Five reasons why online poker is here to stay

The annual World Series of Poker got underway in Las Vegas Tuesday. Poker enthusiasts are looking to see if legalization of online poker has an impact on the tournament series, which takes in 65 bracelet events over seven-and-a-half weeks, culminating with the $10,000 Main Event beginning July 5.

If there is a substantial bump in registrations – say, an increase of 1,000 entrants over the 6,352 who played in last year’s Main Event – it would be a strong indicator that online play has caused an uptick of interest in the game.

Nevada was the first state to legalize online gambling, in February 2013, and two of the three current sites got rolling early last summer. The Silver State limits online wagering to poker, but Delaware and New Jersey, the two states that followed shortly thereafter, permit Internet sites that offer the gamut of traditional casino house-banked games, such as blackjack, roulette, slots and video poker.

Overall, however, the first year of online gambling has fallen short of expectations. U.S. online poker revenues for the first 11 months of operation totaled $9.4 million, according to a recent Associated Press report. By comparison, the casinos in Nevada by themselves brought in $982 million in the month of March alone.

Gaming operators point to continued competition from off-shore providers, some of which still take deposits from players in the United States. There has also been the usual tech hiccups with some sites. In addition, Ultimate Poker, the first site to launch in Nevada, made a strategic decision to stick to very low-limit games at the outset —literally nickel-and-dime stakes—to keep professionals off the site. While this allowed newcomers the opportunity to play with less risk, it also suppressed early revenues.

Then there’s billionaire casino mogul Sheldon Adelson, principal owner of the Venetian and Palazzo hotels in Las Vegas, who says he’ll spend “whatever it takes” to stop online gambling. His principal goal is a federal law that would pre-empt state action, but he also aims to stop any state-level legalization.

Nonetheless, Morgan Stanley predicts that by 2020, legal online gambling in the U.S. will generate $8 billion a year. At least eight states have introduced legislation to legalize online poker or full-out house-banked gambling.

So despite the slow start, there is reason for optimism. Momentum for legalization is growing in Pennsylvania and California, although in the latter case, some tribal issues need to be worked out. However, the prevailing feeling in the Golden State is that online poker is an extension of the numerous brick-and-mortar poker rooms that already dot the state.

Here are five more reasons poker players should be patient, but optimistic, about the return of online play:

  1. The basic fact is that online poker is back.

After a meteoric rise, the last few years the industry has been dinged with shutdowns and (in the case of the Full Tilt Poker site) scandal. But legalization brings the ability to promote and advertise. The NBA’s Philadelphia 76ers and NHL’s New Jersey Devils have signed sponsorship deals with PartyPoker, which operates a site in New Jersey. This means PartyPoker signage in their playing arenas and consequent visibility on TV, as well as extensions into digital space. The pact will build mindshare about online poker in the key young male demographic. As awareness grows, so will online participation. In the meantime, Delaware and Nevada have agreed to a compact that allows residents of both states play on each other’s poker sites. New Jersey, guarding its large population, so far has stayed out. Nonetheless, compacts like these, which derive from multi-state lottery agreements, will help build player pools.

  1. The Feds made good on Full Tilt repayment.

Although the news didn’t get much play in the mainstream press, the government’s decision to return funds seized from online poker accounts was a huge development in the poker community. The money was seized as part of the Department of Justice’s investigation into Full Tilt Poker and few expected to see that money again. As a result of a complicated agreement (explained here), PokerStars was awarded Full Tilt’s assets under the stipulation that funds held in any accounts be returned to players.

  1. States need the money.

Call it cynical or realistic, but most states face enough financial pressure that any new source of tax revenue is attractive. Allowing online gambling through Pennsylvania’s casinos could bring in $307 million annually to the state, according to a study commissioned by the Pennsylvania Senate. Since gambling has the air of “vice,” higher percentages can be extracted than would be otherwise feasible with conventional sales taxes (not necessarily fair, but true all the same). Tobacco and alcohol serve as a model.

  1. Sheldon Adelson is hard to take seriously as a moral crusader.

While it’s one thing to give an ear to passionate critics who believe the social harms of gambling outweigh any fiscal benefits, it’s difficult to accept anti-gambling moralizing from a man who’s made billions operating casinos internationally. Adelson, 80, has made online gambling his personal bête noir, and seems bent on using a considerable part of his casino-generated wealth on winning political favor for a ban on Internet gambling.

Most observers believe there will be no federal legislative action here, despite Adelson’s lobbying. Adelson is in direct opposition to his fellow casino owners, represented by the American Gaming Association, which is pro-legalization. Such intra-industry conflicts favor the status quo, which in this case, tilts toward online.

  1. Poker is popular.

Finally, people like to play. Poker is recognized as a game of skill, in which satisfaction and profit can be derived from learning and improving on one’s play. Unlike lotteries, which rely on pure chance, or house-banked games, which give the casino a built-in mathematical edge, poker can be a winning proposition for those with the knowledge and self-control required to master the game.

Poker always was a social game, and online play served to introduce millions more to the experience. Its peak moment came when Chris Moneymaker won the 2003 World Series of Poker Main Event, after having played only online to that point. At that point, there was no turning back.

Right now, it’s enough to say that online poker has overcome a coordinated government effort to run it out of the country. Besides poker players, this simple statement should warm the hearts of anyone weary of paternalistic or moralistic governing. Yes, there can indeed be pushback when the government arbitrarily takes away a pastime that a substantial portion of the population enjoys.

Full Disclosure: Titch is an avid poker player and will play in his second $1,500 event in this year’s World Series of Poker.


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