How I Learned to Stop Worrying and Love the Ban

I promised some thoughts on the recent port-security-online-gambling-funding bill that was passed a couple weeks ago by congress. Things aren't always how they seem. There are a ton of people speaking out about this bill, but everyone has their own agenda. If you're out of the loop like I usually am, here's the summary as I understand it.

A few Fridays ago Bill Frist (a seasoned senator who is shooting for president and knows how to get things done) along with Goodlatte (now here's a guy who's been battling online gambling for awhile, but couldn't land a punch until now) slipped in a provision in a port security bill that would make it illegal for companies to fund offshore accounts of online gambling sites. They said that terrorists use online gambling to transfer funds between cells or something like that. They slipped in some exceptions for horseracing and state lotteries. Put the thing on the floor at the last minute... so it would be awhile before the bill could be voted on if it was amended. And then...

BAM! Thing passes by a landslide.




Here's Shelley Berkley arguing against the bill she voted for.



Here's Doyle Brunson sans DoylesRoom logo on Fox.



Here's Annie Duke and Mike Sexton with the PPA guy explaining why poker shouldn't be lumped in with other gambling games because it's a game of skill.



Here's some guy (who until recently probably relied on Party Poker affiliate money) smearing Frist and Goodlatte.


Then a bunch of things all happened at once.

1. Party Poker announces that they will no longer be accepting US real-money players when the bill was signed into law. Their stock goes into the toilet.

2. Firepay announces that they will pull out of the US market.

3. Neteller announces that they will stay in the US market.

4. Pokerstars announces that they are staying open. So does Full Tilt, Doyles Room, Poker.com, Absolute, and not suprisingly Bodog, who's owner, Calvin Ayre, has seemed to make it a point to get on plenty of magazine covers flipping off the US Justice Department). UltimateBet, which was a public company, somehow converted to a private company so that it could remain open. Overnight, Pokerstars and all the other cardrooms explode with the players that can no longer play on Party. A lot of other sites, though, go the Party route and seal off US action. A couple sites decide to go state-by-state and just seal off the states that have laws against it.

5. Antigua files some sort of complaint with the WTO. Their whole country has been built as a safehaven for online sportsbooks and casinos since the late nineties. Before that it was built around tourism... because it's true. Antigua Nice. If the US doesn't yield to the Antiguan government's pressure, we could face economic sanctions by Antigua. This could actually be a really bad thing... for anybody who loves rum or relies on its ports to fix their yacht. Most of us who just drink beer and are lucky to have a car probably shouldn't be too worried about Antigua backlash.

6. Neteller announces that they reversed their earlier decision and will now pull out of the US market.

Ok... that's pretty much it. Now what does this bill actually do? First off, it doesn't outlaw online poker. Online poker is already illegal. That's why we play on PartyPoker.com instead of Harrahs.com or ESPN.com. That's why media companies have already been fined for advertising real-money sites and why we can't deposit money online anymore with PayPal. And that's why all these annoying online poker commercials all end with some guy screaming "PAAAAAAAAARTYPOKER!"... and then in his inside voice "dotnet". I mean, come on... is anybody really fooled by the "poker school" idea behind these .net advertisements? Aren't the media outlets still violating the same laws they were when they were advertising the "dotcom"?

So you might ask yourself... how did this bill actually get passed? What was going on? Here's my take. Bill Frist and Goodlatte had an agenda to get rid of online gambling. One thing that I thought was interesting was that one of Frist's campaign contributors was... wait for it... Harrahs. That makes sense. The American casino lobbyists were eerily silent about the bill. And then the same day that Party stock tumbled, Harrahs went up 20%. All that money that's currently being siphoned out of the US gambling economies into offshore companies... now some percentage of that is going to be taken out to Vegas.

