An improving hand: Why online poker could finally be on a winning streak

This spring will be the 10-year anniversary of an event that still sends a shiver down the spines of Americans who were professional and semi-professional poker players at the time. That was when the US DOJ unsealed indictments against top executives at PokerStars, Full Tilt Poker, and Absolute Poker, while the FBI seized the dotcom domains of all three sites, for continuing to roll out the welcome mat for US players following the passing of UIGEA in 2006. April 15, 2011 was given the ominous moniker “Black Friday” in the poker fraternity.

Those who had made a living, or a tidy side income, in these leading digital cardrooms were forced to either up sticks and relocate to Mexico or Canada to continue playing. The other option was to abandon his or her unconventional métier altogether and go get a proper job.

Almost a decade on and six states – Nevada, Delaware, New Jersey, Pennsylvania, West Virginia, and Michigan – have, in the intervening years, passed their own legislation legalizing and regulating online poker, although no operator has launched in West Virginia yet due to its modest population of under two million.

These five states represent just 10% of the total US population, much to the chagrin of those living in the other 45 states itching to ante up at the online tables of a legal site, particularly during Covid-19. So, is public affairs expert John Pappas – a long-time advocate for online poker when he led the Poker Players Alliance until 2018 – surprised only half a dozen states have regulated this old cowboy game after all these years?

“I wouldn’t say I’m surprised; I would probably say more dismayed,” he tells EGR North America. “But I feel like poker also had a lot of external challenges that sports betting didn’t have, and poker has always been assumed to be a game that’s played in the casino. You had a land-based industry that didn’t fully embrace online gambling and looked at PokerStars, who had built up a tremendous brand, and others as threats to their business.

Then you also had a very powerful and influential voice in politics with Sheldon Adelson, who was staunchly opposed to internet gaming, and poker was clearly in his crosshairs. Poker was something he referenced all the time.”

Adelson, the billionaire owner of Las Vegas Sands and the Republican Party’s biggest donor, passed away in January a few days before the US Court of Appeals for the First Circuit ruled that the Wire Act applies to just sports betting.

The court rejected the DOJ’s reinterpretation of the 60-year-old law which said it covered all forms of interstate gambling. Although we will have to wait a few months to discover if the DOJ will throw in the towel (it seems unlikely the Supreme Court would hear the case anyway), the development is a major shot in the arm for online poker.

Pappas says: “The Wire Act litigation slowed down the progress of igaming, but now a lot of that is in our rear-view mirror and I think there’s a lot of reasons to be optimistic about where poker goes from here in the US.”

Clubbing together

Concerns that linking player pools would be an infringement of the (badly worded) Wire Act was a main reason for a lack of regulatory progress. Now though, the court’s decision could provide the impetus for more online poker states to legalize the vertical and join forces.

New Jersey, Delaware, and Nevada are part of the Multi-State Internet Gaming Agreement (MSIGA) first signed in 2014 and enacted the following year between Delaware and Nevada (New Jersey hooked up in 2017).

Pennsylvania, which passed expanded gaming legislation in 2017, has yet to join forces with the trio since online poker went live there in November 2019, with the DOJ’s revised Opinion in 2018 largely to blame for poker’s ponderous rollout and the Keystone State’s reluctance to join MSIGA.

If all six states currently with legal poker did form one big compact, it would create a combined population of 37 million, or almost as much as California’s. Add on Illinois, if lawmakers authorized poker there as part of efforts to legalize igaming to complement sports betting, and you’re looking at a total addressable population of almost 50 million, minus those who are under the age of 21.

This prospect would probably encourage more states to pass poker laws and join forces. More operators would launch poker, too, creating bigger tournaments and attracting more players. So, a snowball effect. “We are looking at that,” replies Kindred Group CEO Henrik Tjärnström on whether the Malta-based operator now has plans to bring its poker product, Unibet Poker, to the US.

“We’re also working on preparing our own proprietary platform for the US. When we have that ready for the respective states, it is an easier choice if we want to add poker to the offering rather than doing a separate integration for it,” Tjärnström says.

Kindred, which has market access in up to 12 states, is in quite a unique position for a multi-vertical operator in that Unibet Poker is a proprietary platform, built by Relax Gaming, and has been a standalone offering since 2014. “It has been a positive development and we’ve been able to acquire through poker and cross-sell into other products, so we’re byno means ruling it out [entering the US],” the CEO explains.

He adds: “Poker has a heritage in the US, albeit it is a relatively small product in the overall scheme of things. It could be a good, unique selling point.” It’s a view echoed by Yaniv Sherman, SVP and head of US for 888: “Poker is always going to be the smaller one [vertical] but will be a meaningful vertical for two reasons: firstly, it’s an opportunity for 888 to have a bigger slice of a smaller pie as it’s much less competitive; and the other opportunity is around cross-sell because poker is a very effective gateway for other casino games.”

