AGA Opposing PokerStars Atlantic City Casino Acquisition

When last week New Jersey became the third state in the nation to enact legislation to regulate some type of Internet-based wagering, the signing of the bill into law by first-term Republican Governor Chris Christie was heralded as being a step in the right direction toward a revitalization of Atlantic City, the state’s worn-out gambling capital. In permitting online gambling, which the state’s constitution requires be based in that city, it is expected that at least some endangered jobs can be preserved and a few land-based casinos might be able to escape shutdown.

As part of the ushering in of a new era of gambling in the Garden State, it was predicted that online poker behemoth PokerStars would be able to move forward with its acquisition of The Atlantic Club Casino Hotel, which decades ago enjoyed the status of being the most profitable casino in Atlantic City, but has in more recent years fallen into disrepair.

The Atlantic Club was rebranded as a locals-only casino a few years ago, taking a the rather dismal slogan of “a casino for the rest of us.” The parent company for PokerStars, Isle of Man-based The Rational Group, made an undisclosed bid for the property last year, with unnamed sources putting the purchase price at under $50 million. The Rational Group is seeking interim permission from the New Jersey Division of Gaming Enforcement to operate the casino, which they have promised to renovate back to its former glory.

What was not so expected, however, was the brief issued by prominent casino trade group the American Gambling Association, or AGA, earlier this week. The brief, which some have accused of being motivated by forces from Caesars Entertainment who hope to deter foreign investment in Atlantic City, where they control a full third of the casino properties, accuses PokerStars of being a criminal enterprise and a danger to the renewed New Jersey gambling market.

In the brief, AGA lawyers David Stewart and Brian Molloy said, “The integrity of the gaming industry would be gravely compromised by any regulatory approvals of PokerStars, a business built on deceit, chicanery and the systematic flouting of U.S. law. New Jersey’s law and regulatory tradition mandate denial of this petition.”

PokerStars continued to operate online poker rooms catering to US-based players well after the 2006 passage of the UIGEA, a law to prohibit financial transactions having to do with online gambling. Last year the company settled with the United States government to the tune of $731 million. As part of their deal with the feds, PokerStars acquired former rival Full Tilt Poker, another site that operated in the United States after 2006.

The company admitted no wrongdoing under the terms of the deal, and has repaid foreign players $184 million. American players, however, have yet to be reimbursed for their accounts, now frozen for nearly two years with a repayment schedule still unclear. It also remains unclear whether or not players will be able to recover the full value of their accounts.

In the brief, the AGA cautioned that allowing companies who previously breached US law to enter the market would establish a potentially dangerous precedent, writing, “Any action allowing PokerStars to be licensed would send a damaging message to the world of gaming, and to the world beyond gaming, that companies that engage in chronic lawbreaking are welcome in the licensed gaming business.”

“That message would dramatically undermine public confidence in gaming regulation and could cripple the industry’s public image,” the brief went on to add.