Free of Rake Sites and the PPA

[Babygrand]

How come the PPA doesn't unite and create a solid website free of rake. The site could clearly run itself with advertisements and be not-for-profit. Any admins and employees could get cut a decent salary, legally. This would make it ten times harder for politicians to restrict the sites because household poker, free of rake, is already legal in some states.
If the PPA tries to push a bill through, they should try to only legalize sites that are rake free, US based, and sponsored and run by an established PPA executive board. The PPA could then establish guidelines for approved sites that would follow the laws.
Then to get money into the sites, you actually set up accounts with the PPA and pay yearly membership fees. The PPA could establish a financial institution responsible for holding players' money. Then, through the PPA, you could deposit money into rake-free poker sites.

[Mondogarage]

Actually, the site being rake free is irrelevant. The UIGEA doesn't address rake, and, unfortunately, the sites are already "restricted". The politicians don't have to do anything else -- they've already done it.

The issue is, how can anyone, or any organization, convince the politicians to undo what's already been done.

[Grasshopp3r]

I posted on a similar idea. There needs to be critical momentum level for this to succeed, though. Here was my thread: http://forumserver.twoplustwo.com/showfl...rue#Post8892148 (http://forumserver.twoplustwo.com/showflat.php?Cat=0&Board=law&Number=8892148&Search page=1&Main=8885969&Words=+Grasshopp3r&topic=&Sear ch=true#Post8892148)

[Babygrand]

Actually, I disagree that rake is not addressed. According to past legislation on poker, a rake makes poker gambling. You can run a poker game out of your house, up until you begin raking. Then there is massive legalities. If you want to fight a battle with legislators, I think you have to remove raking from sites. The government is clearly pissed at the top dawgs at all of these sites. They definitely don't want to see people making money when they can't get a cut.

All in all, I am pessimistic about this. I cashed out every dollar and I dont plan on putting any money back in soon. We shall see what happens in the next few months.

[Mondogarage]

Actually, there are several states where you can't legally run a home game, rake or no rake. Nevermind past legislation, it's the UIGEA, and enforcement of the Wire Act that has put things where they are today, and neither of those specifically address rake. Rake isn't what creates an element of chance, and thus, gambling. (I'm not sitting here being a moralist on the topic, of course.)

The idea is nice, but it's a complete non-starter as long as any merchants handling money for the purposes of poker are subject to arrest and felony convictions...

[Skallagrim]

Mondogarage hasnt really got all the legal technicalities correct here. The UIGEA -probably (see other posts)- does not affect a poker-only site by itself (the Wire act does not cover poker). The UIGEA does incorporate State law, however, and that of course varies. 2 states ban playing poker online for money under any circumstances (Wash and La), all the others are a mishmosh of regulations and exceptions. MOST states do not ban poker home games by exempting poker games where the "house" does not get any money from the game. Most states do not ban the actual playing of poker. Thus a rake free/fee free site would not violate those state laws and thus not violate the UIGEA. So its legal, but it still costs money to run ... solve that dilemma and you have a work around indeed, at least for most states.

Skallagrim

[Mondogarage]

The UIGEA does not differentiate between poker-only sites and sites that combine poker with a sports book.

At any rate, I'd love to see a rake free online poker site. Hell, I'm just hoping there's any sites to play on a few months down the road. I'm just saying there's no chance in hell anyone's ever going to actually open one up under the current legal environment, because anyone who does under this environment is risking the wrath of the DoJ.

For all those who beg to differ, I kindly invite them to be the next to open up a site.

You know, it's like all those who rampantly support the invasion and occupation of Iraq. When I ask them why, if they support the war so much, and think the US is doing the right thing, they didn't volunteer and enlist, I get nothing but "uh...uh...uh...," or worse, some lame ass excuse like, "well, I can't quit my job", or "I'm still in college". In other words, for you folks who think it's stone cold legal right now, why aren't you putting together such a business?

It's easy to sit and sideline quarterback. And it's certainly possible that no near-future prosecutions result in convictions. But no smart businessman is even going to contemplate entering the online poker space in the US at a time when those businessmen are getting picked off like target ducks in a shooting gallery.

As for the Wire Act, it covers gambling. And, it is clear that poker involves gambling. Now, I'm not going to sit here and pretend that I know each and every minute detail about the application of the UIGEA. However, the implications of the UIGEA to the banking sector that must process the transactions funding poker sites and accounts are obvious. So you set up a rake free site. How do you fund it? Your bank's not going to accept a transaction funding that site any more than they will a transaction to FTP or PS. You think an argument that "rake free means it's legal" is going to hold water with Citigroup's 1000 strong legal department?

