32 Nations at Online Gaming Summit reach accord; America conspicuous in its absence

Tessa Jowell, UK secretary of state for culture, media and sport, at an online gaming summit meeting of 32 countries stated that, “We do not support the approach the US has taken. The enormous risk of prohibition is that it forces the industry underground.”

The summit resulted in a draft statement action plan regarding regulation of e-gaming, in which attendees agreed “that in passing legislation or regulations in relation to remote gambling our principal and over-riding concerns are: that remote gambling should not be a source of crime nor finance criminal activities; that, where offered, remote gambling should be fair to the consumer; that the protection of children and vulnerable people should be a key objective of the regulation of gambling.”

The fact that high level attendees from 32 countries agreed with the principles of the draft summit suggested a “substantial appetite for regulatory co-operation,” according to Jowell. She added that the summit was “recognition of the power of the internet.”

Summit attendees also agreed to further action aimed at developing best practices to protect children and the vulnerable, further research, and to support the ongoing dialogue with national regulators through the International Association of Gambling Regulators.

No representative from the United States was present — further evidence that we’ve missed the boat and apparently don’t give a damn that we did.

Why Online Gaming Needs a Politcal Action Committee

Next week the British government will seek international support for legalized, regulated online gambling by adopting of a set of principles on Internet gambling. More than 30 countries are expected to send representatives. The United States will be conspicuous in its absence.

While the Brits are seeking to regulate online gaming, the United States enacted the Unlawful Internet Gaming Enforcement Act, a piece of prohibition-style legislation tacked onto the “must pass” Safe Ports Act, enacted without discussion and without a recorded vote, at the 11th hour, just prior to congressional adjournment.

Britain’s decision to legalize and regulate online gambling companies is expected to yield financial benefits for the government by allowing it to tax companies that are expected to move back to Britain from a variety of offshore locations.

According to William Eadington, a professor at the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada, said, “The changes may give U.S. gamblers more ways to evade the ban on Internet betting at home. A sub-industry in circumventing the rules will evolve," Eadington said, adding that, “American gamblers may find themselves pushed into a market that's in the hands of Europeans."

Those opposed to UIGEA will be in Washington, DC on November 3-4 to protest the law and to press coverage from major news organizations and get the message out to the general public before they vote. The fact that Senate Majority Leader Bill Frist attached the bill to the Safe Ports Act angered other politicians as much as it angered the 25 million American citizens who participate in online poker. "What could be a greater invasion of privacy than government telling you cannot play Internet poker in your own house?" congresswoman Shelley Berkley said. "This was a breathtaking abuse ... of power."

But if money is the mother’s milk of politics, all online gaming providers should take a page from the leading political action committees and establish a political action committee. Money contributed by PACs will ensure access to Congress and secure legislation that enables online gaming to be legalized, taxed, and regulated in the United States, as it is in Britain.

According to USA Today, here are the top contributors among PACs for 2005-06:

1. National Association of Realtors - $3.04 million
2. National Automotive Dealers Association - $2.38 million
3. National Beer Wholesalers Association - $2.36 million
4. International Brotherhood of Electrical - $2.13 million
6. Credit Union National Association - $2.02 million
7. National Association of Home Builders - $1.98 million
8. American Bankers Association - $1.97 million
9. United Parcel Service - $1.91 million
10. AT&T - $1.77 million

While the National Association of Realtors has 1.4 million members and the IBEW has 750,000, the National Beer Wholesalers Association has only 1,900 members. Their contribution amounts to $1,242 per member. That’s the highest per-member contribution by a long shot, but in the grand scheme of things it doesn’t seem all that much to buy the kind of access needed to maintain legislation favorable to one’s industry of choice.

It’s still not too late. I’d like to see the major online poker rooms, and the smaller ones too, form a political action committee and begin priming the pump to secure the kind of legislation that will guarantee the health of our industry.

Is the WSOP fiddling While Rome Burns?

“The number of entrants into the World Series of Poker might be significantly reduced because of a new law banning banks from processing Internet gambling transfers,” quotes an online opinion piece I read earlier today.

It went on to quote Michael Bolcerek, president of the Poker Players Alliance, who said, “It’s going to affect the average player most dramatically.”

Mike Sexton was also quoted, saying, “I wouldn’t say it would put poker in a death spiral, but in the long run it will hurt the growth of poker. The World Series of Poker is going to be devastated over this.”

But then I read a statement attributed to “organizers of the World Series of Poker” — it didn’t specify exactly which organizers they were talking about — saying that they “. . . had record fields in 2005 and ’06 and expected next year to be the biggest ever.”

They can’t have it both ways. Earlier information coming from Harrah’s indicated that they would not accept registrations from online sites, or from travel agencies acting in their stead, or from any other groups that seemed to be fronting for online poker rooms. But if that’s the case, how can the WSOP say with a straight face that they expect even more attendees in 2007?

Even if one were to assume — and I think it’s a bad assumption — that each online site awards the same number of entries to the WSOP this year that they did in 2006 and that the only difference is that next year each online satellite winner has to register individually instead of having the online site handle things for him.

Do you think there is any chance that all of the online satellite winners are going to sign up for the WSOP? I don’t. When you win an event online the tournament entry fee is paid directly to the casino by the hosting site. You also receive plane tickets and some walking around money too. But in 2007 each site will have to give all that money to the players and hope they use it to buy-into the WSOP.

Regardless of how dedicated a poker player is, a lot of them will look at that money in their hands and decide they have more pressing uses for it in the real world than to buy their way into a poker tournament. Besides, with many US players shunning online poker — the aggregate numbers are down by about a third, even with privately owned sites that still serve US based customers picking up players abandoned by the publicly traded sites that have given up the ghost — there’s no way the number of entrants in the 2007 WSOP figure to top those of 2006.

There’s even less incentive for online sites to serve as a feeder system to the WSOP, since their players won’t be allowed to wear logo gear with an online poker site’s name on it, nor will these sites by allowed to promote themselves by hosting a hospitality suite at the WSOP or taking a large booth at the gaming expo that runs concurrently with the WSOP’s main event.

