A quick overview of Online Poker
Online poker is the game of poker played over the Internet (online). It has been responsible for
a dramatic increase in the number of poker players worldwide, and as of December 2003, revenues
from online poker were estimated at US$34 million per month.
Online Poker History
Traditional (or "brick and mortar", B&M) venues for playing poker, such as casinos and poker rooms, may be intimidating for novice players
and are located in geographically disparate locations. Brick and mortar casinos are also reticent to promote poker because it is very
difficult for them to profit from the activity. Though the rake, or time charge, of traditional casinos is often very high, the
opportunity costs of running a poker room are even higher. Brick and mortar casinos often make much more money by removing poker
rooms and adding more slot machines.
Online venues, by contrast, are dramatically cheaper due to the online venue having much cheaper overhead costs.
For example, adding another table does not take up valuable space like it would for a brick and mortar casino.
Online poker rooms tend to be viewed as more player-friendly. For example, the software may prompt the player
when it is his or her turn to act. Online poker rooms also allow the players to play for very low stakes (as low as 1¢)
and sometimes organize freeroll tourneys (where there is no entry fee), attracting beginners.
Online venues may be more vulnerable to certain types of fraud, especially collusion between players. However,
they also have collusion detection abilities that do not exist in brick and mortar casinos. For example, online
poker room security employees can look at the "hand history" of the cards previously played by any player on the
site, making patterns of behavior easier to detect than in a casino where colluding players can simply fold their
hands without anyone ever knowing the strength of their holding.
The major online poker sites offer varying features to entice new players. One common feature is to offer tournaments
called satellites by which the winners gain entry to real-life poker tournaments. It was through one such tournament
that Chris Moneymaker won his entry to the 2003 World Series of Poker. He went on to win the main event causing shock
in the poker world. The 2004 World Series featured triple the number of players over the 2003 turnout. At least four
players in the WSOP final table won their entry through an online cardroom. Like Moneymaker, 2004 winner Greg
"Fossilman" Raymer also won his entry at the Poker Stars online cardroom.
In December 2003 it was reported that online poker revenues stood at around $34m (€ 40m)
per month and were growing by 27% per month. By March 2005, at peak times approximately 100,000
people were playing for real money at the various cardrooms with a like number playing free games.
Online Poker Legality
Online poker is legal and regulated in many countries including the United Kingdom and several nations in and around the Caribbean Sea.
While the United States Federal Appeals Courts has ruled that the Federal Wire Act prohibits electronic transmission of information
for sports betting across state lines, there is no law prohibiting gambling of any other kind.
However, some states have specific laws against online gambling of any kind. Also, owning an online gaming operation without
proper licensing would be illegal, and no states are currently granting online poker licenses.
The government of the island nation of Antigua and Barbuda, which licenses Internet gambling entities, made a complaint
to the World Trade Organization about the U.S. government's actions to impede online gaming. The Caribbean country won
the preliminary ruling but WTO's appeals body has partially reversed that favorable ruling in April, 2005. The appeals
decision effectively allowed state laws prohibiting gambling in Louisiana, Massachusetts, South Dakota and Utah. However,
the appeals panel also ruled that the United States may be violating global trade rules because its laws regulating horse-racing
bets were not applied equitably to foreign and domestic online betting companies. The panel also held that certain online gambling
restrictions imposed under US federal laws were inconsistent with the trade body's GATS services agreement.
In March 2003, Deputy Assistant Attorney General John G. Malcolm testified before the Senate Banking Committee regarding the
special problems presented by online gambling [2] (http://www.usdoj.gov/criminal/cybercrime/malcolmTestimony318.htm).
A major concern of the United States Department of Justice is online money laundering. The anonymous nature of the
Internet and the use of encryption make it especially difficult to trace online money laundering transactions.
However, no evidence has ever been presented by the Justice Department or anyone else to support an assertion
that online poker cardrooms are any more vulnerable to this sort of laundering than any other online business.
In April 2004 Google and Yahoo!, the internet's two largest search engines, announced that they were removing online
gambling advertising from their sites, including poker. The move followed a United States Department of Justice announcement
that, in what some say is a contradiction of the Appeals Court ruling, the Wire Act relating to telephone betting applies
to all forms of Internet gambling, and that any advertising of such gambling "may" be deemed as aiding and abetting.
Critics of the Justice Department's move say that it has no legal basis for pressuring companies to remove advertisements
and that the advertisements are protected by the First Amendment. As of April 2005, Yahoo! has provided advertising for
"play money" online cardrooms.
In February 2005 the North Dakota House of Representatives passed a bill to legalize and regulate online poker and
online poker cardroom operators in the State. Testifying before the State Senate, the CEO of one online cardroom,
Paradise Poker, pledged to relocate to the state if the bill became law. However, the measure was defeated by the
State Senate in March 2005.
Integrity and Fairness
As with other forms of online gambling, many critics question whether the operators of such games - especially
those located in jurisdictions separate from most of their players - might be engaging in fraud themselves.
Internet discussion forums are rife with unproven allegations of non-random card dealing, possibly to
favour house-employed players or bots, or to give multiple players good hands thus increasing the bets
and the rake, or simply to prevent new players from losing so quickly they become discouraged. However,
there is little more than anecdotal evidence to support such claims, and others argue that the rake is
sufficiently large that such abuses would be unnecessary and foolish.
Many online poker sites are certified by bodies such as the Kahnawake Gaming Commission, and major
auditing firms like PricewaterhouseCoopers review the fairness of the shuffle for some sites.
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