The Mouthpiece

By Martin Owens
Contributing Editor

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    Martin Owens

    Full Circle for Online Poker

    To the place from which the rivers come, There they return again.... Ecclesiastes 1:7

    A pre-gaming license has been granted to by the state of New Jersey. Technically called a conditional waiver, it allows the company to participate with its partner, the Borgota, beginning with land-based games and moving on to online gaming when the Garden State opens up, hopefully on the scheduled date of November 26th of this year.

    It is a quiet triumph for And it is an equally important defeat for the foes of online gaming; not only the fundamentalist types who oppose the expansion of gaming on any terms, but for those sought to keep the US market all for themselves.

    Rise and Fall

    If you have a long memory, you might remember when there was no such thing as bwin/Party. So long ago, in fact, that there were not even two separate entities, one named Party and one named Bwin.

    Back then there was only Party Gaming, first of the worldwide online gaming giants, and in its time, the greatest. Before the UIGEA, Party Gaming, particularly Party Poker, was a multibillion-dollar industry, culminating in a $9 billion IPO offered on the London Stock exchange in 2005. Its founder, Ruth Parasol, became a billionaire literally overnight.

    But it was not to last. The administration of George W. Bush had set its sights on Internet gambling operations. The bigger the company, the bigger the target. In retrospect, it is hard to credit the supposed intent of their actions against I-gaming. Strikes against it were advertised to the conservative base of the Republican Party as upholding traditional values and morality. But an administration that began the parade of trillion dollar deficits, which attempted to fight two wars overseas off the books, and presided over the growth of the housing securities bubble which did near-fatal damage to the economy of the USA and the world, could hardly claim to be practicing the old-time religion of small budgets and limited government. But as usual, righteous posturing against Wicked Gambling was a great cover story, a useful distraction while the genuine conservative agenda was quietly sold down the river.

    Moreover, there was a dirty little secret at the bottom of it all: there was hardly any such thing as an effective law against online gambling anywhere in America. Only sports betting fell squarely under the official interdict. Such things as online poker and virtual table games were unknown when the state and federal gambling laws were passed. It all boiled down to the fundamental question of location- just where does an Internet bet actually take place? If it takes place at the gaming website's server, then the location of that server has jurisdiction. If it takes place where the gambler resides, the place of residence has jurisdiction. We are 15 years into the problem of Internet gambling, and this point has still not been settled. In fact, US courts have not even seriously analyzed it.

    But they didn't need to. The US Department of Justice used raw administrative power in place of the rule of law. The technique was perfected on Wall Street. When a hedge fund or other investor got up to shenanigans that weren't exactly in the existing playbook, New York prosecutors would strong-arm what came to be called "consent decrees". The accused never went to trial, but instead paid a nice big fine, and while admitting no wrongdoing, promised not to do it again, whatever it was. And the prosecutor got a nice new scalp to display (especially helpful in an election year).

    And just like the investment bankers, online gaming operators tended to handle such probes as a business decision. Pay the fine, and you know just how much it'll cost. Go to trial, and you risk everything. Better to pay up, shut up, and tell ?em you'll be a good boy from now on. Or until the coast is clear.

    In late 2006 the Bush DOJ turned up the heat with the Unlawful Internet Gambling Enforcement Act (UIGEA). Much has been written about the dubious origin and seamy tactics of this bill, which was literally snuck onto the Federal law books in the dead of night. Suffice it to say that highly questionable means were used to force through an admittedly unnecessary law, couched in unintelligible terms, the better to defeat a completely imaginary threat to the so-called morals of the nation which gave the world LSD, The Bomb, Hell's Angels, Playboy and a multi-trillion dollar real estate securities swindle.

    Nevertheless, the law had its desired effect- at least initially. Party Gaming pulled out of the US market, along with many others. At first this was quite serious, for US customers make up half of the online poker market, even yet. But a funny thing happened on the way to total annihilation of Internet poker. They never got there. And never will.

    Black Friday and Party's return

    For as soon as Party Gaming had been chased out of the arena, other gladiators appeared: ready, willing, and able to fill the gap and exploit an online poker market that had grown past $12 billion (with the USA still providing between 50% and 60%, depending on who you talked to).

    Sure enough, FullTilt and PokerStars grew into the role, and became billionaire players in their turn. Had the transfer of money back and forth become a little, um, sketchy? Fact of life: for that kind of money, somebody will be found to run the blockade. Same as Prohibition.

    Fear not: the Inquisition was waiting. On April 15, 2011, known at the time as "Black Friday", the DOJ descended on FullTilt, PokerStars and Absolut Poker. In a sequence which has become all too familiar, the Federal prosecutors of the second District of New York froze the bank accounts of all the above-mentioned, and then announced that the fact that they didn't pay their players proved that they were crooks. Kind of like throwing somebody out a third-floor window and then writing him a ticket for blocking the sidewalk.

    As usual, there were few actual prosecutions, but lots of intimidation and the sort of funds extraction that would be termed a "shakedown" if done by non-governmental parties. Little doubt that the powers -that- be were looking for the usual show trial without the trial; the indictment on minimal charges, followed by a big fat fine and apology. But this time it turned out slightly different. To be sure, they paid. They paid big. $547 million in gotcha charges, over and above cashing out the existing customers.

    But let's be clear about it, this was not a crime and punishment scenario. Arrangements for them to pay customers came from consultations with the DOJ. It took a year and some change to start getting the money back to the players. In the meantime, Pocket Kings, LTD, the parent company of FullTilt, was reported to be hiring again almost a year to the day after the supposed "Black Friday Massacre".

    Well, all right, but that's in Dublin. America's gambling virtue has been preserved, right?

    The Return

    To use a well-worn East Coast phrase : fuhgeddaboutit.

    Don't look now, but the stones which the authorities have rejected are now well on their way to becoming the cornerstones. Again. Poker Stars, the supposed villains of Black Friday, got a new parent company in France and coolly applied for an Internet gambling license from the New Jersey authorities this year, through connections with the Atlantic Club casino of Atlantic City. This was turned down, because one of the Poker Stars principals was still entangled with the law, on charges of bank fraud, money laundering, and other heavy caliber no-no's. His transfer of interest to his son was somehow not taken seriously by the counsel for the prosecution. Resolution of this matter is still pending. Nevertheless ,it is extremely significant that the application was entertained at all.

    And in the meantime, Party Gaming, having undergone a similar reincarnation with a European partner, has actually made it back to the States, whence they came. If all goes well, they'll be back in the mix on November 26th.

    Villains, but OUR villains

    But weren't they the original villains of the piece? Well, yes.

    But another funny thing happened on the way to excluding those damn "furriners": the US establishment- government or vested interests- found they couldn't do without ?em. All very well to posture and bellyache that those overseas criminals must be excluded from tapping the pure, licensed, US market. Another thing entirely to discover that they were the only ones who knew how to make the business work as a business. To enter the game without their help was to resign your jurisdiction to reinventing the wheel, in a context that had already discovered warp drive.

    Prospective legislation about Internet gambling often features righteous denunciations of those online sites which have accepted American customers without American permission (never mind that the state of the law was so comprehensively screwed up that no one could tell whether it was legal or not). But as a practical reality, this is giving way to the needs of the market.

    Internet gambling began as a global market and will always be one. Any government-state, local, provincial, whatever- which wishes to enter this market must have the help of people who know what they're doing. Forgiveness, in other words, is obtainable at a price. It would be foolish to exclude oneself from this market simply from a desire to punish a crime that was never adequately described in the first place.

    Or as Groucho Marx once remarked: "it's not the Money that matters: it's the AMOUNT".

    Copyright 2013

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