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New law may break the bank for Internet gambling industry
Pittsburgh Post-Gazette


October 24, 2006

Hours after Congress approved a bill on Sept. 30 that suddenly imperiled Internet gambling, hundreds of the world's best poker players partied at a beachfront Radisson resort in Aruba, toasting their good fortune, until they learned otherwise.

The players lined up near the trays of Caribbean pork and pick-and-peel cocktail shrimp. Some took to the dance floor, twisting to '80s hits. A few, aided by beer, jumped into the pool.




Such exuberant moments typified the poker landscape, given its boom within the past half-decade.

Although government prosecutors maintain that Internet gambling is illegal within the United States, they have been mostly helpless to stop it. Wagering sites are easily accessible and operators can evade U.S. laws by opening off-shore sites. But authorities in the United States recently arrested two Internet-site operators as they tried to pass through the country, indicating they intended to crack down. And the new legislation cuts to the heart of the operation, money, by stopping the flow of credit-card payments to gambling Web sites.

That money and the power of the Internet to drive the boom is in evidence everywhere in the gambling world. At the Aruba tournament, the UltimateBet Aruba Classic, some 80 percent of the 512 participants qualified online. Devon Miller, 21, won the $744,960 championship check. The UltimateBet Web site paid for a blogger, Gene Bromberg, of Shaler, Pa., to write about the event for his online audience.

By the night of the party, Bromberg had heard the news. Senate GOP leader Bill Frist of Tennessee had attached an anti-gambling bill to a larger measure addressing port security. The bill passed through Congress with some politicians never knowing of its existence. And, pending President Bush's signature, which he provided Oct. 13, the Unlawful Internet Gambling Enforcement Act was to be the law of the land.

Though individual gamblers didn't face an immediate threat, online poker players such as Bromberg recognized what would happen. That night, he mentioned the bill to several others. Their spirits dropped. "Oh, no," one muttered.

"It was kind of strange," Bromberg said later. "We were having this great party, an amazing time, and yet the world had changed for online poker completely."

Online gamblers, the mass of poker loyalists, in particular, have spent the past weeks assessing the changes, speculating and worrying and searching for last-resort measures to protect their game. Though poker originated centuries ago, the online game revolutionized, and perhaps subsumed, its in-the-flesh partner.

Rep. Jim Leach, R-Iowa, who helped write the anti-gambling legislation, called the Internet "crack cocaine for gamblers," borrowing the analogy from a professor.

Experts estimate that online gamblers placed $12 billion in bets last year. Some 2,000 poker or gambling sites populate the Web. And many of them, in off-shore tax havens, depend on Americans for half or more of their market.

"It's ironic that this bill was attached to the port-safety measure," said I. Nelson Rose, a professor at Whittier Law School in Costa Mesa, Calif., and an authority on gambling law. "Because Bill Frist did more damage to the London stock market than the terrorist attacks. Eight billion dollars in equity, gone, just like that."

"Yeah, but there should have been mayhem, because, for an intelligent, industrialized country to cater to gambling stocks is an anathema to stability," said John Kindt, a University of Illinois professor of business and legal policy. "There should be no sympathy for the people who were involved in this speculative bubble. You cannot gamble your way to riches."

Bush's signature presented a new level of risk to an industry founded on it. It came on the heels of the recent arrests of Peter Dicks, chairman of Sportingbet, which is traded on the London Stock Exchange, and David Carruthers, chief executive of competing site BetOnSports. News of those arrests sent shares of other Internet casinos downward and worried many in the industry.

Partypoker.net, the country's most used poker site, announced Oct. 13 that it would no longer accept wagers and deposits from U.S. players, though it had depended on them for 90 percent of its revenue. PartyGaming, which operates the site, saw its shares on the London Stock Exchange nosedive. PokerStars.com and FullTiltPoker.com e-mailed their customers announcing they'd withstand the turbulence.

Michael Martin, a Penn State senior who'd participated during the summer in the World Series of Poker, received a message from a poker friend on his Facebook.com message board: "I miss the way it once was."

Martin's ascension to poker's highest ranks hints at both the game's allure and its inherent danger. He left home in Washington Crossing, Pa., more than four years ago, an English major with little clue about his career path and, admittedly, little interest in classes. He began playing poker 2-1/2 years ago. During Christmas break of his sophomore year, he played casually with family members. Back at school, he placed $100 into a startup online account and idled away time in $5 and $10 games.

He took the game seriously. He studied it. "I saw money," he said. "I noticed that the good players were winning and the bad ones were losing." So he dedicated himself to becoming a good one.

That meant an escalation. That meant a summer job with a moving company that became just an interruption of his poker playing, which consumed 30 to 45 hours every week. It meant a new group of friends, poker players from around the country instead of familiar faces from campus. It meant a house in Las Vegas this summer, a seat in the World Series of Poker and a $42,882 payout at the no-limit Hold-'em championship.

Now back at school for his final semester, Martin plays every day, often two or three tables at a time.

Martin never risks more than 5 percent of his bankroll and, since starting his online account, he said, he's netted "six figures."

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Scripps Howard News Service, http://www.shns.com

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Ketchikan, Alaska