The Future of Online Poker in the US: Managing Expectations. Many people await the day when online poker is fully licensed and regulated in the US, but visions of 2005 or anytime pre-Black Friday are likely to bring disappointment. Even worse is the unwillingness to accept anything less. The Future of Online Poker in the U.S. Internet poker became available in Nevada, New Jersey and Delaware in 2013, and poker fans hoped that other states in the U.S. Would follow suit by legalizing online poker.
The history of online poker in the U.S. is short in terms of absolute years, stretching back nearly two decades. But packed within that tiny time frame is one of the wildest, most riveting stories of the internet age. It’s the story of a new way of playing an old game (and the industry surrounding it) that captivated a country so absolutely the American government saw fit to intervene.
There are any number of ways to view the tale of online poker in America. We’ve chosen to divide our take on the history of American online poker into four distinct eras: The Unregulated Era, the UIGEA Era, the Black Friday Era and the Regulated Era. Each of these eras marked a dramatic shift for poker players and the larger US online poker industry, and in this article, we’ll walk through the basic timeline, key events and lessons learned for each individual era of online poker in the US.
Following our exploration of those four eras of American online poker, we’ll take some more time to discuss the likely shape of the next era for online poker in the United States.
The Poker Boom 1997 – 2006 » UIGEA 2006 – 2011 » Black Friday 2012 – 2013 » Regulation 2012 – 2020
Let’s kick things off with what’s new in 2017 followed by a timeline of events starting with: The Unregulated Era of online poker.
Online poker is on the minds of many lawmakers in 2020. The most active state in moving toward a legal and regulated online poker and gambling market is Pennsylvania, which began taking steps toward the goal in the early months of the year. By the summer months, both houses of the legislature had passed a gambling expansion bill that included online poker and casino games, but controversy surrounding the inclusion of video gaming terminals (VGTs) in the bill prompted it to be put on hold until after the summer recess. The House and Senate differ on the tax rates and licensing fees for the new industry, but many legislators and lobbyists are hopeful that the details can be ironed out in order to finally pass the bill sometime in 2018.
New York came very close to legalizing online poker in 2018, as a bill to do so passed in the Senate but failed to make enough progress in the Assembly. Analysts say that New York is a very strong possibility for joining the US online poker market in 2020.
Michigan is a state that came into the picture fairly recently with an online poker proposal, and the sponsoring senator has been working hard to bridge the divides between tribal leaders and other land-based casino owners. A bill remains in play through the summer months with ongoing efforts to make changes in the hopes of passing the legislation in 2018 or 2019.
On the other hand, California seems to have given up on the process temporarily. After making a great deal of progress in 2016 and 2017, one barrier remained to passing an online poker bill after 10 years of efforts, which was the entry of PokerStars into the market. Some tribes stood with PokerStars to support the operator’s ability to offer internet poker to California residents, but most of the major tribes of the state opposed the idea. The rift created between the factions pushed talks to a standstill in 2017, with legislators and most parties involved simply giving up all possibilities of regulated online poker in California in the near future. There will likely be another effort in 2019, but the PokerStars component will remain a barrier.
Several members of Congress renewed their efforts to ban online poker and gambling on the federal level in the US in 2017. Congressmen who have received financial support for their political party and campaigns from casino mogul Sheldon Adelson have stepped up their fight to pass a bill to ban all internet games, including poker. The Restoration of America’s Wire Act and other similar efforts are presented in the hopes of reversing the 2011 Department of Justice decision to allow individual American states to decide their stances on internet gambling. While Congress is generally not supportive of RAWA-type bills that remove states’ rights to make their own laws regarding the online games, some members of Congress have tried to quietly add anti-online poker language to various budget and appropriations bills. Watchdog organizations and lobbyists have been able to detect those attempts and bring national attention to them, which has prompted removal of the ban from all bills through the summer of 2017.
Timeframe – The Unregulated Era of American online poker can be identified as the time between the primitive launch of online poker games with a financial incentive in or around 1997 and the introduction of the Unlawful Internet Gambling Enforcement Act (UIGEA) in October 2006.