It looks as though 2006 will be the high water mark for the WSOP for a number of years to come, unless there are changes to the law and online poker becomes what it ought to be — a regulated and taxed business industry here in the United States.

While many online gaming sites have set their eyes on the Asian market, it will be a while until inroads there produce a sufficient number of players to offset those lost in the US. For Harrah’s to think otherwise seems foolish, or a misguided attempt to assure observers that everything is still OK despite the ripple effects felt throughout the poker industry as a result of UIGEA.

But facing facts hasn’t stopped others from issuing rosy predictions in the past. After all, didn’t Nero do something like that as he fiddled while Rome burned?

Radley Balko's Article About the Madness of Banning Online Gambling

The following piece comes from Radley Balko, a senior editor with Reason magazine who also publishes the weblog, TheAgitator.com. In the past few days I've also republished articles by George Will and Charles Murray about the Unlawful Internet Gaming Enforcement Act. This is the third and final piece I plan to reproduce here, and I'll leave you with Balko's extremely comprehensive and well-thought out article about the the lunacy of UIGEA.

Online Gambling Ban a Bad Bet for Republicans

by Radley Balko

In the wee hours of the last night of the last session of Congress, Majority Leader Bill Frist attached a ban on Internet gambling to a port security bill.

It was a dubious maneuver, which not only prevented any real floor debate over the ban, but also attached an intrusive, unnecessary, big government measure to a bill that addressed important national security concerns. This meant that any senator who held the position that what Americans do with their own money in their own homes on their own time is none of the government's business couldn't vote against the gambling ban, lest they risk being smacked about the head with the "soft on national security" cudgel.

If Frist's move was underhanded, it was also wholly appropriate, given the way the GOP has handled this issue. The debate — to the extent that there has actually been one — has been marred by misdirection, red herrings, and a certain obliviousness among the bill's supporters to, well, reality.

The two Republican congressmen pushing the ban in the House of Representatives, for example, — Rep. Jim Leach and Rep. Bob Goodlatte — tried for months to sell the ban as an effort to exorcise the scourge of Jack Abramoff from the Congress and the Republican party, as if Abramoff were the reason the bill never passed in the first place.

In fact, the bill we now have is nearly identical to the bill Jack Abramoff would have wanted. The bill bans online poker, sports wagering and casino games, but doesn't touch state lotteries or horse racing (which, by the way, has in the past made some meaty contributions to Rep. Goodlatte's campaign chest).

Contrary to what Reps. Goodlatte and Leach would have us believe, the bill Jack Abramoff was pushing was also a prohibition on poker, sports wagering, and casino games. And it also contained exemptions for state lotteries, as requested by one of Abramoff's clients, eLottery.

It only gets worse from there. When the lobbying reform package fell apart, the Republicans tried a new approach, bundling the ban with flag burning, gay marriage, and a number of policies on the GOP social agenda as part of the "American Values" agenda. That's how it passed the House.

In the Senate, Frist first tried to attach the ban to a bill reauthorizing funding for U.S. troops in Iraq. When that didn't work out, he fell back on the last-minute port security bill.

In addition to invoking Abramoff, the ban's supporters frequently invoked the "for the children" canard, and relayed anecdotes about problem gamblers who frittered away their kids' college education with online wagers. In truth, there has yet to be a significant peer-reviewed study of online gambling habits, and whether they're more or less conducive to addictive behavior (there have been studies of state lotteries, however, and most show them to be among the most addictive forms of gambling).

Most online wagers are made in poker rooms. Poker is a game with some element of chance, but with a significant component of skill. Good poker players will turn a profit, which is why lots of people make a living playing the game (as opposed to say, slot machines or roulette).

Poker professionals — three of whom came to D.C. earlier this year to speak against the ban — argue that the game isn't really gambling at all. At the very least, it's not a particularly addictive form of wagering. Of course, some (like me) would argue that the nature of poker is beside the broader point: preventing people from playing games of chance simply isn't a legitimate function of the federal government.

At the very least, there are surely items on the DOJ's agenda that ought to be of higher priority — fighting terrorism, for example.

Reps. Leach and Goodlatte, along with Sens. Frist and John Kyl, frequently used the words "untaxed" and "unregulated" when describing the estimated $12 billion Americans wager each year online. But they're "untaxed" and "unregulated" because Congress made online gambling illegal in the first place, pushing gaming sites offshore.

In fact, the major gaming sites are begging to be both taxed and regulated. They'd much rather set up shop in the U.S., pay U.S. taxes, and be subject to U.S. laws and regulations. They'd rather carry the seal of legitimacy that comes with being recognized and incorporated on U.S. soil. Were online gambling legalized and regulated, we'd likely see trusted names like Harrah's, Bally, and MGM get into the business.

Despite all of the dire warnings from the ban's supporters about fraud, graft, and preying on minors, this bill will actually make all of those problems worse. Many of the major gaming sites are publicly traded, and/or incorporated in countries like Great Britain or Canada. They are taxed and regulated, just not by the U.S. government.

Before this bill was rushed through the Senate, cautious poker players or sports bettors could choose to patronize companies that are subject to market regulation, or are incorporated in countries that respect the rule of law. Most of those sites also have vigilant child-protection measures in place, and some even have stopgap features players who know their own weaknesses can use to limit their betting. Watchdog groups have sprung up to monitor the fairness and integrity of these sites (private, non-government regulation — imagine that!).

Immediately after the ban passed Congress, many of the major gaming sites announced they'd no longer do business with U.S. customers. Most I'd imagine were intimidated by the U.S. Department of Justice's recent penchant for plucking foreign gaming site executives out of U.S. airports and tossing them in prison, despite the fact that their businesses were legal in the country where they were incorporated, and where they were citizens (think of the implications there for Americans traveling abroad.)

So once the major gaming sites stop doing business with U.S. customers, who is that going to affect? The problem gambler? The curious minor who swiped his parents' credit card?

Not likely. The people who are going to be affected by the ban are the millions of Americans who play online poker recreationally — and responsibly. But that $12 billion per year is going to simply dry up. Problem gamblers and minors will still be able to find places online to make wagers.

