GPWA Times Magazine - Issue 18 - October 2011

From: Joe Brennan, iMEGA To: John Pappas, PPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . When it comes to federal legislation, it’s clear that I did not say, “Abandon ship.” What I did say was, in effect, that this navy ought to have more than one boat in the race, and if one is going faster, maybe it should see more support. Right now, the state-level initiatives are going “faster” than the Fed-level initiatives. Yet not only is the faster boat lacking support from the Fed lobby, elements of the Fed lobby (yes, Caesars, I’m talking about you) have actively campaigned against state-level initiatives. Caesars has not done this in the guise of “best way for the players.” They’ve done this as “best way to pump our pre-IPO valuation.” Also, your statement that “Internet poker is at its core a borderless and global activity” is simply not true. There is nothing inherent in Internet poker that requires a borderless environment. There are many who argue that there is insufficient “critical mass” of liquidity and players to support state-by-state play. If you want to hold the industry fixed within a pre-Black Friday world – which it obviously cannot be – then perhaps that would be correct. But there is nothing inherent in the game or the technology that requires this. Given that it only takes two players to have a cash game, online or offline, the logic simply doesn’t hold. That’s not to say that large liquidity and player pools are not desirable. It seems that state lotteries believe they are, as they’ve banded together into interstate lottery compacts, like PowerBall and MegaMillions, to do just that (which technically violates the Wire Act, by the way). And, it is likely that states could and would do exactly the same thing with iGaming: advancing through a kind of “soft federalization.” Also, your assertion that the state-by-state approach “lends itself to the enemy of the free market and competition from a business perspective” again fails the logic test. With multiple states offering multiple licenses, the contrary is true: the free market would rule out through increased competition for those franchises, rather than limiting the market to a small handful of “winners.” The reality is that the Internet is already establishing borders, even within iGaming. Let’s set aside for the moment the fact that “states” small and large within the European Union (ranging from Denmark to Italy) are regulating the game at a profit on a dot-country basis. Establishing a federal system is also establishing an arbitrary “border” around a player pool. Given the past history of the industry, people can theoretically argue that even within a federal system, the player pool and liquidity would not be to their liking. Why? Because it would not be the same as was available pre-Black Friday. The fact is, this industry’s regulatory environment is evolving (again, note the European Union). Business models will have to evolve with them, if progress is to be made. So what is the choice here? “The world or bust?” “America or bust?” “New Jersey or bust?” How about, “Walk and chew gum at the same time.” I’m pretty sure the industry can bear dual efforts, if what it really wants is to get players into a safe, regulated environment where they can play again.