Tuesday, November 01, 2011

In a Subjunctive Mood

If....“It’s not a question of ‘if’....”

That’s a favorite line of late when it comes to the possibility of federal legislation to license and regulate online poker in the United States.

Not long ago Jim Ryan, co-CEO of Bwin-Party, was being quoted in The New York Times in a piece on online poker (discussed here) proclaiming of such legislation that “It’s no longer a question of if, it’s a question of when it will be passed.”

And last week John Pappas, Executive Director of the Poker Players Alliance, came away from that House hearing on “Internet Gaming: Is There a Safe Bet?” saying how encouraged he was by what appears to have been a sea change in legislators’ approach to the topic of licensing and regulating online poker in the U.S.

“The question on the lawmakers’ minds was not ‘if’ internet poker should be regulated, but rather ‘how’ should regulation look,” wrote Pappas in his recap of the hearing.

Yesterday came more news that some are taking as yet another sign that we’re moving away from the uncertainty of “if” and into something more definitive regarding the prospects for such legislation to occur. That news concerned agreements being struck between the Boyd Gaming Corporation, MGM Resorts International, and the Bwin-Party folks regarding future plans should legislation be passed in the United States to license and regulate online poker.

The skinny is that should online poker become legal in the U.S., a new company would be formed by the three entities that would subsequently aim to offer online poker to Americans. The new company would be mostly owned by Bwin-Party -- they’d have 65% to MGM’s 25% and Boyd’s 10% -- with those percentages representing both what each group would put into the new company to start and operate it as well as what they’d get out of it down the line.

MarketWatch tickerYou might recall how the Bwin and Party groups got together in the spring of 2010 to form what is now the largest online gambling company in the world. Their stock rose even more over the last 24 hours, jumping a good bit since the news broke regarding yesterday’s agreement. Meanwhile, MGM and Boyd both saw their stock slip a touch since yesterday. (That to the left is a composite screen shot from MarketWatch showing how the respective companies’ stocks looked mid-afternoon Tuesday.)

An article about the agreement appearing over on MarketWatch yesterday quoted MGM CEO Jim Murren necessarily describing the agreement as “anticipatory” -- i.e., a move by the huge gaming company to ready itself for possible legislation.

The article refers to Murren explaining how the new (unnamed company) “will offer games under Bwin brands like PartyPoker” while also adding that “MGM would be ‘very interested’ in using Bwin's existing technology to operate sites under its brands, which would include MGM Grand, Bellagio and Mandalay Bay.”

Boyd Gaming also owns a number of smaller Vegas properties like the Orleans, the Gold Coast, and others across the country (including half of the Borgata in Atlantic City). Yesterday’s Wall Street Journal article about the agreement quotes Keith Smith, the CEO from Boyd Gaming, similarly describing “online poker as a compelling future growth opportunity” and how the agreement “would position” his company to be in a good spot should legislation in the U.S. occur.

And like Murren and MGM, Boyd Gaming would also be interested in offering online poker under its own newly-developed brand. Another of the agreements made between the groups yesterday was a 15-year one that would enable MGM and Boyd to use Bwin-Party’s technology to offer games under their own brands.

In other words, what is being envisioned here is a (near?) future in which we Americans are playing online poker “at” the Bellagio or MGM or other sites associated with particular casinos and/or U.S.-based gaming companies.

But is this really a harbinger that legislation might come sooner than later?

The Las Vegas Review Journal piece on the agreements yesterday brought up that so-called “super committee” again as a possible fast track for online poker. (Read more about the super committee here.) That piece also notes how the Bwin-Party-MGM-Boyd agreement is one of a few different ones that have been made (the Caesars-888 one forged earlier this year being the other most notable) in which big gaming corps are aligning themselves with online groups in preparation for a brave new world of U.S. online gaming.

Jim Ryan, co-CEO, Bwin-PartyIncidentally, in that LVRJ piece the well-known poker player agent Brian Balsbaugh is quoted as saying that the new agreements between Bwin-Party, MGM, and Boyd instantly made Bwin-Party co-CEO Ryan “the most powerful person in poker.” (That’s Ryan to the left, who prior to taking his current position in 2008 was the CEO of Excapsa, the software provider for UltimateBet, from 2005-2007.)

In other words, Balsbaugh -- himself a fairly powerful guy in poker (ranking #5 in BLUFF’s most recent “Power 20”) -- certainly regards yesterday’s news as significant, and not just in a theoretical “if-this-happens-then-that-happens” kind of way.

It was impossible when hearing yesterday’s news not to think about those other, similar agreements that were being made in the days leading up to Black Friday such as the Wynn-PokerStars one and the other between Full Tilt Poker and Station Casinos. Those were made on a contingency that legislation be passed, too, although as it turned out another contingency arose to end those unions -- i.e., the U.S. government unsealing an indictment and civil complaint targeting the involved online sites.

I remember wondering then about how unlikely it seemed that the U.S. was really going to let so-called “bad actors” like Stars, FTP, and others who continued to operate in the U.S. post-UIGEA to get licenses under a newly-regulated system. It’s still hard to predict that if legislation comes to pass just how the U.S. will look upon folks like Party and 888 who pulled out of the U.S. in 2006 -- or, really, any non-U.S. based (or “offshore”) company.

I’m recalling those amendments that were being stuck onto Barney Frank’s old H.R. 2267 last year by legislators, such as the one by Rep. Brad Sherman stating how when it came to giving out licenses, a company had to be an “established a corporate entity or other separate business entity in the United States, a majority of whose officers are United States persons and, if there is a board of directors, that the board is majority-controlled by directors who are United States persons.”

Who knows if such restrictions will be part of whatever new legislation might arise? The new Bwin-Party-MGM-Boyd company -- in which 65% will be controlled by the non-U.S. online company -- doesn’t seem like it would be given a license if language similar to Sherman’s amendment found its way onto a new bill. Then again, I suppose it is possible to move the shells around enough to satisfy those that matter.

(There is the whole federal-vs.-state issue with regard to future legislation that figures in here as well. Stuart Hoegner touches on that and other issues in his Pokerati piece on the agreements.)

If... then...Is interesting to step back and consider how when it comes to online poker the rest of the world has such an enormous head start on the U.S. The fact that U.S land-based gaming companies are “positioning” themselves by joining forces with non-U.S. folks shows how much America would need to rely on “offshore” sites to get anything going here.

We may still have legislators wanting to ensure that the new U.S. companies are “majority-controlled” by Americans, but practically speaking there’s no way online poker happens in the U.S. without a lot of foreign influence/input. Not in the near term, anyway.

We’ll see, though, how all that will be sorted out. Or if it will be sorted out.

Because, really, any statements about online poker and legislation in the U.S. should continue to be cast in the subjunctive for a good while.

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