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Six Stories that Dominated the Online Gambling World in 2007: Part II...By Hartley Henderson

What follows is Part II of an editorial posted yesterday. Please see Part I located here:

The Rise of a Pro Online Gambling Movement

While there was some interest among politicians and special interest groups to defeat the anti-online gambling lobby prior to 2007, those pro gambling groups were few and far between. Barney Frank, the Congressman from Massachusetts, called the UIGEA the stupidest law ever passed and tried to have it repealed. Some congressmen agreed, but none were willing to stick their necks out. As well, the Poker Player's Alliance had formed to try and have online poker exempted in the UIGEA. But for the most part anyone trying to defeat the law and have online gambling regulated in the U.S. seemed to be spitting into the wind. In 2007, however, the pro online gambling movements started gaining momentum. Barney Frank raised his voice louder and proposed a bill to legalize and regulate online gambling. His bill convinced numerous congressmen and senators to join the cause, including notable names like Jim McDermott, James McGovern, Don Young, Carolyn McCarthy and Ed Perlmutter. Robert Wexler, who was busy trying to pass his own skill gaming bill, and Shelley Berkley of Nevada, who tried to pass a gambling study, also supported Frank's bill.

But of all those that threw their support behind Frank's motion, the one name that stood out the most was that of Ron Paul. The Texas Governor had always indicated that he was opposed to the UIGEA and didn't feel Americans should be dictated to about how to spend their money, but this was the first time Paul actually took a definitive side. More importantly, Ron Paul became a viable candidate for the Presidency. While the Libertarian is still a longshot to win the Republican candidacy, a groundswell has developed for Paul, mostly due to the online gambling community. In fact Paul raised over $4 million for his campaign in one day. Ironically, Paul never claimed to be pro gambling and in fact indicated that he personally does not feel it is a wise way to spend one's money. At the same time he did indicate that as President he would look at overturning the UIGEA because it is a law that protects someone from themselves, an ideology he cannot support. Paul seems to have become the darling candidate for the pro gambling movement, and he has provided interviews on various gambling websites and stands beside Barney Frank, despite the fact that Frank is a Democrat and Paul is a Republican.

It is not just politicians, however, that have moved to strike down the UIGEA and create online regulation in the U.S. for gambling. The Poker Player's Alliance has reached close to a million members and made a very strong appearance at a congressional meeting on gambling in the fall. As well, a trade union named iMEGA (Interactive Gaming & Media Association) was formed early in the year to challenge the UIGEA and try and stop the passing of the UIGEA regulations. The organization sued the U.S. government for creating a law it deemed as unconstitutional. The organization was formed by Joe Brennan Jr., a former marketing executive for various sportsbooks and is defended by Edward Leyden Jr., who represented sports players in their respective player's associations. The UIGEA regulations were passed, but the organization has a strong lobby and is currently trying to challenge the regulations.

Lastly, Harvard University seems to have stepped up to the plate to try and defend the rights of bettors. First, Harvard Medical School released the findings of a study it conducted which aimed to refute the claims that online gambling was more addictive than traditional forms of betting. The Medical School conducted a study of online sports bettors and determined that online bettors spent less per bet, wagered less frequently and were far less likely to become addicted than other bettors. This was exactly the opposite of what other anti-gambling crusaders claimed. Consequently, the medical school concluded that the so called findings presented to support the ban on online sports betting were unfounded. As well, a professor at the Harvard Law School, along with students, tried to create a case for legalizing poker. The Harvard Global Poker Strategic Thinking Society has been created to show the educational value of poker and to prove that it is solely a game of skill. Consequently, in connection with Robert Wexler's bill, the GPSTS wants to have poker listed as a skill game and therefore exempted from the UIGEA.

