Underdog Hand 

Federal crackdowns on online poker leave some pro players short stacked

There is no dress code for the World Series of Poker. Players are as likely to show up wearing garish Hawaiian shirts as they are Izod polos, and glasses with snake eyes painted on the lenses as mirrored Oakley shades.

This year, though, a new trend in poker attire has emerged, and it was more than evident at the World Series of Poker’s No-Limit Hold’em Championship, which took place last month at the Rio All Suite Hotel and Casino in Las Vegas: hoodie sweatshirts emblazoned with college logos, flip-flops and iPod earbuds.

The buy-in for this game – which this year attracted some 3,000 players – was a whopping $10,000, but the payoff for the winners made it worth the investment: The last man standing could bring home $8.7 million. Traditionally, this kind of game would attract veteran players who qualified by doggedly working their way up the ladder through a series of smaller games (thereby having their buy-in fees waived) or the foolhardy inexperienced player who could afford to lose $10,000. But this year a new crop of players – those in the hoodies and flip-flops – had a heightened attraction to the game: refugees from the online poker world, mostly men in their 20s, who had been displaced from their online games in April after a federal fraud investigation shut down many of the sites that hosted them.

Grayson Nichols of Windermere is one of them. Nichols, 27, is one of about 10,000 career online players unaccustomed to having to show his poker face to anything other than a computer monitor. When the feds shut down the online poker rooms this year, they also cut off his most reliable source of income. Nichols is used to earning between $50,000 and $100,000 per year playing online poker; it’s the only well-paying “job” he’s ever known.

He began his card-playing career in 2003, when he was a freshman at the University of Florida. When he started out, he says, he was a “fish”: A weak opponent preyed upon by more experienced players. Despite the fact that he kept losing money, he was addicted to the game and would wake up in the morning and head straight to the computer.

Eventually, he realized that if he could develop a better strategy, he might have more success, so he picked up a copy of Doyle Brunson’s Super System: A Course in Power Poker, known as the poker player’s bible. He learned the basics about position, betting and which hands to play.

After a period of diligent study, his game improved and he’d amassed $50,000 using the screen name The_Dean221. It wasn’t long before he was approached by a backer – someone who pays promising players to play for them – and he soon realized that playing the game with someone else’s money wasn’t such a bad idea.

Over time, Nichols says, he discovered that he was no longer addicted to gambling or poker at all. It had become something very mundane for him: a job.

Now he’s unemployed.

Eventually, Nichols thinks the online poker sites will return, but in the meantime, he’s got to find a way to make a living. So earlier this year, he found himself turning to live games again and preparing to enter the World Series of Poker. This would be the third time in his career that he’d entered the tournament. The last two times, he says, he qualified for the World Series, and his buy-in fee was waived. This year, supported by backers, he forked over the $10,000 for a seat at the table.

And he’s feeling confident.

“This is my third main event,” he says before he heads out of town for Vegas, “so I’m feeling like this will be the lucky one. The first one, I busted on day one. The second one, I busted late in day two. I think that means I’m going to at least make day three this time. So, we’ll see.”

In April, the top executives of three of the biggest online poker sites – Full Tilt Poker, Absolute Poker and PokerStars – were indicted by the federal government on charges of illegal gambling and bank fraud. Prosecutors seized the companies’ websites, stopping all games played for real money. The sites have been quiet ever since.

The U.S. Department of Justice froze the funds in the sites’ bank accounts as part of the crackdown, making it impossible for players, some of whom had tens of thousands of dollars in their online accounts, to cash out. The U.S. Department of Justice and the FBI, which orchestrated the crackdown, say that the players’ money was never part of the seizure and that the sites may return the money at their own discretion. Two of the sites, Full Tilt and PokerStars, currently display a prominent “This domain name has been seized by the Federal Bureau of Investigation” message on their home pages, and all of the sites say they are working with players to pay them back. So far, though, most players say they haven’t been able to retrieve their funds. At the end of June, a class action lawsuit for $150 million was filed against Full Tilt, demanding that it return players’ money, plus damages.

For many young players who used the poker sites to make a living, the investigation meant the end of a way of life. Nichols says he used to average 100 online tournaments per week.

“That’s all I’ve done for the last five years,” Nichols says. “I started in college. I played cash games, but that was when I was addicted. I was gambling and having fun with my own money. I’d want to get home and play. I was, like, jonesin’ for it. It was like an addiction, for sure. … Then after a couple of years, I started doing really well in tournaments.”

Nichols and others like him aren’t rogues or criminals. In fact, legal experts say, they aren’t doing anything wrong, because playing online poker is not explicitly illegal in any state except Washington. It’s the sites themselves that are violating the law.

In 2006, the Bush administration passed the Unlawful Internet Gambling Enforcement Act, which makes it illegal for payment processing websites, banks and credit card companies to allow U.S. players to transfer money to gambling sites, or to process gambling-related payments. Though the law passed in 2006, it wasn’t scheduled to be implemented until 2010.

The dominant poker site at the time UIGEA was passed, Party Poker, ceased its U.S. operations in response to the law, and two new companies, Full Tilt and PokerStars, stepped in to fill the void. They operated relatively unfettered by feds until 2010, when the law kicked in and the government indicted them, as well as Absolute Poker, on charges of bank fraud, money-laundering and, of course, violating the UIGEA. The move didn’t surprise Nichols, who says he suspects that the government wants to intervene in online gambling so it can regulate it – something he thinks is inevitable and that he’s actually in favor of. In addition to legitimizing the careers of online players like himself, he says, it’d protect people from being preyed upon by unscrupulous gamblers and cheats.

