Why Sheldon Adelson is a lying sack of mule muffins

Sheldon Adelson is chairman and the largest shareholder of Las Vegas Sands, the world's largest casino gambling company. About three years ago, Adelson decided that Internet gambling is the root of all evil in the world, and pledged to stamp it out. 

Coming from almost anyone else in the world, this pledge would hold little water. But this one comes from a guy who has the 12th deepest pockets in the world (according to the 2014 Forbes Magazine Forbes 400), with an estimated net worth of $28 billion. Rest assured that this guy has undue influence over American politics, having contributed over $100 million to various campaigns in the 2012 election. Adelson said a few years ago that he was willing to spend $100 million to wipe out Internet gambling; in a recent Bloomberg News interview, he revised that number to "whatever it takes" (more on this in a minute).

Adelson is a smart guy. He has long supported conservative Republican candidates, some of whom don't have strong feelings about Internet gambling. But an aspiring presidential candidate without strong feelings on this topic can easily be swayed by a fraction of the money Adelson is willing to spend on this campaign. Take Marco Rubio (R-FL) as an example. Three years ago, his stance on Internet gambling consisted of his saying, "I'm not a big fan." Now, after having passed the gauntlet of the Sheldon Adelson Primary (a gathering at the Venetian, technically called the Republican Jewish Coalition Spring Meeting, but widely acknowledged as a tryout for Republicans looking for Adelson's support), Rubio is not only rabidly anti-Internet gambling; he's cosponsoring Adelson's attempt to ban online gambling at the federal level.

A little history here: back in 1961, the Interstate Wire Act was passed and signed into law. The intent of the law was to restrict transmission of sports gambling information across state lines. Over the 25 years or so since the Internet became part of our lives, there have been repeated efforts to use the Wire Act to threaten or prosecute online gambling sites other than sports, although none has been successful (more on this in a lengthy 2-part article here).

In 2011, less than a year after Black Friday shut down the world's most popular online poker sites (PokerStars and Full Tilt), the Department of Justice issued a stunning opinion letter in response to a state-level request for clarification about selling lottery tickets online. The key sentence in this letter, from US Deputy Attorney General James Cole, read:

“The Department’s Office of Legal Counsel (“OLC”) has analyzed the scope of the Wire Act, 18 U.S.c  § 1084, and concluded that it is limited only to sports betting.”

Anyone who read the Wire Act already knew this, but the DOJ's formal renunciation of their former interpretation of the Act left the US with no federal-level legislation that directly impacted online gambling except the Unlawful Internet Gambling Enforcement Act. The UIGEA, contrary to popular belief, didn't make any form of online gambling illegal. All it did was make financial transactions for illegal Internet gambling illegal, and it never defined what constituted illegal Internet gambling.

The heart of Adelson's anti-online-gambling campaign is a piece of legislation called the "Restoration of America's Wire Act." Keep that in mind as you read the rest of this story.

Let's go back in time a few years. In 2010, PokerStars was attempting to re-establish their presence in the US. One of these efforts was the North American Poker Tour, which was to consist of a series of events in the US and Canada. I have first-hand knowledge of this, because my wife Sharon and I both consulted with PokerStars on the project and were involved in the operation of the event.

When we first started discussions with the Venetian, Sharon and I met with Kathy Raymond, then-Director of Poker Operations for the Venetian. Before we had any serious discussions, Kathy informed us that the somewhat sensitive nature of PokerStars' involvement meant that their CEO needed to approve. That, of course, was Sheldon Adelson, and he did in fact approve PokerStars' participation. 872 players participated, generating a prize pool of over $4 million, of which over $200,000 went to the Venetian. But that was far from all - including rooms, events, meals, parties and all of the other revenue generated by an event this size, The Venetian took in no less than $1.5 million.

In fairness to Adelson, things did change after this, most notably Black Friday. I suppose Adelson could argue that Black Friday changed his thinking. But given his almost religious rhetoric describing online gambling as "sin," this seems unlikely. Somewhere along the line, Adelson became convinced that online gambling threatened his business, and took it on as a cause.

I'm not going to attempt to take a stand here - I think my attitude about online gambling is clear. But I'm going to dissect a very short video interview that Bloomberg's Betty Liu conducted with Adelson a few months ago to give you a sense of who this kingmaker is, and what he does with the truth (hint: it's not "telling it").

Here's the interview. I suggest you watch it, and then return when you stop laughing.

Following are my comments on this laughable effort to justify his position.

00:01

Adelson: "Why don't we legalize prostitution? ...Why don't we legalize drug addiction?"

Good questions, but they have nothing to do with this discussion. Gambling is a form of entertainment that is already legal, in one way or another, in 48 states. Neither prostitution nor drugs are.

00:15

Adelson: "The [air quotes] sin activity should be controlled."

OK. Which sins? Gambling? Oh, you mean just that online gambling stuff; never mind.

00:41

Adelson: "For instance, here in the land-based casinos, we're required to have the dealers shuffle a certain way. How do you do that in...on the Internet?"

This actually made me laugh out loud. (1) Allowing dealers to shuffle cards may be the individual biggest source of employee cheating in any casino. (2) Sands properties use ShuffleMaster machines extensively. What they do is nearly identical to the way cards are shuffled online. 

00:51

Adelson: "Here we're not supposed to allow underage people to gamble. How do you do that in (sic) the Internet? There's no technology a kid can't get around."

While it's true that no technology is unbeatable, there's another fundamental truth here: Every single player who plays online has to prove their identity and age. In live casinos, players at table games are often (not always) asked for ID, but players on slots are rarely asked - unless they win, in which case the win is voided if the player is found to be underage.

01:05

Liu: "But maybe, maybe, maybe the regulations have to catch up with the growth of the market."

Adelson: "No. There's nothing to regulate. I'm regulated in four jurisdictions. I don't know of one regulation that would apply to Internet gaming."

Once again, I had to choke back a laugh. That's true in the US, Sheldon. How about the United Kingdom? France? Australia? Your interpretation translates to, "We shouldn't regulate Internet gambling because there are no regulations."

02:01

Liu: "Your detractors say, look, the people that we've seen so far go online gambling, right, they're not visiting regular casinos."(We can debate the silliness of this statement another time.)

Adelson: "Because they're too poor."

