Online Poker Hits the Lottery

Lotterypic
Have you ever heard the name Virginia Seitz? If you follow the progress of the regulation of online gambling, it is a name you should know. On September 20, 2011, newly-confirmed Assistant Attorney General Virginia Seitz of the Office of Legal Counsel (“OLC”) wrote a 13-page legal opinion that stated the federal Wire Act of 1961 only applies to sports betting. This opinion was written in response to a request made in 2009 by the New York lottery division and the Illinois governor’s office to clarify if selling lottery tickets to adults within their own borders over the Internet fell under the Wire Act.

According to a Forbes article written on March 30, 2012, called “Why Can’t You Buy Your $640 Million Lottery Ticket Online?,” Seitz concluded, “nothing in the materials supplied by the Criminal Division suggests that the New York or Illinois lottery plans involve sports wagering, rather than garden-variety lotteries. Accordingly, we conclude that the proposed lotteries are not within the prohibition of the Wire Act.”

Though the decision was written in September 2011, it was released three months later under the radar on December 23, 2011, the Friday before the Christmas weekend. A mere three months after that, on March 25, 2012, the Illinois lottery became the first U.S. lottery to sell tickets on the Internet. As for the New York Lottery, New York State Gaming Commission Acting Executive Director Robert Williams said in a statement, “In New York, we are examining our options for Internet gaming and what the best strategy will be for us going forward.”

As I asked at the beginning of this article, who is the woman behind such a seismic shift in the government’s stance on Internet gambling? Being in the office only ninety days, Seitz authored one of the most sweeping reinterpretations of a law that had been used by law enforcement to fight organized crime for fifty years. Isn’t it strange that someone who was still looking for the exits and where to eat lunch took on as her first major assignment an issue that had been sitting in that office for two years?

Where did she come from? Virginia Seitz, a Rhodes Scholar, was a partner in the law firm of Sidley Austin, headquartered in Chicago, Illinois. Sidley Austin, the law firm where Michelle Obama was working as an associate when she met Barack Obama, is one of the country’s largest corporate law firms generating over a billion dollars in annual revenue. On January 5, 2011, President Barack Obama nominated Seitz to be the Assistant Attorney General for the Office of Legal Counsel (“OLC”). The OLC is a part of the United States Department of Justice (DOJ) that assists the Attorney General as legal adviser to the President and is often referred to as “the president’s law firm.” Two of the OLC’s bosses, William Rehnquist and Antonin Scalia, became Supreme Court Justices. Newsweek characterized the OLC as “the most important government office you’ve never heard of.” The same label can be applied to Sidley Austin as the people who come from that law firm often go on to work for the government at its highest levels.

The estimated revenue that can be generated by online poker pales in comparison to the numbers that will be generated by online lottery ticket sales. The legal age in both New York and Illinois to buy a lottery ticket is 18 years of age compared to 21 for gambling, which greatly expands the player base. People think that online lottery just means picking numbers and buying a ticket; that’s simply not the case. Hundreds of lottery games are being created that combine sports, poker and anything else they can think of. On the Illinois lottery webpage, for example, they sell lottery tickets that benefit charitable causes, such as the fight against breast cancer and MS. Nothing is off limits to sell more tickets.

Online lottery will be the platform to launch other gambling games. Some states even put online gaming under the umbrella of the lottery commission. Most lottery commissions welcome the task of controlling all online gaming. Right now in California the lottery is one of the obstacles keeping online gaming from moving forward.

Online ticket sales for the lottery is the sleeping giant of the Internet gaming world, and it looks like President Barack Obama, using the OLC, might be the stealth advocate for online gambling. President Obama and the Democratic Party may be the biggest proponents for the expansion of online gaming in all its forms, and the sale of lottery tickets on the Internet is just the beginning.

The DOJ’s narrowing of the interpretation of the Wire Act by President Barack Obama’s appointee Virginia Seitz opened the floodgates for the legalization of all forms of online gambling. Without the lottery, there would be no online gaming. I’m sure in the next election the legalization and regulation of online poker and sports betting will be a political hot topic. New Jersey Governor Chris Christie is in the midst of this battle right now. So when laws need to be changed, it helps to have friends in high places.

Robert Turner is a legendary poker player and billiard marketing expert. He created Live at the Bike, the first live gaming site broadcast on the internet in 2002. He also created the Legends of Poker for the Bicycle Casino and the National Championship of Poker for Hollywood Park Casino both in 1995.

Robert is most well known for introducing the game of Omaha poker to Nevada in 1982 and to California in 1986. In the year 2000, he created World Team Poker, the first professional league for poker. He has spent over 30 years in casino marketing and player development and has served as an executive host at the Bicycle Casino and MGM. He is currently working with his new companies Crown Digital Games developing apps and Vision Poker, a poker marketing and managing group.

