Does innovation come from stifling initiative, shutting down industry, banning in the interest of special-interest, walling-in against technology, throwing up barriers to stagnate and obscure?

Or does innovation come from free-market freedoms, from opening new resources to innovators, promoting and rewarding entrepreneurial work, creating a climate of possibility and hope, and inviting all to participate.

America falls behind because of special-interests and private agendas that thwart innovation and chain-lock change to sustain a status quo.

America leads the way when they are free to dream and make their dreams a reality.

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“In America it’s Prohibition” ~ UK Culture Secretary Tessa Jowell at Britain’s International Summit on Gambling

Britain’s culture secretary sought to build support among dozens of nations _ but not the U.S. _ for improved regulation of the global Internet gaming industry Tuesday at an international summit on the sector.

Officials from more than 30 countries debated regulation measures just weeks after the United States effectively banned online gambling amid fears it could exploit children and encourage criminal activity.

And so it goes. The USA did not regulate the growing international business when it passed the UIGE Act.

No, it effectively dealt itself out of the game.

With every passing day, the United States falls a little bit more behind in technology, expertise, and the market-place leadership of a burgeoning multi-billion dollar industry.

“Remote gambling has gone from a niche to mass market in a matter of years,” Jowell told journalists during a break in the gathering, the first summit to discuss the global impact of Internet gaming.

“There is a recognition that it is in the interests of all our citizens that we move to a framework of global standards on Internet gaming.”

The U.S. Congress caught the gaming industry by surprise when it added a provision to a bill aimed at improving port security that would make it illegal for banks and credit card companies to settle payments to online gambling sites. U.S. President George W. Bush signed the law Oct. 14.

The decision closed the most lucrative region in a market worth $15.5 billion this year in ’spend’ value; the amount gambling companies win from their clients, or the amount gamblers lose.

Jowell likened the U.S. decision to a new form of the 1920s Prohibition on alcohol, warning that it would drive the industry underground.

Well, the UK Culture Secretary Tessa Jowell has nailed it - it is Prohibition. And it’s hurting America, not helping it.

The latest news out of the Guardian UK is that PartyGaming and 888 Holdings have chatted over coffee about the possibility of a merger in light of the US Gambling Ban. Both are publicly listed in the UK, both operate out of Gibralter [offices on the same block] and the merger has been estimated at a value of $3B USD. Since the ban Party stock lost 70% of its value while 888 lost about 25%.

PartyGaming runs PartyPoker, what once was the largest online poker room, while 888 owns Casino-On-Net and Pacific Poker, no slouches themselves. The problem for Party mainly lies in the fact that at least 75% of its revenues came from the US market, so when they pulled out after the ban, they started sucking wind. 888 wasn’t impacted as much after pulling out America, since they’ve been marketing internationally for years and perhaps 50% of their revenue comes from the US.

So what do we make of this?

Well, it’s obviously early stage for merger talks, but that aside, what’s the real impact on the industry and players? This is where it gets interesting.

Let’s say I’m a UK player and I’ve been playing at PartyPoker because of the sheer number of other players. Then one day 75% of the players go away because they’re from the US. So what do I do? Stick with Party? No way - I want to go where the players are, so I start looking for poker rooms that still accept Americans, places like Scarlet Poker, Ultimate Bet, Full Tilt Poker, etc [go here for a complete list of places to play]. Where does that leave PartyPoker? Sucking even more wind because now their international players are leaving too, and revenue plummets further. The situation isn’t much rosier for 888 or the other major pub co’s either.

So one move from the US could collapse public, legally operating companies from many other nations. Shining stars of foreign public markets disappear and drive down the value of their stock market index - most countries don’t like that. Imagine if Microsoft disappeared from the Nasdaq one day - that’s impact.

Anyway, there’s an international battle brewing behind the “innocuous” moral arguments of our special-interest friends in Washington. One can imagine Bill Frist getting a cavity search upon arrival at Heathrow. Don’t worry, we’ll publish the photos.

That’s the consensus across the board just a couple of weeks past the official signing into law of the UIGE Act – there has been no shut down of poker.  Only a shake up.

Article after article, post after post, confirms that American poker players are not giving up their game - they’re just playing in the new places that welcome them.

In fact, it seems that the smaller poker rooms are booming.  The Tribeca Tables Network that is connected through online poker rooms such as Doyle’s, Scarlet, and Victor Chandler are seeing a huge influx of American players.  All that ‘Black Friday’ did was shift players from the publicly traded companies to the private ones.

The bigger rooms that are publicly traded had to bend to the new act, being forced to drop the US market due to a restriction on their books that say they can not knowingly break the law in a country they trade in; this opened the door for smaller, privately owned poker rooms and networks, such as Skill Games, to step up and take on a larger share of the market pie.

It’s working Poker Players.  The UIGE Act is un-American – and we’re proving it.

So keep playing poker.  Keep talking poker.  Because Poker is America.

In a typically coherant move, Tessa Jowell, the Secretary for the UK Department of Culture, Media and Sport has spoken out against the US gambling ban, saying the “new prohibition” makes offshore gambling sites the “modern equivalent of speakeasies,” the illegal bars that opened in the US under alcohol prohibition in the 1920’s. Of course she believes that regulation is far better than prohibition.

