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Online Subscription Poker Clubs Present an Array of Possibilities for Other Forms of...By Hartley Henderson

Online Subscription Poker Clubs Present an Array of Possibilities for Other Forms of "Social Gatherings"

As I was flipping through a poker magazine the other day, I noticed several ads for dot net poker sites. While there is no law that specifically bans the advertising of dot com gambling sites, most media companies stopped accepting advertising for dot com sites a few years back after the DOJ issued a letter in 2003, stating an opinion that they believed online gambling was illegal and stated that any company that accepted revenue for gambling ads could be in violation of the law. In fact, The Sporting News waited 6 months following that warning to pull the ads. They consequently paid $7.2 million as a fine to the DOJ for their disobedience. Google, Yahoo and Microsoft also agreed to pay a fine in 2007 for accepting advertising from online gambling companies in the past although there was every indication they could have avoided the fine had they chosen to fight it. Realizing that there was going to be a limited opportunity to advertise their dot com brand in major magazines and media outlets, the gambling sites decided to circumvent the issue by creating "for information only" dot net sites and hence provided the media an opportunity to generate revenue from them without promoting gambling. These dot net sites are identical in every way to the dot com sister sites except there is no actual gambling or even links to gambling on the dot net sites. The dot net sites have proven valuable as they help online companies gather a list of names as potential clients for the dot com sites and hence is a useful marketing tool. But more importantly, they indirectly generate traffic to the dot com sites. In fact studies showed that when most people see advertising for a dot net site during a televised poker game they believe it's actually for the dot com site of the same name.

While 99% of the ads in the magazine were for .net poker sites there were a couple of .com sites that claimed to be 100% U.S. legal and were operating from within the United States. These sites called "poker clubs" offer real money tournaments and accept U.S. citizens. In fact the first and most successful poker club, Pureplay issued a press release last year stating that it had over 1.5 million "members" and ClubWPT recently announced their brand was a huge success likely due to the name recognition of the World Poker Tour along with celebrity endorsements. Some clubs have failed recently, these include Duplicate Poker and Zosos although the majority seem to be doing well. These poker clubs offer many of the same products as the dot net poker sites of offshore poker companies such as tutorials and strategy sheets but they also offer "free" tournaments where people can win real money. Visitors to the clubs have the option to play for free and wager play money to win more play money or they can pay a subscription fee of around $20 per month which in turn allows them to win points that they can use to enter real money tournaments. And the prize money they are playing for isn't cheap. In fact ClubWPT is currently advertising the ability to play for a $1 million prize. They also offer free seats to World Poker Tour tournaments valued as high as $10,000 and there are other large prizes but the sites stress that no one is risking anything to win these prizes which makes it legal. Asked how the subscription fee is not a "buy-in fee" for the tournaments a spokesman for one of the clubs informed me the subscription fee had nothing to do with gambling and was just a fee for membership. He claimed that the set fee was an administration fee which would be common to any social club. He refused to comment beyond that. In fact I emailed several clubs and many of my former poker contacts, but no one seemed to be willing to discuss the clubs in detail if at all. One contact did say he would answer my questions but after several follow ups I concluded that he changed his mind. And even the lawyers I spoke to weren't anxious to discuss these clubs in public. Only l. Nelson Rose was willing to give any comment which was brief -

"I have given Legal Opinions to some of these. If done right, with a true free alternative means of entry, it is legal under federal law and the laws of most states."

Clearly these subscription clubs must realize they are operating in a grey area of the law and aren't anxious to discuss the legal aspects of the sites in public. They all surely received legal council prior to establishing the sites so one must assume that whatever the reason these sites are allowed to exist without fear of legal ramifications is acceptable. Perhaps the explanation on ClubWPT's own site sums up their operation best:

"It's Not Gambling? ?Gambling means you put something at risk (consideration) to play a game (like poker or blackjack) for a prize (like money). ClubWPT is not a gambling site because you join the "club" to get benefits like discounts on goods and services and the opportunity to play in tournaments for prizes. The tournaments are part of the club promotion."

