An Existential Crisis
Fear of poker bots is no longer a tinfoil hat conspiracy, with some believing the modern, sophisticated bots are a signal of the end of the online poker era.
The Bulletin Board
VIEWS: Does the era of poker bots spell doom for online poker as we know it?
LOOSE ENDS: Underdog returns to Kansas; BetFred leaving Arizona.
NEWS: Wynn settles another lawsuit: Down $200 million in two weeks.
VIEWS: Online gambling critics have repackaged an old argument, but it’s catching on this time.
AROUND the WATERCOOLER: Underdog “just made the list, buddy.”
STRAY THOUGHTS: Words matter: The end of gambling’s C-word.
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Online Poker’s Latest Threat: Russian Bot Farm
Bots are nothing new in the online poker world, but the level of sophistication has reached a point where there are legitimate concerns that online poker (at least as presently structured and offered) may not survive.
A Bloomberg article detailing a nearly 20-year-old poker bot farm in Russia is attracting considerable attention.
As the Bloomberg article notes:
“Advanced poker software is now widely available for a few hundred dollars. Forums are full of accusations about everyone from anonymous, low-stakes fish to sponsored professionals. All the big platforms promote a zero-tolerance policy, but no one seems to know how many bots are out there or where they come from. “It’s a scourge,” one gambling executive told me.”
How does this end? There are a lot of potential scenarios.
Is it the end of online poker? Will online poker and live poker become separate games, one focused on data and the other on rapid adjustments and live reads? Or will technological advancements become a part of the game, with a focus on who has the best bot assistant? Or is it merely a reason for the game to evolve further?
As the Bloomberg article said:
“This new reality made me think of bots as a virus, attacking the body of online poker. Over time, some viruses evolve to shed their predatory traits, and the host’s biology absorbs them as they weave themselves permanently into the genome. Perhaps it’s the same with poker, and online players should learn to live with bots.
“Or maybe the Morgan Stanley analysts were right in 2019 and the game is slowly destroying itself... Moneymaker himself told me AI and bots represent a massive threat to the industry he helped make. “It might end up killing the whole online poker world eventually,” he said.”
For more on this topic, you can read an excellent summary of the Bloomberg article from an online poker player’s perspective from Jonathan Raab and a separate but connected poker bot article from Poker.org.
Loose Ends: Underdog Returns to KS; BetFred Leaving AZ;
Underdog receives regulatory greenlight in Kansas: Underdog Fantasy (a newsletter sponsor) was one of six daily fantasy sports operators that received a cease-and-desist order from Kansas regulators in February. The company has returned with its peer-to-peer “Champions” offering. Kansas Racing and Gaming Commissioner Don Brownlee said the new offering “complies with the spirit of Kansas law.” You can find more Underdog news in the Around the Watercooler section.
And then there were three: Betfred is exiting another US state, announcing it will leave Arizona in November. The company has already pulled out of Maryland and Colorado, leaving it active in just three states: Iowa, Virginia, and Pennsylvania — BetFred operates retail books in Louisiana, Nevada, and Washington State. As reported in August, BetFred US CEO Kresimir Spajic told EGR a complete US drawdown was on the table: “The question is: Can you make a business profitable enough to make sense to continue operating in the US versus putting this effort and investment elsewhere that might yield a bigger return?”
The number heard around the gambling world: $63 Billion: Yes, I’m aware of FanDuel’s very interesting Investor’s Day presentation and comments and will have a full write-up on it for Monday’s newsletter — it’s a story that I would prefer to research and find points of interest rather than be quick.
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Wynn Settles Second Lawsuit: Down $200M In Two Weeks
Wynn Resorts has settled a class action lawsuit that will see shareholders split $70 million. The case stems from the sexual misconduct allegations against former CEO Steve Wynn.
According to the lawsuit, Wynn's stock lost value after the news broke. The suit claims executives failed to disclose once they were made aware of the allegations.
Per the Las Vegas Review-Journal:
“Each class member that files a valid proof of claim will receive their pro rata share of the net settlement fund,” a representative of the law firm said. “Attorneys will request that the court approves a fee for their services and reimbursement of some costs, which will come out of the $70 million fund. We cannot now predict what a recovery per class member will be.”
“We are pleased to have resolved this long-standing legal matter through a settlement which we believe is advantageous for the company,” Wynn Resorts said in a Thursday email. “As is customary in such matters, our insurance has covered the majority of the $70 million settlement, with Wynn Resorts covering $9.4 million of the total.”