Any attempt to prohibit consensual activity is going to create black and gray markets. The legitimate, law-abiding gaming sites may now be out of reach for Americans, but that'll create a niche for truly unregulated sites. These sites will be far more prone to fraud, won't much care about the age of their customers, and customers who are defrauded will have no recourse.

There's also no telling who's behind them. But it's probably a safe bet (pardon the pun) to say that the people operating black market, blatantly illegal gambling sites will include a significant criminal element.

Some say the GOP pushed this ban to light a fire under family values voters. Others say their intent was more nefarious — to protect established gambling interests from online competitors. There may be some truth in both of those explanations, though I think the main motivation for the bill was simply the moral aversion to gambling held by its chief sponsors — Goodlatte, Kyl, and Leach — and a desire to impose that moral rectitude on the rest of the country.

What does seem clear is that none of the people behind this bill were interested in thoughtful debate, any serious consideration of the bill's implications or consequences, or the principle of a limited, "leave us alone" federal government.

Polls show that Americans are overwhelmingly opposed to a federal ban on Internet gambling. Industry experts estimate that some 15-20 million Americans wager online each year. The overwhelming majority do so responsibly. This largely apolitical group could well get politically motivated the first time they try to log on, and are told their small-stakes poker game has now been outlawed by the Republican leadership in Congress. If this was a political move, there's a pretty good chance it'll backfire, and cost the GOP more votes than it wins them.

George Will's recent Newsweek column about the Unlawful Internet Gaming Enforcement Act

The following post appeared originally in the October 23 issue of Newsweek Magazine. I'm repeating it here because it is on topic, and I'm a big fan of George Will. Whether writing on topics as far ranging as politics to baseball, or in this case, about the Unlawful Internet Gaming Enforcement Act, Will always has somethinginteresting and important to say, and he always says it with clarity and style.

Perhaps Prohibition II is being launched because Prohibition I worked so well at getting rid of gin. Or maybe the point is to reassure social conservatives that Republicans remain resolved to purify Americans' behavior. Incorrigible cynics will say Prohibition II is being undertaken because someone stands to make money from interfering with other people making money.

For whatever reason, last Friday the president signed into law Prohibition II. You almost have to admire the government's plucky refusal to heed history's warnings about the probable futility of this adventure. This time the government is prohibiting Internet gambling by making it illegal for banks or credit-card companies to process payments to online gambling operations on a list the government will prepare.

Last year about 12 million Americans wagered $6 billion online. But after Congress, 32 minutes before adjourning, passed its ban, the stock of the largest online-gambling business, Gibraltar-based PartyGaming, which gets 85 percent of its $1 billion annual revenue from Americans, declined 58 percent in one day, wiping out about $5 billion in market value. The stock of a British company, World Gaming PLC, which gets about 95 percent of its revenue from Americans, plunged 88 percent. The industry, which has some 2,300 Web sites and did half of its business last year with Americans, has lost $8 billion in market value because of the new law. And you thought the 109th Congress did not accomplish anything.

Supporters of the new law say it merely strengthens enforcement; they claim that Internet gambling is illegal under the Wire Act enacted in 1961, before Al Gore, who was then 13, had invented the Internet. But not all courts agree. Supporters of the new law say online gambling sends billions of dollars overseas. But the way to keep the money here is to decriminalize the activity.

The number of online American gamblers, although just one sixth the number of Americans who visit real casinos annually, doubled in the last year. This competition alarms the nation's biggest gambling interests—state governments.

It is an iron law: When government uses laws, tariffs and regulations to restrict the choices of Americans, ostensibly for their own good, someone is going to make money from the paternalism. One of the big winners from the government's action against online gambling will be the state governments that are America's most relentless promoters of gambling. Forty-eight states (all but Hawaii and Utah) have some form of legalized gambling. Forty-two states have lottery monopolies. Thirty-four states rake in part of the take from casino gambling, slot machines or video poker.

The new law actually legalizes online betting on horse racing, Internet state lotteries and some fantasy sports. The horse-racing industry is a powerful interest. The solidarity of the political class prevents the federal officials from interfering with state officials' lucrative gambling. And woe unto the politicians who get between a sports fan and his fun.

In the private sector, where realism prevails, casino operators are not hot for criminalizing Internet gambling. This is so for two reasons: It is not in their interest for government to wax censorious. And online gambling might whet the appetites of millions for the real casino experience.

Granted, some people gamble too much. And some people eat too many cheeseburgers. But who wants to live in a society that protects the weak-willed by criminalizing cheeseburgers? Besides, the problems—frequently exaggerated—of criminal involvement in gambling, and of underage and addictive gamblers, can be best dealt with by legalization and regulation utilizing new software solutions. Furthermore, taxation of online poker and other gambling could generate billions for governments.

Prohibition I was a porous wall between Americans and their martinis, giving rise to bad gin supplied by bad people. Prohibition II will provoke imaginative evasions as the market supplies what gamblers will demand—payment methods beyond the reach of Congress.

But governments and sundry busybodies seem affronted by the Internet, as they are by any unregulated sphere of life. The speech police are itching to bring bloggers under campaign-finance laws that control the quantity, content and timing of political discourse. And now, by banning a particular behavior—the entertainment some people choose, using their own money—government has advanced its mother-hen agenda of putting a saddle and bridle on the Internet.

Where Poker Dreams Go to Die

Jim Kasper’s dream died recently, a casualty of the Unlawful Internet Gaming Enforcement Act of 2006 — a law passed in the middle of the night with no debate and no recorded vote, just so Senator Bill Frist could pander to the religious right and garner their support in advance of his bid to secure the Republican nomination for President.

On July 27, we had Jim Kasper on Keep Flopping Aces, the radio show Amy Calistri and I host each Thursday night at 9:00 PM Eastern Time on www.holdemradio.com. While many other republicans were lining up behind UIGEA, Kasper was trying to make North Dakota a licensing agency for online casino poker sites. He told us that North Dakota would be able to fund public services by licensing online gaming and that the state-owned bank of North Dakota would profit by handling transactions.

