Today, Tuesday April 15th marks 3 years since the fateful day for poker players when the U.S. government seized the websites PokerStars.com, FullTilt.com and AbsolutePoker.com. As a result of 'Black Friday' the interest in poker stateside has declined dramatically and new legal state sanctioned poker sites are missing their targets. In fact New Jersey has revamped their revenue projections by 1/10 and Nevada is still struggling to get 300 active players a day. The casino companies and governments may be surprised by the lack of interest in online poker but they shouldn't be. What's happening with poker is similar to what happened with baseball after the 1995 strike. In that year the players launched a strike cancelling the whole post season and it took the league years to recover. The owners and players just assumed fans would come running back to the ball parks when baseball started up again but fans found other ways to occupy their time that they deemed more meaningful than attending a baseball game and many fans were so fed up with the indifference the league had to them that some chose to stay away. League representatives at the time admitted that taking the fans for granted was a huge mistake that cost them dearly.
Unfortunately for the casino companies and state governments, the same thing happened with online poker. Americans were left reeling when they could no longer play at their favorite poker sites but rather than seeking out poker site alternatives that were accepting American customers the majority chose to just give up on the game altogether and find other ways to occupy their time. Their new philosophy was, "out of sight, out of mind". In fact a survey of former online poker players conducted by USGamingSurvey.com in 2012 showed that more than 75% of respondents said they were waiting on the sidelines and had no interest in poker and would decide whether to join a legal poker site once that opportunity presented itself. One of the major beneficiaries of poker's decline was social media games that gained a whole new interest as well as some other forms of entertainment. As a result it should not be too shocking that most New Jersey and Nevada residents were disillusioned and disinterested and as a result have not taken to the new "legal" online poker offerings. It should also be noted that land-based gambling and particularly poker in both states have declined greatly over that period too.
The question is whether anything can be done to help regain interest in poker stateside and the answer is probably "yes" but to do so the governments and casino companies will have to shelve their egos and accept a solution that many find repulsive. Namely, the governments need to allow PokerStars and/or Full Tilt into the market and let them lead the way. At this point a brief history is needed to explain the reasoning.
On April 15th PokerStars and Full Tilt represented almost 80% of all play online among Americans and the sites had tens of thousands of U.S. players. Most of the general public knew who Phil Ivey, Daniel Negreanu and Phil Hellmuth were and they watched and learned from TV programs offered by the two sites such as Poker after Dark and The Big Game. And no doubt many were hoping that some day they could be the next Chris Moneymaker who turned a $12 satellite buy-in into over $1 million. And to their credit the advertising by PokerStars and Full Tilt helped perpetuate that hope. The two companies were marketing geniuses as well as being very successful, well run sites, so they were able to keep the allure and interest in poker high. Naturally that all went away after Black Friday. Along with all the customers, the industry lost their biggest sales representatives (the marketing genius behind PokerStars and Full Tilt), and it was inevitable that interest would wane. And whether Caesars, MGM and the like want to admit or not, cold selling isn't their strong point. In fact at a recent conference I attended (not gambling related) I asked 5 people from New Jersey if they were playing poker online now that it's legal and 4 of them indicated they didn't even know it was legal. Asked if they saw much advertising or promotion for online poker in New Jersey all 5 of them said "no." Poker Stars and Full Tilt, (now under the direction of a company called The Rational Group), would no doubt have flooded the airwaves and put up billboards and advertisements to let citizens know it existed the same way PokerStars does in Canada and Europe now. Plus, The Rational Group would have hired the right professionals to generate interest among the disillusioned players in those states. As well just the ability to play once again at PokerStars would lure a large number off former customers who moved to the sidelines back into the game. The US Gaming Survey poll even indicated that. The fact they can play with Ultimate Poker or Borgata Poker just isn't generating the same excitement among those former players.
Of course there's another reason the Rational Group should be allowed to offer poker in states that now sanction it – it's the right thing to do. After Black Friday American poker players were left quite upset but Full Tilt customers were left even angrier since they weren't paid back the funds they had in their accounts. PokerStars immediately paid back all U.S. customers, since they kept operating funds separate from post up funds, but Full Tilt, who didn't segregate the funds, had no way of paying anyone back. It became evident after the U.S. government looked closely into Full Tilt's background that the company was more or less insolvent, leading the government to call Full Tilt a ponzi scheme that paid managers and professionals before post up players. Full Tilt lawyers and industry experts, on the other hand, suggested that Full Tilt's issues were simply a case of mismanagement and arrogance by the CEO and the finance people who decided to fund player accounts before deposits actually cleared, mostly do to the inability of Full Tilt to find proper payment processors that could fund payments in a timely and efficient manner.