The Unregulated Era of online poker can fairly be characterized as something of a “wild west” for online gambling. During this era, a staggering number of new online poker rooms opened – almost daily, it seemed at some points – and a similarly astounding number closed their doors with little notice or fanfare. Along with the surfeit of rooms came intense competition for players, a competition that spurred rooms to offer unsustainable promotions and bonuses in an attempt to attract a player base.
One unique characteristic of the Unregulated Era is the relatively small traffic disparity that existed between leading rooms. In the status quo, PokerStars has a massive lead, dwarfing the next-closest competition several times over. But in this era, the leading rooms were separated by far smaller gaps in terms of player numbers, and positions at the top of the online poker charts shifted with regularity.
Another important aspect of this era was a near-total lack of regulation or oversight. While independent regulators did spring up in some out-of-the-way jurisdictions, the amount of governmental influence over the regulators was minimal. While this allowed the industry to grow rapidly with little restraint, it also served as the breeding ground for some cheating scandals that continue to haunt online poker to this day.
A final note of interest: During much of this era, you would have found a minimal amount of training tools or training sites. It wasn’t until close to the end of this era that poker players began to take note of new software tools and video-based training sites such as CardRunners. That segment would eventually explode but by and large remained a niche business during the Unregulated Era of online poker in the United States.
Timeframe – The UIGEA era of online poker in America can be loosely identified as the time spanning the introduction of the UIGEA in October of 2006 through the Black Friday indictments handed down in April of 2011.
The UIGEA Era of online poker in America is a study in contrast. On one hand, online poker appeared as healthy as it has ever been during the UIGEA Era. One indicator of its health was the astounding number of big-ticket online poker tournament series hosted by sites like PokerStars and Full Tilt Poker – series that award not thousands, not millions, but tens of millions of dollars in prize money to players.
But on the other hand, a number of threats to the long-term viability were also emerging during the UIGEA Era – the UIGEA itself not the least among them. As the profile of the online poker industry grew, so did questions about the inherent legality of the activity at the state level, UIGEA or no UIGEA. And, buoyed by their decision to stay the United States following the passage of the UIGEA, PokerStars and Full Tilt were dominating the global market for online poker in a way that was unthinkable during the relative parity of the Unregulated Era. While players were fond of both rooms, the overall decrease in competition was viewed by many as a troubling sign for the industry’s future.
At the same time, online poker training sites were proliferating and poker analysis software was becoming increasingly more complex and more popular, creating a parallel threat to the health of online poker by exacerbating the skill gap between the regular players and the recreational and casual players.
Timeframe – Arguably the darkest of all periods for American online poker players, the Black Friday Era of online poker in the US, dates between the unsealing of indictments against major American-facing online poker sites in April of 2011 and in many ways continues to this day.
But we mark the formal end of the era at the point when Nevada issued its first interactive gaming license in June of 2012, accepting that there is a great deal of overlap between the two eras.
The Black Friday Era for American online poker players was one with precious little silver lining. During this era, it became increasingly difficult for players to deposit and cash out. Traffic dropped across the board, causing an industry consolidation that saw multiple rooms and skins close their doors to players – often without allowing players to cash out their balances first. And what games did remain became increasingly tough to profit from, as payment processing hurdles dissuaded the recreational players from signing up and making badly-needed deposits.
Timeframe – The Regulated Era is the present state of online poker. You could legitimately place the start of this era in American online poker at a few different points, but we chose the date on which Nevada issued its first interactive gaming license: June 21st, 2012.
We chose this date as opposed to, say, the date Nevada passed the law to regulate online poker for a few reasons. First, it has a nice symbolic quality. Second, it marks a point at which many – but not all – of the loose ends of Black Friday had been tied up or are in the process of being tied up.
During the Regulated Era, we’ve seen more states than ever considering some form of online gambling regulation. While the number of states that have actually passed regulation into law remains relatively small, the concept of nationwide regulated online poker (or something close to it) becomes far more plausible than at any point during the Black Friday Era.
But while there are reasons for optimism during the Regulated Era, there are also plenty of reasons for American online poker players to be concerned – concerned about their bankrolls at unregulated sites, where cashing out is becoming almost impossible at some sites; concerned about the future of the games at unregulated sites, which are closing at an even greater rate than we saw during the Black Friday Era; and concerned about the timeline for the return of a viable American online poker industry.
