July 21, 2010

PPA Provides Cheese for the Sh*t Sandwich at Online Poker Hearing

"It's a huge shit sandwich, and we're all gonna have to take a bite."

Full Metal Jacket

Today was supposed to be a big day for online poker, with Rep. Barney Frank holding a House Financial Services committee hearing on his bill to legalize and regulate online gaming (HR 2267).  On the panel testifying for the Poker Players Alliance (PPA) was Annie Duke.  The PPA has posted video footage online for the hearing; it clocks in at over two hours total, but with a 30-40 minute intermission in the middle, the actual hearing time is a much more reasonable length.

As I feared, questions were raised about Duke's connection to Ultimate Bet and the "superuser" scandal (video ~ 53:00 mark).   Duke did parry the question and used it as a pivot to explain the need for legalization of online poker to provide better regulatory oversight of online poker, as well as effective legal remedies for players who feel they have been wronged by an online poker site, and even criminal prosecutions in appropriate cases where cheating or fraud are discovered.  However, it seems that the PPA could have made the same arguments with a spokesperson unconnected to the Ultimate Bet scandal, who would have had more credibility.

Duke didn't help her credibility when she stretched the truth, if not outright misrepresented, a couple of facts.  First, when questioned about her connection to Ultimate Bet, Duke quickly cut in to clarify that her connection was to "UltimateBet.net" which she characterized as a free, non-gambling site.  Although her description of the ".net" site was correct, it takes little effort to see that Duke is also a member of "Team UB" over on the real money ".com" site.  Duke also testified that "most courts" who have considered the "game of skill vs. game of chance" argument have ruled that poker is a game of skill.  Unfortunately, there is currently no state where an appellate court has issued a decision adopting the "game of skill" argument; in fact, the appellate courts which have ruled to this point on the issue have all held that poker is a game of chance governed by state gambling laws.  I am baffled by why Duke would make these kinds of misrepresentations to the committee.

Now, in fairness to Duke, I do feel she made strong points about the advantages of having online poker regulated in the United States to better protect Americans from fraud and cheating, and to better control access by minors, problem gamblers, and criminal elements.  But those same points could have been made by any number of other possible spokespeople without the credibility baggage Duke added to the mix.  However, the person raising the Ultimate Bet scandal, Republican Rep. Spencer Bachus of Alabama, likely would have found an opening to discuss the issue in any event.  So, in the grand scheme of things, Duke probably did no real harm to the legalization cause.  But the PPA still looks a bit like an ad hoc amateur hour outfit in failing to find a better spokesperson.

While on the topic of Ultimate Bet, Duke testified forcefully that the superuser fraud was committed by "one person", presumably Russ Hamilton.  If Duke knows this for certain, then why is Ultimate Bet so slow in revealing all it knows about the scandal?  Alternatively, if more than one person were involved in the scandal, then either Duke was not fully honest with the committee, or Ultimate Bet was not fully honest with Duke.  It might have been interesting if the committee had pressed Duke for additional information about the scandal while under oath.  Regrettably, the online poker community will have to continue waiting for those answers.

Frankly, though, I found other aspects of the hearing much more interesting than Duke's PPA talking points.  It is fairly clear now that many industry forces are in favor of legalizing gaming, but are also in favor of barring companies that are currently violating state or federal laws by offering online gaming or online poker in the United States.  Gaming industry rumors long-reported by Bill Rini and Pokerati's Dan Michalski suggest there is a strategy being pursued by leading brick-and-mortar casinos to legalize online gambling in a manner that clears the field of competition from established online poker sites, notably sites like Full Tilt, PokerStars, Ultimate Bet, and Bodog.  From the committee's questioning, it seems that some of the representatives are inclined to support this approach, voicing opinions that companies that are violating the law should not be rewarded by legalization of online gaming.  This again raises concerns that the PPA, dominated by directors associated with established online poker sites, might face a serious conflict of interest between the interests of its membership and the interests of its leadership.