So in better words, these places are just social clubs and as a benefit of joining the club and paying the subscription fee you have the opportunity to win prizes without risking anything. I guess a similar analogy would be joining a country club and as a member of that club you have the ability to play golf on the exclusive course. Visitors are able to look around and maybe take brochures but only those who pay membership fees can get the true benefits of the club.

Nevertheless, the purpose of this article isn't to try and shoot down some innovative game.. err sorry socializing ideas but to ask whether it can be expanded to other areas which would allow Americans the opportunity to engage in other "social networking" without the fear of prosecution or concerns about payment processing. While no lawyers were willing to discuss these clubs on the record, off record some did say that they believed the idea of expanding it to other forms of "socializing" could work provided games included skill, were something that would take place in a land based club and most importantly charged a flat fee as a subscription and there was no ability to actually win more money via gambling on the site. All lawyers stressed however that those were just personal opinions that have never been tried and again were not willing to put their names to the comments.

An example of how I believe these social clubs can be applied to other forms of "entertainment" is with sports handicapping. While most poker players are quick to point out that poker is a game of skill and tend to shoot down anyone who dares suggest otherwise, to date there has been no law in the U.S. that has given poker that status. The UIGEA, on the other hand, did provide an exemption to both horse racing and fantasy sports both which have the common feature of handicapping. It is very common to see groups get together in sports clubs, offices etc. where people use their handicapping skills and apply it to rotisserie leagues or other fantasy sports involving weekly games. In fact many would argue that it takes far more skill to look at trends, injury reports, weather reports etc. in an attempt to predict correctly how a team will fare in a given week than it does to play a poker tournament. Clearly anyone who takes the time to study a Racing Form can attest to the amount of skill it takes to weigh all the variables to predict a horse race. Obviously luck is involved in the area of handicapping as it is in poker but unlike other countries that demand games be totally skill based to be deemed a game of skill, most pundits suggest that in the U.S. it only needs to be 51% skill. In fact Robert Wexler's Skill Games Protection Act which has growing momentum states that something only has to be "predominantly skill" to be legal by his definition.

Needless to say, if companies followed the poker clubs' example, these handicapping clubs could be set up with operations within the United States and the monthly $20 (or whatever is deemed fair) subscription fees could be paid by credit card, debit card or any other way people currently fund horse racing accounts. People can join and look around the club for nothing where some tips, strategies and other ideas would be available as well as some free handicapping tournaments but to actually join in the handicapping tournaments with real cash prizes they would need to pay the "subscription fee". Prizes could be doled out to those who pick the most winners against the spread in one tournament, to those who pick the winners straight up in other tournaments and there can be mini-tournaments where one half of the club picks a team and the other half picks the other team with the winning club members receiving prizes for having the correct pick. Plus because it's apparently not gambling these clubs could be advertised on places like the search engines, ESPN, Sportsline etc. And most importantly places like ESPN, Yahoo or Google could host and run the handicapping clubs. But where this could be extremely valuable is to companies like Harrah's or Caesar's who are itching at the opportunity to offer online products legally and also to European sportsbooks who are anxious to get a foothold in the U.S. market but aren't prepared to challenge the UIGEA. What an opportunity for William Hill, Betfair or SportingBet to set up a club office in the United States and gather a list of potential names when the time comes (and it will) where online gambling will be legal stateside. And if these handicapping clubs do become successful there are other opportunities like backgammon clubs, bingo clubs or even blackjack clubs.

I plugged the idea to someone at Harrah's but not surprisingly received no comment.

No doubt if these handicapping clubs (or any other sports related clubs) went forward the leagues would challenge them vigilantly. After all the leagues have gone out of their way to try and stop a sports lottery in Delaware and continue to try and stop already legal sports betting so there is no reason to think they wouldn't try to block this. But the poker clubs have been in operation now for over 5 years and operating legally from within the United States so the precedent for their legality seems to have been set. One must applaud the poker industry for its ingenuity. Let's hope that creativity opens up other social opportunities as well

Hartley Henderson

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