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A Look at a Future U.S. Online Poker Market

The Big Players in a Licensed and Regulated Online Poker Market

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Note: This is part one of a three-part look at a potentially licensed and regulated online poker market in the United States. Be sure to check back on Tuesday for part two.

Six months ago, the largest offshore online poker sites were shut down in the United States. Since that time, discussions centered on licensing and regulating online poker have heated up at both the federal and state levels. Such regulations would put the United States in company with 85 other nations that have already chosen to legalize, regulate and tax Internet gaming. Industry estimates say legalizing online poker could generate $2 billion in annual tax revenue and create 10,000 high-tech jobs.

Now, more so than ever, politicians are taking a hard look at poker as a means to put a dent into high unemployment and record deficits. The American Gaming Association, the industry’s most powerful lobby, which once opposed online gambling, released a public statement in March outlining a stance that now supports online poker in the U.S.

Democrats and Republicans alike have introduced legislation to tax and regulate the industry. While bureaucrats are still working to figure out licensing and regulatory standards and revenue streams, these bills provide a glimpse into what the industry’s future may look like and identify what it will take for traditional gaming businesses to enter the market.

Most industry experts agree that Capitol Hill will not vote on a standalone poker bill. Instead, poker legislation will likely be tied to any upcoming deficit reduction or job creation bill. Ironically, it appears any legislation that lays the groundwork for the U.S. online poker industry will, like the legislation that crippled it (the Unlawful Internet Gaming Enforcement Act), be buried within a larger omnibus bill.

One industry insider told Card Player that “the chances of a poker bill happening in 2011 are 50-50 between Thanksgiving and Christmas.” If such legislation was approved, U.S. gaming companies, on sites such as WSOP.com, could offer real money poker by January 2013.

If the legislation is not taken up by end of year, things get interesting. States such as California and New Jersey, hungry for tax revenue to plug record deficits, could approve intrastate poker in early 2012. At the federal level, the issue, a controversial one to address during an election year, would likely remain dormant until at least 2013.

The Major Players

It’s likely that existing brick-and-mortar casino operations that currently operate large gaming facilities will have the first opportunity to stake their claim in the multi-billion-dollar online poker industry. Here, we take a look at the established casino operators who stand to benefit the most from online poker regulation.

Caesars Entertainment

Perhaps the biggest casino entity committed to online poker is Caesars Entertainment, the only company to hold on to their pre-Black Friday relationship with a non-U.S. gaming company. In fact, CEO Gary Loveman has been outspoken about the fact that the Department of Justice’s shutdown of online poker in the U.S. is an opportunity for his company to reduce its billions in debt. In an op-ed on CNNmoney.com, Loveman compared the current freeze of online poker to the Prohibition of alcohol in the 1920s.

“The goals of legislation are simple,” he said. “Let Americans play online poker in the privacy of their homes, and create jobs and revenues here in America. Only federal legislation can accomplish that, by creating a well-regulated system of online poker. And only federal legislation can clear up the current ambiguities in U.S. law and crack down on other online gambling like sports betting and casino games. One day, we’ll look back at 2011 and laugh at the folly of a ban on Internet poker, just like we now think about Prohibition.”

Loveman is one of the more influential chief executives in the business, and wants to position Caesars and perhaps more importantly, the World Series of Poker brand, as the biggest beneficiaries of a legalized online poker market. The company has already made a commitment to the game with their popular summer festival and unlike some other major casino properties, displays their large poker rooms with prominence as opposed to a necessary evil tucked away in a corner. Overall, the privately-owned company, formerly known as Harrah’s, owns and operates more than 50 hotels and casinos all over the country.

MGM Resorts International

A study conducted for the clients of Union Gaming Research concluded in December of 2010 that MGM Resorts had the most to gain from licensed and regulated online poker market in the United States, should legislation occur in 2012. The researchers believe that, of the over $1 billion in potential revenue taken in by licensees, between $100-200 million of that will go to MGM in earnings before interest, taxes, depreciation and amortization.