But UIGEA killed Kasper's initiative because the Bank of North Dakota can not act contrary to UIGEA, and Mr. Kasper's hope that North Dakota might serve as a safe harbor for online poker sites is dead.

Reprint of Charles Murray's NY Times Editorial That Savages UIGEA

This editorial appeared in the New York Times last week. It was written by Charles Murray, a scholar at the American Enterprise Institute for Public Policy Research, a think tank with a mission is to support the "foundations of freedom - limited government, private enterprise, vital cultural and political institutions, and a strong foreign policy and national defense." The Institute is a nonprofit organization supported primarily by grants and contributions, and more than two dozen AEI alumni have served either in a Bush administration policy post or on one of the government's many panels and commissions.

So when one of their own comes out condemming the recently-passed Unlawful Internet Gaming Enforcement Act, you know it's a law with troubles all its own.

The G.O.P.’s Bad Bet
By Charles Murray

Last week President Bush signed a law that will try to impede online gambling by prohibiting American banks from transferring money to gambling sites. Most Americans probably didn’t notice or care, but it may do significant political damage to the Republicans this fall and long-term damage to Americans’ respect for the law.

So, a month before a major election, the Republicans have allied themselves with a scattering of voters who are upset by online gambling and have outraged the millions who love it. Furthermore, judging from many hours of online chat with Internet poker players, I am willing to bet (if you’ll pardon the expression) that the outraged millions are disproportionately electricians, insurance agents, police officers, mid-level managers, truck drivers, small-business owners — that is, disproportionately Republicans and Reagan Democrats.

In the short term, this law all by itself could add a few more Democratic Congressional seats in the fall elections. We are talking about a lot of people (an estimated 23 million Americans gamble online) who are angry enough to vote on the basis of this one issue, and they blame Republicans.

In the long term, something more ominous is at work. If a free society is to work, the vast majority of citizens must reflexively obey the law not because they fear punishment, but because they accept that the rule of law makes society possible. That reflexive law-abidingness is reinforced when the laws are limited to core objectives that enjoy consensus support, even though people may disagree on means.

Thus society is weakened every time a law is passed that large numbers of reasonable, responsible citizens think is stupid. Such laws invite good citizens to choose knowingly to break the law, confident that they are doing nothing morally wrong.

The reaction to Prohibition, the 20th century’s stupidest law, is the archetypal case. But the radical expansion of government throughout the last century has created many more.

For example, all employers are confronted with rules and regulations from Occupational Safety and Health Administration and the Equal Employment Opportunity Commission that they regard with contempt — not because they cut into profits, but because they are, simply, stupid. They impede employers yet provide no collateral social benefit. And so employers treat the stupid regulations as obstructions to be fudged or ignored. When they have to comply, they do not see compliance as the right thing to do, but as placating an agency that will hurt them otherwise.

The same thing applies to lesser degrees to all of us who find ourselves doing things that we know are pointless (think of various aspects of tax law) only because we fear attracting a bureaucracy’s attention. For millions of Americans, our day-to-day relationship with government is increasingly like paying protection to the Mafia — keeping it off our backs while we get on with our lives.

The temptation for good citizens to ignore a stupid law is encouraged when it is unenforceable. In this, the attempt to ban Internet gambling is exemplary. One of the four sites where I play poker has blocked United States customers because of the law, but the other three are functioning as usual and are confident that they can continue to do so. They are not in America, and it is absurdly easy to devise ways of transferring money from American bank accounts to institutions abroad and thence to gambling sites.

And so the federal government once again has acted in a way that will fail to achieve its objective while alienating large numbers of citizens who see themselves as having done nothing wrong. The libertarian part of me is heartened by this, hoping that a new political coalition will start to return government to its proper functions. But the civic-minded part of me is apprehensive. Reflexive loyalty to the rule of law is an indispensable cultural asset. The more honest citizens who take for granted that they are breaking the law, the more their loyalty to the law, and to the government that creates it, is eroded.

Missing in Action: 3,000 Online Poker Players

An interesting graph at Poker Scout, a site that tracks online poker traffic, shows the early effects of UIGEA on selected Internet poker sites, specifically: Party Poker, Poker Stars, Full Tilt Poker, and Paradise Poker.

You can see the clear drop experienced by Party Poker, which was the industry leader, but now trails Poker Stars and is running just slightly below Full Tilt Poker.

But just as interesting as the trend lines are the actual number of real money, cash game players on September 1 and again on October 17.

Back on September 1, before UIGEA was enacted, there appeared to be approximately 18,700 cash game players on these four sites. But on October 17, the total number of cash game players dropped to 15,700 — a loss of 3,000 players or 16 percent.

While some of these players might have migrated to sites other than PokerStars or Full Tilt, it’s hard to think that all of them have found cyber poker games elsewhere. I’m thinking that these are the players who simply packed up and left.

Will they return to play online again? Quien Sabe? Like so much in poker, the answer is, “It depends.”

You can see this graphic rendering of poker site traffic first hand at: http://www.pokersitescout.com/MoversGraph1.htm

Neteller announces it will pull the plug

Neteller today announced that they are pulling the plug when it comes to funding online gaming accounts for US citizens. You can read the entire announcement at: http://investors.neteller.com/neteller/upload/Pressreleaseupdate19oct06Final.pdf.

In their announcement, Neteller says that they will comply with the act, just as if they were within its jurisdiction. They also indicated that they intend to monitor the regulatory development process and determine what action to take during the 270-day rulemaking period.

For the time being, “US-resident customers are able to use the NETELLER service as normal. The funds of US-resident customers are held in trust accounts and will be available for withdrawal, on demand. The ability to withdraw funds will exist regardless of the customer’s location or ability to transfer to any site.”

Neteller is a publicly traded company, and this action will ensure that they can continue to operate with the support of their bankers and commercial partners, while protecting shareholders, employees, and their reputation.

While I understand the reason for the action they have taken, I’m sorry to see them take it. Neteller has no physical presence in the United States, no assets located here that I’m aware of, and is located on the Isle of Man, far beyond the jurisdictional reach of US law.