I'm sorry, I'm not trying to get into a pissing contest with you. I am not an attorney. But the fact is, I am in fact, in the legal industry, and, while I'm not an expert in federal regulatory law (I work in complex commercial litigation), I think I've got a pretty decent understanding of why there is no difference in the eyes of the Wire Act or UIGEA between a raked poker site and a non-raked poker site.

The fact that the OP is asking why the PPA doesn't actually create and run a poker site themselves is instructive here. And while I entirely agree that current state law vis-a-vis poker (whether online or off) is a veritiable varietal feast of differences, none of that makes a rake free site legal, where the financial transactions involved would appear to violate other federal laws. Remember, this isn't really even about whether it's legal or not for you or I to play a game of poker online, it's about whether or not it's legal for those sites to operate and execute transactions involving money.

Anyway, if you can make a colorable argument as to why a rake free site would be legal under existing law, I'm all ears. I'd like to be encouraged about the prospect of continuing my own ongoing FTP odyssey.

But if there is one inalienable truth about 2+2 (and probably all poker forums...I only cite 2+2 because it's the only one I frequent), it's the fact that the overall online poker playing populace is, for the most part, far too pollyanna-ish about what it is they do and its current legal predicament. If all the information folks use to form their opinions on comes from poker forums, poker websites, poker blogs, etc., you're only going to get the analysis of others in the poker community - *all* of whom have a vested interest in the outcome, and *all* of whom are subject to have their analysis and opinions colored by that vested interest.

Right now, Capitol Hill has no stomach to change the UIGEA at all, and frankly, their priorities are better placed elsewhere. (Contrary to popular belief, a poker carve out of the UIGEA should only be about the 83rd highest priority on your elected congressman's list right now, given the war, energy issues, etc.) The current DoJ administration is clearly on some kind of crusade that won't end until at least the next presidential cycle. These two factors make it pretty much dead in the water, any idea of a company stepping in and filling the gap that's being created by poker sites and transactional companies closing themselves off to the US.

Anyway, I'm really not trying to sound (very) snarky here, but comparing the legality of a home poker game to the legality of an online rake free poker site is just silly.

[Skallagrim]

Mondogarage, you may work in the legal field but I am an attorney. A criminal defense attorney who has represented clients accused of illegal gambling. And I currently am involved in providing legal advice to an effort to (hopefully) create a legal method of funding the playing of poker. I cite my credentials because I really dont want to have to cite and explain every little detail of my reasoning.

1) No Federal law specifically bans playing poker for money. The DOJ claims the Wire Act does but they have so far resisted basing an actual prosecution on this claim. That is because 2 seperate US Courts of Appeal have already ruled that the Wire Act only applies to sportsbetting.

2) The UIGEA does not ban playing anything (as you know), it bans sending money to places that engage in "Unlawful Gambling." The UIGEA defines "gambling" in a way that would include poker, but not "unlawful gambling." It says "unlawful gambling" is that which was unlawful before the UIGEA was passed whether under federal or state law.

3) State law is discussed pretty well in my last post. Without going through each one, MOST states permit poker to be played legally by people in a game where there is no House making money. Most states only wanted to bust gambling businesses, not gamblers, when they passed these laws. Poker is legal in California, for example, but you must have alicense if you are a "house" raking or charging for setting up the game. New York specifically exempts players from breaking the law provided there is no house making money (i.e. a home game)

4) Thus under the UIGEA, becasue it uses state law, a house that took no momey from the players would not violate the laws of MOST (BUT NOT ALL) states, and therefore transfers of money to this no-cost site would not be unlawful under the UIGEA and therefore there would be nothing illegal about banks sending money there from players IN THOSE STATES THAT HAVE THIS TYPE OF LAW. The players in those states could play like always, even better (for them) because there is no rake.

THIS IS INDEED A GOOD LEGAL WORK AROUND FOR POKER PLAYING IN MOST, BUT NOT ALL, STATES.

Now you only have to figure out a way to pay for it that doesnt depend on charging people in any way for their play.

That last part is beyond my expertise and I leave it to others to figure the answer if there is one.

Skallagrim

[Mondogarage]

Skallagrim, thank you for clarifying your position, and I certainly won't dispute your technical reading of the UIGEA. (Of course, I entirely agree the UIGEA doesn't ban the playing of anything.)

