Online poker

Online poker is the game of poker played over the Internet. It has been partly responsible for a dramatic increase in the number of poker players worldwide. In 2005, revenues from online poker were estimated at US$ 200 million per month.

Overview

Traditional (or “brick and mortar”, B&M, live) venues for playing poker, such as casinos and poker rooms, may be intimidating for novice players and are often located in geographically disparate locations. Also, brick and mortar casinos are reluctant to promote poker because it is difficult for them to profit from it. Though the rake, or time charge, of traditional casinos is often 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 because they have much smaller 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 also allow the players to play for low stakes (as low as 1¢) and often offer poker freerolls (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 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. Online poker rooms also check players’ IP addresses in order to prevent players at the same household or at known open proxy servers from playing on the same tables.

Free poker online was played as early as the late 1990s in the form of IRC poker. Shortly thereafter Planet Poker was the first online cardroom to offer real money games. Author Mike Caro was one of the founders and the “face” of Planet Poker.

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 on PokerStars 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 three times as many players than in 2003. 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 PokerStars online cardroom.

In October 2004, Sportingbet Plc, at the time the world’s largest publicly traded online gaming company (SBT.L), announced the acquisition of ParadisePoker.com, one of the online poker industry’s first and largest cardrooms. The $340 million dollar acquisition marked the first time an online cardroom was owned by a public company. Since then, several other cardroom parent companies have gone public.

In June 2005, PartyGaming, the parent company of the then largest online cardroom, PartyPoker, went public on the London Stock Exchange, achieving an initial public offering market value in excess of $8 billion dollars. At the time of the IPO, ninety-two percent of Party Gaming’s income came from poker operations.

The market appears to be currently in a consolidation phase. In early 2006, PartyGaming moved to acquire EmpirePoker.com from Empire Online. Later in the year, bwin, an Austrian based online gambling company, acquired PokerRoom.com. Other poker rooms such as PokerStars and Poker.com that were rumored to be exploring initial public offerings have postponed them.

Legality

From a legal perspective, online poker may differ in some ways from online casino gambling. However, many of the same issues do apply. For a discussion of the legality of online gambling in general, see online gambling.

Online poker is legal and regulated in many countries including several nations in and around the Caribbean Sea, and most notably the United Kingdom.

In the United States, the North Dakota House of Representatives passed a bill in February 2005 to legalize and regulate online poker and online poker cardroom operators in the state. The legislation required that online poker operations would have to physically locate their entire operations in the state. Testifying before the state Senate Judiciary committee, Nigel Payne, CEO of Sportingbet and owner of Paradise Poker, pledged to relocate to the state if the bill became law.

The measure, however, was defeated by the State Senate in March 2005 after the U. S. Department of Justice sent a letter to North Dakota attorney general Wayne Stenehjem stating that online gaming “may” be illegal, and that the pending legislation “might” violate the federal Wire Act. However, many legal experts dispute the DOJ’s claim.

North Dakota Rep. Jim Kasper (R-Fargo), the author of the legalization bill, has vowed to continue his efforts. He states that he is “not putting away the idea of getting into Internet gaming licenses in North Dakota” and that the “revenue we missed is too great to pass up.” Kasper has also stated that he will introduce the legislation in the 2007 session of the North Dakota legislature.

In response to this and other claims by the DOJ regarding the legality of online poker, many of the major online poker sites stopped advertising their “dot-com” sites in American media. Instead, they created “dot-net” sites that are virtually identical but offer no real money wagering. The sites advertise as poker schools or ways to learn the game for free, and feature words to the effect of “this is not a gambling website.” Televised ads still feature the dot-net conceit but print ads have been trending back toward advertising the dot-coms directly.

In July 2006, United States federal agents, citing the Wire Act, arrested BetOnSports CEO David Carruthers in Dallas, Texas while he was changing planes. He was traveling between Costa Rica and the United Kingdom; in both jurisdictions online gaming and poker are legal and regulated.

Later in the year a similar event happened in France, where Norbert Teufelberger and Manfred Bodner, the CEO’s of bwin, were giving a press conference. The arrest was made due to offenses against the French gambling laws.

