Polymarket’s Playbook is Familiar to Those Who Watch the Online Poker Industry
Credit: Sheila Sund/Pxhere
Polymarket says it’s cracking down on the use of virtual private networks (VPNs) to access its platform. Taking geocompliance seriously only after having scaled up into a dominant position is reminiscent of the leading company in another gambling vertical: GGPoker.
Like GGPoker, Polymarket has grown its business while welcoming VPN access to the product from banned jurisdictions. Also like GGPoker, Polymarket has decided that playing by the rules might be important now. There’s a difference in scale between the industries, of course: Polymarket now has a valuation in the tens of billions of dollars, which might be more than online poker is worth globally at the moment.
However, both companies have followed the same course: Gaining an early advantage by operating outside the rules, then making a show of compliance only after having leveraged themselves into a dominant position in the market.
Watching the situation play out is a little bit like watching Gladiator II. I don’t feel like I’m watching a sequel so much as the same story playing out in a different package. Russell Crowe has been replaced by Paul Mescal, and GGPoker has been replaced by Polymarket. It’s going through the same motions with the same plot lines. Is the endpoint also the same?
How VPNs Fueled GGPoker’s Rise
Around 10 years ago, hardly anybody had heard of GGPoker. PokerStars was considered to be an unbeatable giant in the international online poker business, with more traffic than the other sites combined.
Yet, in a few short years, GGPoker was challenging PokerStars as the dominant operator. Today, GGPoker is the worldwide traffic leader. How did it happen?
GGPoker would probably tell a story about a plucky underdog company grinding its way to the top. Certainly, that’s part of it. But the part that won’t make the official company line was welcoming American players using VPNs.
Officially, of course, American players weren’t allowed to play on GGPoker. The reality was quite different. All you needed was a VPN and access to an agent who would set up your account. In some cases, the players might have needed certain documents, but the agents took care of that process, too.
Site ambassador Daniel Negreanu himself was on the record that he didn’t consider VPN use cheating and wasn’t much bothered by the practice, not-so-subtly encouraging players to do what it took to play on GGPoker. Players at major Las Vegas poker tournaments openly discussed playing on GGPoker among themselves at the tables.
The situation hit a special level of brazenness when GGPoker began a policy forcing many high-stakes players to play under their real names. In some cases, players would be making deep runs and cashing in high-stakes online tournaments on the same day they were know to be participating in publicly reported live events in the U.S.
GGPoker Beat PokerStars at Its Own Gray Market Game
Thanks to its aggressive marketing and willingness to go where competitors wouldn’t, GGPoker eventually caught up with PokerStars. A separate geocompliance issue sealed the deal: When Russia invaded Ukraine, PokerStars and other regulated operators had to pull out of what had been their most important market. GGPoker technically followed suit, but continued to share traffic with PokerOK, a Russia-facing site with a separate ownership structure.
Of course, it’s hard to feel bad for PokerStars. Its rise to dominance likewise came from flouting U.S. banking laws in the aftermath of the Unlawful Internet Gaming Enforcement Act of 2006. While its main rival, Partypoker, took a compliant stance and left the U.S. market, PokerStars continued accepting business from American customers. That decision eventually led to Black Friday, when PokerStars and other non-compliant operators were shut down by the Department of Justice.
Although that was a setback for PokerStars, the intervening five years had allowed it to secure a dominant lead over Partypoker. Black Friday then took out its other two competitors — Absolute Poker and Full Tilt — who were not as financially prepared for that eventuality. The result was that PokerStars held a comfortable position at the top of the market for more than a decade. But that status also forced PokerStars to become more compliant over the years, eventually allowing GGPoker to beat it at what had been its own game.
Scale First, Comply Later
Now, Polymarket is employing the same tried-and-true strategy. Scale the business first and worry about compliance later.
Countless instances of media coverage reference the ease of access for Americans who bet on Polymarket using VPNs. Sportico produced an article calling it an “open secret online.”
One sportsbook CEO told ReadWrite that prediction markets have no real interest in geoblocking potential customers.
“The geo-blocks are easy to circumvent because the exchanges want them to be,” he said. “If they genuinely wanted to keep restricted users out, the technology exists to do it.”
That echoes much of what happened with GGPoker. Anyone who does any digging can find forum and Discord posts referencing the use of agents and VPNs to access GGPoker. It wasn’t exactly low-key stuff.
Will Polymarket’s Late Pivot to Compliance Pay Off?
So, how did GGPoker’s story end? Well, it not only became the leading online poker operator, but it’s now arguably the leading live one as well, stemming from its ownership of the World Series of Poker.
My sources tell me GGPoker no longer welcomes American players VPNing onto the platform. But the move effectively made the company too big to fail. It paid $500 million for the WSOP acquisition, so it’s safe to say nobody there is too bent out of shape about the choices circa 2020 that enabled its ascent.
That said, the one thing GGPoker has not done is attempt to return to the U.S. with a regulated online site. Online poker has had its day, and it could just be that the market today isn’t big enough to be worth the effort of getting its ducks fully in a line. Polymarket, on the other hand, is committed to competing both in the U.S., as a CFTC-regulated entity, and in the dot-com market, which remains the Wild West.
That may be a tricky tightrope to walk, but the U.S. prediction market space is clearly a lucrative one to be in at present. If that industry succeeds in normalizing itself, Polymarket could well have its cake and eat it too.
The U.S. Could Still Backtrack on Prediction Markets
The bear case is that the current era of permissiveness expires with the inauguration of a new president in 2029. But even then, Polymarket’s bets are well-hedged due to the careful separation of its U.S. product from its crypto-based international site. It can even experiment with different business models, maintaining a feeless structure internationally, but imposing and eventually raising transaction fees in the U.S.
Polymarket owes at least some of its U.S. success to customers already familiar with the brand due to VPN use. They helped build the company into a giant. Polymarket says that’s no longer kosher, but only now that it has a regulated site to direct them to.
That timing is the real story. If compliance corners were really part of Polymarket’s corporate DNA, that move would have happened years ago.
We’ve seen this strategy work in other verticals. And judging from Polymarket’s outlook, it appears it’s working again.
Image credit: Sheila Sund/Pxhere (license)
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