Seriously, he said this. Can you conceive of anyone on the planet that is this tone-deaf? My best guess is that at least 50% of people who play online have visited a casino at least once. I'm probably off by a significant number, and it isn't down.

02:42

Liu: "Who's to say that's exploitation?"

Adelson: "I'm saying. And I'm the biggest guy in the industry."

I'm pretty sure I don't need to comment on that. The only thing he didn't say is, "I have $30 billion, and I say so."

03:33

Adelson: "Why should poor people, who cannot afford to lose that kind of money, be tempted with that kind of activity?"

This is a good reason for Adelson to shut down all of his casinos, no? Unless he's checking the bank accounts of every player who sits down to gamble at Sands properties, this is up there among his most disingenuous statements.

03:52

Adelson: "I can't tell (over the Internet) who's got financial difficulties. I can't tell who is not gaming responsibly. I can't tell whether money is being laundered. I can in the casino."

I'll give Adelson this one, provided that he tells me exactly what he does to find out if the guy playing $25 blackjack has financial difficulties. I'm pretty sure that I can just sit down at a table at The Venetian without providing a financial statement. He's right in the large - he can prevent money laundering to an extent, although his recent $27 million fine for money laundering says otherwise. But that is an issue for bigger gamblers - "poor people" aren't using the Internet to launder their money.

04:30

Adelson: "Do you think I'm bringing in unfortunate people to be exploited?"

I put that one in as a closing laugh.

What I've listed above is just a fraction of the blather that Adelson has spouted over the years. Here is another one that I'll let you watch on your own:

My favorite quote from that interview is one that will resonate with every poker player in the world. When asked about a carveout for poker because it's a skill game, his response was, "that (poker is) skill-based is just a bunch of baloney."

[Side note: keep an eye on the news for coverage of the upcoming trial of the lawsuit filed against Adelson by Steve Jacobs, former CEO of his Asian operation. Jacobs is suing for wrongful termination, accusing Adelson of money laundering (for which Sands Asia has already paid a $27 million fine), bribing public officials, having ties to the Chinese Mafia and...prostitution. None of these charges are proven, but the trial should be fun to watch.]

I know that everyone is entitled to their opinion. But this is a dangerous guy for our industry and our game. He has a personal, likely hidden, agenda, and he has limitless funds with which to implement it. There are bigger issues at stake than just poker - Adelson is a $30 billion blowhard intent on having his way. 

He's sure fun to watch, though.

Are you there, Caesars? It's me, Dan.

I've written several articles about Caesars' handling of the World Series of Poker, some critical ("Six ways Caesars screwed up the WSOP") and some not ("How Caesars saved the WSOP"). I see myself as uniquely qualified to critique Caesars' performance for several reasons: (1) I'm a longtime poker player, (2) I've been playing in the WSOP for 14 years, having played in 44 events, (3) I'm a marketing guy and (4) I have a lot of operations experience, some in casinos. So with that having been said:

Dear Caesars,

It's me, Dan. I know you've heard me complain before, but since we have a long-term relationship, I hope you hear what I'm about to say in its intended spirit, which is entirely constructive.

First, let me compliment you on a few things. You pulled off an impressive coup two weeks ago, running the largest tournament in the history of poker tournaments with surprisingly few logistical problems. You've improved the bathroom situation to an extent. And I can't say enough good things about your adoption of the "no flop, no drop" rule in cash games.

But before your head gets too big, I need to tell you that you have a very, very long way to go before your handling of the World Series of Poker moves up into the acceptable range. I know that gaming restrictions prevent you from changing much this year, but I hope you'll listen not just to me, but to the thousands of players who have rightly skewered you on social media. We're not just whiners. You've got work to do. 

Let me start by telling you that I know poker players are easy to ignore as a group. We whine about everything. Regardless of how good a job you do, we're always going to believe that you're just in this to fuck us. It's not a great starting position for a relationship. But we're the pretty girl and you want us at the prom, so get ready to know what it's going to take.

1. You came into this relationship at a disadvantage. Not only are we whiners, but we're predisposed to believe that you don't know poker, you don't give a rat's ass about what players think and you make decisions in a vacuum. I don't necessarily believe all of those things, but you need to know that this is the filter through which I'm going to judge you, as are my fellow fickle poker players. It's going to amplify the things you do wrong, and minimize the things you do well (unless they're amazing).

2. You have a lot of tangent points with your players, key of which are registration, cashouts, food venues and bathrooms. If you can create good experiences in each of these areas, you'll have leaped a giant hurdle in creating good feelings among your players. Unfortunately, even though you've now been at this for twelve years, I'd give you no higher than 5 on a 1-10 scale in any of these areas.

3. The first contact you usually have with players is registration, whether online or in person. Online registration is conceptually a very smart idea, but you've implemented it so poorly that it is just not worth the effort. It saves players no time, and in some cases causes them to wait even longer than players who just walk in cold. This is not terribly hard to fix - all you need to do is (a) come up with a means by which players can pay online (like PayPal), and (b) allow players to print their own tickets. Given the volume you do in a very short period, I suspect PayPal would be happy to work with you on rates. And your players may even be willing to pay some or all of that. I'd happily pay an additional 1% not to have to stand in line for an hour or more.

4. Cashouts have been a disaster this year, which is surprising, because in the past they've just been poor. I never expected that it could get worse. Now, I cut you a little slack because you ran the Colossus and had more people cashing out than you have registered for many events. But that excuse is only good for two days. I made my fifth trip today and was finally able to cash out, and even though there were only two people ahead of me, it took close to an hour.

One of your supervisors told me a few weeks ago that your typical cashout takes 12 minutes. That's unacceptably long, and having cashed out today, I can see where at least some of the problems are. One very obvious one: there's no reason why you need to scan every player's ID every time they cash out. It doesn't help a lot, but if it cuts a minute out of the process, that's an 8.5% improvement.

Related problem: you have, for some inexplicable reason, instructed your cashout clerks that every player cashing out must have their player's card. This makes absolutely no sense. I needed my player's card to register, so you know I have one. You know who I am, because you have (needlessly) scanned my ID dozens of times. If I have my card number, that should be more than sufficient. There's no legal, gaming or practical reason for this; in fact, when I asked a supervisor why this was a requirement, she very honestly replied, "I have absolutely no idea."

