Saturday, September 24, 2011
Full disclosure: I have $14 in my account at Pokerstars.com. I also used my frequency player points to buy a mug and a cap. I originally deposited $50 back in 2005, took out $100 in 2006, and have vacillated between $10 and $30 in the account since then. Obviously, I have a lot riding on this. If Pokerstars goes under, I'm going to have to have that difficult conversation with the wife: "I know I've made some bad decisions. That massage chair for $800 which I never used. Those fur coats for the dogs. Three big screen TVs in 3 years, each time saying, yes, this one is finally big enough for me*. But now, its going to be Kraft dinner and tuna for the next few weeks. Wait, what?! I just found $14 in the couch ... never mind!"
Back in 2006, the US government slipped a section into the SAFE Port Act that made sending money to online gambling sites illegal. This was a big blow; some sites pulled out of the US and others declared they would still serve Americans. The next few years, online floated along in a grey area (like Canadians getting US satellite signals or picking up a chocolate bar off the ground and still eating it) and then "Black Friday" (Apr. 15, 2011), where the US government arrested representatives of the big online poker sites and shut down the websites. Their big claim is that poker site "tricked" banks by disguising charges. Now the US has made a further complaint, that Full Tilt is a Ponzi scheme and doesn't have enough money to allow players to get their deposits back.
This is so annoying. Hey, you know what else is a Ponzi scheme? CPP! The money young people give to the Canadian Pension Plan isn't invested or put in the friendly giant's mattress; it pays for the old retired fogies. But don't worry, when you're an old fogy, there will be a new batch of suckers to pay for your retirement. Or something.
That was annoying thing #1. Here's number #2**: poker players warned about this. Hey Sherlock, if you make it hard to get money out of a poker site guess what? It becomes hard to get money out of a poker site. The reality is people are going to play online poker because casinos are creepy. I'd rather sit in my underwear and play poker with my wife sitting in her nightie on the couch next to me ... wait. Okay, that's a bad example because 14% of the time you'll see that exact scene in a casino. But you get my point. And with the US government making it much harder to legitimately get money on/offline, you push poker players into having to use shadier methods. Like sending checks to the pokersite with sneaky names like the "Ace of Spades Non-Gambling Charity Foundation".
Annoying #3 is poker is not gambling! I know, you might think it is because there are cards and a dealer, like blackjack (which is gambling). But its not, because there are players that consistently win. What's that? Your aunt Sally wins at blackjack? No, actually she doesn't. She's stealing from you uncle. But the other reason why it can't be a game of chance is that you don't have to show your cards to win. You can bluff. The last reason is that you get to check your cards first before you voluntarily put money it. In blackjack, craps, and roulette you have to pay before you get your cards, the dice are rolled, or the wheel is spun (raggedy man!) Not gambling mean laws that apply to gambling don't apply to poker.
So what we have is an activity that adults freely engage in and the US government has declared war on. So what that a bunch of players are going to lose a bunch of money. Collateral damage.
Now Full Tilt isn't helping by mismanaging its funds. But the scary thing is the exactly same thing would happen if everyone decided they wanted their money in their TD checking account (worse ... see below). The US government is making a big deal about the fact Full Tilt has $400MM in liabilities and $40MM in cash. But what they don't mention is these sites make about $1MM a day in profit. Like all businesses, cashflow is much more important that net assets. But if the US would stop being so anti-online poker, these sites could set up in the US and be regulated. This is win-win, because they would pay taxes and they would be regulated so they would be required to keep some percentage of deposits available.
Okay, now something that will scare the hell out of you. Full Tilt had 10% of its deposits in reserve. In banking, this is called the "reserve rate". And Canada phased out "reserve rates" back in the 90s. Yes, that means that banks in Canada are free to lend out 100% of the money you deposit. But don't worry. Because the powers that be are dealing with this huge gambling problem.
** This is like saying "number number 2", but it made me laugh, so it stays in.