But I'll give Frist and Goodlatte the benefit of the doubt and assume that their agenda had everything to do with fiscal protectionism and not with special interest groups because I really believe that Frist and Goodlatte probably are opposed to all forms of gambling. And let's face it, people. Their agenda is not without some merit. Step outside your own point of view for a second and look at online gambling from a legislators point of view. I don't really think the US as a whole benefits from a bunch of college students putting loan money into blackjack at Golden Palace. Is anybody really going to say that online casinos and online sportsbooks are a healthy positive thing for society? And you might think Vegas is great... it is... but there is a big difference between people going on a vacation and gambling a little for fun and some MU college freshman betting his first credit card that the Cardinals win the series. And right now that happens all the time. Hell, I got started on Planet Poker when I was 17 years old. I get email from kids a lot younger than that asking for my opinion on a hand they played on Stars...

So online gambling is a problem. They decide to try to get rid of it. But how do you kill it? It's easier said then done. It's the internet, and going after Party isn't as easy as raiding some mob-run underground room down on 14th street. A few years ago they thought, well, maybe we can put the burden on the ISPs like AOL and the cable companies. That didn't work. The internet is too tricky and the cable companies had deep pockets and lobbied hard against it. So then they thought, let's put the burden on the financial institutions. That was pretty smart. If you can keep the bulk of the money out, you can cut it at its source. You still have to put a burden on banks and credit cards to make sure they aren't letting transactions through to what I assume would be some sort of blacklist of companies.

What's that? But poker is different than sportsbooks? Yeah. Damn skippy. It's a lot different. It's a skill game. And the poker economy is like a big giant pyramid. Thousands of professional players consistently beat their opponents and live off their winnings. At the top tier you see many players (hundreds, not thousands) making several million a year. But hundreds of thousands of players consistently lose. Billions are taken out of the pyramid by the operators, but funneled back into it to some extent by their marketing expenditures (which go to editors and writers who then play poker) and the fact that a good chunk of poker players own a piece of the operations they endorse. It's an industry where being a top-earning professional poker player means spending more time doing commercial shoots and writing poker articles then actually sweating in a chair all day going for a checkraise.

Just because poker is a skill game doesn't mean that the poker industry is a positive thing on a social level. Being a professional poker player means taking money from other players. It's not charity work. It's a negative-sum game where most people lose. Poker is never never never going to be accepted as a "non-gambling" game as long as the majority of poker players are losing money. The comparisons to nascar and basketball and golf just look stupid. You don't see many NBA hopefuls losing their tuition... or PGA pros going broke because they lost their bankroll after missing a putt. But you see it all the time in poker.

This is a big problem with poker as a game and why I think this bill might not be such a bad thing. Poker the Game is the illegitimate child of Poker the Industry. Our stars are just as bright as any other sport... our game is just as demanding. But poker is held back because our industry has built around a business model which is dependant on real money wagering. This is the way poker is played. Always has been. But in my opinion it's not good for the game. If the WPT had come out as a radio show in the thirties and poker had never been brought out to the casinos in Vegas, I think that poker would be in a much healthier state today and the top players would be doing much better.

I saw a marathon of MTV Cribs the other week where they showed houses of popular extreme sports stars. Skaters, snowboarders, BMXers, that kinda thing. I didn't recognize a lot of the names, except for Tony Hawk and Bam Margerra. All these guys had sick houses with sick walk-in closets filled with clothes from endorsement deals with Volcom Stone or Hurley or whatever. Video games. Sports drinks. Great big tournament prize-pools in freeroll tournaments with words like "Dodge" in the title. Poker is slowly getting to that level.

But I would submit to everyone reading this that many players in the poker industry don't want change. They don't want poker to be regulated anymore than they want poker to be outlawed. They want the industry to stay exactly how it is because they're making out pretty well and why change a good thing?

But things are changing... make no mistake about it. A lot of people are taking the attitude that Party is overreacting and that this is all going to pass. It's not. The people who are getting hit the hardest are the people who are in positions which are reliant on online poker advertising. Operators can pay much more for advertising space because the customers are worth more. You rarely see regular ads in poker magazines because Degree (or even The Commerce and Harrahs) doesn't make as much money per eyeball as Full Tilt does. All that pretty much fell apart. Marketing budgets are being frozen because now companies aren't sure what's going to happen.

