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Poker players battle crackdown on Internet gambling

By Richard Clough
October 12, 2006

Online poker players are nervously awaiting President Bush's expected signature this week on legislation that would kick them out of their virtual casinos.

The measure, designed to block the financial transactions that have fueled Internet gambling, was quietly attached to a port security bill in a flurry of last-minute activity before Congress adjourned in late September.

The legislation threatens to cripple the $12 billion online gambling industry, cutting off about half of the world's Web-based gaming revenue. It has already forced the suspension of several Internet gambling companies' lucrative U.S. operations and has sent shock waves through the gaming world.

"Who is Congress to tell people what to do in their own home when it doesn't bother anybody else?" asked Mike Sexton, a professional poker player and commentator for the World Poker Tour. "We feel like our rights have been violated."

Most of the 2,300 gambling Web sites currently operating are based outside the United States, often on Caribbean islands or in Central America and Europe, to avoid U.S. law, which prohibits many types of gambling under the Federal Wire Act. Enforcement of the law is difficult, however, and the companies have made billions of dollars annually from American bettors.

The bill that Bush is expected to sign adds considerable enforcement muscle, prohibiting banks and credit card companies from processing online gambling transactions based in the U.S.

Chad Hills, a gambling research analyst for Focus on the Family, a conservative group, applauded the bill's passage, saying the laws in place had been flouted for too long. Online gambling operations, he said, "were making a mockery of our U.S. policy, they were making a mockery of our Congress, they were making a mockery of our ability to enforce this legislation."

But gamblers aren't buying in on the idea. On the gambling Web site Cardplayer.com, poker professional Thor Hansen called the passage "a bad day for poker" and Shannon Shorr, a professional poker player, called the measure "both frustrating and devastating."

Michael Bolcerek, president of Poker Players Alliance, said outlawing online gambling will just push it underground rather than eliminate it. Leading the charge against the legislation, the Poker Players Alliance has begun to focus its efforts on securing legal exemptions for online poker.

Poker, some players argue, is a skill sport and should be afforded an exemption from gambling bans, like those currently given to fantasy sports, horse racing and state lotteries.

In advance of the bill's signing, major betting firms have taken severe financial hits.

The British online gambling firm World Gaming, which derives as much as 95 percent of its revenue from U.S.-based gambling, asked the London Stock Exchange on Monday to stop trading its stock over fears for the company's future. The value of the company's stock declined by 88 percent last week.

Many publicly traded online gambling companies have also seen their shares crumble in the past week, draining the industry of an estimated $8 billion in market value.

On Tuesday, European online gambling outfits Fairground Gaming and FireOne announced the immediate suspension of their U.S. operations.

London-based Fairground, which derives a large percentage of its profit from the U.S. market, said in a press release that it is "attending urgently to appropriate cost-cutting measures" to offset the significant losses it expects to incur as a result of the legislation. Similarly, Dublin-based FireOne said in a press release that it "has embarked upon a restructuring of its operations and cost base" as its awaits Bush's bill signing.

The world's largest Internet gambling company, Gibraltar-based PartyGaming, which derives about 80 percent of its $1 billion annual revenue from the U.S., said it will end its U.S. operations if the bill is signed.

"This development is a significant setback for our company, our shareholders, our players and our industry," Mitch Garber, chief executive of PartyGaming Ltd., said in a statement.

But not all companies are closing up shop in the U.S.

The gambling Web site Poker.com, based in Brisbane, Australia, said the legislation would have little or no effect on its U.S. operations.

"We will not be stopping U.S.-based players from playing at Poker.com and all player account balances are 100 percent safe and will always be readily accessible," the company said.

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