We’ll see what transpires as the rulemaking process moves along, but Neteller does provide a valuable service to anyone who has ever funded an online gaming account. On the other hand, they are a financial intermediary, not the game itself.

If they do pull out of the market, I’m sure there’s enough business out there to motivate a privately held financial intermediary to offer the same services.

Having said all that, I’m still disappointed to see them go for two reasons. One, they do a good job and I’ve had good experiences with their services over the years. Second, and perhaps more important, it just angers me to see this silly law have the reach and effect it does.

Picking Over PartyGaming's Bones

PartyGaming’s share price dropped another 13 percent following its exit from the US market. Party also removed a ticker from the site showing the number of tables in use and how many players are online.

A Party spokesperson said that this data was removed over apprehensions that rival operators would use this information against them. But the lack of available player data hasn’t stopped Party’s competitors, and competing sites are already mounting aggressive campaigns to recruit Party’s abandoned players.

In online poker, the customer and the product are one and the same, and with their loss of liquidity, PartyGaming is also likely to lose its position as industry leader.

With third-quarter figures scheduled to be released within a matter of days, you can expect a comment from Party’s management then.

Big radio show, small tournament, lots of fun

I was in Las Vegas the last few days to do a special, two-hour live, remote broadcast of my Internet radio show, Keep Flopping Aces, which airs every Thursday on www.holdemradio.com, at 9:00 PM, Eastern Time.

This was a special, two-hour show, originating from the Gamblers Bookshop. Live shows always have a lot of energy, and this one was energy packed, primarily because of our guests and topics. Mary Jones, who won the Women’s event at this year’s World Series of Poker, was our first guest. Back when she won the event, initial reports said that she was 84 years, but they got it wrong by about 40 years. Mary was a terrific guest who has been on a roll lately, winning another event in Atlantic City and placing in a WPT tournament within the past few weeks.

Nolan Dalla was up next, and Nolan, Howard Schwartz — the Gambler’s Bookshop proprietor — and I discussed the Unlawful Internet Gaming Enforcement Act, where Nolan passionately expanded on his now famous, “If you’re not outraged, you’re not paying attention!” statement.

Because of some technical difficulties, we were not able to bring in co-host Amy Calistri, who was would have been broadcasting from Austin, TX. So Earl Burton and Jennifer Shoots filled in and interviewed Dr. Al Schoonmaker who was onsite too.

It was a great show, and if you missed it when it aired, you can hear it in the “show vault” at Hold’em Radio, or you can listen to it as a podcast on i-Tunes.

On Saturday, I played in a small poker tournament that’s put on every year by Nana, a long-time, local poker player. This event was held at Sunset Station in Henderson. Because Nana is a regular guest on Hold’em Radio, a number of show hosts showed up to play in her tournament. When it got down to three handed, to our surprise, the final three finalists were all show hosts on Hold’em Radio, so apparently we can play as good a game as we talk.

I got lucky and managed to win it, so for me, and for the honor of Keep Flopping Aces, it was a terrific time.

Surreal Days, Salvador Dali, and Bob Dylan

Well, the Unlawful Internet Gaming Enforcement Act of 2006 was signed into law today, and while that was expected, it still left me feeling like I was walking through a surreal Salvador Dali landscape.

Which, of course, raised the question: "Is that all there is?"

Now that UIGEA is law, and Senator Frist has what he wants -- support from the Republican Party's religious right in his bid for the presidential nomination -- does that also clear the decks for Kyl, Leach, and Goodlatte (KLG), the real anti-gambling boys in Congress, to bring forth more Draconian legislation in the next session.

After all, reprehensible as UIGEA is, it still does not criminalize playing online poker. But that's not to say that KLG won't be emboldened by the legislation just enacted and go straight for the jugular.

They know what's good for you and good for me. Just ask them. What I don't know is whether they will be satisfied with UIGEA, or take a "Why not ask for more?" view of things and come after the poor sinners of the world (that means us) with everything they've got.

We'll see sometime in 2007. In the meantime, the only thing making sense to me today is a verse from Bob Dylan's "Stuck Inside of Mobile with the Memphis Blues Again."

Grandpa died last week
And now he's buried in the rocks,
But everybody still talks about
How badly they were shocked.
But me, I expected it to happen,
I knew he'd lost control
When he built a fire on Main Street
And shot it full of holes.
Oh, Mama, can this really be the end,
To be stuck inside of Mobile
With the Memphis blues again.

Is UIGEA a major marketing opportunity?

With enactment of the Unlawful Internet Gaming Enforcement Act of 2006 the world of online gaming turned upside down.Until enactment, the online gaming industry was undergoing a rapid period of consolidation.

That's not unusual. In fact, it's commonplace in maturing industries. Just look at how many car manufacturers there were at the dawn of the automotive age, or how many computer makers were around 15 to 20 years ago.

As an industry matures, the big and the strong eat the smaller and weaker competitors. But with enactment of UIGEA and the pull-out of industry leader Party Gaming from the field, it's the smaller, more nimble poker rooms that look like they'll benefit by sticking in the US market and going after Party's abandoned customers.

The poker analogy is all too obvious. Whenever a pot is checked twice, you're almost guaranteed to win it simply by betting when it's your turn to act. It's called an "orphaned pot." And those formerly playing on Party are "orphaned customers."

The quick, the sleek, the nimble, the savvy marketers who can act quickly stand a good chance of picking up all those former Party Poker players who now have no place to go, but are still looking to play poker somewhere in cyberspace.

While all of the online sites are talking about Asia being the next big market to open up, there's an open market right here in the United States, with plenty of players who are not being served. And while some operators are leaving the US market, others are probably salivating at the chance to go after any abandoned customers.

It wouldn't surprise me one bit if the topic of Party's abandoned players were the subject of much discussion at the e-gaming conference that's going on right now in Barcelona.

While the Unlawful Internet Gaming Enforcement Act of 2006 is already an unmitigated disaster in terms of eviscerating wealth that's been built up through investment in publicly traded sites, in terms of violating US treaty obligations with the World Trade Organization, and in terms of trampling on an individual's right to do what he wants with the money he's earned, an unintended consequence of this law seems to be the creation of what figures to be a marketing opportunity of land-rush proportions.