And, hopefully, everything you say will allow such a rake free site. I still believe whether or not we ever actually have one will depend on the businesses having to accept such financing transactions seeing things the same way as you do. I guess I see things more from the side of a banking institutions' aversion to legal risk. In other words, their GC will have to tell them they have no exposure to prosecution under the UIGEA, or something similar.

I'd go a bit longer on this, but I actually have to jam to a live tourney...I'll check the thread late tonight. Again, thanks.

[faustusmedea]

The answer is advertising. When you have the 18-34 male demographic sitting passively in front of windows for hours on end, you have a potential ad gold mine. Because of the questionable legality, it hasn't materialized. Remove rake from the game and you potentially open a window to the ad revenues.

[permafrost]

NH, Skallagrim

Donations, ads, membership fees and sales of goods and services have been discussed before as ways to make a profit on the legal, rakefree model.

One quibble about the UIGEA thoughts. I think it "bans" the person in the business of betting from accepting money, not the sending of the money.

[Skallagrim]

Thanks Permfrost, 2 quick replies: to be technically correct, the UIGEA makes it a crime to accept money used in unlawful gambling (this affects the sites) and a crime to fund (send money for) unlawful gambling if the Financial Institution is knowingly violating the upcoming regulations.

I dont think membership fees would be a good idea (if required to play on the site itself - but if to an organization that otherwise sets up the site, then its OK), but donations, advertising, money from other things like sales of products, yeah all of that works. Anyone who is serious about doing something like this let me know and I would be glad to help as much as I can - if you can pay me I'll help as much as you want /images/graemlins/wink.gif.

[Babygrand]

I think the only problem would be the fact that financial are in fear of potentially breaking the law. Yes, rake-free sites could be 100% legal. However, if banks still dont want to fund them then there is no chance of it working.

[counthomer]

A free of rake site funded by advertising etc is a nice idea, but it suffers from some huge practical problems. As someone who has worked in a technical capacity at various online companies (and I now work in a poker company), I can tell you that the costs of setting up any poker site are substantial, and the advertising revenues you will generate are unlikely to cover even half of them.

While you correctly identify that the demographic of poker players is attractive, the internet advertising model generally requires large volumes of click throughs, or a specific localised demographic for more 'tv' type advertising. Neither of these are easy to achieve on a technical or functional level (further increasing the cost) and advertisers are unlikely to enthusiastic in the current climate.

Furthermore, advertising on a scale necessary to cover operating setup and costs will undoubtedly be a significant nuisance to the big players, and you still have a massive issue with getting simple payment options on board (the big banks and processors are notorious for working off a generalised view of an industry - which at the moment has a big red 'risky' stamped all over it).

Furthermore, while you solve a short term problem, the future remains somewhat bleak. The drive behind the current legislation, is almost certainly economic (to onshore the tax revenue) and social ('The evils of gambling'), and i'm not sure this addresses either (in which case it remains in the crosshairs).

[Grasshopp3r]

Look at the ESPN Poker Club. That site is largely funded through advertising. The software development has already been completed. Now it is only a question of licensing the software, which should be much cheaper.

[counthomer]

ESPN Poker Club is not a counter example - it has neither the infrastructure (bandwidth, servers etc) nor the organisation (support, marketing, compliance etc). These are where the real costs lie. Furthermore, there are also costs of doing business with a payment provider (setup, integration) etc.

You will have to trust me on this one that an advertising model is not viable - I have been involved in feasibility studies on this subject in the past, and in reality all you need to consider is the revenue of small search engine (with large click throughs) and compare it to how a ad funded poker site would have to work, to see it is non starter..

[Skallagrim]

There would be little difficulty finding a method of getting player money into and out of such a site, IMHO. If US banks are reluctant to tread in these waters non-US companies/banks will be happy to step in, especially if they realize there is no fear of prosecution for funding this site and they can make a profit on transfer fees.

Funding the operation of the site is indeed the big difficulty. I dont have enough knowledge to guess as to whether you could do it with advertising or not, nor have I any other great funding ideas. But I am quite certain of my legal conclusions, so I really hope someone really creative can come up with a good answer!

[counthomer]

You may be correct on the legal situation (that is not my specific area) but my opinion (which is different to the notes above which are experience based) is that such a simple workaround will not fly with the banks.

The reason the processors are leaving/possibly leaving is not necessarily an actual legal issue, it is a perceived legal risk. Banks (and processors) are massively risk-averse (they have to be to make money). All of the arguments about 'size of the market they are leaving' are credible, but just as Party dropped its ball and left the game due to risk, the big processors/banks are the same.