A week earlier, Wynn reached a $130 million non-prosecution settlement with federal authorities, which included an admission that it illegally used unregistered money-transmitting businesses to circumvent the conventional financial system.
Per the press release from the US Attorney's Office, Southern District of California:
“Casinos, like all businesses, will be held to account when they allow customers to evade U.S. laws for the sake of profit,” said U.S. Attorney Tara McGrath. “Federal oversight seeks to prevent illegal funds from tainting legitimate businesses, ensuring that casinos offer a clean, thriving, and safe entertainment option.”
Critics Claim Online Gambling Is a Net Negative
But how much did you lose? That is the question family and friends asked every professional poker player during the Boom years. And now opponents of online gambling are deploying a similar talking point against legalization efforts, juxtaposing the revenue gains of online gambling against the social costs.
This argument has been around for years (and has been extended to every form of gambling, from lottery to casinos) but has never been taken as seriously as it is now.
“The total loss to consumers from state lotteries, regional casinos, and online gambling every year exceeds more than $150 billion a year,” Les Bernal of Stop Predatory Gambling recently said (Bernal has made these claims for many years). “That’s from all forms of state-sanctioned predatory gambling. And that’s a conservative figure. That’s from the state gambling commissions. That equates to more than $1 trillion of personal wealth lost over the next six years.”
Bernal has repeatedly called online gambling the “ultimate budget gimmick.”
They may seem easy to dismiss, but these arguments are gaining traction (at least in the online realm) and coming at the industry from all different directions.
A recent study (previously reported here) claims that for every $1 deposited into online sportsbooks, households reduce their investment allocations by $2. A second study claims bankruptcies and debt delinquency increase in online sports betting states.
The Campaign for Fairer Gambling claims in a recent report that “Other industries where would-be gamblers might spend their money instead are much more labor-intensive than gambling. Therefore, when customers spend money on these discretionary alternatives, it creates more value in terms of overall economic activity, jobs created, and wages paid out. Between 2015-16 and 2022-23, British customers spent an average of £5.6bn annually on online gambling. We estimate that had the effect of reducing economic activity by £1.3bn per year and wages by £2.6bn.”
Online gambling presents an easy target on this front. Unlike land-based casinos that invest in infrastructure and directly employ hundreds and even thousands of employees (and support even more jobs in the supply chain), the argument for online gambling is limited mainly to direct tax revenue from customers.
Without that “yeah, but” counterargument, the door is open for critics to claim the social costs outweigh the benefits.
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Around the Watercooler
Social media conversations, rumors, and gossip.
It’s always nice when I can shout out my sponsors.
For the second consecutive year, Underdog Fantasy (a newsletter sponsor) has made LinkedIn’s 2024 Top Startups list in the United States, coming in at number 15.
The full list can be found here.
Underdog is the only sports gaming company on the list and the only sports gaming company to land on the startups’ list since 2019.
Per the press release:
“LinkedIn’s annual startup rankings are based on LinkedIn data across four categories: employee growth; jobseeker interest; member engagement within the company and its employees; and incoming talent from LinkedIn’s Top Companies list. To be eligible, companies must be fully independent, privately held, have 50 or more full-time employees, be five years old or younger and be headquartered in the United States.”
I’ve gotten to know the Underdog team (they have sponsored the newsletter since it launched in August 2023, and co-sign what Chris Grove tweeted:
And lest you think Underdog is looking at this as a feather in its cap, Founder and co-CEO Jeremy Levine is eyeing the #1 spot:
Stray Thoughts
You wanted change!
I was a guest on the Indian Gaming Association’s New Normal Webinar Series yesterday to talk about the impact of online gambling on land-based gambling.
I don't believe the C-word (cannibalization) was ever mentioned during the hour-long discussion with Gene Johnson, myself, and co-hosts Victor Rocha and Jason Giles—that was intentional by all involved. Yet, the conversation would have been exactly the same had we used the word.
As I wrote two weeks ago, there are better, more productive ways to discuss the changes in player behavior:
“Let’s talk about the word itself for a moment.
“I suggest we cease arguing against cannibalization. It’s a taboo word, and the minute it enters the discussion, the moment you start to defend against it, I would argue that you’ve lost the plot and the debate.
“We need a new term. Demand substitution, a term coined by Chris Grove, would fit the bill. Other options exist, such as demand or spending shift, but the point of the exercise isn’t to find the magic word; it’s to replace the word that is a conversation ender with a conversation starter.”
As Chris Grove said on LinkedIn, what we call things matters.
