August 27, 2015
Online poker and online gambling, in general has had a tumultuous history in the United States. The gambling obsessed population of the US was responsible for the vast majority of online poker revenues worldwide until a government crackdown put an enormous dent in those numbers.
Today, even in an unregulated market, the United States still makes up about 10 percent of a massive $33 billion dollar online gambling market. Although, online poker still has a way to go in the US, there has been a giant shift in policy over the last several years. To understand the path where online poker is headed, we first have to look at the history of the game.
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The first online poker site in the world was established in 1998. Planet Poker was the first site onto the scene in what would eventually become a multi-billion dollar industry. They grew a small player base almost immediately. Paradise Poker then emerged in 1999 and immediately became a rival. As the new millennium approached more and more real money poker sites began popping up looking to cash in on this newest craze.
The Poker Boom
The number of players continued to rise each year since the game’s inception, and there was a long list of sites vying for market share. Party Poker emerged as the world’s online poker leader, with other sites competing for second place.
The years of 2003 to 2006, were regarded as the “Poker Boom.” Up until about 2007, the number of online poker players each year doubled in size. The 2003 WSOP Main Event win of Chris Moneymaker and the movie Rounders became part of American culture. ESPN televised nearly every event of the WSOP tournament, and it looked as if the rise of online poker could never be stopped.
As all this money was heading offshore due to online poker, many members of the US government became concerned with the issue of online gambling. Though Congress had tried to ban it years earlier, a measure in late-2006 would become successful and rock the landscape of the online poker world across the globe.
The Unlawful Internet Gambling Enforcement Act (UIGEA) was passed in the late hours September, 29th, 2006 and was added as a rider by the House of Representatives by a vote of 409-2 and by the Senate by unanimous consent. The bill was signed into law by President Bush, and the first shots were fired from the Department of Justice against real money online poker. The bill did not criminalize the act of gambling online, but instead went after foreign operators who were offering their services to US citizens. While citizens who gambled online from the United States were safe from any criminal repercussions, the DOJ had their eyes set on the industry’s biggest sites and their executives.
Almost overnight, the industry changed. Many top online gambling operators pulled out of the US market within a matter of days and even more dropped out in the weeks after the bill was passed. Party Poker, the industry leader at the time, left the US market, along with several other top European-based sites. Any publicly traded company was essentially forced to stop accepting US citizens because their shareholders could be charged criminally for the deeds of the company.
Though the regulations and the laws surrounding the UIGEA had not yet even been written, the bill’s passage scared many of the top online poker rooms in the world out of the US market. This created a void in the market and the title for the largest poker room in the world was once again up for grabs.
Even with the threat of jail time hanging over their heads, it was easy to see why operators continued to accept customers from the United States. The online poker in the US was still multi-hundred million dollar industry. Two sites emerged as front runners after Party Poker exited, PokerStars and Full Tilt Poker.
The poker market was still more than viable in the United States, but players did take a few hits along the way. Popular e-wallets, such as Neteller and Moneybookers stop servicing US citizens, as well. It became harder to fund accounts and player numbers were not increasing at even close to the level they did during the poker boom.
All the while, no one knew how serious the Federal government was in regards to online gambling. Yes, they outlawed it, which caused some sites to leave the market immediately, but was it a true priority of law enforcement?
After years of competition between PokerStars and Full Tilt, the US government, more specifically, the United States District Court for the Southern District of New York came down hard on the three largest online poker sites servicing US players.
On April 15, 2011, a day that was dubbed as “Black Friday” for online poker players the US Department of Justice unsealed an indictment against the owners and operators of PokerStars, Full Tilt Poker and the Cereus Network. The crimes all centered around UIGEA violations as the government froze assets and seized bank accounts. Many online payment processors and banks were also indicted for processing illegal gambling transactions.
Immediately, PokerStars and Full Tilt Poker left the US market. The government allowed each company to pay players their current balances a week after the indictment was handed down. PokerStars paid these balances back to play within two weeks, but there were plenty of issues with Full Tilt Poker and Cereus.
Fast-forward to two years later, and Cereus’ customers from Absolute Poker and Ultimate Bet have almost no chance of being repaid. Full Tilt surprisingly turned out to be an insolvent company, and was bailed out by PokerStars in a deal brokered by the US government. Full Tilt’s US client base is expected to be paid back in full by the first quarter of 2014.
Not only did this move tie up hundreds of millions of bankrolls held by US players, but it brought the online poker industry to its knees. In less than 24 hours, the two largest sites in the world pulled out of the US online poker market.
While playing online poker as a US citizen was still legal, player confidence took a massive hit and all of a sudden people were worried about the safety on their bankrolls when they played online. Nevertheless, online poker was still far from dead in the United States.
Today, online poker revenues are still strong. While the number are not near the levels they were when the game exploding was during the early to mid-2000s, few would argue with that there are not still plenty of excellent options for US online poker players.
There are strong VIP & rewards programs available, and deposit bonuses galore. No Limit Hold’em is the preferred game of choice, but Pot Limit Omaha has a strong following, as well. The best action takes place during the evening hours, but there is action around the clock.
Black Friday didn’t kill the online poker industry in the US, but it put a sizeable dent in player numbers across the board. However, one decent thing that came out of the seizures and indictments was that the issue is now on the forefront in Washington.
The Wire Act
In December 2011, the Justice Department reinterpreted the Wire Act of 1961. The longstanding law was always thought to be applicable to all forms of online gambling, but just before the end of 2011, the DOJ stated that the law only applied to online sports betting, and not casino and poker games.
This was a massive shift of opinion, one that spawned legislative action across a number of states. Currently, Nevada, Delaware, and New Jersey have some combination of online poker and casino games legal in their states on an intrastate level.
Regulated Market and Future
As I mentioned above, several states have begun to offer online gambling to their residents and even more are expected to pass laws in 2014. However, offshore sites are still currently the most viable choice for poker players across the country. Most state regulated rooms currently do not have the liquidity to support a strong poker ecosystem. Though, this will almost certainly change in the coming years.
This sets up an interesting showdown between offshore gambling sites and regulated entities of the states and perhaps the Federal government if congress legalizes online poker nationally. While the latter is still a long shot, it would create a compelling showdown between offshore sites and state approved licensees.
Regardless, the outlook for online poker in the states has not looked this good since the Poker Boom. One must remember that we have yet to enjoy a full 15 years of online poker worldwide. The game is still in its infancy. For the first time in years, the future looks bright for US poker players.
About The Author: Joseph Falchetti has been part of the online poker world in some form for the past 10 years. An avid online poker player, Joe was a professional player for seven years before transitioning into a part-time role as an online gambling writer. Having lived through the UIGEA and Black Friday as a pro player, he knows the poker world inside and out.