Is shared liquidity poker's silver bullet?

May 1 2018 marked the first day since Black Friday that multistate online poker has existed in the US. More than seven years after the original online poker boom was brought to an abrupt and acrimonious end, WSOP flicked a switch on its servers and New Jersey grinders could suddenly lock horns with their Nevada and Delaware counterparts – this time in a fully regulated online arena. “[This] is the best news in recent memory for the struggling regulated online poker market,” Eilers & Krejcik Gaming said in a note.

It was a move brought about by sensible regulators, but also perhaps a little by desperation. The Nevada-Delaware pool has amounted to pretty much what you would expect from a combined population of around four million people, while the New Jersey market has been on a downward trend for well over a year. March marked the 13^th straight month that the state’s online poker revenues declined year-on-year. So, will shared liquidity be the boon that players, operators and regulators expect, and/or hope?

On the surface at least, there are reasons for caution. After all, Nevada’s online poker is only around 40% the size of the New Jersey market, so how much extra liquidity can it really bring? Likewise, WSOP and 888 are the only brands with the necessary licenses, meaning they are the only firms set to benefit.

Moving on up

However, the (very) early signs are promising. The 24-hour peak of active players in WSOP New Jersey pools rose from around 200 before the compact to around 380 in the days immediately after – a 90% uptick. Much of that initial excitement will die down of course, but there can be a reasonable expectation of a stable 30% rise. That, after all, was the uptick PokerStars reported in its European games following the creation of a shared liquidity pool between Spain and France.

“I do think it will reverse the recent decline,” says Adam Small, co-founder of poker affiliate PocketFives. “There’s a lot of talk that poker is dying, the good days are gone and you can’t deny a kernel of truth in that because there are some things that can’t be the same as 10 years ago. But we have a chance to move beyond these small ringfenced markets because poker just doesn’t function like that.

“Poker does well when the sites are big,” he adds. “You can offer more variety and bigger prize pools. You’re just going to have more attractive products and that’s going to work out a lot better.” Indeed, one of the promises of the expanded pool was that companies would be more willing to invest in marketing, tournament prizes and the product itself. In fact, Caesars has been making the most of the launch with a flurry of announcements.

“With the advent of tri-state shared liquidity, we have completely revamped our tournament schedules, our cash games offerings, our loyalty program and our promotional calendar,” said WSOP.com’s head of online poker, Bill Rini. The brand also unveiled an improved loyalty program called ‘Poker Rewards’ where players can achieve up to a 32% rake back. The firm also launched the ‘Coast to Coast Classic’ tournament series with more than $1m in guaranteed prize pools, including a US regulated online poker cash record $200,001 guaranteed main event.

It’s a level of investment not seen since PokerStars first launched in New Jersey, and even that investment was quickly reeled in when the realities of the market became apparent. So, the overall effect on the market should be very positive, and even more so when the real-life WSOP rolls around at the end of May and poker fever grips Nevada, with knock-on benefits for players in New Jersey.

Shifting sands

What is perhaps more uncertain is how the compact will affect the dynamics of the market. Pre-compact, PokerStars held around 40% of the New Jersey market, with partypoker (and MGM) at 31%, and Caesars/888 around 29%. “We expect WSOP to capture additional market share above and beyond the simple combination of the three markets,” predicted Eilers & Krejcik Gaming. “The site will be able to justify an increased marketing spend in NJ once the markets are combined. WSOP has been slightly more conservative around marketing and promotions than competing sites in NJ, so an expansion of the budget will likely draw some additional traffic back to the site.”

And with PokerStars’ market lead likely to erode, how will the operator respond? The obvious response is to get a Nevada license of its own and join the liquidity pool, but that could be trickier than it appears. The firm is currently banned from the Nevada market due to the ‘bad actor’ provisions in the state’s online gambling laws. The ban, which applies to individuals and ‘covered assets’ like software, has no firm expiry date. PokerStars declined to comment when EGR NA asked about its chances of securing a license, but Small suggested the firm “seemed to be permanently locked out of Nevada.” Eliers & Krejcik Gaming concurred but said the firm “could possibly find a way back in with the right partner.”

