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Downswing: Online Poker and the New Orleans Economy
by Joe Longo

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Senator Bill Frist, sponsor of the Unlwaful Internet Gambling Enforcement Act, signed into law last week and seemingly dedicated to screw the semi-pro poker enthusiast.
At 5:30am on Sunday, August 28, 2005, Sunny Mehta was in the poker room at Harrah’s New Orleans, running badly in a no-limit game, when the downtown casino decided to shut its doors.

“I’d never been in a casino that closed down before,” Mehta said.

One of the pleasures of card playing, and of poker in particular, is that it focuses the mind so that the passage of time and other outside considerations have a way of disappearing. Consider, then, how Mehta must have reacted to the news of the city’s mandatory evacuation.

After packing a small gym bag, Mehta drove across the Causeway to the home of a friend’s parents in Covington. After riding out the storm, Mehta emerged to find that his car had been blocked in by several fallen pine trees. As for the city itself, the news that did emerge made it clear that he would not be able to return anytime soon, if ever.

“I’d been on a big downswing,” Mehta said, a term winning gamblers use when referring to the variance that often causes sizable short-term losses. “And most of my remaining bankroll was stuck in a safe deposit box in a bank in the French Quarter.”

Whether that money was safe, or looted, or possibly underwater was at the time a mystery. Restless, Mehta packed his gym bag and hitchhiked to Baton Rouge airport, where he waited twenty-four hours for a flight that took him to his mother’s Northern California home. Two weeks later, he borrowed money from his mother and headed to Las Vegas.

“It was a refuge,” Mehta says of his poker playing, mostly at the Wynn Hotel on the Vegas strip. Poker was the one thing he could control when every other aspect of his existence was in flux. It also helped, too, that he began to run well again and very quickly paid his mother back.

While in Vegas, Mehta met up with Ed Miller, a former New Orleanian and MIT grad who has enjoyed tremendous success in the booming world of poker as both a player and author. Miller’s strategy book, Small Stakes Hold ‘Em: Winning Big With Expert Play (2004, Two Plus Two Publishing), has become a bible for players looking to wrest a partial or complete living from the growing interest in poker, in casinos and, more notably, on the internet.

A not atypical online poker success story can be found here in New Orleans. SJ (not his real initials), began playing internet poker in October 2004 while finishing up a Ph. D at an Ivy League school in New England. SJ deposted $100 into an account on Party Poker in order to play .50/$1 Texas Hold ‘Em, the lowest available limit. After running his initial buy-in to $600, SJ moved up to the $1/$2 limit games and began playing multiple tables. He moved from New England to New Orleans to do post-doctoral work 11 days before Hurricane Kartina. When he evacuated, he had $7,500 in his account and was playing at the $10/$20 limit tables. By the end of 2005, playing online in places like Paris, Texas; Orlando, Florida, and, when internet access was restored, back in his Riverbend apartment, SJ had earned $25,000, an amount that doubled his annual income.

For Mehta, a similar story of meteoric success is evident as well. After moving to New Orleans from northern New Jersey shortly after the events of 9/11, Mehta lived as a struggling musician, gigging occasionally and teaching guitar to children. He began taking poker seriously in the middle of 2003, and by 2004 he found himself turning down gigs to make more time for poker, where the earnings were much higher. For Mehta, poker became a way to enhance the enjoyment of the city he has come to love. In fact, after five months of soulless Vegas living, he returned to New Orleans in January of 2006, believing that he could make a living from internet poker.

Mehta’s belief may prove to be short-sighted. On October 13 President Bush signed into law the Unlwaful Internet Gambling Enforcement Act, which was buried in the midst of the 244-page Safe Port Act. The UIGEA, sponsored by Senate Majority Leader Bill Frist, prohibits wire transfers by United States banks to sites which host gambling. Online poker, which has grown into a multi-billion dollar industry, is squarely in the cross-hairs of this legislation.

To put it in simple terms, online transactions such as the one that SJ conducted in 2004 by moving $100 from his bank account to Party Poker can no longer be facilitated by U.S. financial institutions.

The short-term fallout from the legislation is that many popular online poker sites, such as Party Poker, Poker Room, and Paradise Poker, are no longer accepting deposits from the United States, even through third-party online accounts like Neteller and Firepay. On the day the bill passed the Senate, the stock price of PartyGaming, the publicly traded company that owns Party Poker, plummeted by over 50%. Talk about a downswing.

It is easy to argue, of course, that gambling in our country does not produce much social good. It is just as easy to argue that gambling is an essential element of American culture, part of our character even. But leaving the moral and sociological elements aside, the impact this law threatens to have on an untold number of intelligent, rational individuals trying to earn survivable income in New Orleans, a city whose cost of living promises to increase at the same time that viable professional jobs are ever scarcer, is worth wondering about.

Consider for a moment SJ’s contributions to society. Without online poker, he’s making $20,000 per year doing highly specialized post-doctoral work. He barely scrapes by on the grace of a benevolent landlord and, when he’s finished, sends his resume all over the country and hopes he’s hired somewhere, anywhere, before Entergy doubles his utility bill.

With online poker, SJ pays an extra $7,000 in federal taxes in 2005 as a result of his poker income. For the first nine months of 2006, SJ makes $140,000 from online poker (yes, it’s for real) and makes payments of $10,000 each quarter in estimated quarterly taxes. That’s enough money to cut 15 FEMA checks.

And most importantly, SJ, a law-abiding, tax-paying, brainy 28-year old, can, if he chooses, afford to live in New Orleans. One hopes that the city might view him as an economic asset. As SJ says of his new income bracket, “It’s nice to be able to do something as simple as buy a book at Maple Street bookstore and not be concerned about the money.”

Best of all, the money he spends is money brought in from outside the city, from other poker players all over the world.

Speculation exists over whether the UIGEA is truly enforceable. A handful of online poker sites like Poker Stars are continuing to accept U.S. players, gambling on the idea that the law was Senator Frist’s way of appeasing his culturally conservative base, and that the Department of Justice will not seek to entangle themselves in the complications of enforcement.

As for Sunny Mehta, he retains his long-term optimism. In fact, he is currently working as a co-author, along with Ed Miller, on a strategy book focusing on Small Stakes No Limit Hold ‘Em, currently the most popular form of poker among young people who learned the game from watching ubiquitous television coverage of No Limit events.

Mehta cites “loopholes in the language” of the bill and the fact that these laws are “so hard to enforce.”

“In a year,” Mehta said. “Things won’t be different than they are now.” In the meantime, Mehta continues to enjoy the pleasures of the city, playing music and enjoying “good food.”

Nevertheless, perhaps mindful of the anxiety of leaving his money behind to weather Hurricane Katrina, Mehta has withdrawn all his cash from his online accounts.

Faith, after all, is optional.


Joe Longo is the Senior Editor for NOLAFugees.com

photos courtesy.

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