Monday, July 20, 2009

UIGEA Reversal Market effects

How does this thing pan out for us (reads us, not U.S.) players when the UIGEA finally reverses and allows the U.S. Government to stick their hands in it and take whatever they want?

One can only guess. So that's what I am going to do. Guess. But mine will be more of an educated guess. Again, these are all suppositions from my stand point so feel free to disagree. This is why I am doing this. I want feedback to incite dialogue so we can hash this out and get ready for an online ass raping. Because that's what I think is really coming. An ass raping of consumers and sites alike.

So where to begin?

For one, I think you have to decide how the market will look. That is, who will be allowed to compete. I've already posted that Harrah's has been pretty active and through a little persuasion it seems the government may preclude sites that have already admitted guilt, or have been recognized as "guilty" of operating illegally from even being allowed to play in the what will be a new sandbox of legalized U.S. online gaming.

I'm not sure this will actually happen. After all, the largest site pre UIGEA, Party Poker would be on that list. And I'm not sure the Government would preclude a site that has the capability of generating players (hence dollars) when they could realistically be the largest provider of tax revenue. We'll have to see how that pans out. But for now, let's assume that will happen.

If that is the case you can forget about Party, any 888 site, and Titan. These sites have been pretty succesful in the international markets since not being able to compete in the US. However, I don't want to micro manage this post, so I will focus on what could happen given the assumption that Harrahs will be stubborn and protect their brand, hence what they think is the GOD of all poker.

Assuming they will have the largest presence, it won't preclude other brick and mortar's from having their own sites. Other casino's with popular live poker rooms will also get in on the action. Foxwood's, The Borgata, the Bicycle, and possibly even the Commerce Casino. I would guess that some of these would most likely partner with an established site already to save on overhead. That is if the government allows it. There also has to be consideration for the media sites like Facebook, Google, and Yahoo. Time will tell how that will shape up. I'm still not sure if they come flying out of the gates wanting to provide gambling to their customer base. It may take some of their main stream advertisers away from their sites. Afterall, Coke andPepsi still have a consumer base to protect, and promoting gambling isn't the best way to do that.

But how will all these new sites effect online play other than being able to just play? What promotions will there be? Will things change at all?

Obviously it will bring new players into the frey. New, and more players will equal a feeding frenzy from those that can play, and those that think because they have played that they automatically are pre qualified as a shark.

Either way the waters will certainly get deeper. From a standpoint of being able to play, deposit and withdrawl money, and shed the notion that you are breaking the law from non-players, this will be a win from every stand point.

You will pay taxes on those monies now. Most likely from withdrawls. The sites will issue you some sort of tax form, just like when you win at a live casino. But seeing that the average withdrawal is a lot smaller than the threshhold for brick and mortar issues of those forms, I have to believe deposits will be taxed in some way. Only time will tell.

Don't think the sites aren't going to pass off their tax liabilities onto you as well. That can only come in the form of bonuses, rakeback, etc. It will be sad to see how that pans out. Of course competition will be fierce so maybe not (I'm just thinking outloud).

I believe that all of these things will have a very big effect on the industry. As more players flock to the now legal online game (and I recognize that online poker was not illegal, just the wiring of monies for the purpose as gaming), Brick and mortar casinos will have to compete more and more.

You will see things such as comps and credit when you play an online site for their brick and mortar counterpart. You will also see more brand protection. What this means is that you will no longer be able to qualify, or satellite into the WSOP off of the Foxwoods site. Unless of course Foxwoods pays Harrah's a fee for use of the WSOP brand. But I highly doubt that is going to happen at all. At least for quite some time. Harrah's is going to do everything they can to protect, and maximize any revenue off of that brand.

They will almost certainly utilize that brand to hoard players to their new site. You can guarantee that. There will be no more, "what's good for poker" actions. It will be more of a "what's good for our bottom line".

Because of this, the online competitors that don't have brick and mortar places (just yet) will do everything possible to offer the craziest games around. Stars WCOOP and Tilt's FTOPS will rival the real World Series. They will have events in place which will be highly marketed such as the first $50million guarantee. Ridiculous events that will only be feasible from the huge participation that only online sites can accomodate and offer.

The WSOP may even at some point become supplanted as the recognized World Championship of Poker. Other brands will come about as well. The WPT may become stronger, or just bought out and renamed.

Online sites will open their own poker rooms, or at least sponsor them with naming rights (think the state of PA and their impending law allowing poker rooms). The Pinnacle Casinos Poker Stars Poker Room in King of Prussia, PA is not that far off from reality.

You will also see a whole lot of more tournaments falling below the $3k entry mark. That is already, and has been happening for the last 2 years. But as casinos try to cater more and more to that new player, the buy-ins for Championhsip events will become increasingly smaller.

There are a ton of possibilities that will come about. The maket will definately be redefined. And it will happen in a relatively long but steady time. There won't be any surprises. In hind sight there will be some shockers, but everyone will see it them coming.