It would also help if you suggest that your cashout people not act like jackboot soldiers. When I finally sat down today to cash out from the Colossus, and told the clerk that I had my number but not my card, he said (this is an exact quote that I transcribed while I sat there), "I don't need the number, I need YOUR CARD, SIR. Go get a player's card and get back in line."

5. There's been a lot of discussion over the past year about WSOP.com. I know it's been somewhat less than the stellar performer you expected it to be when you launched. I can't speak to the rest of the year, but I can tell you that you've completely, and I mean completely, missed the boat in properly tying WSOP.com to the live WSOP. Three examples:

(a) You have thousands of players in Las Vegas for the WSOP. Many of them, like me, will play cash games and satellites at the Rio, but we would also play in satellites online - if you'd schedule them. It's crystal clear looking at the WSOP.com satellite schedule that the people who created it aren't talking to you guys. Let's use today as an example. It's Wednesday, and on Friday you have one of your biggest events, the Mega Stack. There are exactly ZERO satellites for the Mega Stack (OK, there was one at 4p. 4p, really?). Tomorrow, the day before the event, there are two. You should be running dozens. You don't have to guarantee them all, which I assume is the reason there are so few.

(b) In addition to the satellites I mentioned, you have started running satellites that award two $500 lammers. That's a great idea. Why not extend that great idea and run satellites that award ONE lammer? You could run more of them, even with a one-lammer guarantee, and they'd fill up.

(c) In a classic case of the left hand not having any idea what the right hand is doing - I won an online satellite two weeks ago for an event the following day, and didn't receive anything (no email confirmation, no call, nothing) about how to claim it. So I emailed support at about 1a, and immediately received an auto-responder saying you'd get back to me within 24 hours. I got no response, so I called the support line at 9a. The first response from the woman who answered (who had to consult someone else) was, "Follow the instructions in the email we sent." Well, OK, but you didn't send one. "Oh, OK, hold on." A few minutes later, she returned and said (seriously), "We'll have someone get back to you within 24 hours." When I explained that the tournament was in 3 hours, she asked me to hold again. When she returned, she said, "Just go over to the WSOP and go up to the second floor." I explained to her that there was no second floor. Her response: "I don't know what to tell you. That's what they told me."

When I went to the Rio, there was absolutely no one who had any idea how to process my win. I got lucky and ran into Johnny, a WSOP.com guy who was very helpful last year, and he was a superstar. He stayed with me until they got my ticket, which took close to an hour.

I sympathize with the difficulty in running a huge poker event - I've run a few, including the PokerStars Caribbean Adventure. There are thousands of little details, any one of which can trip you up. But we're not talking about those details here - we're talking the big things, the ones you guys should have spent 10.5 months out of every year since 2004 getting right. Yes, you've improved some things. But you've also made some worse. And until you get the big things right, your customers (because that's what we are - we're players, but we're your customers) are going to continue to hold your feet to the fire.

In closing, I'd like to remind you of something that you will probably laugh at. The WSOP is the gorilla that makes 900 pound gorillas look like capuchine monkeys. But so was Ashton-Tate, who in 1986 was in a virtual tie with Microsoft for the world's largest software company. Or here's one you've heard of: America Online. Or Paradise Poker, who owned the online poker market with more than 80% market share in 2002, and was effectively gone in 2004. 

You know what killed those companies? Arrogance. It can happen to you, too.

We've had a good run at this relationship. I hope it survives, because I do still love you. But you better get some counseling.

Regards...dan

WSOP 2015: Has anything changed?

Just before the Main Event last year, I wrote a post called "Six ways Caesars screwed up the World Series of Poker." It was one of my most popular posts, and even attracted the attention of some people in senior management at the WSOP (who, needless to say, disagreed with much of what I had to say). As the WSOP has just gotten underway, I thought this was a good time to revisit that post and see what's changed, and to add some new grist to the mill.

Prices. Not only has nothing changed here, but the problem has, in fact, gotten slightly worse. I didn't realize that the $1.50 banana I whined about was a bargain - it turned out that there was only one venue that didn't charge $2.50, and I hit it. This year, $2.50 is the going rate. That's right - for one banana.

But just to be sure that you don't think I chose an isolated case - there are practically no meals you can buy in the Poker Kitchen that cost less than $10. I bolted in on a break from the Colossus to grab something, since we didn't have a dinner break, and paid $12.50 for an Italian sub. It was good, but had roughly the same amount of meat as the Italian BMT you can buy at Subway for $5. Add a drink and you're up to $15; add a bag of M&Ms and it's $18.

Now, I recognize that the WSOP is an expensive event to run. But seriously, Caesars, you're making some really decent rake on this event; there's absolutely no reason to pretend that you're an airport - except that you can. And bear in mind that, because all of the regular restaurant venues are jammed during the WSOP and it's not practical to go somewhere else, the meal choices on breaks are very limited. 

Rake. This has, surprisingly, gotten better, although I'm not sure that it's intentional. I played a few hours of cash games on two different days, and both times it was no flop, no drop. (Last year, it was possible to win a pot and lose money because of their policy to take the full rake even on uncalled bets.) But since I played only on the first few days, it's possible that this was an aberration - please chime in if you know what the official policy is this year. [This is now official policy - thanks, Bart.]

Marginal staff. This has gotten considerably worse at the dealer level. As I did in my article last year, though, I'll cut Caesars a little slack, since the WSOP is an almost unimaginable poker resource hog. And this year it seems like there are more tournaments in other rooms, so an already thin resource pool is even leaner.

That having been said, I've seen some absolutely appalling things. Example: a player bet 800 (in a tournament), comprised of one pink 500 chip and three black 100 chips. The next player put in one orange chip (5,000) and three black chips. As soon as he released them, he realized his mistake and said, "I only meant to call." The dealer pushed the orange chip back and motioned for the player to put in a pink chip to correct the action. There was a moment of silence, after which I said, "I think you better call the floor." The dealer actually looked at me and said, "Why?" I let the rest of the table pounce.

I was standing in line waiting for a payout today and another player told me about three veteran dealers from his home club in Washington state who drove to Las Vegas, hoping to deal the WSOP. They auditioned and all three were rejected. Yesterday, while playing in the nightly Deep Stack, that player had a dealer tell him that 4 days ago, he was working in the Poker Kitchen. A shift manager came in and said, "Anyone want a crash course in dealing poker?" He said yes, and 48 hours later he was dealing. (Note that I can't confirm this story, but it sounds credible.)

