It’s hard being a US Senator. One minute you’re trying to push through a federal bill governing regulation on online poker in the States, the next you’re trying to stop America fall into an economic abyss the likes of which has never been seen before.
Sometimes, being Harry Reid just sucks.
As the US Senate majority leader from Nevada oversees a last-ditch raising of the country’s debt ceiling in the hope of averting financial Armageddon (and at time of writing, it looks like he's just about pulled it off), Harry has a side project on the burner: helping America’s displaced internet poker players back onto their laptops and into the biggest nosebleed games in town.
Reid's federal bill for a country-wide regulated market may have bitten the dust (for now), but there are moves within individual states to push for their own online poker legislation. Maybe, just maybe, a new regulated online market in the US can help lower that debt ceiling just a little.
1. It was great in the old days, right?
The internet and TV boom of the early 2000s gripped the US as much as anywhere in the world, and with PokerStars’ emergence in 2001 and the subsequent "Moneymaker Effect" of 2003’s WSOP Main Event, it seemed as though the online poker juggernaut was unstoppable.
With Nevada and New Jersey forging ahead in 2013 with individual bills to provide online gambling to players within their respective state borders, it seems strange to think that just seven years ago US poker players were happily playing poker online in their pyjamas with no idea what was about to transpire.
2. What happened with UIGEA?
Everything was rosy until 2006 when Bill Frist (his surname remains a five-letter word to all online poker fans in America), the Republican Senate majority leader, slipped into the Safe Ports Act what would become another five-letter word for online poker fans – UIGEA.
The Unlawful Internet Gaming Enforcement Act made it illegal for financial institutions to process payments for gambling companies. Despite it being on record by the US Department of Justice that the Federal Wire Act of 1961 does not apply to online poker, many poker sites simply gathered up their moneybags and made a run for it (and in the case of PartyPoker left with an apology and a multi-million dollar fine paid to the federal government).
3. How was life after UIGEA?
Major poker sites like PokerStars and Full Tilt, not content with the new law (which at best was naive and at worst downright illegal) continued to side-step regular payment processing channels and carried on taking US players’ money, as did hundreds of other smaller unregulated sites.
Things came to a head in April 2011 when the DOJ cracked down on alleged crimes against offshore online poker operators – a day known with dread as Black Friday.
The federal criminal case was presented against the three largest online poker companies, PokerStars, Full Tilt Poker and Cereus (UltimateBet and Absolute Poker). These sites and payment processors were charged with violating the UIGEA and engaged in bank fraud and money laundering.
4. Was Black Friday the end of US online poker?
After the DOJ seized the .com addresses of the big poker sites, US players were shut out from games and denied their funds. Although PokerStars.com customers in the US were allowed to access their money eventually, players on Full Tilt Poker are still waiting for their money back and have had to apply to the DOJ to claim it back. At time of writing, however, there are signs that American Tilt players will get their funds back soon.
There was another twist to the saga in September of that year when the DOJ stated that the UIGEA applies only to betting on sporting events and contests and not to other types of online gambling. The US Justice Department issued a ruling making online gambling legal, so long as it was permitted on the state level - that was a green light to some states who started to forge ahead with intrastate online gambling and poker.
5. How is Nevada leading the way?
While some federal bills have been proposed (not least by Reid himself, of course) and subsequently perished, a state-by-state system of online poker legislation seems the most likely way forward for the foreseeable future.
Nevada has wasted no time in forging ahead with online poker plans of its own. The state's new legislation was tested in 2013 at the state’s first legal online room, Ultimate Poker, with visitors to the 2013 World Series of Poker giving it its first test run.
Under the new regulations, players using a Nevada-based poker site like Ultimate must be physically located within the state borders to log in and play online poker. These same players do not need to reside within the state nor have any financial assets - like a bank account - to participate; all they require is proof - typically a valid IP address - to determine if they are within the borders of Nevada. This is great news for gambling holidaymakers from other US states wanting to visit Las Vegas and enjoy online poker.
