The online poker industry has seen a lot of movement from a legal standpoint over the years, but in the United States, things are finally taking a turn for the better as the game is being legalized at a state level. Playing legal online poker is a favorite pastime of those Americans living in the states where it is an option, while players in other states are hopeful that their time will come soon. With the changes in sports betting laws in the country, online poker could easily be added to proposed regulations, but for now, let’s focus on the states where it is currently legal to play.
Before Poker Was Legal In the U.S.
With all this talk about poker being legal in the U.S., it is important to give somewhat of a history lesson of how we got to this place. Back in the late 1990s, when the internet was starting to boom, is when we actually saw the very first online poker sites. The game was still somewhat of a fringe game even in a land-based environment, but in the early 2000s, things changed with the introduction of the World Poker Tour and the hole-card camera that allowed television viewers to see the cards that were being played. This change started to move online poker up the ranks, and when Chris Moneymaker won the World Series of Poker Main Event in 2003 after qualifying at an online poker site, the industry was changed forever.
The next few years after Moneymaker’s historic win saw online poker sites launched and growing exponentially. The U.S. airwaves seemed to be taken over by poker programming and advertising across all networks. There was no question that poker was becoming a trendy game, and being able to play online was incredibly convenient and, for some very profitable. The land-based game was also growing as a result – more players were learning how to play online and then taking their skills to casino poker rooms, and the major tournaments held around the country were buoyed by thousands of online qualifiers.
However, with all this growth…was online poker legal? Technically, no one knew the answer to this question. The Wire Act of 1961 was the only piece of legislation that could impact the industry, and seeing that this law was passed well before the Internet, it made the language even more ambiguous. Mostly, the Wire Act made it illegal for betting to take place over a wire (in this case, a telephone line). However, it was used in a couple of high-profile sports betting convictions featuring offshore bookmakers. Poker sites argued that even if the Wire Act was valid for online gambling, that the fact that players were playing against one another on servers based outside the country, and that the online poker operators were only renting seats at tables rather than playing against the players meant that the games were legal in their opinion. For the early 2000s, that argument seemed to be enough not to have a challenge by the government.
Payments Were Targeted First
The online poker sites that were leading the way in the U.S. in the 2000s were becoming very valuable companies, and this is when the government started to take notice. Re-opening the Wire Act or creating new legislation that would make online poker illegal were not solutions that made sense – what caused the most grief for the government is that they were not reaping any tax benefits from these companies that were accepting real money play from American residents. There needed to be a quick fix that would slow down the growth without killing the opportunity for legalizing online poker.
The U.S. government found the perfect solution in 2006 when it passed the Unlawful Internet Gaming Enforcement Act. This bill would not make operating the sites illegal, but it would make the processing of payments through U.S. banks against the law. This crippled the industry, forcing many of the top sites to leave the U.S. to protect their publicly-traded parent companies. What was left was a landscape full of online poker players looking for places to play, and only a handful of options remaining.
Those remaining in the U.S. despite this legal challenge included PokerStars and Full Tilt Poker, both of which took full advantage of the situation by doubling down on their positions. These companies aw massive growth in the face of limited options for players and a bidding war for market share ensued. Yes, the UIGEA legislation did cripple the online poker industry for the time being, but the desire to play cards seemed to trump the limited number of available sites for American players.
The Need for Legal Online Poker is exposed
It seemed as though the poker industry was going to continue this way for an undetermined amount of time, but in 2008 and 2009, the news broke of some improprieties in the industry that would spark the need for change. Two sites were caught cheating players by founders, causing a major uproar in the online poker community. Calls for the legalization of online poker were heard far and wide, and while the companies in question were called out for their indiscretions, many players still ended up playing with these sites. This player behavior online proved that legal online poker was the desired result, but how would the government deal with these issues?
Black Friday
The answer to that question would come on April 15, 2011, when the Department of Justice, armed with evidence of sites breaking the UIGEA law, seized the domains of the remaining online poker sites in the market, effectively shutting down the industry. Again, this did not make online poker illegal, but it did bring to an end the idea of large-scale operators being able to attract American players without consequence.
Hundreds of millions of dollars in fines were levied against these companies to settle their cases, and the sites that could pay them did hand over the cash. After Black Friday, it appeared the time had come to make online poker legal across the country. However, this was not going to be an easy task.
State vs. Federal Legislation
While the Wire Act and UIGEA are federal laws, in the United States, each state has the right to regulate and oversee all gaming operations individually. The federal government only collects taxes from the states for gambling activities, including the lottery games that are available on a national level.
For online poker to become legal, each state would have to introduce and pass legislation. This, as you can imagine, is not the most straightforward task. Given the different levels of conservatism across some of the states, and the hesitancy to try to regulate an online-only industry like poker, the movement has been very slow towards legal online poker.
The First States to Legalize Poker
Thankfully, some liberal states have taken the idea of a regulated online poker industry and run with it. Delaware was the first state to pass online poker legislation all the way back in 2012, with New Jersey and Nevada following quickly behind. This was excellent news for players in those states who had been left without a legal online poker option since Black Friday.
Reaching Out Across State Lines
While the news of individual states making online poker legal in a handful of states was welcomed by those living in Delaware, Nevada, and New Jersey, one logistical issue was rearing its ugly head. State regulations included ringfencing of the games, meaning that players who wanted to play online poker in New Jersey could do so legally but only in pools of players from within that state. This fragmented liquidity made it difficult for sites to create prize pools and offers to make their games attractive to players, and the sites were not growing quickly at all. In fact, some sites that launched were forced to close their doors due to these low player numbers.
These three states decided that it would make good business sense to share pools of liquidity, and so they created an agreement that would allow for player pools to be mixed. This has helped keep the legal online poker industry afloat while other states decided if they would also pass legislation.
The Future Is Bright or Legal Online Poker
Thankfully for fans of online poker, the repeal of PASPA by the Supreme Court in 2018 ignited conversations across the country about all forms of legal online gaming. To date, Pennsylvania, Michigan, and West Virginia have passed online poker legislation, with sites starting to come online in Pennsylvania in late 2019. With more states planning sports betting legislation in 2020, we can expect that online poker will be added to many of these bills to make them more comprehensive. What does this all mean for poker fans? Well, if you are in one of the states that have legalized online poker, then you can start playing right away (check out our pages dedicated to those states). The rest of you can begin to have hope again that you will soon be able to hit the digital felts very soon! Check this page often for updates on the industry.