But it's not just poker that the Law School is looking at designating as a skill game. Famed lawyer Alan Dershowitz represented Kaplan from Bet on Sports and used the defense that sports betting was a game of skill and hence wasn't illegal since most states have exemptions for skill games in their betting laws. In an interview with me, Mr. Dershowitz expounded the complexities of picking sports winners and noted that the best handicappers win while the worst handicappers lose, thereby making sports betting a game of skill. If sports betting was pure chance, then the house would always win, as is the case with casino games like craps, baccarat or roulette. With an election around the corner and a new government with a different ideological agenda ready to take over, the pro gambling movements could play a major role in 2008.

Absolute Poker Scandal

While not on the same scale as the previous stories, the Absolute Poker debacle is significant because it demonstrates that all gambling software, particularly poker software, is not foolproof. This is the only scandal to develop of its kind, but it does bring up the legitimacy of the games offered online, which was one of the issues brought up by John Kyl in the initial drafting of his online gambling bill. Without going into great detail on the scandal, a player was involved in a high buy-in poker tournament at Absolute Poker. After losing, he asked a company representative for a hand history and the representative sent him a spreadsheet with the history for every hand dealt in the game, as well as a list of all observers. Upon reviewing the hands it was clear that one player, who went by the screen name Potripper, was able to see the hands of all the other players at the table. Potripper folded everything for the first 5 minutes, and then when an observer came to the table he played like a maniac. His play was totally inconsistent with those who would pay a $500 buy-in and Potripper was making large raises with junk when the flop indicated that no other player had a good flop. He also openly folded great hands (including a KK in the hole) when other players had a better deal.

This convinced poker experts to look more closely at Potripper's background, and they determined that he was a former director of Absolute Poker. As well, one of the observers at the table (the one that came in after 5 minutes of play) was a President of the company until 2005 and a friend of the former director. Furthermore, the IP address of the observer was registered to, which is on the Kahnawake reserve where Absolute Poker has its server. Absolute Poker denied all wrongdoing and fired the clerk who sent the full spreadsheet of hand histories for the tournament.

When the issue reached the mainstream news media, Absolute Poker finally did something and agreed to refund all buy-in fees for that tournament without admitting fault. And the Kahnawake Gaming Commission agreed to do a thorough investigation into the matter and also tighten up any possible flaws in its systems that could have allowed the breach. Thus far, no charges have been filed and Absolute Poker continues to operate, although the Kahnawake Gaming Commission says the investigation is still ongoing.

Closing of Pinnacle Sportsbook to American Customers

In 2006 many public companies shut their doors to American customers, while other companies closed up shop completely. At the same time, private offshore sportsbooks, poker rooms and casinos seemed to be operating as usual. It thus came as quite a shock when in January of 2007 Pinnacle Sportsbook, one of the largest sportsbooks in the world, announced that it was going to close the accounts of American customers. What made the announcement especially surprising was that there was absolutely no indication that Pinnacle was planning this move. The decision came prior to the super bowl and with absolutely no forewarning whatsoever. The Curacao based company was a mainstay for many American bettors and they revolutionalized the betting world with low vigorish, high limits and rebates along with full track payouts on horse racing. Pinnacle's customer base was also 60% American.

As a result of this unexpected decision, conspiracy theorists came to the forefront with reasons why they felt the company closed shop to American customers, although Pinnacle has always maintained it was strictly for strategic reasons. As well, some American customers have sent petitions and tried in vain to get Pinnacle executives to change their mind. But to date Pinnacle has stayed its course and has expanded its operations in Europe and Asia. They still cater to the Canadian market as well. American bettors still have many choices, but Pinnacle was a great loss to them. Pinnacle ensured that all outstanding bets were honored and every penny was paid to American account holders.

With an expanding pro gambling movement, a new American President, backlash by the banks against the UIGEA regulations, and a lot of controversy surrounding the WTO decision for Antigua and the unpopular settlement by the EU, 2008 should prove to be an eventful year for online gambling.

Hartley Henderson

If you would like to make or read comments about this article, you may do so by visiting the Mess Hall forum at where a thread has been started. Please click HERE

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