Since many banks and credit card companies will not allow direct money transfers to online poker sites, electronic money transfer businesses provide online “e-wallets” that players can load from a bank account, then transfer the funds directly to the poker site. The advantage of these services is that it makes it easy for people to transfer money between different poker sites without the money going back to their bank accounts.

On October 13, 2006, President Bush officially signed into law the Safe Port Act, a bill aimed at enhancing security at U.S. ports. Attached to the Safe Port Act was a provision known as the Unlawful Internet Gambling Enforcement Act (UIGEA). According to the UIGEA, “unlawful internet gambling” means to place, receive, or otherwise knowingly transmit a bet or wager by means of the internet where such bet is unlawful under any law in the State in which the bet is initiated, received, or otherwise made. Thus, the UIGEA prohibits online gambling sites from performing transactions with American financial institutions. As a result of the bill, several large publicly traded poker gaming sites such as PartyPoker.com, PacificPoker.com and bwin closed down their US facing operations. Some operations have not closed and it is still possible for some American players to play online for real money and even sign up for new accounts. The UIGEA has had a devastating effect on the stock value of these companies.

Following passage of UIGEA, former U.S. Senator Al D’Amato joined the Poker Players Alliance (PPA). Part of the PPA’s mission is to protect and to advocate for the right of poker players to play online. Sen. D’Amato’s responsibilities include Congressional lobbying. The PPA has over 650,000 members as of August 2007.

On April 26, 2007, Rep. Barney Frank (D-MA) introduced HR 2046, the Internet Gambling Regulation and Enforcement Act (IGREA). IGREA would modify the UIGEA by providing a provision for licensing of Internet gambling facilities by the Director of the Financial Crimes Enforcement Network. On June 8, 2007, the House Financial Services Committee, chaired by Rep. Frank, held a hearing entitled, “Can Internet Gambling Be Effectively Regulated to Protect Consumers and the Payments System?”. Details of the meeting, including the archived webcast, are available on the House Financial Services Committee website. Expert witnesses at the hearing testified that Internet gambling can be effectively regulated for age verification, money laundering issues, facilitation of state and federal tax collection, and for issues relating to compulsive gambling. As of August 2007, IGREA has 35 cosponsors.

On May 3, 2007 Rep. Shelley Berkley (D-NV) introduced HR 2140, the Internet Gambling Study Act. This bill “provide(s) for a study by the National Academy of Sciences to identify the proper response of the United States to the growth of Internet gambling.” As of December 2007, IGSA has 68 cosponsors.

On June 7, 2007, Rep. Robert Wexler (D-FL) introduced HR 2610, the Skill Game Protection Act. This act would legalize Internet poker, bridge, chess, and other games of skill. Also on June 7, 2007, Rep. Jim McDermott (D-WA) introduced H.R. 2607, the Internet Gambling Tax Act. The IGTA would legislate Internet gambling tax collection requirements.

How online poker rooms profit

Typically, online poker rooms generate the bulk of their revenue via four methods. First, there is the rake. Rake is collected from most real money ring game pots. The rake is normally calculated as a percentage of the pot based on a sliding scale and capped at some maximum fee. Each online poker room determines its own rake structure.

Second, pre-scheduled multi-table and impromptu sit-and-go tournaments are not raked, but rather an entry fee around ten percent of the tournament entry fee is added to the cost of the tournament.

Third, some online poker sites also offer games like black jack or side bets on poker hands where the player plays against “the house” for real money. The odds are in the house’s favor in these games, thus producing a profit for the house.

Fourth, like almost all institutions that hold money, online poker sites invest the money that players deposit. Since the sites do not have to pay interest on players’ bankrolls, this method can be a significant source of revenue.

The first three methods are also the primary methods brick and mortar casinos use to derive profits from operating poker tables.

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 allegations of non-random card dealing, possibly to favor house-employed players or “bots” (poker-playing software disguised as a human opponent), or to give multiple players good hands thus increasing the bets and the rake, or simply to prevent new players from losing so quickly that 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 claim to see lots of “bad beats” with large hands pitted against others all too often at a rate that seems to be a lot more common than in live games. This might actually be caused by the fact that online cardrooms deal more hands per hour. Since online players get to see more hands, their likelihood of seeing more improbable bad beats or randomly large pots is also increased.

Many online poker sites are certified by bodies such as the Kahnawake Gaming Commission and other major auditing firms like PricewaterhouseCoopers to review the fairness of the random number generator, shuffle, and payouts for some sites.

