Archive for July, 2010

A Few Thoughts About The Internet Gambling Regulation, Consumer Protection, and Enforcement Act

Thursday, July 29th, 2010

A few things come to my mind when seeing this recent development:

1. Good first step all in all. It is encouraging that it passed  subcommittee by such a wide margin (about 2:1 in favor). Nearly all the Democrats voted for it. About 1/3 of the Republicans did. Would have liked to see more Republican support, but too many Republican Congressmen are still behelden to Bible thumpers. But a few years ago, this sort of bill would have been shot down by more than 2:1, so the tide is definitely swinging in our favor.

2. But let’s not get our hopes up too much. Bills attempting to ban internet gambling go all the way back to the mid 90′s. Most of the time, they would pass the House or the Senate but not both in the same session. Congress has traditionally not put a huge priority on internet gambling one way or the other. The only reason the UIGEA passed was because Senator Frist tacked it onto another bill that was bound to pass. Unless a Senator is able to do the same thing with this anti-UIGEA bill, we likely won’t see legalized internet poker in the US for awhile.

3. This development is great for Party Poker and the other non-US brands like 888, Titan, etc  (especially Party Poker since I think they would take off again in the US if this bill passed). Party Poker stock jumped 20% on the news. Of course, when the UIGEA passed, their stock dropped by 58%.

Conversely, PokerStars, Full Tilt, and the other US-facing rooms may publicly support the measure but are truly against it. The law would ban these sites from becoming regulated, legal websites since they have flouted US law for several years. Not only would they be shut out of being legal sites, regulated online poker would strengthen their competitors. Currently, Full Tilt/PokerStars have larger tournaments and userbases compared to Party and the other non-US sites. Once these other sites are strengthened, Full Tilt/PokerStars would lose a lot of their competitive edge, which would hurt their European traffic as well.  For instance, Europeans may start playing at Party Poker more due to its enlarged userbase and now larger tournaments.

4. Even if this bill became law, states could opt out of it. It’s almost certain many conservative states would. Most states, even more liberal states like New York, still ban casinos entirely, so why would they allow it on the Internet? It could be the bill ends up passing but is ultimately a non-issue since most states opt out and most Americans still end up playing at PokerStars/Full Tilt anyways. We could also have weird scenarios where in some states, it’s legal to gamble on the Internet but not in a casino and vice versa.

I think the main thing to take away from this bill is that the conversation in the United States is finally moving away from ‘how to ban online poker’ and more towards ‘how to regulate online poker.’ It took about ten years of ‘how to ban online gambling’ talk for anything to actually be done. I’m afraid it still may be another 3-10 years of ‘how to regulate online gambling’ before we actually see anything meaningful done.