US Poker History

Unlawful Internet Gambling Enforcement Act
Timeline of Events in US Poker History

The history of online poker in the U.S. is short in terms of absolute years, stretching back only a bit over a decade. But packed within that tiny time frame is one of the wildest, most riveting stories of the Internet age. It's the story of a new way of playing an old game (and the industry surrounding it) that captivated a country so absolutely the American government saw fit to intervene.

There are any number of ways to view the tale of online poker in America. We've chosen to divide our take on the history of American online poker into four distinct eras: the Unregulated Era, the UIGEA Era, the Black Friday Era and the Regulated Era. Each of these eras marked a dramatic shift for poker players and the larger U.S. online poker industry, and in this article we'll walk through the basic timeline, key events and lessons learned for each individual era of online poker in the US.

Following our exploration of those four eras of American online poker, we'll take some more time to discuss the likely shape of the next era for online poker in the United States.

The Poker Boom 1997 - 2006 » UIGEA 2006 - 2011 » Black Friday 2012 - 2013 » Regulation 2012 - 2013

Let's kick things off by starting at the beginning: the Unregulated Era of online poker.

The Unregulated Era of Online Poker in the United States

Timeframe - The Unregulated Era of American online poker can be identified as the time between the primitive launch of online poker games with a financial incentive in or around 1997 and the introduction of the Unlawful Internet Gambling Enforcement Act (UIGEA) in October 2006.

Key events of the Unregulated Era

  1. Launch of Planet Poker - While beta testing for the room occurred in 1997, it wasn't until New Year's day 1998 that Planet Poker dealt what is generally considered the first hand of real-money online poker in the United States. Planet continued as the leading online poker site for a time, but was eventually displaced by competitors with more sophisticated software and superior marketing.
  2. The PartyPoker Million - In March 2002, PartyPoker hosted the inaugural PartyPoker Millions tournament. At the time, the thought of an online poker site guaranteeing such a large prize pool for a live tournament was unheard of, and the concept of online satellites to live events was by and large unproven. Kathy Liebert claimed the top prize of the tournament, banking $1,000,000 for her win on March 17th, 2002. The tournament went on to become a staple of the live circuit and continues to this day.
  3. Satellites to the World Series of Poker - 2003 was the first year that it was possible to take part in WSOP satellite at online poker sites like PokerStars. Stars sent 37 players to the World Series of Poker that year, including a then-unknown Chris Moneymaker. Over the years that followed, various online poker sites would collectively send thousands of entrants to the WSOP, a trend that continues to the present day.
  4. Chris Moneymaker wins the World Series of Poker - After parlaying a $39 satellite entry into a victory at the 2003 Main Event of World Series of Poker, Chris Moneymaker became inexorably linked with the story of American online poker[1]. The wild growth of online poker in the wake of his win is commonly referred to as the "Moneymaker Effect," but many observers believe online poker would have exploded in the United States whether or not Moneymaker achieved his improbable championship. Regardless, Moneymaker's win did happen, and his championship will likely continue to be identified, rightly or wrongly, as the tipping point for online poker's popularity in America.
  5. Harrahs purchases the WSOP- The originator of the WSOP, Binion's fell on hard times in the 2000s and was forced to sell their casino and the World Series of Poker brand to Harrah's Entertainment (which would eventually rebrand as Caesars). Under the watch of Caesars, the WSOP and online poker would enjoy a close relationship and parallel growth of astounding proportions - until the Black Friday Era rolled around and upended the relationships between American casinos and international online poker operators. [2]

Characteristics of the Unregulated Era of online poker

The Unregulated Era of online poker can fairly be characterized as something of a "wild west" for online gambling. During this era, a staggering amount of new online poker rooms opened - almost daily, it seemed at some points - and a similarly astounding number closed their doors with little notice or fanfare. Along with the surfeit of rooms came intense competition for players, a competition that spurred rooms to offer unsustainable promotions and bonuses in an attempt to attract a player base.

One unique characteristic of the Unregulated Era is the relatively small traffic disparity that existed between leading rooms. In the status quo, PokerStars has a massive lead, dwarfing the next-closest competition several times over. But in this era, the leading rooms were separated by far smaller gaps in terms of player numbers, and positions at the top of the online poker charts shifted with regularity.