Online poker in America appears to be on a slow but set path to regulation. There are a number of potential milestones along that path that will mark significant advancements for regulated online poker in the United States.
Below, we take a look at some of the key eras still to come for American online poker.
As of now, only three states in the U.S. have passed laws that will allow for regulated online poker to be offered by licensed operators: New Jersey, Nevada and Delaware. Many more – including California, Illinois, Pennsylvania, Michigan, New York, and Massachusetts – are considering the idea, along with online casino games and lotteries.
But a greater number still have shown little or no interest in regulating online poker. While it seems that there will be a majority of states offering regulated online poker at some point in the future, it also seems as if the path to that point will be an extended – and, for poker players, a potentially very frustrating – one.
Once more states and tribes are participating in regulated American online poker, the next step will be the evolution of the agreements that allow those operators to share player pools across state lines.
While such agreements may seem like simple affairs at first glance, a deeper look at the situation suggests that establishing internet poker compacts between states will be a complex and extended process. Nevada and Delaware did pool their online poker players in a landmark liquidity agreement signed in February 2014. The Multi-State Poker Network official launched on March 25, 2015, as players in the two states finally shared the same virtual poker tables and prize pools. Similarly, Nevada and New Jersey have discussed the same possibilities consistently, but the part of the New Jersey law that requires servers be located in Atlantic City has created a rift. Lawmakers are working to change that law, however, so online poker liquidity can grow and eventually include states like Pennsylvania that are in the process of legalizing and regulating online poker.
Tribal compacts are more complicated, however. The years of online poker efforts in California – still to no avail – are proof that the plethora of disagreements between Native American tribes, non-tribal casinos, and online poker operators are complex and many times lead to stalemates. Efforts to legalize online poker in Michigan is experiencing the same complications as they work to bridge differences between all of the special interests and tribal nations who want to participate in the new industry on equal footing.
One of the most exciting events on the horizon for US online poker players is the inevitable combination of live and online poker. With the absence of any major land-based US operators prior to online poker’s Regulated Era, American poker players never got a chance to see how an integrated live / online poker experience would change the game and expand the market.
We’ve seen some hints of the potential with PokerStars’ international foray into the business of running live poker rooms, but the full-fledged development of a hybrid product by American casino giants such as Caesars definitely presents potential that American online poker players should look forward to with eagerness.
Online poker is on the way back in America, but the only way American online poker players can begin to hope for a return to the pre-UIGEA & pre-Black Friday eras of the game is if regulated online poker operators in the US are allowed to partner with international online poker sites to share player pools. New Jersey lawmakers and regulators have been in discussions with the UK Gaming Commission to discuss details and possibilities, but there has yet to be an agreement to make that international online poker liquidity a reality.
This development could come earlier than expected, especially if the process of state-by-state regulation continues to drag on. If regulated American online poker operators – especially in smaller states like Nevada – aren’t able to find the traffic they need from interstate partnerships, then they may have no choice but to turn to international partnerships in order to generate the player liquidity necessary to support a thriving online poker site. New Jersey, Nevada, and Delaware are keenly aware of this need and hope to make changes in the system that allows international poker liquidity to happen in the coming years.
US Senator Lindsey Graham had been pushing for any type of legislation or Department of Justice ruling that would overturn the 2011 decision regarding the Wire Act. He was relentless in his pursuit of US Attorneys General under President Trump to take action. During the 2017 confirmation hearings of now-former US Attorney General Jeff Sessions, Graham asked Sessions about the Wire Act decision and was assured that the issue would be addressed, though Sessions ultimately had to recuse himself from anything related to Sheldon Adelson – which the DOJ opinion would be – due to close ties to the casino mogul. But when Trump fired Sessions in late 2018, Graham saw another chance to influence another nominee for the position. Graham admitted that one of his questions for a nominee will relate to the 2011 DOJ decision.
Before that could even happen, though, word came through the online gambling grapevine in late December 2018 that the Department of Justice’s Office of Legal Counsel did write a reversal of that 2011 opinion. This new opinion reportedly solidifies that the Wire Act applies to all forms of gambling, not just sports betting. As of December 30, however, the opinion had not been made official.