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Reason Foundation

Casinos Canít Beat Online Poker, So They Join It

Steven Titch
April 1, 2011, 1:12pm

Station Casinos Inc. has become the second resort and casino company in two weeks to team up with an online poker venture. According to the Wall Street Journal, Fertitta Interactive, an entity set up by Station Casino owners and execs, has entered into a partnership with Full Tilt Poker, a popular online poker site.

Last week, Wynn Resorts announced a partnership with PokerStars, which the Journal reports is pushing a bill in the Nevada legislature that would enable it to be licensed to run poker Web sites for Nevada residents and, eventually, customers outside the state as well.

While online poker per se is not banned in the U.S., the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) makes it illegal for U.S. banks and credit card companies to transfer funds to offshore online gambling sites or their financial partners, making Internet poker much more cumbersome for would-be players stateside.

Groups such as the Poker Players Alliance have been putting steady pressure on legislators to repeal the act, getting a sympathetic ear, but not much more, from some members of Congress, including Rep. Barney Frank (D-Mass.).

The budget crises in many states, however, has upped the ante, so to speak. States are beginning to see online poker as a potential tax source that might go down with constituents easier than alternatives like “fat” taxes on soft drinks and snack foods. Earlier in March, the New Jersey State Assembly voted to allow casinos to create online poker portals in their casinos, but Gov. Chris Christie, who had not taken a previous position on the bill, vetoed it. Christie cited the bill’s language as the reason behind his veto, not outright ideological opposition to gambling, and supporters say they have hope for a second chance.

Meanwhile, California lawmakers are trying to build consensus among various parties, including the California Nations Indian Gaming Association (CNIGA) and the California Tribal Business Alliance, on a bill to allow but regulate online poker in the Golden State.

What is particularly new is cheerleading such as this coming from brick and mortar casinos, which were more antagonistic toward online gambling when these sites began emerging more than ten years ago.

But online poker boosted interest in the game with among a new generation of players, enthusiasm which spread to casinos and card rooms. Trouble is, once Congressional nannies took away American players' right to do business with legitimate foreign financial institutions, those poker rooms, often expanded and remodeled at the height of the boom, emptied out. Walk into any poker room, in Vegas or elsewhere, and you’ll see a lot of empty tables taking up space.

Statistics bear witness. In 2008, poker revenues declined for the first time in Atlantic City since 2002, according to a 2009 report from the American Gaming Association. While the recession contributed to the decline, data from Las Vegas indicates that it began before the September 2008 meltdown.

A 2008 Gaming Today study, based on Nevada Gaming Control Board revenue reports, found that Nevada poker revenues based on a percentage or "rake" of all poker pots began dramatic increases in 2003, but began a plateau in 2006, the year UIGEA was passed.

Beginning in late 2007, poker revenues have actually begun to decrease, based on month-over-month reports.

For the first four months of 2008, revenues from poker tables have declined by an average of about 7 percent per month about double the rate of overall casinos revenues decline.

If the trend continues, tables in 2008 will rake about the same amount, per table, as they did in 2003. Whether the decline is based on waning interest in poker, or like other segments of commercial gambling  it is feeling the effects of a slowing economy, it is difficult to pinpoint.

Nonetheless, poker rooms in Nevada especially the major operators in Las Vegas will most likely begin to remove tables from the floor as the number of players decreases.

"We’ve seen a steady decline in the number of players over the past few months," said the poker room manager at a Las Vegas Strip casino. "As a result, we don’t open as many tables as we did, say, a year ago."

It should be noted, however, that none of the state bills so far would immediately make it easier to play poker from your home laptop, tablet or smartphone. Most of the bills would create franchise set-ups that would be offered to licensed casinos operating in the state (just read through the California debate). The legislative push and pull is between two of the more odious tendencies of big government—covetousness for revenue streams it can’t tax and morality-based intrusiveness into the recreational choices of its citizens. The outcome may simply be greater regulatory capture and a state-sanctioned monopoly. Still, we can hope that by opening the door to limited online play will spur a gradual end to this hypocritical restriction.



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