Internet Poker Company May Attempt A Comeback By Buying An Atlantic City Casino

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Ed. note: This post appears courtesy of Techdirt. We’ll be sharing business-related posts from Techdirt from time to time on Dealbreaker.

While it's lost steam, you likely recall what is commonly referred to as the "poker boom" of the 2000s. Due in large part to the sudden interest in the game resulting from ESPN's coverage of the World Series of Poker, it seemed like everyone was playing. This took the form not only of a massive uptake in friendly neighborhood games, but also in the emergence of online poker as a serious force in the internet world. That is, of course, until the United States government, conversely beholden to a largely religious lobbying effort coupled with an inability to collect taxes on the gaming, decided to shut down most of the popular poker sites. The result of the efforts by these anti-freedom groups was the crafting of the Unlawful Internet Gambling Enforcement Act, which then led to the takedowns of all kinds of poker sites. Predictably, this simply caused those sites to relocate domains and move their money processing facilities offshore, further depriving the government of both oversight and any chance at revenue. Recently, Chris Christie, Governor of New Jersey, has sought to expand legalizing online gambling in his state, and is currently working through the legislative/vetoing process to do so as he sees fit.

Which brings us to today, where a company called the Rational Group, owners of the previously popular PokerStars and Full Tilt sites, is looking into buying a distressed Atlantic City casino, giving them a legitimate home-base of operations within America, allowing them to reopen their online poker doors, and providing a massive revenue opportunity to the state of New Jersey.

Rational is taking its own gamble (sorry) in trying to develop a US base within the Atlantic Club, which lost $13.6 million during the first three quarters of last year amid declining revenue. The problem for Rational, however, is that its crown jewels are still on shaky footing with US regulators. In July, PokerStars paid $547 million to the DoJ and $184 million to foreign players in a bid to settle charges. The question now is whether or not the slate has been wiped clean.

"Both companies had issues with U.S. law when, in 2011, the Department of Justice closed down [PokerStars's and Full Tilt's] websites after they continued accepting U.S. bets," attorney Jason Gross told Press of Atlantic City. "Here you have these two companies, both owned by Rational Group, that went farther than most companies, and it may create further issues."

Let's avoid mincing words here: the idea that legal complications stemming from a what was essentially a religious lobbying effort (with some help from the pro and college sports leagues) could prevent a now legitimate business from operating and generating state revenue would be a travesty. A tyranny of the minority serves nobody in this instance. The people want online gambling, the state wants online gambling. Holding Rational's feet to a fire sparked by bad legislation is wrong, particularly when that company wants to invest into a distressed NJ business and help turn it around.

With that said, the broader point appears to be that online gaming is going to come back, whether Rational succeeds in this endeavor or not. As the article notes:

By legally forcing online gaming to have a home casino in the States, it could both reopen the online market while also capitalizing on that sweet tax revenue. Rational and its all-powerful brands might not bring online poker back, but it does look increasingly likely that online gaming is coming back.

And, in my opinion, not a moment too soon. I'm all for religious freedom and belief, but those stop where my freedom begins. The sooner the government gets out of the business of enforcing morality on the internet, the better.

Internet Poker Company May Attempt A Comeback By Buying An Atlantic City Casino [Techdirt]

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Dispatches From The World Series Of Poker

What do you do when you’re a mid-20s male that dropped out of college to play online poker for a living, and the government suddenly cuts off your source of income? The answer, it seems, is move to Mexico. That’s right; apparently there is an expatriate community of American online poker professionals that have relocated to Baja California, just across the border from San Diego. A larger group is centered in Cabo San Lucas, which is much nicer but also more expensive and farther from the States. Hundreds of players have made the move and resumed playing on Pokerstars and the smaller European sites. However, right now it is June, and that means poker players live or online are in Las Vegas for the World Series of Poker. I was curious to see the long-term repercussions of the government’s crackdown on internet poker last April. Unsurprisingly, it seems like the live poker industry has contracted. Overall, Americans had $150 million stuck online in the now-defunct Full Tilt Poker, and removing all that cash from the poker economy was bound to hurt the live games. From what I saw, most of the cash games at the Rio were small-stakes No Limit Hold ‘Em or Pot-Limit Omaha. There were a few bigger-stakes mixed games but nothing above $50/$100 limit. As for the WSOP itself, the number of entrants to most events has fallen off dramatically year-over-year. Last year, the first $1,500 no limit tournament had 3,157 entrants; this year it had 2,101. A dealer told me that Harrah’s overestimated the player pool and hired a lot more staff than was necessary. The fabled ‘big game’ with Doyle Brunson et al no longer runs regularly in Las Vegas. Amazingly, the biggest games in the world have now moved to Macau, where the ultra-high-limit players are competing with Chinese businessmen in No Limit games with blinds of HKD$10,000/HKD$20,000($1,300/$2,600). Probably the biggest story from this year’s WSOP was Phil Ivey nearly winning another bracelet. Ivey didn’t play last year’s series due to the Full Tilt debacle, but this year he’s back and five-bet bluffing as usual. First-place money in a preliminary WSOP event has long since ceased to matter to Ivey, as he regularly plays in games with million-dollar swings. However, he’s got huge side bets that pay off if he wins a bracelet. The rumors going around place the odds for these bets at either 2-1 or 3-1, and the amounts are likely in the millions. In other words, if Ivey wins a bracelet, he gets the first-place money, but he also gets several million additional dollars from the side bets. He’s come close twice already – he took 3rd in the $5K Omaha 8 event and 2nd in the $10K pot limit hold ‘em event. In the latter tournament he was defeated in heads-up play by a former Wall Street equity trader. The next big thing at the WSOP is the million-dollar-buyin tournament coming up on July 1st. The event is capped at 48 players, and it seems likely to sell out. Nearly every confirmed entrant so far is a professional poker player, many of whom have likely sold off big pieces of their action. There are a couple of confirmed non-professional players including an “anonymous hedge fund manager.” For the next few years, it doesn’t seem likely that the WSOP will reach the size that it did in 2006, when the number of entrants to the main event peaked at 8,773. The live poker boom of the mid-2000s was always fueled by internet poker. When the major sites were shut down, the WSOP lost a major feeder source of new players. Americans still have $150M in funds locked up on Full Tilt, and it remains doubtful that any of that money will come back. The only hope for a revival for the struggling industry is the legalization of online poker in individual states. In a supremely ironic twist, the Justice Department changed its mind about internet poker last December and cleared the way for regulated intrastate poker. Nevada has already passed legislation and will probably have games up and running within a few months; it seems likely that other states will follow.