Online poker giant PokerStars may have found its way back into the U.S. online gambling market through its sale to Amaya Gaming for .9 Billion.
Amaya now becomes an online giant which already has a foothold in the U.S. market through its licensing in New Jersey, one of three U.S. states to allow online gambling.
New Jersey regulators have already announced they are scheduled to begin talks with Amaya to bring the PokerStars and Full Tilt brands to the state’s regulated online gambling sites.
The New Jersey Division of Gaming Enforcement blocked PokerStars from receiving an online license in the state twice before, but only suspended the company’s online application rather than denying it outright.
The division cited outstanding indictments against key PokerStars officials—including founder Isai Scheinberg—stemming from the U.S. Department of Justice’s move to shut down online gambling sites illegally accepting bets from U.S. players in 2011 as a reason for the suspension.
The sale to Amaya divests Scheinberg and other key officials cited by New Jersey from PokerStars.
“We’ve had discussions with Amaya to reactivate the application, and we plan to begin discussions with them,” DGE Director David Rebuck told the Associated Press. “We’ll look at whatever they bring over.”
Rebuck said he was “encouraged” by the sale and the licensing talks.
“I think in the long run it will be a good story for New Jersey,” he said. “I’m optimistic that they know what the rules are, and I fully expect them to be very aggressive because they want to be here.”
Amaya has already been approved for online gambling operations in New Jersey as the platform for Caesars Interactive, and officials for the company said they are optimistic about entering New Jersey’s market with PokerStars.
New Jersey’s revenue form online gaming has declined for two consecutive months—at about $10.5 million for May—and many analysts hope a brand like PokerStars can reinvigorate the market.
PokerStars had partnered with Atlantic City’s Resorts Casino Hotel to offer online gaming in the state and had promised to locate its U.S. offices in the city and build a $10 million live poker room at Resorts before the license application was suspended. That deal is expected to be revived, though officials for Amaya and Resorts have not commented specifically on the deal.
PokerStars, however, could have trouble in other markets, such as Nevada—which has online gambling—and California, which is considering it.
PokerStars paid $731 million in 2012 to settle other money-laundering charges brought against it by the Justice Department, but its history of accepting U.S. bets after 2006 blocked PokerStars from entering the Nevada online gambling market. Nevada has a “bad actor” clause in its online gambling laws and has already blocked PokerStars from entering there for five years under the clause.
A proposed online poker bill in California—which would lend its large population to the fledgling online market—also has a “bad actor” clause, which could shut out PokerStars. The company has a deal to operate online poker for three Southern California card rooms and the Morongo Band of Mission Indians.
The proposed bill is backed by 13 other Indian tribes who are strongly backing the “bad actor” clause, but the provision is strongly opposed by the Morongo tribe, which claims it’s a veiled effort to keep out a major competitor from the market. Both the tribe and PokerStars say they feel the proposed California law would not survive a constitutional challenge to the “bad actor” clause.
A legal analysis paid for by PokerStars—conducted by Laurence H. Tribe, professor of constitutional law at Harvard Law School, a leading constitutional scholar—concludes that the two proposed California bills on online poker are clearly written to exclude certain competitors from the state. The clause punishes companies like PokerStars without the due process of a trial, Tribe concluded.
Amaya, however, is clearly expecting to move the brand into the U.S., at least through New Jersey.
“We believe our track record of working in licensed jurisdictions in the United States and recognition of our suitability by numerous regulators will help facilitate the licensing of Rational’s brands as i-gaming operators,” David Baazov, Amaya’s chairman and chief executive, said during a conference call with analysts. “Rational already has a relationship established with a land-based casino in the state, Resorts, and would be able to be operating it in a short time if and when it receives a transactional waiver.”
Baazov also said he feels the acquisition will allow Amaya to grow in the field of social gaming, which often outpaces online wagering in revenue.
“With the continuing trend of online gaming regulation around the world, the company has in front of itself an enormous opportunity to leverage its brand recognition and customer loyalty to diversify into other gaming verticals as casino, sports betting and social gaming,” said Baazov.
After reports of the sale began circulating, Amaya’s stock surged 29 percent in just two days and eventually increased as much as 40 percent. PokerStars and Full Tilt Poker are operated by Isle of Man- based Rational Group Ltd. The company, with more than 1,700 employees, has 85 million registered players worldwide.
Under the deal, Isai Scheinberg and his son Mark, founder and CEO of Rational parent Oldford Group Ltd.—along with several other company officials—will sell their stock and resign from the company and all its subsidiaries, according to a press statement.
Online gambling has gotten off to slow start in the three states that have approved it—New Jersey, Nevada and Delaware—but analysts see the return of a trusted brands like PokerStars and Full Tilt Poker as having the potential to give the fledgling industry a boost.
However, the company’s large database of players and name recognition could also spell trouble—and intense competition—for companies such as Caesars Entertainment and Boyd Gaming, which have dominated in the young market, especially if online gambling expands into other states.
Still, PokerStars will not be bringing its international players into the mix, at least not at this point. Only players physically located in Nevada, New Jersey and Delaware can legally play on the three state’s approved sites.