The professional players that have pined for years over a percieved right of sponsorship will jump from site to site. Deals will come and go. Quickly and painfully. Some will be deserved and those top players (maybe 15) will have a very nice future secured. But most of them will go the way of their profession. That is to play. They will quickly realize that this "main stream" market they've been told about, or have been talking about really doesn't want them as spokespeople. Their hopes will be snuffed out like an abandoned campfire in the rain and their sense of survival will turn them back to the tables.

With this, I am heading into my next post. Which is why I will stop here. That next post has to do with all of the tweets and articles about how Phil Ivey being at the final table will be such a boost for poker.

I'll tell you why it's not as hot as you think it is. And what to really expect.


DrChako said...

I don't think withdrawing money will be taxed. Remember that only about 9% of online players are profittable. You only pay tax on profits. For the government to assume that everyone who withdraws money is making a profit is a big leap. I agree that in a B&M casino, when you win a tournament, they give you a tax form, but online it's a little murkier. In the casino, they KNOW you won that tournament. When you cash out online, it's likely a mishmash of money from different sources (i.e. cash games, multiple tournaments and even transfers from other players for loans/prop bets). There is an online record of tournaments, but I doubt the government will track this. They may require US to track it, but again, it would be a huge headache for them if it came to an audit.

I believe the real money for the goverment will come from taxing the online sites directly. The end result is that the rake will go up. Not by much, but it won't be as easy to beat the rake in the future.

Just my $0.02.


Astin said...

What you will see is data management. In order to tax properly, the sites will have to have books of record on all US players. This means every dollar deposited, transferred, and withdrawn will be tallied. I'm sure this is done to some degree now for their own purposes, but with the IRS involved, it will be more transparent.

It will also be seen as a "security measure" to track any money laundering or financing of distasteful organizations. Which means the US will likely enact laws that allow them to follow a money trail across borders. So if they're keeping an eye on you, and you send me $200 on FT because I won a bet at The Bash, then they'll now flag my account, despite me being outside their jurisdiction.

This will make things like WSOP buy-ins interesting. If you win $10k, does FT put a withholding tax on it when you try to withdraw to enter? Would they have to negotiate 3rd party buy-ins with Harrah's again? Harrah's will become an online juggernaut between their own site and licensing opportunities.

If nothing else, you can expect poker sites to be THE major advertiser across all media if this goes through.

1Queens Up1 said...

Just stream of conciousness, so pardon me if I start to ramble.

I just can't see Foxwoods starting up their own Internet poker site, I CAN see the WPT starting up their own site to coincide with their circuit, just like what I envision Harrahs is going to do.
I just can't see the logistics of every single "big name" casino starting up their own site. Would they be leaning on name familiarity? Like for example, people in the NE area know and trust Foxwoods so why wouldn't they join F-wood's poker site? You would know more in-depth costs etc etc but I think the costs associated with startup and maintaining the site would prove to cumbersome if only 5k to 10k people play on a site. Thats why I harken back to my circuit theory, WPT signs some kind of exclusivity contract which each of their participating casinos, letting WPT use each casino's name and allowing for direct buy-ins to WPT events. Maybe a new TV contract with Fox instead of relegated to Fox sports net for primetime WPT coverage.

PA has a poker law going through? I might have to check up on that, I'd be giddy if the Sands picked up a poker room it'd make me go home more often!

Keep up the good work Riggs. I think yo uare only scratching the surface with this post-UIGEA thing. New TV contracts, prime time poker. These poker circuits could turn into an "NFL or MLB or NBA".

dave b said...

Might be off topic...
Canadian's don't pay any taxes on lottery/casino winnings. Being Canadian, I won't stand for paying taxes and then wait for my tax return to get it back.
I know the population of CAD poker players is insignificant on a huge Euro/American scale.
Unless they put a macro to avoid this on Canadian addresses.

Riggstad said...

The taxing of withdraws will be based on how much is actually withdrawn. Most likely not on every single withdraw, but if you hit a big score that goes beyond the threshold of 9k you will be getting a good 'ole tax form in the mail.

Just as B & M casinos are to issue you a form for what they pay out, so will the sites be mandated to do the same.

Of course taxing it going in won't be the same, and yes, the sites will be taxed all over. But players who "earn" enough will surely be taxed as part of the earned income.

It will be interesting to see how it plays out in the least. As far as Canadian players, I think your own government will have a say. I'm just not sure how it will be effected by the US laws finally allowing the wires to go through.

Harrahs will absolutely own this market when they open shop. And I know for a fact of several casino that already have working sites. That is to say sites that are launch ready right now. If they launch is yet to be seen.

But think about companies trying to vie for players. I just don't think Harrah's is going to be as lenient with their brand when it comes to the competition anymore.

Drizztdj said...

What this means is that you will no longer be able to qualify, or satellite into the WSOP off of the Foxwoods site.

Sure they can, if they're smart they'll do the same thing Vegas does to promote the Super Bowl. Since Vegas is not allowed the use the name "Super Bowl" in their promotions and have to call it the "Big Game", Foxwoods (or anyone else) would just rename the WSOP sat as One Ticket for the Donkey Show :)

Great post man.

Alan aka RecessRampage said...

Are you fuckin kidding me? I've been paying taxes on my poker winnings the past 2 years. If there are tons of people out there not paying, then I'm all for legalizing and making sure that everyone has to pay their share.