The one piece of good news is that the floor staff seems to have gotten considerably better. I didn't see a single bad decision; by this point last year I had seen at least 5.

One suggestion that Caesars won't like, but that they need to consider: they shouldn't attempt to run a massive event like Colossus until their staff is up to speed. Many of the problems we saw just wouldn't have happened had staff gotten a little experience under their belts.

Pervasive lack of understanding of poker. It's hard to tell whether this has gotten better, although the Colossus payout situation (see below) certainly indicates otherwise. I still vehemently object to the array of logos on the table in areas that can cause confusion, particularly large black logos (since they almost completely obscure black chips). To Caesars' credit, they changed card vendors this year, switching to Modiano cards, which I think are far better. Dealers think so too; some initially complained because the cards are thinner, but soon realized that they are, in fact, very easy to shuffle and rarely show wear or cracks.

Break time clusterf***. This seems to have gotten worse, but that may well be because of the Colossus event, which had about 13,000 unique players. The big problem is that there is simply no way to get to the bathroom and back in 20 minutes unless you leave before the break starts. I suggested last year that they consider staggering breaks in big events to help deal with this problem.

Hallway gauntlet. This problem is much better this year. Last year, vendors who rented hall space to hawk their wares acted exactly like the spice vendors in the bazaar in Marrakech. It was bad enough that I took my complaints up the ladder at the WSOP - vendors were actually interfering with players' ability to get back to their tables. Someone clearly laid down some rules, which I acknowledge and applaud.


So what new things has Caesars done for which they deserve criticism?

I was only at the WSOP for 6 days (returning in 2 weeks), but there are two glaring things that Caesars urgently needs to address:

Registration. As they have in prior years, Caesars allows players to register in advance and then wire funds. However, players who have pre-registered still need to stand in line to pick up seat assignments, and in many cases the lines still took upwards of an hour. I can think of at least one way to handle this that's much better: let players print their own tickets. I don't think the Bravo system allows for this, but it's not rocket science. This problem will only get worse.

Payouts. Each payout takes about 12 minutes, according to the payout supervisor I spoke with this morning. That's an appalling number. I made my third trip to the payout line today to attempt to collect my winnings from the Colossus, and even though there were only about 150 people in line, WSOP staff warned us that it would still be at least a two hour wait. This is entirely unacceptable. I have no idea what to suggest here, but they need to both streamline the process and add staff.


One last rant: there has been an ongoing controversy since payouts were announced for the Colossus. In case you have been under a rock, here's the short version: the prize pool for Colossus was about $11 million, and players just assumed that first place would be in the $1-1.5 million range. Two things went wrong here: (1) first place was, in fact, $630,000, and (2) the prize distribution was announced, literally, 15 minutes before we reached the money.

As soon as players started complaining on Twitter, both Seth Palansky (VP of Corporate Communications) and Ty Stewart (Executive Director of the WSOP) responded with stunningly defensive and tone-deaf tweets. The most appalling of those came from Palansky, who said, 

"Anyone who doesn't want to accept 1,130 times their investment, I guess they can go put their money in an interest bearing CD and good luck."

And this wasn't the only incomprehensible comment from Palansky, who is well-known for using the WSOP Twitter account to express controversial and less-than-professional opinions.

The bottom-line issue regarding payouts for Colossus is that the WSOP didn't bother telling anyone in advance that this was their plan. I don't love that they chose to pay 5.6% for first place, but I can live with it. Their thinking is that they wanted to spread the money out to make more players happy and recirculate more money back into the WSOP economy, which is a noble goal. But they needed to tell us a long time ago. In one of his many ham-fisted comments on Twitter, Palansky somewhat snidely declared that the payouts have been on the WSOP site for months. If they're there, I couldn't find them, and as far as I know, no one else can either.

There is no major tournament in history that has paid less than 10% for first place. If they wanted to spread the wealth, they needed to let players know so they could make informed decisions. Instead, they brought a massive controversy on themselves, and then handled it as badly as they possibly could.

My guess is that Caesars will gross somewhere in the $50-60 million range for the WSOP this year, including everything (rake, entry fees, broadcast rights, food, swag, etc.). They clearly realize that they have a monopoly, and don't appear to be making any great strides to satisfy their customers. As I said last year:

"We have a right to demand a high level of service, and Caesars has had more than enough time to get this right."

Caesars, please let us know that you remember the lessons of AOL and Paradise Poker. Your customers aren't going to let you push us around forever.

The Wire Act, the UIGEA and other silliness (Part 2)

In Part 1 of this post, I traced the history of anti-Internet gaming laws up through passage of the Unlawful Internet Gaming Enforcement Act in the fall of 2006. The UIGEA was essentially a toothless law - it made financial transactions for the purpose of "unlawful Internet gambling" illegal, but since it relied on existing laws to define what was illegal, it really didn't change anything. However, the perception, particularly among banks and the media, was that the UIGEA made online poker and other forms of online gambling illegal.

This perception was so pervasive that it was accepted as fact, even by media outlets that are usually known for diligently checking facts. Example: the New York Times called me for some background on an article on Internet gambling in early September 2006, just before the UIGEA passed. The article never ran, but the reporter called me just after then-President George W. Bush signed the UIGEA, and had only one question: "What are you going to do now that your company's business is illegal in the US?"

As I mentioned in Part 1 of this post, the Department of Justice, along with the overzealous New York State Attorney General's office (then headed by Eliot Spitzer), used subterfuge to support their campaigns against Internet gambling. This included informal briefings and briefing documents that either intimated or stated explicitly that all forms of online gambling were illegal in the US, and therefore any online gambling transactions could be prosecuted under the UIGEA. This was the same tactic that the DOJ used in the 2003 June Letter (also discussed in Part 1) - while they had no legal support for their contentions, merely raising them was enough to persuade the traditionally conservative banking industry to stay away.

This chicanery chilled the Internet gambling market from late 2006 through 2008. The UIGEA contained a provision requiring regulations to be drafted within nine months of its passage into law, but everyone in the industry knew this was unrealistic. Regulators were quite surprised to discover that banks were among the most strident critics of the regulations, mostly because even the most conservative estimates pegged the cost at $1 billion, all of which would be borne, without relief, by the banks.

