Tuesday, October 3, 2006

Online gaming ban passes, President to sign into law

It's a dark day for online players. The house passed the Port Security bill today, of which a last minute addition was a section designed to prohibit any U.S. bank or credit card company from processing transactions deemed to be from overseas gaming companies (Read about it here). I will skip over the obvious issue about why it's unethical and immoral to pervert our lawmaking process by putting unrelated items into the same bill (Online game affects port security how?). Instead I will focus on what this means to us as online poker players.

We're screwed.

The legislation, which Bush WILL sign into law, will provide for significant penalties if U.S. firms process offshore gaming transactions. There is no wiggle room here either. Stock in PartyGaming (parent company of PartyPoker) as well as related poker sites plunged by 50% after passage of the bill. NetTeller, which doesn't even host gaming, went so far as to put out a press release saying the bill would have a "materially adverse" affect on future revenues. It is well known that even though online poker is technically illegal in the U.S., fully 60% or more of offshore gaming revenue is generated in our borders. That comes to millions of customers and billions of dollars. The legislation, as it stands, will effectively wipe that out.

Initially, I was skeptic as to how business wouldn't simply go on as usual via NetTeller or Firepay. How could banks or credit card companies possibly distinguish between legitimate online transactions and ones from gaming corporations? But if NetTeller is saying it will affect them then I have to believe that there is language in the bill to take care of companies like theirs.

Personally, I have very little direct stake in this since I stopped playing poker online, but I am afraid of how this will affect poker as a whole. Let's look at the domino effect this will create. If online poker sites lose revenue through the instantaneous loss of 60% of their membership, then the number of poker sites will shrink dramatically. The advertising budget of the remaining site will be a shell of their former selves. With the loss of the ad revenue from these sites, many TV shows featuring poker will dry up (think off all the Bodog.com, PartyPoker.com, etc... ads you see every day). After all, it doesn't make sense for the poker sites to advertise here when we can't play! With the reduction of TV time devoted to poker and the loss of the online sites, the number of poker players in the country will contract. Imagine all of the college students who play online now who will no longer be able to practice during the semester. How many of them live near a casino that offers poker? With the reduction of the number of players in the country, the number of tournaments and casinos offering poker will naturally decline to match the market. OVERALL EFFECT = Less poker and fewer fish for you and me.

However, there is a bright side, sort of. I find the marketplace to be very resilient and you simply can't stop pent up demand. If there are (at last guesstimate) 80-100 million poker players in the U.S., then that is a market that just won't be ignored. I predict that another method of payment will be developed that will take the place of NetTeller or credit cards. I don't know what that is but I have a feeling it will come relatively quickly.

Beyond my belief that the marketplace takes care of itself (regardless of laws), I can't imagine what this will do to the state of poker. The U.S. government has tried banning all sorts of vices for hundreds of years, with varying degrees of success. Will this be any more effective than prohibition was? Or will this be treated more along the lines of the ban on illegal drugs? And which one more adversely affects the country?

One thing I know for sure, Wall Street Poker, and other home games (legal or otherwise), will receive a BIG boost in interest. :-)

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