What If the UIGEA Had Never Passed?

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The immediate effect of the Unlawful Internet Gaming Enforcement Act of 2006 was to destroy an unregulated but predictable market for online poker and leave in its place an uncertain playing field.

The law’s passage came not because of a sudden groundswell of popular opposition to online poker, but thanks to some late-night political maneuvering by a handful of politically influential anti-gambling Republicans and one GOP senator with no horse in the online gambling race but a hankering to become president.

It’s enough to make one wonder what would have happened if some pollster with a brain had gained then-Majority Leader Bill Frist’s ear and let him know his White House chances were slim to none.

With no need to strike a deal with influential anti-gambling Congressman Jim Leach for support in the Iowa caucuses, there would have been no reason for the otherwise gambling-agnostic Frist to jam UIGEA through the Senate.

When Republicans lost control of the Senate shortly afterward, making Harry Reid Frist’s replacement, and Democrats took the White House in 2008, everything would have progressed differently.

The still-developing market for online poker likely would have continued to grow and diversify it offerings, and a wide range of events that came to pass post-UIGEA never would have occurred, bringing with them their own reverberations for the industry.

So what would the online poker landscape look like if the UIGEA had never passed?

Party Poker

The online poker market has belonged to PokerStars for so long now that it’s easy to forget that wasn’t always the case. When UIGEA was signed into law, PartyGaming controlled two out of every five dollars in the online poker market and made more than three-quarters of its profits in the United States, thanks to an early entry into the market and ubiquitous advertising during televised poker shows and even mainstream sporting events.

Had the company never gone public in 2005, it could have remained in the U.S. market like PokerStars, Full Tilt, and a raft of smaller rooms and networks. But the pressure from stockholders who didn’t want to see their company involved in any potential violation of American law forced the company to abandon its cash cow.

Though it’s still around and profitable today, Party is no longer the behemoth it once was. It took a sea change for the company to lose market share in the U.S., and had UIGEA never passed, there’s no reason to believe things would have been much different at the publicly traded company.

Poker on TV

Prior to UIGEA poker was enormously popular on television in the United States, and the number one source of advertising dollars during such shows was the online poker industry. Even after the Act passed, the money pipeline between poker and media remained intact, at least until Black Friday brought that to an end.

Without UIGEA there would have been no reason for poker rooms to stop pouring marketing dollars into new invitational and made-for-TV events. Nor would there have been cause for them to stop slapping patches bearing their company logos on any player who got within a sniff of a televised table.

PokerStars IPO

PokerStars, the second-largest online poker room in the world pre-UIGEA, had an initial public offering of its stock planned for the spring of 2007 that was only called off because of UIGEA.

Other companies with inferior products had already gone public for huge sums – Party, in particular, soared in value from an initial valuation of £4.64 billion in June 2005 to more than £12 billion ($21.3 billion at the time) one month later.

A PokerStars IPO would have been the most successful of all-time in the online gambling industry. More than that, a valuation anywhere near that of Party would have rivaled the IPOs of major corporations like AT&T Wireless ($10.62 billion in 2000), Deutsche Telekom ($12.48 billion in 1996), General Motors ($15.8 billion in 2010), and Visa ($17.9 billion in 2008).

Such a turn of events would have placed PokerStars in the top half of the 10 biggest IPOs in history even today, making the online poker industry a true force to be reckoned with in the process.

No Full Tilt scandal

Before the passage of UIGEA, Full Tilt Poker had developed an excellent reputation based on innovation, customer service, and the best software in the business.

Once UIGEA’s regulations went into effect and made moving money vastly more difficult, though, the site’s owners decided to start playing a shell game with players’ funds while claiming hard cash for themselves.

That ended up turning into one of the biggest fiascos in industry history, and for good reason. But in the absence of UIGEA, with players still able to move money back and forth, the incentive for Howard Lederer, Ray Bitar, and company to engage in such a ruse would have been nonexistent.

Live tournament growth

In the absence of the UIGEA, we would have seen continued growth at live tournaments via cheap online satellites. The World Series of Poker and World Poker Tour took full advantage of the online poker boom by accepting buy-ins from online poker sites that held their own satellites to these live tournaments.

Satellites were high-test fuel for the engine of the poker economy, bringing in all sorts of players who otherwise wouldn’t have been able to afford to play in high-stakes tournaments and vastly increasing the amount of money in play at tables around the world.

This created new millionaires, but it also fed most of the fish to the sharks who then circulated their money to the rest of their communities through cash games and local and regional tournaments.

Perhaps no two tournaments typify the impact of UIGEA better than the WSOP Main Event and the WPT Championship, as shown below:

$10,000 WSOP Main Event attendance, 2003-2013

  • 2003: 836
  • 2004: 2,576
  • 2005: 5,619
  • 2006: 8,773
  • 2007: 6,358
  • 2008: 6,844
  • 2009: 6,494
  • 2010: 7,319*
  • 2011: 6,865
  • 2012: 6,598
  • 2013: 6,352

* – post-UIGEA high-water mark

$25,000 WPT Championship attendance, 2003-13

  • 2003: 111
  • 2004: 343
  • 2005: 453
  • 2006: 605
  • 2007: 639*
  • 2008: 545
  • 2009: 338
  • 2010: 195
  • 2011: 220
  • 2012: 152
  • 2013: 146

* – post-UIGEA high-water mark

Both the Main Event and the WPT Championship enjoyed massive growth during the poker boom era despite the fact that their buy-ins were unaffordable to the vast majority of poker players. Together they made Las Vegas the undisputed center of the poker world. But after UIGEA removed the source of their growth – online satellites – both tournaments experienced a decline that has endured ever since.

The WSOP had its brand recognition and prestige to fall back on and could still enter satellite winners from the growing online markets in other countries, so even though its attendance declined it has remained fairly steady over the years at levels higher than any previous year except 2006.

The WPT also retained its ability to enter satellite winners from overseas, but it did so by sending them to more tournaments closer to their homes, usually in Europe. As a result the WPT Championship, which was nearly a full decade ahead of the current high-roller tournament boom with its $25,000 buy-in, remains stuck in a tailspin and is far less relevant to the poker world at large than it used to be. (The WPT is trying to change that this year by moving to Borgata in Atlantic City and lowering its buy-in to $15,000, which will probably work but remains a sign of just how much things have changed.)

Potential American regulation

It’s likely that there still would have been some sort of eventual move by the federal government to regulate online poker in the U.S., if only because states tend to try to control any industry that pulls in such hefty revenues. But having to go through a normal legislative process would have made any such efforts more diffuse than the full-court punishment press of UIGEA.

Unlike that law, which was pushed through by GOP leaders via last-minute procedural tactics in the Senate instead of facing the full House, any law addressing online gambling would necessarily have had to be much more moderate in its approach.

That means the existent players in online poker industry would have had at least some kind of input, something it sorely lacked the way things actually happened. Partnerships with American gaming companies could have come much sooner and we could have been enjoying an online poker renaissance years ago.

Photo credit: Martin Falbisoner

- Jason Kirk is a freelance writer. He has covered poker, both online and offline, since 2005. He lives with his wife and two dogs in Nashville, Tennessee.
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