History of Online Poker & Poker Sites

The game of poker may go back as far as 200 years, but the online version as we know it today is only a mere 13 years old. The first virtual poker hand was dealt over the Internet on January 1, 1998 when the very first online poker site was launched, Planet Poker. Planet Poker was founded by poker pro, author, and legend, Mike “Mad Genius” Caro and is still in existence today, though it quit taking real money bets in March 2007 following the UIGEA fiasco (more on that later). The first real-money poker game was a Texas Hold ‘em game of $3/$6 stakes. Although Planet Poker was the first online poker room, it failed to tap into the crowds of players waiting to be summoned.

Interestingly enough, as unexciting as the history of Planet Poker is, the initial rake rate set by that very first online poker room is still the industry norm today at about 5% rake or max $3 rake cap.

Later in the year, a Senator Jon Kyl from Arizona introduces the Internet Gambling Prohibition Act (IGPA), so that before online gambling had even really gotten started, there were already lawmakers trying to knock it down. If passed, the IGPA would make it illegal for websites to offer online gambling services to US citizens. It fails to pass.

By the end of 1998, the online gambling business has generated $834.5 million in revenue despite connectivity issues, slow servers, and primitive network technology, as reported by Frost and Sullivan, global market research firm.

In 1999 three unnamed Canadians launch Paradise Poker out of Costa Rica, and it has much better success than Planet Poker and becomes the industry leader. In addition to Texas Hold ‘em, they offer Seven Card Stud and Omaha. They also provide improved software, security, and overall customer service.

In May 2000, Poker Spot launches by successful poker professional, Dutch Boyd. In September of 2000, Poker Spot is the first online poker site to offer online poker tournaments. Unfortunately, Poker Spot would be the first of many online poker horror stories as the sport struggled to form an orderly path to success despite its exponential and compounding growth. Boyd claims that the credit card processing firm that he used to process player deposits was not able to collect deposits, and there was no money in the system. Winners are not paid, and the room is out of business by November 2001. The emergence of e-wallets and e-cash payment processors like NETeller eradicates the problem that brought Poker Spot down.

UltimateBet launches in 2000 with some silent partners who turn out to be some high-stake players, and no-limit hold’em is offered. The average pot size is displayed in the software lobby for the first time. Russ Hamilton is hired to promote the site. His player sponsorship model that is still used today brought on 11-time WSOP winner, Phil “The Poker Brat” Hellmuth.

In 2001, Party Poker and PokerStars start up. Along with Paradise Poker, these three online poker sites are very successful and feature proprietary software that make their games better and easily accessible to dial-up and early broadband Internet users.

Throughout 2001, Paradise Poker remains in the front line of the industry, but PartyPoker has begun offering tournaments, and that summer, they host a series of tourneys that finish up on a cruise ship, now known as the PartyPoker Million cruise. The promotional-style strategy they adopt is a very successful business model and pays off with financial success.

By 2002 the momentum is gaining for online poker. Paradise Poker begins to lose ground, as they are still not offering mutli-table tournaments. Also, the travel channel televises the World Poker Tour. PartyPoker jumps at the opportunity to advertise and they see a huge influx of new players as a result. As if over night, PartyPoker becomes the world’s largest online poker site, successfully capturing a global market. It will remain the biggest Internet poker provider until 2006.

In 2003, Chris Moneymaker qualifies for a seat at the World Series of Poker Main Event and wins the tournament, turning a $40 investment in a qualifier tournament into a $2.5 million payout. This instantly catapults PokerStars into the running for biggest online poker site with average Joes everywhere signing up with the site hoping to be the next Moneymaker. Moneymaker inspired millions and as if over night, again, the online poker community swells. PokerStars takes in more players than all other sites combined.

