The Night After the Poker Party

Through a lamentable twist of circumstance, one of my least favorite people, former New York Senator Alfonse D’Amato, has become the champion of one of my most favorite causes: playing online poker in my bedroom. D’Amato recently signed on as the chairman of the new Poker Players Alliance, a group that seeks an exception for poker from the restrictions on internet gambling that Congress passed at the end of last term.

It feels a bit as if one’s mother-in-law has become the spokesperson for pizza and Ring Dings, sapping the joy out of two of the few unqualifiedly great things in life. The ambivalence is appropriate here, because this is a debate in which everybody involved has it wrong.

To be sure, the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006 is a paradigmatic example of the legislative process at its worst. Appended to a bill dealing with port security and jammed through Congress just minutes before election recess, Senator Frank Lautenberg said that no one on the Senate-House Conference Committee ever saw the final language of the bill. Surprisingly – or not surprisingly (depending on your level of cynicism about Congress) – the bill does not accomplish what it set out to do.

The UIGEA’s critically fails to expand the reach of the Wire Act, the main mechanism the Department of Justice uses to combat racketeering and organized-crime-controlled gambling rings. Needless to say, the Justice Department would like to use the Wire Act against on-line poker sites, but has met two substantial obstacles. First, it is not clear that the Wire Act, which was passed in 1961 and refers to “wire communication facilities”, includes the Internet within its reach. Second, courts have held that the Wire Act’s prohibition against interstate wagering on “any sporting event or contest” applies only to sporting events, such as professional football games and horse races, but not the playing of pure contests, such as Scrabble tournaments.

Congress did not address any of these deficiencies. The UIGEA does not change the legality of any gambling activity – it is still legal to play Internet poker. All the law does is make it more difficult for Internet poker players to get money into and out of their on-line accounts. The law targets financial institutions and blocks them from transferring funds to any online gambling site. It is particularly targeted at “e-wallets”, off-shore companies that accept checks and bank wire transfers and are reciprocally accepted by all of the major sites. In January of 2007, the Department of Justice arrested the executives of Neteller, the largest of these sites, and seized $55 million in funds, most of which was presumably headed to the poker tables. After the arrests, Neteller closed shop in the United States as did several of the leading poker sites, including Party Poker, the industry leader. The crackdown has poker players up in arms. They say restricting their right to play Internet poker violates their civil liberties.

Few people are more poorly positioned to make this argument than Al D’Amato. D’Amato, a Republican, became Senator in ’80 after defeating in the primary the incumbent Jacob Javits, then in the early stages of Lou Gehrig’s disease. In three terms in the Senate, D’Amato voted to restrict abortion rights approximately 100 times, voted against same-sex marriage, and called then-Congressman Charles Schumer a “putz-head” during their Senate campaign. D’Amato was also reported by CNN as doing favors for mobsters and was reprimanded by his Senate colleagues for his ethical lapses. Still, for D’Amato casts this debate as an issue of civil liberties and equal protection. “What about the veteran who fought for America and now is crippled and cannot get out?” he asks. “Only ambulatory people can play poker? What a tragedy!”

Much of the pro-poker case is predicated on the distinction between a game of skill, such as poker, and a game of chance, such as a slot machine. This distinction continues to have force under the Wire Act and in the court of public opinion. It is the gist of the argument offered by Daniel Negreanu, one of the best all-around players, and a highly intelligent and reasonable voice in the poker community. Railing against Bill Frist in his blog, Negreanu writes, “Has he ever played poker? Probably not. Does he even understand that it’s different from slot machines? Probably not. Does he even realize that many Americans put food on the table by playing online poker? Probably not, and I doubt he cares.”

The distinction between games of skill and games of chance has continued legal significance both under the Wire Act and in many states, but the ethical consequence of the distinction is less clear. There is a case to be made for government paternalism here – not because gambling is wrong or immoral – but, more simply, because the people who play online poker don’t know what they’re getting themselves into.

Nothing could be more sacred to a civil libertarian, less appropriate for government intervention, than sitting down at home for a nice game of chess. The situation is more complicated, though, when one wants to play chess for money. Most people understand how foolhardy it would be to play grandmaster and former world champion Garry Kasparov at chess for money. A person might pay a dollar or 10 to say that he had the experience, but no one would put serious money on it. Everyone understands that in the long term – and playing chess against Kasparov, one game would be the long term – Kasparov would profit. Chess is universally understood as a game of skill.

