POKER

Who escaped blame for Black Friday? You did.

TAGs: Black Friday, iMEGA, Joe Brennan Jr, payment processing

Joe Brennan Jr

iMEGA Director Joe Brennan Jr

This editorial was submitted by iMEGA Joe Brennan Jr. If you are an iGaming industry professional and would like to submit an editorial please contact us

Online poker in the US? What a disaster.

Amazing how much the world can change in only six months, isn’t it? Libyan war – now over, Quaddafi dead and gone. Egypt – government toppled virtually without a shot fired (but millions of rounds of tweets expended). The leader for the GOP presidential nomination is Herman Cain. For now. The Philadelphia Phillies did not win the World Series – impossible, but true.

And the firms that we’re the biggest driving force (besides Harrah’s) behind the i-poker lobby in Washington DC have now been drummed completely out of the US (as in the case of PokerStars) or worse, alleged to be Ponzi-scheming pariahs hoping to be bailed out (not yet literally) by a French sugar daddy looking for a bargain (of course, Full Tilt).

To quote Steve Jobs, “Oh wow. Oh wow. Oh wow.”

There has been a great deal of ink spilled, virtual and otherwise, running over this sad story ad nauseam. The aftermath, entirely predictable, remains largely a dual track of naked opportunism (see Ryan, Jim, and his “red line” slide from the latest bwin.party Tour of America, as well as their “if/then” deal with MGM and Boyd), and the “gimme my damn money” cacophony of players looking for their missing bankrolls and filing class-action lawsuits.

There is a story, though, that that has been largely missed, specifically related to the “blame game” that kicked into full gear not long after the DOJ and ICE logos commanded those .com domains.

Who is to blame for this predicament that the US online poker world finds itself in? Is it Chris “Jesus” Ferguson and Howard “the Professor” Lederer (an ironic nickname now, given the circumstance)? Did Isai bring the house down, legal opinion in hand and (alleged) zombie banks churning out processing for “travel” and “prizes” and “whateverwecancallitbesidesgambling”? Was it, as many of you have called him, “that goddamned Preet Bharara” sitting up there in Manhattan, piloting an all-powerful asset forfeiture and subpoena machine at the SDNY office of DOJ?

Well, yeah. Duh.

But there is a party that has contributed to this disaster that has thus far escaped blame, skated without any responsibility pinned on them, though I’d argue that they share significantly in what has transpired.

I’m talking about, of course, the players. Yes YOU, poker player. It’s your fault, too.

Now, before the click-clack of keyboards powering the “Joe Brennan is a &%$*#!” thread on twoplustwo commence in earnest, I beg your indulgence for just a moment before you flame me beyond recognition. There is something to this.

You see, US poker players want their processing NOW. Immediately. And for the most part, that’s what they got. Deposits as low at $10.00 and payouts as low as $0.01 (I kid you not; read the civil complaint) were handled within 24 hours. Anything slower than that, and complaints would fan out across the forums, and word-of-mouth about alleged slow-paying would result in immediate attention from the top firms, to make sure the players’ expectations of fast credit/payment were met.

And it was those expectations that contributed to the Black Friday meltdown of the US-facing online poker industry.

Especially after the passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) in 2006, when reliable payment options for operators were drying up, players responded by wanting money even faster than before. Fear of getting their funds caught in the middle of one of those well-publicized processor busts drove players to increase their expectations of fast payouts precisely at a time when the industry could no longer reasonably (and legally) keep up.

Poker players, in particular amongst online gamblers, treated their accounts like ATM machines. A large percentage of those that did earn at the tables immediately withdrew their winnings, regardless of how small (note that the previous $1.00 payout requests by CWs were not refused, as they were commonplace).

This put Stars and Tilt in an awkward position, of which they were both fully aware. If both firms (and yes, AP/UB…whatever) were intent on satisfying the increasingly unreasonable expectation of players for instant transactions, they would not be able to accomplish it with offshore processing. The processing would have to come from within the US. With UIGEA, that was an increasingly risky proposition, as evidenced by the targeting of US-based processors starting in 2009.

PokerStars and Full Tilt are the world leadersBoth companies were in a power dive. The Earth was racing toward them. They could see it. Yet they didn’t pull up. Why?

Because it became a game of chicken.

The first operator that pulled up, and pulled out of US-based processing, would be yielding a “competitive advantage” to the other firm. Think of it: Firm #1 says, screw it, we’re putting the company and the players as risk here, so no more US-based processing, which means no more “instant” deposits or payouts.

How does Firm #2 respond? By shouting to the rooftops of the world, “Firm #1 won’t give you instant payouts or deposits. WE STILL DO!!! Open an account now with us, and f—– Firm #1”.

And the rest is history, my friends.

Oh sure, maybe the poker operators could have worked together (after all, they did work together in DC, right) to change the expectations of the players, and get them to understand that in a post-UIGEA world, they’d all have to get used to waiting a bit for their processing. But no one ever got rich telling you guys to “eat your peas”. The Internet is an instant gratification medium. Waiting is not something people accept anymore.

So, there you have it. The poker companies (allegedly) broke the law so that they could process players’ funds. Players were unwilling to change; even as the DOJ made it clear they were targeting US processors. Black Friday was a surprise only if you remained wilfully ignorant of everything the DOJ said and did for two years (BTW, all a result of a major uptick in enforcement activity during the Obama administration, for those of you who still erroneously think this is a partisan issue).

Of course, Jesus and the Professor shouldn’t have been paying themselves dividends out of your deposits (allegedly). Of course, it seems a ridiculous “horse out of the barn” situation regarding the US and Internet gambling, with no end in sight. Of course, players can be better “protected” were the activity to be licensed and regulated.

But don’t act surprised that this all happened, poker players. Mr. Bharara telegraphed this punch for going on two years, and you kept playing like everything was OK. You have to assume part of the blame, even as we acknowledge that you shouldn’t get screwed out of your money. With so many parties circling around it, though, don’t expect the get much back, if any.

Just ask the people who used to play at Betonsports.com.

Joe Brennan Jr. is Director of IMEGA and a consultant in the iGaming industry.

 

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