Dealers Choice: Regulation, Innovation Always At Odds

Dealers Choice: Regulation, Innovation Always At Odds

Dealers Choice: Regulation, Innovation Always At OddsTwo bits of news from the online poker world caught my attention this week. The first is the impending arrival of PokerStars in the New Jersey regulated market, which, even if you’re not a fan of the online giant, is still huge news given recent history. The other piece of news is that, as of yesterday, Bitcoin sportsbook Nitrogen Sports has begun offering poker as an option to its customers.

Aside from both falling under the umbrella of online poker, there isn’t much in common between the two. One is the largest online poker room in history, stepping into a highly regulated market. The other is a completely unregulated newcomer running brand-new software and only accepting deposits in cryptocurrency. They’re pretty close to complete opposites – and that’s precisely why they’re worth comparing.

Innovation isn’t impossible in regulated markets – it just has to be approved in advance. Today, PokerStars has licenses to operate in regulated markets around the world. The amount of control over what they’re allowed to offer in their software, and to whom they’re allowed to offer it, varies greatly by jurisdiction. But in all of them the room’s freedom to innovate is stifled in all sorts of ways, always by design.

The most obvious is the ring-fencing of player pools in places like Spain, Italy, and France (and soon New Jersey), which experience shows is traffic killer over the long term. Every time PokerStars reaches out to a new market around the world with its massive marketing machine, the players in ring-fenced locations are left out of from the benefits of playing against new, usually less-skilled competition. Related to separated player pools are the higher taxes in walled-off markets. These external costs are always passed on to the consumer, whether it’s through higher rake or worse player loyalty programs.

Then there’s the regimentation of software. PokerStars’ software has evolved over the years into a highly customizable package, with more bells and whistles than any other online room, almost exclusively because of feature requests from its players. It’s been able to introduce new games and tournament formats at will over the years, add instant hand history functions, and generally make any sort of improvement that it feels its players want to see.

But changes to software in regulated markets can’t be implemented until they’re run by the regulators first. If it were otherwise, there would probably already be excellent options available in places like New Jersey and Nevada instead of the middle-of-the-road current offerings. And some changes – like using better geolocation providers so players who are within the state will be recognized as such by the poker room, rather than being told they’re not allowed to play because they’re located elsewhere – simply aren’t possible unless the government decides to grant new licenses for some reason.

None of these problems exist for Bitcoin poker sites. It’s tempting to think of such sites’ freedom from strict regulation as simply having the freedom to make any change they want. But that implies choice in the matter. An online poker room can’t just make one set of decisions and stick with them. In an unregulated environment, the only real choice is between innovation and death.

An unregulated Bitcoin site wishing to compete with an established room like Seals With Clubs, for instance, can’t be content with simply matching SWC’s feature set. The incumbent has all the advantages, particularly when it comes to having proven that the low transaction costs of Bitcoin are extra good news for poker players. The upstarts have to decide exactly what kind of innovations will get people to look at them, and then go implement those as aggressively as possible.

Maybe that means a better player reward system, or more generous freerolls, or offering more game variety. Or maybe it means finding a way to market to a new segment that hasn’t played Bitcoin poker before and create new users instead of siphoning off existing ones from the competition. There’s certainly no clear answer, which is why SWC remains the leader in its market. The only sure thing is that a would-be competitor has to do something different enough to convince people that they’re a should-be competitor.

The offering at Nitrogen isn’t much at the moment, but it does stand out in at least one significant way. The software, which runs in-browser as an HTML5 and was programmed by Swedish company Cubeia, is a new platform for a Bitcoin poker site. It doesn’t break any truly new ground, but it could in the future. Whether or not Nitrogen (or indeed any additional potential upstart competitors) takes advantage of that potential remains to be seen, but just the introduction of a new platform alone is an innovation worth noting at the moment.

Bitcoin poker is still in its relative infancy, so there’s little reason to compare any form of it to a mature offering like PokerStars. What will be interesting to see is how it stacks up five years from now, when more and more markets are locked down by regulation. Innovation is sure to be stifled to some degree or another in all of these markets. If Bitcoin poker proves to be viable as more than just a cheaper alternative to playing on the state-sponsored rooms, if its operators can find enough innovative ways to differentiate their products, too much regulation could push some players toward it – and then we can fairly start comparing the two directly.