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Opportunity Opens for US Casinos After “Poker Black Friday”

Posted on May 4th, 2011

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The recent filing of formal charges against three of the leading online poker providers in the United States exemplifies how, in the online gambling industry, one man’s loss could be another man’s gain. American casinos, who have since acknowledged the multi-billion dollar potential of mining the benefits to be gained from the online community, have expressed their intent to develop their respective online poker sites. With PokerStars, Full Tilt Poker and Absolute Poker’s current legal skirmish with federal laws, the considerable number of regular online poker enthusiasts inadvertently affected by the indictments provides land-based casino owners a window of vast opportunities—an unserviced market just waiting to be tapped.

The industry believes that the crackdown may prevent online gambling companies from operating, but it may be more difficult to stop consumers from patronizing similar sites. Ceasars CEO Gary Loveman said that the casino industry needs to break out of the traditional setup and start offering its services electronically, targeting the younger members of the community who are usually online. Casino magnate Steve Wynn primarily argues that by allowing legitimate casinos to open online poker sites, the government will be able to generate revenues from gambling taxes. Furthermore, for every day the lawmakers delay in implementing a comprehensive regulatory system that would allow online poker , millions of dollars will be spent on unregulated offshore sites thus causing money to flow away from the country untaxed. However, before any legislation could be finalized, federal laws need to clarify which types of gambling are to be categorized as illegal or otherwise. Although internet gambling was banned way back in 2006, the law fell short in identifying the illegal forms of gambling.

Such gray area was allegedly capitalized by poker sites which managed to work their way around bank and credit card companies’ policies against processing payments from gambling companies. During a meeting with company investors the previous week, Wynn—whose company Wynn Resorts Ltd. previously called off a deal with PokerStars— criticized government policy related to the gambling issue, calling it “murky and arcane”. He added that corporate policy can only be drafted after a clear public policy is conveyed. On the other hand, Loveman believes that going after foreign operators of illegal gambling sites is not the sole solution to the problem. He reiterated that allowing licensed providers to offer online gambling will help in its regulation.

Loveman is not alone in his opinion. Senate Majority Leader Harry Reid sponsored a bill in 2010 which aimed to legalize online poker. Unfortunately, the bill never made it all the way through to ratification. Still, Senator Reid remains adamant that online poker must be legalized in the next two years. It is interesting to note that those in the gambling industry have diverse opinions and sentiments regarding the matter. Extreme reactions are shown by big companies like Caesars and Wynn who see online gambling as an untapped goldmine. They also prefer federal over state by state legislation, stating that the former makes more financial sense, and a better chance for the industry to develop. At the other end of the spectrum, smaller casinos are not as excited and receptive of the idea, fearing that online gambling will end up taking away considerable revenues from their traditional operations.

For the end-users, the online gamblers, there are those who deem that all these are irrelevant as long as they could find a site to access in order to play. The Washington-based Poker Players Alliance, through its Executive Director John Pappas, shared that the indictment of PokerStars, Full Tilt Poker and Absolute Pokers has been taken negatively by the online poker players, saying that players “feel like they’ve been trampled on by their government.” However, based on the 2006 law, anyone who played online poker can be held legally liable. To date, the Department of Justice has not gone into the matter.

Pappas’s group has long since pushed for the legalization of online poker. They believe that by prolonging the process of legalizing poker, government failed to generate revenue from a surefire source that could have been used to create jobs, boost economy and pad dwindling state budgets.