Online Poker’s Offline Impact

In late December, the Nevada Gaming Commission approved regulation changes that effectively pave the way for the legalization of online poker in the Silver State. That’s a necessary step forward for the industry, and the regulations spell out exactly how online poker will be licensed and policed. But no one, so far, has hazarded a guess as to exactly what Nevada’s online poker industry will look like.

There’s some historical precedent for what’s about to happen, and it suggests that online poker will strengthen, not diminish, the appeal of brick-and-mortar poker rooms.

Online poker enjoyed a boom in popularity in 2003, thanks to Internet pro Chris Moneymaker winning the World Series of Poker and the growth of televised tournament poker. It came at an opportune time for Nevada poker: Over the previous 10 years, the number of poker rooms in the state had gone down from 92 to 57, and revenues fell from $75 million to $58 million. Casino poker appeared headed toward extinction; with slot machines so much more profitable than poker, it made sense to replace poker tables with banks of slots. Many casinos did.

Then came the Great Online Poker Boom of 2003-2007, when Americans played in unregulated offshore poker rooms before federal legislation ended the party. By the time the boom was over, there were 114 old-fashioned live poker rooms in Nevada—double the amount before online poker took off—and revenues had climbed to $168 million. While the total number of casino slot machines fell statewide by about 20,000, the number of poker tables nearly tripled. Online poker didn’t kill play at Nevada casinos, and it didn’t lead to dealers being laid off. Instead, it revitalized it and brought more rooms, more tables and more jobs.

There will be, at minimum, a few months before the first legal online rooms open. First, each applicant has to be licensed. In addition to the usual compliance issues—vetting finances and checking for complaints in other jurisdictions—there’s an operational layer to the licensing process. Each applicant must demonstrate that their game software has protections against fraud and cheating, that their identity-verification and credit systems work correctly, and that they have adequate protections against underage gambling.

Poker is the first step of a bigger move online for Nevada’s chief industry, says Gaming Commission member Randolph Townsend. “We want to get into this, see how it works, and adjust the regulations if need be,” he says. “Poker is a steppingstone for us to get ready for the inevitability of online interstate gaming, which they already have in Europe.”

Townsend expects the first rooms to open by the spring. Judging from the applications, we can expect to see some casinos running their own online poker rooms, and others contracting with such providers as IGT, Bally Technologies and Cantor Gaming to run the software for them.

Players will be able to sign up in person or remotely, after proving their date of birth and providing a physical address and Social Security number. Before being allowed to bet, players will have to affirm that they’ve accurately identified themselves, that they are prohibited from letting anyone else use their account and that their play will be monitored by the operator. The state of Nevada will have the final say on any disputes. To get money into their accounts, players will use cash, credit cards, debit cards, personal checks, wire transfers or other Internet payment solutions.

Once the games begin, players can count on a few things: First, everyone at the table will be human—no bots will be allowed to play, and online poker providers are compelled to prevent them from joining in. Likewise, casinos have to take reasonable steps to ensure that there’s no collusion between players. And, though you’ll have to give your name, Social Security number and financial information to the casino when you sign up, you can use another username at the virtual table if you don’t want to play under your own name.

In the wake of the U.S. Department of Justice ruling that the Wire Act—a federal prohibition on interstate gambling data transmission dating to 1961—only applies to sports betting, there’s some question about whether this will open up the field for interstate online poker. For Nevada online poker rooms to take bets from out of state, the governor will have to call a special session of the Legislature to amend the statutes (or wait until the 2013 regular session), as well as compacts with other states. Once that happened, and other states developed their own licensing procedures, you could see bettors from outside of the state showing up in Nevada online poker rooms.

That’s all in the future. For now, the regulators are moving so that, sooner rather than later, you’ll be able to play online poker inside Nevada, against Nevadans.