“I remember 2006 so well. I thought it was over then,” he says. “Six months ago, they were talking about a blackout period for a year and a half, and I was actually rooting for that when most kids didn’t want that to happen, because they were like, ‘What? We can’t play for a year and a half? This is bullshit! And that’s just the way it is?’ And I told them: ‘Guys, the status quo is not sustainable, it’s going to burst eventually.’”

A survey conducted in 2009 by PokerPlayers Research, a London-based market research firm, found that even though poker sites offer a “play-money” alternative for people who don’t want to actually gamble, some 10 million Americans play poker online for cash each year. The closest competing market was in the U.K., where 1.9 million people play for real money regularly.

As a result, American players dominated the online poker games and tournaments and rose to the top of online poker ranking sites like pocketfives.com (where Nichols works as a trainer). Since the shutdown, though, international players are all that are left, and they’ve been cleaning house, competing against a weaker set of players: the fish, who are also known as “ATMs.”

When Nichols went to a World Series of Poker event recently, he says he ran into a former online poker mentor and backer, Chris Moorman. Moorman, who lives in Essex, England, told Nichols that it’s easy to win big, now that U.S. players are out of the picture.

“He’s winning everything, because all the good players were American,” Nichols says. “Literally, of the top 10 players in the world, he was the only one who wasn’t American. So, now he’s just been climbing up the rankings, and it’s been kind of like the joke on the net that it was only a matter of time until he was first.”

Nichols and his stateside colleagues, meanwhile, are finding other ways to make a living. At the moment, Nichols coaches other players at PocketFives, where he charges $125 per hour helping amateurs hone their online poker skills. It could be a reliable source of money, Nichols says, if he were able to find enough students, but he lost almost all of his 15 clients as soon as the online sites shut down.

So he’s also playing in live tournaments. It’s more time-consuming and more expensive to play live, and players can never reach the same volume as they can playing online, but it’s all they have for the moment.

“The thing is, with live, you can only play so much,” Nichols says. “I have to travel to tournaments, whereas online I can play 100 tournaments in a week, and it’s like nothing. So, I can have four weeks, and that’s like 400 to 500 tournaments I’ve played, whereas four weeks live is more like four or five tournaments. So the thing is, to catch up with the variance, you’ve got to play a lot. Live, you can never really get to that number.”

Owners of online casinos have rakedin billions of dollars from U.S. poker players alone, and online poker has also been a big money-maker for experienced players, who can earn well into the six figures if they play their cards right. The only entities not making money off the online games right now are government agencies. Some legislators, including Florida state Rep. Joseph Abruzzo, D-Wellington, are now seeing an opportunity to cash in.

Last session, Abruzzo introduced HB 1441, the Internet Poker Consumer Protection and Revenue Generation Act of 2010. The bill would legalize online poker and allow the state to “regulate Internet poker sites that can ensure consumer protections and additional revenue to the state by authorizing, implementing and creating a licensing and regulatory structure and system of Internet poker.”

According to Abruzzo, about 900,000 Floridians visit online gambling sites, and he thinks the state, which faces a crushing $3 billion deficit, could generate $200 million per year if it legalized online gaming.

According to the bill, the state would charge a $500,000 fee to one or multiple Internet poker-hub operators; each of those operators would also be required to pay the state 20 percent of all monthly gross receipts.

Players would need a Florida-based IP address to play, and all winnings would be taxed. The bill would also put rules in place to punish those who try to cheat the system – exactly the sort of regulation that career players like Nichols are willing to go all in for.

Abruzzo’s bill did not pass last year, but he says it’ll be reintroduced next session.

“We hold the agreement to go back next year,” he says, adding that as the state considers building new physical gambling casinos, it ought to consider how quickly and easily it could set up online casinos as well.

“Unlike building a casino, which will be considered this next legislative session, brick-and-mortar casinos, which could take years to open up, we could have our intrastate network set up in a matter of months and start generating this revenue legally,” Abruzzo says. “More than that, it’s a consumer protection bill. It gives the players safeguards and a place to play, legal recourse if needed, so the consumers are better off, the state is going to be far better off, and our education dollars should grow tremendously just from this one piece of legislation.”

Nichols says he thinks that’s probably what the future of online gaming will be, and he thinks the federal government shut down online poker with a plan in mind.

“The idea of seizing the sites and doing stuff without an ending point in sight seems crazy,” he says. “So my assumption is that they knew they were going to get into the whole poker thing, and in a year and a half from now, we’ll see Harrah’s ESPN.com or something, and that will be amazing.”

Until that happens – if that happens – you’ll find Nichols making the rounds at the green-felt tournament tables wherever he can find them, such as last month’s No-Limit Hold’em Championship in Las Vegas. Despite his high hopes for that particular event, he left the tournament penniless.

By playing other World Series games, though, he won $15,915. That may not seem too bad for about a week’s worth of work, but compared to what he could have won in a week playing online – about $150,000, he estimates – it’s not much. The thing about online playing, Nichols is learning, is that you’re generally rewarded for making all the right calls; live games, though, are not as predictable. So now he has to work his way back up to the top of the heap.

“The first thing you’re always going to do when you bust out of a tournament is question all the things you did, especially in the final hand,” Nichols says. “But for the most part, after a little bit of reflection, I’d pretty much always be like, ‘All right, I’m pretty happy with what I did.’ When you’re losing, it feels like you’re never going to win again, and when you’re winning, it feels like you can never lose. It’s crazy, I can’t even describe it, but that’s really how it is.”

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