GPWA Times Magazine - Issue 16 - May 2011

Purely European companies, like Playtech, and the not-quite Internet poker sites are also doing well. PurePlay.com, a sub- scription poker site with free alternative means of entry, based in San Francisco, received $2.8 million in new funding after Black Friday. And Atlantis Internet Group Corporation, which is setting up legal closed-circuit computer-linked poker on Indian land, saw its stock rise 400 percent in the last few days. Brick-and-mortar cardrooms have seen modest increases in the number of poker players. The first weekend after the on- line players’ funds are freed up will show whether the crackdown on Internet com- petition can help save Atlantic City. In the long run it will probably be land- based operators, like Caesars, and online sites which had already pulled out of the U.S., led by bwin.party and 888, that will be the biggest winners. The indictments reinforce arguments that states should le- galize intrastate poker, so that the opera- tors, their computers and payment proces- sors will be physically located in the U.S., the better to be taxed and regulated. The major obstacle is political. The same forces that allow us to talk about legaliz- ing Internet poker also stand in its way. There is so much legal gambling in the U.S. that allowing one more form is no big deal. But that also means local opera- tors will fight to prevent outsiders from coming in to create new competition. Each state will create its own formula for extracting as much money as possible without alienating existing local opera- tors. Atlantic City casino companies have enough money that there is no reason to open New Jersey online gambling to for- eign bidders. In California there will be at least three licenses: one for a consortium of the state’s card clubs, the same for its gaming tribes, and at least one for an out- side operator who can bring $200 million cash up front to the table. Nevada casinos may want a federal law to prevent them having to compete against politically powerful local operators in 50 different states – and 51 counting the District of Columbia. But the recent indict- ments and stalemates in Congress prove that states are where the action is, and is going to be, until after the 2012 election. Revisiting Prohibition The timing is suspicious. March saw Nevada regulators approving a partnership between Caesars and 888, and Wynn announcing a joint venture with PokerStars. Now come the indictments, a $3 billion civil suit and seizures of domain names by the feds. Wynn immediately canceled his plans. Players were panicked. Which was, of course, the goal. If the allegations are true, the operators brought this on themselves, by lying and bribing bank officials. Of course, the prosecutors have the problem of convincing a jury that there is bank fraud when the “victims” are tricked into making millions of dollars. And will this be the end of Internet poker? Did Prohibition end drinking? Prohibition spawned modern organized crime by outlawing alcoholic beverages. When people want something and it is illegal, organizations will arise to fill the demand. How much more so when the activity, online poker, is not even clearly illegal? Every actionby theU.S. federal government makes it more difficult for it to go after the next operator. The UIGEA, rammed through by the failed politician Bill Frist, can be seen as an anti-consumer- protection law, because it scared all of the publicly traded gaming companies out of the U.S. market. Then prosecutors went after payment processors, making it more difficult for players to find legitimate ways to send their money to betting sites. Now the feds have seized .com domain names and charged operators with bank fraud. So, gaming sites are switching to .eu and .uk, and cutting off all physical contact with the U.S. Even the present Special Report 29