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Black Friday
Apr. 17th, 2011 05:46 pmI suppose that those who know about such things might have expected me to post something earlier on the US Department of Justice's indictment of a number of the senior figures at Pokerstars, Full Tilt and Cereus (Ultimate Bet and Absolute). Indeed on Friday I did a few updates on Facebook, since the news was actually breaking at that time, so I was bringing some added value to the table.
Now, however, I'm not sure that I have that much to contribute. I'm not an insider; I have little inside knowledge.
For those unaware of what happened, on Friday, probably around 11am local time, the Southern District of New York served an indictment on the alleged owners and founders of three poker sites that offer online poker in the US. In simple terms, most of the charges relate to the 2006 Unlawful Internet Gaming Enforcement Act (UIGEA), which led to Party Gaming and IPoker pulling out of the US. Stars, FTP and UB stayed, asserting that they were not breaking the law of the UIGEA. These charges have maximum penalties of five years in prison and five-figure fines.
However, two of the charges (and I shall focus on these) relate to money laundering and wire fraud. They assert that the three companies set up 'shell' operations (online flower sellers, pet food sellers), to conceal that money transactions with US players were for the purposes of online gaming. Penalties for these two offences are roughly six times higher than for the UIGEA charges. Once again, I recall that old tale -- they only caught Al Capone for tax evasion.
Also charged were people alleged to have helped with the payment processing, including the part-owner of a small Utah Bank which, the charges claim, was effectively 'owned' by Pokerstars.
The DoJ also "seized" the pokerstars.com and fulltiltpoker.com domain names. The legality of this is perhaps up for grabs. Pokerstars (domicile, Isle of Man) immediately shifted to pokerstars.eu, while over the weekend Full Tilt looks to be going over to fulltiltpoker.co.uk.
++++++++
There are several separate strands on this that are running.
1) The impact on US online poker
2) The impact on US players' balances with Stars/FTP/UB
3) The impact on non-US online poker
4) The impact on non-US players' balances
5) The impact on the online companies
6) The wider impact for the US poker industry (B&M games, TV entertainment, the WSOP and other major tournaments).
1) The impact on US online poker: Well, for the moment, it's dead. Up until Friday, the talk was of the Harry Reid blackout and a Nevada bill that was quasii-legalizing the business. But Pokerstars and Full Tilt have now closed off online poker to US players. The message you receive is the same as if you are trying to play from France. (UB at the moment is still taking players. Tom Dwan thinks UB is a busted flush and that this is a cash grab. He has advised against making a deposit there.)
For US professional players, they are effectively unemployed. There was talk on 2+2 overnight about getting a foreign address, utility bill, etc, but my suspicion is that Pokerstars will do anything not to give the DoJ extra leverage. If you had a US address when the indictment went through, Stars/FTP will make much more sure that any "emigration" is genuine than they would have before Black Friday.
Within a few years there will be online poker again, run by Harrahs.com, or whatever. Those guys with skills in the area who have to leave Stars/FTP will almost certainly be hired by these "new" sites. Chances are that non-US players will be locked out.
2) The impact on US player balances: At the moment, frozen, as in the Neteller case a few years ago. Pokerstars/FTP/UB no longer have a payment processing operation in place. Bank accounts in 44 countries have been 'seized'. This is misleading, in a way. What that means is that themoney is just sitting there. The DoJ hasn't taken it. It's just stopping the pokersites doing anything with it. Once again, if these monies are in foreign lands, the legality of this is dubious. But, for the moment, there doesn't seem an easy way to get money to US players.
3) The impact on non-US online poker: In theory, Stars and FTP will become softer, because the US already made it hard to deposit cash. This "weeded out" the more casual player. So, although the average standard of play in the US is probably not much higher than it is in the rest of the world, the persistence required to play in the US had made it, on average, a stronger set of players.
Meanwhile, the cash guarantees at Stars have been cut, possibly by a bit too much. I suspect Stars will start restoring the good guarantees fairly soon.
Deposit bonuses for non-US players will increase as poker companies battle it out for a smaller player base.
