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Best of Liz Benston

Gaming Guru

Liz Benston
 

Conference Highlights Internet Poker's Popularity

7 July 2005

LAS VEGAS -- Flanked by hostesses in slinky black dresses and introduced with blaring rock music, a group of marketing experts and attorneys gathered at a Las Vegas casino to advise online poker operators how to promote a business that both the state and federal government consider to be illegal.

Several hundred people filled a giant ballroom at the Mandalay Bay Convention Center for a conference hosted by Bodog.com, one of the largest sports betting sites on the Internet that recently introduced an online poker room to capitalize on the poker boom.

The irony of the situation is not lost on Bodog.com Chief Executive Calvin Ayre.

"The progressive casinos ... acknowledge the industry for what it is," said Ayre, a Canadian whose site is based in Costa Rica. "We are a large feeder system for the casinos and Las Vegas is the center of this space."

It's no accident that the conference kicked off the day before the start of the championship event of the World Series of Poker, the world's largest poker tournament. By about noon today, 2,000 hopefuls will have faced off against one another in the so-called Super Bowl of poker at the Rio convention center.

Up to 6,000 players have so far registered to enter the event and have been divided into three groups over three start days to fit into the Rio's ballroom, where 200 poker tables await. The tournament can accommodate up to 200 extra people per day if players get knocked out of the early rounds, which means the tournament would be sold out at 6,600 people.

The top prize will be about $7 million, with several runner-ups assured a prize of at least $1 million.

Since a novice named Chris Moneymaker leveraged a $40 online buy-in to win the World Series of Poker in 2003, Internet casinos have played a major role in the tournament. In the months leading up to the World Series of Poker, online casinos have hosted satellite tourneys that allow players to win their $10,000 buy-in to the WSOP's final event. PokerStars.com, where Moneymaker learned the ropes of poker and where he is now a paid host, will be feeding more than 950 players to the tournament this year.

Jeff Shulman, a poker player and publisher of Card Player magazine in Las Vegas, estimates that as many as a third of the entrants to the final tournament will have won or otherwise obtained their seats through online poker sites such as Bodog.com.

"The casinos know how important (online sites) are," said Shulman, who will be playing in the final tournament. "If you go to Bellagio you've got 40 people waiting for every game."

Web casinos have become a "farm league to bring players into the casinos for the first time," he said. "And they're winning ... That's the beautiful thing about poker."

The Bodog.com event began as an insider party for sports handicappers three years ago and has morphed into the country's most public promotional event for the burgeoning online gambling industry.

Last night, some 800 people gathered for an afterparty at the Palms, which Ayre calls another one of Las Vegas' few "progressive" casinos.

Ayre's persona is an anomaly in an industry that is largely made up of anonymous officers and investors that avoid the spotlight. The federal government's ban has driven Internet operators offshore, where Web gambling has ballooned into an $12 billion business with profit surpassing the biggest Las Vegas casinos.

Last month investors and regulators took notice when the owner of the world's largest online poker site, PartyPoker.com, went public in London in a $9 billion offering, setting the stage for other offerings and interest from major investment banks.

Of the industry's illegal status in Nevada, Ayre doesn't blink.

"We don't block bets from Nevada but we don't go out of our way to tap people in Nevada," he said. "We don't do business in Nevada. And we're not going to police jurisdictions all over the world. That's not our responsibility."

Nevada is one of only a handful of states that specifically prohibit Internet gambling, which regulators have interpreted to include Internet poker. While the state has previously expressed interest in legalizing Internet gambling, it stands by the ban so as not to run afoul of the U.S. Department of Justice, which has issued an opinion that Internet gambling is illegal and has threatened legal action against U.S. media companies that have accepted Internet gambling ads. The federal government is largely basing its prohibition on the 1961 Wire Act, a law intended to combat organized crime that bans cross-border wire communications relating to wagers on a "sporting event or contest."

Ayre also isn't afraid of the feds, calling the Department of Justice's legal position flimsy. The federal government has so far avoided a lawsuit against an Internet poker room because of the risk of losing in court, he said.

Last year the U.S. Attorney in St. Louis sent out several cease and desist letters to media companies saying they were "aiding and abetting" Internet gambling, a criminal enterprise. More recently, Esquire pulled ads from Bodog.com after the feds warned the magazine against running ads from online gambling sites.

Ayre said the crackdown has actually helped his business by weeding out some of the advertising clutter.

"We're more nimble than most of our competitors," he said. "You can't stop the Internet."

Web casinos are using a host of techniques to skirt the law and appear to be successfully avoiding prosecution.

That includes launching play-for-free sites using ".net" suffixes instead of their real-money casino counterparts, which use the ".com" moniker. Many major online casinos now advertise their free play dot.net sites to placate media companies even though those sites are designed to teach players in preparation for real money games. Free sites often link to registrations for online casinos. In some cases, Internet casinos are running variations of "void where prohibited" disclaimers to avoid lawsuits in specific jurisdictions.

Attorneys representing online casinos dismissed some of the federal government's warnings against media companies promoting Internet gambling.

To win a court judgment, the government would have to prove that a media company actively promoted and "substantially contributed" to an Internet gambling business, attorney John Ford said at the conference. While running advertising doesn't present much risk, a company that somehow shares revenue with an Internet casino might run into trouble, he said.

Allyn Jaffrey Shulman, an attorney for Card Player and the wife of the magazine's owner, Barry Shulman, said the government is using an outdated and unproven law to ban Internet gambling.

If the feds threaten Card Player, the magazine would likely fight back with a lawsuit, she said.

"There's no specific prohibition of online gambling, there's just posturing from the federal government," she said.

Conference Highlights Internet Poker's Popularity is republished from GamingMeets.com.