“Who that partner would be is another question altogether,” the boutique analyst firm added. “Stars’ partner in NJ [Resorts] has no links to Nevada, and there’s not another super-obvious candidate. You could make an argument that Penn/Pinnacle fits the bill (national footprint, no established poker partnership) but we’ve heard no talk to that end and have a hard time believing poker would be a priority for the company at this stage.”

Indeed, with The Stars Group recently buying Sky Betting & Gaming, as well as integrating two new acquisitions in Australia, the relatively small poker market of Nevada is unlikely to be front-of-mind.

Join the party

It is likely to be a different story over at partypoker and its MGM skins, where there is significantly more chatter about expanding, although the company also declined to comment on the record. However, Small says he definitely thinks MGM is “going to get in there with party.” “In the next few months we will be looking at an MGM site,” he suggusts. “Maybe it will be playMGM [as in New Jersey], maybe it’ll be party, or maybe both.” Partypoker’s owner, GVC, has indeed been ramping up its investment in New Jersey in recent months, and in partypoker itself. At the start of May, for instance, GVC upgraded the Spanish version of the partypoker site before joining the Spain/France shared liquidity pool in what could be seen as a harbinger of things to come in the US.

“It’s certainly possible that MGM could decide to launch in Nevada now that there’s the opportunity to link up with the NJ market,” Eilers & Krejcik Gaming added. For the smaller players like Pala Poker, there are no plans for expansion. Pala Interactive CEO Jim Ryan told EGR NA via email: “Pala will not be seeking a Nevada license. The Nevada poker market is too small to justify the cost and the market is well served by Caesars/WSOP.”

Of course, that is not unexpected given that Pala has said since launch in New Jersey that its poker product is kind of a trial balloon – a way to improve the platform and product ahead of the rest of the US market opening up. In that sense, Pennsylvania is the priority, and the big question for them – and the rest of the industry – is whether Pennsylvania will eventually join the new liquidity pool.

Penn pals

The Pennsylvania Gaming Control Board has issued no formal statement on the matter, but the people in the know are quietly confident. “You may not be giving the regulators and legislatures enough credit here,” Bill Rini tells EGR NA when questioned about the likelihood of Pennsylvania joining the compact. “They are smart and savvy people and ahead of the curve of their brethren around the country.

“They are trying to generate revenue to help the state. They understand the best way to do that is to ensure the product offering is competitive and has the best chance to succeed. They are well aware that poker is a liquidity game and the bigger the pool of players the more everyone benefits.”

Online casino operators may not agree about the “smart and savvy” description of Pennsylvania regulators, but Rini’s confidence should be reassuring for online poker operators around the world who are awaiting progress in the US. Pennsylvania brings another 13 million people into the pool should it join later this year, and that is suddenly a very different proposition for players and operators alike.

The final factor to consider with the liquidity compact is the knock-on effect on other states considering online poker legislation. “Most states in the US don’t have a huge population and while many would be reasonably poker-friendly, they don’t want the responsibility of launching a market like this for a return which simply isn’t going to amount to much,” says Small. “This compact changes that.”

“The opportunity to latch onto something existing could encourage legislators in smaller states to give this a more serious look.” Indeed, the structure of the pool, with all the servers being situated in New Jersey, could also be attractive to smaller states, with much of the administrative and compliance duties perhaps passed on to the experienced regulators in New Jersey – at a small cost, of course.

The advent of shared liquidity to the US does indeed promise to be more than the sum of its parts, with the promise of more marketing and investment in the game, and more opportunities for expansion around the corner. Maybe it’s time for the ‘poker is dead’ doom-mongers to walk away from the table.