Ultimate Poker Closes in Nevada: Reactions and Impacts

Ultimate Poker is closing their Nevada online poker room. The news was first reported by Howard Stutz at the LVRJ.

The shuttering in Nevada follows Ultimate’s September exit from New Jersey and appears to effectively mark the end of Station Casinos’ foray into regulated online poker and casino games.

The company continues to see potential in mobile sports betting and social gaming, per comments made yesterday by Station CFO and SVP Mark Falcone.

Impact on California online poker

California’s Graton Resort is operated by a partnership of Station and the Federated Indians of Graton Rancheria. That partnership was expected to serve as Stations’ entry point into the California online poker market.

The Graton Rancheria have been mentioned as a supporter of legislation in the past, but did not appear on the list of tribes supporting the unified online poker bill draft floated over the summer.

While Station certainly reserves the right to reopen their online poker operations in California, shuttering Nevada sends a clear signal that the company does not expect to be up and running in California at any point in the near term.

Station’s exit from the online poker space effectively removes a relatively powerful, extremely motivated voice from the debate over online poker in California.

On face, that’s a net negative for supporters of regulated online poker in California. But it’s harder to argue that Station’s exit will tip the scales to a degree likely to change the course of regulation.

How will Nevada’s player pool respond?

Nevada’s cash game market share was split about 60-40 between Ultimate Poker and WSOP NV (on a good day for UP).

I’d expect WSOP to move aggressively with promotions and other outreach to capture as much of that departing traffic as possible, even though much of it likely represents a duplication of their player base.

But no matter how aggressive WSOP is, it’s highly unlikely that we won’t see some leakage, meaning that UP’s departure will result in a net loss for the Nevada market.

As a side note, it’s a shame for both the New Jersey and Nevada markets that Ultimate wasn’t able to undertake a deal that saw customer accounts and balances transferred to a new operator.

It’s tough enough to get deposits in population-restricted markets, let alone under the payment processing conditions faced by NJ and NV. The market would be far better off if player balances stayed within the economy following a closure.

Proprietary software approach proved flawed …

Another impact to the sad end of Ultimate’s tale in Nevada: would-be operators will now think long and hard before developing an online gambling platform in-house.

While Ultimate’s fate wasn’t wholly a result of their software platform, the platform clearly deserves a plurality (if not a majority) of the blame for Ultimate’s performance in Nevada and New Jersey.

Rightly or wrongly, Ultimate’s experience is likely to become a cautionary tale for operators going forward about the potential hazards of reinventing the iGaming wheel.

… but regulated US markets more overcrowded than underperforming

I’d argue that chalking Ultimate’s end up to platform problems is a bit too simple.

There’s also the cold reality that underpins population-restricted markets: they can only support so many operators.

It was, in many views, inevitable that Nevada would eventually reduce to a single major online poker site, simply because that’s arguably all the state’s population can support.

Further closures and consolidation are likely in New Jersey for the same reason.

It’s tempting to accept that fact and then issue nearly limitless licenses to operate online regardless, reasoning that competition will sort things out.

But that approach has serious implications for the long-term viability of an online poker market (as we’re now seeing in NJ) and for the public image of regulated online gambling at large (stories of shuttered operators don’t exactly beget optimism and political support).

The lesson learned: lawmakers and regulators need to more carefully consider demand when structuring the licensing system.

Reactions to Ultimate Poker’s closure