The online poker world is becoming geographically split. Countries want their share of the tax revenue, and the best way to do that is to have poker sites that are country-specific. Although this will reduce liquidity, it's no bad thing for the good online player, because the average standard of UK players online is lower than it is in Sweden, Norway, Germany, Russia, the US or Canada. It's about the same as Spain, Netherlands, Denmark, Finland, other eastern European countries. It's a bit better than Belgium, Australia, South Africa, Israel.
Lots of the online world missing there, of course.
4) The impact on non-US players' balances: Not sure yet, as I haven't bothered to try any withdrawal. It all depends on the success of the DoJ in freezing the international funds. My hunch is that it will not have a significant impact -- with the exception of UB, where I take Tom Dwan's warning seriously.
5) The impact on the online poker companies: Clearly, it's huge. Pokerstars in Costa Rica will be significantly affected. The company's US-bias was about 37%, so, as of now, it's 63% the size of what it was. My hunch is that they will have to settle, if only because the money laundering and wire fraud penalties are so huge. There are both criminal and civil charges pending, and the civil charge seeks compensation of $3bn. I wouldn't be surprised to see a settlement from Stars in excess of $500m, and of around $1bn in total. This could take 18 months or so to play out. In the meantime, they need to grow elsewhere in the world.
6) The impact on the non-online poker industry: Huge. This could be an article in itself. Since TV coverage in the US was little more than thinly-disguised promotions for Stars and FTP, all of that will be dead. The WSOP attendance will fall by half. Indeed, you could argue that the WSOP should be held in Europe rather than in LV, because a majority of the main event players will -- by virtue of satellite qualifiers -- be from outside the US. Without the oxygen of TV publicity, poker will have a far lower profile in the US. Casual players will fall away. ESPN staffers will be looking to dust off their CVs. The online poker-coverage sites (including 2+2, Cardplayer, etc etc) will also suffer.
The only way to avoid this disaster would be for acts to go through Congress and the Senate fairly quickly to legalize online gambling within a "Harrahs.com" context. This, in effect, would be a hijacking of the US market by the B&M gambling industry. The only losers would be the stakeholders in Stars/FTP/UB. Even most of the employees would probably find it fairly easy to slide across.
The risk, though, is that Harrahs and the other new players would fuck it up. One only has to look at how badly Ladbrokes ran its online poker site, at how badly Betfair performed, and at how little companuies such as Grosvenor in the UK know about poker, to see that just because you can run a gambling operation does not mean that you can run an online poker site.
+++++++
Oh, and the impact on me? Well, minimal, TBH. If anything, it's a positive, although the prospects for the long term don't look good. The corporatisation of online poker was well underway anyway, and Stars, with its Supernova system, had got close to its "everyone goes broke slowly" ideal.
The US has been becoming a less relevant part of the online poker community for a good few years, but the testosterone-fuelled 2+2 posters were too blind to see it. Although one can admire Americans' built-in optimism, it has a flip-side. So many opf the US online professionals not only did not have a plan B (hence the panicked talk about relocating, with most of them not even aware of the rules regarding (or differences between) residency, diomicle and citizenship) but they also had too much (now frozen) money in the poker sites, meaning that they can't even pay the bills at the end of the month.
It's hard to feel much sympathy for poker professionals who don't have the metagame foresight to prepare for the worst. That said, I DO feel some sympathy for the huge-volume grinders who will have seen much of their work for the first four months of the year laid to waste (because of the way the bonus/rakeback system works on Stars). That's because for these guys there wasn't much they could do to mitigate the disaster.
The prize for the "biggest asshole" of the week undoubtedly gets split between two people.
The first was the 2+2 poster "SpaceGhost" who, after the original news was broken by RazzSpazz, said, not once, but twice in the thread that it was "total bs". Later he tried to explain it away but, too late!
The second was Janice Fedarcyk, "Director In Charge" at the FBI Field Investigation. She said that the online poker sites "bet the house" and "tried to stack the deck". Clue. Do not use poker metaphors when charging online poker sites. It just makes you look silly.
