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History of Online Poker in the United States

The history of online poker in the U.S. is short in terms of absolute years, stretching back nearly two decades. 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 US 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 – 2018

Let’s kick things off with what’s new in 2017 followed by a timeline of events starting with: The Unregulated Era of online poker.

What’s New in 2018

Online poker is on the minds of many lawmakers in 2018. The most active state in moving toward a legal and regulated online poker and gambling market is Pennsylvania, which began taking steps toward the goal in the early months of the year. By the summer months, both houses of the legislature had passed a gambling expansion bill that included online poker and casino games, but controversy surrounding the inclusion of video gaming terminals (VGTs) in the bill prompted it to be put on hold until after the summer recess. The House and Senate differ on the tax rates and licensing fees for the new industry, but many legislators and lobbyists are hopeful that the details can be ironed out in order to finally pass the bill sometime in 2018.

New York came very close to legalizing online poker in 2018, as a bill to do so passed in the Senate but failed to make enough progress in the Assembly. Analysts say that New York is a very strong possibility for joining the US online poker market in 2019.

Michigan is a state that came into the picture fairly recently with an online poker proposal, and the sponsoring senator has been working hard to bridge the divides between tribal leaders and other land-based casino owners. A bill remains in play through the summer months with ongoing efforts to make changes in the hopes of passing the legislation in 2018 or 2019.

On the other hand, California seems to have given up on the process temporarily. After making a great deal of progress in 2016 and 2017, one barrier remained to passing an online poker bill after 10 years of efforts, which was the entry of PokerStars into the market. Some tribes stood with PokerStars to support the operator’s ability to offer internet poker to California residents, but most of the major tribes of the state opposed the idea. The rift created between the factions pushed talks to a standstill in 2017, with legislators and most parties involved simply giving up all possibilities of regulated online poker in California in the near future. There will likely be another effort in 2018, but the PokerStars component will remain a barrier.

Several members of Congress renewed their efforts to ban online poker and gambling on the federal level in the US in 2017. Congressmen who have received financial support for their political party and campaigns from casino mogul Sheldon Adelson have stepped up their fight to pass a bill to ban all internet games, including poker. The Restoration of America’s Wire Act and other similar efforts are presented in the hopes of reversing the 2011 Department of Justice decision to allow individual American states to decide their stances on internet gambling. While Congress is generally not supportive of RAWA-type bills that remove states’ rights to make their own laws regarding the online games, some members of Congress have tried to quietly add anti-online poker language to various budget and appropriations bills. Watchdog organizations and lobbyists have been able to detect those attempts and bring national attention to them, which has prompted removal of the ban from all bills through the summer of 2017.

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 continued for well over a decade.
  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 player named 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. Harrah’s 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 number 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 the 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 much of 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 were 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 the 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 after the 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 US market[3], including market leaders PartyPoker and 888Poker. 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 was 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 served as an apology.
  3. Implementation of UIGEA regulations – While the UIGEA itself was passed in 2006, the implementation of the law didn’t happen 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 US 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 the 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 was 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 and casual players.

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 they 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 US, 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 its 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 pending federal indictments 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 was tens of millions of dollars short on player balances. This fact resulted 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 had yet to receive any of the funds that were lost when the site ceased operations until news came in the spring of 2017, which will be explained in a later section.
  4. Full Tilt Poker taken over by PokerStars – In the summer of 2012, rumors flew that PokerStars was negotiating to take over Full Tilt Poker, just as Full Tilt was set to be purchased by Group Bernard Tapie. A deal between PokerStars and the DoJ was announced on July 31st, 2012 [9] that both resolved the charges against PokerStars (the company, not the individuals involved) and required PokerStars to provide funds to cover the balances of Full Tilt’s American and international customers. PokerStars reopened 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 settled their cases with the DoJ. Some – including Absolute Poker head Brent Beckley [11] and payment processor Chad Elie[12] – served jail time. Others – including Howard Lederer and Chris Ferguson – agreed to hefty fines. Scott Tom finally came to the US in 2017, received a fine, and avoided prison. And PokerStars founder Isai Scheinberg still remains outside of the United States, leaving his issues with the U.S. government unresolved.
  6. Lock Poker leaves Merge and forms its own network (Revolution Gaming) – When Lock split from Merge [13] in May of 2012 and announced its 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 was 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 saw multiple rooms and skins close their doors to players – often without allowing players to cash out their balances first. And what games did remain became increasingly tough to profit from, as payment processing hurdles dissuaded 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 state 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 its 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 had been tied up or are in the process of being tied up.