Another important aspect of this era was a near-total lack of regulation or oversight. While independent regulators did spring up in some out-of-the-way jurisdictions, the amount of governmental influence over these regulators was minimal. While this allowed the industry to grow rapidly with little restraint, it also served as the breeding ground for some cheating scandals that continue to haunt online poker to this day.

A final note of interest: during this era you would have found a minimal amount of training tools or training sites. It wasn't until close to the end of this era that poker players began to take note of new software tools and video-based training sites such as CardRunners. That segment would eventually explode, but by and large remained a niche business during the Unregulated Era of online poker in the United States.

Lessons of the Unregulated Era

  1. Rakeback wars are not a sustainable business model, a lesson learned after rooms engaged in a battle for player share by offering always-escalating rakeback rates to players. The end result was a player base that demanded a level of promotions, bonuses and total value that simply wasn't feasible for the majority of online poker sites. Many skins, and even a few networks, closed as a result of these so-called "rakeback wars" of online poker.
  2. At least some governmental oversight is necessary to mitigate the inevitable threat of cheating, a point made clear by the horrific cheating scandals at Ultimate Bet Poker and Absolute Poker (which began in part prior to the UIGEA era but were not uncovered until post-passage of the UIGEA). While both sites were issued a license by a regulator, that regulator was subject to no additional oversight. Many believe that the presence of a strong government regulator would have stopped the scandals from ever happening in the first place, or, at the very least, mitigated their ultimate financial impact.

The UIGEA Era of U.S. Online Poker

Timeframe - The UIGEA era of online poker in America can be loosely identified as the time spanning the introduction of the UIGEA in October of 2006 through the Black Friday indictments handed down in April of 2011.

Major Events in the UIGEA on US Poker History

  1. Exit of several international operators- Following the passage of the UIGEA in 2006, several online poker sites (most publicly traded companies) exited the U.S. market[3], including market leaders Party Poker and 888 Poker. Others, such as PokerStars, remained in the market. The result was a complete shake-up in the online poker traffic rankings, one that catapulted PokerStars to the dominant position it still enjoys today.
  2. The Ultimate Bet / AP scandals - Word began to emerge in 2007 of a massive cheating scandal at Absolute Poker and a separate but related scandal at UB was uncovered around the same time. The total amounts involved will never be known, but estimates from insiders suggest a number in the tens of millions of dollars. Many of poker's top names were caught up in the scandal, either as participants, peripheral players or victims of the cheating. The silver lining to the scandals is the work done collectively by the online poker community to uncover their existence in the first place. Paul Leggett, CEO of Tokwiro Enterprises released a statement to the press[4] which acknowledged the cheating and also apologized.
  3. Implementation of UIGEA regulations - While the UIGEA itself was passed in 2006, the implementation of the law didn't come until several years later. When the "final rule" of the UIGEA was implemented in January 2009[5], requiring compliance by December of that year, the American online poker industry was forever altered. Processing delays caused by the UIGEA wouldn't become apparent right away, but in the months and years following the impact of the regulations on depositing and withdrawing at online poker sites was acutely felt by U.S. online poker players.
  4. Significant push for federal regulation of online poker - In December of 2010, Senator Harry Reid (D - NV)[6] made a push for federal online poker regulation during the so-called "lame duck" session of Congress following November elections. Despite intense speculation that Reid would use his powers as Senate Majority Leader to advance the bill, the session came and went without any breakthrough for American online poker players.

Characteristics of the UIGEA Era of Online Poker

The UIGEA Era of online poker in America is a study in contrast. On one hand, online poker appeared as healthy as it has ever been during the UIGEA era. One indicator of its health is the astounding number of big-ticket online poker tournament series hosted by sites like PokerStars and Full Tilt Poker - series that award not thousands, not millions, but tens of millions of dollars in prize money to players.

But on the other hand, a number of threats to the long-term viability were also emerging during the UIGEA era - the UIGEA itself not the least among them. As the profile of the online poker industry grew, so did questions about the inherent legality of the activity at the state level, UIGEA or no UIGEA. And, buoyed by their decision to stay the United States following the passage of the UIGEA, PokerStars and Full Tilt were dominating the global market for online poker in a way that was unthinkable during the relative parity of the Unregulated Era. While players were fond of both rooms, the overall decrease in competition was viewed by many as a troubling sign for the industry's future.

At the same time, online poker training sites were proliferating and poker analysis software was becoming increasingly more complex and more popular, creating a parallel threat to the health of online poker by exacerbating the skill gap between the regular players and the recreational or casual player.