By 2004 PartyPoker is making more than $1 million in profit daily. Online poker is growing faster than anyone could have fathomed. Mainstream America is seeing poker on television and more players are signing up. More and more new online poker sites are popping up on a daily basis. Full Tilt Poker emerges with heavy advertising campaigns on television and top poker pro spokesmen. Full Tilt instantly becomes one of the big guns in online poker.

In 2004, search engines Yahoo and Google remove all Internet gambling advertising from after the US Justice Department announces that advertising for such activity may be interpreted as aiding and abetting illegal gambling in the Wire Wager Act of 1961.

The US makes up more than 51% of the $8.5 billion in revenue generate by online gambling, according to Christiansen Capital Advisors, industry researchers. In 2005, an estimated 55 million Americans participate in online poker, 15 million of those playing with real money, according to the Poker Players Alliance (PPA), a newly founded grass roots advocacy group formed to combat the fight against online poker in the US. This year, PartyGaming lists on the London Stock exchange with a market value of around £4.6 billion.

Furthermore, Antigua Barbuda, Caribbean island nation and one of the top established Internet gambling hubs in the world, files action to the World Trade Organization against the US government suggesting that US anti-Internet gambling laws (as interpreted from the Wire Wager Act) are in violation of the WTO’s General Agreement on Trade in Services. The WTO rules in favor of Antigua Barbuda.

In 2006, just when everything is going great for global and US online poker markets, the US Senate under the Bush Administration attaches the Unlawful Internet Gambling Enforcement Act (UIGEA) to the Safe Ports Act, which passes, rendering it illegal for US banks to process online gambling payments for US residents. Overnight, the industry is shaken. PartyPoker bans US players from participating in real money poker games on its site, as do a number of other online poker websites. Other Internet poker sites, however, opt to ignore the UIGEA.

Barney Frank, Democrat US Congressman, attempts to pass legislation that will overturn the UIGEA, and the PPA takes a stand for the millions of US players who have been locked out of their accounts.

By 2007, NETeller, one of the biggest online payment processors for online gambling related transactions shuts its doors to US players when co-founders Stephen Lawrence and John Lefebvre are charged with money laundering and arrested in Manhattan, making the threat of the UIGEA all the more real for payment processors. Many other e-cash servicers also pull out over the following years.

Despite this though, online poker rooms continue to welcome new US real money player signups. Deposits and cash outs are masked by labels that hide their ties to online gambling.

Online casinos are also becoming more and more popular, with their success developing just as quickly as that of online poker. Many accept US players, many do not, as they face the same money processing issues.

In 2007, a story breaks that Absolute Poker players may have been the victim of a superuser account that was able to see its opponents’ hole cards. The online poker community is taken aback.

The fight for legalized online poker is gaining ground. In 2008, Barney Frank continues to try and overturn the UIGEA. A 32-32 vote needs one more vote to pass and doesn’t make it through, but the future seems bright for online poker with a new administration taking office. Texas Republican Congressman, Ron Paul uses repeal of the UIGEA in his presidential campaign.

In 2008, another superuser account scandal breaks out, this time with Absolute Poker’s sister site, UltimateBet.com. Via an in-depth investigation by the Kahnawake Gaming Commission and player analyses that were ignited by player allegations, Ultimate Bet is in the middle of a whirlwind of accusations that security of software has been compromised and once again some players were in fact able to play at these sites with the knowledge of other players’ hole cards. Between the years of 2005 and 2007, millions of dollars of unsuspecting players’ money is taken by superuser cheaters and goes unrecovered.

Also in 2008, South Africa and Italy join the long list of nations that have introduced legislation to regulate and endorse Internet gambling legally in their countries.

At the end of 2008, Anurag Dikshit, founder of PartyGaming, pleads guilty to illegal online gambling and is sentenced to pay $300 million in fines and faces up to two years in jail for violating the Wire Act.

By 2009, there is still no headway in the US for regulated online poker, despite the global trend for it. Congressman Jared Polis says, “The nail in the UIGEA coffin is the fact that the law doesn’t prevent Americans spending over $100 billion every year on foreign gambling sites.” The US ultimately loses this annual revenue that could otherwise be kept on US soil and benefit the still staggering economy.