The study arrived at its findings because of the company’s large recognizable brands and an overwhelming number of physical venues. CEO Jim Murren is on record as stating that the company that owns properties such as Bellagio, Mirage, Mandalay Bay and Aria, is positioning itself for the inevitable post-Black Friday legislation.

“The indictments validated our position,” Murren said. “We believe that we have the proper approach and the only thing that’s happened in the last couple of months is to reinforce our position on how Internet gaming should be regulated and pursued.”

MGM Resorts has shown a strong commitment to poker over the past decade as one of the primary hosts for the World Poker Tour. The Bellagio plays host to the WPT Championship each season and four other MGM properties accommodate or have accommodated tour events in the past. In addition, long-time poker pro and four-time WSOP bracelet winner Bobby Baldwin now serves as CEO of Mirage Resorts, after stints as president of both Mirage and Bellagio.

Wynn Resorts

Even prior to Black Friday, CEO Steve Wynn felt that online poker in the United States was a reach. That made his partnership with PokerStars, the largest online poker room in the world, all the more convoluted.

“What happens if the government gets involved and they control it and interfere with our ability to run a business?” Wynn asked a reporter after the relationship had dissolved. “If [the U.S.] do[es] Internet poker, they are going to tax the hell out of it. They would only make it legal in America because they have this insatiable appetite for money in Washington.”

The Wynn Resorts brand would undoubtedly be one of the premier faces in a legalized online poker market, but it remains to be seen if Wynn himself hasn’t soured on the idea since Black Friday. The 69-year-old has stated his desire to be a big part of the equation, citing Harry Reid when saying, “Poker is as American as apple pie” and that “this is a business that cries for regulation.” However, he still believes there are some major hurdles with the current bills.

Las Vegas Sands

Another casino giant that is itching to get into the online poker market is Las Vegas Sands, a company that owns properties in Pennsylvania, Singapore and the booming gambling destination of Macau, as well as the Las Vegas-based properties Palazzo and the Venetian Resort and Casino, a property that makes no effort to hide its commitment to poker. With 39 tables, the Venetian poker room is the largest in Las Vegas outside of the annual WSOP and frequently grows beyond 50 tables during the popular Deep Stack Extravaganza series.

CEO Sheldon Adelson has been quiet about any possible federal developments concerning online poker.

The Others

The Union Gaming Research report estimates that initially there will be roughly 10 gaming companies that will be able to overcome the barriers to entry currently written into Rep. Joe Barton’s bill. MGM Resorts International and Caesars Entertainment stand to generate the most from the estimated multi-billion-dollar Internet poker pie, with Las Vegas Sands and Wynn Resorts taking much of the rest. There would still leaves room for companies such as Station Casinos, Boyd Gaming, Penn National Gaming, Isle of Capri Casinos, Ameristar Casinos and Pinnacle Entertainment to enter the market.

Be sure to check back on Tuesday for part two of this look at a potentially regulated online poker market.

 
 
 
 

Comments

bparmalee
6 years ago

Exactly. Poker will end up being legalized and the only companies that will benifit are the current large casino corps. I do think that Romeny could be a set back for this intiative but it will be get done at some point. The FTP situation wont have any bearing on it going through because it will be argued thats exactly the reason we need regulation. I guess the only question will be if Americans will have any money to play by the time this thing gets done. I know a lot of people that would play casually (then claim they have 143k in their account.. thats how wannabe poker players are) on a WSOP site... especially leading up to the WSOP events in the summer.

 
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cardplayerlifestyle
6 years ago

Interesting article. I wrote about this 3 weeks ago on my poker blog. Strange that Brian didn't mention current "non-gaming" entities like Zynga... Maybe that's supposed to come in part 2? http://cardplayerlifestyle.com/2011/09/who-will-conquer-us-market-upon-legalization/

 
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LisaJax
6 years ago

I heard the Government is going to insist that the poker sites ban the use of 3rd party poler statistic tracking software. Any one else know anything more about that?

