So Pokerstars, Full Tilt and Absolute Poker have been given a major KITN by the Feds, as every poker blog in the world is reporting;

http://www.justice.gov/usao/nys/pressreleases/April11/scheinbergetalindictmentpr.pdf

AFAIK Full Tilt have already put out a release saying that they’re pulling out of the American market entirely, and 2p2 reports that their client software update this morning is already blocking log-ins from the States. Pokerstars have a statement reassuring people that it only affects Americans and people’s accounts are safe. No idea what AP have done, I’m guessing nobody really cares that much about them.

A lot of people are pointing out the suspicious timing of the event with regards to the District of Columbia deciding to regulate poker (plus general noises of regulation in a bunch of other states). Is it a corporate conspiracy to destroy the main sites in order to allow a US-only (and US based) site to dominate their local market? A bit too much hollywood probably, but quite possibly it is linked in some way, in at least it’s a cleaning house before regulated poker gets going there. Pretty dumb though to bring down an industry in such a heavy handed way though.

For all the poor suffering of the Americans (who have my sympathies), I might actually profit from this situation. A few weeks ago I bought a load of stock in Party Gaming. They were about to merge with Bwin, and it looked like an excellent opportunity. Even though their online poker was a shadow of its former self, their general online gaming business (bingo etc) was easily outstripping any losses from their poker business. With Bwin their player base would be strengthened, and while it still wasn’t going to compete against PS & FT, it was definitely going to be viable certainly until a possible return to the States 2012ish. My thoughts were to buy a moderate stock which should gain a bit on the merger, but mainly had the chance to rocket if US regulation sorted itself out.

However I was immediately hit by a regulatory change in another country – Germany decided it was going to ban live sports betting, plus tax gambling companies 16% on bets. Bwin’s market is largely in Germany, and a lot of speculators felt that this rate of taxation would completely destroy that market. BPTY shares dropped 30% in two days flat!

The masssive volume of shares that moved during that period were also very suspicious. Lots of people were suggesting the bad news from Germany had been used to heavily short the stock, and it had been a deliberate manipulation by the market makers.

I held onto the shares (from stupidity mainly – I hadn’t set a stop loss order, and it all happened too quickly to get out in time), and generally the view on Germany is that the news isn’t all that bad (and it’s not set in stone yet anyway, so may change). When the stock bottomed out and stopped crashing I even bought more shares since they’re clearly undervalued now, and I’m still banking on a return to the US at some point.

So now black Friday happens! I’m imagining that even a lot of non-US players won’t be comfortable staying at FT & PS, and Party could get a player boost. Also Party’s competition has taken a massive blow, in fact this will be a huge boost to every minor poker site out there – FT & PS dominating was great for the players, but maybe not so good for the industry as a whole. This could be a slash and burn action that actually regenerates a much healthier market. BPTY should strengthen on that basis, but I am wondering if people aren’t as rational as that, and what could happen is the bad guy image of online gambling has been bolstered (not to mention the vulnerability to goverment regulation), and we could see the share price drop even further.