_______________
(BTW, do not go to www.escapistmagazine.com for details on this (it appears high in the google list). I got the Windows Defender Virus pop-up message: "This requires an earlier version of Java" which, if you click OK, installs the virus.)
________________
Now, however, I'm not sure that I have that much to contribute. I'm not an insider; I have little inside knowledge.
For those unaware of what happened, on Friday, probably around 11am local time, the Southern District of New York served an indictment on the alleged owners and founders of three poker sites that offer online poker in the US. In simple terms, most of the charges relate to the 2006 Unlawful Internet Gaming Enforcement Act (UIGEA), which led to Party Gaming and IPoker pulling out of the US. Stars, FTP and UB stayed, asserting that they were not breaking the law of the UIGEA. These charges have maximum penalties of five years in prison and five-figure fines.
However, two of the charges (and I shall focus on these) relate to money laundering and wire fraud. They assert that the three companies set up 'shell' operations (online flower sellers, pet food sellers), to conceal that money transactions with US players were for the purposes of online gaming. Penalties for these two offences are roughly six times higher than for the UIGEA charges. Once again, I recall that old tale -- they only caught Al Capone for tax evasion.
Also charged were people alleged to have helped with the payment processing, including the part-owner of a small Utah Bank which, the charges claim, was effectively 'owned' by Pokerstars.
The DoJ also "seized" the pokerstars.com and fulltiltpoker.com domain names. The legality of this is perhaps up for grabs. Pokerstars (domicile, Isle of Man) immediately shifted to pokerstars.eu, while over the weekend Full Tilt looks to be going over to fulltiltpoker.co.uk.
++++++++
There are several separate strands on this that are running.
1) The impact on US online poker
2) The impact on US players' balances with Stars/FTP/UB
3) The impact on non-US online poker
4) The impact on non-US players' balances
5) The impact on the online companies
6) The wider impact for the US poker industry (B&M games, TV entertainment, the WSOP and other major tournaments).
1) The impact on US online poker: Well, for the moment, it's dead. Up until Friday, the talk was of the Harry Reid blackout and a Nevada bill that was quasii-legalizing the business. But Pokerstars and Full Tilt have now closed off online poker to US players. The message you receive is the same as if you are trying to play from France. (UB at the moment is still taking players. Tom Dwan thinks UB is a busted flush and that this is a cash grab. He has advised against making a deposit there.)
For US professional players, they are effectively unemployed. There was talk on 2+2 overnight about getting a foreign address, utility bill, etc, but my suspicion is that Pokerstars will do anything not to give the DoJ extra leverage. If you had a US address when the indictment went through, Stars/FTP will make much more sure that any "emigration" is genuine than they would have before Black Friday.
Within a few years there will be online poker again, run by Harrahs.com, or whatever. Those guys with skills in the area who have to leave Stars/FTP will almost certainly be hired by these "new" sites. Chances are that non-US players will be locked out.
2) The impact on US player balances: At the moment, frozen, as in the Neteller case a few years ago. Pokerstars/FTP/UB no longer have a payment processing operation in place. Bank accounts in 44 countries have been 'seized'. This is misleading, in a way. What that means is that themoney is just sitting there. The DoJ hasn't taken it. It's just stopping the pokersites doing anything with it. Once again, if these monies are in foreign lands, the legality of this is dubious. But, for the moment, there doesn't seem an easy way to get money to US players.
3) The impact on non-US online poker: In theory, Stars and FTP will become softer, because the US already made it hard to deposit cash. This "weeded out" the more casual player. So, although the average standard of play in the US is probably not much higher than it is in the rest of the world, the persistence required to play in the US had made it, on average, a stronger set of players.
Meanwhile, the cash guarantees at Stars have been cut, possibly by a bit too much. I suspect Stars will start restoring the good guarantees fairly soon.
Deposit bonuses for non-US players will increase as poker companies battle it out for a smaller player base.
