Is Online Poker Dead...or Just Getting Started?
Friday, June 8, 2007
Last year’s ban on internet gambling marked a major setback for the industry, but Congress is taking a second look at the issue… and things might be changing in any case.
Online poker players and companies have long felt they’ve been unfairly lumped in with the rest of the internet gambling crowd, and they don’t like it. Being associated with unsavory, purely chance-driven games such as roulette, video slots and craps can earn some unwanted attention from the government.
This past September, they got exactly that, when Senator Bill Frist slipped an outright ban of all online gambling— including poker—into a port security bill just before Congress adjourned for midterm elections. The ban makes it possible for the government to go after poker sites and the money services that fund player accounts. Perhaps poker’s own success is to blame: In the past, online gambling had largely been out of sight and out of mind. But in 2003, ESPN began running footage from the full length of the World Series of Poker competition, and sparked the current craze.
'The moves demonstrate how far the U.S. government is prepared to take its crackdown on gambling...'
Today, the House Financial Services Committee will hold a hearing to “examine whether Internet gambling can be regulated to protect consumers and the payments system,” according to Reuters. The hearing stems from a bill Representative Barney Frank (D-Mass.) introduced in April which, according to Wired.com, “would re-legalize online poker and gambling and regulate the industry, requiring that all gaming sites build technological safeguards to prevent underage and compulsive gambling, crack down on cheating and protect user privacy.”
“The fundamental issue here is a matter of individual freedom,” Frank said at a news conference introducing the bill.
The legality of online poker has historically been vague. Most of the government’s efforts have focused on sports betting. A month before the ban was passed, David Carruthers, CEO of BetonSports, was arrested on charges of violating the wire act. On the other hand, a 2002 ruling by the United States Court of Appeals for the Fifth Circuit declared that non-sports betting doesn’t fall under the Federal Wire Act.
But this new ban has given the government a broader scope, and they’ve been using it. In January, they targeted Neteller, a money service company often used to fund online gamblers’ accounts since banks, credit cards and even PayPal won’t do it. Stephen Lawrence and John Lefebvre, former directors and founding shareholders of Neteller, were arrested on charges that they helped transfer “billions of dollars in illegal gambling proceeds from Americans to overseas Internet gambling companies,” according to Yahoo! Finance.
The effects of the ban were almost immediate for some companies. Party Poker, Pokerroom.com and others immediately discontinued service to
James Halpert, a communications and e-commerce lawyer at the
It’s not likely to snuff out online poker altogether—creative players will still find ways around it—but it does make the potential customer jump through more hoops, which is never good for business. “I think what you’re likely to see is payments flowing in a more decentralized way, maybe a little less convenient,” he said.
Halpert said much of the future of online poker and online gambling in general will depend on what happens in the next couple of weeks, when the U.S. Treasury and Federal Reserve are scheduled to introduce rules that will require payment services to identify and block overseas gambling sites.
Advocates point out that a key difference between poker and regular gambling is that in most gambling games, you play against the house, and the house always wins. In poker, however, you compete against other players.
But the four major professional sports leagues still denounced Frank out of fear that legalized sports betting will encourage corruption, and experts say he faces “long odds.”
But his bill is not the only positive sign for poker players. Rep. Bob Wexler (D-Fla.) is crafting legislation that would single out games of skill like poker rather than shove them into purgatory with all the other frowned-upon money-drainers like roulette.
There is a significant amount of opposition to the law, and Frank is a formidable opponent, but even a successful movement against the law is likely to take years, Halpert said.
Poker’s association with other gambling has always made it tough for pro-poker bills to get the necessary support. In 2005, the
The coming months will be crucial for the online poker business in the
But no matter what happens, online poker is far from dead. Despite these setbacks, the industry is still going strong. Sure, a few poker sites have shut down, and funding accounts without Neteller is tricky, but plenty of players still find a way.
But ending online poker is like ending any other government-stamped vice—damn near impossible.
A Wired article describes two poker players who have found ways around the legal impediments: “Boy Wonder and Johnny CIA describe pre-paid VISA debit cards sold through foreign middlemen that allow Americans to pay online casinos. Some gamblers bankroll friends that have existing credit. Americans can also set up offshore bank accounts or sign up for foreign credit cards. Some use phone cards. There are many ways to keep playing. Many are legally dubious.”
As is often the case, the
The government has faced similar problems with fighting online music piracy. Despite shutting down file sharing sites like Napster and prosecuting music-swappers in high-profile cases, new sites keep popping up and piracy continues to grow every year, and there’s simply no way for the Justice Department to stop it.
They’ll have more success dealing with online gambling since funds are easier to track than music files, and publicly-traded, large sites will be forced out of the market. But the market’s still there.
Image credit: Photo by Flickr user NickStarr
Image credit: Photo by Flickr user NickStarr