The Treasury Department and the Federal Reserve adopted final regulations in November, 2008, and were implemented in January, 2009, nearly 30 months after passage of the law. By that time, the online poker companies that chose to remain in the US, including PokerStars, Full Tilt Poker, UltimateBet, AbsolutePoker and a few more, were once again firmly established. And while processing credit card transactions was still very difficult in the US, each of these companies had means to accept deposits via the Automated Clearing House (ACH) system, meaning they could accept virtual checks from their players.

And so it was, pretty much, until April 2011. There were no significant indictments or prosecutions, and exactly zero prosecutions under the UIGEA. Despite this, the publicly-traded companies that withdrew from the US market saw their shares languish, having lost close to $20 billion in market value, mostly equity belonging to US investors.

And then, out of nowhere, and with not even a vague hint that it was coming, the DOJ took its most draconian action. On March 10, 2011, a secret grand jury handed down sealed indictments, charging the principals of PokerStars, Full Tilt Poker and Cereus (owners of UltimateBet and Absolute Poker) with bank fraud, UIGEA violations and violations related to the obscure Illegal Gambling Business Act of 1955 (a bill passed largely to control illegal casinos). On April 15, 2011, the indictments were unsealed and, court orders in hand, the DOJ seized the web domains and financial assets of these companies and effectively shut down their US operations. Overnight, an estimated 9 million US players no longer had anywhere to play online (sort of - more on that in a future column). Within a few days, poker players had dubbed the day "Black Friday."

Once the indictments were unsealed, PokerStars immediately began efforts to fully reimburse players for funds on deposit. Within four weeks, all PokerStars players in the US had access to their accounts and were able to withdraw. In a shocking development, Full Tilt Poker players learned within a few days of Black Friday that they weren't nearly so lucky.

While they were experiencing constant growth, Full Tilt was able to process cashouts from new player deposits, the online poker version of a Ponzi scheme. It was later revealed that many of the founders of Full Tilt Poker, several of whom were household names in poker (Howard Lederer and Chris Ferguson, among others), had paid themselves outsized bonuses totaling hundreds of millions of dollars. Ultimately PokerStars bought their largest rival for $731 million and reimbursed all player deposits, an amount totaling nearly $400 million.

The impact of Black Friday is nearly impossible to estimate. There is no question that it cost US broadcast companies over $200 million a year in television advertising revenue. PokerStars and Full Tilt both underwrote television shows for the US market, costing an estimated $40 million a year. The episodes that had been shot were aired, but production on these shows came to a screeching halt. And both companies had US employees, as well as US players on their sponsorship teams. The vast majority of US employees left the companies in the days following Black Friday, and many of the sponsored players were either let go or saw their sponsorship money dramatically reduced.

And so the online poker industry was decimated a second time by the United States, first by legislation, then by law enforcement. But the story didn't even end there - it then took a turn that many would describe as incredible, but for many in the industry it was simply another head-shaking turn in online poker's turbulent seventeen year history.

On December 23, 2011, just eight months after Black Friday, the Department of Justice's Office of Legal Counsel issued an opinion letter regarding the Wire Act that changed the landscape of online poker once again. The letter essentially admitted that the DOJ's prior interpretations of the Wire Act's applicability to online gaming were incorrect. The key line in the letter from US Deputy Attorney General James Cole:

“The Department’s Office of Legal Counsel (“OLC”) has analyzed the scope of the Wire Act, 18 U.S.c  § 1084, and concluded that it is limited only to sports betting.”

This letter represented a sea change in the thinking of the DOJ. Ever since online gaming first took hold during the Clinton Administration, the DOJ had use the Wire Act as its legal justification for its pursuit of online gaming. It even quoted the Wire Act in its 2003 June Letter (see Part 1 of this article for more on this). And suddenly, or so it seemed, all that had changed.

The real story is that this wasn't all that sudden. The first rumblings that something might change happened on July 14, 2011, when two odd bedfellows, Senate Majority Leader Harry Reid (D-NV) and Senator Jon Kyl (R-AZ) sent a joint letter to US Attorney General Eric Holder. 

While the letter itself appears to ask the DOJ to take a harder line regarding online gaming prosecutions, the odd tone of the letter led many to believe that Reid and Kyl had made a deal. Both knew that the DOJ's reliance on the Wire Act was weak and was unlikely to withstand a serious legal challenge. Reid's primary campaign contributors (Las Vegas casinos) supported online gaming in general, but were willing to settle for online poker as a start. Kyl, a longtime opponent of online gaming, had announced his retirement, and observers speculated that his cooperation with Reid in writing this letter was political payback (although no one knew for what).

On September 20, 2011, the DOJ issued a 13-page legal opinion regarding a years-old request by New York and Illinois for clarification regarding the legality of selling lottery tickets online using out-of-state payment processors. The letter, which was not publicly released until December, did away with the Wire Act's applicability to Internet gaming in two sentences:

"Interstate transmissions of wire communications that do not relate to a 'sporting event or contest' fall outside the reach of the Wire Act. Because the proposed New York and Illinois lottery proposals do not involve wagering on sporting events or contests, the Wire Act does not prohibit them."

With this opinion, the DOJ formalized what online gaming supporters had contended for fifteen years - the language of the Wire Act was only intended to deal with sports betting. The opinion was released on December 23, 2011, the same day that Ron Weich, Assistant Attorney General, sent letters to both Reid and Kyl, stating unconditionally that the Wire Act did not in fact make Internet gambling illegal, opening the door for states to enact intrastate online gambling at their option.

Many believed that this would start a gold rush, with many states passing laws to regulate Internet gaming. But through this writing, only three states have done so - Nevada, New Jersey and Delaware. And it is clear that until a few key states legalize and regulate online gaming, particularly California, New York and Florida, online poker won't flourish - it needs the liquidity (players) that these big states can provide.

And this brings us to 2015. A number of states have online gaming bills up for consideration, although few (if any) will pass this year. The latest cloud on the horizon of online gaming: Sheldon Adelson, chairman and CEO of Las Vegas Sands, who has taken on the industry with almost religious fervor, pledging to spend "$100 million, $500 million, whatever it takes," to make online gaming illegal at the Federal level. I'll take Sheldon on in a future column.

