Everyday Internet entrepreneurs, bloggers and other experts discuss and write about the success stories of online companies like Facebook, Groupon, Google and others. But never someone mentions one of the best monetizing industries: online gambling. Just to give you an idea on how well these sites are monetizing, in 2009 Pokerstars made stunning $ 1.34 mln. per day resulting in a yearly profit of $ 1.4 bln. Even though Pokerstars is the biggest it’s one of many so the total yearly earnings of the online poker industry are close to $ 10 bln.
Because these companies are mostly off-shore companies operating from places like Isle of Man, Malta or other places where the law and tax regulations are in their favor regulations are somewhat shady. Some of the bigger sites are regulated by the Kahnawake Gaming Commission, though it is not clear what level of scrutiny the commission applies to its licensees. By now Pokerstars is listed on the London stock exchange even though the absence of clear regulations and monitoring.
When so much money is involved one can be sure there will be scandals of big proportions. One of the moste memorable ones was the one where an official of AbsolutePoker.com used a backdoor in the software that enable him to see the cards of his opponents. Though this news pretty much stirred the poker community in the end it didn’t effect the popularity of the game at all.
Of course an industry like that soon became a regular nuisance to governments, taxes and the established gambling industry. In the US the established gambling industry has a powerful lobby to protect the interests of the US owned State Lottery and the (mainly) Las Vegas gambling cartels. Making online Poker illegal wasn’t an option for the US government because it’s not gambling but a skill game so through an equally dodgy law which was passed quickly and silently they made it illegal for banks to process payments going to or coming from gambling sites.
At first this was a big blow for the industry because the absence of payments/cashing methods in the US shut out a huge part of the community. That’s where an Australian “boy wonder” named Daniel Tzvetkoff stepped in to save the day. Allegedly this young Australian entrepreneur set up the payment processing schemes used by the biggest poker sites to handle their transactions. Of course this scheme enable sites like Pokerstars, Full Tilt Poker and Abolsute Poker to resume business as usual and make hundreds of millions but Daniel also was kind to himself earning at one point a $ 150.000 per day! Now that pissed off Pokerstars and Full Tilt who then pressed charges against Daniel in the US accusing him of stealing $ 100mln.
Thanks to a tip of Pokerstars to the FBI Daniel could be arrested in april last year when he visited the US. At first bail was denied simply because Daniel’s financial means and consequent danger of him leaving the country. Daniel was facing charges of money laundring, bank fraud and wire fraud and faced 75 years in jail. But all that changed in august last year when it seems Daniel made a deal with the prosecutors resulting in a turn around where his former partners are now facing the exact same charges he faced and Daniel has been released on bail. So the irony is that basically the charges of Pokerstars, Full Tilt Poker and Abolute Poker against Daniel completely back fired possibly resulting in an unprecedented blow for the online gambling industry which effects shareholders and ordinary people playing poker. Now it’s not Daniel who’s in jail facing the charges but 11 people involved with Pokerstars, Full Tilt Poker and Absolute Poker including their founders. The FBI seazed 5 domain names and froze 75 bank accounts.
Anyway, this proves again for me how corrupt everyone can and will get when huge amounts of money are involved. And when I say everyone I mean everyone including banks, taxes and governments. It still seizes to amaze me why gambling in Holland is illegal except when it’s government owned. Basically the government is saying gambling is bad and thus illegal unless they get a cut and then all of a sudden different rules apply. The same can be said of the US government and many others. Personally I’m in favor of legalizing it so it will be regulated and monitored. But unfortunately many governments have no idea and can’t keep up with all the online developments resulting in weird laws and regulations and industries pushed into illegality. But so far governments refuse to accept the fact that these things can’t be banned out so it would be a lot better to embrace and regulate them or just completely ban gambling including the state owned casinos.
Update: The money exodus has started but still waiting to see if the money is actually paid.