 
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bparmalee
6 years ago

The clock on online poker doesnt start untill Jan 2013. By then the election cycle will be complete and people will be settled in. Also things arent likely to move untill they clear up the current cases against FTP. When you see those start to get resolved then something can get done but I wouldnt start paying attention untill Jan 2013. So most we might have online poker by late 2013 or early 2014 but that would seem to be the soonest. Nothing is going to happen in an election cycle. That would be my guess.

 
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lolwme
6 years ago

Legalizing online poker will be the one chance I have of making any money with poker as we introduce our Patent Pending POWER BUTTON Poker both online and off.

Black Friday was a monster blow to all poker players making tons of money online and to we inventors who want to see our poker variants online worldwide.

patrick g harrison

 
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bigmatt912
6 years ago

the only way they should legalize online poker is if they don't allow tracking software a stuff like that...it should be the exact same concept of playing live poker at these casinos. only difference is obviously u can play at the convenience of your own home and these companies can still rake us players(which 100% of true poker players are ok with as long as they know there playing a legit person and it is a legit game)

 
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LisaJax
6 years ago

Amen, bigmatt912.

 
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paulgibbo
6 years ago

Not using tracking software playing poker is like investing in the stock market without stock reports or economic news. worse. the software costs 50 bucks, installs in five minutes and so I wonder why everybody would not want that - it helps track profit and loss if nothing else.

 
 

rlb369
6 years ago

Why is it that under current proposals, only a select few organizations or companies can get a license to operate an online poker site? This doesn't seem fair. Why can't you or I get a license? In other words why isn't the opportunity to operate an online poker site open to everone?

 
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rlb369
6 years ago

A crucial issue related to the operation and regulation of online poker sites is to insure that the software programs used for online poker games deal the cards completely randomly. In other words, the dealing algorithm must be controlled by a true random number generator implemented in the software.

The reason this issue is so important is that, from my observations, having played many thousands of hands of online poker at Full Tilt Poker and Poker Stars, I feel pretty confident that the algorithms used by these and similar sites do not produce truly random deals. In fact, I believe that the deals are biased, in order to speed up the games, thus helping the online poker site increase its hourly revenue rate, as I will explain. There is no legal entity monitoring or insuring the fairness (i.e., randomness) of their dealing software.

I am making a distinction between deals being biased to favor the house, as opposed to being biased to favor any specific player at the table. I do not believe that online sites deal to favor any specific player – it would have no interest to do so. The house's interest is to spread as many games per hour as possible, in order to increase its hourly revenue rate. In order to accomplish this, the house would like to see all games end as quickly as possible. That is, spread as many games per hour as they can. Here, I am primarily concerned with "tournament" type games, as opposed to cash or ring games, which have a different fee structure.

A great way to speed up the game is to deal 'Hot Hands' to several players at the same time, such that these players hit the flop (Texas Holdem) very hard, that is, so that their hands correlate strongly with the community cards resulting in highly playable hands. For example, if on the flop one player is dealt an open-ended straight draw, another player a flush draw, and another player three of a kind, then each of these players will be motivated to stay in the hand for as long as possible, and much of the time betting heavily . The point is that frequently dealing "Hot Hands" is a way to insure lots of action, heavy betting, and has the effect of eliminating players more quickly, so the games finish faster. It is a simple matter to program the dealing algorithm to incorporate this kind of bias into the play. I'm fairly certain that this bias is employed by most online poker websites. In fact, if you operated an online poker site which had no laws to regulate or insure its fairness, I would think you would be stupid not to bias the deals this way. It's something that is easily implemented, but difficult for the players to perceive or to prove. However if online poker is legalized and regulated, the regulatory authority could and should implement technology to check for such non-random dealing by the licensees’ software. If steps are not take to prevent it, this kind of chicanery will surely employed by online websites.

 
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