One night in 1832, four men played poker aboard a Mississippi steamboat. Three of the men were professionals and the other was a helpless sucker from Natchez. The game was rigged so that the young man from Natchez would lose all of his money and he in fact did.
Distraught, the young man attempted to escape his miseries by jumping into the river. An observer prevented this suicide attempt and led the young man back to a cabin. The mysterious observer then returned to the game with the three sharks. In the midst of a high stakes pot, the observer caught one of the professionals cheating. He wrestled the cheat and pulled a knife on him.
The observer yelled, 'Show your hand! If it contains more than five cards I shall kill you!' As he twisted the cheater's wrist, six cards fell to the table. The observer then took the $70,000 pot,. He returned $50,000 of it to the man of Natchez and kept $20,000 for his trouble.
'Who the devil are you, anyway?' cried the cheat.
'I am James Bowie.' 1
In less than two centuries time, poker has changed drastically. Once a game mainly played by cheats, outlaws, and knife-makers aboard riverboats, it has developed into a celebrated 'sport' played worldwide. The cheat and hustler has been replaced by the professional poker player, whose celebrity status is much more akin to a professional athlete or movie star than an infamous outlaw. Poker hands are no longer dealt by professional cheats who manipulate the deck; instead, they are often dealt by software programs connecting players from around the globe.
The exact origins of poker are unclear. It seems to have originated from a 16th century Persian card game known as As Nas. This game was played with 25 cards with 5 different suits. The game played in a similar fashion to modern 5 card stud and possessed similar poker hands rankings, such as three-of-a-kind. When Europeans began to play the game, they called it 'poque' or 'pochen.' 2 While poker's origins may lie in Europe and Persia, it truly developed in the United States. Poker was first widely played in New Orleans in the early 1800's. Prior to the American Civil War, poker spread quickly from New Orleans to towns throughout the Western frontier. 3 Poker's spread was the result of a general spread of gambling during the era. The West was comprised largely of speculators and travelers, both groups that enjoyed gambling. Gambling suited the speculator's individualistic and risk-taking traits. Unburdened by family needs and the social stigmas of Southern and Northern culture, travelers were allowed to indulge in this vice for their own entertainment. 4
Those responsible for poker's initial boom were professional gamblers, trying to expand their craft. The professional gambler viewed his occupation as quintessentially American. They considered themselves entrepreneurial businessmen who took advantage of America's growing obsession of gambling. However, the public did not have such a rosy view of professional gamblers.
Gambling was viewed to be comprised of two distinct groups. There was the player, who was considered to be a gentlemen who merely enjoyed this form of entertainment in moderation. In contrast, there was the professional, who aimed to simply make money without any regard to moderation or propriety. Professional gamblers were considered to contribute nothing to society. The public viewed their practice as nothing more than one man trying to con another out of his hard-earned money.5 This was especially the case because professional gamblers often cheated in order to win money from their victims.
Another practice of professional gamblers that was particularly troublesome was their disregard for the social status of their victim. "To [professional gamblers], as to prostitutes, it seemed unprofessional to differentiate between paying customers. They consequently played indiscriminately with all potential victims, from the most upright planet to the meanest flatboatsman or, even worse, the black slave 6 ." This practice slowly led to the "democratization" of gambling in America. No long was gambling, poker in particular, thought to be a practice of only the wealthy. Rather, it became a practice to which people of all social ranks were accustomed.
Professional gamblers were involved in both banking and percentage games, such as roulette and faro, as well as card games. Of all games, faro was a particular favorite for both professional and casual gamblers. Faro is a game where players would bet on which cards would be dealt next. Both banking games, like faro, and card games guaranteed the pro a steady income over the long run. Banking and percentage games had a built-in house edge that guaranteed the professional to be a statistical winner. These types of gamblers are similar to the modern casino, which primarily rely on these types of games for revenue. When professionals dealt card games, such as three card monte or poker, they guaranteed themselves a steady income from cheating. 7
Poker initially was played with one round of betting. Players were dealt five cards face down and there was no draw of cards. 8 Professional gamblers later modified the rules in order to enhance the profitability of the game for them. After 1850, wild cards and bluffing became common practices in the game. The draw was also added. The addition of the draw helped professionals because it introduced another round of betting (meaning another opportunity to cheat their opponents) as well as introducing more skill to the game. 9
Poker playing became increasingly popular as American gambling shifted from the frontier towns to the riverboats. While gambling was tolerated on the Southwestern frontier during the early 1800's, it came out of favor by the 1830's. The Western, frontier culture of these towns was steadily replaced by Southern culture, which was more averse to gambling. 10 Western towns passed ordinances against gambling and many towns kicked out known gamblers. Some gamblers were tarred and feathered and there were even instances where vigilante groups lynched gamblers. 11 Since their trade was no longer tolerated on land, professional gamblers took their trade to the many steamboats navigating the Mississippi River. However, carrying heavy equipment like a roulette wheel proved more difficult aboard the steamboats, so card games like poker became an increasingly popular game of choice for gamblers. 12
The California gold rush introduced a new venue for poker playing. The gold rush resulted in a large influx of men traveling to a new area, seeking to strike it rich. Unsurprisingly, gambling houses sprouted in Northern California, offering an array of gambling and entertainment opportunities for young men. Casinos employed musicians and pretty women (not necessarily prostitutes) to entertain gamblers as they played games such as roulette, faro, and blackjack. 13
During the early gold rush period, poker was not popular at all in California. This is because gamblers preferred games with more fast paced action. 14 Poker, especially the traditional five card stud or draw, is fairly slow. Gamblers cannot constantly double or lose all of their money in a single bet like they can in roulette. However, poker would eventually become a California pastime. As people became more settled in California and the gold rush ended, their desire for fast action games like faro diminished, and they had a renewed interest in slower games like poker. 15
Poker's growth during the 1800's was largely the result of the increase in gambling along the American frontier. Nevertheless, it managed to establish itself as a unique gambling game, with characteristics notably different from the other frontier gambling games.