Your idea (if it can even be done on a practical level) will therefore almost certainly be left dealing with some very dubious processors, which will not facilitate the sort of mass scale adoption you need to make a return on the setup costs and a ad revenue model.

On a related note, I think your idea is good, but more in a sense that it gives me hope that somewhere out there is a real solution (possibly along these lines) that will change the nature of poker. I am not sure whether my company is developing something like this, but I am pretty confident someone somewhere is.

[faustusmedea]

Your take is interesting; I have pondered an ad-based model for awhile. Can you tell me (since we don't know who you work for) if the rake model needs to be so onerous? In other words, are the sites grabbing the goldmine because they can or is $3/hand really necessary to cover the expenses you describe?

[Dennisa]

There is no way a non profit could work out. Before the Neteller collapse, I think the sites were paying about 4-5 points for every dollar taken in. I would imagine post Neteller this is going to be closer to 6-9 points. Add the cost of fraud to every poker site and will rake free users want to buy $100 for $85.00 in chips?

Not a good model.

[Black_Angler]

I would think that a free rake site would be relatively simple. Back in the day, poker clubs used to get around the law by requiring an annual fee. You were paying to be a member of the CLUB, what people did inside that club of their own free will was up to them. That is one reason that the old clubs had you deal your own cards. Now, converting that to an online cardroom might be difficult. You could offer an ad site for the casual player and an annual fee site for the less than casual player. As to the legalities online, I'm not sure.

[permafrost]

[ QUOTE ]
the UIGEA makes it...a crime to fund (send money for) unlawful gambling if the Financial Institution is knowingly violating the upcoming regulations.


[/ QUOTE ]

What would the crime be for the financial institution in that case?

[counthomer]

Would like to tell you who I work for, but I am posting in a personal capacity other than a professional one.

In terms of the rake, it does not need to be anywhere near as high (just look at the profits of Party for evidence). Poker sites can set rake at that level as it is almost a hidden cost to the average player, but you should never discount the costs of setting up in terms of equipment and expertise. There has never been a rake 'price war' simply because it is not a determining factor in attracting customers. Certainly when I used to work in a support role I only occasionally (one or two times a month) came across an email on rake.

This concept feeds into the fundamental flaw of the second 'rake free' model - subscriptions. Simply put, it has been tried and has comprehensively failed - people can 'see' the subscription so feel they are getting a worse deal than on a raked site. Ridiculous? Yes, but a reality also.

[faustusmedea]

No, I appreciate your info.

In fact, what it says to me is that if the legality of people playing together could be nailed down, then sites like Google for instance would have no problem absorbing the costs of network/server configuration. Since it sounds like ongoing costs are not the issue, advertising could in fact replace the rake.

[Grasshopp3r]

The funding issue can be solved in a myriad of ways. One of the more interesting concepts is to use USB smart card readers and then users would essentially send/receive money to and from their cards. There is no central administration or accounting. This is an elegant solution that also removes the ability of central prosecution. This is more like peer to peer sharing models. (apparently they shall not be named, but they dealt in mp3 file swapping).

I am told that the smart card systems are fast and reliable. They are also physically durable, but portable like cash. The obvious problem with this scheme is someone losing their card, but that is the same risk with cash.

[counthomer]

USB smart card readers are an interesting concept, but apart from the huge security issues that would arise, ultimately what you are doing is effectively making the system the processor. The creator of the system is therefore in the firing line.

Furthermore, at present the poker companies provide a buffer for fraud with their compliance and security teams - with smart cards you couldn't have that, so if you get scammed for your money at a table it would be gone without hope of recovery.

In issues such as this people generally make the mistake of trying to circumvent the letter of the law rather than the broad spirit. While you can often get ahead for a short period of time, workarounds like this will never take in the medium term, by which point you will not have made your money back or gained traction in the market. It is the practicalities that become the killer once you have twisted enough to satisfy the law.

On the advertising model, it might be possible to cover basic running costs, but you need to remember that advertising revenues are not a tap you just turn on. You need a delivery medium and demonstrable results. Again the practicalities are where the model falls down. Even a company like Google (which effectively has the infrastructure, payment systems and advertising model in place) would not go near a poker system because there is simply too much to lose, and without rake the model becomes substantially less lucrative.

There are some very smart people designing software for the big poker companies, and a very good reason why you are not seeing any advertising on the clients at present.