The DCMS set up the Gambling Commission back in 2001 to study the issue of “remote gaming,” or any form of gaming that happens away from a physical establishment. By 2005, they had developed the Gambling Act to cover and regulate all forms of gambling in the UK, with a target implementation date of September 2007. This timeframe may be adjusted in light of recent developments. As we stated in a previous post, the UK is working hard to become the world leader in Internet Gambling.

Ms. Jowell is hosting a summit next week with politicians from 30 countries to discuss the achievement of international gambling regulations.

Those are the words of North Dakota State Representative Jim Kasper speaking about his party when it comes to internet gambling.

Kasper, R-Fargo, had promoted a bill and state constitutional amendment during the 2005 Legislature to allow North Dakota to license and regulate online poker sites. His bill resembled the way the UK Gambling Act will regulate and tax online gambling and protect its citizens when it goes live in 2007.

Kasper believed that by regulating the online poker industry in North Dakota that the license fees generated would have covered the costs for all state public services and reduce property taxes. He also believed that the state-owned bank of North Dakota would have been able to make profits since they would be the only bank allowed to handle North Dakota-licensed online poker transactions.

The thinking behind Kasper’s bill was similar to the revolution the credit card industry underwent a couple of decades ago. And by addressing new laws and regulations, the Dakotas were on the front lines of a credit industry boom. Other states quickly followed when they caught wind of the money being made. That’s why today you have the number of choices and rates offered in a variety of credit products.

But, for now, protectionism won over vision.

When Freeloading Frist slipped the UIGE Act into the Safe Port Act in the last hours before Congress adjourned, Kasper commented, “I was saddened to see what the Republican Congress did.”

He added, “It was a terrible way to make public policy.”

In a follow-up to Let Foreigners Eat Our Lunch, the International Herald Tribune has written an article about the landscape of online gambling in Europe, as the fallout from the US ban continues. In summary, the European Union is generally taking a different approach than the US.

“Chaos breeds opportunity and we will seize that opportunity. The European Union is run in a way that favors our business,” states Mitch Garber, CEO of PartyGaming.

Monte Carlo Casino at night

Not all countries in the EU are going the way of regulation. Though the UK, Italy and Belgium are opting to regulate, France and Germany are attempting to protect both their private and state-owned lottery and casino revenues.

“European countries like the U.K. that take a more enlightened approach of regulation, not prohibition, stand to gain.” - Paul Renney, Internet lawyer at Addleshaw Goddard in London

The primary impact of all this maneuvering for the American gambler is simple: “American gamblers may find themselves pushed into a market that’s in the hands of Europeans,” according to William Eadington, a professor at the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada at Reno.

As the final word, Mitch Garber addresses the major issue at play in Europe, and which we believe also applies to American lottery corporations and private gaming operators such as Harrah’s and MGM Mirage: “The gaming and lottery monopolies are the last to fall, and they are falling and will fall. You’re going to see a lot more tolerance in Europe.”

“PLANS to turn Britain into a world leader in internet gambling have been drawn up by ministers, according to internal Whitehall documents. In stark contrast to America, where online gambling has in effect been outlawed, ministers want to attract offshore companies to Britain.”

So starts a recent article in the Sunday Times Business section. The British have realized that the internet will keep on growing right along with gambling. Together, internet gambling will present fantastic opportunities on an international scale. Since both industries generate innovation, technology, expertise, high-paying careers and tax revenue, it would be smart to lead the way. Make a plan. Attract investment. Regulate, tax and promote.

Britain gets visionary leadership. We get the UIGE Act.

We invent poker. They create an international market from it.

London has their gambling companies listed on a stock exchange. We can’t even use Visa to bet on the World Series.

The rest of the world embraces challenges, finds solutions, and surges ahead. We nod our heads and go “tsk, tsk”.

Poker is one of America’s greatest exports to the world. Too bad we’re just giving it away.

The headline alone should tell you how broad this issue has become. When FOX News allows an opinion that berates the Republicans for their stance on online gambling, one must take notice. The focus of the piece is on the moral aversion to gambling held by its chief sponsors - Goodlatte, Kyl, and Leach - and their desire to impose that moral rectitude on the rest of the country, coupled with the dirty pool that led up to the ban. Go read the whole thing over at FOX.

What happens to your business when the source of your recent overwhelming growth dries up? This is the question facing organizers of the World Series of Poker, who saw event entrants grow by over 1,000% in two years, thanks to the increased exposure of online poker and the qualifiers who came through the online poker sites.

The likely answer is: your business suffers, badly.

Now, whether through sheer determination, lack of foresight, pure bravado, or simply an unwillingness to admit that the sky is blue, the WSOP doesn’t agree:

“In 2005 and 2006 we had record fields each year. We’re confident again that 2007 will be the best one ever.” - Gary Thompson, WSOP Tournament Spokesman

This flies in the face of what other industry insiders are saying. Mike Sexton, host of the World Poker Tour, thinks the WSOP will be “devastated” and Michael Bolcerek, president of the Poker Players Alliance, agrees. There’s a great article over at Business Week with all the gory details.

Considering that many of the entrants were awarded entry fees to the WSOP via low buy-in qualifying tournaments, we think they might not be so keen to shell out the actual $10K buy-in.

What do you think? Will you still go, even if you have to pony up the full fee?