An Alarming Thought About a U.S. Online Poker Ban |
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Posted Sat Jul 22, 2006 6:18 pm GMT by lwestatbus
Recent posts about the latest round of U.S. legislation aimed at online gambling regulation got me to thinking about something. After thinking it through for a couple of weeks I thought I'd post my thoughts. The thoughts are alarming and I am not generally an alarmist person.
I need to preface the thoughts with some info on my background. I am a university professor in business with a Ph.D. in Information Systems and one of my teaching specialties is in electronic commerce. My supporting area of study in my Ph.D. and the focus of my research is the field of Industrial Organization Economics, the study of how firms, individuals and industries react to economic forces and how these forces dictate the organization and practice of government and commercial activities. For example, why in the U.S. is it common to pay a fixed price for a restaurant meal but to pay a variable amount for the tip and why is this practice different in Europe? An IO economist can tell you.
So much for the mini-dissertation. Here's the problem (finally): There are thousands of situations and much well-respected economic research describing industries where customers pay for products or services and the merchant is in a position to screw the customer by not providing the product, by providing inferior products or services, or by demanding increased payments half-way through the service delivery. Contracts, courts, and tipping your waiter after service is received are all reactions to this situation.
Another important restraint on merchants is the possible loss of ongoing revenues from repeat business if customers are disappointed or cheated. If I pay $100 for a service and the merchant would normally make a $10 profit he can make $100 by cheating me but will lose the future stream of $10 profits for all repat business I would not give him plus the loss of all other business from others that learned of his deceit.
I am not an attorney but it is my understanding that U.S. citizens have virtually no recourse to claim deposits with offshore online poker rooms if such a site were to renig on their promise to cash out on demand. I do not think we could sue in a U.S. court and (based on my MBA Business Law course that I got a 'B' in) a debt established for an illegal reason cannot be enforced in a U.S. court. So if a poker site were to declare itself out of business and all U.S. deposits forfeit a U.S. player would have to find the jurisdiction of the site, hire an attorney there, and pursue their claim, probably a prohibitively expensive process.
In past operations these sites have the incentive to behave fairly because of the ongoing stream of future revenues from play, with much of it originating in the U.S. This is a pretty classic case.
Now, if the U.S. government can effectively prohibit U.S. players from playing online a huge portion of future revenues disappears, and with it the constraint on cheating U.S. players. The only possible consequence I can see from an offshore site cheating their U.S. customers is the loss of business they may face from non-U.S. players outraged at the deceitful behavior. Do any of you see this as a real consequence? And possibly the laws of the jurisdiction in which the site operates may preclude such behavior even if there is no enforcement in U.S. courts.
Sorry for the lengthy post. Hopefully you can see why it couldn't be expressed in a couple of sentences.
Thoughts?
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Posted Sat Jul 22, 2006 7:27 pm GMT by Jefecaminador
To sum up, if the US decides to ban online gambling, all the sites that we currently frequent have little incentive to return us our money. And it would be a pain in the ass to get it back, if even possible.
I guess the prudent thing would be to withdrawl most of our bankroll from these sites and just deposit more money if necessary. This would be especially wise on smaller poker rooms, or those that deal primarily with US customers, since they aren't losing out on too many future customers from other countries.
Posted Sat Jul 22, 2006 8:51 pm GMT by vyni
I'm so glad someone else saw it too: a few days ago I suggested the same scenario to sid. There are alot of issues and scenarios I see possible if this thing is passed, but there's no need to play them all out right now as it's not expected to pass anytime soon.
This kind of thing really only applies to the smaller less established poker rooms, which you should already be cautious of. Recovering bankrolls from an overseas operation that simply disappeared one day already would be a costly experience. Larger operations... well I dont think anyone out there believes this is going to end US poker online. There will still be a massive US market to be had.
When, rather if, the senate sits to consider this, I intend to publish the full text and inerpret it line by line for people. There are some issues within it that can impact us all, and its only right that we make it known and prepare for it.
Posted Sat Jul 22, 2006 9:29 pm GMT by shorn7
Thanks vyni. I look forward to your thoughts in the future.
I think for now, the advice is to stick to the bigger sites out there and decide how much you are willing to risk losing and then transacting around that amount. THis will obviously differ from player to player, but seems to me to be a good way to limit the downside.
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