There will be winners and losers in the shakeout that follows enactment of UIGEA, and none of us can accurately predict the results right now. What we can be sure of are interesting times, and a new landscape that might look much different than the one we had all grown accustomed to.

A short, concise view of the Unlawful Internet Gaming Enforcement Act

Many poker players are still confused about the Unlawful Internet Gaming Enforcement Act of 2006. I hope to encapsulate the law in this short discussion. Detailed discussions and legal analyses of this law can be found at www.gamblingandthelaw.com/and at http://www.gambling-law-us.com/.

UIGEA does not criminalize players for gambling online. Instead, it penalizes financial institutions such as banks, credit card companies and financial intermediaries that process bets.

A bigger issue may be the reaction to this law by the majority of online gaming sites. Some have already blocked access to customers logging on from the United States. Others are undecided, while still others plan to continue serving customers from the US. If the vast majority of online poker sites eventually decide to cut and run and online financial intermediaries follow suit, you won’t be left with many places to play poker online.

But if a sufficient number of online sites decide to carry on business as usual, it’s difficult to see how the United States can enforce this law because every online site is located offshore and beyond the government’s reach.

The Justice Department, the FBI, and local law enforcement all lack the resources and the inclination to bust poker players. Their focus will be on applying the law to online gaming sites and related business, such as affiliates, Not even Washington State, which recently passed a law making online gambling a felony, have busted gamblers; instead, their efforts have been directed to gambling businesses.

Who's staying, who's going, and who's undecided

Here's a list of the firms that are staying, leaving, and are as of yet undecided about remaining in the US online poker market. This list is a moving target, and may not be accurate by the time you read it.

Leaving US Market
Party Poker
Pacific Poker
Cryptologic and Affiliated Sites
Boss
Sun Poker
Bet Fred
Bet365
P1Gaming.com


Staying in US Market - For now
True Poker
Paradise Poker
Ultimate Bet
Poker.com
Absolute
Bodog
Bugsy'sClub
Planet Poker
Full Contact Poker
Cake Poker
Royal Vegas Poker
Poker Time
privately owned sports books

Undecided
Poker Stars
Paradise Poker
Full Tilt
Poker Room
Titan Poker
Everest Poker
Neteller

Does the World Poker Tour really believe what they just said about online poker?

"The Justice Department has been very clear that it believes online gaming to be illegal in the United States and our policies have been always been tailored accordingly," said Adam Pliska, General Counsel for the World Poker Tour. "This law clarifies the rules,” and, according to Pliska, “makes it possible for everyone to move forward on an even footing."

According to World Poker Tour CEO and founder Steve Lipscomb, "It was a wide-spread love of this game and the reinvention of poker as a televised sport that ignited the poker phenomenon, and that is what will continue to drive the future of the sport."

Is this the WPT’s way of saying “We were right and you everyone else was wrong when it came to interpreting the laws regarding online poker,” or was it merely a slap in the face to the online poker industry that somehow offends the WPT? Perhaps it was nothing more than a simple case of following the money. After all, if online sites will no longer advertise on television, they can’t bring televised poker shows into the marketplace and therefore won’t be able to offer competition to the WPT?

I don’t know; no one’s told me. Despite different marketing thrusts and competition for players, advertising, and rake, and regardless of the major differences that some big-name players have with the World Poker Tour, I’ve always believed that everyone in the industry was united when it came right down to the bottom line: Keeping poker legal and available for everyone.

I guess not. But then again I’ve always thought that the way to win in the marketplace was to provide a superior product at a better price. I didn’t think the way to win was to hitch one’s wagon to a disingenuous law, riddled with hypocritical exceptions that was dragged unseen in the night and appended to a piece of must-pass legislation in order to enhance Bill Frist’s presidential ambitions.

I would have thought that businesses engaged in the world of poker would have had a sense of honor that transcended that sort of thing. Most do, but some don’t. But poker, along with the politics that surrounds it, always does a very nice job of revealing character, whether it’s individual or corporate.

A foreign diplomat's view of the Internet Gaming Act's hypocrisy

Publicly traded Internet gaming companies in Britain and their subsidiaries in the Caribbean have been eviscerated by Unlawful Internet Gaming Enforcement Act of 2006, the law that makes it illegal for banks, credit card companies, and other financial intermediaries to transfer funds to foreign online gambling sites. As a result of this law being tacked on to the Safe Ports act at the eleventh hour and passed with neither debate nor recorded vote, more than $7 billion was wiped off the market value of companies that that were worth $12 billion the day before UIGEA was enacted into law.

The bill’s passage outraged opponents of the bill, who see it an act of protectionism rather than a moral crusade because it did not outlaw horseracing, fantasy sports, or state-owned lotteries.

Sir Ronald Sanders, pictured to the right, a former Antiguan diplomat with responsibility for negotiations on financial and trade matters in the World Trade Organization and the International Monetary Fund, is a keen observer of the scene. He recently wrote that “revenues to the UK government – and more significantly to governments of Caribbean countries such as Antigua, Belize and Costa Rica - will be reduced immediately and employment will be adversely affected.”

Mr. Sanders went on to say that “If the United States was not the main centre of the world for gambling, the bill, ostensibly adopted on the basis of morality, may have been acceptable,” adding that “the US is the major centre in the world for gambling. Five years ago, spending in US land-based casinos alone reached almost $26 billion. It is much more today. And there is no effort in Congress to close down US casinos on any moral basis.”

And Mr. Sanders is right. The bill has cut-outs allowing other forms of Internet wagering, including horse racing, US Internet lotteries, and fantasy sports. It also permits states and Native American tribes to authorize Intrastate Internet-gaming of almost any kind.

“Even though the moral argument is being touted, and the religious right in the US has welcomed the Bill,” according to Mr. Sanders “it has little to do with morals and more to do with stopping Internet gaming companies from outside the US providing services to US customers.”