While poker has been played for nearly 200 years, the online version of the game is a recent phenomenon. Online poker has boomed in the past couple of years, and it has forever changed the face of poker.
Other types of online gambling sites were launched significantly before the first online poker room. Online sportsbooks sprouted in the mid 90's. The mid 90's also witnessed the launch of online casinos. For example, Microgaming, a major online casino software supplier, developed its first operational online casino in 1994.16
It was not until 1998 that the first online poker room was established. Planet Poker, which has since become a relatively small poker room, enjoyed the status as the sole online poker firm for a short period of time. While Planet Poker has since been overtaken by many other online poker rooms, the initial rake structure it set, 5% up to a $3 max rake, has been mirrored by other poker rooms. So while the industry has drastically changed since 1998, the rake structure has remained fairly constant.
Other online poker rooms soon entered the fray. Paradise Poker was established in 1999 and would soon become the industry leader. During this initial period of entry, the infamous case of Poker Spot occurred. Poker Spot was an online poker firm founded by Dutch Boyd, a successful poker player.
Poker Spot was launched in May 2000. In September of that year, it would become the first online poker room to offer tournaments. However, troubles soon plagued Poker Spot. According to Dutch Boyd, it was unable to collect player deposits from its credit card processing firm. Essentially, all of the money players deposited and played with was not in the system, so Poker Spot was unable to pay its players their winnings. The firm soon went under.17
An incident like the Poker Spot case has so far not been repeated by any major online poker room. This is largely the result of the emergence of e-cash. In particular, Neteller has become the dominant funds transfer service for the online poker industry. Neteller has appeal for both users and online poker firms. For users, it allows them to deposit at a poker room without a credit card or wire transfer, and it also allows the user to generally receive quicker withdrawals. The online poker rooms like Neteller because it decreases fraud and has relatively modest fees for them.
It was not until 2001 that the two most dominant online poker firms entered the industry. Poker Stars became a popular destination because of its tournaments, and Party Poker made a splash in the industry.
Poker steadily gained popularity and the industry continued to grow. Paradise remained the dominant firm in the industry until 2003, when Party Poker launched its television advertising campaign. Party's advertising campaign during the World Poker Tour, and its launch of the Party Poker Million were very successful marketing moves that quickly catapulted the poker network to the top. Currently, the network represents roughly half of the entire online poker market.18
While Party Poker was spending millions on marketing, one man's $40 buy-in truly put the entire industry on the map. Chris Moneymaker's Cinderella story of winning the World Series of Poker was the type of advertising the online poker industry could once only dream about.
Moneymaker qualified for the World Series of Poker main event through a small buy-in satellite event at Poker Stars. At the WSOP, he outlasted a field of 839 entrants, the largest in World Series of Poker history at the time. He pitted heads against some of the most well-known poker professionals in the world. Moneymaker's first place finish earned him $2.5 million, which is not bad considering it was his first live tournament.
Nevertheless, clearly the most remarkable thing that occurred in 2003 was the launch of a poker information website, www.pokertips.org.
Online poker exploded in 2004. The increasing popularity of the poker and the "Moneymaker effect" resulted in even more play at the virtual tables. Because of this, the industry's revenues more than tripled.19 The industry also saw even more entry, with new firms such as Full Tilt Poker and Noble Poker.
Now it seems that the major online poker firms may soon become public companies. Paradise Poker was purchased by Sportingbet, a publicly traded online sportsbook, in October of 2004 for $297.5 million. Currently, other online poker firms are considering becoming publicly traded firms. Party Poker, Empire Poker, and Pacific Poker are all potential candidates for a public offering.
There have also been recent developments in the legal arena. The United Kingdom recently passed a bill that allows for the licensing and regulation of online gambling firms. Whether these online poker rooms soon make the UK their official home, instead of Gibralter or the Kahnawake Mohawk tribe, remains to be seen.