April 15 in the U.S. can be a real frustration for many Americans – it’s last day of the year to file one’s income taxes. And for poker players, it’s also become synonymous with something else – this year it marks the three-year anniversary of the death knell of the Wild West world of Internet poker. And while the future of the game remains in a constant state of flux, in recent years federal lawmakers and state regulators have been moving to considering regulating – and taxing – a form of entertainment and gaming that has attracted millions of players worldwide.
Poker boomed over the last decade, thanks to Chris Moneymaker’s rags to riches tale of poker glory – qualifying for the World Series of Poker Main Event via a $39 online qualifier through PokerStars.com. The popularity of the game online and on television continued to fuel the poker fire. But Internet poker was dealt a crushing hand on April 15. Federal officials shut down three of the biggest online operators (PokerStars, Full Tilt Poker, and UB.com) charging several company insiders and various bank executives with flouting the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA). The act “prohibits gambling businesses from knowingly accepting payments in connection with the participation of another person in a bet or wager that involves the use of the Internet and that is unlawful under any federal or state law.”
The act also requires American banking institutions to put procedures in place to prevent transactions, which could be used for poker or other forms of gambling. While many online poker companies pulled out of the American market after the law went into effect, some argued that poker should be considered a game of skill and is legal. The federal government charges that the companies knowingly flouted the act using unscrupulous banks.
The poker world was also rocked by scandal as Full Tilt and UB.com were slow in returning money to players. And the wild card in this poker mess came in December 2011, when the Justice Department ruled that the Wire Act of 1961, which many argued outlawed online gaming, only applied to sports wagering. The states of Illinois and New York sought a legal opinion as to whether using out of state payment collector and online sales of lottery tickets violated the act. The department ruled that it did not.
“We conclude that interstate transmissions of wire communications that do not relate to a ‘sporting event or contest,’ fall outside of the reach of the Wire Act. Because the proposed New York and Illinois lottery proposals do not involve wagering on sporting events or contests, the Wire Act does not, in our view, prohibit them,” the ruling notes.
Several states and even Washington D.C. have concluded that intrastate online poker is allowed under the ruling and even compacts between states similar to the PowerBall and Mega Millions multi-state lotteries. Some states see it as a taxing opportunity as states suffer cash crunches during this economic downturn. Efforts have also been made to legalize the game at the federal level, but most think those efforts are a ways off. Major gaming corporations such as MGM Mirage are pushing for resolving the issue allowing them to enter the business. MGM has partnered with Europe’s bwin.com to launch if the game becomes regulated and legal.
STATE BY STATE
Until a federal option comes about, a few states have entered the poker arena. Naturally, Nevada was the first to legalize online poker in April of 2013, and Station Casinos was the first company to get in on the action in May. Frank and Lorenzo Fertitta are the principal owners of the company, which owns 17 properties. The Fertittas have also owned and operated the Ultimate Fighting Championship (UFC) since 2001, and have attempted to cross-promote the two brands.
Ultimate had been preparing for a new online poker world and company officials had been preparing for legalization in Nevada. After overcoming regulatory obstacles, Ultimate was off and running dealing games not just to Nevada residents, but also the 40 million tourists who visit the state annually. Players can make deposits in an Ultimate Bet account (as well as competing sites) and play when they visit the state. When the first legal virtual hands were dealt, company officials were pleased with the reaction.
“Players have called in to tell us how excited they are. I was just as excited for another reason. For a long time I’ve been telling everyone who would listen that online poker would invigorate the economy,” company co-founder and chairman Tom Breitling wrote on the site’s blog. “On Day 1, we’ve already started to hire additional support staff to deal with the higher-than-expected volume of questions that poured in. And I’m proud to say that the first tax dollars were generated from real money online gaming.
The site also quickly signed some big names to promote the site including Antonio Esfandiari, who has more than $25 million in poker winnings including the $1 million Big One For One Drop tournament at the World Series of Poker in 2012. The unique link to Station Casinos has also made for the cross promotion of live and online casinos at the Station Las Vegas casinos where players can sign up and deposit as well as play live. When New Jersey also legalized online poker in late-2013, Ultimate Poker also expanded into the Garden State and players can even deposit at the Trumpt Taj Mahal.
Not to be outdone in the Nevada market, Caesars Corp. began signing up players for accounts at the WSOP festivities last summer at the Rio. The company launched its online offering in September 2012.