This is the underlying argument made by Antigua, in their case against the US that was brought before the World Trade Organization (WTO). Antigua complained that in its commitments under the General Agreement on Trade in Services (GATS), the US bound itself to provide market access and national treatment to the cross-border supply of foreign services including gambling and wagering.

A WTO Panel ruled earlier that the US must bring its laws into conformity with its international obligations. This UIGEA, which specifically permits a variety of domestic Internet betting opportunities, discriminates against gaming services offered to the US from other countries, and is even more discriminatory than US law was before Antigua brought its case to the WTO.

Is the war against online poker over, or has it just begun?

While the party’s over for Party Poker and many other online poker sites, and supporters of the law cheer it as a victory for family values, American land based casinos are still eager to bite into the $12 billion online market. There’s some wiggle room, too, because the approved legislation neither bans nor criminalizes online poker.

“This bill did not make anything legal or illegal," American Gaming Association President Frank Fahrenkopf said. "What it did was affect the mechanism by which Internet gambling takes place…and there is some question as to whether or not that will be effective."

Nevada Congressman Jon Porter introduced a bill backed by casinos last May to study and recommend whether US-run online gambling sites could be regulated. Fahrenkopf believes that bill is likely to be considered early next year.

Some foreign governments believe this law to be protectionist in nature. Antigua and Barbuda’s case against the U.S. at the World Trade Organization claimed that exceptions for horseracing and lotteries were compelling evidence that the U.S. was not as opposed to gambling as they were opposed to foreign governments taking betting dollars through online sites.

Although the WTO ruled in favor of Antigua, in April, 2006, the U.S. said it had addressed the concerns. Antigua then appealed the US response to the World Trade Organization, and is still awaiting a response from the WTO.

How the Feds will develop regulations for the new law

Once the process of developing regulations for the Unlawful Internet Gaming Act begins, government officials will probably propose a "coding-and-blocking" system to identify and stop payments to online gambling sites. Many banks and credit card companies already use this kind of system to block Internet gambling transactions, so the new law will build on a familiar process that's already in place.

Because banks and credit card companies will be asked to provide input into the process of developing regulations, they are optimistic that a workable system can be crafted. Some bankers were apprehensive about being held responsible for blocking payments by check as well as those made by credit card. But those concerns abated once Congress allowed check payments to be exempted from the coding and blocking process.

The Treasury Department and Federal Reserve Board have nine months to draft regulations once the bill is signed into law by President Bush.

Which online poker sites are staying, and which ones plan to leave the US market?

Here’s what the sites are saying about whether they plan to stay in the US market or not, as of 4:00 PM Pacific Time today, 2 October 2006.

True Poker
Congress passed the UIGE Act of 2006, which covers deposits made by US players to certain types of sites. Our read is that Act covers only sites which offer Sports Betting or Casino type games where you bet against the Site itself.
TruePoker does NOT make or accept bets or wagers in which it has any stake in the outcome. So, our games and tournaments, and your deposits, are not covered by this UIGE Act of 2006.
TruePoker does not have a stake in the outcome of the games or tournaments we offer, in the US or anywhere else. (We do not offer casino games or sports betting, and so have no stake in the outcome and are not in the "business of betting or wagering")

Party Poker
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 US residents with access to its real money poker and other real money gaming sites. As a result of this development, the Board of PartyGaming has determined that if the President signs the Act into law, the Company will suspend all real money gaming business with US residents, and such suspension will continue indefinitely, subject to clarification of the interpretation and enforcement of US law and the impact on financial institutions of this and other related legislation. Access to PartyGaming's online gaming sites for the Group's US free play customers will be unaffected. Access for all of PartyGaming’s non-US customers will also be unaffected.

The Group’s strategic focus remains on developing its existing markets outside of the US and on developing new markets and products. Should activities in the US be suspended, the Directors will also seek to re-align the Group's cost base to accommodate the changed business environment. However, any such suspension would also result in the Group’s financial performance falling significantly short of consensus forecasts for 2006 and 2007.

Poker Stars
We have not made a decision one way or another as regards closing our American accounts.

Cryptologic
CryptoLogic Inc. announced that effective immediately licensees of WagerLogic Limited, the company's licensing subsidiary, will not take wagers from U.S.-based players. This is a result of new legislation expected to be signed today by President Bush that prohibits financial transaction processing in the U.S. online gaming market.

WSEX
We have absolutely no plans whatsoever of dropping any players. In short, it will be business as usual. WSEX.com and all its sister companies are legal and licensed businesses regulated by the Gaming Commission of Antigua and Barbuda. We are wholly located in Antigua and do no business or run any part of our operation on US soil.
The World Trade Organization (WTO) has recognized the right of Antiguan companies to be in this business and has instructed the United States to stop trying to block US residents from playing at Antiguan operations.
Nothing in the bill criminalizes placing a bet or sending money to or receiving money from an offshore gambling business.

Bodog
This bill still has to be passed by the executive branch of government before it is enacted into law.
Regardless of the outcome this time, the online gambling industry will continue to flourish and Bodog.com will remain at the front and center of this digital entertainment industry for years to come.

You should take comfort in knowing that Bodog.com is well situated to adapt to any change in the legislative environment.

Bodog.com considers online gambling to be legal under international law and complies with the laws within all of its jurisdictions where it carries out its operations.

Ultimate Bet
UltimateBet is not going away as a result of this legislation…The new law does not change the legality of playing online games. The law does not impact people who play games from their computers. Instead, the law focuses on the payment processing of unlawful Internet gaming.Our strong belief is that poker is a game of skill and therefore is not encompassed by this law. As set forth in the user agreement, we furnish a gaming environment, and participants are eligible to access this environment for their enjoyment where legal to do so. We do not undertake to assess the legality of play in any particular case as our users may access us from around the world.

Poker.com
Very quickly, as far as we are concerned our operations are 100% legal under international law and we follow all laws of the jurisdictions in which our operations reside. There will still be plenty of places to play poker and the industry will adapt, evolve and survive.

