Thursday December 12,2013 : NO NEW JERSEY LICENSE FOR POKERSTARS
Online poker giant's application frozen for two years in a Black Friday backfire.
The New Jersey Division of Gaming Enforcement delivered a disappointing decision on the Pokerstars-Resorts Casino online gambling license application Wednesday, telling the partnership that its application would be suspended for two years due to an unresolved federal indictment against Pokerstars founder Isai Scheinberg.
The indictment referred to harks back to April 2011 and Black Friday. It is based primarily on the unresolved federal indictment against Scheinberg for the alleged “…violation of federal gambling statutes, namely, the Illegal Gambling Business Act and the Unlawful Internet Gambling Enforcement Act (UIGEA), and the involvement of certain PokerStars executives with Internet gaming operations in the United States following the enactment of UIGEA,” the division said in a statement.
Scheinberg stepped down from heading the company last year, handing the reins to his son Mark in what was widely seen as a bid to protect the company by distancing himself from its active management.
The DGE emphasised that Pokerstars can reapply for a licence if its circumstances change materially before the two year suspension ends, leaving the door open for the Isle of Man-based online poker giant.
What those changes might entail is not clear, as the regulator did not disclose any specific requirements, however DGE spokesperson Lisa Spengler later said:
“The division … may consider a request for relief to reactivate the application if significantly changed circumstances are demonstrated at which time the division’s investigation of PokerStars and its affiliated entities and associated individuals will be resumed to assess suitability.”
Eric Hollreiser, communications chief at Pokerstars, said in a reaction to the news:
“We are disappointed that the New Jersey Division of Gaming Enforcement has suspended the review of our application at this time.
“We note that the DGE will resume the review of our application if our circumstances change. We will remain in open dialogue with the DGE and will update them on changes in our situation as they occur.”
Approached by the Associated Press news agency for comment, Resorts Casino Hotel, which partnered with Pokerstars in anticipation of offering Internet gambling, wouldn't say whether it is seeking another online partner.
“We are disappointed that Pokerstars was not issued a license,” Resorts president Mark Giannantonio said. “We are hopeful that they can resolve their issues with the DGE in an expeditious fashion.”
Coincidentally with the Pokerstars application, the DGE issued an Internet gambling permit to Resorts on Wednesday, but the Atlantic City casino currently has no obvious online partner to exploit it.
AP encapsulated the views of many US poker players in quoting an American poker player, who opined that New Jersey online poker guaranteed prize pools are too low.
The player compared New Jersey offerings with those of Pokerstars, saying that company offered online "…a $5 million guarantee Sunday; 16,000 people played. None in America though. Home of the free, huh? They block out the biggest and best poker company in the world.”
In covering the suspension the Press of Atlantic City reported that some experts fear that the lack of Pokerstars involvement could impact online revenues in New Jersey.
The report quotes Brad Polizzano, a New York-based tax and gambling attorney, who said:
“It’s a blow, obviously. Pokerstars is going to have to decide just how much they want to be in the market. They could just stay out of the U.S. if they wanted to. Obviously being here means a lot to them because they’ve hired lobbyists to pull for their interests. They may have to be willing to make some changes.”
Pokerstars had plans to team with Resorts Casino Hotel to offer online gambling. The move was expected to result in a $10 million poker room built by PokerStars at the land-based property, and the establishment of Pokerstars' US headquarters in the Garden State, creating up to 150 new jobs by Q2-2014.
Local media reports speculated on what changes at Pokerstars would be acceptable to the New Jersey regulator, noting that only last month Ruth Parasol DeLeon and James Russell DeLeon, major shareholders in Bwin Digital, had elected to dispose of their shares rather than undergo DGE scrutiny in the company's bid for a licence as part of its partnership with the Borgata Casino.
But analysts have speculated that the decision was more about an agreed separation from the company in the interests of securing a licence.
New Jersey state senator Ray Lesniak, long a champion of legalised online gambling, said that excluding Pokerstars had the potential to negatively impact revenues from the new market, but that it would not be a fatal blow.
“Look, it’s not good when you don’t have the big name in the business in play,” Lesniak said. “However, we have plenty of sites in operation, and I’m sure they’ll be able to step up and fill the gap.”
Ratings agencies have suggested New Jersey will see $200 million to $500 million in online gambling revenue in the first year, far from the governor’s predictions of more than $1 billion by the end of the fiscal year.
“The revenue projections were way too high from the start,” Lesniak said. “Pokerstars would have made an immediate impact because they have such a huge name in the Internet gaming business.”