PokerStars Teaches Lesson of Segregated Funds

Anything PokerStars does evokes mixed reactions from the online poker community. The largest online poker site in the world is no stranger to controversy, with everything from player sponsorships to rewards system changes prompting a wide range of feedback from the public.

Its latest move, however, received overwhelmingly positive responses. PokerStars announced that it was rescuing players from the bankrupt PKR online poker site, reimbursing them for all funds lost when PKR abruptly closed its virtual doors last month. While players must log on or create a PokerStars account to access the money, they are under no obligation to play and can simply withdraw the money if they so choose. As PokerStars noted in its announcement, there are no strings attached.

The notice takes special care to mention the importance of segregated funds. In fact, the first sentence written by PokerStars and Amaya VP of Corporate Communications Eric Hollreiser emphasized that point. “For online poker operators, nothing is more important than protecting players’ bankrolls.” He then continued, “PokerStars keeps player money and operating funds separate and protected – we always have. … As we learned in April 2011 and again last month, not all operators do.”

Told You So

Some may say the move by PokerStars is an “I told you so” moment. It is a nice way of kicking PKR owners when they’re down. It is a chance for PokerStars to prop themselves up as the savior of online poker around the world.

That may be true, but that’s not to say it’s not deserved. PokerStars did show by example the importance of segregating funds when Black Friday happened in April 2011. When the United States government seized online poker websites and players panicked about the safety of their funds, PokerStars was the only one of those affected operators able to respond quickly to players. They told players their accounts were all safe, as they had been segregated from operating funds from the start, and an agreement with the government would allow PokerStars to pay all players.

It wasn’t so with Full Tilt Poker, as everyone well knows. Player funds were not segregated, and the company had systemic problems that led to Full Tilt’s inability to pay anyone. PokerStars did work to save the day by coming to an agreement with the US government to use money from the fines it paid to arrange a payment system for Full Tilt victims. It took several years to carry out the process, but it did happen. The same thing happened with Absolute Poker and UltimateBet, and those players are now able to claim their funds as well.

PKR was a respected online poker site in the industry, but its executives did not put players first in the end. When it closed its doors due to financial problems, the players were out in the cold. Less than a month later, however, PokerStars agreed to bail out the players.

Benefits for PokerStars

Of course, there are benefits for PokerStars in the deal. PokerStars does garner favorable public opinion from the move, especially at a time when the company has been dealing with a great deal of negative feedback for recent changes to its rewards system. And PokerStars does gain access to PKR’s player database that consisted of approximately 60,000 online poker players, all potential customers who will come to the site with a positive view of PokerStars.

There is a larger picture, though, which is the state of online poker around the world.

Lessons for Players

The message from Hollreiser did not mince words and clearly pointed fingers at operators who fail to abide by the highest standards of the industry and laws that require licensing. One might say, however, that the bigger message was aimed at players, who are the ones making the decisions about where to play and deposit their online poker funds.

Sites that segregate funds for player protection will answer questions and show proof of their compliance with such standards. Other online poker operators steer clear of such questions and don’t apply for licensing in countries where they are required because they are unable to show proof of player fund segregation. This leaves the primary decision with players, to make their choices based on security without risking money they rightfully earn on the website.

As the PokerStars memo from Hollreiser stated, “We’re doing this because we think it’s the right thing to do for the poker world and to encourage others to join us in putting you, the player, first by segregating and protecting player balances from operating funds.”