Now that the Internet Gambling Enforcement Act (2006) has been passed by US congress (after a back-door entry attachment to a Port Security restriction that was sure to pass) what now for online poker and what effect will it have on the multi-billion dollar US gambling industry as a whole?
The full effects of the US Gambling Enforcement Act are not likely to be known for some time, probably the end of the next financial year. The law, which restricts the provision for players to submit funds using US banking systems could be devastating, not only for the online poker companies themselves, but for the spin-off companies such as software providers, payment mechanism and the many other companies that all feed off the online poker industry. Indeed, Neteller’s share price dropped 63% upon release of a statement declaring that it was considering carefully its response to the US Act.
Some of the smaller poker sites will struggle to survive now, due to the massive loss of players from the US. You have for example Paradise Poker that has lost around 80% of the players from its network, and can now be seen as a site which will struggle to keep the liquidity of players that is necessary to be able to provide a competitive online poker site.
Already the law has forced many online gaming companies to rethink their strategy and direction, and there has been much speculation regarding mergers and takeovers with sites like Party Poker and 888 even suggesting collaboration.
However, since the Act, companies are now said to be increasing their marketing spend in the UK and into Europe, as a way of looking forward and moving away from reliance upon the US market. Party Gaming, one of the largest poker operators, already has a substantial part of the gaming market outside the US, with $150 million of revenues generated from non-US business this year, a 151% increase on the previous year. Playtech, another major player also has over 50% of its business derived from other regions such as Asia and Europe, so is likely to survive the fallout from the US Act.
A lot of the big companies have suspended the receipt of payments from US players, but sites like Party Poker still allow access by US players to its free play games.
Also, since the US Gambling Act came to pass, some US players have still been finding ways of cash playing online poker. One such player was said to have closed his Party Poker account, wired his money to an offshore account via Neteller, and then deposited via Neteller into Pokerstars, a Canadian based poker site. Casino City (who monitor online poker traffic) are said to have seen a huge increase in traffic into other offshore poker sites, fuelling speculation that US players will not be hindered in fulfilling their desire to play and gamble at poker.
On the other side of the ocean, the UK has recently seen safe passage of its UK Gambling Act. The Act could help the UK become one of the largest online gaming centres of the world. This of course will depend on the next stage processes, ensuring that tax levels and gambling commission regulations do not restrict too tightly the operations of online gambling. The UK Act will play an important part in helping age verification, gambling addiction and fraudulent behaviour to be monitored and will also allow the UK to be seen as providing legitimate access to online gaming, something which other European countries may wish to follow.
The state-run lotteries in most countries in Europe would like to see online gaming restricted, as protection of their own profits, but the future looks brighter in Europe as a whole, with countries like Italy and Portugal also looking at the licensing situation with regard to online gaming. Indeed Italy recently invited tenders to run one of its state operations.
What impact will the US Act have on the European online poker market? Well, most likely it will be a war on marketing from an increased number of competitors on a smaller market, due to the US change and the difficulties of entering the Asian market. So most likely the cost of acquiring each poker player will increase very much and the profitability will drop within the industry short term.
Overall, the future does look bright for online poker. Sites like Juega Poker Ya who operate in Spain, have seen an increase on its poker network of some 30% this year as thousands of budding Spanish poker players are queuing up to learn how to play the world’s greatest card game in the hope of repeating the success of Spanish poker supremo Carlos Mortenson, World Poker Champion just three or four years ago.
One thing the US Act has achieved since coming into place, and that is to have brought online poker to an even wider audience. It has meant that players are seeking other sites which do not have restrictions and it means that US players will fight even harder in the face of adversity and ensure that they can continue with their favourite online pastime.
By Morgan Collins
Written for Juega Poker Ya, part of the IPN Poker network. Poker online in various international languages. This article may be reproduced in full, providing all links and author are retained.