The Wire Act, the UIGEA and other silliness (Part 1)

First, an apology. For quite a while, I tried to post here at least once a week. I found that to be manageable for a while, but since I always try to write at least 1,500 words, I can't just sit down and bang it out. I end up spending 4-5 hours on each post, including research, checking links, etc.

Couple that with some tumultuous times elsewhere, the past few months have been a challenge. I'll be able to talk more next week about those issues (and I promise to do so), but in the meantime I had a few things that I thought I could get through today. We'll see.


In Nolan Dalla's excellent blog today, he says an inordinate number of kind things about me, some of which relate to Fleet Street Games. Sharon and I attempted to start a subscription poker site back in 2008-2009, and had some success, but our funding ran out and we were unable to raise money to continue operations (a common story for 2008). One of the things we did was to develop a short series of TV spots that focused on the absurdity of federal and state crackdowns on online poker, which you can see at the links below. These spots featured a lovable schlub named Bean, who just wants to play online poker but has a succession of terrible things happen.

Bean Gets Busted
Bean Goes to Jail
Bean Gets Fried
Bean in Heaven 

[There's also a long-form version that we intended to use as a viral video - you can see that one here. It's about three minutes long.]

The theme is simple: why are we treating online poker players like hardened criminals, instead of dealing with hardened criminals?

I came to that way of thinking after several years as an online poker player (1999-2002) and as an online gaming marketer (2002-present). And it occurred to me as I thought about this that there is a massive amount of incorrect information out there about how we got to this point, so I thought I'd collect it all in one place.

DISCLAIMER: I am not a lawyer, although I often talk like one. I do have a thorough understanding of the laws I'm going to discuss here, but don't take me to task if I get something wrong, unless it's something big.

Way back in 1961, Congress passed the Interstate Wire Act. The intent of the bill was simple: make it illegal to transmit information across state lines for the purpose of sports betting. This was part of a much larger effort by then-Attorney General Robert F. Kennedy to crack down on organized crime.

The federal government has been careful over the years not to attempt to pass legislation regarding gambling, which has traditionally been left to the individual states. The Wire Act was not an attempt to change this; it was the Fed's way of ensuring that they had jurisdiction in cases where gambling wasn't taking place in a specific state, but crossed state boundaries.

Spin forward many years, to the Early Middle Ages of the Internet (1998). The first online poker site emerged that year, Planet Poker. There were already a few sites that allowed casino games of various types, but since they are in a different category (more on that in a minute) I'm not going to try to deal with them in this discussion.

In 1999, Congress attempted to pass the Internet Gambling Prohibition Act, which was intended to do exactly what it sounds like. This was the first of many annual attempts to ban Internet gambling in the United States. The bills rarely made it past committee review, and none made it to the House or Senate floor for a vote. [Amusing side note: the primary driver behind the defeat of the Internet Gambling Prohibition Act was Jack Abramoff. If you don't know who he is, click here, but be prepared to go down a rabbit hole.]

In 2002, after several attempts by the Bush Administration's attorney general, John Ashcroft to use the Wire Act against online gambling advertisers, the US Fifth Circuit narrowly interpreted the Wire Act, ruling that the statute could only be applied to sporting events and contests.

Other than a few aborted attempts, there was little legislative activity in the online gambling space until 2003, when Chris Moneymaker won the World Series of Poker after winning an $82 satellite on PokerStars.com. Chris's win generated a huge amount of publicity, mostly because he was the first online qualifier to win the WSOP.

Around that time, PokerStars, PartyPoker, UltimateBet and other sites began advertising on television, further raising their profile. John Ashcroft realized that he had very little legal standing to prevent these ads, as well as the tens of millions of dollars in advertising for online sites in print and other media. So he took a creative, although deceptive, approach to the problem - he went directly to the media with a chilling scare tactic. In a letter dated June 11, 2003 (signed by his deputy, John Malcolm), Ashcroft and the DOJ claimed that Internet gambling was illegal, regardless of what the courts or other interpretations said. 

The full text of what became known as the June Letter is available here. But the key issues are covered in just a few sentences:

•   "the public [has been led to believe] that such [Internet] gambling is legal, when in fact, it is not."
•   "...individuals that accept and run such advertisements may be aiding and abetting these illegal activities."
•   "...state and federal laws prohibit the operation of sportsbooks and Internet gambling within the United States."
•   "Internet gambling and offshore sportsbook operations that accept bets from customers in the United States violate Sections 1084, 1952, and 1955 of Title 18 of the United States Code, each of which is a Class E felony." [note: 18 US Code § 1084 is the Wire Act]

Each of these statements is false, but that didn't stop the Department of Justice. It was a scare tactic, pure and simple, and it was backed up by this incredible statement:

"...any person Or entity who aids or abets in the commission of any of the above-listed offenses is punishable as a principal violator of those statutes."

Translation: If you [NBC/ESPN/Travel Channel) allow these ads to run, we are going to charge you with a Federal crime just exactly as though you were running the site yourself. Ashcroft was furious with the Fifth Circuit for emasculating the Wire Act, so he decided to just ignore it and wave a big stick at broadcasters.

It worked, at least to a degree. Broadcasters suddenly and dramatically raised their prices to online gaming companies, or refused to run their ads. They imposed draconian rules on what could and could not be said in ads, even though there was no basis in law (and no other advertiser was subject to this treatment). This was one of the principal reasons that the World Poker Tour took the branding off the PokerStars Caribbean Adventure broadcast in early 2004. 

The next few years saw a flurry of anti-Internet gambling legislation, each of which was introduced by a Republican. I found this very surprising, since I was under the impression that one of the founding principles of the Republican party was less regulation and smaller government. But this has continued to be true - each piece of legislation introduced to ban Internet gambling at the Federal level has been introduced by Republicans. If I'm showing bias here (I am not a Republican), my apologies, but it's hard to interpret this fact.

All of these attempts failed until late September 2006. Bill Frist (R-Tennessee) was then the Senate Majority Leader and had aspirations for the presidency. He had been an opponent of Internet gambling, and was listed as a cosponsor of some previous bills, but was never particularly vocal. However, he found what he thought was a cause that could propel him to the 2008 Republican presidential nomination. 