Of more immediate concern to the online poker legalization efforts was the palpable hostility toward the bill from Rep. Bachus, who is the ranking minority member on the panel.  Rep. Bachus is not only opposed to legalization, he openly supports the UIGEA and expressed frustration that its implementation was delayed for two years!  This is not necessarily a deal breaker at this stage of matters, as the House operates in a manner where a majority can push through virtually any legislation it deems a priority, particularly when the bill is supported by a powerful committe chairman like Rep. Frank.  But, there is no indication that the current legalization bill is a priority, and there is precious little time for any real progress towards a vote between now and the fast-approaching reelection campaign season.  Of even greater concern is the real possibility that the Republicans will take control of the House after this fall's elections, which would flip chairmanship of the Financial Services Committee from Rep. Frank to Rep. Bachus.  Under such a scenario, Rep. Bachus would be able to singlehandedly kill any online gaming legalization bills.  To be blunt, if Republicans take control of the House, online poker legalization will stall for at least two more years.

So, the real lesson of the day for online poker legalization proponents is to support Democrats in the upcoming Congressional elections.  Time for the PPA to organize some "money bomb" fundraisers for key Democratic campaigns.


  1. Duke also insisted that the UB losses were $22, not some larger figure. That is now clearly not true. As Haley Hintze writes:

    "In another light, however, one could also say that the whole $22 million in refunds was a giant, approximately-shaped band-aid slapped on the scandal in the hopes that it was enough to make the pressure go away. Not quite a sham, but not quite true, either. It's best described as a desperate measure employed to give all the shareholders -- on both sides -- at least the chance to move forward and continuing collecting revenue from players.

    The real story is this: Despite the enormity of the amount refunded, the individual refunds could not possibly be correct, in whole in or in part, and there is likely no affected player who ever received the exact refund that he should have received. Many players received nothing or not enough, while there must be others who received too much."

    The whole post is worth a read in order to understand why ANY claim about how much was lost due to cheating is bogus; the real number is literally unknowable. See here: http://haleyspokerblog.blogspot.com/2010/05/just-conjecturin-volume-17-real-story.html

    Anyway, either Annie Duke knows this and willfully misrepresented the situation under oath, or she is woefully misinformed about the company she represents. My guess is that she knows perfectly well, but is under orders to stick to the party line that it was $22 mil, and that it has all been repaid--both of which are false.

  2. @ Rakewell: Great point about the UB scandal. Haley Hintze has done a good job of doggedly unwinding all the UB propaganda.

    I also found it interesting that Annie Duke essentially made the argument that poker should be legalized so that, if scandals like UB occurred, then companies could be forced to take corrective action. Ummm, I thought UB was the paragon of virtue and cleaned up its mess without anyone holding its feet to the fire?? That's just a really curious argument to make--Stop us before we cheat our customers again!

    Anyway, here's from Duke's prepared remarks:

    "For me, the most critical component of regulation is player protections. As some of you know, I play at a site called Ultimate Bet. Under previous management, an associate of the website developed a breach in the software that allowed for players to be cheated out of a great deal of money. I agreed to continue to endorse the site only after I was sure that new management had addressed the problems, took voluntary steps to refund the cheated players and ensured tighter control over their site security. Nonetheless, an important benefit of regulation would be to ensure, through source code-based testing and outcome-based testing, that the games are fair and those players cannot be defrauded by the sites and that players cannot cheat others at the table. Further, under a U.S. regulated system players would have legal recourse should they feel they are harmed and regulators would be able to penalize licensed companies that breach the regulatory standards. Today, the best non-U.S. licensing regimes already do this, but, U.S. players deserve the protections and assurances of their own government."


  3. Time for the PPA to organize some "money bomb" fundraisers for key Democratic campaigns

    I may be a cynic, but I see no evidence that the PPA is capable of doing much of anything. I would love to support them, but I don't see the value.

  4. @ Memphis MOJO: The last time I posted about the PPA "money bomb", I used a quote from Dodgeball to sum up my feelings about the PPA:

    "Son, you're about as useful as a poopy-flavored lollipop!"



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