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Extended Reading.....
All About Online Poker

Online PokerMillions of people woke up on the morning of October 1, 2006 to fi nd something they cared about attacked by the United States government. For some, it was a hobby. For others, it was their profession.

Rarely in history has an industry at its peak fallen into uncertainty overnight. During the previous eight years, online poker had grown from nothing into a multi-billion dollar industry, capturing the imagination of everyone from college students to grandfathers who fi rst played poker when The Dunes, The Sands, and Stardust ruled the Las Vegas Strip and No Limit was the speed at which people drove into Sin City. Online, while serious players could risk thousands of dollars, casual hobbyists could play true nickel-and-dime games that aren’t available in casinos. The internet poker boom popularized the game on television, turned top players into celebrities, and transformed the World Series of Poker from a competition to an extravaganza. Not even two months before that October day, a record 8,773 people participated in the $10,000 buy-in Main Event, with about two-thirds of them qualifying through online satellites.

Then came the Unlawful Internet Gambling Enforcement Act, blindsiding the poker world almost out of nowhere. Serious players who spent their time reading about the game on internet message boards knew the bill was fl oating through Congress. Entering September 30, the fi nal day before Congress adjourned for the November elections, it appeared the issue would not come to vote. Then Bill Frist, the Senate Majority Leader, managed one of those sneaky political maneuverings that give politicians a bad name. He attached the UIGEA to the completely unrelated SAFE Port Act, a lock for passage. No one was going to vote against improving maritime and cargo security. The bill passed unanimously through the Senate with many senators unaware of the impact the legislation would have on poker.

Fear and panic reigned in the aftermath. People rushed to remove their money from poker sites. PartyPoker, the industry leader, had the stock of its parent company, PartyGaming, collapse by more than fi fty percent in a single day on the London Stock Exchange and shockingly withdrew from the U.S. market. Other sites such as Paradise Poker and Pacifi c Poker followed suit.

The online poker craze appeared to reach an abrupt end. But two years later, not much is different than pre-UIGEA. Millions of Americans continue to click away at those raise and fold buttons. As sites have left the U.S., other powerhouses and small sites have emerged. The industry remains extremely profi table for the offshore companies, as well as for good players.

“It’s certainly the position of the Poker Players Alliance that the UIGEA didn’t change anything,” says Howard Lederer, a PPA board member, successful poker pro, and one of the founders of Full Tilt Poker. “It basically put an added burden on the banks to crack down on these things, but it left undefi ned what is illegal. What it did was create an atmosphere of fear.”

When one deposit method closes, another appears. Some of the casual players scared away by the legislation never returned, making the games tighter. Sites need to constantly adjust their methods of deposit and withdrawal, which has also kept away the casual player who doesn’t fi nd it worthwhile to jump through extra hoops to play.

The UIGEA has not been enforced – and may never be. The legislation has done nothing but awaken poker players such as Lederer to organize, make their voices heard and defend their right to play a skill game. This September, two years after the UIGEA shook the industry, poker claimed its fi rst signifi cant victory in Congress. Despite the doom and gloom that permeated the community after the UIGEA’s passage, there are signs that the best of online poker may be yet to come.

Misinformation Abounds

Friends and family asked Paul Wasicka, who had just fi nished second at the 2006 Main Event for a $6 million cash, what he was going to do now that online poker was illegal. They weren’t the only ones confused by the UIGEA.

The legislation did nothing to address the legality of online poker, did not make it illegal for people to play poker on the internet and had no jurisdiction on the sites themselves, which are all based offshore anyway. Poker is not even directly named in the act. What the bill did was try to forbid U.S. banks and credit card companies from funding illegal online gambling.

Enforcement of the act proved diffi cult. The burden was put on the banks, which aren’t interested in spending their resources fi guring out what money is going to illegal online gambling in these diffi cult economic times. Then there’s the question as to whether internet poker qualifi es as illegal online gambling. The Department of Justice argues that all interstate gambling was made illegal by the 1961 Wire Act. However, the PPA disputes this, claiming that the Wire Act only addresses sports betting.

“The very fi rst couple months, supposedly the hammer came down and a lot of things were going to happen,” says BJ Anderson, the head of marketing for the poker site Doyles- Room. “I think, really, a lot of clarifi cation was needed. As time goes on, it has been two years, and I don’t think it’s any more clear than it was back then. I think our own lawmakers are working to clarify that and it actually appears to be in the favor of poker.”

Not that the legislation didn’t have an impact. The fear factor did enough damage. The loss of the secure, customer-oriented, and player-friendly PartyPoker and the occasional, casual players who saw losing $100 as the cost of a night’s entertainment, created a shark vs. shark atmosphere for the players that remained.

