Fresh start for PokerStars may revitalize N.J. gambling

2 September 2014

The online gaming community believes PokerStars’ planned entrance into New Jersey’s Internet wagering market in October is the fuel needed to kick-start the state’s stagnant gambling activity into overdrive.

The tainted European betting giant — which was bought this summer in a staggering $4.9 billion transaction by Amaya Gaming Group, Inc. — was angling for a piece of New Jersey’s action long before the state launched Internet gaming in November.

The Isle of Man-based company wanted any slice of the potential U.S. online gaming pie. PokerStars, however, is viewed by U.S. gaming regulators as dirty.

Nevada and New Jersey ignored the company’s $731 million settlement with federal prosecutors two years ago that made criminal and civil charges disappear. The U.S. Justice Department said it wouldn’t keep PokerStars from entering legal U.S. online gaming markets.

A “bad actor clause” in Nevada’s interactive gaming regulations sidelined the company. Online casino operators that took wagers from Americans after the 2006 passage of the Unlawful Internet Gambling Enforcement Act are banned for five years from doing business in the state.

New Jersey doesn’t have a “bad actor clause,” although state gaming regulators were hesitant to sign off on a deal between PokerStars and Resorts Atlantic City for a joint venture in online wagering.

Showering in the fresh Canadian water provided by Amaya could wash away PokerStars’ stench.

Montreal-based Amaya provides gaming equipment, lottery systems and interactive gaming technology to American states and Canadian provinces. The company, which has its stock traded on the Toronto Stock Exchange, is licensed as an interactive equipment provider in New Jersey.

Amaya closed the PokerStars purchase in August and cleaned house of former company officials and owners, some of whom remain under indictment in the United States.

Earlier this month, Amaya CEO David Baazov told analysts he wouldn’t make any statement on the company’s New Jersey plans but was hopeful on getting involved in other U.S. opportunities.

“I think that a lot of states are looking at the regulation because of the benefits of consumer protection; however legislation takes time and it’s difficult to predict when it’ll be passed,” Baazov said in a transcript posted on the Online Poker Report website. “We’re going to examine proposed legislation on a state-by-state basis.”

PokerStars, along with its affiliated Full Tilt Poker, controls 54 percent of the global online gaming traffic outside of the United States. Combined, the websites have more than 85 million users.

PokerStars was the undisputed industry giant when the website operated in the United States, albeit illegally, until it was cut off by the April 2011 Justice Department indictments.

Many former PokerStars players in the United States would like to regain access to the website. Resorts Atlantic City could provide the opportunity, as long as players are willing to travel within New Jersey state lines.

New Jersey’s six online casinos are on pace for $125 million in annual revenue, less than half of what analysts once predicted for the market. Nevada’s three online poker websites had their first $1 million revenue month in June.

“At this point, real-money I-gaming does not have the catalytic power that some analysts had hoped,” Macquarie Securities gaming analyst Chad Beynon told investors.

PokerStars, however, could boost the figures in New Jersey.

“PokerStars had been the poster child for the ‘bad actor clause,’ but with Amaya having removed the former management team, PokerStars is now more viable and will begin to operate in New Jersey after being in indefinite limbo,” Beynon said.

Eilers Research gaming analyst Adam Krejcik said PokerStars “should give a boost to online poker revenue trends.”

The competition is watching the maneuverings around PokerStars closely.

Caesars Interactive CEO Mitch Garber, whose company controls 29 percent of New Jersey’s online gaming business through the Caesars and websites, told analysts he expects PokerStars “will go through that very stringent licensing process.”

Ironically, Caesars and Amaya are partners in New Jersey. Caesars uses the Canadian company’s software platform for casino games under its New Jersey brand.

“Certainly PokerStars has been a company to be reckoned with,” Garber said. “And we leave decisions about how that will impact the market and whether they’ll enter the market at all to the regulators.”

Others believe U.S. online gaming is facing issues that even PokerStars can’t fix, such as geolocation technology troubles and payment processing complications.

PokerStars is also at the center of the California online poker debate.

State lawmakers shelved online poker legislation debate until next year, mostly because of discord among Indian tribes.

The Morongo Band of Mission Indians and three California card rooms have a deal with PokerStars. More than a dozen other tribes want PokerStars banned through a “bad actor clause.”

Beynon believes California could be another catalyst for online gaming throughout the United States.

“The tribes will come up with a solution in 2015, legalizing what we estimate is a multibillion-dollar poker market,” Beynon said. “California is meaningful on a stand-alone basis but would also be an accelerant for New Jersey, as a potential interstate agreement would provide New Jersey with much-needed liquidity.”

The agreement could include PokerStars.

If Amaya can get PokerStars up and running in the United States, the action will be the most game-changing event led by a Canadian business since 1988, when the Edmonton Oilers shipped hockey superstar Wayne Gretzky to the Los Angeles Kings.

The trade transformed the U.S. image of the National Hockey League forever.

Copyright GamingWire. All rights reserved.

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