AGA Opposes PokerStars in New Jersey; Did Caesars Offer to Sell the Rio to PokerStars?

AGA Opposes PokerStars in New Jersey; Did Caesars Offer to Sell the Rio to PokerStars?

PokerStarsWe’re already down to bare knuckles in New Jersey.

Yesterday, the American Gaming Association filed with the New Jersey Division of Gaming Enforcement a brief opposing the petition of Rational Group, the parent company of PokerStars, for an interim casino authorization in New Jersey. The ICA is a regulatory hurdle to Rational Group’s acquisition of the Atlantic Club casino, which itself is a hurdle to Rational Group being able to offer online poker in New Jersey.

Describing PokerStars as “a business built on deceit, chicanery and the systematic flouting of U.S. law” and “a criminal enterprise”, the AGA warned that the integrity of the gaming industry “would be gravely compromised” if New Jersey licenses PokerStars. It added that such action “could cripple the industry’s public image for many years”.

All very dramatic stuff, but digging deeper into the brief doesn’t reveal any new fact about Rational Group or novel legal argument that New Jersey regulators wouldn’t already know. In fact, the brief plays a little loose with the facts at places in order to burnish its argument that Rational Group is unfit to be licensed. So what’s this all about, really?

The axe that’s being ground appears on page 6 of the brief.

“[E]very business holding a U.S. gambling license has decided not to offer any form of unlicensed gambling over the Internet in this country.” (emphasis in original)

The AGA is the lobbying arm of the casino industry. Although membership includes equipment suppliers, state associations and professional services firms, the bulk of the AGA’s funding comes from casino groups. That makes the AGA a proxy for Caesars, MGM, Pinnacle and other major casino interests. And the casinos are miffed that PokerStars made a mint on the U.S. market from 2001-2011 while the casinos had to sit on the sidelines and do nothing. With the shoe now on the other foot, the casinos are trying to serve Rational Group a dose of the same medicine.

For the most part, PokerStars has held itself above the fray.

“These are matters for expert regulators to determine, not self-interested partisans picking a public fight,” Eric Hollreiser, a PokerStars spokesperson, said in a written statement. “PokerStars is one of the largest and most respect internet gaming companies because we work closely with regulators and are in good standing with governments around the world.”

That might have been the end of it, but this morning Forbes reported that Caesars offered to sell the Rio Casino and maybe even the WSOP to PokerStars last month.

“Caesars Entertainment approached PokerStars and offered to sell us certain assets, such as the Rio Casino in Las Vegas,” Hollreiser told Forbes. “Caesars suggested that this acquisition would give us a better relationship with Caesars and would help PokerStars gain a license in Nevada.”

To put it bluntly, this is an incredibly strange story. It’s been rumored for a while that Caesars wants to unload the Rio, but given the company’s recent investments in Caesars Interactive Entertainment, its online gambling business unit, and the company’s plans to leverage the WSOP brand to bolster that unit, it’s highly unlikely that the WSOP would have been included in any sale.

It’s therefore hard to know what to make of this offer by Caesars. Was it genuine? Was it premeditated to subject Rational Group to regulatory scrutiny in Nevada, where Rational Group would almost certainly fail to pass muster? Is Caesars looking to offload certain assets to help pay down its staggering debt load? Or were these assets offered as the price of Caesars’ acquiescence to the re-entry of PokerStars into the U.S. market?

You can re-read Hollreiser’s statement and come to your own conclusion. Regardless, it gives Caesars the appearance of unclean hands in opposing (through the AGA) the re-entry of PokerStars in New Jersey.

The only thing that’s clear right now is that Caesars will use all the tools at its disposal to harry PokerStars at every turn as the U.S. market re-opens. Make no mistake, this isn’t about Caesars being afraid of PokerStars. It’s about spite, about trying to shut out Rational Group the way the casinos themselves were shut out for so many years. Certainly, that’s the way Hollreiser framed it when responding to questions about the AGA brief yesterday.

We’ll see how respected the Division of Gaming Enforcement finds PokerStars to be. Its preliminary recommendation to the New Jersey Casino Control Commission on Rational Group’s ICA petition is due by mid-April.

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