THE NETELLER FALLOUT ---------------------------------------------------------------------------------------------------------- The arrest of Neteller's founders and the company's subsequent withdrawal from the US market has sent a shock wave through the online gambling industry. Money transfer sites similar to Neteller, such as Citadel and Click 2 Pay, are no longer servicing US customers. Not only are deposit options for American players dwindling, it is also difficult for Americans to withdraw money from their online poker accounts. When Neteller ceased processing transactions to online gambling sites for Americans, they initially allowed US citizens to continue using Neteller's peer-to-peer transfer system. However, this soon ended when Neteller realized many Americans were indirectly using the service to fund their online gambling accounts. Americans are currently unable to withdraw money from their Neteller accounts. Neteller is not able to send money to its US customers via EFT or check, and it is not clear when they will be able to do so. The only reliable method to withdraw large sums of the money in the past was through peer-to-peer transactions. A US Neteller user would send money to a non-US friend and then the non-US friend would send the money through some other method back to the American. Since the other method of choice was often online gambling site transfers, Neteller viewed the peer-to-peer transfer service as indirectly aiding Americans with funding online gambling accounts. The inability for US members to withdraw their money from their Neteller accounts is making many lose faith in the major payment processor. Neteller insists that all of its members' funds are safe since they are held in segregated trust accounts. No statements of reassurance can replace the confidence people would have in the company if Americans were actually able to receive their money. American players, especially ones that play for higher stakes, are now naturally untrusting of any new online payment service. If their funds ended up getting tied up by Neteller, which was considered the largest and most trusted payment processor, who knows what will happen with these brand new payment processors. Had Neteller just voluntarily left the US market when the UIGEA was passed (as many poker rooms did), Americans would have likely received their funds from the money transfer corporation in a timely manner. It's not clear why exactly Neteller can not currently pay its American accounts, but it's likely due to logistical reasons. Financial services companies in the United States are cutting whatever ties they had with online gambling companies since they do not want to be the DOJ's next target. This is making it difficult for Americans to receive money from online gambling companies (or firms in the online gambling industry like Neteller). Future Predictions Revisited Three weeks ago, I made several predictions regarding Neteller's exit from the US market. First, I predicted that in four months time, the top US-facing sites will have about half the number of active players they do now. My prediction seems to be fairly accurate. So far, many of the major US-facing sites already have lost 25% of the traffic they previously had before the Neteller debacle. Right now, the US-facing sites are dependent on their American customers using funds already in their accounts to play poker. While some US players are still depositing, many are unable or unwilling to deposit any more money into their online poker accounts. This is especially the case with casual, inexperienced players, who were already losing money. Many of them will be unlikely to jump through hoops to send money offshore using unfamiliar methods. In about 1-2 month's time, most of the weaker players will have run out of money in their accounts. The games have already gotten tougher at the US-facing sites, and they will likely get even worse. A lot of current break-even players will start losing in this new, more shark-infested environment. These players will start playing less at these sites, and the games will become even tougher. Furthermore, we can expect many European players to stop playing at the US-facing sites, especially the medium-sized ones. For a European, there is not much reason to play at a site like Full Tilt compared to Everest Poker or Poker Room since the games will be much easier at the non-US sites, and Full Tilt will not have the size advantage it used to. Party Poker is threatening to replace PokerStars as the world's largest poker room. As the games get even tougher at PokerStars, more European players will stop playing at Stars and will play at Party Poker. As of January 1st, about half as many real-money ring game players were playing at Party Poker compared to PokerStars. However, I predict that Party Poker will regain the title as the world's largest online poker room, say, by June 22, right before the WSOP Main Event kicks off. Another prediction I made was that sites that are US-facing but not that dependent on the American players would withdraw from the US market. This has already come true for one major US-facing site. Mansion Poker, which sponsored the MansionPoker.net Poker Dome Challenge featured on national US television, no longer services US customers. We can expect more poker rooms to follow Mansion's example. Unless these US-facing sites are able to set up reliable methods for US players to deposit, there is little reason for them to service the US market if they can live without it. Continuing to allow US players to play will mean their games will get tougher, as well as expose the company to potential legal problems.