When it comes to poker in New Jersey, ‘smaller’ would be an understatement. In the latest numbers released by New Jersey’s Division of Gaming Enforcement, poker generated $2.7m in revenue in January compared with $101m from online casino.

That works out at just 2.6% of the total $103.8m igaming mix. While it is true poker has enjoyed a bump due to the pandemic and the fact play tends to increase in winter, the vertical continues to struggle.

888, which has been present in the Garden State since the outset in 2013, is the only operator combining player pools across states with its All American Poker Network (AAPN), which the company assumed full ownership of in late 2018.

The London-listed company also provides the software behind WSOP.com in Nevada and New Jersey. 888 hasn’t released its poker products in Pennsylvania, but the plan is to do so by summer and have the Keystone State join the network so players there can also compete for World Series of Poker bracelets online. 888’s new platform, Poker 8, is also due to hit US shores. “This is all pending regulatory approvals and certification, but we are aiming to get Poker 8 in the US sometime in the first half of the year,” says Sherman.

Stars above

The latest state to offer legal poker is Michigan, with PokerStars the only operator so far to launch there through its partnership with the Little Traverse Bay Bands of Odawa Indians. It is understood that BetMGM, the joint venture between MGM Resorts and Entain, will soon be unleashing its own poker products in the Wolverine State, including its partypoker brand.

Nevertheless, PokerStars got off to an impressive start in Michigan and kicked off its Michigan Championship of Online Poker (MICOOP) on February 20 with $1.2m guaranteed across 60 tournaments ranging in buy-ins from $10 up to $500 as it looks to hammer home its first-mover advantage.

On top of this, PokerStars MI has a seven-day average of 500 cash-game players at the time of writing, according to poker traffic resource Poker Scout. This puts the site 15th in Poker Scout’s global poker pecking order, sandwiched between Unibet Poker with a seven-day average of 550 players and partypoker Europe (pooled players between France and Spain) with 425 participants.

Moreover, PokerStars MI has already surpassed its seven-day average for traffic in Pennsylvania (400) where the Flutter- owned operator has held a monopoly since November 2019, meaning its Michigan poker room is already the largest across all regulated US states across all brands.

And it only launched at the end of January. “We are really excited about our Michigan launch,” says Kip Levin, CEO of Fox Bet, which encompasses PokerStars. “There was clearly a lot of anticipation from the Michigan poker community and pent-up demand for a leading, safe, and legal option to come to the market.”

Levin adds: “As we’ve seen in the run-up to our Championship of Online Poker series in Michigan, there is an appetite for what we’re offering. It has been exciting to see and we are encouraged by the future of online poker in the US.”

Michigan’s legislation originally didn’t allow for compacting as there was concerns about progressive slot jackpots across state lines, yet it was tacked onto the bill this past legislative session. Now the Wire Act is less of a problem, Michigan is expected to act quickly.

“Having Michigan and Pennsylvania come into the compact would be huge,” Pappas remarks. “But the issue is you have to have operators who are licensed in all of those states – you’re not going to be able to have somebody in Nevada playing on PokerStars if PokerStars isn’t in Nevada [the Silver State has a “Bad Actor” clause]. So, there is still going to be some work to be done on the state legislative side and then get various poker companies licensed and approved.”

In the meantime, those determined to play online poker in states devoid of legal options will find a way, be it offshore sites with a blasé attitude to preventing Americans from using VPNs or the brazen US-facing online poker rooms that continue to ignore UIGEA.

These players run the risk of sites legging it with their funds, as was the case when Curaçao-licensed Lock Poker closed in 2015 owing customers millions of dollars, and yet they see that element as part of the gamble. Then there are the mobile poker clubs which have exploded during the pandemic.

These are free apps with private tournaments and cash games, with agents used in some cases to recruit people to play. A host manages the games, with winnings and losses settled outside of the app in cash or via bank wire. It is completely unregulated and pretty much impossible for the authorities to shut down as these apps masquerade as harmless free-to-play action.

“I think the popularity of those [mobile poker clubs], particularly during the time of the pandemic, shows that there is a market out there,” says Pappas. He adds: “I haven’t been directly involvedwith the Poker Players Alliance for three years, but I still get people reaching out to me all the time asking when they can play on PokerStars. There is a serious appetite for poker out there, and it’s been highlighted by the pandemic. I think the pandemic has created another renaissance of interest in poker.”

If the US is to achieve a sustained revival of online poker, which won’t match the boom years of the mid-2000s when Americans had access to global player pools, then clearly interstate compacting is crucial. From there, “competition breeds creativity,” remarks Levin.

Sherman, who insists legal online poker in the US is a three-horse race between 888, PokerStars, and BetMGM, says: “We are very much focused on it [poker] – I think the others are more focused on sports and casino. We will try to capitalize on the opportunity.”

He continues: “We have the opportunity to pull away if we are able to pool liquidity as quickly as possible.” How quickly depends on lawmakers and regulators. If the past decade since Black Friday has taught us anything, it is that patience is a virtue where online poker is concerned.