In what is known on Capitol Hill as a "midnight drop," Frist inserted a series of clauses, known as the Unlawful Internet Gambling Enforcement Act (UIGEA), into a larger bill, the Security and Accountability for Every Port (SAFE) Act. The SAFE Port Act was a "must-pass" bill that itself was introduced very late in the legislative process, and as a result had not been thoroughly reviewed by either house of Congress. The UIGEA clauses were introduced just hours before the bill came up for a vote. The UIGEA itself was never debated or even officially read into the Congressional record. The SAFE Port Act was approved by voice vote in both the Senate and the House, and was signed into law on October 13, 2006.

This is where a lot of confusion and obfuscation began about just what the UIGEA was. The UIGEA is, at heart, a very simple piece of legislation. 

What the UIGEA does: it makes banking transactions for the purpose of "illegal Internet gambling" illegal. 

What the UIGEA doesn't do: it doesn't make any form of Internet or other gambling illegal. In fact, the bill explicitly states that its intent is to cover only transactions for Internet gambling that are already illegal under State or Federal law.

Over the next year, I can't tell you how often this law was misinterpreted, misquoted or misapplied. I made no less than 100 calls to the press in the wake of the UIGEA, and roughly 90% of the reporters I talked to were under the impression that the UIGEA made online poker illegal. I later learned that at least some of this 'misunderstanding' came from an informal DOJ briefing document that explicitly stated that online poker was covered under the Wire Act and was therefore "illegal Internet gambling."

Getting back to October 2006: in the wake of the UIGEA, Sharon and I were expatriates, and maybe worse (more on this here and here). It wasn't at all clear that we could return to the US without my being arrested. And our plight paled in comparison with others - for example, PartyPoker, which had gone public on the London Stock Exchange in 2005 with a valuation greater than British Airways, saw its market capitalization drop from over $12 billion to less than $1 billion in a matter of days. It's safe to say that there was no one involved in the Internet gaming business that wasn't affected in a significant way by one man's attempt to become President.

Next up: Black Friday, the December letter and where we are now.

My name is Bond. My word, not so much.

Winter 2006

By late 2005, the battle for the online poker market was all but resolved. PartyPoker was the clear leader, although their lead over PokerStars was steadily diminishing. In early 2004, the PartyPoker/PokerStars ratio was about 5:1; by December 2005 it was just under 2.5:1. Full Tilt Poker was a clear threat, but they were well behind the two leaders.

In January 2006, PokerStars held its second WPT event at the Atlantis Resort & Casino (actually our WPT third event; the first one was on a cruise ship). The people at Atlantis, who didn't take us seriously enough to even talk to us about an event in 2004, had become believers - in fact, one of their executives told me in a meeting just before our 2006 event that we were one of Atlantis' five largest customers. We were working closely with Atlantis on several fronts, including their attempts to bring other major poker tournaments to the resort. 

It was in this mindset that this same executive mentioned to me during our 2006 event that Atlantis was working with Eon Productions on the upcoming James Bond movie, Casino Royale. In fact, part of the movie was being shot at The Ocean Club, the upscale neighbor/partner resort to Atlantis (as well as other locations in and around Nassau, Grand Bahamas). Then, as if planned (which it may have been), the senior marketing guy for Eon walked by, and my Atlantis contact pulled him over for an introduction. In the interest of not being sued, I'm going to call this guy Gene Voltshiker.

Gene was one of the savviest marketing guys I'd ever met. He started by telling me that, unlike the original Casino Royale, the new film's climactic gambling scene would be poker, not baccarat. Within just a few minutes, Gene and I were discussing with increasing excitement the possibilities that this presented for a partnership between PokerStars and Eon. We decided that we each needed a little time to think about this further, but agreed we should get together for lunch the following day.

By the next day, I had roughed out an idea in my head for a series of online tournaments, culminating in a final table held at the very same table and location as the climactic Bond-Le Chiffre scene. When Gene and I met at the Atlas Bar & Grill at Atlantis for lunch, I led with this. Unsurprisingly, Gene had a similar idea. Of course, he wanted it to be a $100 million tournament just like in the movie, which wasn't going to happen, but I loved his enthusiasm and was thrilled that we might have a chance to participate with one of the most iconic brands of the past fifty years.

We concluded our lunch by agreeing that we should talk the following week, once the PokerStars Caribbean Adventure was over and we could all dedicate the time to this idea that it deserved. I made a note to myself to formalize the idea and send something to Gene the following week.

Gene beat me to the punch. Two days after I returned to the Isle of Man, he called asking if I had plans for the first week in February. The "Bond Partners" were meeting at Atlantis to craft a unified marketing plan. I asked who the partners were. Gene told me that the list hadn't been finalized, but the confirmed partners were Aston Martin, Sony, Omega, Heineken, Smirnoff, British Airways, Atlantis, Sunseeker Yachts, Brioni and Electronic Arts.

No, I told Gene, I wasn't busy.

I quickly sketched out my ideas for the poker tournament and a variety of other ways we could take advantage of the Bond brand. I set up a meeting with Isai and Mark (CEO and COO of PokerStars) and outlined the ideas I had come up with. For the very first time since I had started with PokerStars, Isai and Mark greeted an idea with unbridled enthusiasm. They understood the value this association could bring us, and were willing to commit to it as long as we were a full marketing partner.

I returned to my office and checked my email, and to my surprise, I found a 51-slide PowerPoint deck from Gene outlining some of his ideas for the tournament and an overall partnership. He had already spoken with Atlantis about the tournament, and they were over-the-moon excited about the prospect. In fact, Atlantis agreed to store the entire final table set, which we would use to produce a truly one-of-a-kind live final table. And he had already booked travel for me to attend the partner meeting.

Over the next three weeks, the project took on even more massive proportions. I asked Gene about product placement in the movie, which was quite rare in Bond films, and without actually committing to it, he indicated that it was a possibility. He suggested that there were many obvious partnerships we could develop, which made the partner meeting even more critical. And while we hadn't signed anything, it was becoming very clear that this deal was not a pipe dream - it was happening.

The partner meeting was perhaps the most energetic and exciting marketing event I've ever been involved with. There were 21 official Bond partners - including PokerStars, which was prominently featured in all of the promotional materials and PowerPoint decks we saw over the course of the three-day meeting. I was stunned at how many of the partners were lining up to associate with PokerStars, including Sony (who wanted to discuss an ongoing TV series), Aston Martin (who wanted us to sponsor a racing team) and Omega (who wanted to produce a limited-edition Omega/PokerStars watch). Meetings with various potential partners stretched way into the nights. By the time I left, I was in the enviable position of having to choose which of the powerhouse brands we really wanted to do business with, since we clearly couldn't do them all.

