The Disadvantages of Regulated US Online Poker

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Regulated online poker has existed in the US since 2011. Nevada became the first state to legalize the game in 2011 and saw Ultimate Poker (now defunct) launch shortly afterward.

Many had high hopes for the legal US online poker market when it first started. After all, America was the primary catalyst behind the poker boom (2003-06).

But nearly a decade later, regulated iPoker has fallen vastly short of expectations. Even with shared player pools between New Jersey, Delaware, and Nevada, the American market isn’t generating much traffic.

It’s safe to say that the US internet poker market is a disaster. But why? You can find out by reading the following points.

Slow Process

Online poker regulation hasn’t moved anywhere near as fast as players would like. In fact, it’s been painstakingly slow.

The government slows anything down that it gets involved with due to red tape. The same is definitely true of internet poker.

At the time of this writing, only Delaware, New Jersey, Nevada, and Pennsylvania feature legal online poker for real money. Other states have discussed the matter only to fail to pass or even introduce legislation.

Assuming the next decade goes like this one, perhaps up to 10 states will feature regulated iPoker. This amount still may not be enough to produce serious traffic.

Divided Player Pools

In 2015, Delaware and Nevada became the first states to share player pools. However, this deal didn’t have much of an impact due to the fact that both states combined equal less than 4 million residents.

New Jersey remained the elusive state that wouldn’t join their compact. The Garden State, which has nearly 9 million residents, felt that it needed to share players with smaller states.

However, New Jersey finally came around and joined the Delaware-Nevada multi-state compact in 2017. This deal has produced a player pool that draws from nearly 13 million people.

Pennsylvania may very well enter this compact at some point as well. The state and its 12.8 million residents would create a pool that draws from close to 26 million.

But then again, the Keystone State could remain like New Jersey and initially reject an interstate compact. Future states may also take a wait-and-see approach.

In the end, the US will only continue seeing divided pools as more states legalize the game. It would be great if every state that regulated iPoker would join in a compact. Again, though, no guarantees can be made.

Less Liquidity and Smaller Tournaments

The height of the online poker boom was partially fueled by massive guarantee tournaments at the time. Sites like Partypoker, PokerStars, and Full Tilt regularly offered seven-figure tourneys.

Of course, the same sites enjoyed access to a global player pool that was unbound by government regulations. Once certain legal events crippled the global internet poker economy, seven-figure tournaments became less frequent.

Full Tilt Online Poker Game

Regulation and divided player pools have severely reduced online poker liquidity. As a result, sites can no longer profitably run massive guaranteed events.

You can find some $50,000 and even $100,000 tourneys in the US market on occasion. But these events aren’t large enough to draw huge crowds of casual players.

Liquidity won’t really pick up until more states legalize online poker and join in interstate compacts. Until then, struggling sites will continue billing $50k events as their marquee weekly or even monthly events.

Big Players Haven’t Entered the Market

Pennsylvania legalizing internet poker is definitely a big deal. After all, they’re the fifth-largest state in America.

However, even the Quaker State’s population isn’t close to the four largest states. California (35.8 million), Texas (29.1 million), Florida (21.5 million), and New York (19.5 million) are the biggest prizes in terms of iPoker legalization.

Unfortunately, not one of these states have legalized any form of internet gaming. California is the only member of the four to hold serious talks about the matter.

In fact, the Golden State has been discussing legal online poker for a decade now. Talks stall year after year due to a divide between Native American casinos, cardrooms, and racetracks.

As it stands, none of the four-largest states are close to regulating online poker. Considering that they collectively represent 30% of the US population, this definitely isn’t a good thing.

High Taxes in Some States

Politicians and American citizens alike have lightened their view of gambling in recent decades. Once considered a bigger taboo, gaming is now seen as commonplace in many parts of the country.

Nevertheless, certain groups still battle any efforts to expand land-based or online gambling. Poker is no exception to this fact.

Politicians who represent conservative groups always want something to sweeten the deal before they agree to legal internet gambling. This sweetener comes the form of taxes.

Nevada imposes a reasonable iPoker tax rate (6.75%) on operators. New Jersey and Pennsylvania straddle the line between reasonable and high taxation at 15% and 16%, respectively. Delaware, meanwhile, features a ridiculous 29.4% tax rate on internet poker sites.

At first glance, such high taxation only seems to affect operators. But online poker rooms must pass some of these costs onto players to have any chance of being profitable.

These costs negatively affect rake, VIP rewards, and the number of available promotions. Simply put, higher taxes mean less chance of being a winning player.

Online Poker Isn’t Viable Without Casino and Sports Gambling

Many internet poker rooms made a killing during the boom years. Again, access to an unchecked global market helped sites earn serious profits back then.

Such potential has been drastically reduced with regulation and, in some cases, high taxation. Online gambling sites in regulated markets don’t see many profits from poker alone.

PokerStars is the perfect case of this fact. Stars entered New Jersey in 2016 to much acclaim and were seen as a savior of US online poker.

PokerStars Online Poker Game

However, they too found the Garden State’s iPoker market rough going in the beginning. Much like with the other states and countries they operate in, PokerStars now pushes their casino gaming and sports betting more than anything.

With liquidity as low as it is today, gambling sites simply can’t rely on internet poker is to keep them in business. Instead, they dedicate more time and resources to their online casinos and/or sportsbooks.

The result is that gambling operators aren’t enthused about making their poker products more attractive to gamblers.

Conclusion

Many US poker players pray for the day when the boom years will return. The mid-2000s represented a time when Americans could compete against anybody in the world in multimillion-dollar tournaments.

But these days are long gone. The harsh reality is that legal US online poker has been a massive failure up until this point. Everything begins with the slow regulation process. Only four states feature an iPoker market at the time of this post.

California has been debating online poker for a decade to no avail. The way it seems, the major players in California will never agree to a deal. At least the Golden State is willing to discuss the matter. Most states have had no serious talks about the game.

The current situation creates the possibility that regulated US internet poker could suffer from low liquidity for years to come.

The lack of operator and tax revenue hasn’t exactly been enticing either. Politicians fail to get excited about legalizing internet poker when seeing that New Jersey, for instance, rakes less than $2 million per month.

Other states will eventually join the fold and regulate the game. They may even sign compacts and share players with other states. Unfortunately, online poker’s popularity will only continue to diminish in the meantime. By the time 10-20 states finally offer the internet version, will Americans even care?