Poker is equally a game of skill. Luck also plays a role, though, so the long-term may be a little longer. Good fortune could propel an amateur through a single on-line sit-n-go. But play a top online pro such as Cliff “johnnybax” Josephy or Darrell “gigabet” Dicken over the long-term and they will end up with your money just as certainly as Kasparov. The difference between poker and chess is that the dominance of skill is not universally understood.

This misperception has serious consequences, particularly among college students for whom compulsive gambling is epidemic. Jeff Marotta, problem-gambling services manager for the Oregon state human resources agency estimates that approximately one college student in 20 has a gambling problem. Marotta’s counterpart in New Jersey, Ed Looney, attributes the problem to online poker. “I’ve been doing this for 35 years,” Looney says, “and I’ve never seen anything like this Texas Hold ‘Em rage. When crack cocaine came out, the phenomenon was similar.” The putative “putzhead”, Senator Charles Schumer, notes that online gambling sites specifically target kids and that kids can play online, by and large, without difficulty. Indeed, this is truely problem and it is on the rise. The Annenberg Public Policy Center at the University of Pennsylvania reports that in 2004, 11.4 percent of in-school male youth bet on cards at least once a week, an 84 percent year-over-year increase. Individual students report losses in the tens of thousands of dollars. And the problem is not confined to the United States.

While Negreanu asks rhetorically whether Bill Frist realizes that many Americans put food on their table by playing poker, the fact is that very few do. Online sites are protective of the data regarding play so it is difficult to assess Negreanu’s claim empirically. Inevitably, though, the average poker player must be a loser, since poker is a zero-sum game and websites take either a rake for playing at the table or a fee for playing in a tournament (generally 10 percent of the entry fee). Some estimates put the number of profitable online poker players at less than five percent. The idea is that the poker-Kasparovs and some programmed robots (another real, unreported fact – some poker site “players” are in fact just computer programs) win consistently, leaving only scraps for the average or even the merely good players. The only certain winners are these few players at the top and, most notably, the websites themselves. Before it suspended operations in the United States, Party Poker was valued in open-trading at more than $8 billion.

The irony is that the average player would be better off in some ways at the slot machine than at the online poker table. For one thing, the Kasparovs of the world would have no competitive advantage (and for this reason, would likely not play). Gaming sites would still profit, but the distribution of losses would be spread evenly among players instead of borne disproportionately by the poor or inept. And players would understand that the game could not be beat. Compulsive behavior would lead some to continue to play, but the game would not have the added attraction of appearing falsely beatable.

D’Amato and the PPA have drawn analogies to other legalized forms of gaming including lotteries, horse racing, and the stock market. Allowing the government to have a monopoly on legalized lotteries and race tracks is highly problematic, but the analogy between these pursuits and online gaming is inapt. Except for a few people who subscribe to numbers newsletters (pages and pages of winning lottery numbers; they make for great reading), no one believes that the lottery is beatable. Some people believe that horse racing is beatable, but it is least possible to keep kids from wagering in person on the Kentucky Derby. And while speculating on stocks is risky, the fact is that the stock market is a stable and profitable long-term investment (the ’30s excepted).

None of this is to say that people do not have a right to play poker, just that the appeal to civil libertarianism is more complicated than the leaders of the poker world care to admit. Negreanu is right to condemn Frist and the Republican’s puritanical motivation to legislate against the sin of gambling. Enforcing morality is not the government’s business. But poker does have a labeling problem. It carries risks that are not obvious — it is addictive and far more difficult than people understand — and proper labeling is most assuredly the proper business of government. Everyone agrees that it is good that the government requires cigarette companies to inform consumers of the hidden risks of smoking. Still many people smoke, and it may be even harder to convince gamblers, particularly young gamblers, of the hidden danger of online poker. And, of course, society has a particular interest in keeping kids from playing poker, something that is also the proper business of government.

The Internet Gaming Act is a bad law made badly. It does nothing to help poker players and nothing to help compulsive gamblers. But the poker community cannot simply disengage from the debate about appropriate legislation and cry that playing poker is everyone’s basic civil liberty. Even from the standpoint of a civil libertarian, Internet gambling is problematic in some nuanced ways that the poker community has yet to confront honestly.