Off Shore Gaming Association

In January, Antigua announced that it was preparing to use the $21 million settlement the WTO gave it years ago and would apply it by suspending U.S. intellectual property rights (TRIPS).  Apparently the plan is to produce cheap versions of software, movies and music and sell it at a ridiculously low price with no reimbursement to U.S. companies who have trademarked and copyrighted those products. The hope is that doing so would cause such an outcry in the U.S. by companies like Sony and Microsoft to settle the dispute that the U.S. would either agree to allow Antiguan gambling companies access to the U.S. market or more likely that the U.S. would give Antigua a better deal in other areas of trade that would benefit their economy. The two sides apparently met in February and March to try and work out a settlement but neither side was close to what they believed was an equitable agreement. If Antigua does indeed proceed with the option it would likely be done through Slysoft, an Antiguan software company which would ensure it wouldn’t have to deal with countries that have tough anti-piracy laws.

I spoke to a former trade representative under the Bush administration who still has close ties to the current USTR and he informed me that if Antigua does indeed use TRIPS its method for retaliation that “Antigua would pay dearly.” Without going into great detail, the former representative said that the current government is prepared to go after the two industries that Antigua values most – high tech and tourism. Nkenge Harmon, a current U.S. Trade Representative has gone on record warning Antigua against using the TRIPS option.

“Government-authorized piracy would undermine chances for a settlement. It also would serve as a major impediment to foreign investment in the Antiguan economy, particularly in high-tech industries,” Harmon stated.

But the threat against tourism is new and if applied would have devastating consequences to the Antiguan economy. Tourism accounts for half ofAntigua’s GDP and a large number of those visits are by Americans. In fact Antigua has boosted its efforts to attract American tourists by increasing the number of ads and promotions to get U.S.citizens to fly to the tiny island. But if the U.S. does indeed take actions to prevent that (possibly by stopping advertising from Antigua or even issuing a travel advisory), the ramifications could possibly lead the country into bankruptcy. At the same time, the Antiguan government has indicated that the U.S. actions have practically ruined their economy anyways, since most online gambling operators have left and since they invested so much into setting up remote gambling that these actions may be a last resort anyways to help save Antigua’s economy from collapse.

Ironically the USTR won a case against China at the WTO around the same time that Antigua won their case against the U.S., where the WTO agreed that China wasn’t doing enough to protect intellectual property rights and ordered China to do more to protect the TRIPS agreement. China in turn has hinted at the Antigua case (namely the U.S.ignoring the ruling) as a reason not to comply. The fact that Antigua is prepared to use TRIPS as its retaliation measure just makes China’s argument more compelling.

Antigua has done everything in its power to get the U.S. to come to the table with a reasonable offer to settle the dispute but by all accounts the USTR refuses to cooperate fully because they believe the WTO ruling was wrong. So far there has been no harm nor foul on the USTR’s parts but if they actually use Antigua’s tourism industry to hit back at the Caribbean island, then all gloves are off and any sympathy or support internationally for the U.S. in this dispute will quickly disappear.

Contact Hartley via email at Hartley[at]osga[dot]com.

Read insights from Hartley Henderson every week here at OSGA and check out more from Hartley’s RUMOR MILL!

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In the 12 years I’ve written about the gambling industry, I made many contacts at various levels of government including a former DoJ agent from the Clinton administration. The agent has been quite vocal about the methods of the DoJ and knew long before the UIGEA was passed that the legislation was imminent.

“On the list of issues that are important to the Department of Justice, gambling is way down the list,” the DoJ agent told me.

The agent informed me that terrorism, drug trafficking and money laundering are the prime issues of concern for the DoJ and while gambling could be a part of money laundering if it involves organized crime, generally speaking that’s not the case. So when the DoJ arrested David Carruthers, then Peter Dicks and issued the warrants against Gary Kaplan and others in 2006 the former DoJ agent actually wrote to me months before and said “expect some major legislation to come down regarding online gambling in the near future.” Sure enough not long after those arrests the failed vote to stop online gambling and the inevitable passing of the same law by attaching it to the Safe Port Act occurred. The Agent was clear that when sweeps are made by the DoJ it’s almost always at the beckoning of the government and in preparation for a major vote on legislation.