What We Learned From the UIGEA Era

  1. The last-minute passage of the UIGEA taught online poker proponents that the political power of gambling opponents should not be underestimated. This truth was reasserted again during the 2012 lame duck session, a development we'll discuss more in a later section.
  2. A related lesson: Just because you don't agree with a law doesn't mean it won't impact you. American online poker players were openly disdainful of the UIGEA and the process by which it passed, but were ultimately forced to recognize that the law changed their game in an irrevocable way. Some believe that if the poker community had been more organized prior to the passage of the UIGEA, such legislation would have never come to pass.
  3. The nature of gambling law in the United States is so complex and so often contradictory that even well-established experts on the subject can disagree on the most fundamental issues. Both PokerStars and Full Tilt Poker were operating under legal opinions from some of the top names in the field asserting that the UIGEA did not apply to online poker. But, as the Black Friday indictments proved, the United States government took a decidedly different stance on the issue.

The Black Friday Era of American Online Poker

Timeframe - Arguably the darkest of all periods for American online poker players, the Black Friday era of online poker in the U.S. dates between the unsealing of indictments against major American-facing online poker sites in April of 2011 and in many ways continues to this day.

But we mark the formal end of the era at the point when Nevada issued their first interactive gaming license in June of 2012, accepting that there is a great deal of overlap between the two eras.

Major Occurrences in the Black Friday Era

  1. Black Friday indictments - On April 14th, 2011, the DoJ unsealed indictments [7] against the three largest US-facing online poker sites and seized their domain names. This caught much of the online poker community by surprise, although rumors of a pending federal indictment had be circulating for several months prior.
  2. Full Tilt revealed as practically bankrupt - In or around June of 2011, the full extent of the problems at Full Tilt Poker became apparent, as reporters uncovered evidence [8] that the room is tens of millions of dollars short on player balances. This fact results in the eventual filing of additional charges against the company and its principals by the DoJ.
  3. Absolute and UB collapse - While both rooms remained technically open after Black Friday, the Cereus Network eventually ceased operations in the summer of 2011. Players have yet to receive any of the funds that were lost when the site ceased operations.
  4. Full Tilt Poker taken over by PokerStars - In the summer of 2012, rumors fly that PokerStars is negotiating to take over Full Tilt Poker. This is as Full Tilt is set to be purchase by Group Bernard Tapie. A deal between PokerStars and the DoJ is announced on July 31st, 2012 [9] that both resolves the charges against PokerStars (the company, not the individuals involved) and requires PokerStars to provide funds to cover the balances of Full Tilt's American and international customers. PokerStars reopens FTP [10] for international play in November of 2012.
  5. Black Friday figures reach pleas / settlements with the DoJ - Throughout 2012 and into 2013, most of the biggest names mentioned in the Black Friday civil and criminal indictments settle their cases with the DoJ. Some - including Absolute Poker head Brent Beckley [11] and payment processor Chad Elie[12] - serve jail time. Others - including Howard Lederer and Chris Ferguson - agree to hefty fines. And still others - including PokerStars founder Isai Scheinberg - opt to remain outside of the United States, leaving their issues with the U.S. government unresolved.
  6. Lock Poker leaves Merge and forms their own network (Revolution Gaming) - When Lock split from Merge [13] in May of 2012 and announced their takeover of the Cake Network, many thought the development was good news for U.S. poker players. But technical problems and payment delays plagued the new network from the start, causing Lock Poker to become somewhat emblematic of the problems involved in operating a US-facing online poker site in the Black Friday Era.
  7. Nevada regulates online poker - In June of 2011[14], Nevada lawmakers passed a bill aimed at bringing regulated online poker to the state. It would be six more months before regulations were issued by Nevada regulators, and almost two years before the first hand of online poker regulated under the law would be dealt.

Characteristics of the Black Friday Era of Online Poker

The Black Friday Era for American online poker players is one with precious little silver lining. During this era, it became increasingly difficult for players to deposit and cash out. Traffic dropped across the board, causing an industry consolidation that sees multiple rooms and skins close their doors to players - often without allowing players to cash out their balances first. And what games do remain become increasingly tough to profit from, as payment processing hurdles dissuade the recreational players from signing up and making badly-needed deposits.

