I kind of get a kick out of how all so many blogs and poker news sites get so excited whenever some relatively minor development happens in regards to the legalization of online poker in the US. Mostly because it’s much ado about nothing.
Most likely we’re still about 12 to 24 months away from a bill really legalizing online poker to make it past the House and the Senate. None of the bills proposed so far have had any sort of overwhelming support. Online gambling has opponents on both sides of the aisle so this isn’t one of those bills they can ram down a minority party’s throat.
Of course the land based casinos are starting to change their tune towards online gambling and there’s always the off chance that they push for something sooner but that’s still going to be problematic with everything else Congress has on its plate. All things considered I think 12 – 24 months is an optimistic outlook.
The bad news is that it will probably be another 12 – 24 months after that before you see the first online poker rooms dealing a hand to US citizens with the express blessing of the government. The reason for that is that whatever gets passed will come with some strict consumer protections and the number one consumer protection tool is a licensing scheme. It will take awhile to appoint a licensing agency, draw up rules, and all of the other stuff you expect a gambling commission to do.
Now, a lot of this may sound straightforward as many states already have gaming commissions but online is a different beast. First off, we have to look no further than UltimateBet and Absolute to see that a major function of any regulatory body would be to make sure that players were getting a fair game. So a regulatory body will have to draw up a whole new playbook compared to brick and mortar casinos. They may include things like encryption protocols or having rules about what data may and may not be transmitted to the client software. They also have to come up with a way to monitor and enforce that, something no regulatory body is doing at the moment.
That could require substantially rewriting some poker platforms. For some it could mean completely throwing out their existing platform and starting from scratch.
And then we have the auditing and reporting requirements. Uncle Sam is going to want his slice of the pie. Most likely that will mean automating the submission of winning records to the IRS. Also, getting a US license to offer gaming might also come with the stipulation that the poker rooms must submit all previous payout information to the IRS. That could be a big, big problem for a lot of players who have been flying under the radar.
On top of the normal consumer protection stuff you also have to look at how land based casinos are going to try to influence regulations to their advantage.
For instance, should offshore poker rooms be allowed? It’s not difficult to make a case that any poker room that operates in the US have a US presence. That would put them under US legal jurisdiction and make it easier to go after crooked rooms.
But what about staff and servers? You can’t expect gaming commissioners to fly to Alderney every time they need to certify hardware and software, can you? So again, a good case could be made that the servers have to reside on US soil as well.
And shouldn’t all of your relevant staff members be located under US jurisdiction as well? Shouldn’t they be bonded? Even Gibraltar and Malta gaming commissions require that all final decisions take place there.
What this brings into play is that it will require many companies to establish a US presence, set up servers, and have key personnel in the US. As with most things, it sounds easier than it really is. First off, relocating your entire platform in the US is a huge undertaking. My guess is that you’re looking at 3 – 6 months of planning and actual work to pull it off.
But the biggest problem is how do you split your key staff? There are a finite number of people on this planet who have relevant experience in many specialties. How many managing directors? How many chief legal councils? How many poker room managers? Well, I think you start to get the picture. You probably wouldn’t need to double the size of your operations but maybe 50% – 60% of your key personnel would need to have counter-parts on both sides of the pond.
If I was a land based casino I would also push to close the US market off from foreign players like Italy has done. It’s easy to make the argument that foreign players colluding or otherwise cheating would be beyond US jurisdiction so online poker companies operating in the US should not permit them to play.
That would force many operators to make a choice. The vast majority of your smaller poker rooms simply don’t have the ability to staff up a US operation and market to it completely separately. Many European brands would have to opt out of playing in America. It would also force larger rooms like PokerStars and Full Tilt Poker to split their liquidity up and rob them of synergies.
Of course, from the perspective of a land based casino, this is exactly what I want. I want Stars and Tilt to get knocked down a peg or two while they’re scrambling to meet all of the other regulatory requirements of offering poker in the US legally. And as soon as my room picked up enough traction and I was competing head to head with Tilt and Stars (maybe even beating them) then I would go back to the gaming commission and recommend allowing US operators to take on overseas customers because we can prove our fraud detection and other various policies would sufficiently protect US players.
It’s exactly the same strategy they used with legalization. They opposed online gaming until they got their ducks in a row and now they’re in favor of it.
So when all is said and done, we’re still looking at 2 – 4 years before a government approved hand of online poker is dealt. And when that hand is dealt, it’s likely that online poker in the US will look very different from what we know today.
Instead of getting all excited about every little court case or getting all creamy because President Obama or some SCOTUS nominee players poker we should keep in mind the bigger picture which is that this is a slow moving process with many players. Even if the stars align nothing is going to happen overnight.