Palo Alto entrepreneur ready to debut legal online poker room to rival S.F. company
By Tom SomachA poker war is about to break out on the Internet, and the Bay Area is ground zero for the fray.
A local mathematician and software designer plans to open an Internet-based poker room that will legally allow Americans to play online poker for real money.
Arthur M. Pfeiffer, owner and founder of Palo Alto software company Thwart Poker Inc., told TheSan Francisco Examiner that his venture will be a website called Texas Block ’Em that is expected to debut some time next year.
“I have invented a new form of poker called Texas Block ’Em that removes the element of luck from the game,” Pfeiffer claims. “Since my version of poker is 100 percent skill and involves no luck, it’s not gambling and therefore is legal.”
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Texas Block ’Em removes the element of luck by eliminating the randomness that comes from dealing players their cards, Pfeiffer said. Instead of randomly being dealt cards to play, players are allowed to choose the cards they want to play, making Texas Block ’Em, according to Pfeiffer, a game of skill and not luck or chance because every player has the same opportunity to play the same cards.
Texas Block ’Em plans to challenge another local online poker room that also claims to be legal,San Francisco-based Pure Play, for a piece of the multimillion-dollar Internet poker market in the U.S., Pfeiffer said.
Pure Play, which has been in operation since 2005, is legal under U.S. law because it doesn’t charge an entry fee to play in its online tournaments, according to Pure Play owner and founder Jason B. Kellerman. Instead, players pay a monthly fee to join the site and then the tournaments, which award cash prizes, are free.
Pfeiffer noted that his site’s “game-play dynamics and player strategy are very different than that of Pure Play’s poker games. Their players passively observe what cards are randomly dealt and have no control over the process.”
“Our players actively participate in the process, as it is their card-selection decisions that determine what cards are dealt,” Pfeiffer said.
In the traditional poker game of Texas Hold ’Em, five face-up community cards are dealt randomly to each player, as are each player’s hole cards, which are dealt face-down. Pfeiffer said. In Texas Block ’Em, community cards are dealt randomly, but then players get to select any hole cards they want to play with those community cards. If two players pick the same hole card, both are blocked from getting it, which is the essence of Texas Block ’Em, he said.
“In regular poker, each player relies heavily on the fixed laws of mathematics to calculate the probability that the cards dealt will give him a winning hand,” Pfeiffer said. “In Texas Block ’Em, each player relies heavily on his sense of human psychology in reading opponents to determine the probability that he can pick the right cards for a winning hand.”
And unlike Pure Play, Texas Block ’Em plans to charge players a fee for every tournament they participate in, Pfeiffer said.
GOING TOE TO TOE
Pfeiffer won’t be going into the online poker business blindly. His lucrative one-man company, Thwart Poker, currently produces apps so people can play poker on their mobile devices, though without betting actual money. Two other poker variations he also invented and patented, called Hold ’Em Blitz and Hold ’Em Battle, are currently available on the iPhone, iPod Touch and soon the iPad, he said.
“It’s just a matter of moving poker from the cellphone to the Internet,” said Pfeiffer, who turns 80 in February, lives with his girlfriend in Palo Alto and stays sharp by playing the clarinet. “I estimate needing between three-quarters of a million to a million dollars to go online. The company has already raised half a million dollars from investors, plus there’s the profits from the phone apps. But we’re always looking for more investors.”
Kellerman told The San Francisco Examiner he doesn’t fear the competition, even though his company will also operate from the Bay Area.
“Texas Block ’Em is very different than typical poker and plays in a smaller niche category of skill-based games where users are required to learn a new game,” Kellerman said. “By contrast, Pure Play appeals to an established mass audience by offering well-known poker games.
“I think it’s going to be tough for anyone to invent one new game and have it become big in its own right.”
Kellerman recalled there used to be an online poker room called Duplicate Poker that mimicked duplicate bridge by dealing identical cards to players. “Duplicate Poker tried something similar several years ago by removing chance from the game,” he said. “They invested over $10 million and got 250,000 users to try their product, but had a tough time getting players to stick and eventually went out of business. I think it’s really going to come down to how many players are interested in learning a new game.”
THE QUESTION OF LEGALITY
Over the past five years, the U.S. Justice Department has busted more than a dozen illegal online poker rooms that permitted Americans to play poker for real money. Websites were shut down, operators were arrested and millions of dollars were confiscated.
I. Nelson Rose, a professor at Whittier Law School in California and a noted expert on gambling law, has served as a paid consultant for both Pure Play and Texas Block ’Em. He told The San Francisco Examiner that even though both entities offer online poker, they use vastly different methods to get around U.S. gambling laws.
“Under the law, for an activity to be considered gambling, it must contain three elements: consideration, chance and prize,” Rose said. “Consideration means you have to pay to participate. Chance means the activity involves luck, not skill. Prize means you can win money or something of value.
“When consideration is missing and something is free to participate in, it’s a sweepstakes. When chance is missing and an activity is skill, it’s a contest. If prize is missing and you can’t win anything of value, it’s an amusement."
What makes Pure Play legal, according to Rose, is that it’s free and thus considered a sweepstakes. “Legally, it’s like the Monopoly game run by McDonald’s,” he said.
“On the other hand, Texas Block ’Em is a contest and not gambling because it doesn’t have the element of chance,” Rose said. “Legally, it’s like a golf tournament that has an entry fee and awards a cash prize to the winner.”
ONLY A MATTER OF TIME
Since neither Pure Play’s nor Texas Block ’Em’s claims of legality have been tested in court, it’s difficult to know for certain if either concept actually is legal. And receiving government input on the issue has been a challenge as well. Officials from the California Department of Justice and theU.S. Department of Justice -- who previously declined to comment on the legality of Pure Play — also declined to comment on the legality of Texas Block ’Em.
Chris Costigan, owner and publisher of Gambling911.com, a website that covers the online industry, believes the legality of so-called legal U.S.-based online poker rooms such as Pure Play and Texas Block ’Em will be a nonissue in the future.
“Eventually, as more and more states on an individual basis legalize online poker, there won’t be a need for websites that operate via loopholes in the law and offer quasi forms of poker, such as Pure Play and Texas Block ’Em,” Costigan said. “Regular poker for real money, as it’s played in a casino, will be legal and widely available online.
Nevada, New Jersey and Delaware are the only states that have legalized Internet poker, but Costigan said he thinks more and more will follow suit.
“With states taking the matter of online poker into their own hands,” he said, “it won’t matter if the federal government legalizes it or not.”
Arthur M. Pfeiffer:
1934: Born in New York
1951: Graduates from Music and Art High School (N.Y.) as a clarinet player
1957: Completes stint in military as member of U.S. Army Band
1959: Graduates magna cum laude with mathematics degree from Hunter College (N.Y.)
1960: Attends graduate school and teaches at Northwestern University (Chicago)
1960-61: Works at IBM in Chicago
1961-68: Works at Illinois Institute of Technology in Chicago
1969: Moves to Palo Alto to start software company Symbolic Control Inc.
1971: Symbolic Control sues IBM in federal court in San Francisco for antitrust violations
1982: Settlement reached in lawsuit against IBM
2001: Starts Palo Alto software company Thwart Poker Inc.
2004: Thwart Poker develops its first successful app that permits people to play poker on mobile devices
2006: App boasts 250,000 users and earns company more than $2 million
2014: Thwart Poker scheduled to go online with Texas Block ’Em, a legal Internet poker room
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