Lessons from the Black Friday Era

  1. Governments will only tolerate unregulated gambling activity for so long. Earlier participation in the political process might have helped the companies targeted by Black Friday avoid those issues.
  2. Committed online poker players will find a way to play poker online, a point well-proven by the willingness of players to deal with the often harsh realities of continuing to play on US-facing poker sites after Black Friday.
  3. International companies are not necessarily beyond the reach of United States authorities, especially if they rely on the Internet to conduct their business.

The Regulated Era of Online Poker in America

Timeframe - The Regulated Era is the present of online poker. You could legitimately place the start of this era in American online poker at a few different points, but we chose the date on which Nevada issued their first interactive gaming license: June 21st, 2012.

We chose this date as opposed to, say, the date Nevada passed the law to regulate online poker for a few reasons. First, it has a nice symbolic quality. Second, it marks a point at which many- but not all - of the loose ends of Black Friday have been tied up or are in the process of being tied up.

Regulated Era: Key events

  1. Nevada issues their first "interactive gaming" license - Our era begins in June of 2012[15], when Nevada issues the first interactive gaming licenses to Bally Technologies (not to be confused with the casino property Bally's) and International Gaming Technologies (IGT). Nearly two dozen other companies will also receive a variety of licenses before online poker actually launches for real money in Nevada.
  2. Delaware regulates online gambling - Only days after Nevada issues their first licenses for online gambling, Delaware passes a bill[16] allowing multiple types of online gambling to be offered under the regulation of the state lottery.
  3. Another lame duck federal push fails - Senators Harry Reid and Jon Kyl make a bipartisan push to regulate online poker (while banning most other types of online gambling) during the 2012 lame duck session, but ultimately come up short and no bill is ever introduced[17].
  4. New Jersey regulates online gambling - In February of 2013[18], New Jersey Gov. Chris Christie signs a bill to bring various forms of regulated online gambling to the Garden State.
  5. PokerStars attempts to purchase an Atlantic City casino - Negotiations began in late 2012, but it wasn't until a few months into 2013 that the world learned of PokerStars' ill-fated attempts[19] to purchase the Atlantic Club Casino. The legal battle surrounding that attempted purchase continues to the present day.
  6. Full Tilt funds remain in quasi-limbo - The DoJ names the company that will handle the return of U.S. Full Tilt player balances in March of 2013, picking remission specialist the Garden City Group. But key details regarding the remission process remain unanswered, causing some players to speculate that the full balances of FTP's American customers will not be honored[20].
  7. Ray Bitar reaches deal with U.S. authorities - On the second anniversary of Black Friday, former Full Tilt CEO Ray Bitar, suffering from a potentially fatal heart complication, agrees to a plea deal with the U.S. [21]that allows him to avoid jail time and pursue a heart transplant.
  8. Ultimate Poker deals the first hand of regulated online poker - The era of regulated real money poker in the United States begins in earnest when >Ultimate Poker deals their first hand on April 30th, 2013[22].

Characteristics of the Regulated Era of Online Poker

During the Regulated Era, we've seen more states than ever considering some form of online gambling regulation. While the number of states that have actually passed regulation into law remains relatively small, the concept of nationwide regulated online poker (or something close to it) becomes far more plausible than at any point during the Black Friday era.

But while there are reasons for optimism during the Regulated Era, there are also plenty of reasons for American online poker players to be concerned - concerned about their bankrolls at unregulated sites, where cashing out is becoming almost impossible at some sites; concerned about the future of the games at unregulated sites, which are closing at an even greater rate than we saw during the Black Friday era and concerned about the timeline for the return of a viable American online poker industry.

Lessons from Online Poker's Regulated Era

  1. The pace of regulatory progress in the United States is likely to be plodding as various stakeholders with competing agendas quibble over the nature and details of regulation.
  2. Player expectations for the quality and quantity of games need to be adjusted, as a return to pre-Black Friday games appears to be several years down the road.
  3. American casinos are not willing to forgive and forget when it comes to their international counterparts - primarily PokerStars - who remained in the American market for online poker post-UIGEA.
  4. The desire for regulated poker among Americans is very, very strong, as indicated both by the willingness of players to continue on unregulated sites in the face of mounting issues and the enthusiastic reaction to a very bare-bones Ultimate Poker in Nevada.

What Lies Ahead For American Online Poker?

Online poker in America appears to be on a slow but set path to regulation. There are a number of potential milestones along that path that will mark significant advancements for regulated online poker in the United States.
Below we take a look at some of the key eras still to come for American online poker.

