The Atlantic Club

PokerStars New Jersey Situation Addressed in Stars Year-End Blog Post

atlantic-clubPokerStars’ Head of Corporate Communications, Eric Hollreiser, wrapped up 2013 on behalf of his company by posting a year-end blog addressing PokerStars’ failure to re-enter the New Jersey market, in particular the sad episode of Stars’ attempts to purchase the foundering Atlantic Club casino, which its owners have announced will close permanently on January 13th.

The statement by Hollreiser, posted on the official PokerStars blog, is about as close to a formal corporate statement  on the matter as the poker world is likely to see.   There’s nothing particularly new or revelatory in Hollreiser’s words, but it’s interesting to get a closer look at the mindset within the Isle of Man-based online gaming giant.

That mindset is clear from the post’s title, “PokerStars saddened by ‘avoidable’ NJ casino closure,” and that’s true enough, if one assesses the circumstances surrounding the Atlantic Club’s demise in a vacuum.  This statement by Hollreiser is typical:

“At this time last year, PokerStars reached an agreement that would secure a new future for the casino, save the jobs of 1,800 employees and inject new blood, new technology and new finances into the Atlantic City casino economy.”

That’s true enough, but it really wasn’t anywhere near that altruistic for motivations.  PokerStars saw the cash-strapped Atlantic Club as a possible point of reentry into the US market, and risked a few tens of millions in what can now be seen as a fruitless attempt to win the favor of New Jersey legislators and gaming regulators.

Hollreiser correctly notes that PokerStars faced a challenging, uphill path in its attempts to get New Jersey approval.  As Eric wrote:

“It was a leap of faith and commitment of significant investment for PokerStars to do this considering there was not yet an online bill in New Jersey and we faced a challenging regulatory approval process. Nevertheless, in good faith we immediately began funding the Atlantic Club operations, which provided the current owners with a lifeline and secured jobs in the dark days following Hurricane Sandy and the seasonally slow winter months.”

“Leap of faith” is at best diplomatic, and the mention of Hurricane Sandy is pure pandering.  Atlantic City’s ongoing malaise has many causes, and frankly, Stars wouldn’t have had much interest in New Jersey if there hadn’t been the thin chance of leveraging some favorable casino approvals on the cheap.

That Stars overestimated its own chances led them to being victimized by Crown Colony for the $15 million they sunk into the failing casino, but the likeliest reality is that in PokerStars, Crown Colony likely saw a fish waiting to be played, and took advantage of it during the intervening months.  Crown Colony is no one’s hero, and the billboard the Atlantic Club’s owners recently purchased outside Atlantic City to thank the Atlantic Club’s workers is disgusting — particularly since those same owners appear to be making off with $32 million owed to an Atlantic Club employee pension fund that was supposed to be fully funded, but wasn’t.

Hollreiser noted how the prospects for all involved seemed to improve for a while, but the real picture was never that rosy.  Given New Jersey’s ongoing legal actions regarding its attempts to break Nevada’s virtual monopoly in sportsbetting services, a battle that seems destined to reach the US Supreme Court, New Jersey regulators could simply never risk being seen as having licenses available for purchase by would-be investors with legal problems.  Had Stars sought a New Jersey entry before Black Friday and that day’s still-outstanding criminal warrants against founder Isai Scheinberg and finance exec Paul Tate, then the New Jersey story might have had a different outcome.

That same cold slap of reality makes Hollreiser’s closing paragraph read hollow:

PokerStars does not share the vulture-like management practices that led to the coming job losses and disappointment of thousands of people in New Jersey with the closure of the Atlantic Club. Instead, PokerStars will continue to pursue our goals and remain confident that we will have a strong presence and positive economic impact in the American market in 2014, whether that is in New Jersey or another state seeking the benefits of being home to a world-class online gaming company.

The bashing aimed at Crown Colony is well deserved, but Stars having “a strong presence and positive economic impact in the American market in 2014” just isn’t going to happen given the current framework of circumstances.  That’s nothing but salesmanship, and it can’t be justified by American political regulators.  We love PokerStars and duly wish they’d find a way to return to the States, but the current strategy of attempting regulatory end-arounds is clearly not going to pay off.  Stars needs to change its tack, or it won’t be returning to the US in 2014… or any time soon.

 

 

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