Arrest warrants died down considerably after the passing of the UIGEA but on Black Friday the DoJ were in full force again and shut down the sites of the three main U.S. facing poker sites. As soon as that happened the DoJ agent called me and said that some big legislation was coming our way. “These arrests against Stars and Tilt are obviously directed by government to clean the street before they legalize poker stateside,” the DoJ agent said. And sure enough not long after bills to introduce legalized online poker came forth – both federally and at the state level and shockingly even John Kyl was on board! In the end the legislation never passed but the message had been sent. The DoJ agent also believed it was a message by Eric Holder to the state of Nevada that they’d better not step on Big Brother’s heels (as many will recall numerous land based casinos set up partnerships with online poker companies), but the main motivation behind the actions was to clear the way of hurdles for legislation to be enacted by not having to deal with the online poker sites in competition. In other words, the government wanted all the money made to be kept in the U.S. if the poker legislation passed.

Since then little had happened in the way of arrests, warrants etc. until recently. As many will recall the government made a major sweep in Nevada that eventually saw Cantor Gaming boss Mike Colbert arrested and the eventual ties to Pinnacle Sports and most recently a major sweep has been made to shut down Internet sweepstake cafes across the U.S. For those unfamiliar with the cafes, the owners issue cards which are used to purchase time on the café’s computers. There people play gambling games (apparently for fun) although cash prizes are awarded to individuals who win the most money. It’s clearly a way to skirt the gambling laws although café owners equate it to McDonald’s Monopoly game or similar fast food games where people are given a chance to win major prizes in exchange for buying food items.

“These cafes are small potatoes,” the former DoJ agent recently informed me “so to go after them, Congress must have some major legislation coming forward when they return in 2013.” The fact that the arrests related to casino games (at the cafes) and sports betting seems to indicate that the pending legislation may involve all forms of gambling and not just poker. So Congress may be preparing to address the issues of New Jersey’s challenge of PASPA, and the Native Americans concerns over online casinos along with just poker with a major piece of legislation that will encompass all areas of online gambling and sports betting.

“These arrests don’t just happen for no reason,” the former DoJ agent stated “so something big is about to happen, I’m guessing in February or March.”

And given this agent’s past record I wouldn’t bet against it.

Contact Hartley via email at Hartley[at]osga[dot]com.

Read insights from Hartley Henderson every week here at OSGA and checkout more from Hartley’s RUMOR MILL!

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Rumors about the sale of the Ongame poker network have been in the news for some time now. Bwin merged with Party Gaming last year and the new company wanted to move all the Bwin sportsbook customers to the more popular Party Poker network. Party Poker has been rated as one of the best in Europe for some time now and has scored the highest rating by reviewers on Pokerscout.com. As a result Bwin was looking to sell Ongame as surplus. Early in the year it appeared that Shuffle Master, the Nevada based developer of automatic card shufflers and gaming tables would be purchasing the company, but the deal fell through after Nevada failed to pass online poker legislation. Sources informed me that Shuffle Master was convinced that Nevada would be passing legislation by the summer and the company hoped to lure some of the Nevada casinos to the network by providing a ready to launch poker product. After it was clear that Nevada wouldn’t be legalizing poker any time soon, however, Shuffle Master backed out of the deal.

When Shuffle Master decided it was no longer interested, there were rumors that Zynga Poker, the Facebook social media poker site, would be purchasing the company. On the surface the purchase seemed to make little sense but as I wrote on OSGA.com at the time of the rumors surfacing, Zynga officials believed that having all licenses and paperwork in place, a base to launch from and some goodwill with the Ongame name would help make real money Zynga poker a success from the get go. It appears however, that Zynga has soured on the idea, possibly due to some negative pressure from Facebook and if they do indeed launch a real money site in the upcoming year they will do all the legwork from scratch. In all fairness, Zynga Poker has over 115,000 daily players on Facebook (albeit free social poker), while Ongame has fewer than 10,000 players. Zynga still says it is interested as apparently are Playtech and Gtech but the latter two probably are only interested in Ongame to eliminate potential competition to their already existing poker networks.

