One of the things that I speculated about when I first analyzed the impact of the UIGEA was that the real force of this law was in drying up the money supply. Cut off the money and you kill the game liquidity. So, two and some odd weeks into this bill being law, let’s look at how the money transfer world has reacted.

Processor UIGEA Response
Neteller Has indicated they will comply with US law
FirePay Announced plans to no longer allow US customers to transfer funds to gaming sites
Moneybookers No longer allows US players to transfer funds to gaming sites.
Citadel Has issued a press release stating that they are reviewing their options. The CFO resigned 2 days before the bill was signed into law.
ePassporte No clear indication from ePassporte though many sites have never allowed withdrawals from ePassporte because they are primarily a credit card-ish sort of solution.
Click2Pay Unable to find an official statement from them on their website but other blogs and websites report that Click2Pay says that they are looking into it.
Nexum Financial Known by many different names due to the fact that Nexum allows merchants to rebrand their service. They basically are a EFT/ACH house so some of the rebranded names include the phrase echeck. No real statement from Nexum though on whether they intend on complying with the law.
Western Union / MoneyGram Both of these processors have banned online gaming transactions long before the UIGEA. Some sites use a third party service that lets people send cash to some person in a Latin American country that then desposits funds into your gaming account but WU and MG have been trying to crack down on these as they are a possible vehicle for money laundering and/or payments to coyotes bringing people into the US illegally.
IGMPay PartyGaming proprietary payment system. Party has said they will not accept US customers.
Credit Cards While it has never been illegal to use credit cards to fund gaming accounts, most credit card companies quit processing payments to gaming sites years ago which is the whole reason all these eWallet companies came into existance. Interestingly, even though someone like Neteller didn’t have to code their transactions as a gaming transaction, the credit card companies quickly picked up on what was going on and they declined credit card transactions with Neteller as well.
Paper Checks Possibly the most difficult to stop but the online gaming sites traditionally don’t have the staff to deal with paper checks. Also, being an offshore entity and depositing via offshore banks, paper checks would take, on average, 3 – 6 weeks to clear.

There are many smaller players but the above list of transfer methods probably account for 90% or more of all money moved around online gaming sites. The largest processors have either bugged out of the US market (or have said they will) or have not made any public statement about their plans going forward. How the rest of the market plays out over the next 270 days is anyone’s guess but my own personal opinion is that you’re more likley to see additional payment methods dry up. Many have said that new forms of payment will pop up seeing the massive opportunity, and I think many will try, but as long as the money is passing through the US banking system, it’s going to be very difficult as money laundering laws start to overlap with the UIGEA and US banks attempt to distance themselves from what might be an even bigger headache.

Now, that’s not to say that people won’t be able to fund their online poker accounts. In fact, I’ve posted workarounds that would allow US players to fund their accounts and play on sites that don’t accept US players. But who is going to go to that level of hassle? Maybe 20% – 30% of online poker players? And mostly those who are already winning poker players or think that they’re winning poker players. As the game liquidity begins to dry up, more and more of those winning players are going to face much stiffer competition and they will quickly become losing players. I mean, we’ve all seen the stats in PokerTracker and read about them on 2+2; only about 2% – 5% of online players are profitable over a sufficiently long period of time. Nobody is going to jump through hoops to deposit money onto a site if they constantly find themselves the mark at the table.

As Lou Krieger has already pointed out, 3000 people disappeared from the online poker playing community shorty after the bill was signed. If you look at the historical information for the top four poker sites, PokerStars, FullTilt, Party, and OnGame, their combined traffic was 30,095 for Sept 1, 2006. The numbers for Oct 31, 2006 show 26,173 for a total net loss of 3922 players. But, it was Halloween and Sept 1 was a Friday and the 31st was a Tuesday so let’s even these numbers out and take the first Sunday in Sept and compare it to the last Sunday in October. Sunday tends to be the busiest day for online poker sites so it should be a fair comparison. The first Sunday in Sept was Sept 3 and the combined total was 30,103. The last Sunday in October was the 29th and the combined totals were 26,153. Net loss is 3950 players.

One could go on and speculate endlessly on why this might be. For instance, the source of these numbers, PokerSiteScout, only counts cash game players (which, BTW, are the most profitable) so perhaps more people are playing tournaments. Regardless, this was a growth industry. Monthly growth rates of 2% – 5% were the norm. Now we have a 13% decline in overall players. The question that must be asked is whether this is a one time hit in response to the UIGEA or are we looking at a trend? It may be too soon to make that call and we’re sure to see many factors spring up over the next 270 days that will cause dips and spikes but one thing that is clear even now is that right now it’s easier to get money on an online gaming site than it will be in the near future. Many players rushed to deposit on their favorite sites and as they lose that money and find it increasingly difficult to reload, it lends credibility to the predictions that this is going to be more of a trend than a one time hit.

Right now many people seem to be focusing on the record breaking weekly tournaments at Stars as evidence that we’ve weathered the worst of the storm and have come out in relatively good condition. However, it’s a false comparison. When places like Party and 888 shut their doors to US players they forced those players to the few reamining sites accepting US players. Of course, Stars is going to post a record weekly prize pool. It would be hard not to considering they more or less combined two of the largest weekly tournaments available. The real question is whether or not the aggregate totals are getting bigger or smaller. Because as we’ve just seen with cash games, they certainly are not.

According to this article which doesn’t give exact details but has enough information to draw some general conclusions, the first big Sunday tournaments after the bill was signed and Party withdrew from the market saw record breaking turnouts for the Stars and Full Tilt tournaments. But how big? Stars saw their average for the $1 Million Guarantee go from 5000 to 6157 (though they did pull 5500+ players in the week before Party pulled out so the average may be low). Full Tilt went from an average of 1000 players in their $250K Guarantee to about 1300. But if Party was drawing 5000+ players for its $1 Million Guarantee, those numbers don’t add up. Stars gained anywhere from 600 – 1100 tourney players while Full Tilt picked up 300. Obviously there’s huge overlap between tourney players. Many of the Party players already were regulars in the Stars tournament. So, while it may seem like a massive jump for Stars or Full Tilt, there’s a lot of missing prize money that was left on the table somewhere.

All in all, it seems that what was a growing industry has taken a massive dip both in cash games and in tournaments. While the liquidity at Stars and Full Tilt has increased in both their cash games and tournaments, the overall industry has taken a bit of a fall. The short term impact is good for players as increased liquidity provides players with more opportunities but one also needs to keep an eye out for storms on the horizon like the fact that overall number of players is falling. When people have burned through their last minute deposits and Neteller and others start shutting down US accounts, we could see some of these one time gains wiped out almost as quickly.

Update: Haley has been covering the weekly guarantees and after seeing my post has put up some of the raw data. Bottom line: Yes, Stars and Full Tilt have been growing but their bumps aren’t as big as what was lost. Haley also observed that it seems to look like the big prize tourney players play X number of tourney’s a week/month. With Party gone, all that’s happened is that most have picked Full Tilt for their second tournament. So, we’re seeing an overall drop in the number of players but those remaing players are concentrated on fewer sites leading people to make false conclusions about the state of the industry.

Call Todd
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