“This is a historic moment for our company,” Caesars Interactive Entertainment CEO Mitch Garber said. “A state-of-the-art poker offering from one of the most established and regulated operators in the United States is finally here. We have taken the 43-year-old World Series of Poker brand and combined it with the Caesars Entertainment portfolio of assets to provide consumers with what we believe will be an unrivaled poker offering to satisfy today’s technologically savvy consumer. We will bridge land-based and online gaming in ways that have never been seen before.”
The company has since also expanded into New Jersey, and hopes to take advantage of the best-known name in poker. The company moved quickly to cross-promote its brands. The site immediately offered an opportunity for players to win a seat at the WSOP-Europe in Paris, France. WSOP.com will also offer satellite tournaments to the $10,000 WSOP Main Event at the Rio “for the price of a movie ticket,” as the company notes.
“This opens up a whole new category for the WSOP brand, enabling us to connect with consumers year-round and reach them where they are most today – on digital devices,” said Geoffrey Stewart, WSOP.com’s general manager of online poker. “We have high standards, we know our players do as well, and we believe everyone will be impressed with WSOP.com once they get the chance to play and experience its exceptional benefits and rewards.”
Because of its size and populous neighboring states, New Jersey has been the most sought-after market thus far. Beyond WSOP and Ultimate Poker, other offerings include PartyPoker, BorgataPoker, and 888Poker. With such a large population, Jersey is the place operators are looking to gain a foothold. Others will surely look to enter the marketplace and Wynn Resorts was also recently granted a license for an online gambling site. In October, online gaming, including poker, also became legal in the state of Delaware, but has been slow in attracting players according to sites like CompatiblePoker.com, and had only attracted $253,000 in state revenue by February and only 4,000 registered online players (New Jersey has registered 125,000).
A few sites stick out that aren’t yet back in the U.S. market – PokerStars and FullTilt (which was absorbed by PokerStars after a $731 million settlement with the federal government in 2012). Thus far, PokerStars has been unable to get back in the U.S., but as the poker market grows – the site will be looking to get back in the U.S. and raise the stakes.
OTHER OPTIONS & THE FUTURE
Online poker’s future is certainly not certain, but appears to be gaining traction. For those living outside of Nevada and New Jersey, there are some “sweepstakes” poker-style options available like the World Poker Tour’s ClubWPT.com. In 2010, the site became the title sponsor to WPT Season IX.
“We were already seeing a strong uptick in demand for ClubWPT.com prior to Black Friday,” says WPT CEO Steve Heller. “This exposure was instrumental to informing consumers of our online poker offering, although we certainly did see a secondary increase following Black Friday. We firmly believe in this product and are enthused by its growth over the past few years, thanks in large part to the televised promotion on the World Poker Tour.”
Like other similar sites that have popped up, ClubWPT.com is an online membership site, which offers inside access to the WPT as well as a sweepstakes-based poker club. Because of the “sweepstakes” style play, it is legal in the U.S. and available in 35 states. The WPT offers tournaments that award prizes and cash as well as free satellites to its tournaments throughout the world.
Some overseas sites like Bovada, the American face of online sportsbook and poker site BoDog, are still offering poker and other games for real money to U.S. players despite the federal crackdown on sites like PokerStars, FullTilt, and UltimateBet.com.
What’s the future of online gaming and poker in the U.S.? That is still a bit up in the air. Federal efforts by members of both political parties have thus far been unsuccessful. Legislation on a state-by-state basis seems to be the state of the game for the foreseeable future.
So far, there have been mixed results in the three states that have legalized online poker. But as legislators look to add to state revenue, there are a number of states looking to get in the online poker business. That will not come easily. Anti-poker foes like Sheldon Adelson, chairman of Las Vegas Sands, have argued that online poker is a security risk and threat to minors who might be more susceptible to gamble online. Adelson has formed a group to oppose the game’s expansion online.
Nonetheless, efforts to legalize the game in several states continue. The sites GamblingCompliance believes 10 states will consider online gaming and poker legislation (and further expansion) in 2014 including: California, Colorado, Hawaii, Illinois, Iowa, Louisiana, Massachusetts, Mississippi, New Jersey, and Pennsylvania. As more states come take a seat at the virtual poker table, compacts among states and possibly other countries become a possibility – increasing the player pools and game offerings.
The online poker landscape is anything but a certainty. And like the game itself – there is always a little gamble involved.
Sean Chaffin is a freelance writer in Crandall, Texas. His new book is Raising the Stakes: True Tales of Gambling, Wagering & Poker Faces, available at his blog PokerTraditions.com, Amazon.com, and BarnesandNoble.com.