Can US Online Gaming Commissions Succeed Where Others Failed?
Many existing online gaming commissions have failed players in one way or another over the years. Many of these gaming commissions are nothing more than a tax haven and an internet service provider. Gaming commissions in US states looking to expand their business to the internet have the ability to start fresh and learn from the mistakes of their predecessors that have shown deficiencies in doing their jobs. Can they pull off that difficult task?
Many of the first US state gaming commissions will have a decisive head start when it comes to experience. Some offshore gaming commissions were created with the sole purpose of offering a home to online gambling companies. Some online gambling companies have used these licenses to shield themselves from their rogue behavior.
Examples of Online Gaming Commissions Failing to Protect Players
Betfair’s actions caused the company to find itself involved in one of the largest online casino scandals in history in 2010. Betfair offered a Happy Hour bonus that some felt was too good to be true. It turned out that it was. Betfair retroactively reversed the bonuses and instead of paying their players, they simply kept their casino player’s winnings.
Most industry followers agree that Betfair was completely in the wrong and needed to pay their players. Betfair fell silent and pointed their victims’ complaints to the Malta Lotteries and Gaming Authority (LGA) knowing that they would not help players that fell victim to this alleged fraud. The LGA did nothing, something that seems to be a normal course of action when there is a player dispute. Other examples of their lackadaisical attitude include Everleaf Gaming, Strykke, Purple Lounge and a number of other online gaming companies that have not fulfilled cashout requests to players under the watch of the LGA.
Malta is not the only country where online gaming commissions have collected licensing fees but failed to protect players. Alderney allowed the Full Tilt Poker debacle to happen. Gibraltar, long thought to be one of the better jurisdictions, has remained mostly silent while a rigged casino game scandal rocked several of their large licensees. Even the well respected Antigua Gaming Commission watched the implosion of World Sports Exchange under their jurisdiction.
The Kahnawake Gaming Commission (KGC) allowed the Absolute Poker and Ultimate Bet cheating scandals to happen and the cover up that occurred after it was exposed. Some have accused the KGC of failing to disclose the actual ownership of these poker rooms and the failed oversight that was eventually exposed when Black Friday put these online poker rooms out of business.
Even Las Vegas brick and mortar operations are not immune from sudden closures due to a lack of liquidity. Binion’s Horseshoe in downtown Las Vegas was forced to close by federal authorities in 2004 for not paying union benefits. Harrah’s Entertainment, now known as Caesars Entertainment, bailed the casino out and became the owners of the World Series of Poker brand through this action.
Some of these examples prove that even the most well respected operation can fail under the watch of legitimate gaming commissions.
There are some gaming jurisdictions that have been clean in their online gambling dealings, but it is clear that far more have not. Nevada, New Jersey and future US state gaming commissions can take one of many actions to guarantee this does not happen under their watch.
Criminal Penalties
One of the biggest problems facing online poker is cheating. It may not actually be a big problem, but there is at least the perception that there is a lot of cheating at online poker through collusion, bots and software hacks. Most state legislation that I have read addresses this. Unfortunately, so do some of the less effective gaming jurisdictions. The problem is that they are not currently enforced. When a player gets caught cheating they are often just banned. That makes cheating a freeroll because the worst thing that happens to a player is they lose the money they won cheating. In my opinion, this is unacceptable.
US gaming commissions need to include severe penalties for cheating. They also need to enforce them at or above the level of penalties that brick and mortar cheaters receive. There is one big problem.
Players accused or suspected of cheating at brick and mortar poker are not always thoroughly investigated or penalized because the money is not stolen from the house. This is short sighted because money stolen from players cannot become rake so the money is indirectly stolen from the house. A poker room’s reputation can also be forever destroyed by not addressing this issue.