A confirmed incident of cheating by a person or persons involved in running a major online poker room came to light in October 2007, when Absolute Poker acknowledged that its integrity had been breached by an employee with trusted access to the system, who had then been able to play at high stakes whilst viewing his opponents hidden “hole” cards.

Differences compared to conventional poker

There are substantial differences between online poker gaming and conventional, in-person gaming.

One obvious difference is that players do not sit right across from each other, removing any ability to observe others’ reactions and body language. Instead, online poker players learn to focus more keenly on betting patterns, reaction time, speed of play, use of check boxes/auto plays, opponents’ fold/flop percentages, chat box, waiting for the big blind, beginners’ tells, and other behavior tells that are not physical in nature. Since poker is a game that requires adaptability, successful online players learn to master the new frontiers of their surroundings.

Another less obvious difference is the rate of play. In brick and mortar casinos the dealer has to collect the cards, shuffle, and deal them after every hand. Due to this and other delays common in off line casinos, the average rate of play is around thirty hands per hour. However, online casinos do not have these delays. The dealing and shuffling are instant, there are no delays relating to counting chips (for a split pot), and on average the play is faster due to “auto-action” buttons (where the player selects his action before his turn). It is not uncommon for an online poker table to average ninety to one hundred hands per hour.

This large difference in rate of play has created another effect among online poker players. In the brick and mortar casino, the only real way to increase your earnings is to increase your limit. In the online world players have another option, play more tables. Unlike a physical casino where it would be impossible to play multiple tables at once, most online poker rooms allow this. Depending on the site, a player might play from four to ten tables at the same time, viewing them each in a separate window on the computer display. For example, a winning player may make around $10 per 100 hands at a low-limit game. In a casino, this would earn them under $4 an hour. After dealer tips, the winning player would probably barely break even. In an online poker room, the same player with the same win rate could play four tables at once, which at 60 hands per hour each would result in an earning of $24/hour. Some online players even play eight or more tables at once, in an effort to increase their winnings.

Another important difference results from the fact that some online poker rooms offer online poker schools that teach the basics and significantly speed up the learning curve for novices. Many online poker rooms also provide free money play so that players may practice these skills in various poker games and limits without the risk of losing real money, and generally offer the hand history of played hands for analysis and discussion using a poker hand converter. People who previously had no way to learn and improve because they had no one to play with now have the ability to learn the game much quicker and gain experience from free-money play.

Finally, the limits associated with online poker are much less than the table limits at a traditional casino. On gambling sites, players can find limits as low as $.01/$.02. However, at most brick and mortar establishments the lowest limits are often $1/$2.

Bonuses

Many online poker sites offer incentives to players in the form of bonuses. Usually the bonuses are given after a certain number of raked hands are played. For example, a site may offer a player who deposits $100 a bonus of $50 once he plays 500 raked hands. A poker player who can at least break even can become a long-term winner by playing with poker bonuses. A winning poker player can add to their winnings with the use of bonuses.

In addition, several online cardrooms employ VIP Managers to develop VIP programs to reward regular players and additional bonuses exist for players who wish to top-up their accounts. These are known as reload bonuses.

See the online casino article for more on general information on bonuses.

Compatibility

Online poker rooms typically operate through a separate piece of software. This may be cross-platform, for example using a Java Applet, allowing the program to run equally well on various computer systems such as Windows, Linux and Mac OS. However, many online poker rooms offer downloadable programmes designed only for Microsoft Windows which require a compatibility layer such as Wine to run on Macintosh or Linux computers. Some sites do make available clients that run natively on Mac or Linux.

Some mobile content providers have started offering poker on portable devices (mobile phones, PDAs). The functionality of mobile online poker software is much the same as computer-based clients, albeit adapted to the interface of mobile devices. The player must be able to receive a cell phone signal in order to play.

Online poker portals and forums

Online poker portals are websites offering poker-related content. Examples of such content could be news, tournament results, strategy articles, poker software, or reviews of online poker cardrooms. Some portals have a considerable amount of content, while others attempt to act as mere conduits to other sites, where actual gambling games are offered. Poker forums exist that discuss poker strategy, cardroom information, gambling news, and other topics.