Over the past few days, I've spoken to several journalists about last week's wave of indictments that targeted three major online poker sites. One question that I've been getting is, "Could this benefit brick and mortar casinos?"
My initial answer was no, it wouldn't in the long term. If you look at the numbers of tables and total win from 2002 to 2010, it's clear that, as online poker became more popular, poker in Nevada casinos boomed. That implies that a thriving online market actually helps Nevada casino poker, since more people are more familiar with the game.
Now, you can never prove that the boom in online poker caused the growth in Nevada poker; we all know that correlation doesn't necessarily mean causation. It could be that they both benefited from a bigger upswing in public interest in the game due to the rise of televised tournament poker around the same time. I'd argue that online and televised poker cross-pollinated each other, with a pretty big overlap in their audiences. But even though I can't definitively prove that online poker caused the 2003-06 Nevada boom, it seems the most likely explanation.
So what impact will closing three major websites have? Instead of logging on, will people flock to local cardrooms and casinos? It's definitely possible, particularly in the short term. But in the long term, denying Americans access to online poker will, ultimately, shrink the market for casino poker. With fewer places to learn with training wheels on, it's likely that there will be fewer new live poker players. It's one thing to get the feel of the game by playing for free, then playing for money online; it's another to make the jump from freeplay to a live table.
I was curious (there's a lot of that going around on this site, apparently) about what impact UIGEA's passage had on Nevada revenues, so I compiled a new report, looking at monthly statewide Nevada revenues from January 2004 to February 2011--that, I figured, would give me enough of a set of data to see how significantly UIGEA impacted Nevada gaming. Was there even a small influx of players to Nevada casinos after it passed?
The answer is no, there wasn't. The growth of Nevada casino poker really peaked in the summer of 2006; for the next year, it grew moderately each month. There wasn't any significant change in the rate of that growth in October 2006, when UIGEA was passed, or in the months following. In fact, after a big jump in June 2007 (because the WSOP was moved up by 3 weeks), Nevada poker started to decline pretty dramatically.
It might have been anticlimactic, but the official implementation of UIGEA in June 2010 didn't do anything to stop the decline in Nevada poker either.
To me these numbers suggest that, ultimately, the traditional casino and poker business won't really benefit from online poker prosecutions. I'd guess that either players will find other sites to play on or they'll cut back on their play. And, as I mentioned above, if online play noticeably drops, traditional poker rooms would lose a vast farm system.
So history seems to tell us that the prosecutions won't really be a game-changer for Nevada casinos. Their ultimate impact won't likely be a direct one; instead, it could be that the attention the indictments focus on online poker might spur cash-hungry state legislatures to seriously consider legalizing online poker. Should Congress be persuaded to slightly amend UIGEA to allow interstate play (it already allows intrastate play), we might see a new American online poker industry rise from the ashes of the Black Friday indictments.
But that's a story that hasn't been told yet.
UPDATE: I've expanded the CGR report to include data going back to January 2004. And it's now in landscape instead of portrait orientation.