Online poker a booming global enterprise

By Andy Sullivan

WASHINGTON, March 4 (Reuters) - It's noon on a snowy Monday, and Joe Fox is looking for action.

The pool tournament at a local bar doesn't start for another seven hours and the casinos of Atlantic City are a three-hour drive away, but on his computer screen the world's largest poker party has drawn 35,000 players from around the globe.

He transfers $75 out of his checking account to Gibraltar-based PartyPoker.com and joined nine others in Texas Hold 'Em, the staple game of tournaments and TV specials.

With a click of his mouse, he raises the bet or folds his cards, ignoring other players' banter about the weather and their cards.

He wins several hands, but within half an hour his $20 worth of chips are gone. It's time to join the 18,000 players at PokerStars, another online poker room.

"It's a way to be competitive without having to get sweaty, which is ideal for schlubby, non-exercising people like me," says Fox, a 34-year-old political strategist.

The poker craze has moved from the basement card table to the home computer, as millions of players take part in low-stakes games or $10,000 tournaments that stretch for hours.

It's a huge business that exists in a legal limbo in the United States.

Inspired by players like Chris Moneymaker, who won the World Series of Poker in 2003 after qualifying through PokerStars, more than 1.78 million players bet money in online poker rooms during the month of January, according to the research service PokerPulse.

During the 24-hour period when Fox logged on from home, players wagered a total of $186 million.

INVESTORS BET TOO

The rapid growth of the industry has drawn the interest of another form of gambler on the London Stock Exchange.

PartyGaming, which owns PartyPoker.com, is considering a public offering expected to value the company at 3 billion to 5 billion pounds ($5.7 billion to $9.6 billion) in what would be London's largest listing since 2001.

NETeller Plc , which handles money transfers for the industry, has seen its stock price more than triple to 622 pence ($11.87) since it went public last April, while Sportingbet.com Plc saw its stock price shoot up more than 50 percent last October when it announced plans to buy No. 3 poker site Paradise Poker for $300 million.

But while England and other countries increasingly welcome online gambling, the U.S. Justice Department says a 1961 law that forbids interstate telephone betting also applies to the Internet.

Congress has since 1997 failed to specifically outlaw online gambling amid a thicket of competing interests.

Under pressure from the Justice Department, services like Visa and PayPal have blocked payments to gambling sites, while media outlets and search engines like Yahoo Inc. have refused to run their ads.

But the U.S. residents who account for more than half of all online poker players face no penalties if they gamble online.

So when Joe Fox wants to bet U.S. dollars against other Americans, he logs on to a service registered in Gibraltar with operations in India that may be soon publicly traded in London. His money transfers are handled by a Quebec payment processor at $3.99 a pop.

Online poker rooms took in $1.3 billion in revenues last year, a figure that Christiansen Capital Advisors expects to grow to $5.8 billion by 2008, or 28 percent of all Internet gambling revenues.

Analysts say the United States will eventually accept the industry.

"Somebody in Washington is going to say, 'Hey guys, we're losing a fortune by not taxing this,'" said Joseph Kelly, a professor of business law at Buffalo State University who has helped other countries draft online gambling rules.

Sebastian Sinclair of Christiansen Capital Advisors said the United States will gradually legalize the industry after realizing that attempts to stop it are fruitless.

Nevada and the U.S. Virgin Islands have already legalized online gambling for casinos and residents within their borders, and a similar bill is advancing rapidly through the North Dakota legislature.

Several U.S. courts have ruled that the 1961 Wire Act only applies to sports betting and not other forms of Internet gambling, while the World Trade Organization ruled last year that the ban on Internet gambling violates international trade agreements, a decision the United States has appealed.

Joe Fox says legal concerns don't affect his 15-hour-per-week hobby, which has set him back roughly $500 over the past year out of a total investment of $1,400.

"I like testing myself against other people, and I like beating other people," he said. "It's a lot more fun to take money from people you don't know than from your friends."