* First time association intervenes in state case
* Pokerstars paid $731 million in 2012 settlement
* Gaming group says Pokerstars violated U.S. law
* After 2006 ban, online gambling making comeback
* Online gambling market worth $7 billion annually
By Joseph Menn
SAN FRANCISCO, March 6 The trade group for the
U.S. casino industry has asked New Jersey regulators to bar a
British-Isles-based online gambling company from returning to
the U.S. market in an unprecedented intervention in a state
In a brief filed Monday with New Jersey's Casino Control
Commission, the American Gaming Association says the panel
should reject a petition by PokerStars, a closely held Isle of
Man operator of online gambling web sites, for interim
authorization to buy a small, real-world casino in Atlantic
A law signed in New Jersey last week allows companies with
physical casinos in the state to offer online betting as well.
PokerStars, which authorities had alleged for years accepted
bets from U.S. customers up to 2011 at a time when online
gambling was illegal in the country, now hopes to operate in the
United States. That prospect alarms American Gaming Association
members such as MGM Resorts International and Caesars
Entertainment Corp, which have their own plans for
online poker sites.
At a Wednesday meeting, the New Jersey Commission will
consider allowing the Gaming Association to intervene in the
process. Even if PokerStars gets interim authorization, the
casino's ownership would be held in trust until state officials
complete a full suitability investigation.
For years, U.S. residents were the biggest players in a
global online poker market that the trade group said produced
nearly $7 billion in annual revenue. PokerStars and rival Full
Tilt Poker, were the clear market leaders, operating from what
they thought were safe havens abroad.
Two years ago the Justice Department sued both firms for
fraud, saying they used false billing codes to process wagers
from U.S. residents after Internet betting was explicitly barred
by Congress in 2006. Prosecutors filed related criminal charges
against several principals at the companies and temporarily
seized their web sites.
PokerStars stopped taking bets from the United States in
2011 following the Justice Department lawsuit.
The New Jersey showdown could end up deciding what sorts of
past transgressions will disqualify a company from handling
online betting in the United States. Three states, including
Nevada and New Jersey, have legalized online gambling in the
wake of a 2011 decision by the U.S. Department of Justice giving
states broad latitude on the matter.
In July 2012, PokerStars agreed to forfeit $731 million to
settle the case and to take over the accounts at Full Tilt,
which did not have the cash to refund customers on its own.
The Gaming Association, which acknowledged it had never
previously intervened in a state regulatory proceeding, noted in
its filing that criminal charges are still pending against two
fugitive former PokerStars officers, including founder Isai
Scheinberg, whose son is the acting chief executive.
"Allowing PokerStars to be licensed would send a damaging
message to the world of gaming and to the world beyond gaming,
that companies that engage in chronic lawbreaking are welcome in
the licensed gaming business," the 18-year-old trade group
PokerStars spokesman Eric Hollreiser said that many of the
claims in the brief were "false and defamatory" and that
PokerStars did not admit to wrongdoing in its settlement.
"We work closely with regulators and are in good standing
with governments around the world," Hollreiser said. "We will
continue to work with authorities, including the New Jersey
regulators and other interested state regulators, to discuss our
The New Jersey commission is expected to hold a hearing on
the dispute next week. A spokesman there did not return a call
The stakes in the battle increased dramatically this month
with the passage of the New Jersey law and a revamped law in
Nevada. Delaware also allows in-state online gambling, but the
Nevada and New Jersey laws both allow for the negotiation of
interstate compacts. For analysis, see
Those deals would allow residents in one approved state to
play against people in another approved state, which would
attract more bettors and increase the pressure on other states
to allow their citizens to play. If PokerStars were approved in
New Jersey, that might allow it to effectively circumvent a
Nevada law which bans companies that took bets from U.S. players
after the 2006 ban. Hollreiser said he couldn't talk about any
plans beyond New Jersey.
In the meantime, MGM and Caesars are getting closer to
making their own online offerings in partnership with
PartyGaming owner Bwin.Party Digital Entertainment Plc
and 888 Holdings Plc, respectively.
Both of those companies were also major participants in the
U.S. market prior to legalization, gaining online expertise that
Las Vegas casino operators need. Unlike Pokerstars, they pulled
out of the United States after the 2006 legislation.
The Gaming Association's brief in the New Jersey proceeding
acknowledges that many states had declared that online poker was
illegal even prior to 2006. At least eight states enacted laws
specifically banning Internet gambling, and every state bans
gambling without a license, the trade group noted. Thus,
"PokerStars violated the laws of every state," it wrote.
By that standard, 888 and Bwin's PartyGaming, with which
AGA's members are now allied, would also have been in violation
of the laws of every state.
PartyGaming agreed to pay $105 million in a settlement with
the Justice Department in 2009. Officials at 888 acknowledged
settlement talks but never signed.
On Wednesday, 888 will go before the Nevada Gaming Control
Board for a hearing on its suitability for an online license in
conjunction with Caesars. If approved, as expected, the two
could begin accepting bets by the end of the year.