The new name to come forward as a possible purchaser of Ongame is Amaya Gaming, a Montreal based entertainment solutions provider. Amaya bought Cryptologic a couple of months ago but Cryptologic only produces casino and arcade games. Amaya is looking for a turn key poker product to complement that purchase. Amaya said it is interested in providing the products to customers in Europe and Asia but no doubt it has its eyes on Canadian provinces as well (and particularly Ontario) since many provinces are planning on introducing online casinos and poker. B.C. has hired Paddy Power to run their games and Quebec has its own provider but the other provinces will all be going online soon and Amaya would love to provide the provinces with a Canadian owned alternative.

To add some fodder to speculation that Ongame’s sale is imminent, this week Betfair announced that it will be launching online poker in Italy and Spain using the iPoker network, owned and operated by Playtech. The company insisted that the move will not apply to their other markets which still use the Ongame network but sources have told me that it’s just a matter of time that Betfair moves all its customers to iPoker. Several affiliates that were on the Ongame network moved to either the iPoker or Microgaming network apparently with mixed feelings from their customers. Some common complaints of both iPoker and Microgaming are that there are far too many disruptions, that the support leaves a lot to be desired and that the tournaments seem to be filled with bots. Of course those complaints are common with many sites. iPoker has been rated 1.5 out of 10 by reviewers on Pokerscout.com and Microgaming has been rated 2.3 out of 10. Ongame was slightly better with 2.8 out of 10. Party Poker has the highest rating with 4.8 out of 10.

Ironically, Amaya Gaming provides Betfair with the software for their arcade.

Contact Hartley via email at Hartley[at]osga[dot]com.

Read insights from Hartley Henderson every week here at OSGA and check out more from Hartley’s RUMOR MILL!

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Up until June it appeared that exchange wagering on horse racing in California was a sure thing. Two years ago The California Horse Racing Board gave its okay for TVG (owned by Betfair) to offer the product and the only hurdle that TVG had to pass was the approval by other horsemen and a reasonable figure for commission.

As the name suggests, a horse racing exchange operates like the stock exchange whereby one bettor offers a price on a stock (in this case a horse) and another bettor takes that price. The price they agree on is final and if the market changes subsequently it has no effect on the odds that are already agreed to. In North America currently the only option for horse betting is pari-mutuel where the odds on the tote board at the time of the bet are irrelevant and the odds the bettor receives are only known when all the pools, both at the track and those simulcast from other racetracks, are amalgamated and the track takes out its percentage (ranging from 17% to 30% depending on the type of wager). Many younger bettors have said that the fact they don’t know what odds they will be getting is one of the biggest turnoffs to them in betting on horse racing. The other major turnoff is the high takeout. Exchange wagering also offers two other advantages, the ability to bet while the race is being run and the ability to lay a horse (i.e. bet against it). Effectively laying a horse is similar to selling short a stock and is one of the biggest concerns that horsemen have indicated. They believe that the ability to wager against a horse will cause problems with integrity and may convince some jockeys (and possibly trainers or owners on advice to the jockey) to purposely lose on a horse in order to get a big payday on the exchange. After all, if a horse is 1/5 favorite they can probably get 3/1 betting against it and there are certainly subtle ways that jockeys can throw races if they want to. What these horsemen fail to realize is that every wager is logged and TVG would know exactly who placed a wager and for how much so they can actually indicate to the California Horse Racing Board that someone who wasn’t eligible to wager has placed a bet against a horse plus they can highlight suspicious betting patterns which can’t be done currently with pari-mutuel wagering.

I spoke to someone in California who is close to the situation and they were confident that exchange wagering will never get the go ahead as long as Frank Stronach has a say. While TVG and many other more visionary types see the exchange as a savior to the industry, my source says that Stronach is still old school and wants nothing to do with it. He hates the fact that all wagering on the exchange will be done only by computers and he particularly hates the idea of being able to wager against horses. And because Stronach is the head of the Los Angeles Turf Club and Pacific Racing Association, which owns Santa Anita and Golden Gate fields, his approval is necessary for the exchange to ever get the go ahead. That’s why my source is confident that the exchange is effectively dead as Stronach will never give his approval. Moreover, the source said that horsemen at all tracks also want a bigger commission than TVG proposed. The Betfair owned company proposed a 10% commission on all winning wagers to be split between the track, the horsemen and TVG. But the horsemen want it to be closer to the 20% that is taken out from pari-mutuel wagering now and they want the bulk to go to horsemen. The problem with that, as TVG pointed out, is that at a 20% commission there will be no incentive for younger bettors to wager on the exchange since the current exorbitant takeout is a reason they stopped betting on horse racing in North America as it is. Right now Betfair charges UK customers 3% – 5% commission based on their level of play, so the 10% commission is already higher than they would like, but the company realizes that the higher commission is necessary to get the horsemen to at least consider the idea.