Steady Expansion of State-by-State Regulation

As of now, only three states in the U.S. have passed laws that will allow for regulated online poker to be offered by licensed operators: New Jersey, Nevada and Delaware. Many more - including California, Illinois and Massachusetts - are considering the idea.

But a greater number still have shown little or no interest in regulating online poker. While it seems that there will be a majority of states offering regulated online poker at some point in the future, it also seems as if the path to that point will be an extended - and, for poker players, a potentially very frustrating - one.

Evolution of Interstate / Tribal Compacts

Once more states and tribes are participating in regulated American online poker, the next step will be the evolution of the agreements that allow those operators to share player pools across state lines.

While such agreements may seem like simple affairs at first glance, a deeper look at the situation suggests that establishing internet poker compacts between states will be a complex and extended process. For example, it seems unlikely that states in competition for land-based customers (New Jersey and Pennsylvania come to mind) would agree to compact without protracted negotiations over revenue sharing and power sharing - if they even agree to compact at all.

Integration of Live Poker and Online Poker

One of the most exciting events on the horizon for U.S. online poker players is the coming combination of live and online poker. With the absence of any major land-based U.S. operator prior to online poker's Regulated Era, American poker players never got a chance to see how an integrated live / online poker experience would change the game and expand the market.

We've seen some hints of the potential with PokerStars' international foray into the business of running live poker rooms, but a full-fledged development of a hybrid product by American casino giants such as Caesars definitely presents a development that American online poker players should look forward to with eagerness.

A Return to International Player Pools

Online poker is on the way back in America, but the only way American online poker players can begin to hope for a return to the pre-UIGEA & pre-Black Friday eras of the game is if regulated online poker operators in the U.S. are allowed to partner with international online poker sites to share player pools.

This development could come earlier than expected, especially if the process of state-by-state regulation continues to drag on. If regulated American online poker operators - especially in smaller states like Nevada - aren't able to find the traffic they need from interstate partnerships, then they may have no choice but to turn to international partnerships in order to generate the player liquidity necessary to support a thriving online poker site.

Refrences and Resources

  1. [1] LasVegasSun.com: Poker champion tells story of ‘dead money’
  2. [2] UTSandiego.com: Harrah's Entertainment creates World Series of Poker Circuit
  3. [3] BusinessWeek.com: Party's Over for Online Gambling
  4. [4] WashingtonPost.com: Statement for 60 Minutes: Cheating scandals at AP and UB
  5. [5] FederalReserve.gov: Prohibition of Funding of Unlawful Internet Gambling
  6. [6] DailyFinance.com: Harry Reid Goes All In for Online Poker
  7. [7] Justice.gov : Scheinberg et al Indictment
  8. [8] WSJ.com: U.S. Alleges Poker Site Stacked Deck
  9. [9] FBI.gov: Manhattan U.S. Attorney Announces $731 Million Settlement of Money Laundering and Forfeiture Complaint with PokerStars and Full Tilt Poker
  10. [10] PokerStars.com: Pokerstars Settles Dispute with U.S Department of Justice and Acquires Assets of Full Tilt Poker
  11. [11] HuffingtonPost.com: Brent Beckley, Absolute Poker Owner, Sentenced To 14 Months In Prison Over Bank Fraud
  12. [12] ReviewJournal.com: Chad Elie, convicted in Internet poker scheme, sues lawyer
  13. [13] TwoPlusTwo.com: Lock is Leaving Merge and Purchasing Cake
  14. [14] LasVegasSun.com: Internet poker company looks to Nevada for entry into U.S.
  15. [15] Bloomberg.com: IGT, Bally Win Nevada’s First Online Casino Licenses
  16. [16] USAToday.com: Delaware to Allow Online Gambling
  17. [17] TheHill.com: States Bristle at Reid’s Push to Legalize Online Poker in Lame-Duck Season
  18. [18] WSJ.com: Internet Gambling Scores Its Biggest Win
  19. [19] LegalUSPokerSites.com: PokerStars Bid To Buy Into New Jersey Fails
  20. [20] LegalUSPokerSites.com: Full Tilt Remittance Still Not Coming Anytime Soon
  21. [21] DailyMail.co.uk: Ringleader of Online Gambling Site-Turned Ponzi Scheme ‘Strikes a Deal….
  22. [22] LegalUSPokerSites.com: Ultimate Poker to Go Live in Nevada