What will happen? This is what I predict for our game and our industry.

First off, all current online poker sites are going to suffer. The ones who pull out of the US market will suffer immediately (i.e. Party). The ones who stay put for awhile will see an immediate boom in profits... their numbers will be up because of the Party fallout. But this boom will be short-term. Pokerstars may be seeing a drastic increase in customer activity, but Neteller and Firepay surely are not. And my guess is that the average deposit per player has gone down for these sites even as their players have grown.

If and when Neteller shuts down, and the banks and credit cards start making sure that they aren't funding any online bankrolls... then the online action dries up quick. The money will continue to be raked off by the operators and cashed out by the winning players. But the recreational fish (i.e. the base of the pyramid) won't be putting in new money. The "big game" will drop from several 200/400 limit games going to a single 20/40 game. But online poker won't disappear.

Instead, most of the current operators will probably look to expand the game and their operations through the other continents. They'll start making plans to aggressively target South America and India. This will be a cool time for companies like the WPT as they bring poker as a spectator sport into other countries. But I don't think this strategy will work in the long-run for the operational companies (although it'll work out great for companies like the WPT), because online poker is going to change in the US.

The demand to play online is still going to be there and will be filled with companies that aren't violating US law. At first, it will be freeroll sites. The Myspace poker league. The Yahoo Poker Challenge. Online poker in the US will become an industry where players don't deposit anything. There will be a smaller percentage of players who actually make a decent living off of poker. But there will be a lot more players and potentially a lot more money to divide up.

Then online poker will probably start getting regulated state-by-state. When this happens, a lot of online sites will pop up that are region specific. Because it is now no longer "grey" a lot of well-funded companies will pop up and as a result you'll finally see the elimination of the rake forced on all the online real-money sites from companies entering the market with deep pockets to begin with and nothing to lose... you'll also likely see a lot of mergers and acquisitions of the existing online poker sites with legitimate American corporations.

Live poker is going to change a lot. Action in the LA, AC, and Vegas soar and I predict the games will get a lot bigger. I suspect they're already seeing a lot more action. In states without readily-accessible cardrooms, this opens up all sorts of opportunities for bar leagues (if I was in charge of Hooters or Buffalo Wild Wings, I'd be all over this yesterday) and promotional freeroll tournaments. It will also probably help the tournament circuit a great deal. I think a lot more people would be playing the circuit if it weren't for the fact that you can just stay at home and play the big Sunday tournaments online. Now people will actually have to go to Tunica if they want to play a $200 event. There probably will be a few staking companies that build a business around seeking out talent in online league-style tournaments to put into live events (if anyone out there is already doing this, I own PokerStakers.com which at this point I'd probably sell for a pretty cheap price). I think at some point some professional association will pop up like the PGA or MLB and really start making some moves. Tournaments will start to become positive-sum. Poker will start to become positive-sum. Losses will be nominal. Big American corporations will no longer feel pressure to keep their safe distance. And then maybe you'll see poker players on MTV Cribs.

I guess I'll wrap this post up by saying this. If you're reading this and you're somewhere in Kansas and for the past two years have been surviving off of online poker, don't be too worried. If you can beat poker in its current state, you can do anything. You will adapt... that's what poker is all about. You're a player and you're always going to be able to see opportunity. You might have to settle for less earn because you won't be able to get in as many hands a year. You might even have to move out to California because the biggest game online is picking between the 10/20 limit on some greymarket site against five other "pros" or some $1 million dollar Budweiser.com freeroll against a few hundred thousand other contenders. Worst case scenario is you might actually have to go get a job.

But poker isn't going to disappear. Poker is not a fad. It is one of the purest games ever invented. You can tell a lot about a person by the way they play poker. It's an American game and has been a big part of our culture since the Old West. Its appeal will be felt by new players getting dealt aces for the first time long after we're all gone. And those aces will still get cracked. That is why we love this game. That is not going to change.

Something Doyle said at the series this year stuck with me. He said, "Poker doesn't owe us anything. We owe poker everything." Good words.