Not surprisingly TVG is angry at the California Horse Racing Board’s decision and feel betrayed since they were effectively given the go ahead by the state amid much hoopla just over a year ago to offer the product and then had the rug pulled out from under them without a real discussion with the company. And no doubt TVG sees the writing on the wall that this delay could become indefinite. TVG’s options now are to go to another jurisdiction to offer the product, most likely New Jersey which has indicated interest; they can try and rally the troops to convince Stronach to change his mind; or they can just give up. The latter, however, is not likely. One of the main reasons Betfair bought TVG in the first place was the realization that they had a product that could revolutionize horse racing in North America and bring back younger bettors to the sport. What they didn’t realize is that they possibly had to wait for the old guard to die before they would get the go ahead. And at this rate, the industry will probably die before the likes of Stronach.

Exchange wagering is an exciting product and is a proven winner in Europe and Australia. It offers a way of betting horses that will bring younger bettors back to the sport but it seems that many horsemen still long for the days when horse racing was the only gambling game in town and the elite went to the track dressed in suits and dresses and paid a premium to sit in the clubhouse. At some point these horsemen will realize that those days are long over. Hopefully, it won’t be too late for the sport.

Contact Hartley via email at Hartley[at]osga[dot]com.

Read insights from Hartley Henderson every week here at OSGA and check out more from Hartley’s RUMOR MILL!

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Apparently there is a new poker room trolling for Ultimate Bet/Absolute Poker players who are waiting for their funds since Black Friday and they have a pretty good pitch.

Walker Poker has been spamming bilked players offering them a 45% rakeback and a 100% Instant Deposit Bonus. The rumor on the street is that the UB/Absolute list has been leaked, so Walker may just be the first poker room to go fishing using that list. The trouble is many players have no idea who Walker Poker is and have been asking us about them.

After a little digging through our database we were able to find that Walker Poker appears to have grown out of the ashes of Wingows Poker, a Costa Rican-based poker site that went belly up in 2008. Walker Poker took over some (not all) of the customers and then had the players complete a convoluted rollover based on rake to get their money. Though rollovers are not uncommon in a bailout situation, at the time Walker did not use the term bailout. Even more disturbing is that players on one of Wingows poker platforms were left with nothing, completely stiffed in the takeover. Walker claimed they overtook only Wingows that was under Dobrosoft network, not the DGS driven poker room and thus left those players using that software out in the cold.

Walker is now part of the Merge Gaming Network which does have several very reputable sites like Lock Poker, Carbon Poker, Poker Host and Play Aces, amongst others. But Merge has/had a relationship with FutureBet/Game Tech which is/was a known problem provider. Both Wingows and Walker were FutureBet websites at one time and both, in addition to UB, use the Kanhawake Indians in Montreal, Canada as their licensing body and location for their servers.

So is it worth taking a shot with this poker room? Options for U.S. players are limited but since the games are all networked in nature, we cannot see any reason to stray from the best and most reputable sites on the Merge Network. That said, outside of the initial problem with the Wingows players, we have not heard of problems at Walker Poker. If players do decide to take the offer from their recent email blast, please tread lightly and report back as to your experience.

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It came as somewhat of a shock when it was announced a couple of days ago that Groupe Bernard Tapie’s (GBT) bid to buy the assets of Full Tilt Poker fell through but what was more startling was the news that PokerStars was in the running to purchase Full Tilt for $750 million. I spoke to people in the industry and while some weren’t anxious to discuss the situation until the arrangement was finalized, I did find a couple of sources who were willing to talk anonymously. According to one of those sources, who is very close to the situation, PokerStars’ interest in purchasing Full Tilt has nothing to do with the assets or player lists of the now defunct Full Tilt (after all most non American Full Tilt players have already gone to PokerStars and both PokerStars and any rejuvenated Full Tilt would still banned from accepting U.S. players), but rather PokerStars is interested with the agreement the company has reached with the DoJ which is far more valuable to them.

