Revisiting the CoinPoker Situation

A couple of weeks back we checked in on a curious situation at CoinPoker, one of handful of crypto-based online poker startups attempting to carve a market in the game. The situation, as first published by Alex Weldon of traffic-monitoring site GameIntel, involved extremely unusual player traffic associated with a major promotion through which large numbers of CoinPoker’s in-house coins (CHP) are to be awarded to winning players.

There was little doubt that some automated accounts were manipulating the CoinPoker site in an attempt to do a bit of poker-themed coin mining, though the degree to which automated bots had taken over the site’s cash-game tables remains open to debate. CoinPoker did announce the banning of three accounts over violations of the promotion’s rules, but has continued to insist that the remaining players high on the site’s 5MM CHP Giveaway Promotion leaderboard obtained those spots through legitimate play.

As the site offered on its blog, “Our team regularly gathers technical data and do human investigative work to identify automated play and detect “poker bots”. What we have found is that our top players put in as much as 10 to 12 hours per day to maintain their spots, and the longest running sessions have been recorded at 16 hours straight. Impressive, but still possible without software assistance.”

Nonetheless, CoinPoker did reduce its table cap from “unlimited” to eight after the CoinPoker traffic story broke, suggesting that, well, maybe there was some more to the tale. Ultimately, that’ll be CoinPoker’s burden to bear, as it tries to establish itself as a legitimate online site.

Here, though, we’re going in a different direction. In my previous piece on the CoinPoker situation, I began with a deep look at the traffic hilarities first published by Weldon, then went on to examine some of the other issues associated with CoinPoker. Those included its initial coin offering (ICO) and several other indicators which would and should have caused consumers to ask more questions.

Most of that information was correct, though some wasn’t, while a lot of points now require further elaboration. Much of the furor that arose stemmed from the fact that the site was caught in a separate whirlwind not of its own making. At the same time CoinPoker’s reps were trying to push their explanation regarding the seeming bot activity, the site’s blog at medium.com was suspended for several days. But that wasn’t connected to the promotion and the bizarre traffic.

Rather, as CoinPoker later was able to state via Facebook, Medium.com changed its own rules regarding ICO-themed blogs. There has been a rush of stories involving purely fraudulent crypto offerings in recent weeks, and a number of large, social-themed sites have introduced new restrictions on such content. CoinPoker’s blog at Medium has since been reactivated and that is duly noted here as well.

Also highly curious amid the player-traffic story was the sudden yanking of a gushy promotional piece over at PokerNews that heavily pushed the 5MM CHP Giveaway. Even more curious was that older PN pieces also touting CoinPoker were left intact.

PN content manager Frank op de Woerd subsequently issued a statement that the yanking of the 5MM Chip Giveaway advertorial was unrelated to the player-traffic story. Instead, the reason was offered is that the story was yanked after discussions between lawyers on both sides of that relationship.

Flushdraw can now confirm some of that from the CoinPoker side. Though we were unable to reach a CoinPoker spokesperson before publication of the piece, we have since been in contact with CoinPoker’s Head of Content and SEO, Sarah Hamid.

Hamid offered this on the PN story removal: “The pulling of the article on PokerNews was related to their legal team’s concerns about limiting visibility of cryptocurrency related content on their homepage. Our article was removed to avoid it being front and center on their site, which was a result of their team still discussing how they wanted to communicate their stance on cryptocurrency.”

That PN stance on cryptocurrency opens up another whole series of topics, which we may return to in greater length another time. For now, two things are worth noting. First, crypto ICOs are increasingly being treated by governments around the globe as securities, meaning they need to be registered wherever they’re offered, and a lot of ICOs are unregistered. Second, PN remains one of CoinPoker’s three poker-industry partners, along with HighStakesDB and PokerTube, meaning that “front and center” positioning for such a story at PN is somewhat irrelevant. More on this later.

However, I posed a number of other difficult questions to Hamid and CoinPoker, and to Hamid’s credit, she offered sincere and researched responses to every one of them. In the interests of fair play, it’s important to acknowledge that sincerity as we explore a few more of those topics.

The Traffic-by-Country Breakdowns

I spent an entire weekend researching everything I could about CoinPoker, and among the many things I examined was where CoinPoker’s traffic has originated. I won’t cite any single traffic site, because the way such traffic is calculated varies significantly from one traffic-monitoring site to the next. What emerged, though, was a general confirmation of Weldon’s supposition that players from Asian countries represented a large portion of CoinPoker’s traffic, in particular Russia and India.

The latter was a surprise to me, but after some thought, I posed this question: “I’ve checked some data-traffic sites that show a large portion of CoinPoker’s traffic coming from places such as India and Russia. The India numbers are particularly intriguing because that’s not much of an online-poker country, but it is a big crypto-mining country. Any thoughts or comments?”

