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August 22, 2014

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THE INSIDE STRAIGHT:

Officially, they want to be regulated, but …

Unofficially, large online poker sites have the best of both worlds

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John Blessing takes part in a slot tournament Wednesday at the Global Gaming Expo.

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Rusty Wigal of Banksupplies Inc. touts the security benefits of the company's chip carriers to Polly Egan.

Beyond the Sun

The state of the online poker business in America is ... still muddled.

Steve Lipscomb, creator of the World Poker Tour, recalls an eye-opening conversation he had at the Bellagio with an executive of a prominent Internet poker site.

Lipscomb and the executive were being interviewed, separately, for a piece on online poker to air on a national TV news program.

After his segment, Lipscomb found the executive at the bar — “three or four drinks ahead of me,” he said this week at the Global Gaming Expo at the Las Vegas Convention Center.

The executive had just finished an interview in which he said he wants his business to be regulated and taxed in the United States, instead of operating in a legal gray area. He had a different story for Lipscomb.

“He said, ‘Are you kidding me?’ ” Lipscomb said. “ ‘I don’t want to be regulated and taxed. That’s the most ridiculous thing in the world. I’m making money without being taxed, without being regulated.’ ”

The executive’s conflicting statements illustrate the fractured nature of online poker in the U.S., Lipscomb said.

The World Poker Tour was recently acquired by Gibraltar-based PartyGaming, parent company of PartyPoker, which opted to pull out of the U.S. market and later reached a landmark settlement with the Justice Department in an effort to avoid future prosecution.

Other big sites — including the one affiliated with the double-talking executive at the Bellagio — still accept U.S. customers, thereby creating a playing field that’s uneven and riddled with confusion.

The large online sites that cater to U.S. customers “are literally living in the best environment in the world,” Lipscomb said. “They are not taxed and they are not regulated. They are keeping all of the media giants and any public company out of their space. The question is whether they would want (the situation) to change ...

“At some level it boils down to the industry together figuring out what the end game is. In other words, if we really want to tax it, we’ve got to get everyone on board. I don’t necessarily know that people have decided they want to be regulated and taxed, or that they want a particular scheme in place.

“So it gets muddier and muddier, which will always work for those who are currently benefiting from the status quo.”

Last year 12 million people in the U.S. played poker for money online and 5.1 million did so at least once a week, according to Michael Lipton, a Canadian gaming law expert who discussed the issue with Lipscomb; Joerg Hofmann, a German attorney specializing in gaming; and John Pappas, executive director of the Poker Players Alliance.

Worldwide online gambling revenue is projected to reach $24.4 billion by 2010, with $10 billion of it generated by poker, Lipton said.

Several pieces of legislation — including bills championed by Rep. Barney Frank,D-Mass., and Sen. Robert Menendez,D-N.J. — would legalize and regulate various forms of Internet gaming in the U.S., including poker.

Such efforts have coincided with the growth of the Poker Players Alliance, Pappas said on the panel at the gaming expo. Membership in the organization has increased from 75,000 in 2006 to 1.2 million Americans. The group is dominated by recreational poker players, with only 4 percent identifying themselves as professionals.

“The movement that we’re seeing — the Menendez bill, the Frank bill, efforts at the state level — are not built around the idea that legislators one day woke up and said, ‘Hey, this would be a great idea,’ ” Pappas said. “It’s because people who live in their districts, people who vote for them, began to care about this issue.”

Even so, Lipscomb said, unless a clear plan is established, chaos — or at least conflict — will reign. Online poker operators who have opted out of the U.S. market don’t want their competitors who remained in the market to benefit from any settlements they made with the government. The major companies dealing to U.S. customers don’t want the paradigm to change, possibly leaving them without the ability to gain a license if new laws are enacted.

Lipscomb calls this stalemate of sorts “the thing that’s beneath the thing that’s beneath the thing that nobody really talks about.”

Meanwhile, lawyers and lobbyists continue to benefit financially, Lipscomb said.

“That can go on for a long time,” he said, “with us in the poker world getting excited when a new letter gets written by a congressperson or when a committee brings something out that, if you are really in the know, you know it’s never going to pass.”

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