Side note: The Eon team went far over the top to impress us. We were all put up in massive suites at Atlantis. Each dinner was more spectacular than the one before. On the second day, we were all instructed to meet at the yacht pier, where three yachts (serious yachts - 100+ feet each) ferried us to a location shoot. That same night, they ran a casino night during which they gave away about $20,000 in prizes (I won a one-pound Sony computer worth about $2,500). And just wandering around with the rest of the guests were Daniel Craig, Caterina Murino (who played Solange) and Giancarlo Giannini. I'm not that easily impressed, but I was impressed. 

When I returned to PokerStars headquarters, I was still having trouble figuring out how we were going to choose who to work with. I expressed this concern to Isai and Mark, who thought I was crazy. "This is an easy problem," Isai said. "We work with all of them."

The marketing department at PokerStars had grown substantially, but we still only had about 20 people, and there was no way we could handle this. But the potential was so great that Isai suggested I recruit a branding guru to run the Bond relationship, and hire as many people as we needed to extract the maximum from the relationship. I was fortunate enough to find Stefan Kovach, a recognized brand expert whose CV included Virgin Atlantic Airways and Beenz (an early Internet affinity marketing company).

Stefan saw Aston Martin as having the greatest potential for us. Within a few weeks of hire, Stefan negotiated deals with Aston Martin that gave us sponsorship of one of their racing teams, as well as the first new DB9 to come off the assembly line (which we gave to one of our players). 

Stefan and I also negotiated deals with several of the Bond partners who wanted PokerStars to run tournaments for them during the year, including Heineken, Sony and Smirnoff. And we moved forward with integrating the Bond name and logo into the site throughout the year.

Perhaps most importantly, we started working on the tournament at Atlantis. Sony got involved in the discussion at this point - they had been looking for a way to get involved in the massive popularity of poker on television, and were willing to pay some significant money for the exclusive right to broadcast this event. We settled on a $10 million guarantee tournament, with $2 million for first place, making it the third largest tournament in the world (behind the World Series of Poker Main Event and the World Poker Tour Championship).

By March 2006, we had spent about $300,000 on this project, not including the salaries of the various people we had hired to work on different aspects of the event. We had signed a 'heads of agreement' letter (the UK equivalent of a letter of intent), and were hammering out the final details of the contract. I traveled to London to meet with the Eon legal people, and all seemed to be well. I was even treated to a short meeting in the coolest office I've ever seen - the 5,000 square foot office of Barbara Broccoli, Eon CEO, producer and daughter of Albert "Cubby" Broccoli, the genius behind the Bond movies. The office, in a 200 year old building with a view of Buckingham Palace, featured a fireplace that could hold 16' logs (which I think should properly be referred to as "trees").

We had a short vacation scheduled in April 2006 - our friends Shaena and Steve were getting married in Hawaii, so we planned to take a week to attend their wedding. Shaena has played a part elsewhere in this saga, including "The girl with the $16 million purse" and "70,000 drunks clinging to a rock." I was a little nervous about leaving - we were very deep into the Bond project, and our WSOP presence was looking to be massive (over 1,000 players had already qualified), but we had committed to attending. 

By early April, the final contract still wasn't done. More troublesome - the Eon lawyers were taking their good-natured time completing it, which was very scary - we intended to launch satellites at the very end of the WSOP, which was less than three months away. And even more ominous: starting the first week in April, I could no longer get Gene on the phone.

Prior to early April, Gene and I had spoken every day, sometimes more than once. We were coordinating the activities of a number of large companies (Sony, Atlantis, Aston Martin and others), and our own companies had their own bureaucracies, so getting all of the moving parts to work in coordination with one another was no simple task. I wasn't particularly alarmed at first; we were all busy, hurtling at high speed down a path that would ultimately lead to huge opportunities for everyone involved.

We were scheduled to leave for Hawaii around April 15, and by the day before we left, Gene had gone dark for 10 days. Isai, Mark, our lawyers and I discussed this regularly - we had been confident that the HOA we had signed would turn into a contract, but the Eon lawyers weren't giving us much, and Gene even less. By this point, we had not only a big investment in money, but in time and marketing efforts. If this event didn't happen, we had a huge hole in our marketing plans for the second half of 2006. And we had already finalized and signed contracts with Aston Martin and others, some of which were dependent on the tournament taking place.

I spent almost the entire week of our vacation (except the wedding itself) emailing and calling Gene and others, attempting to figure out what was going on. By the time the second full week of silence had passed, it was clear that something was terribly wrong. I finally left Gene the message I had been avoiding, which went something like "Look, if you're backing out, at least have the decency to call and tell me so." 

When even this didn't work, we collectively decided that we needed to do something. We went quietly to a few of the partners, each of which also had a substantial investment in the tournament, and asked them to press Gene on our behalf. 

This worked. Gene finally called me on our last day in Hawaii to inform me that Eon's outside counsel believed that Eon was taking a substantial risk in a partnership with us, and as a result, we would not be participating in Casino Royale in any way. As further insult, the day I returned to the Isle of Man, I received a letter from said outside counsel, warning me that our right to use the Bond name, trademarks and logos had been revoked. 

By this point, we had hired five people for the project, and had spent countless hours of other peoples' time building marketing materials and tournament plans. None of it was usable. I even received a veiled threat from Eon that our relationship with Aston Martin might be in violation of Eon's rules for partners (fortunately, the president of Aston Martin intervened on our behalf).

In a way, this ended up being a blessing rather than a curse. When the Unlawful Internet Gaming Enforcement Act (UIGEA) passed in September 2006, Eon would have been forced to terminate our relationship anyway, and by that point we would have spent $5 million or more that we couldn't recoup. But there's a valuable lesson here that we all knew, but ignored: don't spend money until you have it in writing.

By the way, I might have fired me had I been Isai or Mark. But they knew that we had all gotten swept up in the excitement, and everything we did was with their knowledge and approval. Which brings to mind a quote from Die Another Day that sums this up:

Bond:	Do you believe in bad luck?
Jinx:	Let's just say my relationships don't seem to last.
Bond:	I know the feeling.