Considering the Unlawful Internet Gambling Enforcement Act, Part III: Prophets and Profits

The picture there is of Crazy Ralph, of course. The one who runs around telling everyone in Friday the 13th “you’re all doomed.” He says he’s a messenger of God. Don’t know what made me think of him today.

Oh, right. Bush signed the Safe Port Act into law this morning. With some sort of internet poker thingy attached to it, I believe. (Although in the speech Bush gave upon signing the Act, he didn’t bother to mention the attachment.)

Anybody else hear anything about that . . . ?

It was two weeks ago today (or tonight) that the UIGEA was pushed through Congress. By Sunday, October 1st we had already heard that Gibraltar-based 888.com (home of Pacific Poker) had decided to disallow American players. In their statement, they said they would “continue to seek clarification of the overall U.S. legal position to determine whether and to what extent, if any, resumption of participation by U.S. customers is feasible.” However, they also stated that, at present, “no assurance can be given that this will be possible.”

On Monday, October 2nd came the bombshell from the highest-volume online poker site, Party Poker (whose headquarters are also in Gibraltar). They issued a statement explaining that “After taking extensive legal advice, the Board of PartyGaming Plc has concluded that the new legislation, if signed into law, will make it practically impossible to provide U.S. residents with access to its real money poker and other real money gaming sites.”

On that same day a statement from Nolan Dalla, then director of communications for PokerStars (headquarters on the Isle of Man), appeared over on Poker Player. In the statement, Dalla revealed that following the advice of his lawyer he had just resigned his position with PokerStars. He then analyzed the Act and speculated about its possible consequences. His outlook is especially bleak, and, given his affiliation with Stars, it appeared certain that the second-largest online poker site would be following Party’s lead.

By mid-week, CryptoLogic (of which Interpoker & Sun Poker are skins) was out. (CryptoLogic is currently run out of Toronto, Canada, though plans to move to Ireland in January 2007.) Their statement included reference to a new marketing strategy aimed at non-U.S. customers. “Since 2001, CryptoLogic has been shifting its business to Europe,” said their President and CEO. “While the new U.S. developments will be a challenge for the whole industry, our company’s diversification, strong balance sheet, thriving European customers and potential new business in emerging markets enable us to face the future with confidence.”

Cyprus-based Titan Poker also announced they’d be pulling out of the U.S. In an email to a customer, Titan’s poker room manager explained how they did well in France, Italy, and Spain, and how they already received 50% of their traffic from non-U.S. players. Other smaller sites (VIP Poker, CelebPoker, Bet Fred -- all located outside the U.S.) followed suit, similarly choosing to concentrate on non-U.S. customers. As the VIP Poker statement notes, “it is the view of the Board that following enactment of the Legislation it will no longer be appropriate for the Company to serve U.S.-based customers and that the Company should focus solely on its existing U.K. and Italian businesses.”

My impression is that for each of these companies the decision to pull out of the American market was primarily a business one, made more for financial reasons than out of apprehension that the American government would somehow be able to prosecute any of them. I’ve read rumors about Party’s CEOs wishing to be able to travel to the U.S. without having to fear they might be picked up by the feds as they deplane. PartyGaming earned $661.9 million during the first six months of 2006, a 51% increase over the same period a year ago. Party Poker alone brought in nearly $3 million a day to the company, with over three-fourths of players being U.S. residents.

It’s hard to imagine giving up such a huge part of one’s customer base simply to be able to visit America once in a while. Sure, there are some nice beaches and that Grand Canyon is something to see . . . but that’s a hell of a lot of cabbage. I think it much more likely Party and the other sites are thinking long-term here, willing here to take (an admittedly brutal) short-term hit in order to reassess and move forward.

(Incidentally, those figures came from the latest issue of CardPlayer magazine -- the one that arrived on my doorstep day before yesterday. Obviously the issue was printed and shipped prior to Sept. 29th. Seems almost quaint, now, to read such a celebratory article about PartyGaming’s seemingly-unstoppable growth.)

Other sites say they’re staying put. Full Tilt Poker, Absolute Poker, and Ultimate Bet -- all Canada-based -- are staying in. Bodog (licensed in Costa Rica, Canada, and the U.K.) will continue to take U.S. players. So will Planet Poker and Doyle’s Room (both headquartered in Curacao of the Netherlands Antilles). And, of course, PokerStars has also made clear its intention to continue serving American customers.

Like the sites that say they are shutting out American players, these sites also speak of having spoken with lawyers who have advised them that for all its bluster the UIGEA cannot touch them. PokerStars declares the Act “do[es] not alter the U.S. legal situation with respect to our offering of online poker games.” Ultimate Bet says it is their “strong belief that poker is a game of skill and therefore is not encompassed by this law.” Full Tilt also claims “online poker is not encompassed by this new legislation” and promises they “will continue to lobby for an express carve-out for online poker and for your right to play a truly American game from the privacy of your own home and computer.”

While I certainly don’t believe we’ll be seeing any sort of “carve-out for online poker,” my impression is that these sites who have chosen to stay the course are -- as we sometimes say in poker -- at least playing their hand correctly. Doesn’t mean they’ll win, of course. But they are right, in my opinion, to call the U.S. government’s big bet here. No reason to fold just yet. Nor do I think American players need necessarily worry too much about the short-term (i.e., the next couple of weeks). Their money is safe, I believe, particularly in these established sites. And the UIGEA does not in any way suggest that players could ever face the “criminal penalties” outlined toward the end of the Act (i.e., fines and five-year prison terms).

Nevertheless, all the fuss does make it slightly more challenging to concentrate at the tables. I've read a few threads on the 2+2 Forums where folks are describing how uncertainty about the future of online poker is starting to affect their games. Can’t say it has specifically bothered me as yet, although since I have cashed out most of my money (leaving only enough in Stars and FTP to play my usual $0.50/$1.00 limit games), I do feel as though many of my options (including moving up in stakes any time soon) have been taken away at present. As wrote about in the last post, I do think this Act is going to create more hassles -- and perhaps some unexpected surprises -- for American players over the coming months.

It's a little like having Crazy Ralph constantly circling us on his bicycle, telling us over and again how the site were on has a “death curse” and so forth . . . . Sure, we all know he’s bonkers. According to the locals, every time that loony gets drunk, he gets his calling . . . .

Still. Be nice to play a few hands without all the drama.

Image: still from Friday the 13th (1980), Amazon.