An open letter to Sen. Dianne Feinstein

I received an email today from the Poker Players Alliance (PPA), asking me to email my senator, Dianne Feinstein, about her support of the Sheldon Adelson-sponsored Restoration of America's Wire Act (RAWA). Since this is an issue that's close to my heart - I've previously written some analysis of Adelson's anti-online gambling stance - I decided that a personal letter made a lot more sense than the canned one the PPA asked me to send. That letter follows. Please feel free to plagiarize use any part of this you think appropriate if you contact your own Senator or Representative. If you want to use the PPA's form letter, which is pretty good, you can find it here.

Dear Senator Feinstein,

I have been an ardent supporter of yours since your run for Governor in 1990, voting for you then and in each of your campaigns for the Senate. I considered you a strong, fearless advocate, something that is quite rare in today's political climate.

Until now, that is. I find your support of Sen. Graham's Restoration of America's Wire Act reprehensible and irresponsible. I will set aside for now the discussion of the original 1961 Wire Act, which (despite your DOJ letter to the contrary) was never intended to regulate anything other than sports betting.

The real question here is the issue of online gambling and the impact of either regulation or a ban. The position you have taken on this issue is a nearly word-for-word copy of Sheldon Adelson's widely circulated opinion, which I find troubling in the extreme. Mr. Adelson has reversed his position on this matter since I first did business with him in 2006; at that time, he not only supported online gambling, but accepted millions of dollars from PokerStars (for whom I worked at the time). At that time, Mr. Adelson believed enough in online gambling that he allowed us to conduct a televised event at the Venetian, with both the Venetian and PokerStars logos on the table. I participated in a conference call in which Mr. Adelson participated discussing this event, so there is no question that he was both aware and supportive of it, which netted his company nearly $2 million.

In the intervening years, Mr. Adelson has changed his mind, and decided that online gambling is evil and destructive. Unfortunately, the data he has used to support this position is almost entirely fabricated. He has pointed to surveys showing a dramatic increase in gambling addiction in European countries that have legalized online gambling (which is most of Europe); however, the actual data shows the opposite. He has stated that live casino business suffers by as much as 20% when online gambling is introduced, even though published data shows a measurable increase. He takes the position that his and other casino companies can detect people with gaming problems and bar them, but this is far from the truth - casinos take almost no steps to control people with gambling addictions unless their problems disturb the casino floor. And he has taken the almost ridiculous position that his casinos can detect money laundering, despite the fact that the vast majority of live gambling is done with cash, the most easily exploitable means by which money is laundered.

The single area in which Mr. Adelson's arguments make a little sense is in underage gambling. This is a real problem, both in live and online gambling. However, banning online gambling doesn't solve this problem; in fact, it enables far more underage gambling by pushing the problem to unregulated non-US gambling sites, which have virtually no regulatory oversight.

I find your position on this subject particularly troubling because I have long respected your thoughtful positions on such issues as the assault weapons ban and medical marijuana for veterans. The position RAWA takes on online gambling is unsupported by almost 20 years of industry data, including over 10 years in legal, regulated markets.

As my Senator, I expect you to be the voice of reason in a Congress that often veers far from the course of reasonable choices. If you truly believe the position you have taken on RAWA, I strongly urge you to examine the easily-available data that exposes Mr. Adelson's position as nothing but a predatory business position. Absent this careful study, which your staff clearly hasn't done, your position is irresponsible and contrary to the facts.

As a constituent and long-time supporter, I respectfully request that you reconsider your position on this important issue.

Sincerely,

Daniel Goldman

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.