April 15, 2011 becomes forever known in the poker world as “Black Friday.” The federal US government seizes the domains of the three biggest online poker sites services the US market, Absolute Poker, Full Tilt Poker, and PokerStars based on illegal transactions that were verified by Daniel Tzvetkoff. Only one of these would survive the year. A number of indictments are also handed down to founding members and executives responsible for these online poker rooms.

May 23, 2011, just five weeks after Black Friday, the US poker market is hit again. This time, it’s called “Blue Monday,” and 10 more online poker sites are shut down, this time by the Department of Homeland Security. An investigation uncovered an estimated 300,000 financial transactions were being processed via Linwood Payment Solutions connected with illegal gambling.

PokerStars survives the attack by US officials and begins repaying players. Absolute Poker closes. Full Tilt Poker players still await more than $150 million in payments that simply doesn’t exist. Accused of operating a Ponzi scheme, the Full Tilt Poker brand faces the worst publicity an online poker room could endure. Groupe Bernard Tapie works out a deal with the US DOJ and the Alderney Gambling Control Commission (AGCC) to retain licensing for the room and takeover agreements are still in the works.

By the end of 2011, online poker in the US is pretty much eradicated, and the future of regulation looms uncertain overhead. Will online poker ever be legalized in the US? Many hope so, but the question is when? With any luck, it could be in the next few years, as there is a very strong following behind the cause both in the public sector and the political base. The truth is that there are so many other issues facing Congress, Internet poker often gets shifted to the back burner when it comes down to business, but in reality it’s the billions of dollars that could stimulate the US economy, as well as the lost tax revenue that is a shame. US citizens are the real losers here.

Time Line

January 1, 1998 – Planet Poker launches and deals the first real money poker hand online.

1998 – Arizona senator Jon Kyl introduces the Internet Gambling Prohibition Act (IGPA) to attempt to prohibit websites from taking bets from US citizens. It does not pass.

1998 year end – online gambling as a whole generates $834.5 million in revenue in 1998 alone.

1999 – Paradise Poker launches.

May 2000 – Poker pro Dutch Boyd opens Poker Spot and offers first online poker tournaments. Poker Spot becomes the first online poker site to not pay players. By then end of 2001 they close.

2000 – UltimateBet launches.

2001 – PartyPoker and PokerStars launch.

2002 – PartyPoker emerges as the biggest online poker site thanks to promotions and WPT televised advertising.

2003 – Chris Moneymaker wins the WSOP Main Event by qualifying online at PokerStars catapulting PokerStar signups.

2004 – Online poker continues to grow exponentially. Yahoo and Google remove online gambling advertisements from their sites.

2005 – PartyPoker lists on the London Stock Exchange, one of the first Internet gambling companies to go public.

An estimated 15 million real money poker players exist in the US and 51% of the $8.5 billion online gambling industry is from US players.

The Poker Players Alliance forms.

2006 – The UIGEA is passed and immediately PokerStars withdraws from the US market.

2007 – Superuser account scandal breaks regarding Absolute Poker.

2008 – Another Superuser account scandal breaks out, this time involving Ultimate Bet.

PartyGaming founder Anurag Dikshit is sentenced for violating the Wire Act.

June 1, 2010 – The UIGEA officially goes into effect.

April 15, 2011 – Online poker’s Black Friday: PokerStars, Full Tilt Poker, and Absolute Poker domains are seized by the US feds, along with players’ funds; player accounts are frozen. Only PokerStars survives the year.

May 23, 2011 – Online poker’s Blue Monday: 10 more US-friendly poker sites are shut down.

2011 end – A takeover of Full Tilt Poker by Groupe Bernard Tapie is still in the works. Players have yet to be paid the estimated $150 million in owed funds. PokerStars deals its 70 billionth hand without the help of US players.