6. Who else is coming along for the ride?
It’s in New Jersey, however, where the most positive movement has been seen. Since Governor Chris Christie signed a bill making New Jersey the third state to legalise internet gambling, online poker operators have wasted no time in buddying up with land-based casinos – part of the condition of running internet gaming sites within NJ.
PokerStars - back in the game since their buy-out of Full Tilt and payment of a massive post-Black Friday fine - will be offering online gaming after a team-up with Resorts Casino. As part of the deal, a $10m live poker room will be built in NJ, seen as a way of drawing online gamblers to Resorts to play in live poker tournaments. PokerStars are yet to receive a licence, however, and with the Black Friday indictments there's still no guarantee the world's largest poker room will get one.
How bwin.Party will feel about that if Stars do remains to be seen. Remember that Party fell way behind Stars in the online poker market after pulling out of the US market altogether post-UIGEA, with the long-term view that they could be first in line when gaming went legal in the US.
The Golden Nugget wasted little time in joining the party, being awarded a permit by the New Jersey Division of Gaming Enforcement at the beginning of October.
Unlike a lot of the casinos in Atlantic City that have partnerships with existing online rooms, Golden Nugget will be offering online gambling under its own brand. How a traditional land-based casino will fare starting an online operation from scratch remains to be seen.
Elsewhere, Ultimate Gaming – responsible for the first regulated poker room in Nevada – has signed on the dotted line with Trump Taj Mahal Associates and Wynn Resorts has inked a partnership agreement with 888poker to launch online poker and gambling offerings in Nevada and New Jersey.
Speaking of 888, the leading poker room is one of the primary vendors bidding to become Delaware’s first online gambling operator when the state finalises its proposed new legislation. In Delaware, laws have been passed allowing online poker to become a free and legal activity within state lines.
7. bwin.Party are coming back to. Didn’t they get out of the US?
Well, they did, and they're back. bwin.Party, frozen out of the country since UIGEA, is keen on moving in as well, having signed up with Atlantic City's Borgata Casino in the state's first deal. Internet poker is set to be provided as soon as New Jersey’s online gambling laws finally get the go-ahead.
In a notable, if not unexpected move, the World Poker Tour (now owned by bwin.party) has moved its annual WPT World Championship from its traditional home - the Bellagio in Las Vegas - to the Borgata next spring. Gamblers will be able to use their home computers and smartphones to play online, as long as they are within New Jersey’s borders.
8. Will the US have a big bankroll from all this gambling online?
You'd think online gaming would help out an economy struggling to get out of the Dark Ages, right?
Well, according to estimates by Linwood-based casino consulting company, Spectrum Gaming Group, online gambling could become an $8.5bn business in the US within the next five years following current legislation.
The firm also estimates Atlantic City casinos alone will initially reap $400m in annual revenue from New Jersey’s online gambling operations. That's good news for the online companies buddying up with land-based outfits and a wake-up call for other states considering online gambling of their own.
However, what sets Nevada and New Jersey apart is that they already have established bricks and mortar gambling operations for online firms to partner up with. States considering gambling legislation who don't have this tradition already could find it somewhat harder to join the party.
9. Is a federal bill dead in the water?
There is a general hope that as more states pass intra-state legislation and establish a model that others can follow, states will band together to increase prize pools, player numbers and overall revenue. Eventually, this could hit a critical mass and open the gates again.
Global gaming brands - particularly those forced out of the US after UIGEA like bwin.Party - are making their moves now. Online players in the other states will just continue to play at an unregulated poker site of their choice and there's no indication that they're going to disappear anytime soon.
As for a federal bill, it looks very unlikely for the foreseeable future.
10. What does the future look like?
Good question. The regulation of online poker is surely inevitable in the US. As we have seen, some US states are going it alone, but if California goes next, as some expect it may do in early 2014, many more states could follow. As for a federal bill, if Congress can stop fighting like kids and sort out the country’s debts once and for all, perhaps attention can turn to online poker in the coming months. We’re not holding out any hope,