Hamid responded, “As far as our team is concerned players from all over the world are welcome to play on our platform so long as they abide by our policies and conditions. Russia is home to many great online poker players, and Indian traffic may not be common on mainstream poker platforms, but that has less to do [with] crypto-mining and more to do with the national struggle with online payment solutions. India is currently experiencing a boom in online gaming and poker, much like the USA did when Moneymaker won the WSOP back in 2002. India is also by no means our biggest traffic source, and at the moment it is just one of our top 10 sources of traffic including countries like Germany, France, Italy, Vietnam, Brazil, and Japan.”

Whether or not one agrees with it, that’s a sincere and detailed answer.

Corporate Location, ICO Specifics

Also well-detailed were responses regarding the nature of CoinPoker’s incorporation (in Cyprus) and place of ICO issuance (the British Virgin Islands, or BVI). BVI is indeed a hotbed of ICO launches and Cyprus is a well-known hub for international legal and business registrations.

However, Cyprus and BVI have something in common: Online gambling is itself illegal in both of those nations. So why did CoinPoker and its parent company, Processing Fusion, choose those locales?

According to Hamid, “These decisions were made based on the advice given by our legal team and board of crypto advisors. They are fully dedicated to making sure CoinPoker operates in compliance of applicable laws both during our ICO and afterwards as a fully operational online gaming platform.

“It is common practice for legal advisors to register companies using their own address. Our Cyprus business centre address belongs to our directors’ accounting firm. As far as conducting our ICO from BVI, their legal environment is incredible liberal towards cryptocurrencies as you have mentioned.”

CoinPoker Still an Unregulated Site

One other drawback that some online-forum commenters have discussed regarding CoinPoker is that the site, to date, remains unregulated. This was acknowledged by one of the site’s online reps in forums a few months back, and it remains the case today. Here’s what Hamid offered on that point:

“CoinPoker recognizes that it is active in a space that will be subject to an evolving legal and regulatory landscape and remains committed to complying with all applicable laws.

“Given our commitment to legal compliance, we are constantly monitoring and communicating with different global gaming regulators in an effort to stay apprised of any developments related to blockchain and cryptocurrency related regulations. This includes regulators such as Malta, the United Kingdom and Estonia to name a few. It is clear that some jurisdictions are embracing this new technology and establishing ‘sandbox’ structures where the regulators will work with operators of the technology to find a way forward that makes sense and we will be happy to participate in such exercises.

“Considering the space we are in, we are more than happy to obtain licenses when and where they are required to operate. If we are required by law in a given jurisdiction to obtain a licence, we will either obtain such a licence or stop the activities and operations which would require the licence until we are in compliance.

“As an added layer of caution, we will not be targeting the US and we will be utilizing the best KYC practices to boost security and preserve our licensing eligibility.”

Indeed, the US appears to be one of those markets where CoinPoker would be treated as an unregulated security. Whether or not discussions on that topic also factored into PokerNews’ decision to rein in some of its partnering promotions remain unknown.

The KYC (Know Your Topic) issue also begs further discussion. CoinPoker also recently implemented its “Civic” system of player ID verification, but that has caused frustration and opposition among many of the site’s players. The Civic verification system appears to require the use of a late-generation Android device, which at least one of CoinPoker’s online reps has presumptively declared to be a de facto prerequisite for playing on the site.

Adding additional hurdles isn’t a great way for a site to build traffic, and it also flies right into the heart of a major conundrum facing crypto-poker sites. Implementing a KYC system seems great and might protect the site in legal ways, but many of today’s first-gen crypto-poker players play on these sites precisely because they wish to remain anonymous.

Miscellany and a Follow-Up Post

Whatever one believes about CoinPoker in the specific case or crypto poker offerings in general, a few other interesting elements have come to light. First, CoinPoker is indeed using a variation of the TonyBet software that’s dressed in different graphics and denominated in CoinPoker’s in-house coin, CHP, rather than in dollars.

Oddly, this also makes it more likely that bots indeed have populated the site, since the TonyBet software has been around for over a decade through several incarnations. One such self-proclaimed bot seller has even hawked his warez on YouTube, purportedly showing his software in action. Hint: The real CoinPoker account on YouTube belongs to “CoinPoker”, while the bot hawker and potential fraudster uses the slightly different account name “Coin Poker”.

The questions about crypto coins and ICOs created just for specialized use on gambling sites remain unanswered. Such “me too” coins have no value outside of the site itself, and a winning poker player still loses if the value of the coins he’s won collapses. CoinPoker’s CHP has sagged steadily since its offering, and the player-traffic controversy couldn’t have helped.

Also complicating that situation, CoinPoker gave decent quantities of CHP away to the handful of crypto exchanges that list the coin and accept it in trade for other virtual currencies. Not only does this water down the value of the remaining coins, it makes the coin something of a captive to those select exchanges. Three of those exchanges, or executives thereof, are also listed as corporate partners or contributors to the CoinPoker project.

There’s a moral to that, one supposes: If you want to get rich in crypto, don’t dive into the ICOs. Start an exchange instead.

There’s still one more intriguing tale connected to CoinPoker. Check back soon.