This opinion piece appeared in the May 5, 2011 issue of The Fourth Estate.
Much of the online poker community has taken the position that the Department of Justice’s actions against the big three signals the end of online poker as we know it. The concern is understood, but it’s clear online poker has a bright future in the United States.
Let’s think about the arguments for legalization of online poker in the U.S.: regulation, job creation and tax revenue. With that in mind, locking out the big three is an obvious avenue for the Department of Justice to take prior to legalizing online poker.
Online poker has been around for just shy of a decade. The U.S. did not have the proper laws in place at the time of its inception, so companies like Full Tilt Poker, Poker Stars and Ultimate Bet took their business, their jobs and their tax dollars overseas. At the time, the future of online poker was unclear. In the years since, entire industries have been created around online poker. On top of that, it has become a MULTI-BILLION dollar a year industry, and the U.S. missed the bus.
With our country $14 trillion in debt, government officials are scraping the bottom of the barrel for untapped sources of tax revenue. So legalize online poker, regulate it, tax the players, tax the sites. Done, right? Not so much.
If it were legalized, what incentive would there be for sites like Full Tilt Poker, Poker Stars and Ultimate Bet to uproot their home bases overseas and move to the U.S.? None. With the influx of new players, these companies would go about business as usual and make money hand-over-fist. Money the U.S. likely would not get a sufficient share of because of the company’s locations overseas.
Nevada Sen., Harry Reid, has proposed multiple drafts of a bill to legalize online poker. But what chance will a new online poker site stand trying to compete against three established Goliaths like Full Tilt Poker, Poker Stars and Ultimate Bet? Almost all of Reid’s drafts include some sort of a blackout for current online gaming sites after legalization. What this does is allow new companies to penetrate an otherwise impenetrable market. Do you see where this is going?
Undoubtedly, the U.S. will have the proper laws in place at the time of legalization and these new companies will likely set up shop in the States. This means the new player’s winnings AS WELL AS the income of the new companies will be taxed. And let’s face it, the biggest piece of tax revenue pie, the piece the U.S. really wants, comes from the profits of these host sites. They only receive that piece if the sites operate within the U.S.
Sure, the idea of the government intervening is concerning. But in reality, the blackout of the big three is simply the first step in making the online poker world better than ever.
As Caesars CEO, Gary Loveman, said in an op-ed piece for CNN.com, “One day, we’ll look back at 2011 and laugh at the folly of a ban on Internet poker — just like we now think about Prohibition. The sooner that day comes, the better.”