Adaptation

The sites that stuck with the U.S. market were rewarded. Overnight, PokerStars and Full Tilt Poker surpassed PartyPoker as the industry leaders. Smaller sites like Cake Poker also were able to pick away at Party Poker’s large market share, making up for the players who quit because of the legislation.

The biggest challenge facing these sites was to make sure players had a reliable way to deposit and receive their money. Neteller, the largest payment processor that served as a go-between for funds from banks to poker sites, stopped serving U.S. customers in January 2007 and tied up the funds of many U.S. poker players for months after its founders were arrested on U.S. soil for conspiring to transfer funds to promote illegal gambling.

Thus began a musical chairs of deposit options as sites constantly had to adjust. Many smaller payment processors tried to take the place of Neteller, and the gaming sites had to sort through which ones were worthwhile.

“It’s tough for us because a lot of processors approach you and say, ‘we have this method, we have that method,’” Anderson says. “We have to weigh the consequences of whether these guys are going to stick it to the players one day and take off with the money or be shut down. We’re liable to the players to make sure their money is safe.”

A new business called Players Investment Company has recently surfaced as a new option with a novel idea called PIC-Club. There is an exclusion in the UIGEA for trading companies, so PIC-Club has customers deposit by buying shares of the company, then sells those shares to the poker sites.

“The U.S. market, although smaller now, also has seen new entrepreneurial efforts to pick up the slack in both poker services and in deposit processing,” says a spokesperson for the small site True Poker, which uses PIC-Club as a deposit and withdrawal option.

Poker’s Persistence

If the UIGEA was a knockdown punch to online poker, the players certainly got back up swinging. Responsible U.S. citizens who want to play online poker for a living can no longer live in a bubble. They must keep apprised of the latest poker dealings on Capitol Hill and write their congressmen to express their views.

“Americans like poker and will continue to fi nd ways to play online even under the most draconian of federal and state laws,” says John Pappas, executive director of the PPA. “This is exactly why we continue to advocate for a more realistic approach to internet poker through regulation and licensing. Fortunately, more and more lawmakers recognize that the best way to protect adult poker consumers, children, problem gamblers, and to prevent fraud and abuse is through regulation and oversight, not prohibition.”

The message appears to be coming across. The House Financial Services Committee passed the Payments System Protection Act in September. Introduced by Rep. Barney Frank (D-MA), the legislation would prevent the implementation of UIGEA regulations until the defi nition of “unlawful internet gambling” can be clarifi ed. The bill still has to pass through the House of Representatives and Senate, and that may not happen this year, but the committee victory shows that Congress is coming around on online poker. At the least, it should make sure the UIGEA regulations are not enforced until the new legislation runs its course.

“To be sure, it was the best result we’ve had in Congress,” Pappas says. “But the threat of UIGEA becoming fully enforced still looms and the PPA is continuing to work to prevent enforcement of UIGEA from effecting poker… It does show there is at least some level of understanding in Washington that the UIGEA should not apply to poker.”

A Peak In the Future

Players reminisce about online poker’s heyday, back in 2004 and 2005, when they were clearing in one month what now takes three. They talk as if poker is in an inevitable decline, never to be the same. That isn’t necessarily the case. While the amount of U.S. poker players has decreased since the UIGEA, the game has grown enormously in international popularity. Poker is booming in Asia, Central and South America, Russia, Australia, and South Africa.

“It’s sad that poker is growing worldwide while struggling in its own country,” says Lederer. “The U.S. is now a much smaller part of the poker world.” If online poker is offi cially made legal in the United States – a defi nite possibility over the next couple of years with the effort of Frank, the PPA, and a focused poker constituency that is making its voice heard – more casual U.S. players may return to the game and combine with the international growth to help poker reach new heights.

In such a scenario, the sites that abandoned the U.S., such as PartyPoker, undoubtedly would return. DoylesRoom already paved the way for comebacks, leaving the U.S. market shortly after the UIGEA passed and returning six months later. “We decided to get back in because we were confi dent the legislation would work out,” Anderson says. “At this point, companies probably wouldn’t feel compelled to come back to the U.S. until things in legislation are crystal clear. But I think a couple brands that initially started out U.S.-oriented and left are going to want to return at some point.’’

If the past two years have shown anything, it’s that online poker isn’t going anywhere. The U.S. government might as well work to legalize, regulate, and profi t from the industry rather than fruitlessly work against the will of the American people.

“I think online poker would be fi ne and grow with or without the U.S.,” Lederer says. “But if something passed, I think it would start gaining again. The tide is turning. If thirty percent of people get enjoyment out of something, those things are supposed to be allowed in society as long as the other seventy percent aren’t getting hurt. When you have a game as popular as poker and people think they should be allowed to play it on the internet, it’s going to happen.”