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Thoughts on PokerStars VIP Changes
2015-12-20

The Top 9 Myths About Online Poker
2015-05-17

The 4 Worst Tips Given To Beginner Poker Players (Don't Fall Into These Traps)
2015-05-03

Should You Play Poker Professionally?
2015-04-05

Poker Can Change Your Life: 4 Inspirational Rags to Riches Stories
2015-03-29

The Discomfort Zone: Manage it for Growth and Success
2015-03-15

An Intro to Daily Fantasy Soorts
2015-03-08

The 4 Main Psychological Principles That Shape Your Poker Play
2015-02-15

A Detailed Rake and Reward Comparison of Three of the Top Poker Sites
2015-02-08

Don't Jump The Gun: Get Full Value From Your Best Hands
2015-02-01

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Prohibition Attempts and Responses

THE WEEKLY SHUFFLE, 2009-05-10, by TwoGun

Online gambling, and therefore online poker, is not the most politically appetizing industry. Politicians do not view the game we love with the same admiration they view solar energy, education spending, and puppies. Many countries have attempted to curb or outright ban online gambling.

To begin with, I want to put one thing to rest. The online poker community needs to be realistic. Barney Frank's bill in the United States has 0% chance of passing. The UIGEA is here to stay. Even when the UIGEA was a standalone bill (and not tagged onto another one), it passed the House of Representatives by a 3-1 margin. Just because two Congressmen (Barney Frank and Ron Paul) believe in individual freedom in this matter, the 400 other Congressmen (and the President for that matter) do not.

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The government is not our friend and never will be. The only action that may be taken in this matter in the US is Minnesota's attempt to have ISPs block online gambling sites. While the courts will likely rule against this move, it is still scary nonetheless.

What we have seen though is that the online gambling industry can remain resilient despite attempts to prohibit it. This isn't because of legal loopholes discovered or last-minute political action by rowdy college kids. That's all worthless. It's because in a raw cat-and-mouse game of government attacking online gambling companies, the companies have and will continue to win because the companies are competent (at least sort of) whereas the government is downright incompetent. In this article, we will examine the three most common ways government tries to curb online gambling, and how online gambling companies can out maneuver these (non-)obstacles.

ISPs Blocking Online Gambling Sites

The most feared, and probably most effective, method a government can utilize to block online gambling is to order internet service providers (ISPs) to block online gambling sites. Thus, if you type www.partypoker.com in your browser, instead of showing a Party Poker landing page, you will get a message from the government saying it has blocked the website for your own good. Right now, the only country that utilizes this method is Italy. Minnesota is attempting to do this too, though the law will likely be struck down by courts. Five years ago, Pennsylvania tried to block child pornography sites (I would hope the government would view these as more dangerous than online gambling) and the courts overturned that because it was shown that Pennsylvania also blocked legitimate sites and the law affected out-of-state residents.

Let's first look at the Minneota's case in more detail. The list of sites Minnesota wishes to block shows how blatantly incompetent Minnesota's officials are in this matter and how hastily they crafted this order. Just look at the list of sites they wish to block. Look at it (it's near the bottom)! Notice something? Most of the site do not accept U.S. players anyway! Not only that, they forgot to include the largest sites that accept real-money players, like PokerStars and UltimateBet. But they do try to block Titan Poker, Mansion Poker, Virgin Games, and Victor Chandler Poker. They are blocking more legitimate sites than ones that accept US players. If they are going to try to curb free speech and greatly increase government intrusion, you would think they could at least bother to spend the time and make sure they knew what they were doing.

Italy is less stupid with their list of sites they block, but there are ways sites get around those controls as well. The poker rooms just set up a clone of their website on a URL that is not on the list. They advertise that site on websites around the Internet and constantly change the address. It's annoying, but it's not too difficult. It would be a lot harder if government officials were competent and were able to quickly track these new sites and add it to the list, but luckily for online gambling sites, the amount of red tape involved makes it easy on them to switch urls periodically without too much trouble. Oh, and if a web user is savvy enough, he or she will just use a proxy to visit the main site anyways.

Blocking Money Transfers To/From Online Gambling Sites

What the UIGEA attempts to do is make it more difficult for Americans to transfer money to and from online gambling sites. No one knows when the UIGEA will ever be in full effect. The US-facing gambling operations have already experienced issues with payment processing, though it is mainly due to processor's fear of being arrested and shut down. It is not clear if the UIGEA will actually stop transactions themselves, or if it will just scare the middle men and make it more difficult for gambling sites to find willing partners who can help them transfer money to and from their players.

There are a lot of holes in the UIGEA and other financial attempts to prevent online gambling. Let's just look at credit cards for example. All credit card transactions are coded, so if you buy an airplane flight for example, it will be coded as air travel. Online gambling has its own code and merchants are supposed to code all transactions related to online gambling with that code. Well before the UIGEA happened, US-based credit card banks blocked transactions with the online gambling code. However, what some poker sites are doing, though you see this more with the sportsbooks, is that they purposely 'miscode' the transaction. So instead of claiming it as an online gambling purchase, they code it as something else, like you are buying toothpaste from them instead of making a gambling deposit. The government trying to crack down on this method is likely to result in a cat-and-mouse game that the government will lose. The gambling sites will just keep on changing processors and purposefully miscoding transactions, and a few bureaucrats won't be able to stop them.

There are other ways people fund/withdraw from gambling sites, including money transfer operations. It's important to remember that this is against these money transfer operations policies. In other words, they don't want you using their services for online gambling; they're adamantly against it. Yet, people are still able to do it anyways. If the money transfer operation itself can't stop it, the government sure won't be able to either.

Blocking money flows to/from online gambling sites will continue to be a cat-and-mouse game. It will never be as easy as it once was for US players when they could transfer with ease with a site like Neteller, but it won't become impossible. The status quo will remain for quite some time.

Arresting Online Gambling Business Owners/Promoters

Perhaps the most effective method for shutting down online gambling operations is to arrest the owners of the operation or people that actively promote it. The DOJ was successful in shutting down Neteller's US business by arresting its founders, and no major e-wallet has stepped up to take its place due to fear of being the next Neteller.

However, the United States has arrested others involved in the gambling industry, including the owners and operators of BetOnSports (a US-facing sportsbook at the time), without much effect. This is because there are so many US-facing sportsbooks that another one will just take its place easily. The other sportsbooks will just make sure they are not dumb enough to ever be in a US jurisdiction.

The more fragmented the gambling industry is, the less effective arresting online gambling owners will be for the US government. Think of it like the Drug War. If the government arrests some lowly marijuana dealer, some other marijuana dealer will just take his place. There simply are so many of them. This is the case when it comes to arresting sportsbook owners and casino operators.

However, an e-wallet like Neteller was a special case. There was only one Neteller. It does not make sense for there to be dozens of e-wallets, so anyone who operates a US-facing, major e-wallet will always be a huge target. Thus, the government was effective in derailing the e-wallet industry when it arrested Neteller's founders, while it didn't do anything to the sportsbook industry when it arrested the BetOnSports people.

This should give pause to US poker players though. The US poker market is not fragmented; there really are just 3-4 major operations. Legally, US-facing online poker operators are on better footing than sportsbook operators, but US-facing poker sites shouldn't kid themselves into thinking they are running an ice cream stand. If the government was able to and went after the operators of Full Tilt, UltimateBet, and PokerStars all at once, it would have a monumentally significant effect. The key here is if the government is in fact able to go after these operators, which is a debate in and of itself.

The Weekly Shuffle is our Sunday column with our observations and commentary on the poker world. Have an idea for an article? Leave a suggestion on the feedback page.

 


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