The U.S. government believed that they were going to be commended by the general public for unveiling a manipulative scheme but instead they were met by a large number of very angry poker players who put all the blame on the government's shoulders. This was evident not only by letters written to the government and from petitions like those on the Poker Players Alliance (PPA) website but also on poker forums which were calling for poker players to let Black Friday be a determining factor in 2012 when casting their votes, similar to the way poker players almost single handedly defeated Jim Leach in the 2006 mid-term election in Iowa. Full Tilt players suggested that the payment processing issues experienced by Full Tilt were a direct result of the UIGEA and efforts by the U.S. government to block transactions to offshore websites. More importantly, players placed the inability to get their funds directly at the feet of the DoJ. Players indicated that regardless of the internal issues that were occurring at Full Tilt they were still able to get paid their funds when requesting a withdrawal and almost every industry analyst agreed that he company was making more than enough money in rake to continue with their setup until such a time that they could find a reliable payment processing system.
Realizing that these poker players represented a lot of votes (the PPA has over 1 million members) and many in swing states, the government decided they had to assuage the poker players somehow or risk a possible defeat. The company started working with the Alderney government who held Full Tilt's license to find a buyer for Full Tilt that would pay back American players immediately. The Alderney government did eventually find a buyer with Groupe Bernard Tapie (GBT) but the U.S. government dithered on approving the deal, eventually causing GBT to withdraw its offer. As a last resort the DoJ approached PokerStars and cut a deal with them to purchase Full Tilt Poker in July 2012.
PokerStars agreed to pay $731 million to reimburse both U.S. and rest of the world players and the U.S. government would keep the rest as a fine. In return PokerStars and Full Tilt admitted no wrongdoing for their involvement with offering poker to American customers in the past and the U.S. government agreed to dismiss all charges against both companies with prejudice. As well the government agreed that PokerStars and Full Tilt could offer their products in the U.S. once a legal regulatory framework was set stateside. Unfortunately it seems that word is worth nothing.
When New Jersey indicated they were going to legalize online gambling PokerStars applied for a license and sought to buy the Atlantic Club Casino in Atlantic City to meet the requirements of a license. The deal almost went through until the American Gaming Association and some government officials encouraged the casino to cancel the deal stating that the Rational Group should not be allowed a New Jersey license because they are 'bad actors' due to their involvement with the U.S. market after the passing of the UIGEA. Of course the AGA was just trying to keep an oligopoly among their members, but the Atlantic Club backed down and the DoJ did nothing to inform the AGA and New Jersey government that under the terms of the agreement in 2012 PokerStars was not a 'bad actor' and their past could not be held against them. In fact, some suggest that some DoJ agents were secretly part of trying to get the Rational Group nixed from that deal. To his credit New Jersey Senator Ray Lesniak recently stated that he would welcome PokerStars into the New Jersey online market for many of the reasons above.
But it's not just in New Jersey that the Rational Group is being stonewalled as a result of their "past wrongs." PokerStars has tried to set up a partnership with the Morongo Tribe in California to offer poker to Californians once that state sets a legal regulatory framework, but some in government along with the California Tribal Business Alliance and other tribes are trying to block PokerStars from setting up the partnership because they are deemed 'bad actors' due to their involvement with U.S. players after the passing of the UIGEA. And like the case with New Jersey, no one in the DoJ or any of the federal government is helping to inform those entities that under the agreement they reached with The Rational Group, the past can't be held against them.
So it's time that the Rational Group is allowed to offer online poker in states that have legalized it.
Not only do they have the right to do so under the agreement with the DoJ but in the end it will help online poker regain some of its lost allure and customers. The casino groups and tribes believe that keeping PokerStars and Full Tilt out of the market will ensure they keep all revenues, but there's no doubt that if the Rational Group can help regenerate interest in poker it will flow down to all the other poker companies. And in the end, all of the companies offering online poker will all be better off. After all, it's better to get a small piece of a large piece than a large piece of a sliver.
Contact Hartley via email at hartley[at]osga[dot]com.
Read insights from Hartley Henderson every week here at OSGA and check out Hartley's RUMOR MILL!