Congress deals poker fans a hand they can’t bet

By Liz Benston (contact)

Tuesday, Oct. 3, 2006 | 7:44 a.m.

Fallout from the Unlawful Internet Gambling Enforcement Act of 2006 may land hard on two of Las Vegas' biggest gaming companies, Harrah's Entertainment and MGM Mirage. Each has tapped poker fans who love Internet play and then turn to Vegas for the real action.

When those gamblers try to log onto their PartyPoker.com account, they'll soon discover they can no longer place a bet. And that will chill tournament play on the Strip.

For nearly a decade, the campaign by conservative members of Congress to outlaw online gambling remained on the fringes in Washington.

But with Republican lawmakers nervous about the Nov. 7 elections and eager to find issues that will please conservative religious groups, Senate Majority Leader Bill Frist and other Republican leaders saw an opportunity to adopt the ban. They attached it to an unrelated port security bill, which was approved by Congress on Saturday.

Once a small, tight-knit group of hard-core sports bettors, Internet gamblers, attracted by celebrity players and incessant television coverage of poker tournaments, have grown into a largely mainstream group of amateur bettors. But in the eyes of the U.S, they have joined the ranks of people who transport illegal drugs or sell unregistered firearms .

Online operators had largely ignored the Justice Department's opinion that all forms of online gambling are illegal. It was a weak legal position, they said, that was unsupported by federal law and largely unenforceable because online betting operators are based outside of the United States.

With the bill , a "gray area" of gambling just got a lot clearer by making it a felony to process Internet bets generated by Americans.

British operator Partygaming, which owns PartyPoker.com, said it would cease operations in the United States by blocking American bets. Other companies publicly traded in Europe, trying to salvage shares that have already tanked by more than 50 percent, could follow suit.

That means American players could soon be gambling on black market Web sites and reverting to a time when no-name sites operated in an online Wild West of sorts.

A more likely outcome will be an increasingly creative cat-and-mouse game between the remaining Internet gambling sites and regulators who now have the authority to shut down Web sites and go after third parties. Those include Internet service providers that link to gambling sites and a growing number of affiliate sites that make money from referring business to Internet casinos.

Nevada interests have been ineffective in fighting the legislation. State regulators don't want to run afoul of the feds. The state's most powerful legislator, Sen. Harry Reid, opposes Internet gambling on the basis that it can't be adequately regulated. Even Nevada casinos, which have reaped the benefits when online gamblers are teased to real poker rooms, weren't willing to go to the mat on a prohibition bill.

The American Gaming Association, which represents the largest land-based casinos, says the bill's passage won't mean much for its members, which aren't in the business of online gambling.

That may be true for most members that aren't profiting much on poker. They may rather fill those rooms with more profitable slot machines.

But that's probably not the case for the association's two biggest members, MGM Mirage and Harrah's Entertainment. Both companies host the world's largest poker tournaments and have lobbied for regulating and taxing Internet gambling.

As many as half of the entrants in Harrah's latest World Series of Poker qualified for their $10,000 buy in to the final event by playing satellite tournaments hosted by online gambling sites. Similarly, MGM Mirage hosts some events for the World Poker Tour, a global poker tourney that attracts big money from online bettors who qualified for the events online.

Both tournaments will likely now attract fewer entrants.

The ban will have further implications in Las Vegas, the de facto hub for online bettors and support industries such as magazines, Internet portals and other businesses that made money catering to the online poker and betting industry.

"It's like a death," said Jan Fisher, a poker writer, tournament announcer and partner in a company that produces a cruise ship tourney for online operator PartyPoker. "This didn't just stop people from playing online. This touched literally everyone I know. I'm afraid for the industry."