UIGEA Fallout! Don't Worry about the eWallets: Worry about the Network

[Billman]

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Well, you can't seem to grasp the original point of my post, which was simply to say that it isn't "already over". But, whatever.

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You win for being technically correct. Yeah you! But the reality is that while it's not "already" over it is very likely over in the near future (6 - 8 months). You're merely getting into a pissing contest on whether the Titanic was sunk when it hit the iceberg or when the last piece of it slipped below the waters.

Yes, the hard core players will set up proxy servers and fly to Panama to make cash deposits but the fish who used to make this game so profitable will not go to these lengths.

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And what is your background, that you can make this universal assertion?

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I've designed and run payment systems. In fact I architected the payment system for a company that was formerly the third largest eCommerce site in the world. Hundreds of millions in transactions a year. I've worked with Visa, MasterCard, banks, ACH/EFT networks, etc. I've had to design interfaces into their protocols and APIs and know what they can and can't do and/or how easy or difficult it is for them to do something.

[ozziepat]

Three points:

1. There are a small, finite number of poker sites and payment transfer methods. Tracking, prohibiting and/or taking action against them will not be a problem for the DOJ, US Treasury Department or international financial networks if they choose to do so. They have lots of resources.

2. The loudest outcry regarding implementation of new banking restrictions under the UIGEA was from an association of small banks. I don't know if the law was changed in their favor. Probably not; and they were very concerned about the imposition of the new administrative burden they could see coming.

3. Then there are the US ISPs. It is possible that the DOJ could ban Internet access to foreign gaming sites, in which case there would be no way to get there from here irrespective of fund transfer method. I don't think this is likely, but I also don't think it is absolutely precluded as a follow-up action if there are financial "leaks."

[JPFisher55]

The DOJ could repeal the first amendment too. Geez is communism here already?

[Mondogarage]

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You guys all do realize it's already over, right? Anyone facilitating deposits from the US at this point is in violation of numerous laws, and will be going to jail where the only funds being transfered will go to Bubba when he loans them out.

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Wow, this should be loads of fun to watch! Saw some posts in the Zoo about people using major bank debit cards at PokerStars. So, it should be interesting to see major bank owners do the perp walk any day now.

Better make sure my mutual funds don't hold Wamu, BofA, etc. stock!!! [img]/images/graemlins/smirk.gif[/img]

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I hope you typed that with your sarcasm font. BofA is the 2nd highest capitalized corporation in the US, with a market cap (presently), of over $234 billion dollars. No perp walk there, for a few transactions slipping through the cracks.

Somehow, I doubt UIGEA is going to affect my investment position in BofA too significantly (though I probably wouldn't want to be sitting on any shares of NeTeller at the moment...)

[RoundGuy]

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But the reality is that while it's not "already" over it is very likely over in the near future (6 - 8 months).

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More speculation. I prefer to wait and see -- and not run around in hysteria before the facts are known. (Like claiming my banker is going to jail for allowing me to use my debit card, geesh)

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I've designed and run payment systems. ... I've worked with Visa, MasterCard, banks, ACH/EFT networks, etc. I've had to design interfaces into their protocols and APIs and know what they can and can't do and/or how easy or difficult it is for them to do something.

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Excellent. Then you also know it's not like flipping a switch and shutting down every debit card in the US. People have to do it, people have to monitor it -- on a regular basis. We're not just talking debit cards, but credit cards, bank wires, ACH's, paper checks, Ewallets, Western Union, Moneygrams, and ways no one has even thought of that can be used to move money.

Yes, there will be an undue burden on small banks, and yes they will bitch. It's not so easy as you would have us believe.

But then, you could go into a little more detail, and explain exactly why you believe it will be easy. Tell us what's involved.

[Billman]

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More speculation. I prefer to wait and see -- and not run around in hysteria before the facts are known. (Like claiming my banker is going to jail for allowing me to use my debit card, geesh)

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I agree that some poeple are taking arguments too far but I think what I've proposed is a very rational and logical argument for the most likely outcomes of all of this.

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But then, you could go into a little more detail, and explain exactly why you believe it will be easy. Tell us what's involved.


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ACH/EFT: Easy to shut off. 80% of all activity goes over a network controled by the US gov. The remaining 20% goes over a small group of networks who are part of the NACHA. NACHA issued the memo that lead to the shutdown of Neteller, Click2Pay, and other payment processors the other week. All they have to do is determine which companies are in the gaming eWallet business. That would be as hard as . . . oh, logging into a poker site and taking a gander at the payment processor page.