Apparently the DoJ was never that sold on GBT’s bid to buy the company. Many in the government believe Alderney jumped at GBT’s initial offer and tried to sell it to the DoJ and public because the jurisdiction had egg on their face and were worried how it would reflect on other licensees they had. But the DoJ wanted someone who would pay back all customers immediately and they also wanted compensation for their efforts in bringing down Full Tilt. The DoJ had already extorted err . . . ‘negotiated’ a settlement of $300 million from Party Poker and one of its founders Anurag Dikshitz plus they reached a settlement with 888 Gaming for their past wrongs. In exchange for those settlements charges against the companies were dropped and it appears they have been given a clean slate to pursue a license if and when online gambling is legalized stateside. The DoJ weren’t convinced that GBT had the assets to pay back all players and were specifically concerned that GBT would stiff Americans owed money and concentrate on repaying Rest of the World (ROW) players because Americans were already cut off from playing at Full Tilt, with or without new owners.

Nevertheless, by all accounts the DoJ had agreed in principal to let GBT purchase Full Tilt but they were still talking behind the scenes to other potential buyers who had the assets to pay back everyone immediately and give the DoJ their pound of flesh. The DoJ fears were realized when GBT made it clear that they weren’t prepared to fully reimburse American players immediately and ROW players that were owed money would only be able to withdraw only $100 from their accounts without penalty and the remainder would be subject to a rollover requirement. Moreover, there was a time frame in which the ROW players could play through the amounts owed and if they didn’t meet the requirement there would be a penalty. Both the DoJ and Alderney were worried that this concocted scheme of repaying players could result in a lawsuit against Full Tilt and everyone involved in the agreement. According to the source, someone at the DoJ contacted PokerStars and the 2 sides started working out a deal whereby PokerStars would purchase the assets of the company for $750 million. Under the agreement all players owed money would be reimbursed right away (a little over $300 million) with no strings attached and the remaining $400 million plus would go to the DoJ.

The question on everyone’s mind is why in the world PokerStars would want to buy Full Tilt’s assets and more importantly how it’s worth even close to $750 million. After all, the goodwill in the Full Tilt brand is more or less gone and PokerStars is by far and away the biggest poker site in the world even today. The 2 sources told me that the answer is in the details that probably will never be released to the general public. The DoJ most likely is prepared to make a deal with PokerStars similar to what was arranged with Party Poker. If that is indeed the case then the lawsuits filed by the DoJ against Isai Scheinberg and Paul Tate will be dropped and PokerStars will effectively be given a pardon which will allow them to pursue a license to operate in the U.S. It’s highly unlikely they will endeavor to get a license themselves but will team up with one or more existing casinos. Don’t forget that Wynn had originally agreed to partner with PokerStars to offer a poker product to Nevada residents when the online product is legalized in the state and even though Wynn pulled out after Black Friday there will almost certainly be some renewed interest if PokerStars is given immunity. And as for Full Tilt they were willing to partner with Station Casinos so PokerStars would now have a couple of major partnerships already lined up and it seems just a matter of time before Nevada does legalize online poker. 888 Poker has already signed a partnership with Caesars and that deal was never cancelled since 888 was already effectively granted immunity after coming to an agreement with the DoJ after the passing of the UIGEA. As such, the agreement would be worth $750 million to PokerStars if they truly believe that online poker stateside will come sooner rather than later. And Wynn and Station will want to make sure the previous agreements are renewed so that Caesars doesn’t get a huge head start in offering online poker in Nevada.

Another motivation for the DoJ to come to an agreement that would repay players right away is that this is an election year. No doubt many in the government still recall how pissed off poker players effectively defeated Jim Leach in 2006 in his bid for re-election in Congress and the last thing Barak Obama needs is the PPA starting a campaign to defeat him because of Black Friday. If anything the agreement will likely win support from poker players because they are being repaid and one must remember that the DoJ exposed Full Tilt as a ponzi scheme.

If the deal goes through as expected, the rumor is that the repayment to American players will begin in early summer. Let’s hope so.

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