Segregated Funds
As we all know by now, many current online gaming commissions have failed to audit their licensees’ bank accounts to make sure that they could clearly represent all deposited funds were safe. This failure caused many online gamblers to lose their deposits. There are too many examples of this to list. In every example, gaming commissions looked the other way when online poker rooms, casinos and sports books started slow paying players. Too many of these regulatory bodies buried their heads in the sand when the online gambling companies failed, taking no responsibly for the losses, while at the same time happily accepting licensing fees and taxes.
US gaming commissions need to learn from these mistakes. Regular audits must be made to online gaming companies to ensure funds are available and safe at all times. This should be less of a problem since most companies that will operate online gambling sites in the US will also own large brick and mortar casino operations.
Poker Ecology Efforts
Poker ecology models are being rolled out on many current online poker platforms. Gaming commissions need to address what is legal and what is not. The Party Poker Network and Revolution Gaming Networks have developed systems where some players may not be able to access all of the tables on the network because they have won too much money. If this type of feature is launched in the US, it may violate New Jersey law. The New Jersey Supreme Court ruled that Atlantic City casinos cannot back off winning players and it is possible this type of solution might violate that ruling. Gaming commissions must demonstrate that they are willing to listen to players and not just allow any crazy solution an online poker room comes up with to deal with their network’s poker ecology issues.
A lower maximum number of tables could work both for and against regulated online poker rooms, especially at first. Preventing sharks from bumhunting and limiting the number of tables they can play could help prevent fast losses from recreational players. It may also reduce the number of available tables. Gaming commissions may need to find a reasonable middle ground to prevent problems that may discourage the growth of their online poker rooms.
One issue that could fall under both poker ecology and cheating is the use of third party software while playing online poker in the US. This has been a long debated topic in the online poker community. There is no real consensus about what should be banned, but the middle ground appears to be allowing players to use hand histories that they were involved in and not allowing the use of programs that use information obtained by other players. Whatever the solution is, it should be well described and the ability to update the regulations that cover the use of third party software should be included so that states can keep up with current technology.
Granting Licenses Only to Reputable Companies
This may seem like a no brainer, but one company that has been accused of cheating by some of the sharpest online casino watchdogs received a license in Nevada. Lottomatica, soon to be GTECH, is involved in an online casino cheating scandal where the company and their regulators have fallen mostly silent. The Nevada Gaming Control Board was alerted to this issue, but they failed to ask any questions about it during their public hearing that ended with Lottomatica receiving an approval to operate online poker software in the state.
Bad Actor Clauses
Bad Actor clauses may be the most controversial inclusion in state laws and bills that are currently being considered. The biggest problem with these is that they potentially exclude the most experienced operators and software providers. On the other hand, going by the language in most gaming licensing statutes, these companies should be excluded from ever offering online gambling in these states because they operated without a license.
This can be troublesome on both a legal and logistical level. Should states exclude an experienced company because they operated in a gray area of the law? What if they left the market after the UIGEA passed? Since the UIGEA did not make anything new illegal, why does that matter? A blackout period may seem appropriate to level the playing field for existing gaming companies, but is it legal?
The most logical answer to all of this is to go one of two ways. States should either exclude any company that ever accepted unlicensed bets in their state or they should find a way to recoup taxes on the unlicensed play and accept everyone, regardless of how long ago they took unlicensed wagers in their state.
Make State Regulations Similar
It is unfortunate that the federal government has been unable to put together online poker regulations. This has forced states with varying agendas and beliefs to go about it on their own. States that have proposed or passed online poker regulations have allowed for networking between other states. A problem could be caused if one state bans third party software and another does not. There could also be issues with tax collection as states would need to negotiate a compact that addresses it. Another issue could be if one company can get approved in a certain state but not in another. If that online poker room becomes part of a network that accepts players from other states, is that network off limits to players in the outside state because one skin is not found to be suitable?
Even with approval of online poker in Delaware, Nevada and New Jersey, and online poker legislation likely to be approved in others, we could still be years away from any serious online poker market in the US because states have been unable to legislate similar online poker regulations.
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