Debit/Credit cards: These also travel over a fixed number of networks such. Cirrus and Star are examples. The credit/debit card industry already codes transactions so it's simple for them to cut off this payment method. Some banks were willing to accept gaming risk but once the regs are published those issuing banks will decline all requests to certain industry codes. If payment processors begin publishing bogus industry codes then Visa and MasterCard would act and completely shut them off as a merchant and/or issuer. This has happened with a lot of other industries say where phone sex lines reported bogus industry codes so Visa and MC already have the facilities in place to address this.

Bank wires are very similar to ACH/EFT. Again, all they need is a list of offenders. I don't think the DOJ will have too hard of a time supplying a frequently updated list of offenders.

Ewallets are not a payment method, per se. You have to fund them. You fund them via one of the other payment methods (ACH/EFT, debit cards, etc). An eWallet has no value without a way to get money onto and off of it.

Western Union / MoneyGram. WU already doesn't like people using them to fund online gaming accounts and is more diligent about stopping abuse than is MoneyGram which is why most sites offer some sort of bastardized version of MG under a names like CyberCash. This is more difficult to stop and there will always be ways to slip through but once the regs come out MG will likely be forced to start taking a harder look at all of those cash transfers to the same people in Guatamala, Panama, etc.

Paper Checks are probably the most difficult to stop because they don't happen via electronic means. The handling of paper checks is actually quite expense compared to other payment methods for this very reason. The biggest problem though will be convienience factor. Paper checks will need to mailed overseas and then cashed by an overseas bank which could take up to a month (for sending as well as funds to clear) though in most cases it would be several weeks.

So realistically the only option that can't be shut down very easily is paper checks. This is what the banks were lobbying against. They wanted to make sure that they had some wiggle room on paper checks because it would be very expensive (or impossible) for them to come up with a good system to prevent illegal payments to and from online gaming sites.

And that really is the problem. It's become very public that the US gov thinks online gaming is illegal. That scares away many new players. Now you add in this whole process of having to send checks and waiting for weeks for the checks to clear and that will shut out a large number of new and recreational players.

Plus you have to consider that the government already has a lot of things in place to stop money laundering. Using those same tools against online gaming would make some of the above efforts even more effective.

[RoundGuy]

Excellent analysis. I certainly appreciate you taking the time to explain the detail. While I am still not completely convinced it's as easy as you propose, I will also admit it may be easier than I had originally thought. So, there you go. Time will tell.

It will be interesting, to say the least, to read the proposed regs when they are issued -- and to see the reaction of the banking industry.

[Billman]

Roundguy,

I guess that's all we can do (wait and see). You can make educated guesses though which is what I've attempted to do. Could I be wrong? Sure. Do I hope that I'm wrong? Hell YES!!! Unfortunately, I have about 80% confidence in my educated guess on this one.

Bill

[BruinEric]

Add one possible approach I haven't seen anywhere but Party Poker. My first deposit there was using a "phone card" method. First, I used my credit card to buy a phone calling card. Fees were high, I think it cost me $106 for a $100 calling card. My credit card company declined the transaction - so I called them and they released it (apparently this is a common 'purchase' for credit card thieves.) Then, Party Poker accepted the phone card as a deposit.

I think it is possible that similar oddball "mixed-use" (i.e. gaming/non-gaming) approaches emerge as a deposit method, then we have to rely on checks for withdrawal -- perhaps eventually foreign checks.

Maybe next they'll take Shell Gas gift cards, OneCall gift cards, online store "purchases." (i.e., buy this book for $120, get $100 in chips at site XYZ) etc. All are surely violations of the UIGEA, but possibly impractical to enforce.

Also -- maybe we'll see an online e-wallet that is only used for transfers between sites, so there are no deposit or withdrawal methods to be shut down. This will ease money movement and would help lots of players out. That way, if someone wants to move their roll from Site XYZ to Site ABC, they can do so quickly along with a fee. Actual deposits and withdrawals would be done directly with the sites.

I agree this is not good for online poker growth, and if so we should (hopefully) see some site consolidation so player volumes are at playable levels. Certainly in the past year, full ring LHE games have meaningfully changed in style as it is at sites that still accept US players.

This will also make these boards "consumer activist" sites, if it hasn't already, where we have to act as watchdogs against fraudulent sites, lost money, etc. If the deposit method migrates to Cashiers Checks sent internationally, the lost deposits alone will be mega-threads and worrisome risk.

[Billman]

The problem with those phone cards is that in the US a card is either single purpose or multi-purpose. If the phone card can only be used to purchase phone service then it's considered to be a pre-payment for services. If you can use the phone card to purchase any sort of item (e.g. something other than phone time) then it's considered to be a debit-like card and the US gov has traditionally stated that US banking laws now apply.

So you won't likely see any US company offering these. Overseas companies might but this is not a new idea and the US has been pretty successful in keeping these things to a minimum, at least as far as US residents are concerned.