Regulated Era: Key events

  1. Nevada issues its first “interactive gaming” license – Our era begins in June of 2012[15], when Nevada issued the first interactive gaming licenses to Bally Technologies (not to be confused with casino property Bally’s) and International Gaming Technologies (IGT). Nearly two dozen other companies would also receive a variety of licenses before online poker actually launched for real money in Nevada.
  2. Delaware regulates online gambling – Only days after Nevada issued its first licenses for online gambling, Delaware passed a bill[16] allowing multiple types of online gambling to be offered under the regulation of the state lottery commission.
  3. Another lame duck federal push fails – Senators Harry Reid and Jon Kyl made a bipartisan push to regulate online poker (while banning most other types of online gambling) during the 2012 lame duck session of Congress, but they ultimately came up short, and no bill was ever introduced[17].
  4. New Jersey regulates online gambling – In February of 2013[18], New Jersey Governor Chris Christie signed 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 continued for several years.
  6. Full Tilt funds are reimbursed to all qualifying players – The DoJ named the company that would handle the return of US Full Tilt player balances in March of 2013, picking remission specialist Garden City Group. Over the course of several years, the players were vetted and account balances verified, and eight rounds of remission payments were made to repay the majority of the victims. The funds came from the fines paid by PokerStars to the US government, and nearly $114 million was paid out to roughly 45,000 people around the world.[20].
  7. Ray Bitar reaches deal with U.S. authorities – On the second anniversary of Black Friday, former Full Tilt CEO RayBitar, suffering from a potentially fatal heart complication, agrees to a plea deal with the US [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 began in earnest when Ultimate Poker dealt its first hand on April 30th, 2013[22]. The site ultimately closed in November of 2014, but WSOP had since launched its online poker site in Nevada in 2013 and became the singular company to offer real-money online poker in Nevada through 2017.

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 at least several years down the road.
  3. Many 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 to play on unregulated sites in the face of mounting issues and the enthusiastic reaction to the new online poker sites in Nevada and New Jersey.

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 CaliforniaIllinois, Pennsylvania, Michigan, New York, and Massachusetts – are considering the idea, along with online casino games and lotteries.

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. Nevada and Delaware did pool their online poker players in a landmark liquidity agreement signed in February 2014. The Multi-State Poker Network official launched on March 25, 2015, as players in the two states finally shared the same virtual poker tables and prize pools. Similarly, Nevada and New Jersey have discussed the same possibilities consistently, but the part of the New Jersey law that requires servers be located in Atlantic City has created a rift. Lawmakers are working to change that law, however, so online poker liquidity can grow and eventually include states like Pennsylvania that are in the process of legalizing and regulating online poker.

Tribal compacts are more complicated, however. The years of online poker efforts in California – still to no avail – are proof that the plethora of disagreements between Native American tribes, non-tribal casinos, and online poker operators are complex and many times lead to stalemates. Efforts to legalize online poker in Michigan is experiencing the same complications as they work to bridge differences between all of the special interests and tribal nations who want to participate in the new industry on equal footing.

Integration of Live Poker and Online Poker

One of the most exciting events on the horizon for US online poker players is the inevitable combination of live and online poker. With the absence of any major land-based US operators 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 the full-fledged development of a hybrid product by American casino giants such as Caesars definitely presents potential 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 US are allowed to partner with international online poker sites to share player pools. New Jersey lawmakers and regulators have been in discussions with the UK Gaming Commission to discuss details and possibilities, but there has yet to be an agreement to make that international online poker liquidity a reality.

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. New Jersey, Nevada, and Delaware are keenly aware of this need and hope to make changes in the system that allows international poker liquidity to happen in the coming years.

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. [8] WSJ.com: U.S. Alleges Poker Site Stacked Deck
  8. [9] FBI.gov: Manhattan U.S. Attorney Announces $731 Million Settlement of Money Laundering and Forfeiture Complaint with PokerStars and Full Tilt Poker
  9. [10] PokerStars.com: Pokerstars Settles Dispute with U.S Department of Justice and Acquires Assets of Full Tilt Poker
  10. [12] ReviewJournal.com: Chad Elie, convicted in Internet poker scheme, sues lawyer
  11. [13] TwoPlusTwo.com: Lock is Leaving Merge and Purchasing Cake
  12. [14] LasVegasSun.com: Internet poker company looks to Nevada for entry into U.S.
  13. [16] USAToday.com: Delaware to Allow Online Gambling
  14. [17] TheHill.com: States Bristle at Reid’s Push to Legalize Online Poker in Lame-Duck Season
  15. [18] WSJ.com: Internet Gambling Scores Its Biggest Win
  16. [19] LegalUSPokerSites.com: PokerStars Bid To Buy Into New Jersey Fails
  17. [20] LegalUSPokerSites.com: Full Tilt Remittance Still Not Coming Anytime Soon
  18. [21] DailyMail.co.uk: Ringleader of Online Gambling Site-Turned Ponzi Scheme ‘Strikes a Deal….
  19. [22] LegalUSPokerSites.com: Ultimate Poker to Go Live in Nevada