American Gaming Association Follows Bill’s Poker Blog Strategy

Pokerati posted recently regarding rumors that Senate Majority Leader Harry Reid will introduce a bill to legalizing online poker. DanM speculated:

Hmm, interesting. Now the purpose of the American Gaming Association’s shift in policy stance is becoming a bit clearer. Considering that they’re the representative voice for B/M casinos, you can see a plausible plan taking shape:

1. Let the UIGEA go into full effect June 1.
2. Eliminate the most powerful online poker operators currently in the industry (i.e. Tilt and Stars).
3. Pass a new law.
4. Let Harrah’s, the Sands, and MGM/Mirage set up shop.
5. Then let the European poker sites join the party.

Back in June of last year I wrote the following in a post titled Viva Las Vegas – Legalized Online Poker in the US:

Any legalization of online gaming will come with a regulatory body who will determine who can and cannot offer gaming to US citizens. One of the big assumptions at the moment is that because PartyPoker paid a fine that they are clean. Actually, part of the settlement was an admission of guilt. That admission may come back to haunt them if companies like Harrah’s lobby for licensing requirements that state that any company allowed to offer gaming cannot have illegally offered gaming previously. It’s a perfectly logical requirement and one that many people would agree with so I don’t think it would be too difficult for a land based casino to attempt to get it inserted into any licensing requirements.

In reality, I would be very surprised if any of the current top online poker rooms ever get a license to operate in the US. If I was Mitch Garber running Harrah’s online division I would pump as much lobbying money as it took to make sure that the licensing requirements were sufficiently stringent that all existing online poker sites would be disqualified.

Sounds like the AGA is moving the chess pieces to do exactly as I predicted. Even Party and 888 agree.

“The US will be protectionist even if it regulates, and its withdrawal from its GATS commitments means it doesn’t have to conform to any WTO regulation on internet gambling.

“There are five other states [with California] we know of that are considering regulating online poker, and we know the licences will go to US companies.” — 888 CEO, Gigi Levy

“The [egaming] world is changing as regulation takes different shape in different markets. But upcoming regulation means new entrants and competition in the market, and I worry less about direct competitors such as those sitting on this panel than I do about government-licensed operators and major media firms targeting their power markets in the future.” — Jim Ryan, CEO of Party Gaming

As Dan points out, letting the UIGEA go into effect and give the Feds a reason to go after companies like Stars and Tilt clears the playing field for brick and mortar casinos to set up and get a head start while these companies fight multi-year lawsuits trying to get back in the US market. Even “clean” operators who never offered gaming in the US will probably need to establish a US based presence and have all sorts of hurdles to clear before they can offer gaming in the US. This slows everyone down.

For instance, what if a licensing requirement was that you had to have all of your servers, staff, and operations in the US? Moving Full Tilt’s operations from Los Angeles to Dublin was about 6 months of planning and coordination. That was when they were only a fraction of the size they are today. How quickly could they move today?

This is and always has been a chess game being played by the AGA. They’ve taken the longterm approach and at the moment it looks like they’ve flanked the existing operators.

Online poker rooms have some options available to them but most of them involve partnering with the brick and mortar casinos. Someone like Stars could form a completely independent entity, Poker Stars Consulting, and basically run everything for the brick and mortars. Like a network but without the one-sided relationship that networks currently enjoy with their skins. The brick and mortars would be able to call the shots and the network would have to dance to their tune.

It should be interesting to see who moves on this first.

2 thoughts on “American Gaming Association Follows Bill’s Poker Blog Strategy”

  1. A few comments:

    (a) I think once the AGA members (especially notorious cheapskate Harrahs) start taking a closer look at the cost, difficulty and time frame of setting up a new online gaming site, they’ll find that perhaps partnering with existing “illegals” is not such a bad idea after all. It took these sites years to get their sites usable and stable (and many still are total crap, like Bodog), and even now there’s much to find fault with (e.g., PokerStars still doesn’t handle partial bets correctly in limit games), as well as the occasional crash.

    (b) I’ve had enough customer service problems with the offshore operators, including the supposedly good ones like Stars, that I won’t exactly be slitting my wrists if I can’t play on their sites any more.

    (c) I think you’re giving the AGA way too much credit. I don’t think anyone in the US b&m casino industry is smart enough to see the long-term here. I’ve never seen any evidence that the heads of the major gaming corps are good at anything other than persuading creditors to underwrite yet more acquisitions, mergers and new real estate development. I think they just finally realized how much money there were losing by trying to fight rather than join. Plus, no one will loan them money any more at the rates they used to get.

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