Absolute Poker
We want to assure you that Absolute Poker games are still available and that you can continue to enjoy the site as you always have. The new law does not change the legality of playing online games nor will make us close any US customer accounts. The law does not impact people who play games from their computers. Instead, the law focuses on the payment processing of unlawful Internet gaming and we can assure you that our operations are 100% legal.

Full Tilt
We are continuing to study this legislation and, until our investigation is complete, believe it would be wrong to comment on how these new rules will impact the ability for players to transfer funds to and from Full Tilt Poker.
In the short term, we assure you that your online experience at Full Tilt Poker will not change. You will still be able to deposit and withdraw money from the site using the same methods and payment processors you have always used, and your money will remain completely safe and secure. We cannot predict how the online poker experience may change in the future, but we do not expect any immediate impact from the legislation, as the banking industry has 270 days to implement new rules after the bill is signed.

Bugsy’s Club
We want you to know that we will continue doing business with our US customers. We are a legal and licensed business in the Netherlands Antilles and none of our operations are carried out on US soil. We have no intention of closing USA player accounts or restricting their ability to play on BugsysClub. The World Trade Organization ruling brought by Antigua and Barbuda has repeatedly instructed the United States to stop trying to block US residents from playing at such operations while the US simultaneously favors certain US operations (such as horse betting, lottery etc).

Boss Media
As the bill on banned Internet gambling payment processing services in the United States turns into formal law, Boss Media AB will immediately take action to block American players resident in the United States from accessing any such services and software provided by Boss Media.

Assessing the New Law: A Dark Day for Online Poker

The poker world has been rife with speculation regarding the ramifications of the Unlawful Internet Gambling Enforcement Act of 2006, and what it might mean for you, me, and other online poker players, as well as for the industry itself.

In order to review developments as objectively as possible, I believe it is necessary to examine this state of affairs from two perspectives. The first is the law itself. The second is the response to the law by major online poker sites and other businesses involved in the online poker industry.

Looking at the Law
Please do not construe this as a legal opinion. I am not an attorney. These are simply my insights into this law and my take on what appears to be transpiring in the poker community.

This law does not criminalize your behavior as a poker player
As a player, this bill does not criminalize your behavior. The law places the onus on the US banking industry and other payment processors to stop funding online gaming sites. The act is aimed squarely at precluding anyone handling financial transactions related to online gaming. It is designed to stop banks from allowing customers to send funds to offshore gaming sites. It also criminalizes those who accept funds for the purpose of gambling.

This law does not modify the Wire Act of 1961
This law does not include language that would modify the 1961 Wire Act to include online gambling, although the bill passed in the House of Representatives earlier this year did contain that language. As a result, online gaming is still a legally gray area, no more — and no less — illegal today than it was before this law was passed.

A 270 day period to develop regulations and procedures
Once President Bush signs this into law, there will be a 270 day period during which enforcement procedures will be designed. This is a common process at the Federal level: Congress enacts a law and those designed to enforce it are charged with designing procedures to implement the intent of Congress.

The banks don't like it and that might be some small help
The banking industry is opposed to what they see as burdensome requirements regarding payments to online gambling sites. Because the banking industry is likely to be consulted during the regulation writing period because they will play a major role in the act’s implementation, they are likely to argue for requirements they can meet, and which do not impose an overwhelming financial burden on them. That’s probably good for us.

Expect legal challenges
You can expect a number of legal challenges to the Act. It seems to fly in the face of the World Trade Organization’s ruling in a trade dispute brought by the tiny Caribbean nation of Antigua and Barbuda. However, the US government has ignored WTO rulings related to online gaming in the past, and is unlikely to change their posture now.

Looking at Initial Reactions to the Law
As of today, the industry leader, Party Poker, issued a statement saying that they will refuse to take wagers from US, although play money games will be available to those residing in the United States. PokerStars has not made a decision yet, but I will assume they will take a similar course of action soon.

Will Neteller stay or go?
Financial intermediaries, such as Neteller, might choose to opt out of the American market. They have not issued any indication as to what course they will chart. If Neteller decides to forego the US market, there are other payment intermediaries who would probably relish the opportunity to fill that void.

Nolan Dalla was right; I was wrong
Earlier today, Nolan Dalla wrote: “I expect this to have a ripple affect across the entire industry. Most of the larger poker sites and likely offshore sportsbooks as well, will be forced to block wagers from US residents. Otherwise, all operators/employees are subject to arrest and prosecution if they enter US territory. Those here and elsewhere who have stated this new law "only applies to financial transactions" have a narrow and tragically misguided view of the legislation. It essentially makes any employee or agent of the offshore site a criminal under US law -- UNLESS they block transactions from US residents.”

Quite frankly, I never assumed that the leading sites would comply with the legislation and turn their back on the enormous customer base here in the US. I assumed they would continue to serve the cyber gaming market from jurisdictions where online gaming is legal and regulated — in essence, I assumed they would thumb their noses at this law. Instead, it appears they will comply. Nolan was right and I was wrong, and in my opinion, their reaction to this law might ultimately be a more difficult issue to overcome than the law itself.

While players could easily find work-arounds in order to fund gaming accounts regardless of the regulations that are finally set in place to enable this law’s enforcement, it becomes a Pyrrhic victory for the clever player if he is able to fund an online account but cannot find an online game where he is permitted to play.

Jobs will be lost; investors will take a major hit
Because this legislation is aimed at anyone “in the business of betting,” any site that promotes online gaming, including rakeback and affiliate sites — and even “informational” sites — might fall within the law’s scope. This could have a huge economic impact, affecting numerous websites with thousands of jobs lost in the process.
The economic impacts of this law are already being felt, as some of the large public sites have seen their share prices plummet, and many investors are poorer as a result.

In this hypocritical legislation, fantasy sprots and online lotteries win; everyone else loses
Fantasy sport sites and state lotteries are the winners, despite the fact that they too are involved in online gaming. Fantasy sports sites are OK as long as they do not have their scoring systems based on a team’s performance or point spread, but on the statistical performance of player groups. If poker could be constructed as a fantasy sport, it might find itself outside the scope of this law. However, it would no longer be poker, and no longer appealing to many players.