Regulated Online Poker in the U.S. is Wishful Thinking

I wish I was big. No wait... I wish online poker was regulated in the US.
I wish I was big. No wait... I wish online poker was regulated in the US.

Rep. Barney Frank, the chair of House Financial Services Committee, could get a committee vote on H.R. 2267 as early as February 2010. If the bill is passed, it would legalize and regulate the online poker industry in the United States.

Over and over again…I don’t know how many times I’ve come across predictions of rule changes to the poker industry in the U.S. market in the newspapers. Clearly anyone in business knows that in order to run your business with success in mind you have to make some predictions, or at least have some foresight into the future. To use a hockey analogy, you have to pass the puck to where you think your teammate is going to be, not to where he is at that moment. And that is always the trick.

Anyone who is good at predicting the future disproportionally profits in business as there is so much lead time needed to be ready for future events. This is why a lot of media sites are so interested in predictions – and more specifically predictions about the U.S. online gaming market, which was significantly closed in 2006 (at least for the public companies) after the passing of the UIGEA.

Recently, the one prediction I’ve seen made over and over again is that online gaming, or more specifically, online poker, will soon be legalized in the United States. In fact, the most recent prediction comes from none other than Poker Players Alliance (PPA) Executive Director John Pappas, who says that U.S. Rep. Barney Frank’s poker bill could be up for a committee vote as early as next month, so we had better “get ready.”

Well, here’s what I think… (Drum roll please)…

I predict that it would be very unlikely for the legalization or regulation of online poker to happen at the federal level within the next five years, and probably not in the next 10 years. Though it will happen.

Additionally, now that the public companies have been forced out of the U.S. market, I don’t think they will be allowed to come back – even if the UIEGA is repealed. That is, not until they have been submitted to some new formal regulatory environment in the United States. Once the market has opened up, the structure you have will not be an issue; though some of the private companies might have to sell their current U.S. facing operations to a regulated U.S. operator in order to gain free access to e-commerce and advertising.

However, the recent 888 deal with Harrah’s proves that being in the U.S. market prior to the passing of the UIGEA will not necessarily be an impediment to future U.S. facing opportunities.

Going back to the early 2000s I predicted that being a public company was the wrong structure for the volatile environment of the global online gaming industry. This prediction has been proven right in spades and will continue to be right for years to come.

With the publishing of this article, I guess my newest prediction will be put to the test – the test of time, that is. Time will tell who is right…as is always the case.

I think anyone making business decisions on the basis or with the hopes of the U.S. market magically opening up in the next few years is just wasting their time…and they will likely miss their golden opportunity to make good on that break-out pass.

Need more convincing…click here for an extremely knowledgeable opinion from Las Vegas gaming lawyer Anthony Cabot, partner and gaming group leader, Lewis & Roca.