The online poker world is becoming geographically split. Countries want their share of the tax revenue, and the best way to do that is to have poker sites that are country-specific. Although this will reduce liquidity, it's no bad thing for the good online player, because the average standard of UK players online is lower than it is in Sweden, Norway, Germany, Russia, the US or Canada. It's about the same as Spain, Netherlands, Denmark, Finland, other eastern European countries. It's a bit better than Belgium, Australia, South Africa, Israel.
Lots of the online world missing there, of course.
4) The impact on non-US players' balances: Not sure yet, as I haven't bothered to try any withdrawal. It all depends on the success of the DoJ in freezing the international funds. My hunch is that it will not have a significant impact -- with the exception of UB, where I take Tom Dwan's warning seriously.
5) The impact on the online poker companies: Clearly, it's huge. Pokerstars in Costa Rica will be significantly affected. The company's US-bias was about 37%, so, as of now, it's 63% the size of what it was. My hunch is that they will have to settle, if only because the money laundering and wire fraud penalties are so huge. There are both criminal and civil charges pending, and the civil charge seeks compensation of $3bn. I wouldn't be surprised to see a settlement from Stars in excess of $500m, and of around $1bn in total. This could take 18 months or so to play out. In the meantime, they need to grow elsewhere in the world.
6) The impact on the non-online poker industry: Huge. This could be an article in itself. Since TV coverage in the US was little more than thinly-disguised promotions for Stars and FTP, all of that will be dead. The WSOP attendance will fall by half. Indeed, you could argue that the WSOP should be held in Europe rather than in LV, because a majority of the main event players will -- by virtue of satellite qualifiers -- be from outside the US. Without the oxygen of TV publicity, poker will have a far lower profile in the US. Casual players will fall away. ESPN staffers will be looking to dust off their CVs. The online poker-coverage sites (including 2+2, Cardplayer, etc etc) will also suffer.
The only way to avoid this disaster would be for acts to go through Congress and the Senate fairly quickly to legalize online gambling within a "Harrahs.com" context. This, in effect, would be a hijacking of the US market by the B&M gambling industry. The only losers would be the stakeholders in Stars/FTP/UB. Even most of the employees would probably find it fairly easy to slide across.
The risk, though, is that Harrahs and the other new players would fuck it up. One only has to look at how badly Ladbrokes ran its online poker site, at how badly Betfair performed, and at how little companuies such as Grosvenor in the UK know about poker, to see that just because you can run a gambling operation does not mean that you can run an online poker site.
+++++++
Oh, and the impact on me? Well, minimal, TBH. If anything, it's a positive, although the prospects for the long term don't look good. The corporatisation of online poker was well underway anyway, and Stars, with its Supernova system, had got close to its "everyone goes broke slowly" ideal.
The US has been becoming a less relevant part of the online poker community for a good few years, but the testosterone-fuelled 2+2 posters were too blind to see it. Although one can admire Americans' built-in optimism, it has a flip-side. So many opf the US online professionals not only did not have a plan B (hence the panicked talk about relocating, with most of them not even aware of the rules regarding (or differences between) residency, diomicle and citizenship) but they also had too much (now frozen) money in the poker sites, meaning that they can't even pay the bills at the end of the month.
It's hard to feel much sympathy for poker professionals who don't have the metagame foresight to prepare for the worst. That said, I DO feel some sympathy for the huge-volume grinders who will have seen much of their work for the first four months of the year laid to waste (because of the way the bonus/rakeback system works on Stars). That's because for these guys there wasn't much they could do to mitigate the disaster.
The prize for the "biggest asshole" of the week undoubtedly gets split between two people.
The first was the 2+2 poster "SpaceGhost" who, after the original news was broken by RazzSpazz, said, not once, but twice in the thread that it was "total bs". Later he tried to explain it away but, too late!
The second was Janice Fedarcyk, "Director In Charge" at the FBI Field Investigation. She said that the online poker sites "bet the house" and "tried to stack the deck". Clue. Do not use poker metaphors when charging online poker sites. It just makes you look silly.
_______________
(BTW, do not go to www.escapistmagazine.com for details on this (it appears high in the google list). I got the Windows Defender Virus pop-up message: "This requires an earlier version of Java" which, if you click OK, installs the virus.)
________________