Follow Robert on Twitter @thechipburner. Robert Turner can also be reached at robertchipburnerturner@gmail.com.

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Killing the Goose that Laid the Golden Egg

Over the past few years, entry fees for poker tournaments with medium-sized buy-ins have increased from around 10% of the buy-in amount to as much as 25% and 30%, and sometimes even more for smaller tournaments. These fees can add up to as much as a first-place payoff for the casino, and that’s too many golden eggs in one basket.

A typical $300 buy-in tournament before the 2003 poker boom cost a player $330 to enter, with $300 going to the prize pool and $30 to the house. Often, each player would get a free meal, a hat, or other casino-branded item with their entry. If 200 players entered, the casino made $6,000, and first place paid about $20,000. In a recent major multi-day tournament, first place paid just under $250,000, and the casino’s takeout was nearly the same.

This trend takes too much money out of players’ pockets compared to other casino offerings. Poker tournaments now have a higher takeout than horse racing, instead of being only slightly higher than sports betting and table games. This has a negative impact on the gaming industry as a whole, as players enter fewer brick-and-mortar tournaments and turn to other entertainment choices, or, if they have the option, play online poker instead. In order to retain players and acquire new ones, casinos need to strike a better balance between entry fees and buy-ins, and give players more value for their money.

While some casinos still provide tournament entrants with vouchers, food coupons or promotional items, most give nothing back to the player. That’s a lost opportunity to build player relationships and casino loyalty. Poker players have many choices when it comes to spending their hard-earned money, and most enjoy games besides poker as well. Casinos should rethink their marketing strategies and return to using poker tournaments as a low-rake proposition or even a loss leader to encourage both new and returning players to spend their gaming dollars at their property.

Online poker tournaments have low entry fees, require no tokes and are available at the click of a mouse, while brick-and-mortar tournament players have expenses above and beyond the high entry fees. In addition to the extra time invested, live players also pay for transportation, food and lodging, and are expected to toke an additional 3% after winning a tournament. That adds up quickly, and when the entry fees alone for three or four tournaments equal an entire tournament buy-in, we’re killing the goose too.

Another challenge our industry faces is tournaments that offer too many rebuys and re-entries. These multi-day events, with as many as 20 qualifying sessions, dilute the fields and reduce the importance of skill. When deep-pocketed players have the opportunity to enter the same tournament over and over again if they fail, playing good poker becomes secondary to getting lucky. I’ve seen players walk away from a short stack at the last re-entry opportunity so they could start fresh with a full stack when play resumes. That’s not what tournament poker is all about. These events may have marquee value, but they aren’t good for individual players or poker as a whole.

In 2006, I started the Midnight Madness tournament at the Normandie Casino, attracting a core group of players. They drove from all over town to play, but as it was a no-limit tournament, players occasionally lost their chips on the first hand and wanted a second chance after their late, long drive. I decided to allow players to re-enter, but only at the break. If they did re-enter, they came in as a new player – full stack, full buy-in and full entry fee. This gave players a second chance, but not a third, fourth or fifth. By allowing only one re-entry, and allowing it only at the break, I was able to maintain the integrity of the game and keep the players happy. With this model, deep-pocket players can’t buy their way to the money with multiple crapshoots, and players who can’t afford to or don’t want to re-enter still get a fair shot.

For amateurs, live tournaments are a way to gain experience, enjoy the thrill of poker, and have a chance to win. Professional players are always looking for an edge, and gravitate towards events where they can use their considerable skills to exploit weaker players. Unlimited re-entry tournaments give amateurs less value and a smaller chance of winning, which discourages them from playing future tournaments. When those players leave the pool, the difficulty level increases for professionals, and multiple re-entries reduce their edge even further. When that edge disappears, pros will hold out for better opportunities, including online poker.

We can use tournament poker to attract and retain a quality player base, but we need to re-examine the fee structure, and make rebuy and re-entry events an occasional diversion instead of a poker staple. If we do, we’ll help ensure the long-term health of our favorite game.

Robert Turner is a legendary poker player and billiard marketing expert, best known for inventing and creating the game of Omaha poker and introducing it to Nevada in 1982 and to California in 1986. He also created the Legends of Poker for the Bicycle Casino and the National Championship of Poker for Hollywood Park Casino, both in 1995.

In the year 2000, Robert created World Team Poker, the first professional league for poker, and in 2002, he created Live at the Bike, the first live gaming site broadcast on the internet. He is currently working with his new companies, Crown Digital Games, developers of unique mobile apps, and Vision Poker, a poker marketing and managing group. Robert has over 30 years experience in the gaming industry.

Follow Robert on Twitter @thechipburner. Robert can also be reached at robertchipburnerturner@gmail.com.

Edited by Steve Schwab (thatwriter@hotmail.com)