How Will the US Justice Department's Arrest of PokerStars, Absolute Poker and Full Tilt Employees Impact The Impending New US Internet Gambling BIll?

Many people in and around the online gambling space are pondering how the recent US Department of Justice allegations and arrest of  PokerStars, Full Tilt and Absolute Poker associated individuals will impact the new US online gambling legislation being drafted and debated in congress.   

You have to step back a bit  and consider how close Senator Kyle and Senator Reid  came to tacking on an  online gambling amendment to an existing bill in the  fall of 2010 and the debate that  transpired  preceding the drafting of a proposed online gambling bill to understand the timing of this move.  

One of the hotly debated issues during the deliberations was the inclusion of existing online poker sites that where taking US wagers in the legislation. This would have allowed  the PokerStars of the world to turn their large trove of existing US gamblers into legitimate online gamblers when the  legislation was enacted. Many of the existing US casino operators have no online gaming players and no expertise in running online gambling operations. Obviously, Full Tilt, PokerStars and Absolute Pokers have players and expertise providing for a good partnership.

This lead the normally conservative casino operators to change their lobbying position relative to the acceptance of apparent violators of UIGEA to reenter the US market under  US casino brands. Some of the US casino brands lobbied hard for this and brought attention to the fact that for years companies like PokerStars had being taking US wagers despite UIGEA.

This added attention was a blessing and a curse for companies like PokerStars because people started to ask questions about UIGEA and why it was not being enforced.  Rumor has it that the Justice Department did not go after these companies because the law was essentially unenforceable and the Justice Department was concerned that if they did try to prosecute and lost a case then everyone would realize that there was really no US online gambling law.

I have no idea if this is true or not. However, apparently, people in a position of power started to ask questions and  challenged the Justice Department to either enforce the law or admit that it was unenforceable.

It appears that the Justice Department has decided to go forward  taking on Pokerstars, Full Tilt and Absolute Poker  in a court of law to determine once and for all if the UIGEA is viable.

Is this a good or bad thing for the current gambling legislation being debated in congress?

Oddly one could argue that the Justice Department move could improve the likelihood of a new bill being enacted that would open up online gambling in the US providing all operators and systems providers licenced to do so have no prior history of taking US wagers after UIGEA was enacted. In fact, this may be the real reason for the Justice Department 's swift move to identify which operators could and could not run online gambling operations in the US.

Of course, one could make the argument that all bets are off for new legislation in the short run. The dust may have to settle for a bit before anyone ventures forward. If this is the case Zynga once again becomes the big winner. They are making a fortune selling virtual poker chips in their poker room. No there is no cash out so no legal issue for them.

Kevin Flood is the CEO of Gameinlane, Inc. Kevin writes extensively about online games and their impact and integration into iGaming and E-commerce environments. Kevin is a frequent speaker at online game events and conferences in Asia, Europe and the US. Kevin and his Gameinlane team are currently working with online gambling, social gaming and e-commerce companies integrating social gaming with online gaming operations and integrate game mechanics into e-commerce applications.

Are US Land Based Casinos In Jeopardy Of Losing Market Share To Online Gambling Sites?

The recent holiday retail store and online e-commerce sales numbers highlight the steady march of consumers moving away from purchasing products at brick and mortar shops to purchases online. This year's comparison numbers are lower for brick and mortar shops and higher for e-commerce transactions.

The inclination to transact online as opposed to transacting in a conventional store represents a growing trend for individuals to interact virtually as opposed to interacting physically. The pendulum is swinging steadily in the direction of more online activity.

Is the same phenomena occurring in the gambling sector?

Online gambling has been alive and growing since the mid 90's. Some of the earliest e-commerce sites were gambling based. The growth in online gambling has been brisk despite the attempts by governments to render online gambling illegal.

In contrast to traditional retailers that have embraced online e-commerce by launching online stores of their own the US casino operators have avoided embracing the online model. Land based casino operators have not established online brand identities.

In defense of the US land based operators state and federal regulations have been greatly responsible for prohibiting land based operators from entering the online market. However, casino operators have also been reluctant to fully embrace online marketing of their land based properties and introducing legal options for consumers to experience gambling online.

Conversely online gambling sites continue to grow at an ever increasing rate. PartyPoker estimates that they are adding 5000 US players to their free play model every week. Fulltilt and PokerStars continue to allow US players to wager in their poker rooms.

Online gambling operators such as PartyGaming are now entering the legal online US gaming market through the purchase of the WPT property.

Certainly the recession has had a negative impact on the land based casinos. Their drop in revenues can be attributed to a deflated US economy. However, is this the only reason for their loss of revenue?

Online gambling revenue have steadily grown through this recession. Have they taken market share away from US land based operators and will that traffic return to Vegas when the recession abates?

The synergy between the offline and online gambling experience is strong. Playing online helps educate players on how to play the games and will improve their performance in skill based games at the casino. There is no complete substitute for the land based experience. People want to go to Vegas. So a marriage of online with offline(The Walmart model) makes sense. In fact a marriage of the two is almost mandatory for the land based operators to once again become growth mode companies.

The question is who will move first and if a merger of the business models occur who will initiate the merger? Will the online gambling operators be acquirers of land based US operators or will US operators begin to form partnerships with online gambling operators? What will be the dominate brand? Will it be online or offline?