.” At that point, Pollman and Barry write, regulatory entrepreneurs might employ “traditional political techniques,” such as lobbying, to change the law in their favor. In theory, this opens the market to law-abiding rivals. In practice, it’s often too late for them to catch up. Just as Lyft chased Uber into the unregulated ride-sharing business, poker entrepreneurs in Texas followed Kebort and Von Kennel’s lead. 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.Y.O.B., Prime had a full-service bar; it quickly began drawing customers away from Kebort’s club. Meanwhile, as the clubs spread, their business models diversified. Von Kennel’s Texas Card House abandoned its twenty-five-dollar daily fee, shifting to a system in which members were charged ten dollars an hour to hang out, whether they were gambling, playing pool, watching television, or eating a free dinner. 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. In January, 2018, Geanie Morrison, a state representative from Victoria, Texas, asked the state’s Attorney General, Ken Paxton, to issue an opinion on whether the proliferating poker clubs were legal. Opponents of the clubs—including SIGH, a lobbyist employed by Tilman Fertitta, and a group called Stop Predatory Gambling—submitted briefs to Paxton’s office. 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. The request put Paxton, who the Von Kennels considered a family friend, in an awkward position: he either had to tell hold-’em-loving Texans that they couldn’t play poker or explain to religious voters that he approved of gambling. Paxton was still deliberating in May, when a player named Tom Steinbach had a good night at Texas Card House. 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. (On its Web site, SIGH ran a gleeful story about how the robbery was an “inside job.”) Steinbach survived, and sued the club; a lawsuit is ongoing. A few months later, Von Kennel’s Texas Card House sued another club—SA Card House, of San Antonio—over a difference in their business models. Whereas Texas Card House starts charging members per hour as soon as they enter the club, SA Card House only charges them while they’re sitting at a poker table; it also takes a cut from tournament buy-ins. In its suit, Texas Card House argued that SA Card House’s system constitutes a rake, and that only the business model used by Texas Card House was legal. 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. (Three days after Paxton’s announcement, one of the owners of Prime donated ten thousand dollars to his reëlection campaign; a spokesperson for Prime noted that the same owner also donated to Paxton’s rival. The office of the Attorney General directed inquiries to Paxton’s campaign, which did not respond to requests for comment.) This April, the owners of Texas Card House and SA Card House seemed to be on good terms. Each owner recommended that I visit the other’s club, assuring me that it was one of the best in the area. “It’s a legit lawsuit,” Foster Hearn, the founder of SA Card House, told me. “I was served the works. It’s about business models.” “It is a real lawsuit in that it was filed,” Von Kennel told me, with a smile. In the film “Rounders,” from 1998, poker players who compete in New York team up at a table in Atlantic City to strip unwary tourists of their chips. 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-2669, 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. In 2013, when Von Kennel and Kebort had lobbied for similar legislation, poker clubs didn’t yet exist in Texas; now that they did, the legislation seemed to be progressing. Ryan Guillen, a state representative from Grande City, agreed to sponsor it. A hearing on the bill was scheduled before the legislature’s Licensing Committee on the last day of April, 2019. Photograph by Brent Humphreys for The New Yorker

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. Kebort called his Post Oak partners, who didn’t pick up; his wife, Lindsay, wasn’t answering her phone, either. 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.A.’s view, they had been making money through an illegal enterprise—gambling—and then depositing it into their bank accounts, thereby laundering more than six million dollars in a two-year period. 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. They discovered that both Prime and Post Oak had hired Tim Wilson’s son’s firm to manage their security, and that both clubs had been approached by Wilson and Mireskandari about the quarter-million-dollar gambling license. 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. The owners told prosecutors about the licensing scheme and the involvement of Mireskandari. The implication was that there was a connection between the licensing scheme and the raids. Prime and Post Oak succeeded in turning the licensing scheme to their advantage. Ogg’s office was trapped: in a press release, it conceded that there were “multiple potential conflicts of interest” in the case, including “a potential defense witness who is a former contract employee and a political fundraiser.” Prosecutors dropped the charges. The D.A.’s office returned the money it had seized. The case as a whole—the question of the clubs’ legality, the scheme with Wilson and Mireskandari, the conflict of interest between Mireskandari and the D.A.’s office—was referred, by Ogg, to the F.B.I. Still, the raids had consequences. Prime and Post Oak went out of business, and the remaining Houston poker clubs absorbed their customers. Sam Von Kennel, meanwhile, opened a new Houston club, called Texas Card House Houston. Ogg denies ever meeting with Tim Wilson or discussing a licensing program with him or Mireskandari. “I didn’t know anything about Tim Wilson’s activity,” she told me. She described Amir Mireskandari, who had helped to raise money for her political campaign, as “a liaison. We were trying to beef up our financial-crimes enforcement, and also our ties to the international business community. You utilize people you know to perform functions in new jobs—that’s just how administrations come together. I was unaware of his alleged actions.” Still, she conceded, “When you look at it in retrospect, yeah, it looks like it looks.” Mireskandari—who says he received ten thousand dollars a month from Wilson, for a total of a hundred and twenty thousand dollars, to draft and lobby for an ordinance on poker clubs, even though he is not registered as a lobbyist in Texas—told me that he had stopped working for Ogg’s office before he began the poker project. He said that he was not aware that the clubs were being investigated, and would have had no influence over those investigations even if he had known about them. “I never threatened anyone or abused my position,” he said. (Wilson did not respond to repeated requests for comment.) “There’s no question of whether gambling is legal in Texas—it’s not,” Ogg said. “Parts of Texas are liberal, and parts are conservative. In rural areas, they’re opposed. In urban areas, they aren’t. In big cities, these clubs have proliferated due to lack of investigation and prosecution.” (The exception is Dallas/Fort Worth, which has shut down all its poker clubs.) She went on, “It’s important to understand that the Attorney General and the Texas legislature could have cleared this up, and they chose not to. This occurred in a vacuum created by the Attorney General. State lawmakers are not acting directly to address vice issues—marijuana and gambling legalization—and that leaves the public confused, and it puts law enforcement in a difficult place, leading to inconsistent prosecution.” In Ogg’s view, the fact that her office has dropped the case doesn’t mean that the investigation has ended. She believes that the F.B.I. will pursue the criminal case against the clubs, in addition to investigating several possible conflicts of interest. I asked Greg Travis, the Houston city councilman who compared Post Oak to a sex club, if it was true that, as Kebort and other club owners suspected, Tilman Fertitta had played a role getting the clubs shut down. “No, that’s not Tilman,” Travis said. “That’s me!” Soon after Post Oak opened, he said, he met with the Assistant District Attorney’s office and the police department, and asked them to start investigating the club. Travis said that he could imagine a future in which gambling became legal in Texas: “We had blue laws here twenty years ago, and now you can buy alcohol to-go,” he said. The businesses, he continued, “just need to give legislators a reason to sign on.” He volunteered that, in his opinion, Tilman Fertitta would probably open a gambling establishment in Texas, if it were possible to do so legally. (The general counsel for Landry’s said that “the Company and Mr. Fertitta support and continue to actively lobby for casino resort style gambling in the state of Texas, and unequivocally are not involved in either the DA’s investigation or the police raid on the Houston poker clubs.”) Art Acevedo, the chief of the Houston police department, denies any connection between the licensing scheme and the targeting of Prime and Post Oak specifically. “We have limited resources,” he said. “We believed these were the two largest operations in Houston. You can’t catch every speeder on the freeway at one time, but, if you continue to speed, we’re going to catch you.” He continued, “There’s other investigations into other clubs. We’re going to shut them all down.”