By Joseph Menn
Nov 8 The state of New Jersey granted its first
online gambling licenses to several big international gaming
companies on Friday, dramatically speeding their re-entry to the
lucrative U.S. market.
New Jersey joins Nevada and Delaware in permitting online
poker and it is more populous than those states. New Jersey also
will allow its residents to play electronic versions of other
Bills to legalize online gambling are pending in California,
Pennsylvania and Massachusetts and more states are likely to
follow, eventually letting residents of those states gamble
against people in other regulated states.
New Jersey's action also is a landmark for the issue of
suitability, in which regulators weigh the conduct of the online
gaming companies before allowing them into an industry with
State gaming authorities gave "transactional waivers," which
do not preclude additional regulatory scrutiny, to companies
including the parent of PartyPoker, which dominated online cash
card games in the United States for years.
PartyPoker pulled out of the U.S. market in 2006, when
Congress strengthened federal gambling. It later paid $105
million in a non-prosection agreement with the U.S. Justice
Department and admitted violating wire fraud and other statutes
before the 2006 law took effect.
Other recipients of waivers on Friday were 888 Holdings
, and the online affiliate of Las Vegas' Caesars'
Two controversial PartyPoker co-founders are divesting their
stakes in order to get their company back into the United
New Jersey did not approve PokerStars, a company that kept
going in the United States after Congress' 2006 law on internet
PokerStars spokesman Eric Hollreiser said the company's New
Jersey application "remains under review" and that "we remain
committed to working with them to complete the process." Both
PokerStars and PartyPoker's parent, Bwin.party Digital
Entertainment, had focused their licensing efforts on
"We're excited to see the launch of internet gaming in New
Jersey," said American Gaming Association Chief Executive Geoff
Freeman. "New Jersey will send a strong message to all states."
Even with online casinos outlawed, Americans contribute an
estimated $3 billion to a roughly $33 billion world market,
Combined with recent actions in other states, the New Jersey
decision suggests it could be hard for PokerStars to reach the
Last year, the Isle-of-Man-based company forfeited $731
million to settle U.S. government fraud claims and acquire rival
Full Tilt poker, which shut down after a similar lawsuit. U.S.
authorities also filed criminal charges against the founders of
Even PartyPoker's re-entry was more difficult than many in
the industry had expected. Parent Bwin.party pulled out of many
of what it called "gray markets" with uncertain laws and
jettisoned several PartyPoker executives, filling its top ranks
from the other side of a merger with Bwin.
The most dramatic concession was the agreement by PartyPoker
co-founders Ruth Parasol and Russ DeLeon to divest their shares,
which combined for 14.3 percent of Bwin.party. As reported last
week, they will put their stakes into funds that will sell off
the stock to others during the next three years.
Even as the two co-founders leave the stage, they will
benefit from any share-price gains from the U.S. return.
Parasol, an American and former phone-sex and Web-porn
investor, became a billionaire when Bwin.party predecessor
PartyGaming sold stock to the public in London. Advisers said
she left her home country long ago to avoid U.S. legal scrutiny.
Bwin.party said it would launch poker and casino games under
the land-based casino license of its partner in New Jersey,
Borgata Casino, owned by Boyd Gaming Corp's and MGM
Resorts, using both Borgata's and its own brands,
including www.partypoker.com, beginning Nov. 26.
PokerStars could still be approved but it is very unlikely
without at least the same sort of divestiture that Bwin.party
agreed to, according to a consultant who spoke on condition he
not be named because he works with New Jersey applicants.
"PokerStars will not simply coast into the New Jersey
internet gambling market," the consultant said.
He said PokerStars founder Isai Scheinberg, who remains a
criminal defendant in a U.S. case, would have to divest, and
even then the role of his son, the current chief executive,
could be a factor.
CEO Mark Scheinberg personally forfeited $50 million to end
a Justice Department inquiry in June, although he did not admit